Griswold v. United States

United States Court of Appeals,

Eleventh Circuit.

No. 94-2496.

E. Frank GRISWOLD, III, aka Frank Griswold, Plaintiff-Appellant,

v.

UNITED STATES of America, Defendant-Appellee.

Aug. 4, 1995.

Appeal from the United States District Court for the Middle

District of Florida. (No. 93-565-CIV-t-23-A), Charles R. Wilson,

Judge.

Before BIRCH and DUBINA, Circuit Judges, and JOHNSON, Senior

Circuit Judge.

BIRCH, Circuit Judge:

In this appeal, we decide the first impression issue of the

requirements for the Internal Revenue Service ("IRS") to release a

federal tax lien pursuant to Internal Revenue Code ("I.R.C.") §

6325,1 and thereby avoid liability for damages pursuant to I.R.C.

§ 7432.2 The district court found that, to release a federal tax

1

I.R.C. § 6325 governs the release of federal tax liens:

(a) Release of lien.—Subject to such regulations

as the Secretary may prescribe, the Secretary shall

issue a certificate of release of any lien imposed with

respect to any internal revenue tax not later than 30

days after the day on which—

(1) Liability satisfied or unenforceable.—The

Secretary finds that the liability for the amount

assessed, together with all interest in respect

thereof, has been fully satisfied or has become legally

unenforceable....

Id.

2

I.R.C. § 7432 waives the government's sovereign immunity

for private causes of action for civil damages arising from the

IRS's failure to release a lien. The statute provides:

lien, the IRS must file a certificate of release for each notice of

federal tax lien filed against a taxpayer, original or refiled, but

denied the taxpayer's claim for damages because the IRS's failure

to file a certificate of release was neither knowing nor negligent.

We REVERSE in part, AFFIRM in part, and REMAND to the district

court for proceedings consistent with this opinion.

I. BACKGROUND

The IRS assessed responsible person penalties against

plaintiff-appellant E. Frank Griswold III for failure to pay

certain taxes related to two of his businesses during the first,

second and third quarters of 1979, the first quarter of 1980, the

fourth quarter of 1981, the first, second, third and fourth

quarters of 1982, and the first quarter of 1983. The IRS's

assessments resulted in liens against Griswold's property. See

I.R.C. §§ 6321-22. Between 1984 and 1989, the IRS filed a total of

seven, original or refiled, notices of federal tax lien against

(a) In general.—If any officer or employee of the

Internal Revenue Service knowingly, or by reason of

negligence, fails to release a lien under section 6325

on property of the taxpayer, such taxpayer may bring a

civil action for damages against the United States in a

district court of the United States.

....

(e) Notice of failure to release lien.—The

Secretary shall by regulation prescribe reasonable

procedures for a taxpayer to notify the Secretary of

the failure to release a lien under section 6325 on

property of the taxpayer.

Id.

Griswold relating to these liens. 3 The IRS filed four notices of

federal tax lien against Griswold in Hillsborough County, Florida,

for liens arising from the tax periods ending December 31, 1979,

March 31, 1980, and March 31, 1983.4 The IRS filed two notices of

federal tax lien in Rutherford County, Tennessee, and one notice of

federal tax lien in Maricopa County, Arizona. See Appendix A.

Several of the notices of federal tax lien were "refiled notices."

For example, Notice No. 4, see Appendix A, was refiled on July 14,

1989, to maintain priority over purchasers, holders of security

interests, mechanic's lienors, and judgment creditors. See I.R.C.

§§ 6323(g); Treas.Reg. §§ 301.6323(g)-1; Internal Revenue Service

Manual ("IRS Manual") § 535(11).1 (Apr. 29, 1992) ("When the

collection period has been extended, it is necessary to refile the

notice of lien to maintain the continuity of priority established

by the original filing."); 14 J. Mertens, Law of Federal Income

Taxation § 54A.08 (1987) (hereinafter "Mertens"); see also R1-17-

Exhs. F, G, H; Appendix A: Notice Nos. 3, 4 & 6.

In 1991, Griswold and the IRS entered into a settlement

agreement for the payment of the underlying tax obligations and, on

March 10, 1992, Griswold paid the IRS in satisfaction of this

3

The parties, reflecting the language of the statutes and

regulations, refer to "filing" of the notices of federal tax lien

and of the certificates of release. As is common in real estate

transactions, we will often refer to "filing" as "recording";

these terms will be used interchangeably throughout this opinion.

4

Interestingly, one of the liens filed against Griswold was

for an assessment from the tax period ending December 31, 1979.

Nowhere in the settlement agreement or in the materials submitted

to us is it stated that an assessment was made against Griswold

for the fourth quarter of 1979.

agreement. On March 13, 1992, the IRS office coordinating

Griswold's settlement instructed the IRS's District Counsel for

Hillsborough County, Florida, that all liens against Griswold must

be released immediately. Additionally, the office informed and

instructed the District Counsel that "multiple tax liens have been

filed in three locations: Murfreesboro, TN[,] Tempe, AZ, and

Tampa[,] FL. Please make sure that all liens relating to the

above-referenced liabilities are released." R1-1-Exh. D-1.

