Fact Finding

Fact Finding page3

MEMORANDUM ON UNITED STATES' MOTION FOR SUMMARY JUDGMENT

STAIR, JR., Bankruptcy Judge: On October 19, 2001 , the Plaintiffs, Kenneth and Peggy Hurley, filed the Complaint initiating this adversary proceeding in which they seek equitable relief from this court setting aside certain recorded deeds transferring the Plaintiffs' real property, which the Plaintiffs claim were fraudulendy [fraudulently] obtained by the Debtor, Ragip Sinan Mungan d/b/a Mortgage Masters, Inc. The United States of America, "by and through the Internal Revenue Service" ( IRS ) is named as a defendant due to federal tax liens levied against the real property on account of taxes assessed against the Plaintiffs and Defendant Mortgage Masters, Inc. (Mortgage Masters).

Before the court is a Motion for Summary Judgment (Motion) filed by the IRS on October 4, 2002 , asserting that regardless of which entity actually owns the real property real at issue, the Plaintiffs or Mortgage Masters, the IRS has liens encumbering the real property based on recorded federal tax liens. The Plaintiffs filed a "Plaintiffs' Response to United States ' Motion for Summary Judgment" on October 15, 2002 , stating that their tax liability has been satisfied pursuant to payment and settlement with the IRS . Neither Mortgage Masters, the Longs, nor any other defendant filed a response to the Motion. Accordingly, no defendant opposes the Motion. ¹

This is a core proceeding. 28 U.S.C.A §157(B)(2)(A), (K), and (O). (West 1993).

The facts, as pertinent to the Motion, are set forth in the Plaintiffs' Complaint and the Motion. Prior to December 1997, the Plaintiffs owned two parcels of real property, one located at 4220 Van Dyke Drive , Knoxville , Tennessee (collectively, the Real Property). For reasons in dispute and still to be litigated, the Plaintiffs transferred at the Van Dyke property to the Defendants Michael and Robin Hunley and transferred the Van Dyke property was subsequently transferred to Mortgage Masters. By this adversary proceeding, the Plaintiffs are seeking to set aside these conveyances as fraudulent.

The IRS filed four federal tax liens against the Plaintiffs: (1) on August 15, 1994, in the aggregate amount of $12,920.98; (2) on September 29, 1994, in the amount of $1,617.00; (3) on February 10, 1998, in the aggregate amount of $2,285.64; and (4) on March 23, 2001, in the amount of $1,083.34 (the Federal Tax Liens). ² The IRS claims that these tax liens are secured by the Real Property, regardless of whether it is owned by tho Plaintiffs, the Longs, or Mortgage Masters. The IRS argues that if the Plaintiffs still own the Real Property, the 1994 tax liens attached to it prior to any alleged fraudulent conveyances or other encumbrances. Additionally, if the court later determines that the Real Property is owned by Mortgage Masters and/or the Longs, the IRS again claims to be a secured creditor by virtue of its tax liens. ³

Rule 56 of the Federal Rules of Civil Procedure provides for summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." FED R. CIV . P. 56(c). Rule 56(c) is made applicable to this adversary proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure.

The IRS , as the moving party, bears the initial burden of proving both that there is no issue of material and that it is entitled to judgment as a matter of law. Owens Corning v. Nat'l Union Fire Ftre Ins. Co., 257 F.3d 484, 491 (6th Cir. 2001), The burden then shifts to the nonmoving party, in this case, the Plaintiffs, to produce specific facts showing that there is, in fact, a genuine issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 106 S.Ct. 1348, 1356 (1986) (citing FED . R. CIV . P. 56(e)). In doing so, the nonmoving party must cite specific evidence and may not merely rely upon allegations contained in the pleadings. Harris v. Gen. Motors Corp, 201 F.3d 800, 802 (6th Cir. 2000). The facts, and all resulting inferences must be viewed in the light most favorable to the nonmovant. Matsushita, 106 S.Ct. at 1356. The court must then decide whether "the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2512 (1986).

III

In support of its Motion for Summary Judgment, the IRS attached copies of the Federal Tax Liens recorded against both the Plaintiffs and Mortgage Masters. The Federal Tax Liens concerning the Plaintiffs are itemized as follows:

(1) Lien filed August 15, 1994 , which includes taxes in the amount of $12,920.98 for the periods ending December 31, 1989 , and December 31, 1992 . These taxes were assessed on May 28, 1990 , and October 4, 1993 , respectively.

(2) Lien filed September 29, 1994 , which includes taxes in the amount of $1,617.00 for the period ending December 31, 1993 , which were assessed on September 5, 1994 .

(3) Lien filed February 10, 1998 , which includes taxes in the amount of $2,285.64 for the periods ending December 31, 1994 , December 31, 1995 , and December 31, 1996 . These taxes were assessed on October 2, 1995 , September 9, 1996 , and September 29, 1997 , respectively.

(4) Lien filed March 23, 2001 , which includes taxes in the amount of $1,083.34 for the period ending December 31, 1997 , and assessed on November 16, 1998 .

In response, the Plaintiffs rely upon the Affidavit of the Plaintiff, Kenneth Hunley, together with a payment receipt showing payment to the IRS in the amount of $359.84 on October 9, 2001 , and a second copy of the payment receipt with a handwritten "Paid in full. D. Sester ID 62-11031" and marked "Received October 10, 2001 Internal Revenue Service, W & I Area 3, Territory 4, Knoxville , Tennessee ." In his Affidavit, the Plaintiff states that Ms. Sester, an employee of the IRS in Knoxville, Tennessee, told him that payment of the $359.84 would clear the Plaintiffs' debt with the IRS because "the rest of the debt was in a `non-collectable [sic] status."' The Plaintiff also avers that Ms. Sester told the Plaintiffs that "the uncollectable [sic] debt liens would be gone or expire by the end of 2003." The Plaintiffs therefore contend that their debt to the IRS has been "fully satisfied and paid in full."

Federal Tax Liens are governed by the Internal Revenue Code (I.R.C.), located at title 26 of the United States Code. The statutes pertinent to this action are, as follows:

§6321. Lien for taxes.

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.

I.R.C. §6321 (West 2002).

§6322. Period of lien.

Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time.

I.R.C. §6322 (West 2002).

§6325. Release of lien or discharge of property.

(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; ...

....

(f) Effect of certificate. --

(1) Conclusiveness. --... [I]f a certificate is issued pursuant to this section by the Secretary and is filed in the same office as the notice of lien to which it relates (if such notice of lien has been filed) such certificate shall have the following effect:

(A) in the case of a certificate of release, such certificate shall be conclusive that the lien referred to in such certificate is extinguished;

(B) in the case of a certificate of discharge, such certificate shall be conclusive that the property covered by such certificate is discharged from the lien[.]

I.R.C. §6325(a)(1) (West 2002).

§7122. Compromises.

(a) Authorization. --The Secretary may compromise any civil or criminal case arising under the internal revenue laws prior to reference to the Department of Justice for prosecution or defense; ...

(b) Record. --Whenever a compromise is made by the Secretary in any case, there shall be placed on file in the office of the Secretary the opinion of the General Counsel for the Department of the Treasury or his delegate, with his reasons therefor, with a statement of --

(1) The amount of tax assessed,

(2) The amount of interest, additional amount, addition to the tax, or assessable penalty, imposed by law on the person against whom the tax is assessed, and

(3) The amount actually paid in accordance with the terms of the compromise.

Notwithstanding the foregoing provisions of this subsection, no such opinion shall be required with respect to the compromise of any civil case in which the unpaid amount of tax assessed (including any interest, additional amount, addition to the tax, or assessable penalty) is less than $50,000. However, such compromise shall be subject to continuing quality review by the Secretary.

I.R.C. §7122 (West 2002).

In summary, a valid tax lien, once recorded, remains as long as the underlying tax liability is enforceable. I.R.C. §6322; United States v. Hodes [ 66-1 USTC ¶9232], 355 F.2d 746, 748 (2d Cir. 1966). There are only three methods for releasing an IRS tax lien: "1) the tax lien becomes unenforceable by operation of time, (2) the debt which is the basis of the lien is paid in full or (3) an Offer in Compromise is accepted by the IRS which would settle the debt and any tax lien associated with the debt would be no longer enforceable and have to be released." United States v. Alfano [ 99-1 USTC ¶50,303], 34 F.Supp.2d 827, 840 ( E.D. N.Y. 1999) (quoting In re Robert Turner Optical, Inc. [ 94-2 USTC ¶50,555], Bankr. No. 93-01004, 1994 WL 779352, at *4 (Bankr. N.D. Ala. Sept. 8, 1994 )). To be unenforceable under I.R.C. §6322, "all of the [ IRS 's] remedies ... must be extinguished." Id. at 839 (quoting Dillard v. United States (In re Dillard), 118 B.R. 89, 93 (Bankr. N.D. Ill. 1990)).

In the present case, there is no question that the Federal Tax Liens have not become unenforceable by operation of time. As noted on the Federal Tax Liens, with the exception of the 1989 assessments, the re-file deadlines have not yet expired. As such, the Liens would still be enforceable. ⁴ Additionally, there is no question that the Plaintiffs have not paid in full the total amounts assessed and covered by the Federal Tax Liens.

The first issue is whether the Plaintiffs' $359.84 payment to the IRS constituted a compromise for the entire amount of tax liability owed by the Plaintiffs, such that it would release the Federal Tax Liens on the Real Property.

"An offer to compromise a tax liability must be made in writing, must be signed by the taxpayer under penalty of perjury, and must contain all of the information prescribed or requested by the Secretary." 26 C.F.R. §301.7122-1(d)(1). The offer must also be accepted by an IRS delegate authorized to accept such compromises. See Foulds v. Comm'r [ CCH Dec. 45,433(M)], 56 T.C.M. (CCH) 1112 (1989). "An offer to compromise has not been accepted until the IRS issues a written notification of acceptance to the taxpayer or the taxpayer's representative." 26 C.F.R. §301.7122-1(e)(1). These regulations are strictly construed and compliance therewith is mandatory. Delohery v. Internal Revenue Serv. [ 94-1 USTC ¶50,144], 843 F.Supp. 666, 669 (D. Colo. 1994) (citing Boulez v. Comm'r [ 87-1 USTC ¶9177], 810 F.2d 209, 215 (D.C. Cir. 1987)). These regulations provide the only means by which a compromise with the IRS may be effectuated. Id. (citing Klein v. Comm'r [ 90-1 USTC ¶50,251], 899 F.2d 1149, 1152 (11th Cir. 1990); Laurins v. Comm'r [ 89-2 USTC ¶9636], 889 F.2d 910, 912 (9th Cir. 1989); Brooks v. United States [ 87-2 USTC ¶9626], 833 F.2d 1136, 1145 (4th Cir. 1987)).

An informal "agreement" does not constitute a compromise under the I.R.C. and does not bind the government. See Botany Worsted Mills v. United States [1 USTC ¶348], 49 S.Ct. 129, 132 (1929). Therefore, "even if subordinate revenue officials at a conference informally [agree] to accept the taxpayer's payment of a lien in full satisfaction of [his] liability, that agreement would not bind [the IRS]." Foulds [ CCH Dec. 45,433(M)], 56 T.C.M. 1112 (citing Parks v. Comm'r [ CCH Dec. 23,848], 33 T.C. 298, 301 (1959)).

The Plaintiffs have the burden of proving that their payment of $359.84 was a compromise of their entire tax liability of $17,906.96. Id. (citing Welch v. Helvering [3 USTC ¶1164], 290 U.S. 111 (1933)). The Plaintiffs must likewise prove that D. Sester, as the government official who allegedly formed a compromise with them, had the actual authority to bind the IRS to such agreement. See Brubaker v. United States [ 65-1 USTC ¶9274], 342 F.2d 655, 662 (7th Cir. 1965); Buesing v. United States [ 99-1 USTC ¶50,246], 42 Fed.Cl. 679, 688 (Fed. Cl. 1999) (citing, among others, City of El Centro v. United States, 922 F.2d 816, 820 (Fed. Cir. 1990)).

The documents provided by the Plaintiffs do not convince the court that the Plaintiffs and the IRS entered into a compromise whereby the Plaintiffs were released from their total $17,906.96 tax liability by the payment of $359.84. First, there was no offer to compromise in writing, as required by 26 C.F.R. 301.7122-1(d)(1), nor was there a written acceptance by the IRS of an offer of compromise, as required by 26 C.F.R. §301.7122-1(e)(1). The receipt of payment evidencing the handwritten "Paid in full. D. Sester ID 62-11031" and marked "Received October 10, 2001 Internal Revenue Service, W&I Area 3, Territory 4, Knoxville, Tennessee" does not satisfy this requirement.

Moreover, after reviewing these documents, it is obvious to the court that the $359.84 payment made by the Plaintiffs was in satisfaction of their past due 1999 taxes, for which the IRS has not recorded or asserted a lien. The taxes covered by the Federal Tax Liens are for the years 1989, 1992, 1993, 1994, 1995, 1996, and 1997.

Second, the IRS did not file a certificate of release pertaining to the Federal Tax Liens with the Knox County Register of Deeds, as it is required to do in the event of a party's satisfaction. See I.R.C. §6325. A certificate of release of the lien must be filed, otherwise, the tax lien is not released. United States v. Waite, Inc. [ 80-1 USTC ¶9128], 480 F.Supp. 1235, 1239-40 (W.D. Pa. 1979). Clearly, the IRS did not intend for the Plaintiffs' $359.84 payment to satisfy the entire $17,906.96 balance owed by the Plaintiffs and secured by the Federal Tax Liens. ⁵

The next issue before the court is whether the Federal Tax Liens which attached to the Real Property prior to any alleged conveyances or transfers would still attach regardless of the current owner of the Real Property.

Federal tax liens attach to the property and property rights of the delinquent taxpayer. Pronto Enters., Inc. v. United States, 188 B.R. 590 (W.D. Mo. 1995). This includes real and personal property owned at the time of assessment and after-acquired. United States v. Gen. Motors Corp. [ 91-2 USTC ¶50,158], 929 F.2d 249, 251 (6th Cir. 1991). Once a federal tax lien has attached, the delinquent taxpayer "cannot avoid or defeat liability by disclaiming or renouncing interest in the property or transferring or conveying the interest." United States v. Jepsen [ 2000-2 USTC ¶50,608], 131 F.Supp.2d 1076, 1085 (W.D. Ark. 2000) (citing United States v. Rodgers [ 83-1 USTC ¶9374], 103 S.Ct. 2132, 2141 n.6 (1983)). Likewise, once the lien has attached, any subsequent purchaser of the property takes subject to the IRS lien. See United States v. Bess [ 58-2 USTC ¶9595], 78 S.Ct. 1054, 1058 (1958) ("The transfer of property subsequent to the attachment of the lien...."); United States v. Donahue [ 90-2 USTC ¶50,343], 905 F.2d 1325, 1331 (9th Cir. 1990) ("[A] lien continues to attach to a taxpayer's property regardless of any subsequent transfer of the property.").

It does not matter whether the Real Property is presently owned by the Plaintiffs, by the Longs, or by Mortgage Masters. In either event, the IRS maintains a security interest in the Real Property pursuant to its Federal Tax Liens filed prior to any sort of transfer. Accordingly, if the Plaintiffs still own the Real Property, it is encumbered by the Federal Tax Lies filed in their names. However, if Mortgage Masters is the owner of the Van Dyke property, that property is encumbered not only by the Federal Tax Liens in Mortgage Masters' name, but also by the Federal Tax Liens filed in the Plaintiffs' names prior to the first date of transfer, i.e., all Federal Tax Liens filed prior to August 1, 1999. Likewise, the Jade Road property allegedly transferred to the Longs is encumbered with the Federal Tax Liens in the Plaintiffs' names prior to and at the time of the transfer.

VII

Taking all facts and inferences in the light most favorable to the Plaintiffs, the court finds that there is no genuine issue of material fact. There was no compromise of the total tax liability evidenced by the Federal Tax Liens. Additionally, pursuant to the Internal Revenue Code, the Federal Tax Liens attaching the Real Property remain until either released or satisfied. As such, the IRS is entitled to summary as a matter of law.

An order consistent with this Memorandum will be entered.

ORDER

Pursuant to the Memorandum on United States ' Motion for Summary Judgment filed this date, the court directs the following:

1. The United States' Motion for Summary Judgment filed October 4, 2002, by the Defendant United States of America, on behalf of its agency, the Internal Revenue Service, is GRANTED.

2. The Federal Tax Liens filed against the Plaintiffs by the Internal Revenue Service on August 15, 1994, September 29, 1994, February 10, 1998, and March 23, 2001, unless otherwise released by the Internal Revenue Service, continue to encumber the real property known as 4220 Van Dyke Drive, Knoxville, Tennessee, and 610 Jade Road, Knoxville, Tennessee, and the interest of the Defendant United States in these properties is superior to all subsequently filed interests in the properties.

3. The Federal Tax Liens filed against the Defendant Mortgage Masters, Inc., by the Internal Revenue Service on February 23, 2001, April 10, 2001, and October 29, 2001, continue to encumber the real property known as 4220 Van Dyke Drive, Knoxville, Tennessee, and the interest of the United States in this property is superior to all subsequently filed interests in this property.

SO ORDERED.

¹ Pursuant to E.D.Tenn. LBR 7007-1, a party opposing a motion for summary judgment "shall be respond within twenty days after the date of the filing of the motion.... A failure to respond shall be construed by the court to mean that the respondent does not oppose the relief requested by the motion."

² Additionally, the IRS filed the following three Federal Tax Liens against Mortgage Masters: (1) February 23, 2001, in the aggregate amount of $65,897.03; (2) April 10, 2001, in the amount of $1,650.00; and (3) October 29, 2001, in the amount of $7,363.61. Because Mortgage Masters and Robert and Melissa Long do not oppose the Motion, summary judgment will be granted the IRS as to them. See supra 1.

³ Summary judgment is being granted on this claim, so if Mortgage Masters and the Longs are deemed to own the Real Property, the Real Property is subject to the IRS liens.

