Kenney v. U.S.
| Decision Date | 17 August 2006 |
| Docket Number | No. 05-15386.,No. 04-16748.,No. 04-17019.,No. 05-15354.,04-16748.,04-17019.,05-15354.,05-15386. |
| Citation | 458 F.3d 1025 |
| Parties | George J. KENNEY, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee, and Ticor Title Co. of California, Defendant-counter-claimant. George J. Kenney, Plaintiff-Appellee, v. United States of America, Defendant-Appellant, and Ticor Title Co. of California, Defendant-counter-claimant. George J. Kenney, Plaintiff-Appellee, v. United States of America, Defendant-Appellant, and Ticor Title Co. of California; First Select Inc.; Eskanos & Adler, PC, Defendants. George J. Kenney, Plaintiff-Appellant, v. United States of America, Defendant-Appellee, and Ticor Title Co. of California; First Select Inc.; Eskanos & Adler, PC, Defendants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Benjamin C. Sanchez, Tierney, Watson & Healy, San Francisco, CA, for the appellant.
Kenneth L. Greene and Marion M. Erickson, U.S. Department of Justice, Washington, D.C., for the appellee/cross-appellant.
Appeal from the United States District Court for the Northern District of California; Bernard Zimmerman, Magistrate Judge,* Presiding. D.C. No. CV-03-03848-BZ.
Before HUG and O'SCANNLAIN, Circuit Judges, and ROGER T. BENITEZ,** District Judge.
This case concerns U.S. Government ("Government") tax liens on the proceeds of the sale of a house owned by George Kenney ("Kenney") and his former wife, Donna. They owned the house as joint tenants. The Government liens extend only to Donna's interest in the proceeds. Over the years Kenney had made the entire payments on the notes secured by deeds of trust on the property, both his share and Donna's share. He contends that pursuant to oral agreements with Donna those payments of her share were to be applied to diminish Donna's interest in the house, and by the time the Government liens attached Donna had no remaining interest in the house or the proceeds of the sale of the house. Kenney and the Government also disagree on how Kenney should receive equitable subrogation for the loan payments he made; at issue is the amount of the proceeds to which the Government is entitled and whether Kenney should receive interest on his equitable subrogation. There is also an issue of entitlement to litigation costs and attorneys fees. We have jurisdiction under 28 U.S.C. § 1291.
In December 1978, Kenney and Donna purchased a house in Fremont, California. Kenney and Donna paid $25,000 down and obtained a loan for the remaining $52,950 of the house's cost. Kenney and Donna were co-obligors on a promissory note secured by a deed of trust on the house, and they held title as joint tenants.
In June 1989, Kenney and Donna permanently separated. In August 1991, Kenney agreed to assist Donna in obtaining an additional $59,750 loan from a different lender. The loan proceeds were paid to Donna alone, but Kenney and Donna jointly executed a note and second deed of trust against the house to secure the promissory note. Pursuant to oral agreements between Kenney and Donna made between 1989 and 1991, Kenney agreed to assume responsibility for the two loans on the house. From 1989 until the house was sold in 2002, Kenney made all of the payments on the loans. In total, Kenney paid principal and interest of $166,826 on the two loans, according to the parties' joint stipulation for summary judgment.
Between November 1995 and April 1997, the Government filed five tax liens against Donna relating to her business for tax years 1991-1995. In 1996, Kenney and Donna began divorce proceedings. On November 29, 1996, they entered into a property settlement agreement. The agreement was incorporated into the judgment of marriage dissolution, filed on March 6, 1997. Under the agreement, Donna was required to execute a quitclaim deed to the residence in favor of Kenney. She executed this deed on October 9, 1999.
Kenney subsequently decided to sell the house. To allow this in light of the Government's liens against Donna's share, the Government and Kenney entered into a substitution-of-proceeds agreement. Under this agreement, Kenney agreed that the liens would attach to the sale proceeds to the same extent as to the house itself.
On July 2, 2002, the house was sold for $395,000. The net proceeds were $307,244, after payment of the balances due on the notes secured by the deeds of trust and expenses of sale. The Government asserted its liens against one-half of those proceeds, or $153,622, which was held in escrow by Ticor Title Company of California.
On August 19, 2003, Kenney filed a complaint against the Government to quiet title in the sale proceeds under 28 U.S.C. § 2410. He named Ticor as a co-defendant, but Ticor was dismissed from the suit after the sale proceeds and interest earned on the proceeds were taken from escrow and deposited with the clerk of the court.
On June 30, 2004, Kenney and the Government filed cross motions for summary judgment. Kenney contended in his motion for summary judgment that, as a result of his payments on the notes secured by the deeds of trust and the oral agreements with Donna, Donna's interest in the house and proceeds had diminished to zero. As an alternate theory, Kenney contended that he was entitled to equitable subrogation against Donna's interest for the payments he had made on Donna's share of the notes secured by the deeds of trust. Kenney also contended that he was entitled to interest on the payments he made on behalf of Donna.
