FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

JAN 29, 2010

JOHN LEY

ACTING CLERK

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

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No. 09-11887

________________________

D.C. Docket No. 08-60630 CV-CMA

EQUITY INVESTMENT PARTNERS, LP,

Plaintiff-CounterDefendant-Appellant,

versus

KARIN LENZ,

Defendant-CrossDefendant-Appellee,

UNITED STATES OF AMERICA,

Internal Revenue Service,

Defendant-Cross-ClaimantCounter-Claimant-Appellee.

________________________

Appeal from the United States District Court

for the Southern District of Florida

________________________

(January 29, 2010)
Before WILSON and COX, Circuit Judges, and RESTANI, Judge. *

COX, Circuit Judge:

Equity Investment Partners, LP (“Equity”) claims to hold a security interest in

certain real property owned by Karin Lenz (“Karin”). The Internal Revenue Service

(“IRS”) placed a lien on the real property due to Karin’s and her husband’s unpaid tax

liabilities. Equity filed an action against Karin and the United States seeking to

foreclose its mortgage and to establish the priority of its security interest over the

federal tax lien. The IRS counterclaimed to establish the priority of its tax lien. The

district court granted the IRS summary judgment establishing that the tax lien was a

superior interest. The court held that Equity did not qualify as a “holder of a security

interest” under I.R.C. § 6323. Equity appeals. We vacate and remand for further

proceedings.

I. BACKGROUND

Equity is an investment partnership; its majority owners, Stacie Daley

(“Daley”) and Corbett Lenz (“Corbett”) are the children of Karin and her husband

Randolph Lenz (“Randolph”). Randolph and Karin suffered financial difficulties as

a result of various proceedings brought against themby the Federal DepositInsurance

Honorable Jane A. Restani, Chief Judge, United States Court of International Trade, sitting *

by designation.

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Corporation (“FDIC”). To assist with personal expenses and costs related to the

FDIC proceedings, Daley and Corbett loaned their parents over $3 million. The funds

were loaned through Equity and several other entities these children owned and

controlled. Most of the loaned monies were transferred to Randolph’s personal bank

account, but they were used for the joint expenses of Randolph and Karin. Some of

the loaned monies were transferred directly to a law firm to cover the costs of legal

representation in the FDIC proceedings. In addition to the loans, Costa Corporation,

another entity owned and controlled by these children, transferred over $8 million to

the FDIC as part of a settlement of all claims against Randolph, Karin, Corbett,

Daley, and other entities.

Karin held title to certain real property located in Florida. After Daley and

Corbett began loaning their parents money through Equity and other entities, Equity

entered into a mortgage and security agreement with Karin. The agreement granted

Equity a security interest in the real property in exchange for a loan of $1 million. 

Equity and Karin signed a promissory note, referenced by the mortgage, establishing

the terms of the loan. On October 21, 2004, the mortgage was recorded in public

records. Equity did not make a contemporaneous payment of $1 million to Karin at

the time the mortgage and promissory note were executed. Daley and Corbett assert

that the purpose of the mortgage was to secure repayment of the monies they had

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advanced to their parents as of the time of the mortgage transaction. Approximately

ten months later, after the amounts loaned to Karin and Randolph increased to over

$3 million and after the FDIC settlement payment, Equity and Karin entered into a

mortgage modification agreement. The agreement increased the loan amountsecured

by the mortgage by an additional $2 million. The promissory note was amended to

include the amount of the additional loans and set forth repayment terms. On August

12, 2005, this mortgage modification was recorded in public records. Once again,

Equity did not contemporaneously pay Karin the $2 million specified in the

agreement. 

Daley asserts that it was agreed and understood that when the various family

members entered into the settlement agreement with the FDIC, the real property

would be used to secure repayment of funds advanced to Randolph and Karin. (R.46

Ex. 13 at 3 ¶ 22.) And, she asserts it was agreed that the mortgage would be issued

in Equity’s name “as the overall entity entitled to recover repayment of the loans on

behalf of the various entities owned and controlled by [Daley] and [Corbett].” (Id.

at ¶ 23.) Karin testified in a deposition that she does not recall why she signed the

mortgage, but in the same deposition she also testified that the purpose of the

mortgage modification was “[p]robably so I can pay my children back.” (R.43 Ex.

