COURT FINDS NO CONTRACT BETWEEN IRS AND INDIVIDUAL FOR RELEASE OF TAX LIEN.

            IN THE UNITED STATES COURT OF FEDERAL CLAIMS

HORN, JUDGE.

[1] 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.

[2] 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

[3] 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.

[4] 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

[6] 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.

[7] 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.

[8] 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.

[9] 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.

[10] 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.

[11] 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.

[12] 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.

[13] 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.

[14] 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.

[15] 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

          1. At Mr. Buesing's behest, Buesing Corporation will

[18] 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' 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.

[19] 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.

[20] 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

[21] 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.

[22] 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.

[23] 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.

[24] 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

[25] 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

[27] 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.

[28] 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

[29] 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.

[30] 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.

[31] 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, 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

DISCUSSION

[32] 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

[33] The court first examines the question of whether a settlement contract was formed between Mr. Buesing and the IRS. Plaintiff argues that "[t]his 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:

     [T]here never was a meeting of the minds between plaintiff and

          A settlement agreement is a contract; mutual forbearance

[35] 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, 118 S. Ct. 156 (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 (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 (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

[36] 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:

          This correspondence is to confirm that the Internal Revenue

                                * * *

     The Internal Revenue Service agrees that the value of the real

          Q. All right. And can you extinguish a lien in a Chapter 11

          (a) Release of lien. -- Subject to such regulations as the

[41] 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 section 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 "[f]ollowing 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

[42] 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, 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 Really 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)).

[43] 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, "[B]y 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."

[44] 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.

[45] 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

[46] 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 section 50(1) (1981) notes that "[a]cceptance 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.

[47] Furthermore, plaintiffs 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 "[F]OLLOWING 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 plaintiffs 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

[48] 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.

[49] With respect to the material misrepresentation contention, defendant states:

     Plaintiff's misrepresentations regarding his wife's interest in

     Mr. Buesing has continually maintained that he certainly wanted

[51] 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

[52] 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

[53] 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.

[54] 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.

[55] 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.

[56] 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.

[57] 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.

[58] Unilateral mistake is defined in the Restatement (Second) of Contracts section 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,

[59] 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. Northrog 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

[60] 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.

[61] 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

[62] 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 (1992) (citing American Elec. Lab, Inc., v. United States, 774 F.2d 1110, 1113 (Fed. Cir. 1985); Emeco Indus. v. United States, 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 section 805, at 192 (S. Symons ed. 1941)).

[63] 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 (1990); Henry v. United States, 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).

[64] 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.

[65] 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

[67] 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

[68] 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.

[69] IT IS SO ORDERED

                                   Marian Blank Horn

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. section 524(a)(2) (1994), which addresses the "Effect of Discharge:"

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

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

     (b) DISCHARGE OF PROPERTY. --

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

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 [sic] $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 section 153, which states:

     SECTION 153. WHEN MISTAKE OF ONE PARTY MAKES A CONTRACT VOIDABLE

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).