⁴ The Federal Tax Lien notices each provide that:

With respect to each assessment below, unless notice of lien is refiled by the date in column (e), this notice shall constitute the certificate of release of lien as defined in IRC 6235(a).

The deadline for re-filing the Federal Tax Lien as to the 1989 assessment was June 27, 2000. It appears that the 1989 assessment was not re-filed, and if so, the tax liability therefor, in the amount of $11,079.25, was in fact released.

⁵ As noted earlier, however, if the IRS did not re-file its Federal Tax Lien for the 1999 assessment prior to June 27, 2000, the Notice of Tax Lien recorded on August 15, 1994, will, in fact, serve as the Certificate of Release of Lien as to $11,079.25 in tax liability, thus leaving the Plaintiffs' total tax liability as $6,827.71.

[2000-1 USTC ¶50,386] James R. Smith and Thelma J. Smith, Plaintiffs v. The United States , Defendant

U.S. Court of Federal Claims, 99-227T, 4/10/2000

[Code Sec. 6402 ]

Refund claims: Tax overpayment: Offset of prior years' liability.--Married taxpayers who filed suit for payment of income tax refunds allegedly due failed to raise any triable issue of fact. The government's introduction into evidence of assessments against the couple for unpaid taxes, penalties and interest from prior years established a prima facie case of liability. Although the couple alleged that the IRS had wrongfully retained refunds due them as a result of overpayments for several tax years, they did not introduce any evidence to rebut the government's prima facie case that the couple had outstanding tax liabilities to which the overpayments had been applied. BACK REFERENCES: ¶38,519.16

ORDER

MEROW, Senior Judge:

This case is currently before the court on the defendant's Motion for Summary Judgment. After a careful review of the parties' submissions, the defendant's motion is GRANTED.

FACTS

Plaintiffs James R. and Thelma J. Smith filed suit in this court seeking payment of personal income tax refunds allegedly due. Plaintiffs previously litigated personal income tax deficiencies in the United States Tax Court. In a decision filed November 26, 1990, ¹ the Tax Court determined that plaintiffs had an income tax deficiency of $5,810, a substantial understatement of liability penalty of $1,453 and a late filing penalty of $1,183 for the 1983 tax year. In addition, the Tax Court found a tax deficiency of $12,312, a substantial understatement of liability penalty of $3,078, and a late payment penalty of $3,078, for the 1984 tax year. A second Tax Court Decision, filed April 29, 1994, ² determined that plaintiffs had an income tax deficiency of $3,545 and a late filing penalty of $100 for the tax year 1986. Finally, the decision determined that plaintiffs had an income tax deficiency of $4,142 and a late filing penalty of $671 for 1987.

Following each of the Tax Court decisions, the Internal Revenue Service (" IRS ") assessed against plaintiffs the amounts determined by the Tax Court ³ along with interest. On or about April 24, 1991, the IRS assessed $7,485.56 in interest on plaintiffs' 1983 tax return and $15,219.75 in interest on plaintiffs' 1984 tax return. On or about July 4, 1994, the IRS assessed $3,582.78 in interest for plaintiffs' 1986 tax return and $3,178.91 in interest for plaintiffs' 1987 tax return. As of May 26, 1999 , IRS records show that plaintiffs have an outstanding balance of $7,925.90 in accrued interest for tax year 1983; assessed tax, penalties, and interest of $34,509.35 for tax year 1984; assessed tax, penalties, and interest of $7,251.78 for tax year 1986; and assessed tax, penalties, and interest of $8,591.91 for tax year 1987.

Following the first Tax Court decision, plaintiffs filed their personal income tax return for the 1991 tax year, on or about April 15, 1992. ⁴ Plaintiffs overpaid $2,548 and this amount was refunded to them, along with $40.76 in interest. On or about April 15, 1993, plaintiffs filed their 1992 tax return and requested a refund of $925. On or about March 25, 1993, the IRS applied the $925 tax overpayment against plaintiffs' outstanding liability for income tax, penalties and interest assessed for their 1983 tax year. On or about April 15, 1994, plaintiffs filed their 1993 tax return and requested that their $1,102 overpayment be refunded. On or about April 4, 1994, the IRS applied plaintiffs' $1,102 refund to their outstanding assessments for the 1983 tax year. On or about April 15, 1995, plaintiffs filed their 1994 tax return and requested a refund of their overpayment of $869. On or about April 15, 1995, the IRS applied the $869 overpayment to plaintiffs' outstanding assessments for the tax year 1983. On or about April 15, 1996, plaintiffs filed their 1995 tax return and requested a refund of $2,115. On or about April 15, 1996, the IRS applied the $2,115 overpayment to plaintiffs' outstanding assessments for the tax year 1983. On or about April 15, 1997, plaintiffs filed their 1996 tax return and reported an amount owed of $1,189. Plaintiffs included payment of $1,189 with their return. The IRS determined that plaintiffs made an error in calculating their tax liability and had overpaid by $721. The IRS applied the $721 overpayment to plaintiffs' outstanding assessments for the tax year 1983.

Plaintiffs filed their first Complaint, pro se, on April 16, 1999. ⁵ On June 4, 1999, the defendant filed a Motion For a More Definite Statement Pursuant to RCFC 12(e), as the Complaint did not contain sufficient information to allow a responsive pleading. The defendant's motion was allowed on June 8, 1999 , and plaintiffs filed a First Amended Complaint on June 21, 1999 . Following defendant's Motion to Dismiss Pursuant to RCFC 12(b)(4) for Failure to State a Claim Upon Which Relief Can Be Granted, this Court held that plaintiffs:

have asserted a claim within this Court's jurisdiction pursuant to 28 U.S.C. §1491 for refunds allegedly due them for the tax years 1991-1996. To the extent plaintiffs' papers can be construed to request relief beyond refund claims for these years, the Court does not have jurisdiction to grant relief and this will be reflected in the final resolution of this litigation.

DISCUSSION

Plaintiffs maintain that the IRS has wrongfully retained money due them from income tax overpayments for the tax years 1991 to 1996. The defendant maintains that any overpayments were either refunded or properly credited against outstanding assessments for previous tax years. The defendant correctly points to 26 U.S.C. §6402(a) to demonstrate that the IRS ' application of income tax overpayments to other outstanding assessments is proper. The section provides that:

In the case of any overpayment, the Secretary, within the applicable period of limitations, may credit the amount of such overpayment, including any interest allowed thereon, against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall, subject to subsections (c), (d) and (e), refund any balance to such person.

26 U.S.C. §6402(a) (1994).

The IRS records demonstrate that plaintiffs received a refund for the tax year 1991 and that refunds for the tax years 1992 to 1996 were applied to outstanding assessments. Plaintiffs, for their part, deny that they received any funds from the IRS . Assessments by the IRS , properly entered into evidence establish a prima facie case of liability. See e.g. Welch v. Helvering [3 USTC ¶1164], 290 U.S. 111, 15 (1933); Adams v. United States, 358 F.2d 986, 994 (Ct.Cl. 1966); Michaud v. United States [97-2 USTC ¶50,972], 40 Fed.Cl. 1, 15 (1997). As plaintiffs have not introduced any evidence to rebut the defendant's prima facie case, or to raise any triable issue of fact, the Motion for Summary Judgment must be granted. ⁶

CONCLUSION

Based on the foregoing, it is hereby ORDERED:

(1) Defendant's November 8, 1999 Motion For Summary Judgment is GRANTED.

(2) Final Judgment shall be entered dismissing plaintiffs' Complaint amended. No costs to be assessed.

¹ Smith v. Comm'r of Internal Revenue, No. 15262-89 (T.C. Nov. 26, 1990 ).

² Smith v. Comm'r of Internal Revenue, No. 517-93 (T.C. April 29, 1991 ).

³ The $1,183 late filing penalty for tax year 1983 was assessed by the IRS prior to the Tax Court decision.

⁴ Timely tax returns are considered to be filed on the last day for filing. See 26 U.S.C. §6513(a) (1994).

⁵ Plaintiffs' Complaint is dated March 28, 1999.

⁶ In addition to the submissions filed in this matter as permitted by the Rules, an additional "Response," dated December 6, 1999, was mailed directly to chambers by plaintiffs, and was received on December 16, 1999. This Response adds nothing of significance to this matter but since it was received, to complete the record, it is ORDERED that it now be filed by leave of Court.

[2001-1 USTC ¶50,185] TTK Management v. United States of America

U.S. District Court, Cent. Dist. Calif. , So. Div., SA CV 99-1542 AHS (ANx), 11/21/2000

[Code Sec. 6330 ]

Collection due process hearing: District court review, standard: Abuse of discretion.--A de novo standard of review was not the proper standard to be applied to Appeals determinations made at the taxpayer's collection due process hearing. Although Code Sec. 6330 is silent as to the proper standard of review, the legislative history clearly indicated that Congress intended review to be based on an abuse of discretion standard when the amount of tax liability was not in issue.

[Code Sec. 6330 ]

Collection due process hearing: Office of Appeals: Jurisdiction: District court: Rehearing, order for.--The district court did not have authority to order the IRS Office of Appeals to grant a taxpayer another hearing in connection with the taxpayer's compromise offer in satisfaction of its past-due payroll taxes. The Office of Appeals still had jurisdiction over the matter pursuant to Code Sec. 6330(d)(2) . Neither the statute nor its legislative history suggested that a district court had authority to order Appeals to reconsider its decisions.

[Code Sec. 7121 ]

Settlement agreement: Offer in compromise: Appeals officer: Abuse of discretion.--An appeals officer did not abuse his discretion when he did not accept a taxpayer's offer-in-compromise and instituted collection proceedings for past-due payroll taxes. The taxpayer had a long history of noncompliance with payroll tax laws. In addition, it was not meeting current payroll tax obligations at the time of the appeals hearing. Similarly, the officer's decision not to give the taxpayer a full quarter to demonstrate an ability to comply was not an abuse of discretion.

ORDER: (1) GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND (2) GRANTING DEPENDANT'S MOTION TO STRIKE THE TAYLOR DECLARATION AS UNTIMELY

I. Procedural History

STOTLER, Judge:

On January 19, 2000, plaintiff TTK Management filed a corrected Complaint for Lien or Levy Action under 26 U.S.C. §6330(d). In its Complaint, plaintiff appeals the December 8, 1999 Notice of Determination of the Internal Revenue Service (" IRS ") Appeals Office to undertake a levy action against plaintiff's hair salon at 22461 Antonio Parkway A-155 in Rancho Santa Margarita, California .

On September 25, 2000, defendant United States of America filed a motion for summary judgment that the Appeals Officer did not abuse his discretion by making the determination set forth in the Notice of Determination. Plaintiff filed its opposition to defendant's motion on October 24, 2000. Defendant filed its reply on November 6, 2000. Hearing on the matter was set on the Court's November 13, 2000 hearing calendar. On November 6, 2000, plaintiff filed the declaration of A. Lavar Taylor in support of its opposition to the motion. On November 7, 2000, defendant filed a motion to strike the Taylor declaration as untimely filed.

The Court took defendant's motion for summary judgment and motion to strike under submission, and removed the hearing on both motions from the Court's November 13, 2000.

II. Rulings

1. Jurisdiction

Pursuant to 26 U.S.C. §6330(d)(1), the Court may review a timely-filed appeal of an IRS Notice of Determination. On appeal to this Court, plaintiff may raise only those issues raised with the Appeals Office at the Collection Due Process Hearing. See Temporary Treasury Regulation §301.6320-1T, Q & A F5. The parties do not dispute that during the appeals hearing, plaintiff asked Appeals Officer Robert Bottoms to consider an installment plan or offer-in-compromise as an alternative to a levy action for collection of plaintiff's past-due taxes. This Court, therefore, has jurisdiction to review the Appeals Office's rejection of these alternatives.

2. Standard of Review

Plaintiff urges the Court to apply a de novo standard of review on the ground that the circumstances of plaintiff have changed since the Appeals Office issued the Notice of Determination, i.e, plaintiff has been in compliance with its employment tax obligations for the three consecutive quarters following the Notice of Determination. Opp'n at 17:23-18:3.

Although section 6330(d) does not specify the standard of review a district court should apply to an appeal of a Notice of Determination, the legislative history unequivocally indicates that Congress intended the Court to review the Notice of Determination for abuse of discretion where, as here, the amount of the tax liability was not in dispute at the hearing. See H. Conf. Rept. 105-599, at 266 (1998) ("Where the validity of the tax liability is not properly part of the appeal, the taxpayer may challenge the determination of the appeals officers for abuse of discretion."); see also Goza v. Commissioner of Internal Revenue [ CCH Dec. 53,803], 114 T.C. 176, 179-80 (2000); and Sego v. Commissioner [ CCH Dec. 53,938], 114 T.C. No. 603 (2000). The Court will not substitute such a clear congressional statement of legislative intent for a de novo standard of review unsupported by any legislative history or statutory language.

The Court reviews the decision of the Appeals Office in the Notice of Determination for abuse of discretion. An abuse of discretion is "a plain error, discretion exercised to an end not justified by the evidence, a judgment that is clearly against the logic and effect of the facts as are found." Wing v. Asarco, Inc., 114 F.3d 986 (9th Cir. 1997).

3. No Abuse of Discretion

Plaintiff contends that Appeals Officer Bottoms abused his discretion by not considering an installment plan or offer-in-compromise as an alternative to a levy action against the Antonio Parkway hair salon.

The Court finds that the Appeals Officer did, in fact, consider plaintiff's proposal that the IRS select an installment plan or offer-in-compromise to collect plaintiff's overdue taxes. Bottoms and plaintiff's counsel discussed these two alternatives in telephone conversations prior to the August 2, 1999 meeting, conversations that both parties concede were part of the "hearing" by the Appeals Office. Opp'n at 5:3-9, 15:19-23; Linas Udrys Decl. at ¶14; Robert Bottoms Decl. at ¶11:11-4. Bottoms and plaintiff's counsel also discussed the installment plan and offer-in-compromise options at the August 2, 1999 hearing. Opp'n 16:1-12; Udrys Decl. at ¶16:8-20; Bottoms' Decl at ¶11:14-7. By informing plaintiff in these conversations that the proposed alternatives were not appropriate and by explaining his rationale for not selecting those alternatives, Bottoms clearly considered and rejected the installment plan and offer-in-compromise, despite Bottoms' choice of words in his declaration and misunderstanding of "hearing" to mean only the August 2, 1999 in-person meeting.

Furthermore, the decision to reject the installment plan and offer-in-compromise alternatives was not an abuse of discretion. At the time of the appeals hearing, plaintiff had a long history of non-compliance with payroll tax laws, had failed to pay payroll taxes for every quarter since its inception in May 1997, and was not in compliance for the then-current quarter. Bottoms' Decl. at ¶4(d)-(e). The Court finds that Bottoms did not abuse his discretion to reject the proposed collection alternatives for past liabilities when the plaintiff was not meeting its current payroll tax obligations.

In addition, plaintiff contends that Bottoms abused his discretion by not giving plaintiff one full financial quarter after the August 2, 1999 meeting to show compliance. Opp'n at 21:12-5. The parties do not dispute that during and after the August 2, 1999 in-person meeting, Bottoms stated that he might approve an installment agreement if plaintiff could show one quarter of compliance. Udrys Decl. ¶16:10-20, ¶17:22-8. To show compliance, a taxpayer must be making timely payroll deposits for the current quarter. Mot. at 4 n.1. The parties also do not dispute that Bottoms advised plaintiff at the August 2, 1999 meeting and in telephone conversations with plaintiff's counsel thereafter that the Notice of Determination would be issued "shortly." Udrys Decl. ¶17. Plaintiff contends that Bottoms should have waited at least 180 days after the August 2, 1999 meeting for plaintiff to show compliance.

The Court finds that Appeals Officer was not required to wait, nor did he agree to wait, one full quarter to show compliance. The August 2, 1999 hearing occurred during the third financial quarter ending September 30, 1999. Plaintiff did not show compliance for that quarter despite having nearly two months after the August 2 meeting to comply and receiving Bottoms' warning that the Notice would be issued "shortly." The Notice of Determination was not issued until December 8, 2000. Therefore, the Appeals Office waited four months, or over half of the third quarter and most of the fourth, for plaintiff to show compliance.

Furthermore, plaintiff's hiring of a service to pay plaintiff's payroll taxes automatically to the IRS when due did not require the Appeals Office to continue to wait for timely payments, particularly given plaintiff's long-standing record of delinquency. Plaintiff has presented no evidence that plaintiff informed the Appeals Office that plaintiff had hired this payroll service to ensure future compliance, although the Notice of Determination was not mailed for at least a month after plaintiff hired the payroll service. In short, the Court finds that the Appeals Office did not abuse its discretion by giving plaintiff no more than part of one and most of another financial quarter to show compliance.

Finally, plaintiff urges the Court to order the IRS Appeals Office to reconsider its Notice of Determination given plaintiff's compliance for three quarters since the Notice of Determination was issued. Opp'n at 23:18-25. The IRS Office of Appeals retains jurisdiction over its Notice of Determination pursuant to 26 U.S.C. §6330(d)(2). However, absent any indication in the Internal Revenue Code or its legislative history that a district court can or should order the IRS to reconsider a Notice of Determination in light of "changed circumstances," this Court will not order the IRS Appeals Office to exercise its jurisdiction.

4. Taylor Declaration

Plaintiff's opposition papers to defendant's motion for summary judgment were due on October 24, 2000, pursuant to Local Rule 7.6. Plaintiff did not file the declaration of A. Lavar Taylor until November 6, 2000. Plaintiff has filed no response to defendant's motion to strike, or otherwise offered any explanation for the late filing. The Court grants defendant's request to strike the Taylor declaration as untimely.

III . Conclusion

For the foregoing reasons, the Court finds that plaintiff has raised no triable issue of fact indicating that the Appeals Officer abused his discretion by making the determination set forth in the Notice of Determination. The Court, therefore, grants defendant's motion for summary judgment and enters judgment for defendant.

The Court has this date signed and filed the proposed Judgment lodged by defendant on September 25, 2000. Defendant's proposed Statement of Uncontroverted Facts and Conclusions of Law lodged on September 25, 2000, has been modified by strike-outs and interlineations in accordance with the foregoing ruling, and, as modified, is adopted by the Court.

