Lindberg v. United States

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JAN 13 1999
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

JEROME LINDBERG, Personal
Representative of the Estate of
TEMPLE H. BUELL,

Plaintiff - Appellant,
v. Nos. 96-1403 & 96-1472
UNITED STATES OF AMERICA,

Defendant - Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. NO. 94-M-2435)

Blain David Myhre (Stanton D. Rosenbaum and Gary A. Kleiman with him on the
briefs), Isaacson, Rosenbaum, Woods & Levy, Denver, Colorado, for Plaintiff-
Appellant.

Teresa T. Milton, United States Department of Justice, Tax Division, Washington,
D.C. (Loretta C. Argrett, Assistant Attorney General, Washington, D.C., David I.
Pincus, United States Department of Justice, Tax Division, Washington, D.C., and
Henry L. Solano, United States Attorney, Denver, Colorado, with her on the
briefs), for Defendant-Appellee.

Before ANDERSON , KELLY , and LUCERO , Circuit Judges.

ANDERSON , Circuit Judge.
 The Estate of Temple H. Buell (“the Estate”), through its personal

representative Jerome Lindberg, appeals the judgment of the district court

denying its claim for a refund of federal estate taxes. The Estate argues that it is

entitled to a deduction for payments of $2.27 million made to settle Buell’s

descendants’ tort claims for interference with inheritance. It presents three

alternative theories for its deduction: (1) the payments settled “claims against the

estate” under I.R.C. § 2053(a)(3); (2) the payments were an administrative

expense under I.R.C. § 2053(a)(2); or (3) the payments were a charitable

contribution under I.R.C. § 2055(a)(2). The district court rejected each of these

arguments. It determined first that Buell had no personal liability for the tort

claims during his lifetime, and therefore they were not claims against the Estate.

The court reasoned that they were in essence claims to inheritances brought by

potential heirs; furthermore, they sought compensation from a tortfeasor whom

Buell and the Estate had no duty to indemnify. Second, it held that the settlement

payment was not an administrative expense incurred in distributing estate

property, because it was made for the benefit of individual heirs. Third, it

determined that the settlement was not a charitable contribution because it was

actually paid to private individuals, and because any benefit to charity was

speculative. For the reasons stated below, we largely agree with the district court.

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 The Estate also disputes the denial of its Motion for Relief or Modification

of Judgment, arguing that after judgment the district court improperly refused to

hear evidence on various subsidiary issues relating to interest paid by the Estate.

We hold that the district court did not abuse its discretion in refusing to hear

arguments the Estate had not previously raised.

Accordingly, we affirm the district court’s grant of summary judgment and

its denial of the Estate’s motion for relief or modification.

I. BACKGROUND

On January 5, 1990, Temple H. Buell died testate. In the decades preceding

his death, Buell placed much of his wealth into three trusts: the Temple H. Buell

Trust (“the Buell Trust”), the Temple H. Buell / Cherry Hills Trust (“the Cherry

Hills Trust”), and the Temple H. Buell Charitable / Family Trust (“the Family

Trust”) (collectively, “the Trusts”). He also created the Temple H. Buell

Foundation (“the Foundation”), a non-profit charitable organization. As part of

its assets, the Foundation held 10% of the stock of the Buell Development

Corporation (“the BDC”), while the Buell Trust held the other 90%.

Buell’s last will, dated June 8, 1988, specifically excluded his children and

left the residue of his estate to the Buell Trust, or, in the alternative, to the

Foundation. The Buell Trust instruments in turn specified that at Buell’s death,

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its assets were to pass to the Foundation. As for the other trusts, the Family Trust

included terms benefitting both the Foundation and Buell’s grandchildren, and the

assets of the Cherry Hills Trust were to pass to the Cherry Hills Arts and Culture

Center at Buell’s death.

