F I L E D

United States Court of Appeals

Tenth Circuit

PUBLISH

JAN 24 2002

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff,
BONNEVILLE DISTRIBUTING,
INC., a Utah corporation,
Plaintiff-Counterdefendant Appellant
v.
TRIANGLE OIL,
Defendant,
and
GREEN RIVER DEVELOPMENT
ASSOCIATES, INC., a Utah
corporation; WILLIAM S. GREAVES,
an individual; STANLEY DEWAAL,
an individual,
Defendant-Counterclaimant Appellee,
v.
UNITED STATES DEPARTMENT
OF TREASURY; INTERNAL
REVENUE SERVICE,
Counterclaim Defendant.

No. 01-4033

PATRICK FISHER
Clerk

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH
(D.C. No. 97-CV-71-S)
Stephen B. Mitchell (and Richard D. Burbridge, with him on the briefs),
Burbridge & Mitchell, Salt Lake City, Utah, for Plaintiff - Appellant.
George A. Hunt (and Kurt M. Frankenburg, with him on the brief), Williams &
Hunt, Salt Lake City, Utah, for Defendants - Appellees.
Before KELLY, BRORBY, and MURPHY, Circuit Judges.
KELLY, Circuit Judge

Plaintiff-Appellant Bonneville Distributing, Inc. (Bonneville) appeals the

district courts grant of summary judgment to Defendants-Appellees Green River
Development Associates, Inc., William S. Greaves, and Stanley DeWaal
(collectively, Green River). We have jurisdiction pursuant to 28 U.S.C. 1291
and reverse and remand for further proceedings.
Background
This action involves a joint venture between Bonneville and Green River
under which the joint venturers operated a truck stop in Green River, Utah. The
joint venture began in 1983 with Triangle Oil, Inc. (Triangle) and Green River
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as the original joint venturers. Pursuant to the joint venture agreement, Triangle
was entitled to receive one-half cent per gallon of motor fuel sold and was also to
receive common carrier rates for fuel delivered to the truck stop. In 1990, with
Green Rivers approval, Triangle assigned its interest to Bonneville. At the time
of the assignment, Triangles property was subject to federal tax liens.
In April, 1993, Bonneville commenced a state court action against Green
River seeking recovery of an account receivable allegedly owed to Bonneville and
for payment for fuel sold and delivered. In August of 1993, the Internal Revenue
Service (IRS) served a Notice of Levy to Green River upon all of Triangles
property and rights to property. After several inquiries, the IRS notified Green
River that the Notice of Levy applied to Bonnevilles interest in the joint venture
and that any payments to Bonneville should go to the IRS. In 1995, Green River
notified Bonneville that it was dissolving the joint venture effective December 11,
1995. According to Green River, it was dissolving the joint venture pursuant to a
clause in the agreement providing for termination upon the end of the underlying
truck stop lease. The IRS reviewed Green Rivers dissolution plan and agreed to
accept payments of Bonnevilles liquidated interest.
Bonneville then brought an additional claim of wrongful dissolution that
was eventually consolidated with the original action. Due to the levies, Green
River filed a counterclaim naming the United States as an additional defendant
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and sought declaratory relief with respect to whether the United States or
Bonneville was entitled to receive payments related to Bonnevilles joint venture
interest. The United States removed the case to federal court. The district court
granted the United States unopposed motion for summary judgment, thus
reducing the tax liens against Triangle to judgment and concluding that
Bonnevilles joint venture interest was subject to the tax lien. The district court
also granted summary judgment to Green River after concluding that 26 U.S.C.
6332(e), which provides immunity to third parties who comply with IRS levies,
prevented Bonneville from bringing its state law claims against Green River.
On appeal of that decision, a panel of this Court affirmed the district court
on all issues relating to Green Rivers honoring of the federal tax levies . . .
against Bonnevilles interest in the joint venture. United States v. Triangle Oil
Co., No. 98-4147, slip op. at 10 (10th Cir. Jun. 12, 2000) (Aplt. App. at 517).
The panel reversed the district court, however, insofar as it dismissed with
prejudice all of Bonnevilles state law claims against Green River, and stated
further that [o]n this record, we are not persuaded that all of Bonnevilles state
law claims are necessarily subsumed in Green Rivers section 6332(e) defense.
Id.
On remand, the district court again granted summary judgment to Green
River. The district court began by quoting the panel in the prior appeal where it
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stated: Once the levy was served, the IRS effectively stood in the shoes of
Bonneville and acquired constructive possession of whatever rights Bonneville
had in joint venture assets in the possession of Green River. See id. at 89
(Aplt. App. at 51516). The district court reasoned that the joint venture assets
included Bonnevilles state law claims. Thus, according to the district court, the
IRSs actions in this case deprived Bonneville of any ownership interest in the
joint venture and therefore deprived Bonneville of the ability to bring such
claims. In effect, the district court concluded, Bonneville had no standing to
bring its state law claims. On appeal, Bonneville contends that it has standing to
assert its state law claims because it still owns the joint venture interest.