The Clerk shall serve this minute order on counsel for all parties in this action and provide an advance copy by telecopier.

[2001-1 USTC ¶50,184] AJP Management v. United States of America

U.S. District Court, Cent. Dist. Calif. , So. Div., SA CV 99-1541 AHS (ANx), 11/21/2000

[Code Sec. 6330 ]

Collection due process hearing: District court review, standard: Abuse of discretion.--A de novo standard of review was not the proper standard to be applied to Appeals determinations made at the taxpayer's collection due process hearing. Although Code Sec. 6330 is silent as to the proper standard of review, the legislative history clearly indicated that Congress intended review to be based on an abuse of discretion standard when the amount of tax liability was not in issue.

[Code Sec. 6330 ]

Collection due process hearing: Office of Appeals: Jurisdiction: District court: Rehearing, order for.--The district court did not have authority to order the IRS Office of Appeals to grant a taxpayer another hearing in connection with the taxpayer's compromise offer in satisfaction of its past-due payroll taxes. The Office of Appeals still had jurisdiction over the matter pursuant to Code Sec. 6330(d)(2) . Neither the statute nor its legislative history suggested that a district court had authority to order Appeals to reconsider its decisions.

[Code Sec. 7121 ]

Settlement agreement: Offer in compromise: Appeals officer: Abuse of discretion.--An appeals officer did not abuse his discretion when he did not accept a taxpayer's offer-in-compromise and instituted collection proceedings for past-due payroll taxes. The taxpayer had a long history of noncompliance with payroll tax laws. In addition, it was not meeting current payroll tax obligations at the time of the appeals hearing. Similarly, the officer's decision not to give the taxpayer a full quarter to demonstrate an ability to comply was not an abuse of discretion.

ORDER: (1) GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND (2) GRANTING DEFENDANT'S MOTION TO STRIKE THE TAYLOR DECLARATION AS UNTIMELY

I. Procedural History

STOTLER, Judge:

On December 29, 1999, plaintiff AJP Management filed a corrected Complaint for Lien or Levy Action under 26 U.S.C. §6330(d). In its Complaint, plaintiff appeals the December 1, 1999 Notice of Determination of the Internal Revenue Service (" IRS ") Appeals Office to undertake a levy action against plaintiff's hair salons at 30035 Alicia Parkway in Laguna Niguel, California, and 26878 La Paz Road in Alisio Viejo, California.

The Court took defendant's motion for summary judgment and motion to strike under submission, and removed both motions from the Court's November 13, 2000 hearing calendar.

II. Rulings

1. Jurisdiction

Pursuant to 26 U.S.C. §6330(d)(1), the Court may review a timely-filed appeal of an IRS Notice of Determination. On appeal to this Court, plaintiff may raise only those issues raised with the Appeals Office at the Collection Due Process Hearing. See Temporary Treasury Regulation §301.6320-1T, Q & A F5. The parties do not dispute that plaintiff asked Appeals Officer Robert Bottoms to consider an installment plan or offer-in-compromise as an alternative to a levy action for collection of plaintiff's past-due payroll taxes. This Court, therefore, has jurisdiction to review the Appeals Office's rejection of these alternatives.

2. Standard of Review

Plaintiff urges the Court to apply a de novo standard of review, on the ground that the circumstances of plaintiff have changed since the Appeals Office issued the Notice of Determination, i.e, plaintiff has been in compliance with its employment tax obligations for the last three consecutive quarters. Opp'n at 17:23-18:3.

Although section 6330(d) does not specify the standard of review a district court should apply to an appeal of a Notice of Determination by the IRS Appeals Office, the legislative history unequivocally indicates that Congress intended the Court to review Appeals Office decisions for abuse of discretion where, as here, the amount of the tax liability was not in dispute at the hearing. See H. Conf. Rept. 105-599, at 266 (1998) ("Where the validity of the tax liability is not properly part of the appeal, the taxpayer may challenge the determination of the appeals officers for abuse of discretion."); see also Goza v. Commissioner of Internal Revenue [ CCH Dec. 53,803], 114 T.C. 176, 179-80 (2000); and Sego v. Commissioner [ CCH Dec. 53,938], 114 T.C. No. 603 (2000). The Court will not substitute such a clear congressional statement of legislative intent for a de novo standard of review unsupported by any legislative history or statutory language.

The Court reviews the decision of the Appeals Office as outlined in the Notice of Determination for abuse of discretion. An abuse of discretion is "a plain error, discretion exercised to an end not justified by the evidence, a judgment that is clearly against the logic and effect of the facts as are found." Wing v. Asarco, Inc., 114 F.3d 986 (9th Cir. 1997).

3. No Abuse of Discretion

Plaintiff contends that Appeals Officer Bottoms abused his discretion by not considering an installment plan or offer-in-compromise as an alternative to a levy action to collect the overdue payroll taxes.

The Court finds that the Appeals Officer did consider plaintiff's suggestion that the IRS select an installment plan or offer-in-compromise to collect plaintiff's overdue taxes. Bottoms and plaintiffs' counsel discussed these two alternatives in telephonic conversations prior to the August 2, 1999 meeting, conversations that both parties concede were part of the "hearing" by the Appeals Office. Opp'n at 13:11-25; Linas Udrys Decl. at ¶14; Robert Bottoms Decl. at 11:3-12. Bottoms and plaintiffs' counsel also discussed the installment plan and offer-in-compromise options at the August 2, 1999 hearing. Opp'n 13:11-15, 18-25; Udrys Decl. at ¶16:14-20; Bottoms' Decl. at ¶11:12-5. By informing plaintiff in these conversations that the proposed alternatives was not appropriate, and by explaining his rationale for not selecting those alternatives, Bottoms clearly considered and rejected the installment plan and offer-in-compromise options, despite Bottoms' choice of words in his declaration and misunderstanding of "hearing" to mean only the August 2, 1999 in-person meeting with plaintiff's counsel.

Furthermore, the decision to reject the installment plan and offer-in-compromise alternatives was not an abuse of discretion. At the time of the appeals hearing, plaintiff had a long history of non-compliance with payroll tax laws, had failed to pay payroll for every quarter since its inception in May 1997, and was not in compliance for the then-current quarter. Bottoms' Decl. at ¶4(d)-(e). The Court finds that Bottoms did not abuse his discretion to reject the proposed collection alternatives for past liabilities when the plaintiff was not meeting its current payroll tax obligations.

In addition, plaintiff contends that the Appeals Officer abused his discretion by not giving plaintiff one full financial quarter after the August 2, 1999 meeting to show compliance. Opp'n at 21:12-5. The parties do not dispute that during and after the August 2, 1999 in-person meeting, Bottoms stated that he might approve an installment agreement if plaintiff could show one quarter of compliance. Udrys Decl. ¶16:19-20, ¶17:3-8. To show compliance, a taxpayer must be making timely payroll deposits for the current quarter. Mot. at 4 n.1. The parties also do not dispute that Bottoms advised plaintiff at the August 2, 1999 and in telephone conversations with plaintiff's counsel thereafter that the Notice of Determination would be issued "soon." Plaintiff contends that Bottoms should have waited 180 days, at least, for plaintiff to show compliance.

However, the Court cannot find an abuse of discretion because the Appeals Officer did not wait. Nor did the Appeals Officer agree to wait for one full quarter to show compliance. The August 2, 1999 hearing occurred during the third financial quarter ending September 30, 1999. Plaintiff did not show compliance for that quarter despite having nearly two months after the August 2 meeting to do so and receiving Bottoms' warning that the Notice would be issued "shortly." Udrys Decl. at ¶17. In fact, the Notice of Determination was not issued until December 1, 2000. Therefore, the Appeals Office waited nearly four months, or over half of the third quarter and most of the fourth, for plaintiff to pay accruing payroll taxes.

Finally, plaintiff urges the Court to order the IRS to allow the Appeals Office to reconsider its Notice of Determination given plaintiff's compliance for the last three quarters. Opp'n at 23:21-25. The IRS Office of Appeals retains jurisdiction over its Notice of Determination pursuant to 26 U.S.C. §6330(d)(2). Absent any indication in the Internal Revenue Code or its legislative history that a district court can or should order the IRS to reconsider a Notice of Determination in light of "changed circumstances," this Court declines plaintiff's invitation to order the IRS Appeals Office to exercise its jurisdiction.

4. Taylor Declaration

Plaintiff's opposition papers to defendant's motion for summary judgment were due on October 24, 2000, pursuant to Local Rule 7.6. Plaintiff did not file the declaration of A. Lavar Taylor until November 6, 2000, the day before defendant's reply was due. The Court grants defendant's request to strike the Taylor declaration as untimely.

III . Conclusion

In light of the uncontroverted evidence, the Court finds that plaintiff has raised no triable issue of fact indicating that the Appeals Officer abused his discretion by making the determination set forth in the Notice of Determination. The Court, therefore, grants defendant's motion for summary judgment and enters judgment for defendant.

The Clerk shall serve this minute order on counsel for all parties in this action and provide an advance copy by telecopier.

2001-2 USTC ¶50,783] United States of America , Plaintiff v. Jacob Evseroff, et al., Defendants

U.S. District Court, East. Dist. N.Y., CIV . CV 00-6029 (DGT), 11/6/2001, Related opinions at (DC) 2000-2 USTC ¶50,807 and (CA) 2001-2 USTC ¶50,486 .

[Code Sec. 6501 ]

Deficiencies: Evidence: Burden of proof: Form 4340.--The government was entitled to an award of summary judgment with respect to its action to reduce to judgment federal income tax deficiencies assessed against an attorney that arose as a result of his investments in illegal tax shelters. The government's submission of properly certified Form 4340's for all of the tax years at issue constituted presumptive proof that the assessments were valid. Absent proof by the taxpayer that the assessments and a subsequent levy of his personal property were improper, he failed to meet his burden of proof.

[Code Sec. 7122 ]

Deficiencies: Offers-in-compromise, fraudulent: Evidence: Equitable estoppel: Discovery.--An attorney's equitable estoppel defense was rejected where the government proved that an offer-in-compromise that he submitted was fraudulently prepared by his accountant. There was no misrepresentation on the part of the government that the offer was accepted. Moreover, rather than attempting to establish the authenticity of the documents in issue, the taxpayer unsuccessfully argued that further discovery was necessary to demonstrate that the IRS had accepted his offer. Because his request for additional discovery was speculative and failed to demonstrate that further discovery would turn up any genuine issues, his request for additional discovery was denied.

[Code Sec. 6502 ]

Deficiencies: Enforcement of liens: Assessment date: Statute of limitations.--The government was entitled to reduce to judgment federal income tax deficiencies assessed against an attorney that arose as a result of his investments in illegal tax shelters. His statute of limitations defense was rejected because the government's attempts to collect were made within 10 years from the date of the assessments. BACK REFERENCES: ¶39,020.12

[Code Secs. 7401 and 7403 ]

Deficiencies: Assessment date: Offers-in-compromise, fraudulent: Evidence: Failure to state a claim.--The government was entitled to an award of summary judgment with respect to its action to reduce to judgment federal income tax deficiencies assessed against an attorney that arose as a result of his investments in illegal tax shelters. He failed to carry his burden of proving that the assessments were incorrect. Moreover, his contention that the government failed to state a claim lacked merit because the government had authority, under Code Sec. 7401 and Code Sec. 7403 to request that the assessments be reduced to judgment. BACK REFERENCES: ¶41,543.78 and ¶41,653.80

MEMORANDUM AND ORDER

TRAGER, District Judge:

The United States brought this action to: (1) reduce to judgment federal tax assessments against Jacob Evseroff, (2) establish the validity of liens on Evseroff's property, (3) foreclose on those liens, and (4) determine the interests of various parties in some of that property. The United States alleges that Evseroff owes taxes, interest, and penalties from 1978-82, 1991-92, and 1996. The assessments from 1978-82 were entered as a decision of the United States Tax Court in November 1992, and the IRS subsequently assessed Evseroff with additional tax liabilities for 1991-92 and 1996. The United States now moves for all of the assessments to be reduced to judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure ("FRCP"), or, in the alternative, for summary judgment under Rule 56. In addition, the United States moves for the assessments to be entered as final judgment pursuant to Rule 54(b) of the FRCP, leaving the claims regarding the validity and foreclosure of the liens and the determination of interests in the property pending.

Background

Evseroff, a licensed attorney and a former Assistant District Attorney in Brooklyn , purchased a series of tax shelter investment programs between 1978 and 1982 from his office suite co-tenant, John Serpico. Affidavit of Jacob Evseroff ("Evseroff Aff.") ¶6. Evseroff believed the tax shelters were legal and approved by the IRS . Id. After an audit, however, the IRS notified Evseroff in December 1990 that he owed approximately $900,000 in taxes, penalties, and interest relating to the tax shelters. Evseroff Aff. ¶8. When Evseroff confronted Serpico with the notice, Serpico told him that the IRS had disallowed the tax benefits in 1985 or 1986. Id.

Represented by Serpico, Evseroff challenged the IRS assessments in the United States Tax Court in April 1992. Evseroff Aff. Ex. A. On June 4, 1992, Evseroff transferred his interest in certain properties to his sons and grandchildren through a trust agreement. United States ' Complaint (" U.S. Compl.") Ex. 4; Evseroff Ans. ¶22. On November 5, 1992, the Tax Court entered a decision for $209,113 in taxes and penalties on consent. Evseroff Aff. Ex. B.

In an attempt to reduce the amount of his tax liability, in 1993 Evseroff retained James Graves, a public accountant, to represent him before the IRS . Evseroff Aff. ¶11. Evseroff claims that Graves told him that the IRS told Graves it would accept $110,000 as full settlement of Evseroff's tax liability under its "Offer in Compromise" program. Id. Evseroff claims he authorized Graves to submit the offer to the IRS . Evseroff Aff. ¶12.

According to Evseroff, he received a letter from the IRS dated December 31, 1993 accepting the offer-in-compromise agreement. Evseroff Aff. Ex. C. The purported IRS letter instructed Evseroff to pay the IRS $1,600 per month for 48 months to satisfy his liability. Id. Two other purported IRS letters reflecting the offer-in-compromise exist, one allegedly sent to Graves dated July 6, 1994, and one allegedly sent to Evseroff and his wife dated August 2, 1994. United States ' Reply in Support of Motion for Judgment (" U.S. Reply") Ex. 11. Between January and September 1994, Evseroff made nine $1,600 payments to the IRS . Evseroff Aff. ¶12. All of the checks stated they were for a tax settlement. Evseroff Aff. Ex. D. The IRS accepted the checks, deposited them, and stamped on the back, "FOR CREDIT TO THE U.S. TREASURY." Id. At the time, the IRS apparently did not inform Evseroff how the funds from the checks would be applied. United States Memorandum of Oct. 18, 2001 . IRS documents indicate that the payments were applied to Evseroff's tax liability for 1978. U.S. Reply. Ex. 12.

The United States contends that the IRS never accepted any offer-in-compromise from Evseroff, and that the letters of December 31, 1993, July 6, 1994, and August 2, 1994 are counterfeit. U.S. Reply at 2-9. According to the United States , IRS paper files and computer records in the facilities that serviced the areas in which Evseroff owned homes in 1993 and currently were checked and showed no record that the IRS ever accepted an offer-in-compromise from Evseroff. U.S. Reply Ex. 7-10.

The United States contends that the information contained in the letter proves that it was not issued by the IRS . The letter indicates it was sent from the IRS Brookhaven Service Center , but the United States contends that in 1993 and 1994 the Brookhaven Service Center had no offer-in-compromise function other than rerouting to other IRS facilities offer-in-compromise materials erroneously sent there. U.S. Reply Ex. 8. In addition, the United States claims that its correspondence records do not contain an entry indicating that a letter was issued. Id.

According to the United States , the language of the letter does not accurately reflect IRS correspondence and procedures regarding an offer-in-compromise. The letter has a notation that it is a " LTR 105C," which the United States asserts is used to indicate a letter the IRS sends to notify a taxpayer that his administrative claim for a tax refund has been denied, and that such a letter is not used in connection with an offer-in-compromise. Id. The United States also contends that contrary to IRS procedures regarding an offer-in-compromise, the letter: (1) does not contain specific payment terms or discuss actions available to the IRS in case the taxpayer defaults, (2) claims to close the case before all payments were received, and (3) appears to contain contradictory language about when Evseroff should pay his 1992 taxes. Id.

The United States also contends that the July 6, 1994 and August 2, 1994 letters are counterfeit. The United States alleges that Graves admitted to an IRS criminal investigator in April 1996 that he counterfeited them. Evseroff Aff. Ex. F; U.S. Reply Ex. 11. The investigator, James Martin, interviewed Graves twice in April 1996. Evseroff Aff. Ex. F. According to an arrest warrant affidavit prepared by Martin, in the first interview Graves denied any knowledge that the letters might be fraudulent. Id. In the second interview, however, Graves stated that he had fraudulently prepared both letters, doing a "cut and paste" job to create the false impression that they were issued by the IRS . Id.

Furthermore, the United States claims that, as with the December 31, 1993 letter, the other two letters do not accurately reflect IRS correspondence and procedures regarding an offer-in-compromise. Like the December 31, 1993 letter, the other two letters indicate they were sent from the IRS Brookhaven Service Center , which the United States contends had no offer-in-compromise function in 1993 and 1994. U.S. Reply Ex. 8. The signature block of these two letters indicates they were written by "D. Lewis" in the "Special Procedures" section, but Martin found in his investigation that no person with that name worked at the Brookhaven Service Center in 1994 and that there was no Special Procedures function at the Brookhaven Service Center that year. U.S. Reply Ex. 11. Finally, Martin also found that the letters contain bar codes that refer to employment tax numbers of a taxpayer other than Evseroff or his wife. Id.

In the late summer of 1994, the IRS placed a lien on Evseroff's home in Florida and ordered his checking account seized. Evseroff Aff. ¶13. Evseroff claims this was when he learned that the IRS contended it had no record of accepting his offer-in-compromise. Evseroff Aff. ¶13.

