Road & Highway Builders, LLC v. United States
2012 U.S. App. LEXIS 26045
Fed. Cir.2012Background
- RHB appeals a Court of Federal Claims judgment holding it failed to prove IRS acted in bad faith in negotiating a release of the IRS’s right to redeem a Nevada property.
- The IRS released its right to redeem under IRC § 7425(d in exchange for $100,000 paid by RHB.
- The property at issue is 2640 N. Las Vegas Boulevard, Las Vegas, Nevada, purchased by RHB at foreclosure after Crystal Cascades Civil’s defaults.
- IRS liens were filed using the taxpayer identification number for Crystal Cascades, LLC rather than Crystal Cascades Civil, LLC, creating later procedural/record issues.
- Bankruptcy court later found the lien notices defective for naming errors, but that ruling did not retroactively undermine the release agreement.
- The district court applied a presumption of good faith to IRS officials, requiring clear and convincing evidence to show bad faith; it found none.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether IRS acted in bad faith in the release transaction | RHB argues IRS lacked a good-faith belief in its right to redeem and engaged in coercive or unjust conduct. | IRS asserts presumption of good faith; RHB must show clear and convincing evidence of bad faith. | IRS acted in good faith; presumption not rebutted by clear and convincing evidence. |
| Whether misnaming of the debtor in liens negates the release's validity | Evidence of name mislabeling and later invalidity undermines the basis for redeeming rights. | Release judged as of the time, with reasonable reliance on contemporaneous law; misnaming does not prove bad faith. | Misnaming does not establish bad faith; release validity judged at time of agreement. |
Key Cases Cited
- Am-Pro Protective Agency v. United States, 281 F.3d 1234 (Fed. Cir. 2002) (strong presumption of good faith; clear and convincing standard to overcome)
- Savantage Fin. Servs., Inc. v. United States, 595 F.3d 1282 (Fed. Cir. 2010) (presumption not overcome by plaintiff’s evidence)
- Galen Med. Assocs., Inc. v. United States, 369 F.3d 1324 (Fed. Cir. 2004) (insufficient to show bad faith where no clear intent to injure shown)
- T & M Distribs., Inc. v. United States, 185 F.3d 1279 (Fed. Cir. 1999) (presumption of good faith discussed in context of government actions)
- Am-Pro Protective Agency v. United States, 281 F.3d 1239 (Fed. Cir. 2002) (clear and convincing standard to rebut presumption of good faith)