T.C. Memo. 1996-344
UNITED STATES TAX COURT
TRANSPAC DRILLING VENTURE 1982-08, ALBERT D. & LUELLA L.
ESHELMAN, A PARTNER OTHER THAN THE TAX MATTERS PARTNER,
Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18511-90. Filed July 30, 1996.
Charles Haydon, for petitioners.
William A. Heard III, for respondent.
MEMORANDUM OPINION
ARMEN, Special Trial Judge: This matter is before the Court
on participating partner Milton Chwasky's Motion for Leave to
File Motion to Vacate Decision filed pursuant to Rule 162.1
The issue for decision is whether grounds exist in this case
for vacating what is otherwise a final decision.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
Background
Transpac Drilling Venture 1982-08 (Transpac) is a
partnership subject to the unified partnership audit and
litigation procedures set forth in sections 6221 through 6233.
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L.
97-248, sec. 402(a), 96 Stat. 648.
On March 23, 1990, respondent issued three separate notices
of final partnership administrative adjustment (FPAA) to
Transpac's tax matters partner (TMP) setting forth adjustments to
Transpac's partnership items for 1982, 1983, and 1984. On April
10, 1990, respondent mailed copies of the FPAA's described above
to Transpac partners Albert D. and Luella L. Eshelman
(petitioners).
On August 17, 1990, Charles Haydon, Esq. (Mr. Haydon) filed
a timely petition for readjustment on behalf of petitioners, as
partners other than the TMP, contesting the FPAA's described
above.2 Sec. 6226(b). Paragraph 7 of the petition states: "The
name and address of the tax matters partner, so far as known, are
2
The petition includes an allegation that Transpac's
principal place of business is Scarsdale, N.Y. Respondent's
answer to the petition includes a denial of this allegation for
lack of sufficient information. Sec. 7482(b)(1)(E) provides that
an appeal in this case will lie with the Court of Appeals for the
circuit in which the partnership's principal place of business is
located. Considering the limited circumstances under which this
Court may vacate a final decision (as more fully discussed
below), we do not find it necessary to determine Transpac's
principal place of business in order to rule on the pending
motion.
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Churchhill Oil & Gas Company, Inc., a Texas Corporation, 2435
Faber Place, Suite 200, Palo Alto, California 94303." On October
15, 1990, respondent filed an answer to the petition.
On October 19, 1990, Mr. Haydon filed a Notice of Election
to Participate on behalf of the following Transpac partners:
Milton and Claire Chwasky, Donald A. and Maureen S. Cryan,
Herbert and Hartwig Koenig, Murray A. and Adrienne Meltzer, and
Murray and Doris Dichek. Sec. 6226(c)(2); Rule 245(b).
On January 11, 1991, the Court issued an order assigning
this case to Judge Charles E. Clapp for trial or other
disposition. A copy of this order was mailed to the TMP at the
address provided in the petition but was returned to the Court by
the U.S. Postal Service marked "RETURN TO SENDER NO FORWARD ORDER
ON FILE UNABLE TO FORWARD".
On April 20, 1992, petitioners filed a Motion for Summary
Judgment on the ground that respondent had failed to issue the
disputed FPAA's within the applicable period of limitations.
Petitioners' Motion for Summary Judgment was denied. See
Transpac Drilling Venture 1982-16 v. Commissioner, T.C. Memo.
1994-26.
On May 11, 1994, the Court issued an order advising
petitioners and the participating partners that documents served
on the TMP were returned to the Court as undeliverable by the
U.S. Postal Service. The order, which includes a citation to
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Computer Programs Lambda, Ltd. v. Commissioner, 90 T.C. 1124,
1126 (1988), for the proposition that a viable TMP is necessary
to ensure the fair, efficient, and consistent disposition of
TEFRA partnership proceedings, directs the petitioners and the
participating partners to select a successor TMP and notify the
Court in writing, on or before June 20, 1994, of the name and
address of the successor TMP.
The Court did not receive a response to its order dated May
11, 1994. Accordingly, on August 19, 1994, the Court issued an
order directing petitioners and the participating partners to
show cause, on or before September 23, 1994, why the case should
not be dismissed for failure to properly prosecute.