In 1997, Evseroff filed suit against the IRS alleging it had improperly attempted to collect taxes from him. The action was subsequently dismissed. Evseroff v. Internal Revenue Service [2000-2 USTC ¶50,807], 86 A.F.T.R.2d 2000-6711 (E.D.N.Y. 2000), aff'd, Evseroff v. Internal Revenue Service [2001-2 USTC ¶50,486], No. 00-6331, 2001 WL 668528 (2d Cir. June 12, 2001). In that case, Evseroff relied on the purported IRS letters, and the court stated that Graves had forged them. Id. at *1.

From 1992 to 1997, the IRS assessed Evseroff additional tax liabilities based on his 1991, 1992, and 1996 tax returns. U.S. Compl. ¶10. These assessments were not part of the Tax Court decision and apparently are not alleged to be covered by the offer-in-compromise Evseroff claims was accepted by the IRS .

Including all payments, credits, and additional interest and penalties, the United States claims that Evseroff owed $1,546,682.08 as of May 31, 2000, plus additional statutory interest. U.S. Compl. ¶12.

The United States brought this action on October 5, 2000 , to: (1) reduce the federal tax assessments from 1978-82, 1991-92, and 1996 against Evseroff to judgment; (2) establish the validity of liens of the United States on all of Evseroff's property; (3) foreclose on the lien on a piece of real estate in Brooklyn, N.Y. and the other assets of the 1992 trust agreement; and (4) determine the interests and priority of the United States and several defendants in proceeds from a court-ordered sale or liquidation of the Brooklyn property and the trust agreement.

Discussion

(1)

The United States now moves for entry of judgment on the pleadings pursuant to Rule 12(c) of the FRCP, or, in the alternative, for summary judgment under Rule 56, to reduce to judgment the federal tax assessments made by the United States Tax Court and the IRS . ¹ This court has jurisdiction to reduce to judgment federal tax assessments under 26 U.S.C. §7402(a). See United States v. Scherping [99-2 USTC ¶50,758], 187 F.3d 796 (8th Cir. 1999); United States v. Kyser, 78 A.F.T.R.2d 96-6737 (W.D.N.Y. 1996).

The standard for granting a Rule 12(c) motion for judgment on the pleadings is the same as that for a Rule 12(b)(6) motion for failure to state a claim. Patel v. Contemporary Classics of Beverly Hills , 259 F.3d 123, 126 (2d Cir. 2001). For both motions, the court must accept the non-movant's allegations as true, viewing the facts in the light most favorable to the non-moving party. Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir. 1994). A Rule 12(c) motion should be granted if the movant is entitled to judgment as a matter of law. Burns Int'l Sec. Servs. v. Int'l Union, 47 F.3d 14, 16 (2d Cir. 1994).

In its initial motion, the United States sought entry of judgment on the pleadings because Evseroff's answer did not deny the complaint's allegations that: (1) the United States Tax Court entered a decision against him on November 5, 1992 ; (2) the IRS made assessments against him in 1978, 1979, 1980, 1981, 1982, 1991, 1992, and 1996; and (3) the total amount owed by Evseroff as of May 31, 2000 was $1,546,682.08 plus additional statutory interest. United States ' Memorandum of Law in Support of Motion (" U.S. Mem.") at 1-4.

Clearly, however, Evseroff's answers were not intended to admit the United States ' allegations. Instead, Evseroff only agreed that the complaint correctly stated the Tax Court decision and the IRS assessments. Evseroff Answer ("Evseroff Ans.") ¶¶10, 12. For example, responding to the complaint's chart of taxes owed and subsequent penalties, fees, and interest, Evseroff answered: "In response to the allegations contained in paragraph 10 of the Complaint, refers to the IRS transcripts for their true and complete contents." Evseroff Ans. ¶10. Evseroff's other answers are substantially the same, and are far from admissions that he, in fact, owes the amount listed above to the IRS . The United States ' motion for judgment on the pleadings is therefore denied.

(2)

In the alternative, the United States moves for summary judgment pursuant to Rule 56 of the FRCP. Summary judgment is granted when "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). On a motion for summary judgment, the court must consider "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512 (1986). In making this determination, all factual inferences must be drawn in favor of the party against whom summary judgment is sought, viewing the factual assertions in materials such as affidavits, exhibits, and depositions in the light most favorable to the party opposing the motion. Id. at 255, 106 S.Ct. at 2513; Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552 (1986). However, "conclusory statements, conjecture, or speculation" by the non-moving party will not defeat the motion. Kulak v. City of New York , 88 F.3d 63, 71 (2d Cir. 1996).

a. Proper Notice and Demand

Evseroff argues that judgment should not be entered because the United States has not proven that it took the proper steps to issue notice and demand to assess the unpaid taxes and penalties. Evseroff does not offer any evidence that the proper steps were not taken. Instead, he argues that the United states has the burden of proving it took those steps, and that he is entitled to discovery on the issue.

An IRS assessment is made "by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations proscribed by the Secretary." 26 U.S.C. §6203. The IRS satisfies its obligations under this statute when an assessment officer signs a summary record of assessment describing: (1) the taxpayer's name and address; (2) the character of the assessed liability; (3) the taxable period (if any); and (4) the amount of the assessment. Treas. Reg. §301.6203-1. These steps are reflected in Certificates of Assessments and Payments, known as Forms 4340, issued by the IRS . "Courts consistently regard such certificates as presumptively correct and as being sufficient proof, in the absence of evidence to the contrary, of the adequacy and propriety of the notices and assessments listed therein." United States v. Kyser, 78 A.F.T.R.2d 96-6737 (W.D.N.Y. 1996) (citing Hefti v. I.R.S. [93-2 USTC ¶50,591], 8 F.3d 1169, 1172-73 (7th Cir. 1993)).

The United States has submitted properly certified Forms 4340 for all eight of the years in question. U.S. Reply Ex. 12. Evseroff has offered no evidence to contradict their validity, only a conclusory claim that the United States has not proven that it took the proper steps to issue notice and demand. "Conclusory allegations will not suffice to create a genuine issue. There must be more than a 'scintilla of evidence' and more than 'some metaphysical doubt as to the material facts.' " Delaware & Hudson Ry. Co. v. Consolidated Rail Corp., 902 F.2d 174, 178 (2d Cir. 1990) (quoting Anderson, 477 U.S. at 252, 106 S.Ct. at 2512, and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356 (1986)). Accordingly, the court presumes that proper notice and demand was made for the assessments.

b. Offer-in-Compromise

Evseroff argues that the IRS accepted his offer-in-compromise, superseding its right to collect any other amount now. ² Evseroff Aff. ¶16. The United States responds that the IRS never accepted any offer-in-compromise from Evseroff, and that letters of December 31, 1993 , July 6, 1994 , and August 2, 1994 are counterfeit. U.S. Reply at 2-9.

Evseroff does not offer any evidence that the letters are authentic. Instead, he argues that he needs further discovery to demonstrate that the IRS accepted his offer-in-compromise. Evseroff contends that he needs discovery of Evseroff's accountant Graves, Martin, who conducted the IRS investigation into Graves ' alleged forgery, an unnamed IRS employee who assisted Martin, and the IRS personnel who processed his 1993 offer-in-compromise to determine if someone with IRS did, in fact, accept the offer. Evseroff Aff. ¶¶13, 18. Evseroff seeks depositions of the individuals and document discovery from the IRS .

Rule 56(f) of the FRCP governs situations in which a party may need more discovery in order to oppose a summary judgment motion. The rule states:

Should it appear from the affidavits of a party opposing the motion [for summary judgment] that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.

Fed.R.Civ.P. 56(f).

In the Second Circuit, a party opposing summary judgment on the ground that it needs more discovery under Rule 56(f) must present his contention by affidavit. Paddington Partners v. Bouchard, 34 F.3d 1132, 1137 (2d Cir. 1994). "A reference to Rule 56(f) and to the need for additional discovery in a memorandum of law in opposition to a motion for summary judgment is not an adequate substitute for a Rule 56(f) affidavit." Id. The failure to file a Rule 56(f) affidavit alone is sufficient grounds to reject a claim that the opportunity for discovery was inadequate. Id.

Evseroff's request for further discovery does not mention Rule 56(f) and is not styled as a Rule 56(f) affidavit. His only reply to the United States ' motion was an "affidavit" in which he made both factual assertions and legal arguments. In some cases, courts have denied a request for additional discovery because the party's affidavit did not reference Rule 56(f). See, e.g., AAI Recoveries, Inc. v. Pijuan, 13 F.Supp.2d 448, 452 (S.D.N.Y. 1998). Other courts have construed an affidavit to "function" as a Rule 56(f) affidavit. See Lukas v. Triborough Bridge and Tunnel Auth., No. CV-92-3680, 1993 WL 597132, at *8, 11 and n.3 (E.D.N.Y. Aug. 18, 1993 ). Again, Evseroff's request for further discovery could be denied on this basis alone.

Even if Evseroff's "affidavit" is liberally construed to allow it to be treated as a Rule 56(f) affidavit, the Second Circuit requires such an affidavit to include: "(1) what facts are sought and how they are to be obtained, (2) how those facts are reasonably expected to create a genuine issue of material fact, (3) what effort affiant has made to obtain them, and (4) why the affiant was unsuccessful in those efforts." Meloff v. New York Life Ins. Co., 51 F.3d 372, 375 (2d Cir. 1995).

Evseroff's affidavit only partially satisfies these requirements. He does specify that he seeks to determine whether anyone at the IRS accepted his offer-in-compromise and that this will be obtained through "discovery" of Graves , Martin, and unnamed IRS employees. Evseroff also states that he hopes to obtain documents from the IRS establishing that it accepted his offer in December 1993. However, he does not fully state how this discovery would reasonably be expected to generate a genuine issue of material fact. Regarding Graves, Evseroff argues that since Graves at first denied to Martin any knowledge that the letters were fraudulent, a deposition is needed to clear up this inconsistency. In theory, Graves could recant his admission that he forged the letters and direct Evseroff to the IRS personnel that accepted the offer-in-compromise. Considering that it is unchallenged that Graves subsequently admitted to Martin that he forged the July 6, 1994 and August 2, 1994 letters, this is, at best, a highly speculative theory about what could be discovered. Taking Graves ' deposition therefore cannot reasonably be expected to generate a genuine issue of material fact.

Likewise, deposing Martin or the unnamed IRS employee who assisted him cannot reasonably be expected to uncover evidence of the material issue of whether the IRS accepted Evseroff's offer-in-compromise. According to his affidavit, Martin only investigated whether the letters were forged. There is no evidence that he conducted an investigation within the IRS to determine if the IRS did, in fact, accept Evseroff's offer-in-compromise. Therefore, deposing him or his unnamed assistant cannot reasonably be expected to generate a genuine issue of material fact.

Evseroff did correctly specify that discovery of other, unnamed IRS personnel and document requests could possibly lead to evidence that the IRS accepted the offer-in-compromise. However, aside from the fact that the United States has already searched its records and failed to find any evidence that it accepted Evseroff's offer-in-compromise, Evseroff has not explained what efforts, if any, he has made to obtain these facts, and why he was unsuccessful in those efforts. This failure is magnified by the opportunities for discovery previously available to Evseroff which he did not utilize. From the outset of this action, Eversoff [Evseroff] knew that his defense would be that the IRS accepted his offer-in-compromise. The complaint against Evseroff was filed October 5, 2000 and Evseroff filed his answer on January 2, 2001 , but the docket sheet does not show any steps he took to obtain discovery. It was only in his May 30, 2001 response to the United States ' motion for judgment on the pleadings or summary judgment that he raised the need for discovery.

Moreover, Evseroff either was or should have been aware from even before the beginning of this case that he would likely need discovery regarding the authenticity of the purported IRS letters because the issue was raised in his previous suit against the IRS . See Evseroff v. Internal Revenue Service [2000-2 USTC ¶50,807], 86 A.F.T.R.2d 2000-6711, at *1 (E.D.N.Y. 2000). In that case, Evseroff relied on the purported IRS letters, and Graves ' forgery was reported. Id. While the failure to comply with the third and fourth requirements is not automatically fatal to a Rule 56(f) affidavit, the total absence of reference to efforts to obtain the needed facts can result in defeat of the request for additional discovery. See Paddington Partners, 34 F.3d at 1139; Bonnie & Co. Fashions, Inc. v. Bankers Trust Co., 945 F.Supp. 693, 706-07 (S.D.N.Y. 1996). Evseroff thus had a fully adequate opportunity for discovery and did not take it.

As the party opposing the motion for summary judgment, Evseroff is usually entitled to "the opportunity to discover information that is essential to his opposition." Berqer v. United State, 87 F.3d 60, 65 (2d Cir. 1996) (internal quotation marks omitted). "But the trial court may properly deny further discovery if the nonmoving party has had a fully adequate opportunity for discovery." Trebor Sportswear Co. v. The Limited Stores, Inc., 865 F.2d 506, 511 (2d Cir. 1989). Moreover, a court may deny a request for further discovery "if it deems the request to be based on speculation as to what potentially could be discovered." Paddington Partners, 34 F.3d at 1138. The "bare assertion" that the evidence supporting a party's allegation is in the hands of his opponent is "insufficient to justify a denial of a motion for summary judgment under Rule 56(f)." Id. (quoting Contemporary Mission, Inc. v. U.S. Postal Serv., 648 F.2d 97, 107 (2d Cir. 1981)) (internal quotation marks omitted).

As noted, Evseroff had an opportunity to discover the information he seeks. In addition, Evseroff's request is only slightly more than a bare assertion that the IRS has evidence to support his claim. Indeed, Evseroff states in his affidavit that "[e]vidence may exist to indicate that the IRS accepted my Offer in Compromise in December 1993." Evseroff Aff. ¶18. The existence of the purported IRS letters makes Evseroff's argument more than speculation about what potentially might be discovered, but not much more. As noted above, depositions of Martin, Graves , and the unnamed IRS employee who assisted Martin's investigation will not uncover evidence that the IRS accepted Evseroff's offer-in-compromise. Evseroff's vague request for discovery of unnamed IRS personnel is based on speculation about what might be discovered. Nor will document discovery of the IRS aid Evseroff. The United States has already searched its records and failed to find any evidence that it accepted Evseroff's offer-in-compromise. Additional discovery is therefore futile.

For these reasons, Evseroff's request for further discovery is denied.

(3)

In his opposition to the United States ' motion, Evseroff contends that judgment should not be entered because he has asserted several affirmative defenses. However, none of these defenses are a bar to entry of judgment.

a. Failure to state a claim

First, Evseroff asserts as an affirmative defense that the United States has failed to state a claim as to which relief can be granted. This argument is without merit. The United States merely asks for the Tax Court decision and the federal tax assessments to be reduced to judgment. The United States has the authority under 26 U.S.C. §§7401, 7403 to request that the assessments be reduced to judgment, and the Court has subject matter jurisdiction to reduce the assessments to judgment under 26 U.S.C. §7402(a). Accepting all of the United States ' factual allegations as true, the United States has not failed to state a claim.

b. Statute of Limitations

Second, Evseroff claims that the United States ' action is barred by applicable statues of limitation. Evseroff raised this contention in his suit against the IRS regarding his tax assessments for 1978-82, and the court conclusively rejected it. Evseroff v. Internal Revenue Service [2000-2 USTC ¶50,807], 86 A.F.T.R.2d 2000-6711, at *4 (E.D.N.Y. 2000), aff'd [2001-2 USTC ¶50,486], No. 00-6331, 2001 WL 668528 (2d Cir. June 12, 2001 ). Under 26 U.S.C. §6502(a), the IRS has 10 years from the date of assessment for the collection of taxes. The court determined that the first assessment on March 10, 1993 was timely under 26 U.S.C. §§6501(a), 6501(c)(4), 6503(a)(1), and 7481(a)(1), and thus concluded that the IRS has until March 10, 2003 to begin collection of the taxes from these years.

Nor has the statute of limitations run on Evseroff's additional tax assessments for 1991, 1992, and 1996. According to the Form 4340 for Evseroff's 1991 tax liability, he was assessed on November 9, 1992 , giving the IRS until November 8, 2002 to begin collection. U.S. Reply Ex. 12. Similarly, the assessment for 1992 was made on October 10, 1993 , giving the IRS until October 9, 2003 to begin collection, and the 1996 assessment was made on November 24, 1997 , giving the IRS until November 23, 2007 to start.

Evseroff makes no additional allegations in his affidavit, so his argument is to no avail.

c. Laches

Similarly, Evseroff argues as an affirmative defense that the United States ' claim is barred by the doctrine of laches. This argument is also without merit. "It is well settled that the United States is not . . . subject to the defense of laches in enforcing its rights." United States v. Summerlin [40-2 USTC ¶9633], 310 U.S. 414, 416, 60 S.Ct. 1019, 1020 (1940). In fact, laches is especially inappropriate in the area of tax collection. See United States v. De Beradinis [75-2 USTC ¶9530], 395 F.Supp. 944, 953-54 (D. Conn. 1975).

d. Estoppel

The final affirmative defense asserted by Evseroff is estoppel. The traditional elements of an estoppel claim are: "(1) the defendant made a definite misrepresentation of fact, and had reason to believe that the plaintiff would rely on it; and (2) the plaintiff reasonably relied on that misrepresentation to his detriment." Wall v. Construction & General Laborers' Union , Local 230, 224 F.3d 168, 176 (2d Cir. 2000). Furthermore, the doctrine of estoppel does not generally lie against the federal government. See Office of Personnel Mgmt. v. Richmond , 496 U.S. 414, 422-24, 110 S.Ct. 2465, 2470-71 (1990). In the Second Circuit, estoppel against the government is limited to those cases in which the party can establish both the traditional elements of estoppel, and that the government engaged in affirmative misconduct. City of New York v. Shalala, 34 F.3d 1161, 1168 (2d Cir. 1994); Estate of Carberry v. C.I.R. [91-1 USTC ¶50,280], 933 F.2d 1124, 1127 (2d Cir. 1991).

Evseroff does not elaborate on why the United States should be estopped from having judgment entered against him. The best reading of this defense is that the IRS misrepresented that it had accepted an offer-in-compromise through the three purported letters and by depositing the nine checks. Neither of these alleged misrepresentations, however, can sustain an estoppel defense as a matter of law.