On March 30, 1992, the IRS filed four certificates of release

on IRS Form 668(Z) in Hillsborough County, Florida. See Appendix

B. Each of the certificates of release corresponds precisely to a

notice of federal tax lien filed, with one exception. Compare R1-

17-Exh. F and Appendix A: Notice No. 3, with R1-17-Exh. E-1 and

Appendix B: Release No. 3. Release No. 3 neither cross-referenced

a recording book or page number for a corresponding notice of

federal tax lien nor included a date of filing for an original or

refiled notice. Moreover, the amount listed on Release No. 3

matched only the amount of a lien apparently already released in

Release No. 2(b); the amount did not match the amount listed in

Notice No. 3, the refiled notice of federal tax lien which remained

5

of record after March 30, 1992. No certificate of release

5

In its original order, the district court erred in

concluding that this lien had been released. See Griswold v.

United States, 73 A.F.T.R.2d 94-1379, 94-1381, 1994 WL 245223

(M.D.Fla.1994), reconsideration denied, 73 A.F.T.R.2d 94-1936,

1994 WL 264644 (M.D.Fla.1994). The district court misread the

record at R1-17-Exh. J. Those records give notice of what has

been filed during the relevant time period, not of what remains

of record. Although the district court conceded its error upon

Griswold's motion for reconsideration, the court dismissed the

effect of that error as harmless. Griswold, 73 A.F.T.R.2d at 94-

1937.

corresponded to Notice No. 3.

Griswold repeatedly requested the IRS to issue a certificate

of release corresponding to Notice No. 3, one which referred to the

recording book and page number of Notice No. 3. For over eighteen

months from the date of settlement and for approximately six months

from the date Griswold filed suit, the IRS failed to issue a

certificate of release referencing this notice specifically.

Further, corresponding certificates of release to the three notices

of federal tax lien filed in Rutherford County and in Maricopa

County were neither issued nor recorded within thirty days from the

date Griswold satisfied the underlying tax obligations.

Griswold requested administrative relief from the IRS for

damages incurred as a result of the IRS's failure to release Notice

No. 3 for approximately eighteen months. 6 It is unclear from the

record in this case whether Griswold also requested damages

resulting from the failure to release the liens in Maricopa County

and in Rutherford County. The IRS did not respond to Griswold's

6

Griswold apparently lost a business opportunity as a result

of Notice No. 3's remaining of record. The president of Paks,

Inc., with whom Griswold had engaged in business negotiations,

declined to participate in the deal because of the IRS liens. He

wrote:

As we advised, regardless of the documentation you

have presented, which indicates you have satisfied your

liabilities with the Internal Revenue Service; the

lien filings that remain active—prohibit us from

associating with you.

Even as you state, the IRS has failed to release

some liens in error—or through negligence; such active

liens would attach to anything of value.

Regretfully, for all of us—we had to pass on this.

R1-1-Exh. N.

request; therefore, in April, 1993, Griswold filed the instant

action pursuant to I.R.C. § 7432.

Five days prior to scheduled trial, on cross-motions for

summary judgment, the district court denied Griswold partial

summary judgment and granted the IRS final summary judgment. The

district court found that section 6325, the attendant regulations,

and the IRS Manual provisions were "confusing or ambiguous."

Griswold v. United States, 73 A.F.T.R.2d 94-1379, 94-1382, 1994 WL

245223 (M.D.Fla.1994), reconsideration denied, 73 A.F.T.R.2d 94-

1936, 1994 WL 264644 (M.D.Fla.1994). Nevertheless, the court found

it equitable to require the IRS to file with the proper recording

office a certificate of release relating to each notice of federal

tax lien filed against the taxpayer, whether the notice was

original or refiled. Id. at 94-1383. The district court then

concluded that because this rule was unanticipated by the IRS, the

IRS's failure to file the certificate of release relating to Notice

No. 3 could be neither knowing nor negligent as required by section

7432. The district court entered judgment for the IRS and denied

Griswold's motion for reconsideration. Griswold appealed.

II. DISCUSSION

A. STANDARD OF REVIEW

Our review of a district court's grant of summary judgment is

plenary, and we independently assess the record. Real Estate Fin.

v. Resolution Trust Corp., 950 F.2d 1540, 1543 (11th Cir.1992) (per

curiam). Summary judgment is granted properly if there are no

genuine issues of material fact and the moving party is entitled to

judgment as a matter of law. Fed.R.Civ.P. 56(c). The non-moving

party bears the burden of showing that genuine issues of material

fact exist, Post v. City of Fort Lauderdale, 7 F.3d 1552, 1557

(11th Cir.1993), modified on other grounds, 14 F.3d 583 (11th

Cir.1994), and we review the record "in the light most favorable to

the non-moving party, with all reasonable inferences drawn in that

party's favor," International Union, UMW v. Jim Walter Resources,

Inc., 6 F.3d 722, 724 (11th Cir.1993); accord Browning v. Peyton,

918 F.2d 1516, 1520 (11th Cir.1990).

B. FEDERAL TAX LIENS

"A lien is one of the means authorized by law for the

Government to protect its position as a creditor in its effort to

enforce collection of taxes." 14 Mertens § 54A.01. This

authorization originates from I.R.C. § 6321, which provides:

If any person liable to pay any tax neglects or refuses

to pay the same after demand, the amount (including any

interest, additional amount, addition to tax, or assessable

penalty, together with any costs that may accrue in addition

thereto) shall be a lien in favor of the United States upon

all property and rights to property, whether real or personal,

belonging to such person.

