merits, nor sufficiently serious questions going to the merits to present a fair basis for litigation. Substantial evidence presented during the preliminary injunction hearing on October 25, 1993 has led this court to the conclusion that questions on the merits are not sufficient to present fair grounds for litigation or to show a likelihood of success on the merits.
First, the plaintiff Constance Moss relied heavily on Jockey Club certificates which listed her as the owner as proof of her property interest in the horses. However, a representative of the Jockey Club, Nancy Colletti Kelly, testified that the Jockey Club assumes that statements of ownership made by those seeking certification for their horses are true and does not conduct an independent investigation to verify ownership. Thus, the listing of Constance Moss as owner on the Jockey Club certificates for the horses does not present strong evidence that she was the true owner at the time of the imposition of the federal tax lien.
Second, further documentation presented at the hearing supports that Kinderhill Investment had ownership interests in the horses. The defendant presented an affidavit filed in the United States Bankruptcy Court for the Northern District of New York made by Thomas A. Martin, the President of Kinderhill Corporation, on December 23, 1992 which detailed the assets owned by Kinderhill Investment in reference to a Chapter 7 bankruptcy proceeding. This affidavit states that M.J. Bean, Hardly Risen (now Malicious), and Senorita Constanza were among the assets owned by Kinderhill Investment. Furthermore, the affidavit also stated that the yearling of Cosmic and Cormorant (known as the "unnamed philly") was also an asset of Kinderhill Investment.
Third, Constance Moss testified that she purchased the four horses from Kinderhill Select Bloodstock. She agreed to pay $ 45,000 for the four horses with a 10% downpayment. The form of her downpayment, however, took the form of four checks totaling $ 6550.92 paid to John Hertler Stables, Inc., New York State Electric & Gas, and Kinderhill Investment between May 8, 1992 and June 16, 1992 to cover debts owed by Kinderhill Investment. This evidence strongly shows that she was attempting to purchase the horses from Kinderhill Investment rather than Kinderhill Select Bloodstock. Furthermore, the sale agreement took the form of "informal notes" which were not presented as evidence by the plaintiff and no fixed terms had been established for payment of the balance of the $ 45,000 purchase price. This evidence tends to show that Kinderhill Investment, rather than Constance Moss, was the owner of the horses at the time the federal tax lien was imposed. It is also inconclusive whether ownership passed to Constance Moss at the time the downpayment was made, and the plaintiffs have not met the burden to show that ownership did transfer.
Fourth, considered in light of the other evidence, a settlement agreement dated February 19, 1993 between Equine Capital Corporation and Kinderhill Investment also adds weight to the determination that Kinderhill Investment owned the three horses Hardly Risen (now Malicious), Senorita Constanza, and M.J. Bean. This agreement states that Kinderhill Investment is the recognized owner of these horses.
Given the weight of evidence that Kinderhill Investment owned the four horses, the uncertain nature of the transaction by Constance Moss to purchase these horses, and the fact that the plaintiffs presented no substantive evidence to show ownership of the horses by Kinderhill Select Bloodstock at any time, it is unlikely that the plaintiff would succeed on the merits of her claim of ownership in future litigation. Furthermore, substantial questions as to the merits of ownership have not been presented successfully by the plaintiffs who had the burden to do so. Plaintiff Moss presented evidence that she made a downpayment for the purchase of the horses but presented no convincing evidence to show that the downpayment itself resulted in her ownership of the horses. Thus, in light of the fact that the plaintiffs have not sufficiently shown a substantial question on the merits of ownership or likelihood of success on the merits in future litigation, and because preliminary injunctive relief should not be lightly granted, this court denies the motion for a preliminary injunction to further enjoin the sale of the four horses M.J. Bean, Senorita Constanza, Malicious, and the unnamed philly by the Internal Revenue Service.
IT IS SO ORDERED.
October 29, 1993
Albany, New York
Thomas J. McAvoy
Chief U.S. District Judge
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