Duden v. United States

• Decision Date: 13 October 1972
• Docket Number: No. 293-69.,293-69.
• Citation: 467 F.2d 924
• Parties: Helen P. DUDEN v. The UNITED STATES et al., Third-Party Defendants.
• Court: U.S. Claims Court

467 F.2d 924 (1972)

Helen P. DUDEN v. The UNITED STATES et al., Third-Party Defendants.

No. 293-69.

United States Court of Claims.

October 13, 1972.

Robert E. Nelson, Portland, Or., attorney of record for plaintiff.

Thomas Smidt, II, Arlington, Va., with whom was Asst. Atty. Gen. Scott P. Crampton, for defendant. Phillip R. Miller and Theodore D. Peyser, Jr., of counsel.

Terry W. Baker, Lake Oswego, Or., attorney of record for United States National Bank of Oregon.

Dean D. DeChaine, attorney of record for First National Bank of Oregon.

Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, Judges.

OPINION

PER CURIAM:

This case was referred to Trial Commissioner William E. Day with directions to make findings of fact and recommendation for conclusions of law under the order of reference and Rule 134(h). The commissioner has done so in an opinion and report filed on June 7, 1972. No exceptions have been filed to the commissioner's opinion and report and the time for so filing pursuant to the Rules of the court has expired. On August 1, 1972, defendant filed a motion requesting that the court adopt the trial commissioner's recommended findings of fact and conclusion of law to which motion no response has been filed. Since the court agrees with the commissioner's opinion, findings of fact and recommended conclusion of law, as hereinafter set forth, it hereby grants defendant's said motion and adopts the same as the basis for its judgment in this case without oral argument. Therefore, plaintiff is not entitled to recover and her petition and the counterclaims of the third party defendants are dismissed.

OPINION OF COMMISSIONER

DAY, Commissioner:

This is a suit involving a claim against the Check Forgery Insurance Fund, 31 U.S.C. §§ 561-564 (1970)¹ and 31 C.F.R. §§ 359.0-359.4. An alternative claim is made under the provisions of 28 U.S.C. § 1346(a) (1), which covers jurisdiction over suits for refund of internal revenue taxes.

Three Treasury checks issued to Harold P. and Helen P. Duden covering the tentative allowance of loss carrybacks for their tax years 1959, 1960, and 1961 are the subject matter of the plaintiff's claims. Harold P. Duden is the plaintiff's former husband. It is undisputed that Harold P. Duden endorsed all three checks, signing his own and plaintiff's name to the checks, and thereafter negotiated them at the two third party banks.

The United States National Bank of Oregon, Portland, Oregon, and the First National Bank of Oregon, Portland, Oregon, were, by motion of the defendant, noticed into the case and have appeared. Each bank has entered a contingent counterclaim for judgment over, against Harold P. Duden. It is apparent from the motion for leave to serve notice upon an interested third party, that the defendant, if it is found liable to the plaintiff, would have the court enter a judgment over against the two named banks. It would appear that the proper course for the defendant would have been the issuance of a summons under Rule 41(e) rather than a notice under Rule 41(b). No question is raised by the parties as to this difference and the result will not be changed in view of the opinion and conclusion of law to follow.

Most of the facts have been stipulated. A trial has been held, however, and at the conclusion of the plaintiff's case-in-chief, First National Bank of Oregon made a motion (through counsel) under Rule 102(c) that the case be dismissed as to it since the endorsement on the Treasury check which Harold Duden deposited in its bank (the proceeds of which were later paid to Harold Duden) was specifically authorized by a joint account signature card signed by Helen Duden and Harold Duden (see finding 18). This motion was allowed. Thereupon, the defendant moved that the case be dismissed as to it insofar as the proceeds of the check for $11,934.92 (which involved First National Bank of Oregon) was concerned. This motion was likewise allowed, since according to the signature card referred to, Helen Duden had specifically authorized Harold Duden "to sign or endorse any and all checks * * * * payable to the other * * *."

Plaintiff's former husband, Harold P. Duden, was the sole source of the family's income throughout the marriage. He was for many years in the business of receiving, storing and servicing newly imported automobiles in Portland, Oregon. Since 1949, Harold had been the president of one such business, Westland Warehouse. In 1957, its owners offered him a 51 percent controlling interest, which he bought. Two other men acquired the remaining 49 percent interest.