Approximately two months before Buell’s death, his children and

grandchildren (“the Buell descendants”) retained counsel to make claims arising

out of Buell’s disposition of his assets. They entered into negotiations with an

attorney representing Buell, the Trusts, the Foundation, and the BDC. After

Buell’s death, counsel for the Buell descendants continued these discussions with

attorneys representing Harold Williamson individually and in his capacities as

Personal Representative of the Estate, Trustee of the Trusts, President of the

BDC, and Executive Director and Trustee of the Foundation. These discussions

continued for approximately eighteen months.

The negotiations culminated in a settlement agreement dated July 29, 1991.

The agreement stated that it was entered into to save both sides the costs of

litigation. It was executed by all of the Buell descendants, the Foundation, the

BDC, and Williamson individually and in his capacities as personal representative

of the Estate and as trustee of the Buell Trust and of the Cherry Hills Trust. It

dissolved the Family Trust and passed its assets to the Buell Trust. It also

provided that the Buell Trust, “on behalf of itself, the Estate, Trusts, BDC, and

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Foundation,” would pay $2,270,000 to the Buell descendants, App. at 224 ¶ 2,

who agreed to release all claims against the Estate, Williamson, the Trusts, the

Foundation, and the BDC.

The agreement listed eight of the Buell descendants’ claims specifically:

(1) detrimental reliance on Buell’s promises of support; (2) misrepresentation by

Buell concerning his intentions to provide for his descendants; (3) Buell’s breach

of contractual agreements made with his descendants to provide for them; (4)

Buell’s mistake of fact in disposing of his property; (5) interference by “[c]ertain

Trustees or other representatives of the Foundation” with Buell’s efforts to

provide for his descendants through his will, the Trusts, or inter vivos transfers;

(6) exertion of influence by “[t]he Trustee, trustees and/or other representatives of

the Foundation, acting in their capacity as officers, directors, or other

representatives of BDC” to cause Buell to direct BDC assets to the Trusts and the

Foundation instead of to his descendants; (7) Buell’s lack of testamentary

capacity and lack of capacity to create trusts; (8) violations by Buell of a divorce

decree under which he was required to provide for his grandchildren. App. at

222-23. Williamson and certain of the descendants later stated in depositions that

both sides entered into the agreement primarily to avoid the litigation of tort

claims of interference with inheritance, based on (5) and (6) above.

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 Relying on the fact that the Buell Trust, which provided funds for the

settlement payment, was a revocable trust includable in Buell’s gross estate for

federal estate tax purposes, the Estate claimed the settlement payment as a

deduction on its tax return dated April 5, 1991. On audit the Commissioner

disallowed the deduction and on February 7, 1994, assessed a deficiency of

$2,167,080. The Estate paid this amount in full, as well as $671,964.98 in

interest for late payment. It filed a claim with the Internal Revenue Service on

April 20, 1994, seeking a refund of the deficiency as well as $671,464.98 1
in

interest. The Commissioner denied the claim, and this suit followed on October

25, 1994.

On June 13, 1996, the district court decided the case on cross-motions for

summary judgment. Lindberg v. United States , 927 F. Supp. 1401 (D. Colo.

1996). It granted the government’s motion for summary judgment, denied the

Estate’s motion for summary judgment, and dismissed the suit. The Estate filed a

motion for reconsideration on June 24, 1996, arguing that the court’s decision was

legally and factually erroneous. The court denied the motion the next day.

On August 21, 1996, the Estate filed a notice of appeal as well as a

“Motion for Relief from or Modification of Judgment” under Fed. R. Civ. P. 60,

This amount reflects the fact that the Estate filed its refund claim before
1

making a final interest payment of $500.

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“on the basis of mistake and inadvertence and to prevent a windfall and/or unjust

enrichment to [the government].” App. at 148, ¶ 2. The motion did not specify

under which subsection of Rule 60 it was brought. In its motion the Estate argued

that the court had dismissed the action prematurely, without addressing issues

regarding various amounts of interest which the Estate claimed entitled it to a

refund of estate taxes.

