United States v. Allahyari

99 F.4th 486

UNITED STATES of America, Plaintiff - Appellee, v. Shaun ALLAHYARI, Defendant - Appellant,andKomron M. Allahyari, Defendant.

No. 22-35422

United States Court of Appeals, Ninth Circuit

Argued and Submitted September 12, 2023 Seattle, Washington

Filed April 17, 2024

Appeal from the United States District Court for the Western District of Washington Thomas S. Zilly, District Judge, Presiding, D.C. No. 2:17-cv-00668-TSZ

Rachel I. Wollitzer (argued) and Jacob Christensen, Attorneys; David A. Hubbert, Deputy Assistant Attorney General; Nicholas W. Brown, United States Attorney; United States Department of Justice, Tax Division, Appellate Section, Washington, D.C.; Morgan B. Hlinka, Trial Attorney; United States Department of Justice, Tax Division, Washington, D.C.; for Plaintiff-Appellee.

Curtis Isacke (argued) and Avi J. Lipman, McNaul Ebel Nawrot & Helgren PLLC, Seattle, Washington, for Defendant-Appellant.

Before: Michael D. Hawkins, Ryan D. Nelson, and Daniel P. Collins, Circuit Judges.

OPINION

COLLINS, Circuit Judge:

Shaun Allahyari appeals the district court's order concluding that a deed of trust granted in Shaun's favor by his son Komron Allahyari was a fraudulent transfer that lacks priority over the Government's federal tax liens against Komron.¹ We conclude that the challenged order is not a final decision and that we therefore lack jurisdiction over this appeal under 28 U.S.C. § 1291. Accordingly, we dismiss this appeal for lack of jurisdiction.

I

In April 2005, Komron filed late tax returns for the years 1999-2002, and a tax return for 2004. Although these returns showed that Komron owed various amounts to the Internal Revenue Service ("IRS"), he did not include any payments with these returns. The IRS subsequently assessed unpaid income taxes, interest, and penalties against Komron.

In April 2017, the Government filed this action in which, inter alia, it sought to reduce the IRS's assessments to a judgment and to obtain foreclosure relief, in partial satisfaction of these liabilities, with respect to a residence owned by Komron in Mercer Island, Washington (the "Mercer Island Property"). Shaun was named as an additional Defendant with respect to the foreclosure-related claims, because he was the beneficiary of two deeds of trust that were recorded against the Mercer Island Property. In June 2018, Komron and the Government stipulated to the entry of a partial judgment that fully resolved the IRS's claims for a monetary judgment concerning the amounts assessed.² Under the terms of that partial judgment, a monetary judgment was entered against Komron in the total amount of $3,910,470.35, plus "interest and statutory additions from June 14, 2018."

With that partial judgment in place, three claims in the Government's operative amended complaint against Komron and Shaun were left for resolution: (1) a request for a declaration that any mortgage or deed of trust granted by Komron in Shaun's favor was invalid or unenforceable and that Komron "owns the [Mercer Island] Property free and clear of Defendant Shaun Allahyari's purported interest"; (2) a request for an order declaring that any such deeds of trust were fraudulent transfers and setting them aside under Washington law; and (3) for an order, under Internal Revenue Code ("I.R.C.") § 7403(c), that would (i) foreclose on the various federal tax liens that had arisen from the IRS assessments and that the IRS had recorded against the Mercer Island Property beginning in 2005; and (ii) order the sale of the property, with the proceeds "to be applied toward satisfaction of the outstanding and unpaid tax assessments."³

These remaining claims challenged two distinct deeds of trust that had been granted by Komron in favor of Shaun. The first was a 2003 deed of trust on the Mercer Island Property that had initially been granted by Komron to the Boeing Employees' Credit Union ("BECU") as security for a $400,000 loan. After Komron defaulted on that loan, Shaun borrowed money in order to pay BECU the outstanding balance of the loan, and Shaun took an assignment of the BECU loan and the 2003 deed of trust. BECU's formal assignment of that deed of trust to Shaun was recorded on September 8, 2010. On the parties' cross-motions for summary judgment, the district court held that, as a matter of law, Shaun had "with respect to the amount he paid to BECU in exchange for the assignment ($383,044.74), the same priority position that BECU had as to its security interest in the real property at issue, which is senior to the Government's tax liens." The court, however, left for trial the question whether "any interest that has accrued with respect to the amount defendant Shaun Allahyari paid to BECU has priority over the Government's tax liens." At that subsequent bench trial, the district court ruled in Shaun's favor on this issue, holding that "Shaun is entitled to priority over the United States' federal tax liens with respect to interest that has accrued on the amount Shaun paid to BECU."