Standard of Review
We review the grant of summary judgment de novo, applying the same legal
standard used by the district court. L&M Enter., Inc. v. BEI Sensors & Sys. Co.,
231 F.3d 1284, 1287 (10th Cir. 2000) (citation omitted). Summary judgment is
appropriate if there is no genuine issue as to any material fact and the moving
party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In
reviewing a summary judgment motion, the court views the record in the light
most favorable to the nonmoving party. Thournir v. Meyer, 909 F.2d 408, 409
(10th Cir.1990) (citation omitted).
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Discussion
The district courts conclusion that Bonneville had no standing to bring
claims related to its joint venture interest necessarily involved an interpretation of
the effect of the IRSs levy power against that interest. Although there is no
question that the IRS properly exercised its levy power in this case, we find it
necessary to review the relevant statutory provisions to determine the effect its
actions had on Bonnevilles joint venture interest. To satisfy a tax deficiency, the
IRS may impose a lien on any property or rights to property belonging to a
taxpayer. 26 U.S.C. 6321. To complement this provision, 6331(a) allows
the Secretary to collect such tax . . . by levy upon all property and rights to
property . . . on which there is a lien . . . . Id. 6331(a). The term levy as
used in this title includes the power of distraint and seizure by any means. Id.
6331(b). This administrative levy power is justified by the need of the
government promptly to secure its revenues. United States v. Natl Bank of
Commerce, 472 U.S. 713, 721 (1985) (internal quotation omitted). Unlike a
lien-foreclosure suit authorized by 26 U.S.C. 7403, however, an administrative
levy does not determine priority disputes between the Government and other
claimants, but instead protects the Government against diversion or loss while
such disputes, if any, are resolved. See id. at 721. Further, an administrative levy
does not transfer ownership of the property to the IRS. United States v.
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Whiting Pools, Inc., 462 U.S. 198, 20910 (1983).

We look initially to state law to determine what rights the taxpayer has in
the property the Government seeks to reach, then to federal law to determine
whether the taxpayers state-delineated rights qualify as property or rights to
property. Drye v. United States, 528 U.S. 49, 58 (1999). Pursuant to Utah law,
joint ventures are treated under the same statutory provisions as are partnerships.
See Utah Code Ann. 48-1-3.1 (1998). Utah law recognizes the following
property rights of a partner: (1) the rights in specific partnership property held as
a tenant in partnership; (2) the interest in the partnership; and (3) the right to
participate in management. Id. 48-1-21. Here, the levy was against
Bonnevilles property and rights to property. See 26 U.S.C. 6321. According
to Utah law, [a joint venturers] interest in the [joint venture] is his share of the
profits and surplus, and the same is personal property. Utah Code Ann. 48-123. Federal courts, including this circuit, have long defined a partners interest
in the partnership in a similar manner. See United States v. Kaufman, 267 U.S.
408, 414 (1925) (lien against a partner owing an individual tax extends only to
his interest in the surplus of the partnership property); Adler v. Nicholas, 166
F.2d 674, 67879 (10th Cir. 1948); see also United States v. Worley, 213 F.2d
509, 512 (6th Cir. 1954) (citing Kaufman); Economy Plumbing & Heating Co. v.
United States, 456 F.2d 713, 716 (Cl. Ct. 1972) (citing Kaufman). The IRS has
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itself recognized that a partners interest in a partnership is generally limited to

