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Collateral Estoppel | |
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[2000-2 USTC ¶50,724] Gerald J. Buesing, Plaintiff v.
Jeffrey
A. McKee, 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 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 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 On
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 In
May of 1993, soon after purchasing the On
Ms.
Michael filed a divorce petition in Meanwhile,
on 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 During
the course of the divorce negotiations, on With
respect to the divorce, plaintiff contacted his divorce attorney,
Cindra White, on 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 Plaintiff
initiated discussions with the Plaintiff,
by letter dated 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 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 2.
$30,000.00 in cash within 90 days of We
respectfully request an expeditious response to this alternative
offer by the On Two
days later, on 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 As
of 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 On
Plaintiff
interpreted Revenue Officer Unger's On
Mr.
Unger first learned of the property's sale on On
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 On
The
complaint in the instant action was filed in the United States
Court of Federal Claims on After
the case was filed, the defendant filed a motion to dismiss
arguing that a contract had not been formed between Buesing and
the 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 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. 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 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 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 [ 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
[ Washoe Ranches #1, Ltd. v. Commissioner
[ 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 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 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 . . . offer: *
* * 2.
$30,000.00 in cash within 90 days of The purported acceptance from Revenue Agent Unger, dated 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. Defendant argues that the "within 90 days of 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 A.
That had not happened in [plaintiff's case.] Q.
And did you know on 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 |