Investor, IRS Dispute Priority of Liens on Debtor Property

wanted to afford karin the opportunity to sell the real property and realize its full 12 were loaned through equity and several other entities these children owned and it had parted with "money or money's worth." therefore, the court held, equity did records. equity did not make a contemporaneous payment of $1 million to karin at for summary judgment, and remand for further proceedings not inconsistent with this family members agreed that the purpose of the mortgage and mortgage modification ("daley") and corbett lenz ("corbett") are the children of karin and her husband ________________________ the irs counters with two arguments. first, it contends that in order to prove counter-claimant-appellee. eleventh circuit fdic proceedings,daleyand corbett loaned their parents over $3 million. the funds objective evidence demonstrating the parties' agreement," (id. at 12) (emphasis equity and karin signed a promissory note, referenced by the mortgage, establishing defendant-cross- was filed, the security interest was protected under state law against a judgment lien if these mortgages did create a security interest, the irs argued, the transfer of an or personal, belonging to such person." i.r.c. � 6321. that lien arises at the time the worth." 10 judgment in the case. equity appeals the grant of partial summary judgment to the2 summary judgment and denied equity's motion for summary judgment. (id. at 15). federal tax lien. the irs counterclaimed to establish the priority of its tax lien. the 14 property acquired by contract for the purpose of securing payment or performance of stipulated to the dismissal without prejudice of the irs's counterclaim and has not presented such evidence. second, it contends equity has not presented interest." id. under florida law, the local law in this case, past consideration is foreclose its mortgage and to establish the priority of its security interest over the is due"); see also lea v. suhl, 417 so. 2d 1179, 1181 (fla. app. 1982) (issuance of no authority holding or suggesting that florida law demands contemporaneous united states of america, regulations because the mortgages were given to secure antecedent debts. prior to the close of business on september 30, 1981). the purpose of this rule is to prevent a party u.s. court of appeals 11 designated by the laws of such state, in which the property subject to the lien is corp., 577 f.2d 298, 303 (5th cir. 1978); see also bonner v. city of prichard, 661 f.2d 1206, 1209 after it was granted partial summary judgment, the irs moved to amend its for the southern district of florida an obligation or indemnifying against loss or liability." i.r.c. � 6323(h)(1). to be because the mortgage and mortgage modification agreements are not security treasury regulations define "money or money's worth" as including money, internal revenue service, equity filed suit in the united states district court for the southern district of [publish] cmt. 4 (noting subsection (1)(c) "is intended to apply to an instrument given in payment of or as 9 the time the mortgage and promissory note were executed. daley and corbett assert "contemporaneous consideration"--that is, at the time the loans were originally to a money value. 26 c.f.r. � 301.6323(h)-1(a)(3). it also includes "any the irs made assessments against randolph and karin for unpaid income permit the irs to join an indispensable party. accordingly, we have jurisdiction to consider this time monies were advanced to karin and randolph, the parties agreed that, at some defining consideration suggest otherwise. these comments imply that a note or tuscaloosa counties in state of ala., 941 f.2d 1428, 1437 (11th cir. 1991) (en banc). d.c. docket no. 08-60630 cv-cma (providing that an instrument is issued for value if "issued or transferred as payment federal law determines the priority of competing liens asserted against a birmingham bd. of educ., 531 f.3d 1336, 1337 (11th cir. 2008). iii. issues on appeal and contentions of the parties parted with "money or money's worth." in re haas, 31 f.3d 1081, 1085 (11th cir. district court granted the irs summary judgment establishing that the tax lien was a andwithout furthercondition arenot final,appealablejudgments. seeryan v.occidental petroleum filed 1280 (1960). and, for equity's interest in the property to have priority, equity must was no other documentation to support equity's contention that the mortgage and "in favor of the united states upon all property and rights to property, whether real representation in the fdic proceedings. in addition to the loans, costa corporation, arising out of an unsecured obligation; and (4) the holder of the security interest the district court's conclusion that a genuine issue of material fact precludes resolving on1 having concluded the court erred in granting the irs summary judgment [karin]." (r.46 ex. 13 at 3 � 22.) her affidavit also claims the parties executed a "against any purchaser, holder of a security interest, mechanic's lienor, or judgment obligation or indemnify against loss; (2) the property to which the security interest assessment is made and continues until the tax liability is satisfied or becomes priority because they did not create a security interest under i.r.c. � 6323. and, even security interest given to satisfy an antecedent debt is supported by consideration summary judgment is appropriately granted where there is no genuine issue of to equity's complaint, and the clerk entered her default. see fed. r. civ. p. 55(a). 3 date. (appellee's br. at 28.) we disagree. equity need not show that the parties before wilson and cox, circuit judges, and restani, judge.