the right to a proportionate share of the distribution of partnership profits or
surplus after the payment of partnership debts. Internal Revenue Man.
5.17.3.5.16 (2001); see also Rev. Rul. 73-24, 1973-1 C.B. 602 (IRS could not
seize partnership-owned bank account to satisfy tax deficiency of individual
partner).
Given the property and rights to property pertaining to Bonnevilles interest
in the joint venture, it is clear that the IRS properly accepted the proceeds from
the dissolution of the joint venture. Those proceeds represented Bonnevilles
share of the surplus of joint venture assets over the joint ventures liabilities and
the levy attached to that surplus. Kaufman, 267 U.S. at 414.
Requiring closer scrutiny, however, is the question as to whether the
acceptance of the plan of dissolution and the subsequent payment of the proceeds
to the IRS divested Bonneville of those state-law property rights other than its
economic interest in the joint venture. Even if the IRS had foreclosed on
Bonnevilles interest in the joint venture, which it did not do, under Utah law
Bonneville would still remain a partner and would still be able to exercise
management rights and proportionate control over specific partnership property.
See Utah Code Ann. 48-1-24, 48-1-25 (partner retains management rights). As
such, the fiduciary duty that Green River owed to Bonneville still remained even
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subsequent to the dissolution of the joint venture. See Utah Code Ann. 48-1-18
(fiduciary duty of partner to other partners applies to formation, conduct, or
liquidation of the partnership). We cannot say that Bonnevilles state law claims
related to its status as a partner, as opposed to its status as owner of an interest in
the partnership, were obliterated with the IRSs collection of the proceeds
resulting from the dissolution.
Even were we to assume that Bonnevilles state law claims attached only to
its interest in the joint venture, the district courts conclusion that Bonneville
lacked standing because the IRS divested Bonneville of all interest in the joint
venture still could not stand. Although the IRS levy power does provide the IRS
with abilities to enforce its tax liens that are greater than those possessed by
private secured creditors, it still does not transfer ownership of the property to
the IRS. Whiting Pools, 462 U.S. at 20910. Thus, while the levy power does
provide the IRS with rights to property co-extensive with those of the taxpayer,
see Natl Bank of Commerce, 472 U.S. at 725 (The IRS acquires whatever rights
the taxpayer himself possesses.); Kane v. Capital Guardian Trust Co., 145 F.3d
1218, 1221 (10th Cir. 1998) (stating that the IRS steps into the shoes of the
taxpayer and acquires whatever rights to the property the taxpayer possessed)
(internal quotation omitted), absent a foreclosure or similar action the taxpayer
still retains ownership of the property. See United States v. Challenge Air Intl,
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Inc. (In re Challenge Air Intl, Inc.), 952 F.2d 384, 387 (11th Cir. 1992) (stating
that an administrative levy does not transfer ownership of the property and
holding that the IRSs constructive possession of the right to payment did not
obliterate all rights of the debtor). Given that Bonneville still retained ownership
of whatever remained of its interest in the joint venture, we fail to see why it
should be prevented from exercising the rights attached to that property, e.g., a
right to an accounting, simply because the IRS has chosen not to exercise any of
those related rights.
Green River advances a number of arguments to persuade us that
Bonneville has lost its right to bring its state law claims. To begin, Green River
relies on the law of the case doctrine to establish that: (1) the IRS levy attached
to Bonnevilles interest in the joint venture and the IRS stood in the shoes of
Bonneville and acquired constructive possession of whatever rights Bonneville
had, and (2) the United States succeeded to Bonnevilles right to consent to the
dissolution of the joint venture and the valuation of its interest. Aplee. Br. at 8.
While we agree that the panel decision in the prior appeal established these
points, nothing in our present opinion contradicts those two conclusions. We
have already recognized that the IRS had every right to agree to the dissolution
plan, but have simply not gone so far as to say that the IRS, by accepting the
proceeds of the dissolution, wiped out every property right or cause of action
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Bonneville had in relation to its joint venture participation. Neither case that
Green River cites supports its position that the IRS administrative levy subsumed
all of Bonnevilles joint venture property rights. In United States v. Spurgeon,
861 F.2d 181 (8th Cir. 1988), the taxpayers transferred their farm to a trust, but
the IRS discovered the asset, filed a Notice of Levy, and eventually purchased the
farm in a closed-bid sale. Id. at 182. When the taxpayers attempted to challenge
the Governments ejectment action, the district court concluded that they had no
standing to do so. On appeal, the Eighth Circuit affirmed, holding that the levy
proceedings divested [the taxpayer] of all ownership interests he may have held in
the farm. Id. at 183. We are not faced with the same situation as in Spurgeon,
however, because in this case the IRS never undertook the statutory actions
required to transfer ownership of the joint venture interest. See 26 U.S.C. 6335
(detailing actions necessary for IRS sale of levied property). Green Rivers other
case, Shire Dev. v. Frontier Inv., 799 P.2d 221 (Utah Ct. App. 1990), is also
unavailing. In that case, the court simply held that the plaintiffs could not sue on
a contract to which they were not a party. See id. at 22223. Here, there is no
question that Bonneville, by virtue of its written assignment from Triangle, was a
party to the joint venture agreement.
Green River also relies on an IRS district counsels internal memorandum
for support of its assertion that Bonneville lacks standing. In that memorandum,
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the district counsel stated,