Id. The lien remains an interest against the taxpayer's property

until the underlying tax obligation is satisfied or becomes legally

unenforceable. I.R.C. § 6322. Once a lien arises, federal law

governs the priority of competing liens asserted against a

taxpayer's property. Aquilino v. United States, 363 U.S. 509, 513-

14, 80 S.Ct. 1277, 1280-81, 4 L.Ed.2d 1365 (1960); Haas v.

Internal Revenue Service (In re Haas), 31 F.3d 1081, 1084 (11th

Cir.1994, cert. denied, 63 U.S.L.W. 3885, 63 U.S.L.W. 3890, ---

U.S. ----, 115 S.Ct. 2578, --- L.Ed.2d ---- (U.S. June 19, 1995)

(No. 94-1581). The general rule is "first in time, first in

right." United States v. City of New Britain, 347 U.S. 81, 85, 74

S.Ct. 367, 370, 98 L.Ed. 520 (1954). Congress made exception to

that rule when it enacted I.R.C. § 6323. That section of the

I.R.C. provides that, unless the government files a notice of

federal tax lien with the designated recording office or the

district court for the proper jurisdiction, the interests of any

purchasers, holders of security interests, mechanic's lienors and

judgment lien creditors prime that of the government. I.R.C. §

6323(a); In re Haas, 31 F.3d at 1084 ("[S]ection 6323 mandates

that notice of the taxing authority's lien "shall be filed' in the

public records before it operates as notice effective against any

holder of a security interest as that term is defined by section

6323."). Congress thus made the government's interests subject to

recording or filing to maintain priority against certain commonly

encountered property interests.

Once the underlying tax obligation giving rise to the federal

tax lien either has been satisfied or has become legally

unenforceable, the IRS is required to release the lien within

thirty days. I.R.C. § 6325. On appeal, Griswold contends that the

IRS failed to release the lien referenced in Notice No. 3 and the

liens filed in Maricopa and Rutherford Counties within the time

period allowed; thus, the IRS is liable to him for damages. The

IRS asserts that Release No. 3 effectively released the lien

described in Notice No. 3, and, alternatively, that Release No.

2(b) released that lien. There are several aspects of certificates

of release which we must address to discern whether the IRS, with

Release No. 3 or with Release No. 2(b), released the lien described

in Notice No. 3. We must consider (1) whether the certificate of

release must cross-reference the lien or the notice of federal tax

lien, (2) what information the certificate of release must contain,

and (3) whether the IRS must record the certificate.

C. CERTIFICATES OF RELEASE

The IRS argues that, to be effective, the certificate of

release need only identify the specific lien, and Griswold contends

that the certificate of release must identify the notice of federal

tax lien which has been filed, if any. The district court agreed

with Griswold and found that, if a notice of federal tax lien has

been filed, then the certificate of release must relate to the

notice. "We ... examine the plain meaning of the statute to

determine if Congressional intent concerning the issue at hand is

so clearly embodied in the text as to eliminate the need for this

court to examine the legislative history or agency regulations."

RJR Nabisco, Inc. v. United States, 955 F.2d 1457, 1461 (11th

Cir.1992). The statute states that:

the Secretary shall issue a certificate of release of any lien

imposed with respect to any internal revenue tax not later

than 30 days after the day on which ... [t]he Secretary finds

that the liability for the amount assessed, together with all

interest in respect thereof, has been fully satisfied or has

become legally unenforceable.

Section 6325. The IRS advocates that the plain language of the

statute controls; however, we do not find this language to be

unambiguous. The statutory scheme clearly contemplates the filing

of the notice of federal tax lien whenever a lien has arisen, but

nothing in the statute addresses how one removes a notice of

federal tax lien from the public record in order to release the

government's priority.7 Congressional thought on how to release a

lien is not conveyed. Therefore, we look to legislative history,

the corresponding treasury regulations, and the IRS's own manual.8

Our research revealed no legislative history addressing this

issue directly. Congress did indicate, however, that the Federal

Tax Lien Act of 1966 was an attempt to bring federal tax lien laws

9

into line with the Uniform Commercial Code ("U.C.C.").

7

We have stated:

[S]ection 6323 ... operates to protect holders of

perfected security interests from unfiled tax liens or

so-called "secret liens'.... The filing requirement is

critical: even a holder of a security interest who has

actual knowledge of an unfiled tax lien will prevail

over the government.

In re Haas, 31 F.3d at 1084; see id. at 1084 n. 4.

8

While the IRS Manual does not have the force of law, see

Anderson v. United States, 44 F.3d 795, 799 (9th Cir.1995), the

manual provisions do constitute persuasive authority as to the

IRS's interpretation of the statute and the regulations.

