Ketcham v. US
| Decision Date | 27 August 1991 |
| Docket Number | No. CV-N-91-47-ECR.,CV-N-91-47-ECR. |
| Parties | Evelyn G. KETCHAM, Plaintiff, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — District of Nevada |
Thomas A. Collins, Reno, Nev., for plaintiff.
Leland E. Lutfy, U.S. Atty., Reno, Nev., Mark G. Fraase, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendant.
Plaintiff, Evelyn Ketcham, moves the Court for issuance of a preliminary injunction to prohibit the I.R.S. from levying on certain assets pursuant to a levy served on Western Title Company, Inc., on May 16, 1991. An evidentiary hearing was held before the court on May 24, 1991. At that time the court also heard the arguments of counsel and received legal authority in support of the parties respective positions.
This action is brought pursuant to 26 U.S.C. § 7426. Section 7426(b)(1) provides the District Court with jurisdiction to grant an injunction against an I.R.S. levy if such levy would irreparably injure rights in property which the court determines to be superior to the rights of the United States in such property.
The levy in this case was issued on the basis of a notice of federal tax lien for taxes owed by plaintiff's former husband, Charles J. Ketcham, for the year 1979. The notice of lien was recorded on September 30, 1985. This court must decide whether the assets sought to be levied upon belonged to plaintiff prior to recordation of the notice of lien. This issue in turn depends on whether a legally effective assignment of this property from Mr. Ketcham to plaintiff was perfected prior to the date of September 30, 1985, when the lien was filed.
Plaintiff and Charles J. Ketcham were married in 1955 and divorced in 1963 in Las Vegas, Nevada. There were three children born the issue of the marriage. Plaintiff and Mr. Ketcham both testified at the hearing that as a part of the divorce settlement Mr. Ketcham was obligated to pay Mrs. Ketcham the sum of $1,000,000 and that this sum was paid soon after the divorce proceedings were concluded in the form of four cashier's checks, each in the sum of $250,000. Corroborating evidence for these assertions is indeed sketchy at best. The only evidence that such a debt arose from the divorce was the testimony of Mike Furbush, Senior Vice President of Valley Bank in Reno. He testified that in March of 1988, at the time Valley Bank was set to reconvey certain security (as will be further discussed below) which had been posted by Eagles Nest Limited Partnership with the bank, Mr. Ketcham had shown him what was described as a settlement agreement with plaintiff. The settlement agreement was shown to Mr. Furbush in support of a request that the secured property to be reconveyed be transferred by the bank directly to plaintiff. Mr. Furbush did not testify in any detail as to the contents of the settlement agreement but in the context of the hearing it may be inferred that it was the agreement to pay the $1,000,000.
Mr. Furbush also testified that the settlement agreement was in such form that he could have relied on it in reconveying the security, but that bank policy was to reconvey secured property to the original borrower (Eagles Nest) and that he was obligated to follow that policy and did so. While the plaintiff and her former husband, Mr. Ketcham, have a considerable interest in the outcome of these proceedings, Mr. Furbush does not and the court accepts his testimony that a settlement agreement did exist.
No copies of the divorce decree or any related settlement agreement or copies of the alleged cashier's checks were introduced in evidence. The suggestion that no such settlement agreement existed is certainly raised by that fact, but Mr. Furbush's testimony tilts the scales in favor of finding that such an agreement did exist.
The testimony of plaintiff and Mr. Ketcham (hereinafter "the Ketchams") was that Mrs. Ketcham did not negotiate any of the four cashier's checks used in paying the settlement, but instead retained them in a closet at her home. Thereafter, according to the Ketchams, Mr. Ketcham, in need of funds for business purposes borrowed the million dollars back from his ex-wife over a period of two to three years. These loans were supposedly made on four occasions when plaintiff simply endorsed, in each case, one of the cashier's checks and delivered it to Mr. Ketcham. There were no papers or documents prepared to evidence the loans of these very large sums of money. There were no terms of repayment established between the parties or security given, or provision for payment of interest.
In 1978, the limited partnership known as Eagles Nest Limited Partnership (sometimes referred to hereinafter simply as Eagles Nest) was formed in connection with a condominium project in Washoe County, Nevada. Mr. Ketcham was the general partner of the partnership and there were five limited partners.