The district court denied this motion in a one-page order on September 20,

1996. The court construed it as a Rule 60(b) motion for relief from “mistake,

inadvertence, and excusable neglect,” noting, “[n]othing in the motion fits this

requirement of the rule.” App. at 152. The court stated further, “[a]fter

reviewing the pleadings, including the scheduling order, the court concludes that

the judgment entered on June 13, 1996 is a final judgment adjudicating all claims

raised by the pleadings. The claims sought to be asserted in this motion . . .

would appear to require the filing of a separate civil action.” Id.

The Estate filed a notice of appeal from the denial of this motion. On

November 5, 1996, we consolidated that appeal and the Estate’s appeal from

summary judgment.

II. DISCUSSION

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 We first address the deductibility of the settlement payment itself. We then

discuss the Estate’s Rule 60(b) motion regarding deductions and refund claims for

various amounts of interest.

A. DEDUCTIBILITY OF THE SETTLEMENT PAYMENT

We review de novo the district court’s grant of summary judgment,

construing the factual record and the reasonable inferences therefrom in the light

most favorable to the party opposing summary judgment. Woodman v. Runyon ,

132 F.3d 1330, 1337 (10th Cir. 1997).

The parties contest the true nature of the claims compromised by the Buell

descendants in exchange for the settlement payment. The United States points out

that the settlement agreement listed will contest claims as well as tort claims; the

Estate argues that the real reason for the settlement payment was to avoid only the

litigation of the tort claims. Construing the record in the light most favorable to

the Estate, we proceed on the assumption that the settlement payment was made

solely to avoid litigating tort claims against Williamson for interference with

inheritance.

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 1. Deduction for Claims Against the Estate

The Estate argues that payments to settle these tort claims are deductible

under I.R.C. § 2053(a)(3), which permits a deduction from the value of the gross

estate for “claims against the estate.” 2
The United States responds that the

settlement payment is not deductible because it is a distribution of a portion of the

estate, not the payment of a claim against the estate. Cf. First Nat’l Bank of

Amarillo v. United States , 422 F.2d 1385, 1386 (10th Cir. 1970) (interpreting

§ 2053 and making the same distinction); Estate of Huntington v. Commissioner ,

16 F.3d 462, 467-68 (1st Cir. 1994) (same). Both parties cite Treas. Reg.

§ 20.2053-4, which provides in relevant part:

The amounts that may be deducted as claims against a decedent’s
estate are such only as represent personal obligations of the decedent
existing at the time of his death, whether or not then matured . . . .
Only claims enforceable against the decedent’s estate may be
deducted.

The regulation goes on to specify the deductibility of various kinds of “personal

obligations”:

2
Section 2053(a)(3) reads in relevant part:

For purposes of the [federal estate tax], the value of the taxable
estate shall be determined by deducting from the value of the gross
estate such amounts . . . for claims against the estate . . . as are
allowable by the laws of the jurisdiction . . . under which the estate is
being administered.

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 [With certain exceptions,] section 2053(c)(1)(A) provides that the
allowance of a deduction for a claim founded upon a promise or
agreement is limited to the extent that the liability was contracted
bona fide and for an adequate and full consideration in money or
money’s worth. . . . Liabilities imposed by law or arising out of torts
are deductible.

Id.

The Estate would have us read from this regulation a blanket rule that all

tort claims paid by an estate are deductible. The regulation’s language does not

bear such a construction. The general rule that “[l]iabilities . . . arising out of

torts are deductible” is still subject to the regulation’s initial restriction: “[t]he

amounts that may be deducted as claims against a decedent’s estate are such only

as represent personal obligations of the decedent existing at the time of his

death . . . .” As indicated above, the claims here were tort claims against

Williamson, not liabilities incurred by Buell before his death.

To overcome this obstacle, the Estate argues alternatively that Williamson’s

obligation was in substance Buell’s obligation, because Williamson was

essentially acting under Buell’s authority. Williamson, “at the direction of Buell

through his repeatedly expressed desire to exclude his descendants,” influenced

Buell not to succumb to a change of heart. Appellant’s Br. at 23. It reasons

further that Williamson would have been sued as a trustee of the Buell Trust, and

that the Trust would have had to indemnify him. This right of indemnification

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from a revocable trust, it argues, made Williamson’s tort liability a “personal

obligation[] of the decedent existing at the time of his death.”

