The opinion of the court was delivered by: Elaine H. Bucklo, U.S. District Judge
MEMORANDUM OPINION AND ORDER
Julian Wineberg had a limited partnership interest in Somerset Limited
Partnership. In 1998, Mr. Wineberg entered into a "Cash Option Agreement"
with Hohmann OP Holdings, L.L.C., giving Hohmann the option to buy Mr.
Wineberg's interest in Somerset for $426,822. Hohmann exercised the
option on July 1, 1999, but has not paid Mr. Wineberg because it was
uncertain about the status of certain tax liens and levies on Mr.
Wineberg's property. The federal government has millions of dollars of
tax liens and levies on Mr. Wineberg's property covering tax years from
1978 to 1986. Somerset and Hohmann (collectively "Hohmann") filed an
interpleader action against the United States and Mr. Wineberg to
determine the appropriate payee of the money held by Hohmann. The
government brought a separate action to foreclose a lien against Mr.
Wineberg's rights to the proceeds of the options contract with Hohmann. I
consolidated the cases, see Minute Order of August 15, 2001, and the
government moves for summary judgment. Hohmann responds and moves for
partial summary judgment.
Summary judgment is proper when the record "show[s] that there is no
genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In
determining whether a genuine issue of material fact exists, I must
construe all facts in the light most favorable to the non-moving party
and draw all reasonable and justifiable inferences in its favor. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Mr. Wineberg did not
respond to the government's motion, so I enter judgment in favor of the
government and against Mr. Wineberg in the amount of $1,318,480.21, plus
interest and other statutory penalties, and I find that the government
has a valid and subsisting lien on Mr. Wineberg's right to money under
the contract with Hohmann. Hohmann has no objection to this disposition,
but the parties dispute whether Hohmann is entitled to attorneys' fees
out of the money it owes to Mr. Wineberg and whether the government
is entitled to interest under 815 ILCS 205/2.
The government argues that Hohmann's attorneys' fees may not be taken
out of the $426,822 that it will receive as a result of the lien
foreclosure. Hohmann does not contend that its claim for attorneys' fees
is superior to the government's lien, which attached in 1990, more than
eight years before Hohmann entered into the options agreement with Mr.
Wineberg. Instead it says that the government's attorney, Mr.
Snoeyenbos, promised Hohmann that, in return for its assistance in
providing information for the government's suit against Mr. Wineberg,
Hohmann would be entitled to take its attorneys' fees from the money owed
to Mr. Wineberg. The government submits an affidavit stating that there
was no such agreement, so there is a factual question that I cannot
decide here. But even if there were such an agreement, it would be
unenforceable against the government as a matter of law.
The authority to compromise or settle "any civil or criminal case
arising under the internal revenue laws" is vested in the Secretary of
the Treasury, 26 U.S.C. § 7122 (a), and may be redelegated to Section
Chiefs and Assistant Section Chiefs, but may not be redelegated to
attorneys-of-record, 28 C.F.R. Pt. 0, Subpt. Y, App. (Tax Div. Directive
No. 105 § 3) ("Directive 105"). There is no dispute that Mr.
Snoeyenbos is the attorney of record, so he lacks the authority to
compromise cases arising under the tax code. Hohmann argues that §
7122 applies only to cases against taxpayers, but it cites no authority
for that proposition, and the statute says "any civil or criminal case."
"Any" case means any case, see United States v. Ballistrea, 101 F.3d 827,
836 (2d Cir. 1996); see also Lexington Ins. Co. V. Rugg & Knopp, Inc.,
165 F.3d 1087, 1089 (7th Cir. 1999) ("`[E]very' means `every.'"), not
just taxpayer actions. Hohmann also argues that Mr. Snoeyenbos' signature
on a stipulation for entry of judgment against Mr. Wineberg in the
foreclosure action is evidence that he had authority to compromise
cases. However, that stipulation did not compromise the government's
claim; it entitled to government to all the relief it sought, unlike the
claim for attorneys' fees, which would reduce the government's recovery.
Moreover, even if it were evidence of authority to compromise, it is
evidence only as to the foreclosure case,*fn1 not the interpleader
case, and redelegations under the regulations are made "on a case-by-case
basis." Directive 105 § 3. In response to the government's motion, it
was Hohmann's burden to come forward with evidence of Mr. Snoeyenbos's
authority to create a factual issue for trial; it did not discharge or
shift that burden merely by filing a cross-motion. On Hohmann's own
motion, Mr. Snoeyenbos' statement in his affidavit that he never
represented that he was a Section Chief or had the power to compromise a
case or claim would be sufficient to create a question of fact to avoid
Hohmann urges that, even if Mr. Snoeyenbos lacked actual authority to
enter into an agreement about fees, the government should be estopped
from contesting an award of attorneys' fees. Equitable estoppel cannot
apply here because Directive 105 clearly states that mere
attorneys-of-record have no authority to compromise cases, and "those who
deal with the [g]overnment are expected to know the law and may not rely
on the conduct of [g]overnment
agents contrary to law." Heckler v.