11 at 20.) Karin failed to make any payments on the mortgage debt and was in

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default within a few months after the mortgage modification agreement was executed. 

According to Daley, Equity did not immediately foreclose its mortgage because it

wanted to afford Karin the opportunity to sell the real property and realize its full

value.

The IRS made assessments against Randolph and Karin for unpaid income

taxes. It prepared a Notice of Federal Tax Lien on all property and rights to property

belonging to Randolph and Karin. The IRS filed the notice in public records on

August 16, 2005, after the mortgage and mortgage modification agreements between

Equity and Karin had been filed. 

II. PROCEDURAL HISTORY

Equity filed suit in the United States District Court for the Southern District of

Florida against Karin and the United States seeking to foreclose its mortgage and

establish the priority of its security interest over the tax lien. Karin did not respond

to Equity’s Complaint, and the Clerk entered her default. See Fed. R. Civ. P. 55(a). 

The IRS answered the Complaint, filed a counterclaim against Equity to establish the

priority of its tax lien over Equity’s security interest, and filed a crossclaim against

Karin seeking to foreclose its tax lien. Equity moved for summary judgment, and the

IRS moved for partial summary judgment; both motions sought to establish the

priority of their respective interests in the real property. Equity asserted that because

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the mortgage and mortgage modification were filed before the notice of the tax lien

was filed, Equity’s security interest takes priority pursuant to I.R.C. § 6323(a). The

IRS countered that Equity’s mortgage and mortgage modification could not take

priority because they did not create a security interest under I.R.C. § 6323. And, even

if these mortgages did create a security interest, the IRS argued, the transfer of an

interest to Equitywasfraudulent and wastherefore unenforceable against the tax lien.

The district court concluded that because Equity did not “produce objective

evidence that ‘money or money’s worth’ was exchanged for an interest in the

Property, the Mortgage Modification does not qualify as a security interest under

Section 6323(a), and the IRS tax lien takes priority.” (R.67 at 13.) The court also

concluded that whether the conveyance was fraudulent is a disputed question of fact

which could not be resolved on summary judgment. (Id. at 14.) Because it held 1

Equity did not have a security interest under section 6323, it granted the IRS partial

summary judgment and denied Equity’s motion for summary judgment. (Id. at 15).

Equity filed a motion to reconsider based on newly discovered evidence in the

form of a loan and security agreement purporting to show that money or money’s

worth was exchanged for its interest in the real property. The court declined to

The district court’s conclusion that a genuine issue of material fact precludes resolving on 1

summary judgment whether the conveyance was fraudulent is not challenged on this appeal.

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consider the evidence and denied Equity’s motion because the agreement was in

Equity’s possession during the discovery period, and Equity did not exercise

reasonable diligence to discover and produce the evidence. (R.80 at 7.) The court

also explained that, even if it were to consider the evidence, the newly discovered

agreement would fail to demonstrate that Equity held a security interest under section

6323(a). (Id. at 8.) 

After it was granted partial summary judgment, the IRS moved to amend its

counterclaim and crossclaim by adding Merrill Lynch Credit Corporation as a

defendant because it also has an interest in the real property and was therefore an

indispensable party to the case. The court denied the IRS’s motion, and the parties

stipulated to the dismissal without prejudice of the IRS’s counterclaim and

crossclaim. The court dismissed these claims without prejudice and entered a final

judgment in the case. Equity appeals the grant of partial summary judgment to the

2

Under the Ryan rule, we generally hold that voluntary dismissals granted without prejudice 2

and without further condition are not final, appealable judgments. See Ryan v. Occidental Petroleum

Corp., 577 F.2d 298, 303 (5th Cir. 1978); See also Bonner v. City of Prichard, 661 F.2d 1206, 1209

(11th Cir. 1981) (en banc)(adopting as precedent decisions of the Former Fifth Circuit handed down

prior to the close of business on September 30, 1981). The purpose of this rule is to prevent a party

from voluntarily dismissing its remaining claims without prejudice after a non-final adverse district

court order has been entered in order to manufacture a final judgment. Schoenfeld v. Babbitt, 168

F.3d 1257, 1266 (11th Cir. 1999). We decline to apply the Ryan rule in this case because the

dismissal without prejudice was not an improper attempt byEquity or the IRS to manufacture a final

judgment to pursue an immediate appeal; rather, it was prompted by the district court’s refusal to

permit the IRS to join an indispensable party. Accordingly, we have jurisdiction to consider this

appeal. 