In 1960, Westland was acquired in an exchange of stock by Suburban Motors, a holding company which was also controlled by Harold. Suburban quickly acquired additional subsidiaries. Gradually, however, its financial condition began to suffer and in January 1962, its shareholders decided to dissolve the corporation. Harold (who had continued to operate Westland all during this time) was confident that it was still a profitable business and he acquired its assets from Suburban. As it turned out, however, Westland had become more debt-ridden during its ownership by Suburban than he suspected. Its operations had been expanded to include a commodity division which greatly drained off its profits from the automobile storage business.

Still hopeful of eventually making the business successful, Harold eliminated everything except the automobile functions. At this time, there were current accounts payable of approximately $30,000 and other debts of nearly $200,000. Harold had been required to guarantee personally many of these debts to get financing for his promotions. Fearing that these creditors would start pressing him, he decided on a plan to divest himself of his personal assets. Although his personal advisors were opposed, Harold received the approval of two banks which held mortgages on the business. The maneuver was merely to buy time—Harold fully intended to repay all the creditors.

At the time of this decision, Harold had the following principal assets:

(a) The business (now renamed Columbia Warehouse) which he was operating as a sole proprietorship.

(b) A 50 percent interest in the so-called Steel Building, a warehouse he acquired in 1961 (along with his brother) for use in the business.

(c) A one-third interest in the rentals from the Rhodes Building, which was rented to a successful department store in Portland.

(d) A joint interest (with Helen) in their home.

(e) Certain stocks and bonds.

The first step in the plan was to begin depositing Columbia's business funds into Helen's personal checking account at the Citizens Bank of Oregon. Business disbursements were also made from this account.

In June 1962, Harold incorporated the business as Columbia Warehouse Company, issuing 70 percent of its stock to his wife and four children. The remaining 30-percent interest went to three of Harold's business advisors. Helen was designated as president of Columbia Warehouse Company, the corporation.

On June 22, 1963, he deeded his onehalf interest in the Steel Building to Helen. At this time it was encumbered by first and second mortgages totaling $387,535.80. Harold continued to make these payments towards this indebtedness (in the sum of $566.68 per month) until they were taken over by Helen in March 1966.

In October 1962, he shifted his Columbia salary to Helen. Throughout this time, Harold continued to run the business.

In December 1962, Harold moved out of his house because he and Helen were having serious marital problems.

On their joint Federal income tax return for 1962, Harold and Helen claimed business bad debt losses of $167,000. Thereafter, on June 1, 1963, Helen signed an application for tentative carryback adjustment of a 1962 net operating loss amounting to $159,260.29 based on these bad debts. She executed the form perfunctorily and did not notice the amounts. The carrybacks provided for refunds of taxes paid with their previously filed joint income tax returns for 1959, 1960, and 1961. Harold himself signed the application form on June 4, at which time he changed the address on the form from Helen's home address to his office address at Columbia Warehouse. On June 21, notices were sent to Harold's office that the refunds had been granted and that checks would be forthcoming.

On June 24, 1963, three checks refunding taxes plus interest were issued to "Harold P. and Helen P. Duden" as follows:

(a) Treasury check No. 6,220,746 refunding $17,404.70 for 1959 (the first check).

(b) Treasury check No. 6,220,747 refunding $13,040.07 for 1960 (the second check).

(c) Treasury check No. 6,220,748 refunding $11,934.92 for 1961 (the third check).

These checks were received by Harold P. Duden.

The first check was endorsed by Harold (who also signed Helen's name to its back) and deposited in his commercial account at the United States National Bank of Oregon on July 2, 1963. On the same day, Harold drew a counter check from this account, payable to Lenora M. Knudsen (whom he later married) for $15,000, and she deposited this check into her savings account at the same bank. On September 9, 1963, Lenora M. Knudsen transferred the $15,000 to an account at the Bank of Hawaii in Honolulu, which account was controlled by Harold Duden. To prevent Helen's knowledge of this, Harold directed the United States National Bank of Oregon to send its monthly statements to his office address instead of to Helen's home address.

The second check was endorsed by Harold (who also signed Helen's name) and deposited to a trust account of W. F. Whitely at the United States National Bank of Oregon on July 2, 1963. On September 11, Mr. Whitely drew a check on the funds so deposited, payable to Harold P. Duden for $10,391.15. On September 17, 1963, this check was deposited by Harold to the aforementioned account at the Bank of Hawaii.

The third check was endorsed by Harold (in both...