Depositing the checks is not a misrepresentation by the government nor does it constitute affirmative misconduct. Compromise offers can only be accepted by the provisions of 26 U.S.C. §§7121, 7122, and the acceptance and cashing of checks from a taxpayer cannot be used to impute a compromise settlement. Brooks v. United States [87-2 USTC ¶9626], 833 F.2d 1136, 1146 (4th Cir. 1987); Bowling v. United States [75-1 USTC ¶9333], 510 F.2d 112, 113 (5th Cir. 1975); Mayer v. United States, 78 A.F.T.R.2d 96-7422 (Bankr. D. Kan. 1996).

Nor can the letters rise to the level of affirmative misconduct. As discussed above, Evseroff has offered no evidence that the letters are authentic. Any allegation of affirmative misconduct by the IRS is thus speculation inadequate to defeat the motion for summary judgment.

(4)

The United States also moves under Rule 54(b) of the FRCP to enter final judgment on the issue of whether to reduce the federal tax assessments to judgment. Rule 54(b) generally provides that when one or more claims is presented in an action, the court may direct the entry of a final judgment as to one of the claims on an express determination that there is no just reason for delay and on an express direction for entry of judgment. See Fed.R.Civ.P. 54(b). Accordingly, to permit entry of a final judgment under Rule 54(b), there must be: (1) multiple claims; (2) at least one claim finally decided within the meaning of 28 U.S.C. §1291; and (3) the district court must make an express determination that there is no just reason for delay and expressly direct the clerk to enter judgment. See Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 16 (2d Cir. 1997); Ginett v. Computer Task Group, Inc., 962 F.2d 1085, 1091 (2d Cir. 1992).

The United States seeks to reduce to judgment all the federal tax assessments. ³ The United States separately seeks to establish the validity of liens on Evseroff's property, foreclose on those liens, and determine the interests of various parties in some of that property. Therefore, there are multiple claims here.

A claim is finally decided "if the decision 'ends the litigation [of that claim] on the merits and leaves nothing for the court to do but execute the judgment' entered on that claim," Ginett, 962 F.2d at 1092 (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454, 2457, 57 L.Ed.2d 351 (1978)). As there is nothing left for the court to do here but execute its judgment, the first claim is finally decided within the meaning of §1291.

In general, there is no just reason to delay entry of judgment when "there exists some danger of hardship or injustice through delay which would be alleviated by immediate appeal." American Magnetics, Inc., 106 F.3d at 16 (quotations omitted). This danger exists when "a plaintiff might be prejudiced by a delay in recovering a monetary award." Id. (citing Curtiss-Wright v. General Elec. Co., 446 U.S. 1, 11-12, 100 S.Ct. 1460, 1466-67 (1980). Specifically, the concern that the government could be prejudiced by a delay in enforcing its judgment against a taxpayer pending adjudication of a lien foreclosure on the property of that taxpayer has been held to constitute no just reason to delay entry of judgment. See United States v. Julius Nasso Concrete Corp. [2000-1 USTC ¶50,454], 85 A.F.T.R.2d 2000-2157 (E.D.N.Y. 2000).

The United States argues that it will be prejudiced by delaying entry of judgment because a delay will give Evseroff an opportunity to hide his assets. In response, Evseroff argues that no urgency exists to reduce the assessments to judgment because the tax liabilities go back 23 years and nine years has passed since the Tax Court decision, and because a few more months to permit discovery on this count while discovery continues on the other counts will not prejudice the United States. Evseroff Aff. ¶4.

The United States has established that there is at least some danger of hardship or injustice from delay that can be alleviated by entry of judgment. It is undisputed that soon after the Tax Court proceedings began Evseroff transferred assets to a trust for the benefit of his children and grandchildren. In addition, the lengthy delay in collecting owed taxes has already caused prejudice. Therefore, there is no just reason to further delay entry of judgment, and the United States ' Rule 54(b) motion for entry of judgment is granted.

Conclusion

Evseroff has failed to demonstrate that a genuine issue of material facts exists regarding the United States ' notice and demand to collect its tax assessments against him, has failed to fulfill the requirements for additional discovery, and has not offered any affirmative defenses that preclude entry of summary judgment. Accordingly, the United States ' motion to reduce to judgment the United States Tax Court judgment and the federal tax assessments against Evseroff is granted, and the clerk of the court is directed to enter final judgment pursuant to Rule 54(b).

¹ The United States seeks to reduce the assessments to judgment to take advantage of judicial collection remedies. United States ' Letter of April 16, 2001 at 3.

² This argument only applies to the tax liabilities related to the years 1978 through 1982. The purported offer-in-compromise did not cover tax liabilities from 1991, 1992, and 1996.

³ This includes both the assessments from 1978-82 that were entered as a decision of the United States Tax Court in November 1992, and the subsequently IRS assessments of additional tax liabilities for 1991-92 and 1996.

2000-2 USTC ¶50,724] Gerald J. Buesing, Plaintiff v. United States , Defendant

U.S. Court of Federal Claims, 96-70T, 9/7/2000, 2000 U.S. Claims LEXIS 179. Prior decision by the Court of Federal Claims in this same case, 99-1 USTC ¶50,246

[Code Secs. 6325 and 7122 ]

Settlement agreements: Release of lien: Existence of contract: Acceptance of offer: Bankruptcy: Authority: Material misrepresentation: Unilateral mistake.--An individual failed to prove that he entered into a contract with the IRS to release a federal tax lien on his real property. Since an IRS agent lacked statutory authority to release the lien prior to the taxpayer's discharge in bankruptcy, he could not accept the taxpayer's offer to release the lien for payment and, thus, there was no mutual assent to a settlement agreement. Moreover, even if a contract had been formed, the existence of a material misrepresentation on the part of the taxpayer would have made the contract voidable. The taxpayer's communicated intention not to sell the property affected the method by which the IRS agent valued it and the circumstances under which the IRS would release the lien; thus, the misrepresentation was deemed material.

[Code Sec. 7122 ]

Settlement agreements: Release of lien: Existence of contract: Collateral estoppel.--The doctrine of equitable estoppel did not prevent the government from denying the existence of a contract to purportedly release a lien on an individual's real property in exchange for payment of his tax liability. Due to the taxpayer's misrepresentation regarding his intention not to sell the property, the IRS used the property's estimated value rather than its true sale value to calculate its worth. Moreover, the taxpayer suffered no detriment as a result of the alleged agreement since he failed to show that it affected the terms of his divorce settlement, and there was no evidence of misconduct on the part of any IRS agent. BACK REFERENCES: ¶41,605.016 and 41,130.0254

Jeffrey A. McKee, Davis , McKee & Forshey, P.C., Phoenix , Ariz. , for plaintiff. Mildred L. Seidman, Chief, Steven I. Frahm, Assistant Chief, Elizabeth Diane Seward, Department of Justice, Washington, D.C. 20530, for defendant.

OPINION

HORN, Judge:

The above-captioned case is before the court after a trial on the merits. Plaintiff, Gerald J. Buesing, alleges that he entered into a contract with the defendant, the United States, under which a federal tax lien on his home would be released if (1) he converted his bankruptcy to a Chapter 7 proceeding, (2) he received a discharge from his bankruptcy, and (3) he paid $30,000.00 to the Internal Revenue Service. The United States argues that no contract was ever formed, and, if a contract had been formed, it would be voidable because of a material misrepresentation by the plaintiff and/or a unilateral mistake on the part of the defendant. Defendant's allegations of a material misrepresentation and a unilateral mistake both stem from plaintiff's conduct in leading defendant to believe that plaintiff would keep his home, which purportedly caused defendant to underestimate the value of plaintiff's home, and, hence, the value of plaintiff's equity interest in the home. Plaintiff, in turn, counters that defendant would be equitably estopped from denying the existence of a contract.

After the trial on these issues and the submittal of post-trial briefs, the court concludes that no contract was formed. Had a contract been formed, the court agrees with defendant that any agreement would have been voidable due to both a material misrepresentation on the plaintiff's part and a unilateral mistake on the defendant's part. In addition, the court holds that the government would not be estopped by its actions from denying the existence of the contract.

FINDINGS OF FACT

Plaintiff, Gerald J. Buesing, founded a trucking company with his brother in 1965. The trucking company evolved into a construction company called Buesing Corporation, of which plaintiff is the sole owner and president. In 1986, plaintiff decided to move the company to Phoenix , Arizona , from its previous place of business in Minnesota .

On March 10, 1990 , Gerald Buesing married Laura Michael. ¹ At the time of their marriage, the market value of plaintiff's assets exceeded $4.3 million, while Ms. Michael's assets were worth about $30,000.00. On the day before the marriage, plaintiff and Ms. Michael entered into an Antenuptial Agreement. Paragraph 3 of the Antenuptial Agreement stated:

Termination of Marriage by Dissolution. . . . In consideration of the sum of $25,000 to be paid by Mr. Buesing to Ms. Michael at the time either party would initiate an action for divorce or separate maintenance, Ms. Michael hereby waives and relinquishes all statutory rights to temporary or permanent alimony, support, or maintenance, allowance for costs of an action for divorce or separate maintenance, property settlement and all other allowances from one another's assets in any such action.

Initially, the Buesings lived in Ahwatukee , Arizona , in a house which plaintiff had purchased in 1989 with his own funds, and which was titled solely in his name. In March 1993, plaintiff and Ms. Michael purchased, as husband and wife, a residence at 1917 East Clubhouse Drive in Phoenix , Arizona (the Clubhouse Drive property) for $321,562.00. The parties agree that the couple took title to the property as joint tenants with right of survivorship and not as a community property estate or as tenants in common. Plaintiff made the down payment with $100,000.00 of the net proceeds from the sale of the Ahwatukee home, and he also made the monthly mortgage payments.

In May of 1993, soon after purchasing the Clubhouse Drive property, the Buesings' marriage began to dissolve. They separated on or about July 17, 1993 , when Laura Michael moved to Chicago , Illinois . On that same day, plaintiff wrote to Ms. Michael and asked that she sign and have notarized three documents: (1) a quit claim deed relinquishing to plaintiff all of her right, title and interest in and to the Clubhouse Drive residence, (2) a power of attorney, and (3) a waiver of any conflict that might arise from the representation of plaintiff in any divorce proceedings by the law firm of Mariscal, Weeks. ² On July 26, 1993 , Ms. Michael signed the power of attorney and the waiver, but she did not sign the quit claim deed.

On August 24, 1993 , using the power of attorney which his wife had executed, plaintiff signed and recorded in Maricopa County, Arizona, a quit claim deed for himself and on behalf of Ms. Michael, which was identical in substance to the quit claim deed which she had declined to sign. ³ Plaintiff did not inform Laura of the purported conveyance. Later, Plaintiff was advised by counsel that the quit claim deed was probably not enforceable, and that Laura held an undivided one-half community property interest in the Clubhouse Drive residence.

Ms. Michael filed a divorce petition in Maricopa County , Arizona on September 21, 1993 . In a letter of the same date to plaintiff's attorney, Ms. Michael demanded immediate payment of the $25,000.00 provided for in the Antenuptial Agreement, or at least a portion of that sum along with monthly payments to enable Ms. Michael to meet her living expenses.

Meanwhile, on October 19, 1993 , the Internal Revenue Service ( IRS ) recorded a Notice of Federal Tax Lien in Maricopa County , Arizona respecting assessed and unpaid income taxes, penalties and interest totaling $105,369.00 that plaintiff owed for taxable years 1987 through 1989. The federal tax lien attached to all of plaintiff's real and personal property. The taxes had originally been assessed on July 21, 1992 following an IRS audit, and notice and demand for payment had been made by the IRS a total of five times over the course of the following year.

During the following months, the Buesings continued to exchange correspondence through their attorneys as they attempted to reach a divorce settlement. Each of plaintiff's proposals, among other terms, would have resulted in plaintiff receiving the Clubhouse Drive property as his separate property. During the negotiations, Mr. Buesing consistently maintained to his divorce attorney, Cindra White, that Ms. Michael had no interest in the residence, and that it was his separate property.

During the course of the divorce negotiations, on January 18, 1994 , plaintiff filed a petition under Chapter 11 of the United States Bankruptcy Code seeking protection from his creditors. In March 1994, plaintiff's bankruptcy case was assigned to Revenue Officer William Unger of the IRS for resolution of plaintiff's unpaid income taxes for 1987 through 1989. Mr. Unger met with plaintiff and his attorney on March 22, 1994 to discuss the unpaid taxes and plaintiff's options for repayment, which depended on whether the income tax liability was dischargeable. ⁴ Mr. Unger explained that, if the liability was determined to be dischargeable, the federal tax lien then would be satisfied by the equity in plaintiff's real and personal property after his discharge from bankruptcy. Unger explained that plaintiff could make an offer in settlement of his tax liabilities under a Chapter 11 bankruptcy or, alternatively, he could convert to a Chapter 7 bankruptcy liquidation proceeding, obtain a discharge, and then satisfy the still-attached tax lien.

With respect to the divorce, plaintiff contacted his divorce attorney, Cindra White, on August 3, 1994 , and informed her that his wife wanted to finalize the divorce. He instructed the attorney to draft a decree of dissolution under which the Clubhouse Drive residence would have been listed as his separate property, Ms. Michael would have received the Antenuptial Agreement payment of $25,000.00, and various items of community property would have been identified as the separate property of either plaintiff or of his wife. The next day, Ms. White prepared a draft Consent Judgment with these terms, but the settlement was not resolved at that time because Mr. Buesing did not have $25,000.00 available to make the payment to Ms. Michael. He told Ms. Michael that he would be able to pay her when the house was sold.

Meanwhile, for several months, Revenue Officer Unger had focused his work with respect to plaintiff's case on the question of whether the income tax liability was dischargeable. Revenue Officer Unger notified plaintiff's counsel, Jeff McKee, by letter dated January 23, 1995 , that plaintiff's income taxable years 1987 through 1989 met the requirements for discharge from personal liability in his Chapter 11 proceeding. Revenue Officer Unger stated that after the Bankruptcy Court issued an order discharging the taxes, and collection was made from plaintiff's equity in his real and personal property to which the federal tax lien attached, any remaining tax debt would be abated.

Plaintiff initiated discussions with the IRS to determine the extent and value of the real and personal property to which the federal tax lien respecting his 1987 through 1989 tax liabilities could attach. Upon Revenue Officer Unger's request, plaintiff provided to the IRS information and documentation regarding the value of his business, automobile, and residence. With regard to the value of the Clubhouse Drive residence, plaintiff provided comparable sales information to the IRS showing that similarly situated residential property had a market value of $300,000.00. During the negotiations, plaintiff represented to the IRS that his wife had a one-half interest in the Clubhouse Drive property, pursuant to Arizona community property law. Plaintiff also represented to Revenue Officer Unger that he wanted to keep his home. Based on the comparable sales figures and plaintiff's representation that Ms. Michael held a one-half interest in the Clubhouse Drive property, Revenue Officer Unger believed that the value of plaintiff's real and personal property to which the federal tax lien could attach was $30,000.00. Mr. Unger assigned no value to plaintiff's household furnishings, based on a bankruptcy schedule on which plaintiff had listed the fair market value of the furnishings at the exemption amount of $2500.00.

Plaintiff, by letter dated March 8, 1995 , made alternative offers to the IRS to secure the release of the federal tax lien in dispute. The offer at issue in the instant case provided that plaintiff would pay the IRS $30,000.00 within 90 days of IRS acceptance of plaintiff's offer to buy out the federal tax lien on his property. The letter, written by plaintiff's counsel, Mr. McKee, states:

This correspondence is to confirm that the Internal Revenue Service has determined and agreed that Mr. Buesing is entitled to a discharge regarding, and is relieved of personal liability for, personal income tax liabilities for the tax years 1987, 1988 and 1989, subject to obtaining an Order Granting Discharge from the Bankruptcy Court. For ease of reference and your acknowledgment and understanding, I have enclosed your letter dated January 23, 1995 stating and acknowledging that the IRS will not contest the dischargeability of Mr. Buesing's Form 1040 tax liabilities for the years 1987, 1988 and 1989.

This shall also constitute an offer in compromise of all Federal Tax Levies and Liens on Mr. Buesing's real and personal property, including (but limited to) his equity in his personal residence and the value of his stock in Buesing Corporation. As you know, these Federal Tax Levies and Liens encumber Mr. Buesing's real and personal property to the extent of the above-referenced 1987, 1988 and 1989 tax liabilities.

In full satisfaction, extinguishment, and release of these Federal Tax Levies and Liens, Mr. Buesing makes the following alternative offer:

1. At Mr. Buesing's behest, Buesing Corporation will immediately relinquish to the IRS $100,000.00 of Net Operating Losses (NOLs) which it presently retains, and cooperate in reasonable measures to insure that Buesing Corporation does not attempt to utilize said NOLs; or (if, and only if, Option One is not accepted by the IRS )

2. $30,000.00 in cash within 90 days of IRS acceptance, which amount is comprised of $28,600.00 for Mr. Buesing's equity in his home and $1,400.00 representing Mr. Buesing's ownership interest in Buesing Corporation.

We respectfully request an expeditious response to this alternative offer by the IRS . Thank you for your professional courtesies and manner in this proceeding.

On March 15, 1995 , prior to receiving any response to his offer and without notice to the IRS , plaintiff signed an agreement with a real estate agent to list the Clubhouse Drive property for sale at $339,900.00. The residence was listed for sale in a Century 21 advertisement run by plaintiff's friends, Alan and Barbara Levanson, which appeared in the Ahwatukee Foothills News on March 22, 1995 , and every two weeks thereafter through June 14, 1995 .

Two days later, on March 17, 1995 , plaintiff informed his divorce attorney, Ms. White, that he and Ms. Michael had reached a basis for settlement. Mr. Buesing asked Ms. White to prepare two different draft Consent Judgments, with both versions increasing the cash payment to his wife to $30,000.00, with $5,000.00 payable on or before March 31, 1995 . In both versions, the Clubhouse Drive residence was confirmed as plaintiff's sole and separate property. Plaintiff also told Ms. White that he had reached an agreement with the IRS concerning his unpaid taxes, and he advised her that he would need to sell the Clubhouse Drive property. For the rest of that month, while agreeing in principal on the sum to be paid to Ms. Michael, plaintiff and his wife continued to negotiate the payment's timing.

