US v. Brown

• Decision Date: 27 April 1993
• Docket Number: No. 91 C 2771.,91 C 2771.
• Citation: 820 F. Supp. 374
• Parties: UNITED STATES of America, Plaintiff, v. Therese C. BROWN, Defendant.
• Court: U.S. District Court — Northern District of Illinois

820 F. Supp. 374

UNITED STATES of America, Plaintiff, v. Therese C. BROWN, Defendant.

No. 91 C 2771.

United States District Court, N.D. Illinois, E.D.

April 27, 1993.

Charles J. Cannon, U.S. Dept. of Justice, Washington, DC, for plaintiff.

Theodore A. Sinars, John J. Jiganti, Madden, Jiganti, Moore & Sinars, Chicago, IL, for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

SHADUR, Senior District Judge.

This Court has conducted a bench trial in this action, following which counsel for each of the parties has submitted revised proposed findings of fact and conclusions of law. In accordance with Fed.R.Civ.P. ("Rule") 52(a), this Court makes the following findings of fact ("Findings") and states the following conclusions of law ("Conclusions"). To the extent (if any) that the Findings as stated may be deemed conclusions of law, they shall also be considered Conclusions. In the same way, to the extent (if any) that matters later expressed as Conclusions may be deemed findings of fact, they shall also be considered Findings. In both those respects, see Miller v. Fenton, 474 U.S. 104, 113-14, 106 S.Ct. 445, 451-52, 88 L.Ed.2d 405 (1985).

Findings of Fact

1. This action involves a claim by the United States that on September 8, 1984 the late Edward J. Brown ("Edward") fraudulently conveyed his interest in an Illinois land trust to Therese Brown Rubey ("Therese") at a time when Edward was indebted to the United States and was left insolvent by the transfer. If the United States is correct in its claim, Edward's transfer to Therese is voidable under Ill.Rev.Stat. ch. 59, ¶ 4 ("Act ¶ 4").

2. Edward and Therese were married to each other twice, the first time on October 26, 1957. They had four children: Victoria Ann (born July 28, 1959), Vallerie Jo (born March 21, 1961), Vivienne Marie (born September 8, 1963) and Edward, Jr. (born July 19, 1965). That first marriage ended in a divorce decree that was entered on June 29, 1976. During that marriage Edward and Therese and their children lived in the marital home in Des Plaines, Illinois, title to which was held in an Illinois land trust.

3. Therese was a high school graduate and attended Mundelein College and Loyola University, although the record does not reflect that she received a degree from either institution. (Tr. 42). Throughout her childhood and high school years Therese participated in the operation of various family-owned enterprises that operated one or more newsstands and a newspaper distributorship in the Chicago area (Tr. 42-43). In 1965 or 1966 Therese and her sister Roseanne Hudson acquired the Des Plaines News Agency (Tr. 43-44).

4. From 1960 and at various times during his marriage to Therese, Edward was self-employed in a variety of enterprises: a landscape business, a janitorial business, a security company and ultimately the business of establishing and operating the predecessors to health maintenance organizations (Tr. 45-47). During that same period Therese continued to be employed in the operation of her family's businesses.

5. In 1975 Therese filed an action against Edward in the Circuit Court of Cook County for separate support on the ground that he had deserted her on or about November 10, 1974. In that action Therese was represented by Ralph Goren ("Goren") (Tr. 47), who had been Edward's lawyer in the past (Goren Dep. 11).

6. On February 10, 1976 Edward and Therese entered into a property settlement (the "Settlement Agreement," J. Ex. 8¹) in connection with the pending support action, which was thereafter converted by agreement to a divorce action (Tr. 49-50). Under the terms of the Settlement Agreement:

(a) Edward agreed to pay Therese $1500 per month in alimony and to transfer to her (1) his interest in the marital home, (2) any interest he may have had in a partnership known as "The Paper Mill" and (3) the life insurance policies upon his life (on which he agreed to pay the premiums).

(b) Therese agreed to transfer to Edward her shares of stock in a corporation known as National Health Corporation and to accept the provisions of the Settlement Agreement in full satisfaction of her and her children's rights to support and maintenance.