This is an unusual argument for an unusual situation. Typically an

intentional interference with inheritance claim is paid by the tortfeasor, not by an

estate or trust. To justify an estate tax deduction, the Estate must characterize the

alleged tort as Buell’s, who (through his trustee Williamson) tortiously influenced

himself before his death.

This circuitous reasoning failed to convince the district court. It noted that

“[t]he Descendants’ allegation of tortious interference with inheritance was not

against Buell, nor could it have been.” 927 F. Supp. at 1405. For the following

reasons, we agree that this was not Buell’s personal obligation.

a.

The substance of the matter is that the claims at issue here (the Buell

descendants’ tort claims for interference with inheritance) 3
sought inheritances

that the Buell descendants had been denied, not any amounts that Buell personally

owed them before his death. For tax purposes, we characterize their claims as

Because we have accepted the Estate’s premise that the only reason for the
3

settlement payment was the compromise of the interference with inheritance
claims, we need not determine whether any of the other claims in the settlement
agreement represented a personal obligation of the decedent.

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claims to inheritances for two reasons: (1) they were brought by the Buell

descendants in their capacity as Buell’s heirs at law; (2) compensatory damages

for these claims would have been measured by the size of the inheritances with

which Williamson allegedly interfered.

I.R.C. § 2053 and Treas. Reg. § 20.2053-4 “permit deduction for claims

based on personal obligations of the decedent, not for payment to an heir claiming

as such. The status of the claimant is the determinative factor . . . .”

Pennsylvania Bank & Trust Co. v. United States , 597 F.2d 382, 384 (3d Cir.

1979) (citations omitted) (emphasis added). Who pays the claim, and in what

capacity, is not determinative. Neither is the form of the action.

To effectuate the policy underlying the federal estate tax
requires that courts look beneath the surface of transactions to
discover the essential character of each transfer. Even where a claim
is ultimately satisfied by the operation of law, the courts will
determine the nature of the claim for federal tax purposes by
examining the particular status of the claimant that enabled him to
impose his claim on the estate.

Bank of New York v. United States , 526 F.2d 1012, 1017 (3d Cir. 1975) (footnote

omitted); accord Huntington , 16 F.3d at 468.

Here, the Buell descendants’ tort claims were based on their status as

potential heirs. Although Colorado state courts have not recognized the common

law tort of intentional interference with inheritance, we assume for purposes of

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decision that they would, 4
and treat the settlement agreement as a bona fide

compromise of colorable claims. The elements of the tort are quite uniform

across jurisdictions that have recognized it. Recovery in a suit for interference

with inheritance requires proof of (1) a valid expectancy; (2) intentional

interference with that expectancy; (3) independently tortious conduct (such as

undue influence, fraud, or duress); (4) reasonable certainty that absent the tortious

interference the plaintiff would have received the expectancy; and (5) damages. 5

Especially relevant here is the fact that the prima facie tort requires proof of

“more than a mere expectancy”; plaintiffs must show “a tangible basis to assert a

prospective inheritance, such as being an heir at law of the decedent or having

been named in a prior will or testamentary instrument.” 6
Beren v. Ropfogel , 24

4
We made a similar assumption regarding Kansas law in Beren v. Ropfogel,
24 F.3d 1226, 1229 (10th Cir. 1994), and McKibben v. Chubb, 840 F.2d 1525,
1531 & n.9 (10th Cir. 1988). We note that federal cases arising in Colorado have
recognized the tort. See Peffer v. Bennett, 523 F.2d 1323, 1326 (10th Cir. 1975);
McGregor v. McGregor, 101 F. Supp. 848 (D. Colo. 1951), aff’d, 201 F.2d 528
(10th Cir. 1953).
5
See, e.g., Sonja A. Soehnel, Annotation, Liability in Damages for
Interference with Expected Inheritance or Gift, 22 A.L.R. 4th 1229 § 3 (1981 &
Supp. 1998); Restatement (Second) of Torts § 774B (1979).
6
The district court described the requisite status as that of “descendant of
the testator.” 927 F. Supp. at 1405. We think our statement in Beren is more
precise, first because heirs need not be descendants, and second because persons
who are not heirs still may bring claims of tortious interference with inheritance if
they were named in a previous will and thereby acquired a valid expectancy. Of
course, the claimants here were descendants as well as heirs at law.