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IRS, the denial of its motion for summary judgment, and the denial of its motion to

reconsider.

III. ISSUES ON APPEAL AND CONTENTIONS OF THE PARTIES

The main issue on appeal is whether there exists a disputed issue of material

fact that precludes summary judgment establishing the priority of interests in the real

property owned by Karin. Equity contends that evidence shows the mortgage and

mortgage modification agreements created a security interest in the real property. 

And, because the agreements were recorded in public records prior to the recording

of the tax lien, Equity argues it is entitled to summary judgment establishing the

priority of its security interest. The IRS countersthat the tax lien is a superior interest

because the mortgage and mortgage modification agreements are not security

interests. It argues that evidence shows Equity did not part with “money or money’s

worth” as required for the formation of a security interest under I.R.C. § 6323. 

Therefore, the IRS argues, summary judgment establishing the priority of the tax lien

was appropriate.

Equity also argues that the court abused its discretion in denying its motion for

reconsideration. To prevent manifest injustice, Equity contendsthe court should have

reconsidered its judgment in light of a newly discovered loan and security agreement

purporting to show that it parted with “money or money’s worth” in exchange for the

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mortgage and mortgage modification agreement. The IRS counters that the court

properly declined to consider the newly discovered document because it was in

Equity’s possession throughout the discovery period, and Equity failed to exercise

due diligence to produce it. 

IV. STANDARD OF REVIEW

We consider de novo a grant or denial of summary judgment. See Baker v.

Birmingham Bd. of Educ., 531 F.3d 1336, 1337 (11th Cir. 2008). 

We review the denial of a motion for reconsideration for abuse of discretion. 

Corwin v. Walt Disney Co., 475 F.3d 1239, 1254 (11th Cir. 2007).

V. DISCUSSION

If a person accrues a federal tax liability, a lien is created by operation of law

“in favor of the United States upon all property and rights to property, whether real

or personal, belonging to such person.” I.R.C. § 6321. That lien arises at the time the

assessment is made and continues until the tax liability is satisfied or becomes

unenforceable by reason of lapse of time. Id. § 6322. A lien is not valid, however,

“against any purchaser, holder of a security interest, mechanic’s lienor, or judgment

lien creditor” until notice has been filed. Id. § 6323(a). This means that “any

‘security interest’ which arises prior to the proper filing of a federal tax lien takes

priority over the tax lien.” Litton Indus. Automation Sys., Inc. v. Nationwide Power

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Corp., 106 F.3d 366, 368 (11th Cir. 1997) (citation omitted). In the case of real

property, notice of the tax lien must be filed “in one office within the State . . . as

designated by the laws of such State, in which the property subject to the lien is

situated . . . .” I.R.C. § 6323(f)(1)(A)(i). 

Equity claims it holds a security interest in the real property that is superior

to the tax lien. It is undisputed that the mortgage and mortgage modification were

properly recorded prior to the filing of the notice of tax lien. So, if the mortgage and

mortgage modification satisfy the requirements of I.R.C. § 6323 to create a security

interest, that interest has priority over the tax lien. 

The Internal Revenue Code defines a security interest as “any interest in

property acquired by contract for the purpose ofsecuring payment or performance of

an obligation or indemnifying against loss or liability.” I.R.C. § 6323(h)(1). To be

protected under section 6323(a), a holder of a security interest must show (1) the

security interest was acquired by contract to secure payment or performance of an

obligation or indemnify against loss; (2) the property to which the security interest

was to attach existed at the time of filing of the tax lien; (3) at the time the tax lien

was filed, the security interest was protected under state law against a judgment lien

arising out of an unsecured obligation; and (4) the holder of the security interest

parted with “money or money’s worth.” In re Haas, 31 F.3d 1081, 1085 (11th Cir.

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1994) (citing I.R.C. § 6323(h)(1)). The parties agree that the first three requirements

are met. The disputed issue is whether Equity parted with “money or money’s

worth.”

At the time the mortgage and mortgage modification were executed, Karin did

not receive contemporaneous payments in the amounts noted in the agreements. 

Equity claims that the notes and mortgages were issued to secure the debts owed by

Karin and Randolph to Equity and other entities. It argues that it parted with “money

or money’s worth” as defined by the Internal Revenue Code and Treasury

Regulations because the mortgages were given to secure antecedent debts.

The IRS counters with two arguments. First, it contends that in order to prove

it parted with “money or money’s worth,” Equity must present evidence that at the

time monies were advanced to Karin and Randolph, the parties agreed that, at some

future date, they would execute an agreement to secure the loans. It claims Equity

has not presented such evidence. Second, it contends Equity has not presented

sufficient evidence to show that at the time the mortgages were executed, the parties

intended for the mortgages to secure the antecedent debts. According to the IRS, the

only evidence Equity offers to show the purpose of the mortgages is “self-serving”

statements that are unsupported and insufficient to satisfy Equity’s burden of proof.

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The district court observed that Equity did not produce any “objective evidence

demonstrating that either the Mortgage or the Mortgage Modification was intended

to satisfy [the] antecedent debts.” (R.67 at 10) (emphasis added). It explained that

neither the mortgage documents nor the promissory notes refer to the loans Daley and

Corbett advanced to their parentsthrough Equity and other entities, and it noted there

was no other documentation to support Equity’s contention that the mortgage and

mortgage modification were issued to secure repayment of the loans. The court

acknowledged that Daley and Randolph asserted in affidavits and depositions that the

family members agreed that the purpose of the mortgage and mortgage modification

wasto repay the loans. (Id. at 5.) Nevertheless, it reasoned Equity “failed to produce

anything more than circumstantial evidence” that the agreements were intended to

secure the antecedent debts. (Id. at 11.) Because “Equity failed to explicitly outline

this consideration in [the mortgage documents], and [it failed] to produce any other

objective evidence demonstrating the parties’ agreement,” (id. at 12) (emphasis

added), the court concluded Equity did not present sufficient evidence to show that

it had parted with “money or money’s worth.” Therefore, the court held, Equity did

not hold a security interest as defined by I.R.C. § 6323(h)(1), and the IRS was entitled

to partial summary judgment establishing the priority of the tax lien.

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Treasury regulations define “money or money’s worth” as including money,

a security, tangible orintangible property, services, and other consideration reducible

to a money value. 26 C.F.R. § 301.6323(h)-1(a)(3). It also includes “any

consideration which otherwise would constitute money or money’s worth . . . which

was parted with before the security interest would otherwise exist if, under local law,

past consideration is sufficient to support an agreement giving rise to a security

interest.” Id. Under Florida law, the local law in this case, past consideration is

sufficient to support the creation of a security interest. Fla. Stat. § 673.3031(1)(c)

(providing that an instrument is issued for value if “issued or transferred as payment

of, or assecurity for, an antecedent claimagainst any person, whether or not the claim

is due”); see also Lea v. Suhl, 417 So. 2d 1179, 1181 (Fla. App. 1982) (issuance of

a note in payment of an antecedent obligation rendered additional consideration

unnecessary).

Federal law determines the priority of competing liens asserted against a

taxpayer’s property. Aquilino v. United States, 363 U.S. 509, 513-14, 80 S. Ct. 1277,

1280 (1960). And, for Equity’s interest in the property to have priority, Equity must

show it is the holder of a security interest as defined by the Internal Revenue Code

and Treasury Regulations. But, because the Regulations direct us to apply state law

to determine whether past consideration may satisfy the “money or money’s worth”

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requirement, Florida law controls this issue. Past consideration may support the

creation of a security interest under Florida law. So, Equity may prove it parted with

money or money’s worth by showing that at the time the mortgage and mortgage

modification were executed, both Karin and Equity agreed that the purpose of the

agreements was to secure repayment of the loans. 

3

The IRS seems to contend that Equity must present evidence of

“contemporaneous consideration”—that is, at the time the loans were originally

given, the parties agreed that Equity would receive a security interest at some future

date. (Appellee’s Br. at 28.) We disagree. Equity need not show that the parties

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

security agreement was executed for the purpose of repaying the loans. The IRS cites

no authority holding or suggesting that Florida law demands contemporaneous

consideration, and we are aware of none. Indeed, comments to the Florida statute

defining consideration suggest otherwise. These comments imply that a note or

security interest given to satisfy an antecedent debt is supported by consideration

Even if evidence shows that Randolph was the sole party responsible for the antecedent 3

debts because many of the loans were made directly to him, the notes and mortgages would still be

supported by valid consideration under Florida law if Karin agreed that the purpose of the mortgage

and mortgage modification were to secure Randolph’s antecedent debts. See Fla. Stat. § 673.3031

cmt. 4 (noting subsection (1)(c) “is intended to apply to an instrument given in payment of or as

security for the debt of a third person . . . .”). 

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even if, at the time the debt arose, the parties did not contemplate future issuance of

a note or security agreement. Fla. Stat. § 673.3031 cmt. 1 (providing as an example

of past consideration, “X owes Y $1,000. The debt is not represented by a note. 

Later X issues a note to Y for the debt.”). 

Summary judgment is appropriately granted where there is no genuine issue of

material fact, and the moving party is entitled to judgment as a matter of law. Fed.

R. Civ. P. 56(c)(2). It should be granted “against a party who failsto make a showing

sufficient to establish the existence of an element essential to that party’s case, and

on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett,

477 U.S. 317, 322, 106 S. Ct. 2548, 2552 (1986). Here, both the IRS and Equity

moved for summary judgment, but a disputed issue of a material fact precludes its

grant to either party. 

At dispute is whether the mortgage and mortgage modification were executed

to secure repayment of the debts owed to Equity by Randolph and Karin. Randolph

stated in an affidavit that “[i]t was understood and agreed at the time the loans were

made that my wife would agree to place a Mortgage on the Property to provide

security for the loans that were being made.” (R.46 Ex. 14 at 3 ¶ 17.) Karin testified

in her deposition that she did not remember why she signed the mortgage, but she

also testified that she signed the mortgage modification “[p]robably so I can pay my

15
children back.” (R.43 Ex. 11 at 20.) Daley stated in an affidavit that at the time of

the FDIC settlement, “it was agreed and understood that the Property would be

utilized to secure repayment ofthe funds being advanced on behalf of [Randolph] and

[Karin].” (R.46 Ex. 13 at 3 ¶ 22.) Her affidavit also claims the parties executed a

participation agreement “giving [Equity] the right to collect the loan proceeds and to

obtain the mortgages for the loans made by our various entities.” (Id. at ¶ 24.) 

These statements could suffice to establish the purpose of the mortgage and

mortgage modification. While the statements may be “self-serving” and may not be

“objective evidence,” they are evidence nonetheless. If believed, they would support

a finding that the mortgages were given to satisfy the antecedent debts. This finding

would lead the court to hold that the mortgages were supported by past consideration

and that Equity parted with “money or money’s worth.” The truth of these

statements, however, is disputed. At trial, Equity will have the burden of proof on

this element of its claim. 

Without determining the credibility of these statements, there remains a

genuine issue of material fact that precludes summary judgment for either

party—whether the mortgage and mortgage modification were executed to secure

repayment of the loans. And, it is not appropriate to assess credibility on summary

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judgment. See, e.g., United States v. Four Parcels of Real Property in Greene and

Tuscaloosa Countiesin State of Ala., 941 F.2d 1428, 1437 (11th Cir. 1991) (en banc). 

Having concluded the court erred in granting the IRS summary judgment

establishing the priority of the tax lien, we need not consider whether the court

abused its discretion in denying Equity’s motion to reconsider. We reverse the grant

of partialsummary judgment in favor of the IRS, affirmthe denial of Equity’s motion

for summary judgment, and remand for further proceedings not inconsistent with this

opinion.

REVERSED IN PART; AFFIRMED IN PART; AND REMANDED.

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