Opinion
Civil No. 1:02-CV-77J.
March 17, 2005
ORDER RE: THE UNITED STATES' MOTION FOR RECONSIDERATION
On January 28, 2005, the Court filed its Memorandum Opinion and Order ("Order") (dkt. no. 71) in the above-captioned matter. The United States filed its motion for reconsideration ("United States' Motion) on February 10, 2005 (dkt. no. 73), pursuant to Fed.R.Civ.P. 59(e) in an effort to "correct clear error and prevent manifest injustice." (United States' Motion, at 2.) The United States based its motion on three issues: (1) that the Court erred in determining that Donna Holman is not a nominee of her husband, Kenneth T. Holman; (2) that there need not be a transfer of the subject property from Kenneth Holman to Donna Holman; and (3) that whatever inchoate dower interest Donna Holman has in the property of her husband, that interest is not superior to the nominee lien of the United States.
In pertinent part, the Order held,
IT IS HEREBY ORDERED that Hyrum Smith holds record title to a one-half undivided interest in the real property located at 177 West 1500 North, Centerville, Utah 84014 solely as a nominee for Kenneth T. Holman, who is the actual and beneficial owner thereof.
IT IS FURTHER ORDERED that the United States' Motion for a "Directed Verdict" is DENIED.
IT IS FURTHER ORDERED that Donna Holman's request for declaratory relief is GRANTED IN PART in that she is the owner as tenant in common to a one-half undivided interest in the subject property.
IT IS FURTHER ORDERED that the United States' request to foreclose on the nominee lien against Donna Holman is DENIED.
IT IS FURTHER ORDERED that the United States' request to foreclose on the nominee lien on the subject property beneficially owned by Kenneth T. Holman is DENIED at this time subject to further action by the United States pursuant to Title 26 of the United States Code, Section 7403(b) (2000).
(Order at 11-12.)
I. Wife as Nominee for Husband
The United States argues that the Court erred when it did not find that Donna Holman is a nominee of her husband, Kenneth Holman. The United States cites Scoville v. United States, 250 F.3d 1198 (8th Cir. 2001), in support of this issue. In Scoville, a nontaxpayer admitted that he attempted to hide money from the IRS in an elaborate scheme which included divorcing then remarrying his wife in order to put assets in his ex-wife's name, all the while maintaining a domestic relationship and home together. In the month that Scoville was indicted, Mrs. Scoville and their children left for Costa Rica in order to avoid testifying. The Eighth Circuit held that the nontaxpayer failed to negate his beneficial interest in the insurance proceeds of the house in which they resided when it burned down, and that the totality of the facts demonstrated that the nontaxpayer's wife/ex-wife/wife was merely his nominee as to those proceeds. Scoville, 250 F.3d. 1203. The facts in Scoville are markedly distinguishable from the present case. In the present matter, Kenneth Holman could not purchase any interest in a home because he was unable to secure a loan for that purpose. The Holmans are and were at all relevant times married, and furthermore, Donna Holman could hold property in her name even if payments on that property were made by her husband by way of gift, or in consideration of love and affection, or by way of his legal duty of support. ( See Order at 10.) Remarkably, the United States does not address this duty in its motion.
II. Property Transfer Context
The United States argues that this court committed error in its opinion which states,
[I]n United States v. Reed, the five factors considered by the courts regarding nominee status must be present in a specific "context," namely:
Property transferred from a delinquent taxpayer to a nominee is subject to the collection of the taxpayer's tax liability. G.M. Leasing Corp. v. United States, 429 U.S. 338, 350-51 (1977).
Reed, 168 F.Supp.2d 1268 (emphasis added). Thus, although the evidence may support the aforementioned five factors, it is the "context" of a transfer of the subject property from Mr. Holman to Mrs. Holman which has not occurred. Mr. Smith, not Mr. Holman transferred the subject property to Mrs. Holman in 1991. Mrs. Holman transferred by quit-claim to herself and Mr. Smith to perfect refinancing in 1993.
(Order at 9-10.) The United States argues that there need not be a transfer of the subject property from Kenneth Holman to Donna Holman in order to have a nominee relationship. The United States cites to LiButti v. United States, 107 F.3d 110 (2d. Cir. 1997) arguing that the Second Circuit in LiButti held that it is not necessary to find a transfer between the nontaxpayer and the purported nominee to find nominee liability.
However, a closer reading of LiButti reveals that the Second Circuit's holding was conditioned upon the "requisite adverse inference" from the nontaxpayer's refusal to answer whether he ever owned or paid for the acquisition of the subject property — in that case, a horse. There is no "adverse inference" in the Holman matter. Moreover, there is no entity or business nominee situation, as in LiButti. Contrary to the United States' cursory reading of the holding in LiButti, "the proof of transfer remains an essential concern" absent any adverse inference or business entity nominee situation. LiButti, 107 F.3d at 119. The LiButti court held "it is sufficient for nominee and constructive trust purposes if it is found, with the aid of the requisite adverse inference, that Robert transferred his money to Edith for the purchase of the subject horse, consistent with his obvious desire to secrete his assets." Id. (emphasis added).
This court similarly finds that proof of transfer remains an essential concern in the determination of nominee liability.
III. Donna Holman's Inchoate Dower Interest
The United States argues that the court committed clear error when it "intimated" that Donna's inchoate dower interest was a perfected security interest that was superior to a federal tax lien. However, the court made no such finding. The opinion states only what is:
The Utah Uniform Probate Code states that a wife has an inchoate interest in her husband's interest in realty, namely, one-third in value of all the legal or equitable estates in real property possessed by the husband at any time during the marriage, and to which the wife made no relinquishment of her rights, should she survive him. Ut. Code Ann. § 75-2-202 (Supp. 2004)[,]
(Order, at 10), and makes no mention of a perfected security interest or the superiority of liens. In fact, the Court's ultimate observation that the United States had failed to join all other lien holders to the matter — as required by statute — further explains the Court's reluctance to determine the priority of lien holders.
The Order states in pertinent part: "Part (b) of Section 7403 may not have been complied with. See 26 U.S.C. § 7403(b) (2000). There is obviously a security interest held by the new mortgage lender for the 1993 refinancing and there may be other interests of record. The best the Court can do at this point is to declare the interest of Mr. Holman and deny the motion to foreclose, leaving for another day the question of foreclosure." (Order at 11.)
Therefore,
IT IS ORDERED that the United States' Motion for Reconsideration is hereby DENIED.