Morris v. US
| Decision Date | 29 July 1986 |
| Docket Number | No. 85-647-CIV-ORL-18.,85-647-CIV-ORL-18. |
| Citation | 652 F. Supp. 120 |
| Parties | K.A. MORRIS, Plaintiff, v. UNITED STATES of America and the Department of the Treasury, Internal Revenue Service, Defendants. |
| Court | U.S. District Court — Middle District of Florida |
Craig Stephen Boda, P.A., Daytona Beach, Fla., for plaintiff.
Jose F. DeLeon, Trial Atty., Tax Div., Dept. of Justice, Washington, D.C., for defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This action for wrongful levy and lien, and for quieting title was tried before the Court without a jury on July 29, 1986. At the end of plaintiff's case, the Court granted defendants' motion for involuntary dismissal in accordance with Rule 41(b) of the Federal Rules of Civil Procedure. Based upon the facts admitted by the parties in their joint pre-trial stipulation and the testimony at trial, the Court enters the following findings of fact and conclusions of law pursuant to Rules 41(b) and 52(a) of the Federal Rules of Civil Procedure.
In April, 1980, a house and lot, located at 410 Country Circle Drive, Daytona Beach, Florida (Property 1), was purchased and titled in the name of plaintiff K.A. Morris. At that time, a criminal investigation was proceeding against his son Stephen M. Morris for trafficking in cannabis. Plaintiff's son presently is incarcerated for conviction on state charges resulting from his cannabis involvement. Additionally, in April, 1980, plaintiff purchased Lot 99, Quiet Place in the Country, Volusia County, Florida (Property 2), and acquired title in fee simple.
In September, 1980, plaintiff sold Property 1 to James R. and Myrtice L. Peacock, who assumed the first mortgage and entered into a second mortgage with plaintiff. On April 1, 1985, a jeopardy assessment against plaintiff's son for taxable years 1978 through 1980 was made in the amount of $291,525.80, pursuant to 26 U.S.C. § 6861. Consequently, plaintiff's son is indebted to defendant the United States in the amount of $291,525.80 plus interest. On May 7, 1985, defendant Department of the Treasury, Internal Revenue Service (IRS) served a Notice of Levy on James and Myrtice Peacock for Property 1, thereby seizing the mortgage payments due plaintiff as his son's nominee in the amount of $301,040.89. Defendant IRS also filed a Notice of Lien on Property 2 owned by plaintiff as nominee for his son in the same amount of $301,040.89. On July 25, 1985, the Honorable W. Earl Britt, Chief Judge of the Eastern District of North Carolina, entered an order that both the decision to make the jeopardy assessment against plaintiff's son and the amount assessed were reasonable under the circumstances.
By detailing his employment, savings, selling, and investment history, plaintiff sought to establish that the subject properties were purchased by him with his own funds and that he was not the nominee of his son. Plaintiff testified that he has been gainfully employed consistently from 1937 until 1980. The bulk of his employment was for a railroad. For 1973 through 1979, the tax years about which plaintiff testified, he claimed three dependents each year and his highest gross income was $25,937.98 in 1979. Nevertheless, plaintiff testified that he saved substantial money each year.
Plaintiff stated that he has been distrustful of banks. He maintained a sparingly utilized checking account primarily for paying bills. The largest amount about which he testified as having in a savings or certificate of deposit account for the period 1975 through 1980 was approximately $25,000.00. Plaintiff has preferred to deal in cash and cashiers checks. Furthermore, plaintiff testified that he had secreted sums from $50,000.00 to $80,000.00 in his house and on his property over fifty working years. He testified that this money has been kept in his house in a filing cabinet, a chest, a sewing machine, the refrigerator, the washing machine, and behind the baseboard under the kitchen sink. He also has hidden money in his yard. These "reserve" funds have derived from plaintiff's selling real estate, cashing checks, and engaging in entrepreneurial endeavors, such as a honey business. Plaintiff ceased such "side activities" in 1962. Plaintiff's reserve funds have been a source of ready cash for him.
With respect to real estate investments, plaintiff described various property transactions in which he had been involved from 1939 through 1970. The properties, which plaintiff purchased, were acquired with cash or cashiers checks. His proceeds from sales of real estate ranged from approximately $500.00 to $7,000.00. These funds were stashed in plaintiff's reserve funds, and were not used to satisfy daily expenses.
Plaintiff alleged that he purchased Property 1 as an investment. He was informed as to the availability of the house and lot through his son, who lived next door to the property in his girlfriend's house. Although the price of Property 1 was $100,000.00, plaintiff decided on the purchase because he was able to assume a $73,000.00 mortgage with a $27,000.00 down payment. He testified that he made mortgage payments from the reserve funds in his house. For this transaction, plaintiff used an attorney obtained by his son. Payments to the attorney were by check, cashiers check or cash and were delivered by plaintiff or his son.
Plaintiff sold Property 1, taking back a second mortgage from the Peacocks. Part of this transaction involved a $10,000.00 downpayment on an automobile to James Peacock, a car dealer. The car was purchased for and titled to the girlfriend of plaintiff's son. The Peacocks made mortgage payments to plaintiff until the IRS levy was filed. The Peacocks, who currently reside on Property 1, now make mortgage payments to the IRS.
For Property 2, a lot, plaintiff allegedly paid $14,500.00 in cash. This transaction also was handled by an attorney retained through plaintiff's son. IRS Special Agent Craig Garvin testified that his investigation had revealed that Properties 1 and 2 were purchased by cashiers checks drawn from savings accounts in the name of the girlfriend of plaintiff's son. Garvin affirmed that the purchase funds for the properties were from plaintiff's son and definitely were not those of plaintiff.
In this action, plaintiff asserted that the subject properties were purchased with his personal funds and that he was not the nominee of his son Stephen Morris. Defendants contended that plaintiff was the nominee of his son regarding the properties subject to the levy and lien at issue. Defendants maintained that plaintiff did not purchase the subject properties with his own funds.
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