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F.3d 1226, 1230 (10th Cir. 1994) (emphasis added); cf. Lyeth v. Hoey , 305 U.S.

188, 196 (1938) (holding (in income tax context) that for purposes of

deductibility, a will contest settlement is an “inheritance” because of “the heirship

which underlay the compromise, the status which commanded that agreement and

was recognized by it”). 7

Reinforcing this conclusion is the fact that compensatory damages for an

interference claim are based on the amount the claimant would have received

absent the interference. Assuming the validity of their tort claims, the Buell

descendants would have received substantial inheritances (not deductible to the

Estate) if not for the tortious conduct of Williamson and others. It makes no

difference for estate tax purposes that instead these amounts were distributed only

after threatened tort litigation for interference with inheritance.

The fact that the tort claims at issue here did not challenge the validity of

Buell’s testamentary instruments is irrelevant for tax purposes. The form of the

claim, a tort action instead of a will contest, is not determinative; both require

7
We emphasize that not all payments by an estate to family members or
heirs are nondeductible distributions, only those payments made to “heir[s]
claiming as such.” Pennsylvania Bank & Trust Co., 597 F.2d at 384 (emphasis
added). For example, claims for unpaid child support or alimony would not be
claims to a portion of an estate, because they are brought by children or former
spouses to enforce a legal right to support, not by heirs claiming a right of
inheritance. Clearly such claims would represent personal obligations of a
decedent at the time of his death.

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that plaintiffs prove some status-based expectation of inheritance, and both

provide a recovery commensurate with that expectation.

The possibility that Buell intended a different disposition of his Estate does

not alter our analysis. For at least 18 years prior to his death, Buell expressly

excluded his children from the terms of his trusts and from his will (although the

Family Trust did include terms favorable to his grandchildren). Buell may truly

have wanted the $2.27 million to stay in the Buell Trust and then to pass to the

Foundation as a deductible charitable contribution; or perhaps (if not for the

alleged tort) he would have changed his mind and given his descendants

nondeductible inheritances. Rather than proceed to litigation on this issue,

authorized representatives of the Buell Trust, the Foundation, and the Estate

determined that, despite the express disclaimer in the will, Buell’s true intentions

were at least unclear enough to warrant giving his descendants $2.27 million.

Whether or not the settlement accorded with Buell’s intentions, his

representatives made a choice from which flowed tax consequences. “[W]hile a

taxpayer is free to organize his affairs as he chooses, nevertheless, once having

done so, he must accept the tax consequences of his choice, whether contemplated

or not . . . .” Commissioner v. National Alfalfa Dehydrating & Milling Co. , 417

U.S. 134, 149 (1974). The Estate cannot now invoke Buell’s supposed intentions

as a shield against those consequences. A will contest settlement would not be

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deductible merely by virtue of a possible conflict with the testator’s intent;

neither is the settlement of a tortious interference claim.

b.

An additional reason exists for upholding the district court’s decision. Any

tort liability here would have been Williamson’s, not the Estate’s. Even assuming

that a right of indemnification from the Buell Trust would somehow have made

Williamson’s tort liability a personal obligation of the decedent, nevertheless

Williamson was not entitled to such indemnification.

If, as the district court found, Williamson was threatened with suit only in

his capacity as trustee of the Foundation, certainly he was not entitled to

indemnification from the Buell Trust. Even if, as the Estate argues, Williamson

would have been sued as trustee of the Buell Trust, the traditional rule is that an

estate cannot be held liable for a tort committed by an executor or trustee. See,

e.g. , Herbert B. Chermside, Jr., Annotation, Liability of Estate for Tort of

Executor, Administrator, or Trustee , 82 A.L.R.3d 892 §§ 2[a], 3 (1978 & Supp.

