Holman v. U.S., 05-4114.

Citation505 F.3d 1060
Decision Date01 October 2007
Docket NumberNo. 05-4114.,No. 05-4123.,05-4114.,05-4123.
PartiesDonna M. HOLMAN, Plaintiff-Counter-Defendant-Appellee/Cross-Appellant, v. UNITED STATES of America, Defendant-Counter-Claimant-Appellant/Cross-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Thomas N. Thompson, (James C. Haskins with him on the briefs), Haskins & Associates, Salt Lake City, UT, for the Plaintiff-Counter-Defendant-Appellee/Cross-Appellant.

John A. Nolet, United States Department of Justice, Tax Division, Washington, D.C. (Thomas J. Clark, United States Department of Justice, Tax Division, and Eileen J. O'Connor, Assistant Attorney General, with him on the briefs), for the Defendant-Counter-Claimant-Appellant/Cross-Appellee.

Before HENRY, MURPHY, Circuit Judges, and FIGA, District Judge.*

HENRY, Circuit Judge.

Donna Holman filed this quiet title action against the United States after the IRS filed a tax lien on real property in Centerville, Utah, to which she and a friend of her husband Kenneth Holman held legal title. The IRS's lien arose out of assessments against Mr. Holman for unpaid employment taxes. Mrs. Holman asserted that she and her husband's friend, Hyrum Smith, held the Centerville property free and clear of the tax lien. The IRS responded by filing a counterclaim alleging that both Mrs. Holman and Mr. Smith held the property as nominees for Mr. Holman and seeking to enforce the lien.

The district court ruled that (1) Mrs. Holman held an undivided half-interest in the property in her own right, not as a nominee for Mr. Holman; but (2) Mr. Smith held an undivided one-half interest in the Centerville property as a nominee of Mr. Holman. The court based the former ruling on the fact that Mr. Holman had never transferred legal title to the property to Mrs. Holman. As a result, the district court concluded, the federal tax lien was enforceable only as to the half-interest held by Mr. Smith.

The IRS now appeals the district court's ruling that a transfer of legal title was required to enforce the nominee lien. Mrs. Holman has filed a cross-appeal, maintaining that the district court erred in characterizing Mr. Smith's interest in the property. According to Mrs. Holman, Mr. Smith held title to the Centerville property as her nominee, not as Mr. Holman's nominee.

With regard to the IRS's appeal, we agree that a formal transfer of legal title from Mr. Holman to Mrs. Holman is not required in order to enforce the lien. However, we further conclude that the IRS must establish that Mr. Holman held an interest in the property under Utah law. Because the district court did not undertake this state-law inquiry, we vacate its decision and remand for further proceedings. As for Mrs. Holman's cross-appeal, we also conclude that further proceedings are warranted.

I. BACKGROUND

Kenneth Holman is a Utah real estate developer whose businesses became delinquent in paying federal employment taxes. In April 1988, the IRS determined that Mr. Holman was liable for $250,616.13 under 26 U.S.C. § 6672 for willfully failing to pay income and social security taxes withheld from the wages of his employees from 1984 through 1987. In October 1990, the IRS determined that Mr. Holman was liable under § 6672 for an additional $6,674.54, representing unpaid employment taxes for the second quarter of 1989. The IRS provided Mr. Holman with notice and a demand for payment of these assessments.

In 1990, the Holmans moved into a house located at 177 West 1500 North in Centerville, Utah, after an apartment that they were renting was subjected to foreclosure. The Centerville property was owned by Hyrum Smith and his wife, but, by 1990, Mr. Smith was interested in moving to a smaller residence. Mr. Holman realized that because of the tax assessments that had been filed against him and because Mrs. Holman had no income of her own, they could not qualify for a loan to purchase the Centerville property. Mr. Smith agreed that, in exchange for providing an apartment to him and paying an additional $400 in rent, the Holmans and their children could live there.

In 1991, the Holmans agreed to purchase the Centerville property from Mr. Smith. Mr. Smith and his wife executed a warranty deed transferring title to Mrs. Holman. The Smiths and Mrs. Holman also executed a trust deed that identified Mrs. Holman as the trustor and the Smiths as beneficiaries. The trust deed stated that it was to secure the payment of $190,000 for the purchase price of the property. The Smiths remained indebted to Crossland Mortgage on a first mortgage on the property.

In 1993, Crossland Mortgage discovered the trust deed between Mrs. Holman and the Smiths. The mortgage company concluded that the deed triggered a due-on-sale clause in the Smiths' loan agreement. Mr. Holman and Mr. Smith then arrived at a new agreement under which Mr. Smith and Mrs. Holman would become a co-owners of the Centerville property and Mr. Smith would co-sign a new loan. Accordingly, on October 25, 1993, Mrs. Holman transferred the property by quitclaim deed to herself and Mr. Smith as tenants in common. On the same day, Mrs. Holman and Mr. Smith jointly executed a trust deed in favor of Utah Mortgage Corporation, granting it a mortgage on the property to secure repayment of the new loan.

At the bench trial before the district court, Mr. Smith gave testimony as to the reasons for the 1993 transaction: he said that he wanted to assist the Holmans in their efforts to refinance the property. He explained that he discussed this transaction with Mr. Holman but not with Mrs. Holman. Mr. Smith also stated that he had no genuine interest in the property.