Once again, the Court did not receive a response to its
order. Consequently, on October 26, 1994, the Court entered an
Order of Dismissal and Decision in which it (1) made its order to
show cause dated August 19, 1994, absolute, (2) dismissed this
case for failure to properly prosecute, and (3) entered a
decision sustaining respondent's adjustments to Transpac's
partnership items for 1982, 1983, and 1984.
The Court's Order dated May 11, 1994, the Court's Order to
Show Cause dated August 19, 1994, and the Court's Order of
Dismissal and Decision entered October 26, 1994, were all served
on Mr. Haydon as counsel of record for petitioners and the
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participating partners, specifically including participating
partner Milton Chwasky. Rules 246(b), 247, 21(b)(2).
As previously stated, on April 17, 1996, participating
partner Milton Chwasky filed a Motion for Leave to File Motion to
Vacate Decision and lodged a Motion to Vacate Decision with the
Court. Attached to such motion for leave is an affidavit
executed by Milton Chwasky which states that petitioners and the
participating partners failed to respond to the Court's orders
dated May 11, 1994, and August 19, 1994, due to a breakdown in
the lines of communication between Mr. Haydon and Transpac's
accountant, Mr. Bernard J. Pitkoff. Mr. Chwasky's Motion for
Leave to File Motion to Vacate Decision includes an allegation
that respondent does not object to the motion.
This matter was called for hearing in Washington, D.C., on
May 22, 1996. Counsel for respondent appeared at the hearing and
explained that, contrary to representations made to Mr. Haydon
prior to the filing of the Motion for Leave to File Motion to
Vacate Decision, respondent intended to oppose the pending
motion.3 In particular, counsel for respondent asserted that
Milton Chwasky's motion should be denied because the standards
required to support a motion to vacate a final decision had not
been satisfied.
3
Counsel for respondent advised the Court that he notified
Mr. Haydon the day before the hearing that respondent would
oppose Mr. Chwasky's motion at the hearing.
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Mr. Haydon did not appear at the hearing. However, in light
of respondent's belated decision to oppose Mr. Chwasky's motion,
the Court offered Mr. Haydon the opportunity for a second hearing
or to file a written statement with the Court. Mr. Haydon
elected the second option and filed a written statement with the
Court on May 28, 1996.
Mr. Haydon's written statement contains a discussion of the
circumstances surrounding Mr. Haydon's communications with
respondent's North Atlantic Regional Counsel's office leading up
to the filing of Mr. Chwasky's Motion for Leave to File Motion to
Vacate Decision. In sum, Mr. Haydon contends that Regional
Counsel's decision not to object to the motion for leave was
based on equitable considerations; i.e., that Transpac's general
partner has defrauded the limited partners and that the latter
deserved their day in court. In this regard, Mr. Haydon argues
that respondent should be bound by Regional Counsel's decision
not to object to the pending motion.
Discussion
The question presented is whether grounds exist in this case
for vacating what is otherwise a final decision. As explained in
greater detail below, we shall deny Mr. Chwasky's Motion for
Leave to File Motion to Vacate Decision.
The decision in this case was entered on October 26, 1994.
Sec. 7459(c). A decision of this Court becomes final upon
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expiration of the time to file a notice of appeal with respect to
such decision. Sec. 7481(a)(1). Generally, a notice of appeal
must be filed within 90 days after the decision is entered by
this Court. Sec. 7483; Fed. R. App. P. 13(a). The 90-day appeal
period may be extended with the timely filing of a motion to
vacate or revise the decision. Fed. R. App. P. 13(a). Absent
special leave of the Court, such a motion must be filed within 30
days after the decision has been entered. Rule 162. The
disposition of a motion for leave to file a motion to vacate or
revise a decision lies within the sound discretion of the Court.
Heim v. Commissioner, 872 F.2d 245, 246 (8th Cir. 1989), affg.
T.C. Memo. 1987-1.