1998).

The Estate cites two exceptions to this rule, but neither applies here. First,

Colorado law provides that “[c]laims based on . . . torts committed in the course

of trust administration[] may be asserted against the trust estate by proceeding

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against the trustee in his fiduciary capacity, whether or not the trustee is

personally liable therefor.” Colo. Rev. Stat. § 15-16-306(3) (1998); see also IIIA

Scott on Trusts § 268 (4th ed.). Williamson’s allegedly tortious acts were not

committed “in the course of” the administration of the Buell Trust. The Buell

descendants claimed that Williamson tortiously influenced Buell to leave all the

Trust’s assets to the Foundation when Buell otherwise would have changed the

terms of the Trust to leave at least a portion to his family. Williamson had no

business as trustee preventing Buell from modifying the terms of the Trust,

advancing the interests of a current beneficiary at the expense of other potential

beneficiaries.

Second, some courts have held that where a trustee’s personal tort confers a

benefit on the trust, tort victims have an equitable right to reach the trust estate to

the extent of the benefit, when necessary to ensure compensation and to prevent

unjust enrichment of the trust. See Chermside, supra , at § 4; IIIA Scott on Trusts

§ 269 (4th ed.). Influencing Buell to leave Trust assets to the Foundation instead

of to the descendants did not confer any benefit on the Trust. Either way the

Trust would have maintained its assets until Buell’s death, at which time it would

have passed all its assets to beneficiaries.

2. Deduction for Administrative Expenses

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 The Estate also argues that the settlement payment was a deductible

“administrative expense” of the Estate under § 2053(a)(2). 8
Treas. Reg.

§ 20.2053-3(a) limits deductible administrative expenses to

such expenses as are actually and necessarily, incurred in the
administration of the decedent’s estate; that is, in the collection of
assets, payment of debts, and distribution of property to the persons
entitled to it. . . . Expenditures not essential to the proper settlement
of the estate, but incurred for the individual benefit of the heirs,
legatees, or devisees, may not be taken as deductions.
Administration expenses include . . . attorney[s’] fees . . . .

The Estate reasons that because the settlement avoided the payment of attorneys’

fees to defend against the descendants’ claims, it was in essence a deductible

“prepayment” of attorneys’ fees.

We are unpersuaded. Although the settlement payment may have been

made to avoid the risk of litigation, it was not actually a payment of attorneys’

fees incurred in administering the estate. “[A] transaction is to be given its tax

effect in accord with what actually occurred and not in accord with what might

have occurred.” National Alfalfa , 417 U.S. at 148. That the Estate could have

chosen to incur deductible attorneys’ fees instead of making a nondeductible

8
Section 2053(a)(2) reads in relevant part:

For purposes of the [federal estate tax], the value of the taxable
estate shall be determined by deducting from the value of the gross
estate such amounts . . . for administration expenses . . . as are
allowable by the laws of the jurisdiction . . . under which the estate is
being administered.

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distribution of estate assets is irrelevant. For purposes of deductibility, avoiding

attorneys’ fees is clearly not the same as paying attorneys’ fees, no matter how

strong the courts’ preference for settlement of lawsuits.

Furthermore, this was not an expense incurred “in the collection of assets,

payment of debts, and distribution of property to the person entitled to it.” It was

not paid to avoid or facilitate a distribution of estate property; it was in fact itself

a distribution of estate property, as we have explained. Again, the claimants’

status as heirs is key. Determining the deductibility of “administrative expenses”

involves “substantially the same considerations” as interpreting the phrase

“claims against the estate.” United States v. Stapf , 375 U.S. 118, 134 (1963).

Payments to “heir[s] claiming as such” cannot qualify as deductible

administrative expenses. Pennsylvania Bank & Trust Co. v. United States , 597

F.2d 382, 384 (3d Cir. 1979).

3. Deduction for Charitable Contributions

The Estate next contends that the settlement payment was in essence a

deductible charitable contribution under I.R.C. § 2055, because it saved the

Foundation (a charitable organization) substantial litigation costs. Section

2055(a)(2) allows a deduction for transfers “to or for the use of” certain

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charitable organizations. 9
The Estate argues that had the Buell descendants

proceeded with their tort claims, the Foundation could have been liable for the

tortious acts of Foundation representatives. Instead, the Foundation approved the

settlement payment out of Buell Trust money that would otherwise have passed to

the Foundation under the terms of the Buell Trust instruments. Therefore, the

Estate reasons, it is as though the Buell Trust made a deductible contribution of

$2.27 million to the Foundation, which in turn paid the Buell descendants for

release of their claims.

The plain language of the statute precludes this creative argument. The

payment was not made “to or for the use of” the Foundation; it was made to the

Buell descendants, to use any way they saw fit. Any benefit to the Foundation

was incidental. Again, “a transaction is to be given its tax effect in accord with

what actually occurred and not in accord with what might have occurred.”

National Alfalfa , 417 U.S. at 148. What actually occurred here was a payment to

the Buell descendants, not to the Foundation.

9
Section 2055(a)(2) reads in relevant part:

For purposes of the [federal estate tax], the value of the taxable
estate shall be determined by deducting from the value of the gross
estate the amount of all bequests, legacies, devises, or transfers . . .
to or for the use of any corporation organized and operated
exclusively for religious, charitable, scientific, literary, or
educational purposes . . . .

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B. MOTION FOR RELIEF FROM OR MODIFICATION OF JUDGMENT

The Estate contends that the district court abused its discretion in denying

the Estate’s Motion for Relief from or Modification of Judgment under Fed. R.

Civ. P. 60(b). 10
The Estate argues that due to mistakes by counsel and/or the

court, the court erroneously dismissed the Estate’s suit without addressing three

of its arguments relating to various amounts of interest. Although the Estate bases

its appeal on Rule 60(b)(1) as well as Rule 60(b)(6), “we need not rigidly

compartmentalize our analysis upon review. Instead, we look to the record in its

entirety to see if the trial judge clearly ignored excusable conduct or failed to

recognize some other compelling reason for relief to be granted.” Pelican

Production Corp. v. Marino , 893 F.2d 1143, 1146 (10th Cir. 1990) (citations

omitted). Our review here is “meaningfully narrower” than review of the merits

of a direct appeal. Bud Brooks Trucking, Inc. v. Bill Hodges Trucking Co. , 909

F.2d 1437, 1440 (10th Cir. 1990). Relief under Rule 60(b) is extraordinary and

may be granted only in exceptional circumstances. Id.

10
The rule provides in relevant part:

On motion and upon such terms as are just, the court may
relieve a party . . . from a final judgment . . . for . . . (1) mistake,
inadvertence, surprise, or excusable neglect; . . . or (6) any other
reason justifying relief from the operation of the judgment.

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 In its motion to the district court, the Estate argued that it merited

administrative expense deductions for (1) the $671,964.98 in interest paid on the

audit deficiency and (2) $139,453 in interest paid to the State of Colorado on late-

paid state inheritance taxes. 11
The Estate admitted that “due to mistake and

inadvertence of Counsel” it had not raised or reserved these issues in its motion

for summary judgment. Id. at 150, ¶ 13. The Estate also sought a refund of a

portion of the $671,964.98 in interest paid on the audit deficiency. It noted that

the IRS had previously refunded a portion of the deficiency after allowing the

Estate a credit for state inheritance taxes paid, and argued that the IRS should

also return $116,787.50 in interest corresponding to this partial refund.