In effect, the Service levied upon the chose in action. Based upon
[Spurgeon and other cases], it appears that Bonneville has no
standing in its lawsuit, since it is in the lawsuit only as a successor
or transferee of Triangle Oil and the Service seized all the right,
title, and interest of Triangle Oil in the funds that are the subject
of the lawsuit.
Aplt. App. at 521. In addition to Spurgeon, which we have already distinguished,
the district counsel also relied on United States v. Geissler, 1993 WL 625535 (D.
Idaho Nov. 8, 1993), where the court held that the taxpayers had no interest in the
real property at issue because an administrative levy and sale had occurred. Id. at
*5. Geissler, like Spurgeon, is therefore of limited relevance because in this case
no sale has occurred. Thus, whatever its value as persuasive authority, the
internal memorandum was premised on an assumption with which we disagree,
namely, that the administrative levy operates as a transfer of all right, title, and
interest in the subject property. This contradicts the Supreme Courts statement
in Whiting Pools, 462 U.S. at 20910, that an administrative levy does not
transfer ownership of the subject property and is also contrary to decisions in
other circuits. See, e.g., Challenge Air Intl, 952 F.2d at 387; United States v.
Sullivan, 333 F.2d 100, 116 (3d Cir. 1964) (stating that implicit in the
administrative levy power is the principle that the Commissioner acts pursuant to
the collection process in the capacity of lienor as distinguished from owner).
Green River also relies on the Kane case to support the district courts
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decision that Bonneville lacked standing to bring its state law claims. In Kane,
the IRS sent a notice of levy to a trust company that was the custodian of the
mutual fund shares in the taxpayers Individual Retirement Account (IRA). 145
F.3d at 1220. Upon receipt of the notice, the trust company liquidated the mutual
fund shares and transferred the proceeds to the IRS. Id. The taxpayer sued the
trust company, claiming that it had transformed the nature of his mutual fund
shares into cash and thereby prevented him from exercising his right to redeem
the shares. Id. at 1222. As Green River states, the core issue in Kane was
whether, after it had levied upon [the] mutual fund . . ., the IRS was entitled to
exercise Mr. Kanes rights [to] liquidate the fund and take delivery of the
monetary proceeds from the liquidation. Aplee. Br. at 11. The court held that
the IRS was indeed entitled to liquidate the fund and therefore concluded that the
trust company could not be sued for complying with the levy. Kane, 145 F.3d at
1224.
Nothing in our opinion is inconsistent with the Kane decision. Like the
court in Kane, we have recognized that the IRS stepped into the taxpayers
shoes and exercised the same right the taxpayer had available, viz., the right to
receive the proceeds upon dissolution. See Kane, 145 F.3d at 1221. Despite
Green Rivers assertion to the contrary, however, Kane is distinguishable and
does not compel us to find that the IRSs acceptance of the dissolution proceeds
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subsumed all of Bonnevilles state law claims. First, the court in Kane was not
addressing the issue we have before us: whether a party in control of a taxpayers
levied property can be held to answer for claims of fraud, breach of contract, or
breach of fiduciary duty that occurred prior to surrender of the property (or rights
thereto) to the IRS. Second, a joint venture interest is a fundamentally different
asset than mutual fund shares residing in an IRA. As discussed supra, a joint
venturers property rights in a joint venture are comprised of more than a mere
financial interest, but include management rights and rights in specific property.
Although the Kane court did state that [o]nce Capital Guardian converted the
IRA to cash . . . the IRS had nothing to sell, and Kane had nothing to redeem,
Kane, 145 F.3d at 1223, we do not read that statement as suggesting that
ownership was transferred. The statement merely reflects the practical result that,
due to the nature of the levied property involved in that case, the liquidation of
the IRA left Kane without any property.
Green River has suggested in its brief as well as in oral argument that
Bonnevilles only avenue for relief in this case is a wrongful levy action pursuant