9

Senate Report No. 1708 on the Federal Tax Lien Act of 1966

stated:

Since the adoption of the Federal income tax in

1913, the nature of commercial financial transactions

has changed appreciably. Business practices have been

substantially revised and, as a result, many new types

of secured transactions have been developed. In an

attempt to take into account these changed commercial

transactions, and to secure greater uniformity among

the several States, a Uniform Commercial Code was

promulgated somewhat over 10 years ago by the America

Law Institute and the National Conference of

Commissioners on Uniform State Laws. A revised version

of this code is already law in over 40 States and could

well be adopted by many of the remaining States in the

near future. Under the Commercial Code, priority now

is afforded new types of commercial secured creditors

not previously protected.

This bill is in part an attempt to conform the

lien provisions of the internal revenue laws to the

concepts developed in the Uniform Commercial Code. It

Certificates of release are similar to the U.C.C.'s termination

statements. Termination statements are filed to put the public on

notice that a security interest identified in a financing statement

has ended. Financing statements are akin to the notices of federal

tax lien filed; they give the names and addresses of the debtor

and the secured party, and contain a statement indicating the types

or describing the items of collateral. See Ala.Code § 7-9-402(1);

Fla.Stat. ch. 679.402(1); Ga.Code Ann. § 11-9-402(1). Termination

statements must be filed within a certain time period from the end

of a secured party's interest in property and must identify the

original financing statements by filing number. See Ala.Code § 7-

9-404(1); Fla.Stat. ch. 679.404(1); Ga.Code Ann. § 11-9-404(1).

Congress, however, did not provide precise criteria for a

certificate of release as is found in the U.C.C. for termination

statements. Because there is no legislative history to "fill[ ]

the gaps" concerning references in a certificate of release, we

turn next to the federal regulations. See RJR Nabisco, 955 F.2d at

1464.

Although the IRS now argues that certificates of release

relate to individual liens, Temporary Treasury Regulation 401.6325-

represents an effort to adjust the provisions in the

internal revenue laws relating to the collection of

taxes of delinquent persons to the more recent

developments in commercial practice (permitted and

protected under State law) and to deal with a multitude

of technical problems which have arisen over the past

50 years. The bill represents the culmination of a

project initiated approximately 10 years ago by those

concerned with the relationship of the tax lien

provisions to the interests of other creditors.

S.Rep. No. 1708, 89th Cong., 2d Sess. 1-2 (1966), reprinted

in 1966 U.S.C.C.A.N. 3722, 3722-23 (emphasis added).

1(e) allows the IRS's district director to forego issuing a

10

certificate of release for each and every lien. Instead, the

district director may, and usually will, wait until all liabilities

listed on the notice of federal tax lien have been satisfied or

have become unenforceable to issue a certificate of release. If

the taxpayer would like to obtain the release of a lien that is

described in a notice of federal tax lien listing multiple liens,

and the liability underlying that lien is either satisfied or is

legally unenforceable, then the district director must issue a

certificate of release upon request by the taxpayer.11

10

This regulation provides:

(e) Notice of a Federal tax lien which lists

multiple liabilities. When a notice of Federal tax

liens lists multiple tax liabilities, the district

director shall issue a certificate of release when all

of the tax liabilities listed in the notice of Federal

tax lien have been fully satisfied or have become

legally unenforceable. In addition, if the taxpayer

requests that a certificate of release be issued with

respect to one or more tax liabilities listed in the

notice of Federal tax lien and such liability has been

fully satisfied or has become legally unenforceable,

the district director shall issue a certificate of

release. For example, if a notice of Federal tax lien

lists two separate liabilities and one of the

liabilities is satisfied, the taxpayer may request the

issuance of a certificate of release with respect to

the satisfied tax liability and the district director

shall issue a release.

Tempt.Treas.Reg. 401.6325-1(e) (emphasis added). Evidently,

notices of federal tax liens often list more than one lien.

11

The IRS, by taking portions of this regulation and a

portion of the relevant IRS Manual provisions out of context, see

Appellee's Brief at 25-26 & n. 4, misrepresented to us that the

taxpayer always needs to request a certificate of release if the

taxpayer desires a certificate of release for a notice of federal

tax lien which has been filed. The provisions partially cited,

when read in full, require only that the taxpayer make such a

request when the underlying tax obligation of one lien listed on

a notice of federal tax lien has been satisfied or is

These regulations are internally implemented in the IRS

Manual. Section 535(14).1 of the manual states:

(1) Although each assessment listed on a Notice of Lien

is a separate lien and a certificate of release could legally

be issued when each assessment is satisfied or becomes

unenforceable, the general practice will be to issue a

certificate of release only after all assessments covered by

a notice of lien meet the criteria for release.

(2) If a specific request is received from the taxpayer

to issue a release for those modules on the lien which have

been satisfied or are unenforceable, the request should be

forwarded to SPf or other designated function, to issue a

partial release of the lien.

IRS Manual § 535(14).1 (Apr. 29, 1992) (emphasis added). Further,

Temporary Treasury Regulation 401.6325-1, entitled "Release of

liens" provides that

[t]he district director shall issue a certificate of release

for a filed notice of Federal tax lien not later than 30 days

after the date on which the district director finds that the

entire tax liability listed in such notice of Federal tax lien

has been fully satisfied ... or has become legally

unenforceable.