We conclude that the Estate never raised these arguments prior to entry of

judgment, and therefore the court had no duty to address them. The Estate’s

motion for summary judgment made no reference to these issues. In addition,

although its complaint did make two references to “interest,” it asked only for

interest in addition to the refund of taxes paid. It asked for “judgment against

Defendant in the total amount of $2,167,080 plus interest previously paid to the

Internal Revenue Service in the amount of $671,464.98, plus interest as provided

In the district court the Estate also claimed a deduction for attorneys’ fees
11

in connection with its dispute with the Buell descendants and for litigation of tax
issues. In its briefs on appeal, the Estate has not disputed the district court’s
resolution of this issue; therefore we do not address it.

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by law, costs, attorneys’ fees, and such other and further relief as this Court

deems appropriate.” App. at 2 (emphasis added). This “catchall” demand for

“judgment . . . plus interest” did not apprise the court of the three specific claims

the Estate later raised in its Rule 60 motion. Two of these three claims were

based on the payment of state inheritance taxes; the court could not possibly have

ruled on these claims because the state taxes were not even mentioned in the

complaint. The other interest-related claim requested a deduction for the interest

paid to the IRS on the audit deficiency. Although the complaint did ask for a

refund of this interest, it did not claim a deduction in the event the refund was

denied.

In these circumstances, the district court’s denial of the Estate’s motion

was not an abuse of discretion. 12
There has been no showing of grounds for relief

Even if the district court had addressed the Estate’s claims, it likely could
12

not have granted relief because the Estate had not previously made these specific
arguments in refund claims filed with the IRS, as required by I.R.C. § 7422(a):

No suit or proceeding shall be maintained in any court for the
recovery of any internal revenue tax alleged to have been erroneously
or illegally assessed or collected . . . until a claim for refund or credit
has been duly filed with the Secretary [of the Treasury], according to
the provisions of law in that regard, and the regulations of the
Secretary established in pursuance thereof.

Treas. Reg. § 301.6402-2(b) further provides that a refund claim “must set forth
in detail each ground upon which a credit or refund is claimed and facts sufficient
to apprise the Commissioner of the exact basis thereof.” See also Angle v. United
(continued...)

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under Rule 60(b)(1). See Pelican , 893 F.2d at 1146. Furthermore, we see nothing

sufficiently “unusual or compelling” here to warrant relief under Rule 60(b)(6).

See id. at 1147. We realize this may result in a windfall to the government, but so

will every failure to claim an available deduction or refund.

Accordingly, we AFFIRM the judgment of the district court as well as its

denial of the Estate’s Rule 60(b) motion.

12
(...continued)
States, 996 F.2d 252, 254 (10th Cir. 1993). The one refund claim filed by the
Estate included only a “catchall” interest clause similar to the one in its
complaint.

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96-1403, 96-1472, Lindberg v. United States

LUCERO , Circuit Judge, concurring.

Although I respectfully agree with the compelling analysis of my

colleagues, I write separately to express my concern with an injustice occasioned

by the peculiar circumstances of this case. The purpose of the estate tax

charitable deduction is to promote testamentary transfers to qualified charitable

organizations. Yet, when an estate settles a claim in a bona fide effort to respect

a testator’s charitable intent, tax on such settlement is paid by the estate, and

hence—in cases such as that before us—by the charity as residuary. More

paradoxical still, Treasury Regulations provide that “[i]f a charitable organization

assigns or surrenders a part of a transfer to it pursuant to a compromise agreement

in settlement of a controversy, the amount so assigned or surrendered is not

deductible as a transfer to that charitable organization.” 26 C.F.R. § 20.2055-

2(d).

Buell’s last will specifically excluded his descendants and left the residue

of his estate to the Buell Trust and thereby the Foundation. Faced with hostile

claims from certain descendants, the Buell Trust took what it considered prudent

steps in settling the descendants’ claims. The good faith of the Trustee in

effecting that settlement has not been placed at issue by the government, which is

to be expected, considering that under the existing tax scheme the government

need not challenge the bona fides of the fiduciary in order to prevail. Good faith
or bad—the Internal Revenue Service wins out. I fail to see why the federal

government should gain, and charities thereby lose, when third parties

successfully usurp a testator’s charitable wishes.

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