Throughout the 1990s, the Holmans made the mortgage payments on the Centerville property. The IRS sought to collect employment taxes from Mr. Holman but was not successful. Finally, in April 2002, with the unpaid balance of the assessments, with accrued interest, equaling $820,833.85, the IRS filed a lien on the Centerville property.

Mrs. Holman then brought the instant action seeking to quiet title to the house free and clear of the tax lien asserted by the IRS. The IRS filed a counterclaim against Mrs. Holman. The IRS asserted that Mrs. Holman and Mr. Smith held the Centerville property only as nominees of Mr. Holman. As a result, the IRS contended, it was entitled to enforce the tax lien on the property.

Six days after Mrs. Holman filed the quiet title action, the IRS filed a separate action in the District of Utah. The IRS sought to reduce the unpaid balance of the tax assessments against Mr. Holman to judgment. In March 2004, the district court entered judgment for the United States and against Mr. Holman for $892,666.22, plus interest. Mr. Holman has not appealed that judgment.

In this quiet title action, Mrs. Holman argued that she was not her husband's nominee and that, as a result, the federal tax lien could not be enforced against the Centerville property. In contrast, the government argued that requisite factors were present to establish that Mr. Smith and Mrs. Holman held title to the property as Mr. Holman's nominees, and that the property was therefore subject to the federal tax lien. The IRS relied on the following factors to establish that Mrs. Holman was merely a nominee of Mr. Holman: (1) Mr. Holman exercised dominion and control over the property; (2) Mrs. Holman paid little or no consideration for the property; (3) Mr. Holman orchestrated the transaction to place the property in Mrs. Holman's name only after a federal tax lien had attached to the property; (4) there was a close relationship between the Holmans; and (5) Mr. Holman continued to enjoy the benefits of the property. After the bench trial, the district court reached contrasting results with respect to the IRS liens asserted against the interests held by Mr. Smith and Mrs. Holman.

As to Mrs. Holman's interest in the property, the court concluded that she was not Mr. Holman's nominee but rather held the property in her own right. The court acknowledged that there was considerable evidence supporting the IRS's theory that Mrs. Holman held title as Mr. Holman's nominee. In particular, Mr. Holman had provided the vast majority of funds used to pay the mortgage and household expenses. He received the benefit of the mortgage interest deduction by claiming the interest paid on the mortgage against the Holmans' joint income, which for nine of eleven years consisted of Mr. Holman's earnings only. Mr. Holman paid $12,797.94 in closing costs for the 1993 refinancing, and, in applying for several loans, he indicated that the Centerville property was his asset.

Nevertheless, the court concluded that because Mr. Holman had never transferred legal title to the Centerville property to Mrs. Holman, she could not be considered his nominee. Thus, the court found that Mr. and Mrs. Holman owned the Centerville property as tenants in common each with a one-half undivided interest in the whole.

In contrast, as to Mr. Smith's interest in the property, the court observed that "on August 14, 2003, both the United States and Mr. Smith signed and filed a stipulated request for judgment that Hyrum W. Smith owned title to the subject property solely as a nominee for Kenneth T. Holman." Aplt's App. vol I, at 62. The court concluded that "Mr. Smith is a record title holder merely as a nominee for Mr. Holman and thus Mr. Holman has at least a one-half undivided interest in the subject property." Id.

Finally, the court held that the IRS's request for foreclosure and sale was premature. The court explained that the new mortgage holder (from the 1993 refinancing) had a security interest in the property and that it was not clear that the IRS had complied with a section of the foreclosure statute requiring notice to lienholders. See 26 U.S.C. § 7403(b) (stating that "[a]ll persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto"). The court...

To continue reading

Request your trial
70 cases
  • In re Krause
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Kansas
    • April 21, 2008
    ... ... COPYRIGHT MATERIAL OMITTED ... Page 789 ... COPYRIGHT MATERIAL OMITTED ... Page 790 ...         Thomas W. Curteman Jr., US Department of Justice Tax Division, Hilarie E. Snyder, Washington, DC, for Plaintiff, ...         Gary E. Krause, pro se ... 150 ...         More recently, the Tenth Circuit Court of Appeals issued a published decision in Holman v. United States 151 that explored the nominee theory in more detail. Holman provides this Court with clear guidance for analyzing a nominee claim ... ...
  • In re Pearson
    • United States
    • Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Tenth Circuit
    • July 28, 2008
    ...pecuniarily by the decree or order of the bankruptcy court." Id. Only a person aggrieved may appeal a judgment. Holman v. U.S., 505 F.3d 1060, 1068 (10th Cir. 2007). The burden of establishing standing is on the party invoking federal jurisdiction. Weinman v. Fidelity Capital Appreciation F......
  • United States v. Long
    • United States
    • U.S. District Court — Northern District of Ohio
    • March 26, 2014
  • United States v. Balice, Civ. No. 14-3937 (KM)(JBC)
    • United States
    • U.S. District Court — District of New Jersey
    • August 9, 2017
    ...in the hands of [that] third party while actually retaining some or all of the benefits of true ownership." Holman v. United States, 505 F.3d 1060, 1065 (10th Cir.2007); see also Fourth Inv. LP v. United States, 720 F.3d 1058, 1066 & n. 3 (9th Cir.2013). We initially look to state law to de......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT