Friday, December 27, 2013

United States v. Wood case brief

United States v. Wood case brief summary
877 F.2d 453 (1989)

CASE SYNOPSIS
Defendant ex-wife appealed a judgment of the United States District Court for the Western District of Kentucky, which held that plaintiff government was entitled to recover from defendant for breaching her promise to apply the proceeds of the sale of her marital residence to her ex-husband's federal tax lien. Defendant contended the court erred in holding that the government was a third-party beneficiary to the property settlement.

CASE FACTS
Under the terms of a property settlement agreement, defendant ex-wife was entitled to the sale proceeds from certain marital property after the existing liens and mortgages were paid off. One of the encumbrances included her then-husband's federal tax lien. After the property was sold, plaintiff government filed suit to recover from defendant for breaching her promise to apply the sale proceeds to the tax lien.

PROCEDURAL HISTORY
The district court found that plaintiff was entitled to recover. On review, defendant contended the district court erred in holding that plaintiff was a third-party beneficiary to the property settlement.

DISCUSSION

  • The appeals court affirmed. 
  • The court reasoned that in consideration for defendant's promise to pay the lien, the ex-husband conveyed the home and three adjacent parcels of land to defendant. 
  • Moreover, the ex-husband promptly notified plaintiff of the terms of the settlement and repeatedly reassured it that the payment provision survived the judicial sale. 
  • As a result, plaintiff was a creditor beneficiary and was entitled to enforce the promise. 
  • The court also ruled that an attempted rescission of the agreement failed, because plaintiff was never advised of the addendum.

CONCLUSION
The appeals court affirmed the judgment that plaintiff government was entitled to recover from defendant ex-wife for breaching her promise under a property settlement agreement to apply the proceeds of the sale of her marital residence to her ex-husband's federal tax lien. The court ruled that plaintiff had an enforceable claim as a third party beneficiary of the agreement.

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