Mr. Ketcham testified that within ninety days after the formation of the partnership (which would have to be sometime in the year 1978) he assigned his interest in "the ultimate proceeds" he might eventually derive from the partnership to his former wife in repayment of the million dollar loan. He testified that there was written documentation to evidence the assignment, but that after a diligent search it cannot be found. Mr. Ketcham is a very sophisticated businessman who has constantly received the advice of attorneys and accountants. He had a net worth in 1980 of over $30,000,000. He is the sort of person who would have documented such a transaction, or had it done, and who would have retained the documentation. There is some serious question as to whether this assignment ever took place. Mr. Ketcham states that his house counsel, Joseph Montero, of Las Vegas, Nevada, prepared the draft assignment that was used and that it was signed in the presence of a Notary Public, Peggy Ann Ford. Yet, neither Mr. Montero or Ms. Ford was called to testify by plaintiff.
There is other evidence that argues against the existence of the claimed assignment. In a certified financial statement for 1980, prepared by Mr. Ketcham's Certified Public Accountant, William J. Sheehan, the Eagles Nest interest is reflected as belonging entirely to Mr. Ketcham and the debt to plaintiff of $1,000,000 is not shown as a liability. Certainly it must be assumed that Mr. Ketcham talked to the accountant in the course of the preparation of this statement and did not tell the accountant of the assignment, if it did exist, or of the liability to his former wife, if it did exist. This constitutes considerable evidence that neither the assignment or liability actually existed.
Mr. Ketcham's 1987 and 1988 income tax returns, each signed under penalty of perjury, show his receipt of substantial amounts of interest from Eagles Nest via Western Title, which he apparently received as ultimate proceeds of the enterprise and retained and reported as his own income. No evidence was offered to show that he paid or accounted for any of this money to Mrs. Ketcham as would have been required had there been an assignment in existence.
No further details of the text of the claimed 1978 assignment were brought forward during the hearing.
There is, however, some written evidence that the assignment took place. This evidence is contained in a notation written by Mr. Ketcham across the face of an invoice of a company known as Colorand Corporation. The notation reads as follows:
To Evelyn Ketcham 9/22/81 This is the invoice for improvements to unit 129 which together w. the unit represents the first payment to you on the past due 1 MM loan. I have assigned Josh's note to you on June 21, 1981, and all additional proceeds received from Eagles Nest. Hopefully this will keep you from being a "Bag Lady." (emphasis supplied)
s/Chas. J. Ketcham
This perhaps self-serving (at this stage of the case) statement produced by Mr. Ketcham is certainly suspect. It is scant evidence of the claimed 1978 assignment, but it is some evidence that such an assignment did occur. The Government has not seriously challenged the authenticity of the notation or that it was written in 1981. The notation does support the claim of the 1978 assignment or at least of some such assignment prior to 1985.
Mr. Ketcham testified that he told Mr. Furbush of this assignment in 1980 at the time the Valley Bank loans for Eagles Nest were negotiated. However, Mr. Furbush did not recall any such conversation. He testified that had he known of such an assignment of the ultimate proceeds of Eagles Nest to Mr. Ketcham's former wife, it would have necessitated further inquiry as to the nature of the assignment and a concern as to whether the bank was obtaining a first lien in connection with its loan.
One must conclude that a banker making a loan in a sum substantially in excess of one million dollars would have been highly concerned about an assignment of any sort of an interest in connection with the Eagles Nest partnership to a third person who did not join in conveying the security to the bank. Since there is no evidence Mrs. Ketcham participated in any way in the conveyances which occurred in connection with the Valley Bank loans in 1980, we must conclude that Mr. Ketcham did not tell Mr. Furbush about the 1978 assignment.
In fact Mr. Ketcham testified that he never disclosed the 1978 assignment or recorded it because he didn't want to clutter things up and cloud the title to the Eagles Nest property which would make it more difficult to get a take out-loan (from the construction loan for the condominiums).
Mr. Ketcham wanted to be able to deal with the Eagles Nest property entirely as his own, without having to involve plaintiff in any way, and without disclosing to anyone else that such an assignment existed. Mr. Ketcham treated the Eagles Nest property and its ultimate proceeds as his sole property. Any assignment which existed was...
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