* abused its discretion in denying equity's motion to reconsider. we reverse the grant proceedings. interest" under i.r.c. � 6323. equity appeals. we vacate and remand for further this element of its claim. v. discussion liabilities. equity filed an action against karin and the united states seeking to show it is the holder of a security interest as defined by the internal revenue code priority of its tax lien over equity's security interest, and filed a crossclaim against the district court concluded that because equity did not "produce objective and, because the agreements were recorded in public records prior to the recording at the time the mortgage and mortgage modification were executed, karin did taxpayer's property. aquilino v. united states, 363 u.s. 509, 513-14, 80 s. ct. 1277, therefore, the irs argues, summary judgment establishing the priority of the tax lien party--whether the mortgage and mortgage modification were executed to secure security agreement was executed for the purpose of repaying the loans. the irs cites consideration, and we are aware of none. indeed, comments to the florida statute dismissal without prejudice was not an improper attempt byequity or the irs to manufacture a final future date, they would execute an agreement to secure the loans. it claims equity not receive contemporaneous payments in the amounts noted in the agreements. also explained that, even if it were to consider the evidence, the newly discovered 5 to the tax lien. it is undisputed that the mortgage and mortgage modification were by the mortgage by an additional $2 million. the promissory note was amended to a note or security agreement. fla. stat. � 673.3031 cmt. 1 (providing as an example properly declined to consider the newly discovered document because it was in jan 29, 2010 corwin v. walt disney co., 475 f.3d 1239, 1254 (11th cir. 2007). on which that party will bear the burden of proof at trial." celotex corp. v. catrett, priority over the tax lien." litton indus. automation sys., inc. v. nationwide power ________________________ participation agreement "giving [equity] the right to collect the loan proceeds and to the internal revenue code defines a security interest as "any interest in agreement. judgment. see, e.g., united states v. four parcels of real property in greene and irs moved for partial summary judgment; both motions sought to establish the concluded that whether the conveyance was fraudulent is a disputed question of fact members entered into the settlement agreement with the fdic, the real property in the united states court of appeals we consider de novo a grant or denial of summary judgment. see baker v. of partial summary judgment in favor of the irs, affirm the denial of equity's motion secure the antecedent debts. (id. at 11.) because "equity failed to explicitly outline entered into a mortgage and security agreement with karin. the agreement granted indispensable party to the case. the court denied the irs's motion, and the parties daley asserts that it was agreed and understood that when the various family defendant-cross-claimant- supported by valid consideration under florida law if karin agreed that the purpose of the mortgage priority of their respective interests in the real property. equity asserted that because belonging to randolph and karin. the irs filed the notice in public records on repayment of the loans. and, it is not appropriate to assess credibility on summary without determining the credibility of these statements, there remains a no. 09-11887 15 are met. the disputed issue is whether equity parted with "money or money's section 6323(a), and the irs tax lien takes priority." (r.67 at 13.) the court also stated in an affidavit that "[i]t was understood and agreed at the time the loans were iv. standard of review reconsideration. to prevent manifest injustice,equitycontends thecourtshould have at � 23.) karin testified in a deposition that she does not recall why she signed the interest to equitywas fraudulent and was therefore unenforceable against the tax lien. equity a security interest in the real property in exchange for a loan of $1 million. equity did not have a security interest under section 6323, it granted the irs partial 13 demonstrating that either the mortgage or the mortgage modification was intended protected under section 6323(a), a holder of a security interest must show (1) the statements that are unsupported and insufficient to satisfy equity's burden of proof. was parted with before the security interest would otherwise exist if, under local law, counterclaim and crossclaim by adding merrill lynch credit corporation as a the fdic as part of a settlement of all claims against randolph, karin, corbett, ________________________ 6 and that equity parted with "money or money's worth." the truth of these corporation ("fdic"). to assist with personal expenses and costs related to the according to daley, equity did not immediately foreclose its mortgage because it agreements was to secure repayment of the loans.3 utilized to secure repayment of the funds being advanced on behalf of [randolph] and the terms of the loan. on october 21, 2004, the mortgage was recorded in public defendant because it also has an interest in the real property and was therefore an equity also argues that the court abused its discretion in denying its motion for equity and karin had been filed. crossclaim. the court dismissed these claims without prejudice and entered a final statements, however, is disputed. at trial, equity will have the burden of proof on property, notice of the tax lien must be filed "in one office within the state . . . as lien creditor" until notice has been filed. id. � 6323(a). this means that "any worth" as required for the formation of a security interest under i.r.c. � 6323. mortgage modification agreement. the agreementincreased theloan amount secured karin seeking to foreclose its tax lien. equity moved for summary judgment, and the court order has been entered in order to manufacture a final judgment. schoenfeld v. babbitt, 168 to determine whether past consideration may satisfy the "money or money's worth" reasonable diligence to discover and produce the evidence. (r.80 at 7.) the court defendant-appellee, 6323(a). (id. at 8.) 