In the instant case, neither petitioners nor the
participating partners filed a notice of appeal or a timely
motion to vacate or revise the decision entered October 26, 1994.
Thus, the decision became final on Tuesday, January 24, 1995, 90
days after the decision was entered. Sec. 7481(a)(1).
Once a decision of this Court becomes final, we may vacate
the decision only in certain narrowly circumscribed situations.
Helvering v. Northern Coal Co., 293 U.S. 191 (1934). For
instance, some courts have ruled that this Court may vacate a
final decision if that decision is shown to be void, or a legal
nullity, for lack of jurisdiction over either the subject matter
or the party, see Billingsley v. Commissioner, 868 F.2d 1081 (9th
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Cir. 1989); Abeles v. Commissioner, 90 T.C. 103, 105-106 (1988);
Brannon's of Shawnee, Inc. v. Commissioner, 71 T.C. 108, 111-112
(1978), or if the decision was obtained through fraud upon the
Court; see Abatti v. Commissioner, 859 F.2d 115 (9th Cir. 1988),
affg. 86 T.C. 1319 (1986); Senate Realty Corp. v. Commissioner,
511 F.2d 929, 931 (2d Cir. 1975); Stickler v. Commissioner, 464
F.2d 368, 370 (3d Cir. 1972); Casey v. Commissioner, T.C. Memo.
1992-672. In addition, some courts have indicated that the Tax
Court has the power in its discretion, in extraordinary
circumstances, to vacate and correct a final decision where it is
based upon a mutual mistake of fact, see La Floridienne J.
Buttgenbach & Co. v. Commissioner, 63 F.2d 630 (5th Cir. 1933).4
On the other hand, the Court of Appeals for the Eighth Circuit
has adopted the more restrictive view that the Tax Court lacks
general equitable powers, and, therefore, that this Court lacks
the authority to vacate or revise an otherwise final decision.
See Webbe v. Commissioner, 902 F.2d 688, 689 (8th Cir. 1990),
affg. T.C. Memo. 1987-426; see also Heim v. Commissioner, supra
at 249 (Lay, C.J., concurring).
4
Although the U.S. Court of Appeals for the Sixth Circuit
cited mutual mistake of fact as a grounds for vacating a final
decision of this Court in Reo Motors, Inc. v. Commissioner, 219
F.2d 610 (6th Cir. 1955), the Sixth Circuit recently concluded
that Reo Motors, Inc. was effectively overruled by virtue of the
Supreme Court's affirmance of Lasky v. Commissioner, 235 F.2d 97
(9th Cir. 1956), affd. per curiam 352 U.S. 1027 (1957). See
Harbold v. Commissioner, 51 F.3d 618, 621-622 (6th Cir. 1995).
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As previously discussed, the record does not establish
Transpac's principal place of business. Accordingly, there is
uncertainty regarding the appropriate venue of an appeal in this
case. Sec. 7482(b)(1)(E). However, we do not find the question
of appellate venue to be critical to the disposition of the
pending motion. Applying the law to the facts presented, we
shall deny Mr. Chwasky's motion on the ground that we lack
authority to vacate the decision.
In the present case, there is no allegation that the Court
lacked jurisdiction to enter the decision of October 26, 1994, or
that the decision arose from either a fraud upon the Court or
mutual mistake. As indicated, Mr. Chwasky's motion for leave is
based solely on the equitable consideration that Transpac's
limited partners be given their day in court.
The Court entered its decision in this case after giving the
petitioners and the participating partners ample opportunity to
appoint a successor TMP. See Computer Programs Lambda, Ltd. v.
Commissioner, 90 T.C. 1124, 1126 (1988). Although the apparent
lack of communication between petitioners and the participating
partners and their counsel is unfortunate, the fact remains that
the decision entered in this case is now final. Consistent with
the cases discussed above, we are obliged to respect the finality
of that decision. Consequently, we shall deny Mr. Chwasky's
Motion for Leave to File Motion to Vacate Decision.
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To reflect the foregoing,
An order denying Milton
Chwasky's Motion for Leave to
File Motion to Vacate Decision
will be issued.