Temp.Treas.Reg. 401.6325-1(a). If we were to accept the IRS's

innovative and inconsistent argument that the IRS must file a

separate certificate of release for each lien, then these federal

regulations and the IRS's operating procedures would be

meaningless.

"The IRS's understanding of the terms of the Code is entitled

to considerable deference." United States v. National Bank of

Commerce, 472 U.S. 713, 730, 105 S.Ct. 2919, 2929, 86 L.Ed.2d 565

(1985) (emphasis added); accord Asencio v. Immigration &

Naturalization Serv., 37 F.3d 614, 616 (11th Cir.1994) (per

unenforceable and the notice listing that lien also lists liens

which continue to be valid.

curiam). Hence, we must choose whether to accept the IRS's

interpretation as presented to the district court and to us, or the

interpretation in the Code of Federal Regulations. In light of the

regulations that the IRS itself has enunciated and which have been

effective since 1985, we decline to accept the IRS's spurious new

arguments as to issuing a certificate of release for each lien.

Clearly, the IRS has never implemented that practice.

The IRS acknowledges that to release a lien under section

6325 it must issue a certificate of release identifying the tax

liabilities which were satisfied or which had become legally

unenforceable. The IRS contends, however, identifying the

liabilities consists of providing on the certificate of release the

correct taxpayer identification number, the date of assessment and

the period of tax liability. It insists that assessment amount or

notice recording information is unnecessary. The IRS offers that

its responsibility to issue a certificate of release may be

fulfilled by filing the certificate of release in the recording

office where the notice of federal tax lien is filed.12

12

This statement is made by the IRS repeatedly in the

record. R1-9-3 (IRS's Memorandum in Support of Motion for

Summary Judgment) ("On March 30, 1992, all of the tax liens

identified in the four Notices of Federal Tax Lien filed in

Hillsborough County were released by the Internal Revenue Service

by virtue of the filing of certificates of release." (emphasis

added)); R1-9-4 ("Section 6325 requires the United States to

release a tax lien within 30 days of the liability having become

satisfied or unenforceable as a matter of law. The United States

maintains that it satisfied its obligations under Section 6325 by

timely filing Certificates of Release of Federal Tax Lien

identifying the tax liabilities that had been fully paid."); R1-

24-2 (Joint Pretrial Statement) ("3a. Theory of the United

States' Case[;] The United States maintains that it satisfied

its obligations under Section 6325 by timely filing Certificates

of Release of Federal Tax Lien identifying the tax liabilities

that had been fully paid."); R1-10-Exh. 1-2 (Declaration of

This limited amount of information suggested by the IRS,

however, may be insufficient to identify a lien in some instances.

In this case, for example, two liens which had the same assessment

date and the same period of liability were filed against Griswold

in Hillsborough County, Florida, as separate notices of federal tax

lien. Notice No. 1, filed in October, 1985, listed an assessment

of $12,800.15, and Notice No. 2(c), filed in April, 1986, listed an

assessment of $12,580.15. Despite the different assessment

amounts, even by the IRS's standards, the liens were

indistinguishable.13

Furthermore, prior to the expiration of Notice No. 1, the IRS

refiled the notice as Notice No. 4. Notice No. 4 specifically

referred to Notice No. 1 by time and date of original filing and

the book and page number of recording. Notice No. 4 also contained

the same assessment amount as the original Notice No. 1. When

Griswold satisfied the underlying tax obligation, the IRS issued

one certificate of release. This certificate referenced the

original notice of federal tax lien, Notice No. 1, by recording

information and referenced the refiled notice of federal tax lien,

Notice No. 4, by serial number. The certificate of release

Toney Altieri) ("[A] tax lien ... is released when a certificate

of release Form 668(Z) is filed for the appropriate tax

periods."); Appellee's Brief at 7 ("[T]he United States

contend[s] that it ... satisfied the requirements of I.R.C. §

6325 by timely filing certificates of release of Federal Tax

Liens which identified those tax liabilities which had been

satisfied, thereby resulting in the release of the liens.").

13

Separate certificates of release were filed for each

notice, and the certificates listed accordingly the differing

assessment amounts. See R-1-17-Exhs. C, D, Appendix A: Notice

Nos. 1 & 2(c); R1-17-Exhs. C-1, D-1, Appendix B: Release Nos. 1

& 2(c).

included the same assessment amount listed in both Notice No. 1 and

Notice No. 4.

The critical lien at issue in this case, the lien identified

in Notice No. 2(b), indicated that it must be refiled by October 7,

1987. The IRS apparently refiled the notice of federal tax lien on

July 13, 1987, as Notice No. 3, which reflected a higher assessment

balance than the original Notice No. 2(b).14 No other identifying

information was contained on Notice No. 3; no matching assessment

amounts, no recording information, no serial numbers were found.

