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UNITED STATES v. BROWN

April 27, 1993

UNITED STATES OF AMERICA, Plaintiff,
v.
THERESE C. BROWN, Defendant.



The opinion of the court was delivered by: MILTON I. SHADUR

 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 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, 88 L. Ed. 2d 405, 106 S. Ct. 445 (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, P 4 ("Act P 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. 8) *fn1" 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. *fn2"

 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.

 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 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 unpersuaded that the purported guaranty was in fact executed and delivered to Bank at or near the time of the acquisition of the Graceland Property. *fn3" But even if it had, that would not call for the conclusion that Therese rather than Edward purchased the Graceland Property in 1976. Such a guaranty, like the addition of Therese's signature to the mortgage disbursement statement referred to in Finding 16(b), would be entirely consistent with customary lender practices. In light of the proximal time relationship between the final divorce decree (as well as Edward's noninvolvement in the divorce proceedings), coupled with the facts that (1) Edward and Therese continued their business relationship through Therese's management of the Graceland Property (and her business' occupancy of a substantial part of that property) for years thereafter and (2) they apparently continued an amicable personal relationship until Edward's death, *fn4" it would not be surprising if Bank had been wholly unaware of the existence of the final divorce decree and had thus viewed the requirement that Therese's signature also be obtained as the kind of documentation that is normally secured from the spouse of a purchaser. But these Findings are not based on any speculation in that respect. Instead any inference favorable to Therese that might arguably be drawn from her signature (if, that is, she had in fact signed and delivered the guaranty--an unproved assumption) is far outweighed by the evidence indicating that she was not the purchaser of the Graceland Property.

 16. Therese testified that Edward had no interest in the Graceland Property in 1976 (Tr. 105-06). In that and other respects she was not a credible witness. Moreover, her testimony in that regard is belied by more than one aspect of the record:

 
(a) Although Goren testified that he was representing both Edward and Therese at the closing (Goren Dep. 18), that revisionist reconstruction of the situation is also not really credible. For the most part Goren had no real recollection of the events of that period, such as the terms of the Settlement Agreement and what transpired during the divorce proceedings (id. 12-16). What is clear is that Goren was really Edward's lawyer, having represented him before Goren was called on to handle the marital dissolution (id. 11). *fn5" Perhaps most telling is ...

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