to 26 U.S.C. 7426. That section allows a party claiming an interest in property
that has allegedly been wrongfully levied upon to bring a civil action against
the United States for relief. 26 U.S.C. 7426. In this appeal, however,
Bonneville does not challenge any aspect of the IRSs actions in connection with
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the levy. Instead, Bonneville claims that Green River used the IRS levy as an
opportunity to violate the joint venture agreement and avoid liability for any
wrongful actions in doing so. Having reviewed the evidence in the light most
favorable to Bonneville, as we must, we cannot say that the record reveals
anything more than that the IRS simply reviewed Green Rivers proposed
dissolution plan and agreed to accept the liquidation proceeds. See Aplt. App. at
220 (declaration of IRS attorney); id. at 446 (deposition of IRS agent); id. at 54,
21 (Green Rivers answer to Bonnevilles state court complaint). Given that the
IRS did not force Green River to implement a dissolution plan, Bonneville simply
had no reason to pursue a wrongful levy action. True, the IRS did review Green
Rivers plan of dissolution, but that was a right that the IRS had by virtue of the
levy and its exercise of that right was therefore not wrongful. See Kane, 145 F.3d
at 1223.
Finally, Green River asserts that Bonnevilles state law claims should be
dismissed because of the protection afforded by 26 U.S.C. 6332(e). That
section provides that an individual who, upon demand by the Secretary,
surrenders . . . property or rights to property . . .shall be discharged from any
obligation or liability to the delinquent taxpayer . . . with respect to such property
or rights to property arising from such surrender or payment. 26 U.S.C.
6332(e). Although the IRS has interpreted the immunity under that section
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broadly, see 26 C.F.R. 301.6632-1(c)(2), the language of the statute limits the
protection to a partys actions arising from such surrender or payment. 26
U.S.C. 6332(e). Thus, as the panel concluded in the prior appeal, Green River
is entitled to the protection of section 6332(e), but only in relation to its
honoring of the federal tax levies. Triangle Oil, slip op. at 10 (Aplt. App. at
517). On these facts, we decline to extend the immunity afforded under 6332(e)
to the entire series of events that occurred prior to the actual surrender of the
dissolution proceeds to the IRS.
Green River cites the law of the case doctrine to support its assertion that
6332(e) immunity applies, but, in this case, we disagree that the doctrine
prevents Bonneville from maintaining its state law claims. Courts use law of the
case to promote decisional finality and rely on it to prevent relitigation of an
issue already decided in prior proceedings of the same case. Octagon Res., Inc. v.
Bonnett Res. Corp. (In re Meridian Reserve, Inc.), 87 F.3d 406, 409 (10th Cir.
1996). Although in the prior appeal the panel stated that Green River is entitled
to the protection of section 6332(e), it nonetheless reversed because it was not
persuaded that all of Bonnevilles state law claims are necessarily subsumed in
Green Rivers section 6332(e) defense. Triangle Oil, slip op. at 10 (Aplt. App.
at 517). Given the panels ultimate disposition of the case in the prior appeal, we
do not see our present decision as abrogat[ing] the prior decision and we
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therefore decline to allow the law of the case doctrine to control our resolution of
this appeal. See In re Meridian, 87 F.3d at 409410.
At oral argument, counsel for Bonneville conceded that the amount of
money it anticipated from this litigation would never reach the current amount of
the levy against the joint venture interest. Further, although the IRS did not file a
brief in this appeal, it has notified the clerk of this court by letter that any
additional amounts that Bonneville recovers should be paid to the United States
up to the full amount of the outstanding tax liability. On this record, we express
no opinion as to the legal ramifications of these particular circumstances, but
leave it to the district court on remand to determine their effect.
Accordingly, we REVERSE the district courts order granting Green
Rivers motion for summary judgment and REMAND to the district court for
further proceedings.

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