The liens could be matched conclusively neither by the amounts

listed on the liens nor by the recording information of the

original notice of federal tax lien. The certificate of release

which allegedly released both the refiled Notice No. 3 and the

original Notice No. 2(b) contained no date indicating when the

original or refiled notice was recorded, although the Form 668(Z)

provides a space for that information; it contained a serial

number which matched no other notice of federal tax lien on file

against Griswold; and it contained no recording information

referring to the original or refiled notices.

As demonstrated above, multiple liens can arise against a

taxpayer for the same type of tax liability, the same tax period,

and the same date of assessment. Thus, unless there is some

particular identifying information by which to match the original

and refiled notices of federal tax lien and the certificates of

14

This may be because the IRS's manual provides that the

refiled notice of federal tax lien should "reflect the current

unpaid balance of assessment." IRS Manual § 535(11).71 (Apr. 29,

1992).

release, no person reviewing the title to Griswold's property could

conclude with certainty that the lien had been released. As stated

by the IRS, the releases must identify the underlying tax

obligations. The purpose of this is to allow one to deduce which

assessment or lien had been released. While we do not dictate to

the IRS how to ensure that notices of federal tax lien and

certificates of release can be matched,15 without some corresponding

information in the original and refiled notice of federal tax lien

and in the certificate of release allowing for a match to be made,

the lien has not been released.16 See Ala.Code § 7-9-404(1)

(requiring termination statements to reference the filing number of

the original financing statement); Fla.Stat. ch. 679.404(1)

(same); Ga.Code Ann. § 11-9-404(1) (same).

Accordingly, we must determine how this procedure applies to

this case and refiled notices of federal tax lien.17 In Griswold's

15

Cf. United States v. Union Cent. Life Ins. Co., 368 U.S.

291, 294, 82 S.Ct. 349, 351, 7 L.Ed.2d 294 (1961) ("While §

3672(a)(1) unquestionably requires notice of a federal lien to be

filed in a state office when the State authoritatively designates

an office for that purpose, the section does not purport to

permit the State to prescribe the form or the contents of that

notice. Since such an authorization might well result in

radically differing forms of federal tax notices for the various

States, it would run counter to the principle of uniformity which

has long been the accepted practice in the field of federal

taxation.").

16

The use of serial numbers and recording information are

two reasonable ways of accomplishing this goal.

17

Senate Report No. 1708, which preceded enactment of the

Federal Tax Lien Act of 1966, unequivocally indicates Congress's

purpose behind requiring refiling of the liens. The Senate

report states:

Public notice of the existence of a Federal tax

lien is given under present law by the filing of a

notice of the lien. As indicated previously, various

case, without refiling, the original Notice No. 2(b) would have

become ineffective to retain a priority interest in the property

for that lien. As a result of the effects of expiration and of

interests may come ahead of a Federal tax lien if they

arise before the filing of notice. Once the filing

occurs, under present law the filing remains effective

without any refiling of the notice. However, tax liens

may expire, not only because the tax liability is

satisfied, but also because they become unenforceable

as a result of the running of the statute of

limitations. Generally, the Federal Government has 6

years from the date of assessment to take action to

collect the tax. As a result a potential creditor may

well assume that if a notice of Federal Tax lien

indicates that the assessment occurred more than 6

years before his search of the records, he may then act

safely on the assumption that the Federal tax lien is

no longer enforceable. As a result, he may feel secure

in accepting the taxpayer's property as good security

for the extension of credit. However, the 6-year

statute of limitations on the collection of a Federal

tax after assessment may be extended by agreement with

the taxpayer or where the running of the statute of

limitations is suspended such as where the taxpayer is

out of the country for at least 6 months.... As a

result, it is not unusual for a tax lien to be valid

for more than 6 years after it arises.

To remove this potential source of uncertainty for

creditors, the bill as passed by the House provides

that the [IRS] is to be required to refile its notice

of lien in the same office where the original notice is

filed.... The failure to refile the tax lien at the

appropriate time is not to affect the validity of the

lien itself. However, it nullifies the effect of the

prior filing of the notice of the tax lien. Any timely

refiling of a tax lien, in effect, represents a

continuation of the prior filing, but any late refiling

of a tax lien, in effect, constitutes a new filing. As

a result, in the case of a late refiling, any security

interest arising after the prior filing of the tax

lien, but before the refiling, obtains a priority to

the same extent and under the same conditions as if no

tax lien had been filed prior to the time of the late

refiling.

S.Rep. No. 1708, 89th Cong., 2d Sess. 12 (1966), reprinted

in 1966 U.S.C.C.A.N. 3722, 3733. Congress has since

extended the statute of limitations to ten years. §

6323(g)(3).

refiling on priority, the only notice of federal tax lien which is

critical to the creditor and to the taxpayer is the one giving

notice that the lien is still active and that the United States

maintains a continued priority interest in the taxpayer's

property.18 See supra note 17.

The IRS, citing its IRS Manual, contends that "only one

certificate of release needs to be filed in order to effectively

release multiple notices of lien." R1-9-8. The IRS quotes the IRS

Manual provision as follows: " "The filing of a certificate of

release Form 668(Z) shall extinguish the lien and remove all

notices thereof from the records.' " R1-9-7 (quoting IRS Manual §

535(11).8(2) (Apr. 29, 1992)). In the context of refiled notices

of federal tax liens, as this argument is made, the IRS's

contention is specious. Although we begin with the plain language

when construing a statute, regulation or rule, "we do not look at

one word or one provision in isolation, but rather look to the

statutory scheme for clarification and contextual reference."