7. At the time that the Settlement Agreement was signed, neither Edward nor Therese had any interest in a parcel of improved commercial real estate located at 985 Graceland Avenue, Des Plaines, Illinois (the "Graceland Property"). It is the later-acquired Graceland Property that is the subject matter of the alleged fraudulent conveyance that is in turn the subject of this litigation.²

8. On April 30, 1976 Therese and Edward filed a stipulation with the Circuit Court of Cook County stating that Therese's previously-filed complaint for separate support could be heard as a divorce action. On the same day Therese filed an Amended Complaint for Divorce (J.Ex. 4) in that court as Docket No. 75 D 27994, seeking a divorce from Edward on the ground of desertion. At that time neither Edward nor Therese had yet acquired any interest in the Graceland Property. Therese continued to be represented by Goren in the divorce proceedings, while Edward did not have legal counsel representing him.

9. On that same April 30, 1976 date Therese and Goren appeared before the Circuit Court of Cook County for a hearing on her divorce complaint (that date was some 4½ months after the signing of the Settlement Agreement, nearly 2 months after the divorce hearing and about a week before entry of the divorce decree). Edward was not present at the hearing and had executed a stipulation waiving his presence. Therese testified at the hearing (J.Ex. 6) about her marriage to Edward, about his desertion (she stated that he was then living in Minneapolis, Minnesota) and about the terms of the Settlement Agreement.

10. At the hearing the Circuit Court Judge reviewed the terms of the Settlement Agreement with Therese, inquiring specifically about Edward's agreed-upon monthly payment of $1500 and the parties' understanding that the amount would constitute unallocated child support and alimony. As the result of the hearing the court approved the Settlement Agreement (except for its Paragraph 1, which had stated that the $1500 monthly payments were to be considered alimony alone). When the divorce decree was formally entered by the court on June 29, 1976, the Settlement Agreement was incorporated into the decree (J.Ex. 7).

11. On June 21, 1976 Edward entered into a contract (the "Purchase Contract," J.Ex. 48-2) to purchase the Graceland Property, agreeing to pay the $175,000 purchase price to the seller, 985 First Avenue Building Corp. Under the Purchase Contract the seller agreed to take back, representing part of the purchase price, a $20,000 note from Edward payable in or within two years, to be secured by a second mortgage. Only Edward was identified in the Purchase Contract as the purchaser of the Graceland Property, and only Edward signed that document. Neither Therese's name nor her signature appears anywhere in the Purchase Contract. Indeed, Therese testified at trial that she had never seen the Purchase Contract before (Tr. 67).

12. On July 6, 1976 (well after the Settlement Agreement had been approved by the court and a week after the final decree of divorce had been entered) Edward entered into a land trust agreement (the "Trust Agreement," J.Ex. 21) with the First National Bank of Des Plaines ("Bank") to take title to the Graceland Property on the closing of the Purchase Contract. Under the Trust Agreement (Bank's Trust No. 61771574), Edward was named as the sole beneficiary of the land trust and the sole holder of the power of direction as to the Graceland Property. Under the terms of the Trust Agreement, no assignment of any beneficial interest was binding upon Bank as Trustee until the original or a duplicate of the assignment was lodged with Trustee and until its acceptance was indicated thereon.

13. On July 19, 1976 the closing with respect to the Graceland Property took place, with title being conveyed to Bank as Trustee of its Trust No. 61771574. Bank as Trustee executed two installment notes in bearer form (one for $130,000 and the other for $20,000), as well as a deed of trust in favor of Chicago Title & Trust Company to secure the payment of the $130,000 note. In addition the seller took back a $20,000 purchase money second mortgage. Only the seller and Edward (who alone was identified as the buyer) signed the closing statement executed in connection with the transaction (J.Ex. 22). Neither Therese's name nor her signature appears anywhere on the closing statement, nor did she sign any contract, note or mortgage in connection with the 1976 acquisition of the Graceland Property. Therese testified that she came up with the cash required for the closing with funds from the Des Plaines News Agency, while Edward contributed no money to the purchase (Tr. 148). But she produced no supporting documentary evidence whatever, and the closing statement credits Edward with both the $17,500 earnest money deposit and the cash to balance. This Court cannot and does not credit Therese's testimony.

14. Therese testified that she and Edward executed a guaranty (J.Ex. 20) in connection with the 1976 acquisition of the Graceland Property. That purported guaranty is on blank paper and is undated, and it recites that they guarantee the payment of "the attached note, which bears Chicago Title and Trust Company identification number ___." In fact neither of the notes executed by Bank in connection with the purchase of the Graceland Property bears a Chicago Title & Trust Company identification number. Although the purported guaranty refers to a "note," the identity of the note to which the guaranty refers cannot be determined because of the blank space where an identification number is normally inserted. Finally, Therese could not recall at trial when or where she signed the guaranty (Tr. 145-46).

15. On balance this Court is...