While plaintiff was finalizing his divorce settlement, plaintiff's attorney McKee continued to discuss plaintiff's outstanding tax debt with Revenue Office Unger. The two held discussions several times between March 8, 1995 and March 28, 1995 . Mr. Unger restated that, in order to secure a release of the federal tax liens, plaintiff first had to obtain a discharge from his Chapter 7 bankruptcy, and then pay the $30,000.00 amount estimated as the value of the IRS 's lien interest. On March 15, 1995 , Mr. Unger discussed plaintiff's case with his Section Chief, Ed Perry. Based on the information then available to Mr. Unger, including plaintiff's intent to keep his residence, Mr. Perry approved Mr. Unger's recommendation that plaintiff be allowed to buy out the tax lien for $30,000.00.

As of March 28, 1995 , Mr. Unger was unaware that Ms. Michael had tentatively agreed to the divorce settlement amount, and he was also unaware that plaintiff had listed the Clubhouse Drive residence for sale. On that day, Revenue Officer Unger formally responded to plaintiff's tax settlement offer by letter, wherein Mr. Unger agreed that the value of the real and personal property to which the federal tax lien attached was $30,000.00. He stated that following plaintiff's discharge from a Chapter 7 proceeding and plaintiff's payment of $30,000.00, plaintiff's remaining tax liabilities for 1987 through 1989 would be abated and the lien released. The letter from the IRS , signed by Revenue Officer Unger, stated:

The Internal Revenue Service agrees that the value of the real and personal property to which our Notice of Federal Tax Liens attach is $30,000.00. Following Chapter 7 discharge by the court and receipt of $30,000.00, the 1987, 1988, and 1989 income tax liabilities of the debtor will be discharged and the Notice of Federal Tax Liens will be released.

This is a procedure that has several steps involving several people, so the actual release will not appear at the county recorders office for about 4 weeks after the discharge and money are received. Payment should be made directly to this office to minimize delay.

The letter did not refer to plaintiff's March 8, 1995 letter, nor did it refer to the 90-day period in which plaintiff offered to make a lump sum payment of $30,000.00 to satisfy the lien interest of the IRS in his real and personal property.

On April 12, 1995 , the Maricopa County Superior Court entered a consent judgment and decree of dissolution of the marriage of Gerald Buesing and Laura Michael. The consent judgment stated that the Clubhouse Drive property was plaintiff's sole and separate property and was confirmed to him. The consent judgment provided further that plaintiff was to pay Ms. Michael $5,000 on or before March 31, 1995 , and $25,000.00 upon the sale of the Clubhouse Drive property. In March 1995, at the time of the exchange of letters between plaintiff and the IRS respecting the buy-out of the IRS lien on plaintiff's property, plaintiff's bankruptcy proceeding was still in Chapter 11.

Plaintiff interpreted Revenue Officer Unger's March 28, 1995 letter as an acceptance of plaintiff's offer contained in his March 8, 1995 letter, with the additional requirement, developed in interim conversations between Mr. Unger and Mr. McKee, that plaintiff first had to obtain a Chapter 7 discharge. Revenue Officer Unger, however, considered his March 28, 1995 letter to be a separate proposal or counteroffer which stated an additional, material term.

On April 26, 1995 , the bankruptcy court entered an order converting plaintiff's case to a Chapter 7 proceeding. The reason stated for the conversion was that the plaintiff had failed to file a disclosure statement and plan of reorganization by January 31, 1995 , the date stipulated to by the plaintiff and the United States Trustee. On May 17, 1995 , plaintiff received an offer of $340,000.00 for the Clubhouse Drive property, including its furnishings. Mr. Buesing accepted the offer on May 20, 1995 ; closing was scheduled for June 16, 1995 .

Mr. Unger first learned of the property's sale on June 13, 1995 . On June 15, 1995 , one day before plaintiff was to close on the sale, plaintiff's attorney McKee called the IRS to inform them. In order for the sale to close, plaintiff asked the IRS to release its lien on the property and to accept $30,000.00 cash from the sale proceeds. ⁵

On June 16, 1995 , plaintiff attempted to tender to the IRS a cashier's check for $30,000.00 to secure a release of the lien on the Clubhouse Drive property. The IRS refused to accept the check. Revenue Officer Unger, by letter dated June 19, 1995 , notified plaintiff's counsel that he was withdrawing his March 28, 1995 proposal to release the lien on plaintiff's property if plaintiff obtained a discharge from his Chapter 7 bankruptcy proceeding and paid $30,000.00. Revenue Officer Unger stated:

Some of the information provided during our discussions is now known to be incorrect. Mr. Buesing indicated that his wife held a 50% interest in the real property. The recent review of sale documents shows that her interest is limited to $25,000. This significantly increases your client[']s interest and our lien interest in the property. The estimated value was based on comparables you provided. This recent offer to purchase at $330,000 indicates that those values were too low. The net effect of these two factors changes our lien interest from $30,000.00 to $83,000.00.

There are two entirely different actions being discussed here. They cannot be combined. In the event Mr. Buesing receives a discharge one set of laws apply. If he still [owns] his home, then a negotiated value is a reasonable means to determine our secured interest in the exempt property without forcing its sale. That discharge is key. Without it, the actual sale of the home determines the value of our lien . . . .

The sale of plaintiff's home closed on June 30, 1995 . Sale proceeds of $25,000.00 were paid to Laura pursuant to the Antenuptial Agreement and Consent Judgment. Net sale proceeds of $77,943.05 were deposited in escrow with United Title Company pursuant to 26 U.S.C. §6325(b)(3) (1994). ⁶ On October 16, 1995 , United Title remitted to the IRS a check in the amount of $78.543.91, including $600.86 in accrued interest. On the same day, plaintiff's income tax liabilities for 1987 through 1989 were credited as follows: $11,124.06 for 1987; $46,215.50 for 1988; and $21,204.35 for 1989. The credits to 1987 and 1989 satisfied plaintiff's tax liability for those years, but about $31,000.00 of plaintiff's tax liability for 1988 remained unpaid. On October 27, 1995 , the IRS issued a Certificate of Discharge, discharging the Clubhouse Drive residence from the federal tax lien.

On January 10, 1996 , the bankruptcy court released plaintiff from all dischargeable debts, including his remaining unpaid income tax liability for 1988, and discharged him from his Chapter 7 proceeding. On September 16, 1996 , plaintiff's remaining liability for 1988 income taxes was abated.

The complaint in the instant action was filed in the United States Court of Federal Claims on February 7, 1996 . Plaintiff contends that he had a contractual agreement with the IRS by which the federal tax lien on his real and personal property would be removed upon his payment to the IRS of $30,000.00. Mr. Buesing is seeking to recover the net proceeds in excess of $30,000.00 from the sale of the Clubhouse Drive property. Alternatively, plaintiff seeks damages of $30,000.00, which is the alleged value of his exempt furniture and furnishings which were sold with the Clubhouse Drive residence, plus interest. ⁷

After the case was filed, the defendant filed a motion to dismiss arguing that a contract had not been formed between Buesing and the IRS regarding the tax lien, and alleging that plaintiff improperly sought a remedy not available in this court, specifically, declaratory relief or specific performance. In the alternative, the defendant filed a motion for summary judgment, arguing that any contract entered into by the parties was voidable on the grounds that material misrepresentation or unilateral mistake occurred.

The plaintiff responded to the motion to dismiss, and filed a cross-motion for summary judgment asserting that the parties had entered into a contract arising out of a settlement agreement and contending that the plaintiff sought money damages stemming from a failure to perform that contract. Moreover, the plaintiff argued that in the event the court determined there was a contract, but found the government's argument regarding material misrepresentation and unilateral mistake worthy of consideration, that summary judgment was not appropriate as facts material to the formation of a contract were genuinely in dispute.

In a decision issued on January 13, 1999 , the court granted in part and denied in part defendant's motion to dismiss. Buesing v. United States [99-1 USTC ¶50,246], 42 Fed.Cl. 679, 698 (1999). The court granted the motion to dismiss Mr. Buesing's claims for specific performance and declaratory judgment, because those claims fell outside of the court's jurisdiction. Id. at 692. The court, however, denied defendant's motion to dismiss plaintiff's other claims. Id. at 691. The court also denied the parties' motions for summary judgment because they were premature due to an underdeveloped record with material issues of fact in dispute. The court stated:

A number of issues of fact have been raised by the parties in papers presented to the court that weigh against resolution of the instant case upon summary judgment pleadings. It appears that there are questions of fact surrounding the impact upon Revenue Agent Unger's understanding of the equity value of the property owned by the plaintiff, Unger's interpretation of plaintiff's intent to retain or sell the house, and how these issues impacted Unger's determinations for settlement negotiation purposes. In addition, there is an issue as to the plaintiff's intent, or stated intent, to reside in or sell the Clubhouse Drive property.

The issues of materiality, mistake and "reason to know" need further examination by a trier of fact. Moreover, insufficient information is available to the court at this time to resolve the issues raised regarding the authority of Revenue Agent Unger to enter into a settlement agreement and the doctrine of equitable estoppel raised by the plaintiff.

Id. at 697. Plaintiff's case subsequently went to trial in December, 1999.

DISCUSSION

The court must address several issues raised by the parties both at trial and in their post-trial briefs. The court must examine whether a contract was formed between the parties through their exchange of letters regarding a possible settlement, or through defendant's letter and the plaintiff's subsequent conduct taken allegedly in reliance on that letter. If a contract was formed, the court also must decide whether the contract is voidable by the government because of alleged material misrepresentations by the plaintiff, or because of unilateral mistake on the part of the government. Last, the court must decide if the defendant is equitably estopped from denying the existence of a contract.

I. The existence of a contract

The court first examines the question of whether a settlement contract was formed between Mr. Buesing and the IRS . Plaintiff argues that "this is a breach of contract case. A contract was formed when Gerald Buesing offered to settle the value of the tax liens on his property for $30,000 and the IRS accepted that offer." As the basis of an agreement, plaintiff points to (1) the combination of his March 8, 1995 offer letter and the March 28, 1995 letter response from the IRS , and/or (2) the combination of that March 28, 1995 IRS response and subsequent actions which plaintiff allegedly performed, such as converting his bankruptcy proceeding to Chapter 7 and settling his divorce, in reliance on the IRS response. According to defendant, however, no contract was ever formed:

There never was a meeting of the minds between plaintiff and Unger regarding the material terms of a contract to compromise plaintiff's tax liability. Mr. Unger did not agree to release the lien upon a payment of $30,000 within 90 days, and plaintiff never agreed to Unger's counterproposal to release the lien upon a payment of $30,000 after plaintiff converted to a Chapter 7 bankruptcy and received a discharge. Indeed, no one at the IRS had authority to release the lien before a discharge in bankruptcy. There was no contract between plaintiff and the IRS .

As the court noted in its prior opinion in this case, although not addressed directly by this circuit, the law regarding tax settlement agreements has been clearly articulated:

A settlement agreement is a contract; mutual forbearance supplies the consideration. As such, we interpret its terms using general contract law principles. Treaty Pines Invs. Partnership v. Commissioner [92-2 USTC ¶50,418], 967 F.2d 206, 211 (5th Cir. 1992). If the language of the agreement is unambiguous, we will not consider any extrinsic evidence: the meaning will be determined from the terms encompassed within the proverbial four corners of the agreement. Goldman [94-2 USTC ¶50,577], 39 F.3d at 406. Where the language is not so clear, however, we will examine the language within the context of the circumstances surrounding the execution of the agreement. Robbins Tire & Rubber Co. v. Commissioner [ CCH Dec. 29,612], 52 T.C. 420, 435-436, 1969 WL 1677 (1969).

Estate of Kokernot v. Commissioner [97-1 USTC ¶60,276], 112 F.3d 1290, 1294 (5th Cir. 1997); see also Goldman v. Commissioner [94-2 USTC ¶50,577], 39 F.3d 402, 405-06 (2d Cir. 1994) ("As the settlement agreement constituted a contract, general principles of contract law must govern its interpretation."); Slovacek v. United States [96-2 USTC ¶50,467], 36 Fed.Cl. 250, 256 (1996) (citing Goldman v. Commissioner [94-2 USTC ¶50,577], 39 F.3d at 405). This same legal framework has also been applied in the United States Tax Court:

The settlement of tax cases is governed by general principles of contract law. A settlement agreement is in essence a contract. Each party agrees to concede some rights which he or she may assert against his or her adversary as consideration for those secured in the settlement agreement. Saigh v. Commissioner [ CCH Dec. 21,694], 26 T.C. 171, 177 (1956). In determining the proper meaning of the terms of the agreement, we look to the language of the agreement and the circumstances surrounding its execution. Robbins Tire Co. v. Commissioner [ CCH Dec. 29,612], 52 T.C. 420, 435-436 (1969). Generally, extrinsic evidence will not be admitted to expand, vary, or explain the terms of a written agreement unless the agreement is ambiguous. Rink v. Commissioner [ CCH Dec. 48,969], 100 T.C. 319, (1993), aff'd [95-1 USTC ¶50,092], 47 F.3d 168 (6th Cir. 1995); Woods v. Commissioner [ CCH Dec. 45,602], 92 T.C. 776, 780-781 (1989). Petitioner bears the burden of proving that his interpretation of any ambiguous contract language is correct. Rule 142(a); Rink v. Commissioner [ CCH Dec. 48,969], supra at 326.

Washoe Ranches #1, Ltd. v. Commissioner [ CCH Dec. 51,634(M)], 1996 Tax Ct. Memo LEXIS 511, 72 T.C.M. ( CCH ) 1176, T.C. Memo. 1996-495 (1996). This court is persuaded of the rectitude of this approach and will analyze the above-captioned case using the principles of contract law.

A valid express contract requires that the following criteria have been met: "a mutual intent to contract including offer, acceptance, and consideration; and authority on the part of the government representative who entered or ratified the agreement to bind the United States in contract." Total Med. Management, Inc. v. United States , 104 F.3d 1314, 1319 (Fed. Cir. 1997), cert. denied, 522 U.S. 857, 118 S.Ct. 156, 139 L.Ed.2d 101 (1997) (citing Thermalon Indus., Ltd. v. United States, 34 Fed.Cl. 411, 414 (1995) (citing City of El Centro v. United States, 922 F.2d 816, 820 (Fed. Cir. 1990), cert. denied, 501 U.S. 1230, 115 L.Ed.2d 1019, 111 S.Ct. 2851 (1991); Fincke v. United States, 230 Ct. Cl. 233, 244, 675 F.2d 289, 295 (1982))). Even without an express contract, there may still be an implied-in-fact contract if there is a meeting of the minds which can be inferred from parties' conduct showing, in light of the surrounding circumstances, a tacit understanding between them. City of Cincinnati v. United States , 153 F.3d 1375, 1377 (Fed. Cir. 1998) (citing Baltimore & Ohio R.R. Co. v. United States, 261 U.S. 592, 597, 67 L.Ed. 816, 43 S.Ct. 425 (1923)). "Like an express contract, an implied-in-fact contract requires '(1) mutuality of intent to contract; (2) consideration; and, (3) lack of ambiguity in offer and acceptance.' " Id. (quoting City of El Centro v. United States, 922 F.2d at 820). An express offer and acceptance are not necessary, but the parties' conduct must indicate mutual assent. Id. In addition, if the United States is a party, the government representative whose conduct is relied upon must have actual authority to bind the government in contract. Id. The government, however, is not bound by the acts of its agents beyond the scope of their actual authority. Harbert/Lummus Agrifuels Projects v. United States , 142 F.3d 1429, 1432 (Fed. Cir. 1998), cert. denied, 525 U.S. 1177 (1999). "Anyone entering into an agreement with the Government takes the risk of accurately ascertaining the authority of the agents who purport to act for the Government, and this risk remains with the contractor even when the Government agents themselves may have been unaware of the limitation on their authority." Trauma Servs. Group v. United States , 104 F.3d 1321, 1325 (Fed. Cir. 1997). ⁸

The defendant argues that the exchanged correspondences between plaintiff and the IRS cannot constitute a binding agreement because there was no meeting of the minds with respect to the date when payment could be made in return for release of the federal tax lien. The March 8, 1995 offer letter from plaintiff's counsel stated, in relevant part:

In full satisfaction, extinguishment, and release of these Federal Tax Levies and Liens, Mr. Buesing makes the following . . . offer:

* * *

2. $30,000.00 in cash within 90 days of IRS acceptance . . .

The purported acceptance from Revenue Agent Unger, dated March 28, 1998 , states:

Defendant argues that the "within 90 days of IRS acceptance" language in plaintiff's offer letter was a material term to which no one at the IRS ever agreed. After listening to the testimony at trial and evaluating the parties' arguments on this issue, the court agrees that plaintiff's ninety-day limit was a material term and that the combination of the March 8 and March 28 letters cannot be seen as an offer and acceptance because that material term intentionally was removed from the purported March 28 "acceptance." Edwin Perry, Revenue Officer Unger's supervisor, noted at trial that the "within ninety days" term of plaintiff's offer was unacceptable to the IRS "because [the release of the lien is] dependent on the discharge not on 90 days. There was no time frame. Neither party had any control over the time frame . . . for the issuing of the discharge by the [bankruptcy] court." Mr. Unger later corroborated this notion and stated that he also had deemed the ninety-day time period as an "unacceptable" term because it was uncertain when plaintiff's discharge from bankruptcy would occur, and the discharge was a necessary precursor to release of the federal tax lien. Mr. Unger gave the following testimony at trial:

Q. All right. And can you extinguish a lien in a Chapter 11 under--within a fixed time period such as 90 days?

A. No. Because you still have the issue of the discharge.

Q. And that is the Plaintiff's discharge from bankruptcy?

A. The discharge of his total tax liability. It is not just the lien equity.

Q. And that occurs when the Bankruptcy Court discharges the debtor from bankruptcy?

A. That is correct.

Q. And that had not happened at this point? [when plaintiff had offered to pay $30,000.00 within ninety days of IRS acceptance]

A. That had not happened in [plaintiff's case.]

Q. And did you know on March 8, 1995 , when Plaintiff's discharge from bankruptcy was going to take place?

A. I had no knowledge whatsoever.

The position taken by Mr. Perry and Mr. Unger has statutory support under 26 U.S.C. §6325(a) (1994), which makes no distinction between Chapters 7 and 11. The statute states in relevant part:

(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; . . .

As Mr. Perry noted at trial, the bankruptcy discharge makes the lien legally unenforceable. He stated, while discussing a Chapter 7 discharge, "Prior to the discharge, [the lien] is not unenforceable, we have a stay but it is not unenforceable. And nobody really has the authority to release that lien until the court issues the discharge. That's the legal requirement to make it unenforceable." The IRS had no control over the timing of plaintiff's discharge from bankruptcy, so it could not agree to the ninety-day time period which plaintiff proposed. ⁹ Instead, Mr. Unger altered the terms of plaintiff's offer and responded with what is seen most reasonably as a counteroffer. Thus, defendant's March 28, 1995 letter was not an acceptance.

The above analysis finds support in the treatise Corbin on Contracts, which states that "[a] communicated offer creates a power to accept the offer that is made and only that offer. Any expression of assent that changes the terms of the offer in any material respect may be operative as a counter-offer; but it is not an acceptance and consummates no contract." 1 Corbin on Contracts §3.28 (1993) (footnote omitted). The terms of the March 28, 1995 IRS letter differed materially from plaintiff's offer by placing no limitation on the time period for release of the lien on the Clubhouse Drive property. Moreover, Mr. Unger's letter explicitly added another condition to the agreement, namely, that Mr. Buesing first had to obtain a discharge of a Chapter 7 bankruptcy proceeding before the lien would be released. ¹⁰ Mr. Unger's letter stated that the tax lien would be released "following Chapter 7 discharge by the [bankruptcy] court and receipt of $30,000.00." For these reasons, Mr. Unger's March 28, 1995 letter is seen most appropriately as a counteroffer to Mr. Buesing. ¹¹

It is well established that a counter-offer may be accepted by conduct. See Union Realty Co. , Ltd. v. Moses, 984 F.2d 715, 722 n.6 (6th Cir. 1993); see also Ismert & Assocs. v. New England Mut. Life Ins. Co., 801 F.2d 536, 541 (1st Cir. 1986) ("an offer may be accepted by overt acts."); Kurio v. United States [71-1 USTC ¶9112], 429 F.Supp. 42, 64 (S.D. Tex. 1970) ("a contract will arise if conduct by the original offeror following receipt of the late acceptance amounts to an acceptance of the counteroffer"). "Such acceptance does no violence to the 'mirror image' rule . . . ." Union Realty Co., Ltd. v. Moses, 984 F.2d at 722 n.6 (citing horn-book "mirror image" rule articulated in Canton Cotton Mills v. Bowman Overall Co., 149 Tenn. 18, 257 S.W. 398 (1924)).

Plaintiff argues that, if Mr. Unger's March 28, 1995 letter is seen as a counteroffer, a contract still was formed as a result of plaintiff's subsequent actions. Mr. Unger's counteroffer required three things: (1) that plaintiff convert his bankruptcy to a Chapter 7 proceeding, (2) that he pay the IRS $30,000.00, and (3) that he obtain a discharge of his bankruptcy. With respect to the first requirement, plaintiff's bankruptcy was converted from Chapter 11 to Chapter 7, and the conversion was made official by an Order of the bankruptcy court on April 26, 1995 . ¹² For the payment to the IRS , plaintiff attempted to accomplish this by presenting a certified check for $30,000.00 on June 16, 1995 . The IRS , however, refused acceptance. According to plaintiff, "By tendering the $30,000.00 before the IRS withdrew its self-styled counter-offer or proposal, Mr. Buesing substantially performed, and thereby accepted, the offer/proposal."

By presenting payment after the bankruptcy conversion, plaintiff argues that he performed the portion of Mr. Unger's requirements which were within plaintiff's power to effectuate. However, a close examination of plaintiff's conduct indicates that he was not accepting the counter-offer. Instead, plaintiff still was attempting to implement the terms of his original March 8, 1995 offer which had not been accepted by the IRS .

When plaintiff and his attorney attempted to present the $30,000.00 certified check to the IRS on June 16, 1995 , they requested that an IRS official sign a document which accompanied the check. The document, titled "Satisfaction and Receipt of Payment under Agreement," read as follows:

The Internal Revenue Service, by its authorized undersigned agent, acknowledges and accepts payment from Gerald Buesing (Taxpayer I.D. # 469-50-8084) in the amount of $30,000.00 paid this date in certified funds. Mr. Buesing's payment of $30,000.00 satisfies the payment required of him in the attached agreement between Mr. Buesing and the Internal Revenue Service, which payment must be made on or before the expiration of 90 days following March 28, 1995 .

This "payment satisfaction document" was provided to the court at trial as an exhibit. Unfortunately, the exhibit did not include the referenced "attached agreement," so it is at first unclear under what agreement plaintiff purported to be operating. However, the document's denotation of "before the expiration of 90 days following March 28, 1995 " recites a limitation--ninety days --which was only contained in plaintiff's original March 8, 1995 offer. Because plaintiff's March 8, 1995 letter had anticipated payment within ninety days of IRS acceptance, and because plaintiff's payment satisfaction document alleged that the ninety-day period had begun on March 28, 1995 , it is apparent that plaintiff believed his March 8, 1995 offer had been accepted by the IRS through Mr. Unger's March 28, 1995 letter. Thus, the "attached agreement" only could have been the plaintiff's March 8, 1995 offer or a summation of that offer's terms and conditions, and the court has noted above that the March 8, 1995 offer never was accepted by the IRS .

As plaintiff was attempting to perform the requirements of his March 8, 1995 letter, the court must agree with defendant that Mr. Buesing's actions could not have been an acceptance of Mr. Unger's March 28 counteroffer. The Restatement (Second) of Contracts §50(1) (1981) notes that "acceptance of an offer is a manifestation of assent to the terms thereof . . . ." With his belief that the ninety-day limitation was still valid, plaintiff was not assenting to the terms of defendant's counteroffer.

Furthermore, plaintiff's conduct in attempting payment provides additional evidence that there was no meeting of the minds. Defendant's counteroffer allowed for the release of the lien only "following Chapter 7 discharge by the court and receipt of $30,000.00." (Emphasis added.) When Mr. Buesing presented the certified check, he asked for an immediate release of the tax lien in exchange. This would have been appropriate under the terms of plaintiff's March 8, 1995 offer, but was unacceptable to the IRS because no discharge from bankruptcy had been granted yet. For the above reasons, the court holds that a contract never was formed between plaintiff and the IRS to achieve the release of the federal tax lien on the Clubhouse Drive property.

II. Material misrepresentation and unilateral mistake

Even were the court to hold that a contract existed between plaintiff and the IRS , defendant argues that it would be voidable due to a material misrepresentation on the part of plaintiff, or due to a unilateral mistake on the part of the IRS . In either instance, defendant's arguments center on the circumstances surrounding the sale of the Clubhouse Drive property.

With respect to the material misrepresentation contention, defendant states:

Plaintiff's misrepresentations regarding his wife's interest in the property, his intention to sell, the value of the property, and the actual listing and contract for sale at a higher price all induced Unger to believe that the property would not be sold and that the IRS would not receive more than $30,000 upon a forced sale. Had plaintiff not concealed the facts of the pending sale, Unger would have simply waited for the sale to occur and to receive the proceeds according to the IRS 's interest. Those proceeds were still insufficient to satisfy plaintiff's tax liability, and plaintiff certainly would have received nothing. Plaintiff had insufficient equity in his house to receive any funds from its sale after payment of the mortgage, the IRS , and his wife; he should not now receive such funds, and be enriched, as a result of his misrepresentations.

Defendant argues that plaintiff's intention to keep his home induced Mr. Unger to agree to an estimated value of the house rather than the most accurate value determined by the actual sale of the property. Plaintiff, in turn, counters that defendant should have known that keeping the house was not a certainty for plaintiff. Plaintiff's post-trial brief states:

Mr. Buesing has continually maintained that he certainly wanted to keep the house but that he stated that he might have to sell the house; that despite his fondness for the house, his financial situation, his failing business and his ongoing divorce--all of which the IRS was well aware--might prevent him from keeping the house.

As the court noted in its prior opinion in this case, the United States Court of Appeals for the Federal Circuit has quoted approvingly the Restatement (Second) of Contracts §162 (1979) defining material misrepresentation. See T. Brown Constructors, Inc. v. Pena, 132 F.3d 724, 729 (Fed. Cir. 1998) ("A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so."). The Restatement (Second) of Contracts §164(1) provides that a contract is voidable when (1) a party made a misrepresentation, (2) the misrepresentation was material, (3) the misrepresentation induced the other party to enter into the contract, and (4) the other party was justified in relying on the misrepresentation. See Morris v. United States , 33 Fed.Cl. 733, 745 (1995) (adopting the Restatement (Second) of Contracts test for misrepresentation); National Rural Util. Coop. Fin. Corp. v. United States, 14 Cl.Ct. 130, 142 (1988) (adopting the Restatement (Second) of Contracts test for misrepresentation), aff'd, 867 F.2d 1393 (Fed. Cir. 1989); Lehner v. United States, 1 Cl.Ct. 408, 415 (1983) (adopting the Restatement (Second) of Contracts test for misrepresentation). The United States Court of Appeals for the Federal Circuit has applied the same concept of material misrepresentation against both the government and a plaintiff in this court. See, e.g., Roseburg Lumber Co. v. Madigan, 978 F.2d 660, 667 (Fed. Cir. 1992); Summit Timber Co. v. United States, 230 Ct.Cl. 434, 441, 677 F.2d 852, 857 (1982); Morrison-Knudsen Co. v. United States, 170 Ct.Cl. 712, 719, 345 F.2d 535, 539 (1965); Morris v. United States, 33 Fed.Cl. 733, 744-47 (1995).

The evidence presented at trial indicates that, even had the court concluded that there was a contract, the contract would have been voidable due to plaintiff's misrepresentation about whether the Clubhouse Drive property would be sold. It is apparent that plaintiff made a misrepresentation by failing to inform Mr. Unger that the sale of the house would potentially go forward shortly. When plaintiff and Mr. Unger initially met to discuss plaintiff's bankruptcy and the tax lien on his house, plaintiff did disclose his financial and divorce problems, and he and Mr. Unger did discuss the possibility that plaintiff might have to sell his house. Mr. Unger confirmed this with his trial testimony. However, while the possibility of sale was raised, plaintiff's statements to Mr. Unger, as described by plaintiff at trial, would have left a reasonable person with the impression that plaintiff was going to keep the Clubhouse Drive property. Mr. Buesing testified as follows:

Q. Did you have a discussion or did you make, did you tell Mr. Unger what your intentions were with respect to the Clubhouse Drive home?

A. I was always quite clear in reference to settlement and payment and/or terms that I really only had two avenues because my business was not doing well enough for me to envision that paying off any kind of debt, is that even though I'd like to maintain the residence on Clubhouse Drive that it was either sell that or borrow the money, that those were the two options that I saw.

Q. Did you tell Mr. Unger that you wanted to keep the house?

A. Yes.

Q. Did you want to keep the house?

A. Definitely.

Thus, while plaintiff indicated that sale of the house was a possibility, he indicated to Mr. Unger that he did not want to choose that option. Furthermore, when asked whether he told Mr. Unger that he might not be able to keep the house, plaintiff's answer was evasive. He stated:

Because of everything that was going on in and around that time, Jeff [McKee, the questioning attorney], between working with the business and trying to get that back on its feet and working with the creditors, the accountants in reference to the dischargeability just prior to that, and all the other things that were going on financially, the divorce and so forth, I was just really pretty much upside-down.

In addition, plaintiff's testimony indicated that he, himself, did not see sale of the house as a realistic option. Plaintiff testified that "with the bankruptcy I was advised that the odds that I could get a mortgage if I could sell the house were nil, slim to none. And so my intentions were to keep the house. And I liked the house."

Plaintiff's communicated intention to keep the Clubhouse Drive property impacted the method by which Mr. Unger valued plaintiff's house. Instead of waiting for an actual sale of the home to occur to get an actual market value, Mr. Unger estimated the valuation of the house at $300,000.00 based on comparable properties information which plaintiff supplied. This was not Mr. Unger's preferred method of establishing a value for the house, a value which largely determined plaintiff's total equity in his real and personal property that was available to satisfy the IRS lien. Mr. Unger explained at trial:

Q. Would you agree that there are benefits to the IRS to agree to the value of real property such as the Clubhouse Drive home because an agreement provides certainty for the IRS ? You've got a number, it's a known commodity?

A. Actually, I don't agree with that. I think when I value a piece of property unknowingly, I'm at extreme risk. If I have a sale I know exactly what I'm getting and I can validate the sale. But I'm, I am never as comfortable with a valuation as I am with a sale.

Q. I heard you say "when I value a piece of property unknowingly." What does that mean?

A. It's a crap shoot. I mean you take some information. It's very hard to judge the real world out there or the marketplace. The marketplace changes. The uniqueness of his house, the very time we spent discussing how his house sold and what sold it, those are things that can only be measured by the sale.

Q. You're absolutely right. You're absolutely right. And it is a crap shoot. And doesn't that fact make it a good reason why the IRS wants to agree to a dollar figure?

A. Absolutely not. I would always take a sale over a guess.

Plaintiff's counsel further questioned Mr. Unger as to what the IRS response would have been if plaintiff's property had later sold for less than the estimated value, instead of more, as occurred here. Mr. Unger stated, "If you sell the property we get the equity. It's cut and dried. There's no guesswork, there's no decision making, it's a simple process." Importantly, Revenue Officer Unger concluded that "I would, we would never have done this, any of this if Mr. Buesing had said, I'm selling my property." ¹³

Plaintiff's expressed intent to keep his home is material because it affected Mr. Unger's valuation of plaintiff's home, and, hence, the IRS estimation of plaintiff's monetary interest in the property. This, in turn, affected the conditions under which the IRS was willing to release its lien, inducing defendant to allegedly enter into an agreement which defendant otherwise would have rejected. The consequences of plaintiff's expressed intent are evident in this case: the home eventually sold for $40,000.00 more than its estimated value, potentially leaving plaintiff with a windfall. ¹⁴ Had the IRS known that plaintiff was going to sell the property, it would have waited for the consummation of the sale in order to precisely determine plaintiff's monetary interest. This procedure would have avoided the possibility of the IRS shortchanging itself and collecting less from the plaintiff than it was legally entitled to under the lien.

Plaintiff argues that there was no misrepresentation because he originally desired to keep his house, at the time when he and the IRS allegedly reached an agreement to settle his tax lien. The evidence, however, contradicts this position. Plaintiff made his original offer, via letter, on March 8, 1995 . After ensuing discussions between Mr. Unger and plaintiff's attorney, defendant responded by letter on March 28, 1995 . As noted above, had the court concluded that a contract was formed, it could not have been prior to March 28, 1995 , because, based on the evidence in the record, the IRS letter of that date constituted the earliest possible acceptance. Prior to this purported acceptance of his offer, the record indicates that plaintiff had reversed his decision to keep his home. First, plaintiff signed a listing agreement with Century 21 Real Estate on March 15, 1995 which gave Century 21 the right to sell the Clubhouse Drive property beginning on March 16, 1995 . Second, he informed his divorce attorney on March 17, 1995 that he had reached a settlement with the IRS and needed to sell the home. Third, the Clubhouse Drive property was publicly advertised for sale in a local newspaper beginning on March 22, 1995 .

Plaintiff argues that, while the house was listed for sale, it was noted as being TOM , or "Temporarily Off the Market." However, one of plaintiff's real estate agents, Barbara Levanson, testified that any TOM restrictions are placed in the listing agreement. No such restriction appears in plaintiff's listing agreement. Moreover, the same agent recalled showing the house to potential buyers within the first week to ten days after it was listed, and stated that she could not recall any instance where a house was advertised in the newspaper if it was not available for purchase. While the testimony of plaintiff's other real estate agent, Alan Levanson, Barbara Levanson's husband, indicated that the house was TOM or perhaps otherwise held from sale, Mr. Levanson contradicted himself by noting other activity regarding sale of the house at that time, such as advertising which did not indicate TOM status.

It is apparent that plaintiff took affirmative steps to sell his house and failed to inform Mr. Unger of his change in position. Plaintiff's failure to inform the IRS of this information, coupled with his original stated desire to keep the Clubhouse Drive property, constituted a misrepresentation which caused Mr. Unger to estimate the value of plaintiff's home. Mr. Unger would not have agreed to estimate the value had he known that sale of plaintiff's home was imminent, and that he, therefore, could have obtained an actual sale value. Thus, the court concludes that, even had a contract been formed between plaintiff and the IRS , the contract would have been voidable due to a material misrepresentation on plaintiff's part.

Defendant also argues that "even if the Court were to determine that a binding agreement was formed between the IRS and plaintiff to release the lien for $30,000 while he was still in Chapter 7, the contract is voidable as a matter of law because of Unger's unilateral mistake." Largely for the same reasons that a material misrepresentation was found, in particular that plaintiff led defendant to believe he would keep the Clubhouse Drive property rather than sell it, the court believes that, had an agreement been formed between plaintiff and the IRS , it would be voidable by defendant due to a unilateral mistake.

Unilateral mistake is defined in the Restatement (Second) of Contracts §151 (1981), and states "[a] mistake is a belief that is not in accord with the facts." See National Rural Utils. Coop. Fin. Corp. v. United States , 14 Cl.Ct. at 141. In order to show that there was a unilateral mistake, a party must demonstrate a:

(1) Mistake by one party, not bearing the risk of such mistake, as to a basic assumption on which he made the contract;

(2) that has a material effect on the agreed exchange of performance; and

(a) the effect of the mistake is such that enforcement of the contract would be unconscionable; or

(b) the other party to the contract has reason to know of the mistake.