The second deed of trust that the Government challenged had been granted by Komron to Shaun on July 25, 2005 and formally recorded against the Mercer Island Property the next day. At the bench trial, the district court ultimately ruled for the Government on this claim. The court preliminarily agreed with Komron and Shaun that various "transfers" made by Shaun to Komron "beginning in 1991 through 2005 were bona fide loans, not gifts." Although the 2005 deed of trust was purportedly granted to secure Komron's performance with respect to such loans, the district court nonetheless held that the 2005 deed of trust did not take priority over the federal tax liens. The court relied on two alternative grounds in reaching this conclusion. First, the court held that the 2005 deed of trust did not meet the requirements of federal and Washington law to qualify as a "security interest" that would be entitled to priority over a later-recorded tax lien under I.R.C. § 6323(a). See I.R.C. § 6323(h)(1) (defining "security interest" in part based on incorporation of state law). Second, the court held that the 2005 deed of trust was "voidable under Washington's Uniform Fraudulent Transfer Act because Komron intended to 'hinder, delay, or defraud' the United States" in granting the 2005 deed to Shaun. See REV. CODE WASH. § 19.40.041(1)(a).

On October 30, 2018, the district court entered a formal judgment in accordance with these findings, and that judgment specifically "foreclosed" the IRS's tax liens and ordered that the Mercer Island Property "shall be sold pursuant to 26 U.S.C. § 7403 and 28 U.S.C. § 2001, with the net proceeds to be disbursed as set forth" in a simultaneously filed "Order of Foreclosure and Judicial Sale." The latter order contained detailed instructions concerning the "terms and conditions of the sale," which was to be conducted by the U.S. Marshal or an IRS "Property Appraisal and Liquidation Specialist," and the order also contained detailed instructions concerning the distribution of the proceeds.

Both Shaun and the Government appealed, and we reversed and remanded. United States v. Allahyari, 980 F.3d 684 (9th Cir. 2020). We concluded that the district court had applied the wrong legal standards in both of its alternative grounds for concluding that the 2005 deed of trust did not have priority over the federal tax liens. Id. at 689-92. We also held, in the Government's cross-appeal, that the district court failed to consider the effect of the Washington "statute of limitations when calculating the value of Shaun's senior lien under the BECU Deed of Trust." Id. at 694.

After receiving additional briefing on remand, the district court on March 31, 2022 issued an order again concluding that the 2005 deed of trust was a fraudulent transfer and that a foreclosure order in the Government's favor was warranted.

The district court noted that the only error that this court had identified with respect to the earlier fraudulent transfer finding was that the district court had applied the "preponderance of the evidence" standard rather than the "clear-and-satisfactory-proof standard" that applied under the relevant Washington law. Allahyari, 980 F.3d at 692. Accordingly, the district court re-evaluated the relevant factors under that standard and concluded that the Government had "met its burden to demonstrate that the 2005 Deed of Trust was a fraudulent transfer by clear and satisfactory proof." Because the court found that the 2005 deed was voidable as a fraudulent transfer, it explicitly declined to address, on remand, whether Shaun had adequately established a "security interest" within the meaning of I.R.C. § 6323.

As to the 2003 BECU deed of trust that had been assigned to Shaun and that had priority over the Government's liens, the district court on remand resolved certain legal issues between the parties as to how the statute of limitations applied. However, the court ultimately concluded that it did not have sufficient information or assistance from the parties to make what it believed to be the necessary calculations to determine the amounts secured by the BECU deed. Accordingly, the court ordered the parties to "meet and confer" and to "submit a Joint Status Report" setting forth their views as to five specified issues.

The district court further held that, although the court had "limited discretion to not order a foreclosure sale," Shaun had failed to show that a favorable exercise of such discretion was warranted here. Accordingly, the court concluded that "[t]he United States has established it has valid federal tax liens against the [Mercer Island] Property, and therefore the United States is entitled to judgment and to foreclose those liens, sell the [Mercer Island] Property, and apply the proceeds toward its tax liens."

The district court stated, however, that it would "delay entering an order for judicial sale until after it ha[d] received the requisite Joint Status...