12, 2005, this mortgage modification was recorded in public records. once again, judgment to pursue an immediate appeal; rather, it was prompted by the district court's refusal to situated . . . ." i.r.c. � 6323(f)(1)(a)(i). value. to partial summary judgment establishing the priority of the tax lien. material fact, and the moving party is entitled to judgment as a matter of law. fed. a finding that the mortgages were given to satisfy the antecedent debts. this finding another entity owned and controlled by these children, transferred over $8 million to the fdic settlement, "it was agreed and understood that the property would be at dispute is whether the mortgage and mortgage modification were executed sufficient to support the creation of a security interest. fla. stat. � 673.3031(1)(c) of the tax lien, equity argues it is entitled to summary judgment establishing the ("irs") placed a lien on the real property due to karin's and her husband's unpaid tax anything more than circumstantial evidence" that the agreements were intended to later x issues a note to y for the debt."). acknowledged that daleyand randolph asserted in affidavits and depositions that the given, the parties agreed that equity would receive a security interest at some future equity is an investment partnership; its majority owners, stacie daley even if evidence shows that randolph was the sole party responsible for the antecedent3 we review the denial of a motion for reconsideration for abuse of discretion. r. civ. p. 56(c)(2). it should be granted "against a party who fails to make a showing versus corbett began loaning their parents money through equity and other entities, equity appeal from the united states district court this consideration in [the mortgage documents], and [it failed] to produce any other 8 appeal. by designation. mortgage modification. while the statements may be "self-serving" and may not be controlled. most of the loaned monies were transferred to randolph's personal bank 11 at 20.) karin failed to make any payments on the mortgage debt and was in the district court observed that equity did not produce any "objective evidence in equity's name "as the overall entity entitled to recover repayment of the loans on i. background taxes. it prepared a notice of federal tax lien on all property and rights to property certain real property owned by karin lenz ("karin"). the internal revenue service karin held title to certain real property located in florida. after daley and purporting to show that it parted with "money or money's worth" in exchange for the john ley 1994) (citing i.r.c. � 6323(h)(1)). the parties agree that the first three requirements the irs seems to contend that equity must present evidence of 17 equity investment partners, lp, ex. 13 at 3 � 22.) and, she asserts it was agreed that the mortgage would be issued security interest was acquired by contract to secure payment or performance of an consider the evidence and denied equity's motion because the agreement was in not hold a security interest as defined by i.r.c. � 6323(h)(1), and the irs was entitled plaintiff-counter- equity's possession throughout the discovery period, and equity failed to exercise it parted with "money or money's worth," equity must present evidence that at the under the ryan rule, we generally hold that voluntary dismissals granted without prejudice2 was to repay the loans. (id. at 5.) nevertheless, it reasoned equity "failed to produce of past consideration, "x owes y $1,000. the debt is not represented by a note. establish the priority of its security interest over the tax lien. karin did not respond mortgage modification was "[p]robably so i can pay my children back." (r.43 ex. honorable jane a. restani, chief judge, united states court of international trade, sitting* requirement, florida law controls this issue. past consideration may support the made that my wife would agree to place a mortgage on the property to provide unenforceable by reason of lapse of time. id. � 6322. a lien is not valid, however, ii. procedural history these statements could suffice to establish the purpose of the mortgage and account, but they were used for the joint expenses of randolph and karin. some of was filed, equity's security interest takes priority pursuant to i.r.c. � 6323(a). the in her deposition that she did not remember why she signed the mortgage, but she karin and randolph to equity and other entities. it argues that it parted with "money unnecessary). equity investment partners, lp ("equity") claims to hold a security interest in and mortgage modification were to secure randolph's antecedent debts. see fla. stat. � 673.3031 due diligence to produce it. 16 children back." (r.43 ex. 11 at 20.) daley stated in an affidavit that at the time of "objective evidence," they are evidence nonetheless. if believed, they would support florida against karin and the united states seeking to foreclose its mortgage and which could not be resolved on summary judgment. (id. at 14.) because it held1 mortgage modification agreements created a security interest in the real property. equity claims that the notes and mortgages were issued to secure the debts owed by properly recorded prior to the filing of the notice of tax lien. so, if the mortgage and if a person accrues a federal tax liability, a lien is created by operation of law irs countered that equity's mortgage and mortgage modification could not take contemplated future execution of a security agreement at the time the loans were issued. rather, to show past consideration, equity must present evidence that the moved for summary judgment, but a disputed issue of a material fact precludes its mortgage modification were issued to secure repayment of the loans. the court property, the mortgage modification does not qualify as a security interest under neither the mortgage documents nor the promissorynotes refer to the loans daley and sufficient evidence to show that at the time the mortgages were executed, the parties the irs answered the complaint, filed a counterclaim against equity to establish the sufficient to establish the existence of an element essential to that party's case, and was appropriate. 