Northrop Grumman Corp. v. United States , 47 Fed.Cl. 20, 91 (2000) (quoting National Rural Utils. Coop. Fin. Corp. v. United States, 14 Cl.Ct. at 141); ¹⁵ Nevin v. United States, 43 Fed.Cl. 151, 154 (1999); aff'd, F.3d (Fed. Cir. 2000). As discussed with respect to material misrepresentation, Mr. Unger's belief that plaintiff would keep his house was a mistake which led Mr. Unger to estimate the value of plaintiff's house instead of waiting for its sale. The terms of the purported agreement between the IRS and plaintiff were based on the stated desire of plaintiff to keep the Clubhouse Drive property. Plaintiff retaining his residence was, thus, a basic assumption on which the IRS made the alleged contract, and the assumption's materiality has been demonstrated above in the court's analysis of the material misrepresentation claim.

In order to find that there was a unilateral mistake, however, the court must still determine that the IRS did not bear the risk of making a mistake, and that either (a) enforcement of the contract would be unconscionable, or (b) plaintiff had reason to know of the defendant's mistake. Northrop Grumman Corp. v. United States , 47 Fed.Cl. at 91. The Restatement (Second) of Contracts addresses "When a Party Bears the Risk of a Mistake" in section 154:

A party bears the risk of a mistake when

(a) the risk is allocated to him by agreement of the parties, or

(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or

Restatement (Second) of Contracts §154 (1981).

In the present case, the risk of a mistake was not allocated to the defendant under the alleged contract or any other agreement. The court has noted that defendant was unaware of plaintiff's decision, prior to the time of plaintiff's alleged tax settlement with IRS , to seek the sale of his home. Defendant had been told by plaintiff that plaintiff desired to keep his home, and plaintiff made no effort to inform Mr. Unger that the Clubhouse Drive property had been listed for sale with realty agents and advertised for sale in a local newspaper. Mr. Unger could not reasonably have been aware that he did not possess the "whole story," and it would not be reasonable to allocate that risk to him in a situation in which plaintiff had an obligation to alert Mr. Unger of the change of mind with respect to the sale of the Clubhouse Drive property.

Furthermore, plaintiff had reason to know of defendant's mistake. As noted above, plaintiff informed Mr. Unger during their initial meetings that he desired to keep the Clubhouse Drive property. Apart from Mr. Buesing himself, only plaintiff's attorney was conversing with Mr. Unger on a regular basis regarding possible settlement of plaintiff's outstanding tax debt. There is no indication in the record that plaintiff informed his attorney of his attempts, prior to the date of the alleged settlement agreement, to sell his home. Consequently, plaintiff in all likelihood was the only person who could have informed Mr. Unger that he no longer intended to keep the property. Plaintiff, therefore, knew that, at the time of the purported agreement, Mr. Unger was still operating under the assumption that plaintiff wished to keep his home. ¹⁶ With reason to know of the defendant's mistake established, all of the elements for a unilateral mistake have been satisfied, and the court finds that, even had a contract been formed between plaintiff and the IRS , it would be voidable by the government.

III . Equitable estoppel

Plaintiff also contends that his situation meets the requirements to equitably estop the government from denying the existence of a contract between himself and the IRS . The doctrine of equitable estoppel is a remedy by which a party may be precluded, by a party's own act or omission, from asserting a right to which it otherwise would have been entitled. See Heckler v. Community Health Servs. of Crawford County, Inc., 467 U.S. 51, 59, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984). The traditional elements for asserting estoppel against the government in the context of a contract dispute are: "(1) the government must know the true facts; (2) the government must intend that its conduct be acted on or must so act that the [party] asserting the estoppel has a right to believe it so intended; (3) the [party] must be ignorant of the true facts; and (4) the [party] must rely on the government's conduct to his injury." JANA, Inc., v. United States , 936 F.2d 1265, 1270 (Fed. Cir. 1991), cert. denied, 502 U.S. 1030, 116 L.Ed.2d 775, 112 S.Ct. 869 (1992) (citing American Elec. Lab, Inc., v. United States , 774 F.2d 1110, 1113 (Fed. Cir. 1985); Emeco Indus. v. United States , 202 Ct.Cl. 1006, 485 F.2d 652, 657 (Ct. Cl. 1973)). To claim estoppel, a party must have relied on an "adversary's conduct 'in such a manner as to change his position for the worse' and that reliance must have been reasonable in that the party claiming the estoppel did not know nor should it have known that its adversary's conduct was misleading." See Heckler v. Community Health Servs. of Crawford County, Inc., 467 U.S. at 59 (quoting 3 J. Pomeroy, EQUITY JURISPRUDENCE §805, at 192 (S. Symons ed. 1941)).

Although the United States Supreme Court and other courts have left open the narrow possibility that under limited circumstances and in cases of affirmative misconduct by a government agent an estoppel claim against the government may succeed, ¹⁷ thus far, federal courts generally have done so only while rejecting, for a variety of reasons, each attempt at application of the estoppel theory in the particular case then before the court. See, e.g., Heckler v. Community Health Servs. of Crawford County, Inc., 467 U.S. at 66 (holding that the detriment faced was not so severe or imposed in such an unfair way as to invoke the estoppel doctrine); Office of Personnel Management v. Richmond, 496 U.S. 414, 434, 110 S.Ct. 2465, 110 L.Ed.2d 387 (holding that the courts cannot estop the Constitution and, therefore, there can be no "estoppel by a claimant seeking public funds"), reh'g denied, 497 U.S. 1046, 111 L.Ed.2d 821, 111 S.Ct. 5 (1990); Henry v. United States [89-1 USTC ¶9223], 870 F.2d 634, 637 (Fed. Cir. 1989) (holding that the oral advice given by an IRS agent did not constitute affirmative misconduct because the element of reasonable reliance was absent); Hanson v. Office of Personnel Management, 833 F.2d 1568, 1569 (Fed. Cir. 1987) (holding that misrepresentations made by Office Personnel Management and Office of Workers Compensation Programs officials to a benefits recipient did not constitute affirmative misconduct because the officials acted in good faith on the basis of the currently accepted reading of the statute).

Plaintiff's equitable estoppel claim fails because the factual situation at bar does not present elements which are required to press such a claim against the government. Most prominently, as discussed above, the government did not know the true facts in plaintiff's case. Defendant incorrectly believed that plaintiff would remain in his house, rather than sell it. As a result, defendant negotiated with plaintiff using an estimated valuation of the Clubhouse Drive property, rather than the preferred true sale value which defendant would have had available upon the house's sale.

Furthermore, plaintiff suffered no detriment in relying on the alleged agreement. Plaintiff's course of action, purportedly taken in reliance on the agreement with Mr. Unger, was the most favorable to him at the time. As defendant aptly notes:

When [plaintiff] converted to Chapter 7 on April 26, 1995 , he had been in default in his Chapter 11 proceeding for several months for failure to file a disclosure statement and plan of reorganization by January 31, 1995 . His only other option would have been dismissal from bankruptcy, which would have removed him from the protection of the bankruptcy laws and left him in the hands of each of his creditors to pursue their state law remedies against him. See 11 U.S.C. §349. Had he remained in Chapter 11, he would have [had] to have filed a reorganization plan, obtained the approval of his creditors, and paid off the debt, including the tax debt, to the extent of the allowed amount of the claims, over the course of several years out of his future income. The tax lien would not be released until final payment was made. See 11 U.S.C. §1129. By contrast, under Chapter 7, plaintiff's bankruptcy estate assets were liquidated, and his debts were discharged. See 11 U.S.C. §§726, 727.

Plaintiff also has not shown any detriment to his interests as a result of settling his divorce proceedings. The terms of the settlement were nearly identical to the terms of the original Antenuptial Agreement between Mr. Buesing and Ms. Michael. Plaintiff paid Ms. Michael an additional $5,000.00 above the original agreed upon sum, but any detriment from that extra payment was offset and outweighed by the fact that, in the settlement, Ms. Michael waived her right to claim a one-half interest in the Clubhouse Drive property. Moreover, plaintiff has not shown that the supposed agreement with the IRS influenced the terms of this divorce settlement.

Finally, to establish estoppel against the government, a party must show some affirmative misconduct on the part of a government official. Such misconduct is not present here. There is no indication in the record that Mr. Unger, Mr. Perry and the IRS ever attempted to cheat or deceive plaintiff. On the contrary, the record indicates that Mr. Unger and Mr. Perry were at all times honest and forthright with Mr. Buesing, and attempted to help him resolve a debt to the IRS in a manner which would have allowed him to retain his house. They did not go back on any "deal" with plaintiff because that "deal" simply did not exist.

CONCLUSION

After thoroughly reviewing the record and carefully examining the arguments put forth by both parties, the court has determined that no contract was formed in this case between the plaintiff and the IRS to gain the release of the federal tax lien on plaintiff's Clubhouse Drive property, and that the government is not equitably estopped from denying the existence of such a contract. Furthermore, even if a contract had been formed, the court holds that it would have been voidable by the defendant due to a material misrepresentation on plaintiff's part, and/or a unilateral mistake on defendant's part. For these reasons, plaintiff is not entitled to recover any net proceeds in excess of $30,000.00 from the sale of the Clubhouse Drive property, which were retained by the government. The Clerk's Office is directed to DISMISS the case.

IT IS SO ORDERED.

¹ Subsequent to the events of this case, Laura Michael remarried and now uses the surname Booras. For ease of reference, the court will refer to her as Laura Michael, or Ms. Michael, throughout this opinion.

² William Novotny, a partner at Mariscal, Weeks, already had been advising the Buesings with respect to a contemplated filing for bankruptcy.

³ That same day, August 24, 1993 , plaintiff recorded a Declaration of Homestead for the Clubhouse Drive property. Under Arizona law, the Declaration exempted up to $100,000.00 of equity in the residence from attachment, execution, or forced sale.

⁴ A discharge in bankruptcy operates to prohibit the IRS from collecting a tax debt as a personal liability of the taxpayer pursuant to 11 U.S.C. §524(a)(2) (1994), which addresses the "Effect of Discharge:"

(a) A discharge in a case under this title--

* * *

(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; . . .

However, the debtor's property, including the plaintiff's exempt property such as the Clubhouse Drive residence in the instant action, remains liable for a debt secured by a tax lien of the IRS pursuant to 11 U.S.C. §522(c)(2)(B) (1994) which addresses "Exemptions:"

(c) Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title as if such debt had arisen, before the commencement of the case, except--

* * *

(2) a debt secured by a lien that is--

* * *

(B) a tax lien, notice of which is property filed; . . .

⁵ Plaintiff understood that the IRS was not required to release its lien because he had not obtained a discharge from the Chapter 7 proceeding. On June 14, 1995 , plaintiff had filed an emergency motion with the bankruptcy court to abandon the exempt homestead ( Clubhouse Drive ) property from the Chapter 7 estate. On the same date, the court had entered an order abandoning the Clubhouse Drive property from plaintiff's estate.

⁶ The applicable statute, 26 U.S.C. §6325, titled "Release of lien or discharge of property," states in relevant part:

(b) Discharge of property.--

* * *

(3) Substitution of proceeds of sale.-- Subject to such regulations as the Secretary may prescribe, the Secretary may issue a certificate of discharge of any part of the property subject to the lien if such part of the property is sold and, pursuant to an agreement with the Secretary, the proceeds of such sale are to be held, as a fund subject to the liens and claims of the United States, in the same manner and with the same priority as such liens and claims had with respect to the discharged property.

⁷ This relief request was not advanced in the plaintiff's original Complaint, but has been raised in the plaintiff's post-trial briefs.

⁸ In the previous opinion in this case, the court noted the parties' dispute with respect to Mr. Unger's settlement authority:

The facts available to the court, in the parties' papers filed with the court, present uncertainty as to whether Revenue Agent Unger had the authority to bind the government in a contract to release the tax lien that was upon the plaintiff's property. The parties agree that Revenue Agent Unger was delegated in the place of his supervisor Edward Perry as Acting Chief of the Chapter 7/11 Insolvency Section of the Special Procedures Function Collection Branch of the IRS Collection Division in Phoenix , Arizona , on the day that Unger wrote the March 28, 1995 letter. In addition, there appears to be some controversy as to whether Revenue Agent Unger had obtained approval on the proposed settlement agreement from his superior, Mr. Perry. These facts are of material significance to the outcome of this litigation. Therefore, it is prudent for the court to deny the motion to dismiss, pending an appropriate determination of Revenue Agent Unger's authority.

Having heard the testimony of Mr. Unger and Mr. Perry, the court is satisfied that they considered the contemplated settlement terms at issue in this case, and that they needed no further approval from others within the IRS to bind the IRS to a settlement agreement in this case. As noted infra, however, the parties never entered into a settlement agreement, due in part to statutory limitations on the power of the IRS to release tax liens which precluded the IRS representatives from agreeing to some of plaintiff's proposed settlement terms.

⁹ Furthermore, plaintiff's attorney and Mr. Unger engaged in several interim conversations between March 8, 1995 and March 28, 1995 . During those conversations, the parties agreed that plaintiff would need to obtain a discharge under a Chapter 7 bankruptcy proceeding, rather than a Chapter 11 proceeding. As of March 28, 1995 , plaintiff had not yet converted from Chapter 11 to Chapter 7. When plaintiff did convert, his conversion would have begun a new sixty-day period in which creditors could have objected to a discharge, and the period would not have started until the first meeting of creditors after conversion. See Fed. R. Bankr. P. 1019(2); Fed R. Bankr. P. 4004(a). If the meeting of creditors took place more than thirty days from the date of conversion, the additional sixty-day period for discharge objections would have placed any possible discharge outside of ninety days from the time of the March 28, 1995 IRS letter. This likely scenario is further evidence that the IRS would not have agreed to a ninety-day limitation.

¹⁰ Plaintiff's attorney's March 8, 1995 offer letter had noted the parties' agreement that release of Mr. Buesing's tax liabilities was "subject to obtaining an Order Granting Discharge from the Bankruptcy Court," however, plaintiff's attorney had not indicated when that discharge from bankruptcy had to occur.

¹¹ The court notes that its prior opinion in this case indicated that a contract perhaps had been formed. That position, however, was a preliminary finding based upon an incomplete record. After conducting a trial, compiling a fully-developed body of evidence, and re-reading pertinent documents within the context of the parties' testimony, the court has re-evaluated its position and cannot conclude that a contract was ever formed between plaintiff and the IRS .

¹² It is unclear whether plaintiff affirmatively decided to convert from a Chapter 11 bankruptcy proceeding to a Chapter 7. The bankruptcy court converted plaintiff's proceeding because plaintiff failed to file a Chapter 11 disclosure statement and plan of reorganization by a January 31, 1995 deadline.

¹³ Later, when discussing his March 28, 1995 letter to plaintiff, Mr. Unger explained why he had not stated a condition in his letter that plaintiff not sell the Clubhouse Drive property: "I thought we had agreed to that two years ago, well, in our very first meeting with the commitment I want to keep the house. Because at that time I made the commitment I'm willing to go the route that allows you to keep your house."

¹⁴ Plaintiff attempts to argue that $40,000.00 difference between the sale price of the Clubhouse Drive property and the estimated value of the property is due to the inclusion of furnishings with the sale of the home. Plaintiff contends that the furnishings were worth approximately $30,000.00. Mr. Buesing has failed to convince the court that this is true. No evidence was offered to substantiate this contention apart from the testimony of Mr. Buesing and one of his real estate agents. It is also noteworthy that plaintiff listed the value of these furnishings at the exempt limit of $2,500.00 in his bankruptcy filings. Plaintiff cannot have it both ways: a low value to avoid his creditors in bankruptcy and a high value to make it appear that his home is worth less the sale price would indicate.

¹⁵ The court in National Rural Utils. Coop. Fin. Corp. v. United States, 14 Cl.Ct. at 141 cited the Restatement (Second) of Contracts §153, which states:

§153. When Mistake of One Party Makes a Contract Voidable

Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in §154, and

(a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or

(b) the other party had reason to know of the mistake or his fault caused the mistake.

Restatement (Second) of Contracts §153 (1981). The term "reason to know" is discussed in the Restatement (Second) of Contracts in section 19, comment b:

A person has reason to know a fact, present or future, if he has information from which a person of ordinary intelligence would infer that the fact in question does or will exist. A person of superior intelligence has reason to know a fact if he has information from which a person of his intelligence would draw the inference. There is also reason to know if the inference would be that there is such a substantial chance of the existence of the fact that, if exercising reasonable care with reference to the matter in question, the person would predicate his action upon the assumption of its possible existence.

Reason to know is to be distinguished from knowledge and from "should know." Knowledge means conscious belief in the truth of a fact; reason to know need not be conscious. "Should know" imports a duty to others to ascertain facts; the words "reason to know" are used both where the actor has a duty to another and where he would not be acting adequately in the protection of his own interests were he not acting with reference to the facts which he has reason to know.

Restatement (Second) of Contracts §19 cmt. b (1981) (footnotes omitted).

¹⁶ In the end, Mr. Unger did not become aware of a possible sale until plaintiff found a buyer and had his attorney request an immediate release of the federal tax lien on June 15, 1996 to facilitate the sale of the home.

¹⁷ Under the Heckler test and subsequent definitions of the elements of estoppel, without affirmative misconduct on the part of the government, there can be no equitable estoppel against the government. See Westinghouse Elec. Corp. v. United States , 41 Fed.Cl. 229, 240-241 (1998); see also Hanson v. Office of Personnel Management, 833 F.2d 1568, 1569 (Fed. Cir. 1987).

[97-2 USTC ¶50,969] Deryll Wayne Pack, et al., Plaintiffs v. United States of America , Defendant

U.S.

District Court, East. Dist. Calif. , CV-F-92-5327 REC, 10/27/97

[Code Secs. 7121 and 7122 ]

Motion to dismiss: Meritless motions: Procedures for entering into closing agreements: Compromises.--Individual taxpayers' motion to dismiss their action against the IRS was without merit. They had not complied with statutes, regulations, and procedures governing closing agreements and compromises, which prescribe the exclusive method for settling claims with the IRS . Further, they were not seeking to enforce an agreement to compromise their tax liability but, rather, to extinguish it..