Community Health Servs. of Crawford County, Inc., 467 U.S. 51, 63, 66
(1984) (holding that where regulations clearly circumscribed the
authority of government official and party relied on oral statement of
official that exceeded authority, any reliance was unreasonable). I grant
the government's motion and deny Hohmann's motion with regard to
Under the Illinois Interest Act, creditors are entitled to interest at
a rate of 5% a year on debts after they become due. 815 ILCS 205/2. An
unconditional tender of the full amount due will stop the accrual of
interest. See Yassin v. Certified Grocers of Ill., Inc., 551 N.E.2d
1319, 1321 (Ill. 1990) (full amount); Steward v. Yoder, 408 N.E.2d 55, 57
(Ill. App. Ct. 1980) (unconditional). Tender only tolls the accrual of
interest if it is "kept good"; that is, it "must be kept at all times
subject to be received by the creditor when he calls for it." Aulger v.
Clay, 109 Ill. 487, 1884 WL 9815, at *4 (Ill. Mar. 26, 1884); see also
Schmahl v. A.V.C Enters., Inc., 499 N.E.2d 572, 575 (Ill. App. Ct. 1986)
(defining tender as an offer to pay "coupled with the present ability of
The facts here are not in dispute. On July 1, 1999, when Hohmann
exercised its option to buy Mr. Wineberg's interest in Somerset, it
became liable to pay Mr. Wineberg. Hohmann (through Somerset) was aware
of the liens and levies against Mr. Wineberg's property, so, also on July
1, 1999, it sent a check to Mr. Wineberg, payable jointly to Mr. Wineberg
and the IRS, for $384,130, or 90% of the amount due under the contract.
The check was never negotiated, and fifteen months later, on October 10,
2000, Hohmann stopped payment on the check. On January 10, 2001, Hohmann
filed the interpleader action. The government argues that the check was
not legally sufficient tender because it was for an amount less than the
total due under the options agreement. Hohmann attaches to its response
and cross-motion the options agreement, which called for a "holdback
amount" of 10% at the closing. §§ 1.3 and 1.4. The options agreement
called for only a 90% payment at closing, so the July 1, 1999, check was
a tender of the full amount due on that day.
The government also argues that the check was not sufficient to stop
the accrual of interest because it imposed a condition not contemplated
by the options agreement that the IRS endorse the check. The Illinois
Supreme Court stated, nearly sixty years ago, that "[a] tender, to be
effectual, must be without conditions other than those specified in the
contract between the parties." Ortman v. Kane, 60 N.E.2d 93, 97 (Ill.
1945). There the extra-contractual condition imposed was payment of
interest above and beyond the amount agreed to by the parties. Id. More
recent formulations of the definition of "tender" suggest that it "must
be without conditions to which the creditor can have a valid objection or
which will be prejudicial to his rights." Arrio v. Time Ins. Co., 751
N.E.2d 221, 227 (Ill. App. Ct. 2001) (emphasis added); MXL Indus., Inc.
v. Mulder, 623 N.E.2d 369, 377 (Ill. App. Ct. 1993) (same; citing 74 Am.
Jur.2d Tender § 24, at 561-62 (1974)); Telemark Devel. Group, Inc.
v. Mengelt, No. 00 C 3626, 2001 WL 477219, at *2 (N.D. Ill. May 7, 2001)
(Shadur, J.). In Telemark, the court held that a creditor could have no
valid objection to a condition that the creditor admit no greater amount
was due because the amount tendered was in fact everything the creditor
was entitled to. Id. at *4, The "condition" imposed here, signature by
did not change the amount due under the contract. On matters of
state law, I must predict what the Illinois Supreme Court would decide,
see Mutual Service Cas. Ins. Co. v. Elizabeth State Bank, 265 F.3d 601,
612 (7th Cir. 2001) (diversity context), and I conclude that the more
recent appellate court cases, relying on an authoritative standard
reference, provide a better basis for prediction than an older Illinois
Supreme Court decision that is not directly on point. Here Mr. Wineberg
could not reasonably have objected to the fact that the check was jointly
payable to the IRS in light of the substantial liens and levies against
him. Nor was he prejudiced by joint payment, because, as I have already
determined, the lien was valid. Thus the check, jointly payable to Mr.
Wineberg and the IRS, tolled the accrual of interest.
Nevertheless, Hohmann failed to "keep the tender good" when it stopped
payment on the check on October 10, 2000, because Wineberg could not act
immediately to accept the money. See Schmahl, 499 N.E.2d at 575. Hohmann
argues that the interpleader lawsuit, filed three months later, was valid
tender. Although Hohmann and Somerset did not contest the amount due when
they filed the interpleader action, they effectively asked the court to
decide how to make the payment but did not deposit any funds with the
court, so action was not a valid tender because it did not make the money
immediately available. See Aulger, 1884 WL 9815, at *3 ("We have only to
turn to any book of precedents to find that a plea of tender must aver a
readiness, at all times after it is made, to pay the money, ...