7 a security, tangible or intangible property,services, and other consideration reducible priority of its security interest. the irs counters that the tax lien is a superior interest behalf of the various entities owned and controlled by [daley] and [corbett]." (id. establishing the priority of the tax lien, we need not consider whether the court cox, circuit judge: would lead the court to hold that the mortgages were supported by past consideration added), the court concluded equity did not present sufficient evidence to show that form of a loan and security agreement purporting to show that money or money's august 16, 2005, after the mortgage and mortgage modification agreements between acting clerk equity did not contemporaneously pay karin the $2 million specified in the worth was exchanged for its interest in the real property. the court declined to debts because many of the loans were made directly to him, the notes and mortgages would still be from voluntarily dismissing its remaining claims without prejudice after a non-final adverse district `security interest' which arises prior to the proper filing of a federal tax lien takes past consideration is sufficient to support an agreement giving rise to a security equity filed a motion to reconsider based on newly discovered evidence in the 4 the mortgage and mortgage modification were filed before the notice of the tax lien $3 million and after the fdic settlement payment, equity and karin entered into a the main issue on appeal is whether there exists a disputed issue of material consideration which otherwise would constitute money or money's worth . . . which even if, at the time the debt arose, the parties did not contemplate future issuance of defendant-appellant, karin lenz, only evidence equity offers to show the purpose of the mortgages is "self-serving" advanced to their parents as of the time of the mortgage transaction. approximately also testified that she signed the mortgage modification "[p]robably so i can pay my 2 genuine issue of material fact that precludes summary judgment for either obtain the mortgages for the loans made by our various entities." (id. at � 24.) superior interest. the court held that equity did not qualify as a "holder of a security f.3d 1257, 1266 (11th cir. 1999). we decline to apply the ryan rule in this case because the mortgage modification satisfy the requirements of i.r.c. � 6323 to create a security 477 u.s. 317, 322, 106 s. ct. 2548, 2552 (1986). here, both the irs and equity equity claims it holds a security interest in the real property that is superior mortgage, but in the same deposition she also testified that the purpose of the and treasury regulations. but, because the regulations direct us to apply state law the loaned monies were transferred directly to a law firm to cover the costs of legal money or money's worth by showing that at the time the mortgage and mortgage security for the debt of a third person . . . ."). intended for the mortgages to secure the antecedent debts. according to the irs, the to satisfy [the] antecedent debts." (r.67 at 10) (emphasis added). it explained that aresultof various proceedings brought against thembythefederal deposit insurance (january 29, 2010) evidence that `money or money's worth' was exchanged for an interest in the interests. it argues that evidence shows equity did not part with "money or money's daley, and other entities. corbett advanced to their parents through equity and other entities, and it noted there reconsider. grant to either party. fact that precludes summary judgment establishing the priority of interests in the real a note in payment of an antecedent obligation rendered additional consideration irs, the denial of its motion for summary judgment, and the denial of its motion to of, or as securityfor, an antecedent claimagainst any person, whether or not the claim would be used to secure repayment of funds advanced to randolph and karin. (r.46 interest, that interest has priority over the tax lien. that the purpose of the mortgage was to secure repayment of the monies they had mortgage and mortgage modification agreement. the irs counters that the court reversed in part; affirmed in part; and remanded. reconsidered its judgment in light of a newly discovered loan and security agreement corp., 106 f.3d 366, 368 (11th cir. 1997) (citation omitted). in the case of real ten months later, after the amounts loaned to karin and randolph increased to over modification were executed, both karin and equity agreed that the purpose of the equity's possession during the discovery period, and equity did not exercise for the eleventh circuit property owned by karin. equity contends that evidence shows the mortgage and summary judgment whether the conveyance was fraudulent is not challenged on this appeal. security for the loans that were being made." (r.46 ex. 14 at 3 � 17.) karin testified (11th cir. 1981) (en banc) (adoptingas precedent decisions of the former fifth circuit handed down randolph lenz ("randolph"). randolph and karin suffered financial difficulties as creation of a security interest under florida law. so, equity may prove it parted with or money's worth" as defined by the internal revenue code and treasury agreement would fail to demonstrate that equity held a security interest under section opinion. to secure repayment of the debts owed to equity by randolph and karin. randolph was to attach existed at the time of filing of the tax lien; (3) at the time the tax lien ________________________ include the amount of the additional loans and set forth repayment terms. on august default within afewmonths afterthemortgagemodificationagreementwasexecuted.