In reply, the Government denied Kenney's entitlement to recovery under his "diminishing interest" theory, but agreed that he was entitled to equitable subrogation, although this theory had neither been mentioned in the complaint nor had facts consistent with this theory been alleged in the complaint. The Government denied that he was entitled to interest on the payments he paid for Donna's share. The Government also arrived at a different calculation of the manner in which the equitable subrogation was to be applied and sought summary judgment for a different amount.
In a published order on July 30, 2004, the district court granted summary judgment in part to the Government and denied summary judgment to Kenney. Kenney v. United States, 329 F.Supp.2d 1193 (N.D.Cal.2004). The order rejected Kenney's diminishing interest theory, but calculated an equitable subrogation award for Kenney that did not include interest on his payments as Kenney requested. Id. at 1198. The court rejected the Government's calculation of the equitable subrogation and adopted in substance Kenney's calculation. Final judgment was entered August 11, 2004.
On August 24, 2004, Kenney filed a motion for an award of litigation costs under 26 U.S.C. § 7430, which the district court granted to the extent that the costs were attributable to the equitable subrogation theory. The district court made this order an amendment nunc pro tunc to the final judgment. The district court also ordered the parties to present specific evidence of litigation costs, and on February 22, 2005 the district court granted Kenney $5,814.38 in litigation costs ($5,664.38 in attorney fees and $150 in costs).
The Government and Kenney filed timely notices of appeal from both the August 2004 final judgment and February 2005 order.
We review de novo a district court's partial grant of summary judgment in favor of the United States. United States v. $100,348 in U.S. Currency, 354 F.3d 1110, 1116 (9th Cir.2004).
Kenney's opening brief argues that as a result of the oral agreements to assume Donna's loan obligations, Donna impliedly agreed to proportionately transfer to Kenney her equity interest in the house. Therefore, Kenney would have gained all of Donna's interest before the tax liens attached. However, in his reply/answering brief, Kenney concedes that this argument has been foreclosed by In re Marriage of Benson, 36 Cal.4th 1096, 32 Cal.Rptr.3d 471, 116 P.3d 1152 (2005), which held that such agreements are required to be in writing. Kenney then raises the new argument that the precedent established by Benson suggests that remand is necessary to "address the question of what additional rights against the property, if any, Kenney may have that are superior to the tax liens." But Benson established no new rights, and Kenney already had a full opportunity to present legal and equitable theories to the district court.
The parties do not dispute that Kenney is entitled to equitable subrogation for some of the house sale proceeds. To whatever extent Kenney is subrogated to the rights of the lenders, he has priority over the Government in the disputed proceeds, since the lenders' interests are senior to the later-filed Government liens.1 The method of calculating Kenney's equitable subrogation award is a question of law. We review de novo the district court's conclusions of law. Tritchler v. County of Lake, 358 F.3d 1150, 1154 (9th Cir.2004).
Under the district court's method, the $307,244 net proceeds were divided into equal shares of $153,622 for Kenney and Donna, whereupon equitable subrogation was applied to credit Kenney $83,413 from Donna's $153,622 share. The $83,413 represents half of the $166,826 in mortgage payments that Kenney made between 1989 and 2002 on the two notes.2 After deducting the $83,413 award from Donna's share of $153,622, there remained $70,209 in Donna's share available to satisfy the Government liens.
On appeal, the Government argues that Kenney's $83,413 should be taken from the total net proceeds of $307,244, leaving a balance of $223,831 to divide between Kenney and Donna, of which $111,915.50 (Donna's half) would be available to satisfy the Government liens. The Government's approach would increase its portion by $41,706.50. The Government argues that because...
To continue reading
Request your trial
-
U.S. v. Hartz
... ... in the indictment; and (3) that a verdict based on a gun other than the two described in the indictment is a constructive amendment, requiring us to overturn his conviction ... Where a defendant raises a constructive amendment claim before the district court, we review the ... ...
-
Labor/Community Strategy v. Los Angeles County
...under the Decree, and so abused its discretion when it denied BRU's motion to extend its jurisdiction to enforce the Decree. See Kenney, 458 F.3d at 1032. Although I agree with the majority that a consent decree should extend no longer than necessary, See Maj. Op. at 5220-21, MTA's ongoing ......
-
Lincoln Benefit Life Co. v. Dallal
...enjoys broad powers in equity, and its choice of equitable remedies is reviewed for an abuse of discretion." Kenney v. United States , 458 F.3d 1025, 1032 (9th Cir. 2006) (citation and internal quotation marks omitted). The Court agrees with Lincoln that the Policy with respect to both Mr. ......
-
Pacific Fisheries Inc. v. U.S.
...justified. A. BURDEN OF PROOF The fee-shifting statute provides that a party may not be treated as the prevailing party if "the United States establishes that the position of the United States in the proceeding was substantially justified." 26 U.S.C. § 7430(b)(4)(B)(i) (emphasis added). The......