United States v. McLemore, 28 F.3d 1160 (11th Cir.1994) (citation

omitted). The complete section in the IRS Manual reads:

Release of Refiled Notice of Lien

(1) The Form 668-F, used to refile a lien, is not

self-releasing. When the extended statutory period for

collection has expired, a certificate of release must be

filed.

18

Notices of federal tax lien will expire without refiling

and may be self-releasing. See generally § 6323(g)(1); R1-17-

Exh. D (IRS Form 668(Y)) ("IMPORTANT RELEASE INFORMATION—With

respect to each assessment listed below, unless notice of lien is

refiled by the date given in column (e), this notice shall, on

the day following such date, operate as a certificate of release

as defined in IRC 6325(a)." (emphasis added)).

(2) The filing of a certificate of release Form 668(Z)

shall extinguish the lien and remove all notices thereof from

the records, i.e., a certificate of release issued on Form

668(Z) will release the same assessment shown on the Form

668(Y).19

IRS Manual 535(11).8. Section 5717.6(1) of the IRS Manual, also

entitled "Release of Refiled Notice of Lien," states: "[t]he

filing of a certificate of release (Part 3 of Form 668-F) will also

release the same assessment shown on the original lien. Only the

one document is required." IRS Manual § 5717.6(1) (Feb. 11, 1994)

(emphasis added). The IRS Manual clearly contemplates that if the

certificate of release refers to the refiled notice of federal tax

lien, then all previous notices of federal tax lien and the

obligations underlying them are released. We disagree with the

assertion that, if a certificate of release is filed for the

original notice of federal tax lien, then all subsequent notices

filed are released. If an original notice of federal tax lien has

been refiled, then a certificate of release must be issued for the

refiled notice. One certificate of release will be sufficient to

release the original and generally expired notices of federal tax

lien. With respect to Notice No. 3, no release was filed that

adequately identified the lien, the original notice of federal tax

lien, or the refiled notice. As a result, the IRS failed to

release this lien.

Griswold contends that, in accordance with the IRS's

19

Form 668(Y) is generally used to file original notices of

federal tax lien. We note, however, that one of the refiled

Griswold notices of federal tax lien is on Form 668(Y) instead of

on the regular Form 668-F; yet, the refiling information was

inserted by a computer printer on a standard notice of federal

tax lien. The remaining refiled notices of federal tax lien,

Notice Nos. 3 and 6, were filed on a preprinted Form 668-F.

regulations and its own manual, the IRS must record the certificate

of release. The IRS argues that it is only required to issue a

certificate of release rather than to record it. Both parties

interpreted the district court's order to require that the IRS

actually record the certificates of release. We, however, do not

read the district court's judgment so narrowly. In consecutive

sentences of its order, the district court parallels "filing" and

"issuing." The court stated that

[a]lthough the Court finds that the IRS must file a

certificate of release for each notice of federal tax lien,

the Court does not find that Defendants are liable pursuant to

26 U.S.C. section 7432. Because of the uncertainty

surrounding the issue of whether or not the IRS must issue a

certificate of release for each notice of federal tax lien or

simply for each lien, the Court cannot find that, even if

Defendant had failed to release the lien at issue, it did so

"knowingly, or by reason of negligence."

Griswold, 73 A.F.T.R. at 94-1383 (emphasis added). Although it

appears to us that the district court confused the terms "issue"

and "file" and nothing more, we engage in statutory construction

analysis. We look first to the plain language of section 6325.

Green Tree Acceptance, Inc. v. Hoggle (In re Hoggle), 12 F.3d 1008,

1010 (11th Cir.1994). Section 6325 requires the IRS to "issue"

certificates of release when underlying tax liabilities have been

satisfied. To "issue" means to send out, put into circulation,

distribute or publish. The Random House Dictionary of the English

Language 1015 (2d ed. 1987). Yet, the IRS cannot publish a

certificate of release in just any manner or deliver the

certificate of release to just anyone; such a random distribution

would contravene the statute's purposes. See In re Hoggle, 12 F.3d

at 1010 ("Rules of statutory construction dictate that the plain

meaning is conclusive, "except in the "rare cases [in which] the

literal application of a statute will produce a result demonstrably

at odds with the intentions of its drafters." ' " (quoting United

States v. Ron Pair Enters., Inc., 489 U.S. 235, 242, 109 S.Ct.

1026, 1031, 103 L.Ed.2d 290 (1989) (quoting Griffin v. Oceanic

Contractors, Inc., 458 U.S. 564, 570, 102 S.Ct. 3245, 3250, 73

L.Ed.2d 973 (1982))) (alteration in original).

To avoid the absurd result that the IRS could deliver a

certificate of release to any person on the street, we conclude

that to issue a certificate of release means that if a certificate

of release has been filed against the taxpayer, the IRS must either

deliver it to the recording office in which the corresponding

notice of federal tax lien has been filed or deliver it to the

taxpayer. The taxpayer may then proceed as necessary to file the

certificate of release.20 If the IRS never filed a notice of

20

IRS Manual § 5717.52 (Feb. 16, 1989) governs the

"Disposition of certificate of release." It states in pertinent

part:

(1) Form 668(z) or Part 3 of Form 668-F will be

mailed or presented to the proper recording office. If

the certificate is mailed to the recording office and

it is necessary to have a transmittal accompany the

certificate of release, Form 3915, Processing Notices

and releases of Federal Tax Lien and Other Related

Certificates, will be used by checking the applicable

blocks on the form. A self-addressed, indicia clause

(postage and fees paid), envelope will also accompany

the certificates of release if a receipt is requested.

(2) In some instances, the taxpayer may insist

upon personally recording the release. In these cases,

the fee for filing the certificate of release of lien

will not be collected from the taxpayer. Notice 48 is

provided for transmitting certificates to taxpayer.

Id.

federal tax lien, then delivery of the certificate of release to

the taxpayer is sufficient. Unless the lien is self-releasing, the

IRS is required to issue the certificate of release only in either

of the above manners. See United States v. Waite, Inc., 480

F.Supp. 1235, 1240 (W.D.Pa.1979) ("The lien ... is not released

until the certificate is issued.").

Therefore, we hold that, to release a lien, the IRS must issue

a certificate of release which sufficiently identifies the

underlying tax obligation and lien as well as any notices of

federal tax lien filed with respect to that lien so that a person

searching title to the property could discover whether a lien

currently existed. Insofar as the district court required the IRS

to issue certificates of release adequately identifying the lien

and any notices of federal tax lien filed, it is affirmed. To the

extent that the district court may have required that the IRS

record all certificates of release, it is reversed.

D. LIABILITY UNDER I.R.C. SECTION 7432

The district court held that the IRS could not be held liable

for damages arising from its failure to issue a certificate of

release relating to the refiled notice of federal tax lien, Notice

No. 3, because it concluded that the issue was so uncertain that

IRS personnel could not have acted knowingly or negligently. The

provisions requiring the IRS to act responsibly in identifying and

releasing the liens are part of their own regulations and internal

procedures and are fully consistent with Congress's general intent

to make federal tax lien law coincide with general business

practices. There is nothing novel in mandating that the IRS

identify the lien being released and the notice of federal tax lien

filed against the property sufficiently. The arguments advanced by

the IRS appear to camouflage and compound what may have been a

simple mistake. Additionally, we note that, despite the IRS's

arguments regarding the taxpayer's request to release the lien,21

Griswold pursued all possible avenues to have a certificate of

release issued in accordance with the IRS's procedures and still a

release was not forthcoming until September, 1993. Consistent with

our holding herein, we remand to the district court to determine

whether the IRS personnel's actions in failing to release this lien

in a timely manner were either knowing or negligent.

In its order denying Griswold's motion for reconsideration,

the district court also denied Griswold relief with respect to the

tardy release of the liens filed in Maricopa County and in

Rutherford County. The parties do not dispute that these

certificates of release were not issued and the releases effective

until well past thirty (30) days after the underlying liabilities

had been satisfied. This is prima facie evidence that the IRS

violated section 6325. Upon Griswold's motion for reconsideration,

the district court apparently found that Griswold abandoned any

argument that the IRS was liable for its failure to release the

liens in Maricopa County and in Rutherford County in a timely

21

The IRS attempted to argue that Griswold failed to give

the IRS proper notice per Temp.Treas.Reg. 401.6325-1(f) to

release the liens. The IRS had ample notice of its failure to

release the liens and certainly had such knowledge before

Griswold finally mailed them a copy of the offending notice of

federal tax lien, as allegedly required by the regulation. The

IRS's assertion is disingenuous considering that it still took

the IRS over 10 months to release the lien after receiving that

copy of the notice of federal tax lien.

manner. Such a finding is clearly erroneous. As noted above,

however, we cannot discern adequately whether Griswold exhausted

his administrative remedies with respect to these liens. This is

a prerequisite to maintaining a section 7432 action. I.R.C. §

7432(d)(1). Therefore, we remand to the district court to

determine whether Griswold exhausted his administrative remedies

and, if so, whether he is entitled to damages.

III. CONCLUSION

For the foregoing reasons, the district court is AFFIRMED in

part and REVERSED in part. We REMAND to the district court to

determine the following: (1) whether the IRS's failure to issue a

certificate of release properly identifying the refiled notice of

federal tax lien, Notice No. 3, was either knowing or negligent,

and if so, whether Griswold is entitled to an award of damages, and

(2) whether Griswold exhausted his administrative remedies with

respect to the tardy release of the liens in Maricopa County and in

Rutherford County, and if so, whether he should be awarded damages

under section 7432.

APPENDIX A

CA (95) 3792-1,SIZE-41 PICAS,TYPE-

CA (95) 3792-1,SIZE-41 PICAS,TYPE-

APPENDIX B

CA (95) 3792-2,SIZE-41 PICAS,TYPE-

CA (95) 3792-2,SIZE-41 PICAS,TYPE-