Opinion ID: 472233
Heading Depth: 2
Heading Rank: 4

Heading: Compliance with Treasury Regulations

Text: 29 The district court found that Little had failed to follow regulatory requirements in seeking reimbursement for his payments to a senior lienor. Little does not claim that his request satisfied the various requirements of Treas.Reg. Sec. 301.7425-4(b)(4)(ii). Instead, he argues that these procedural regulations could not divest the district court of its duty on remand to determine the factual issues relevant to the correct amount of the government's redemption payment. 30 Little suggests an unusually strict application of the general rule that [o]n remand, a trial court may not deviate from the mandate of an appellate court. In re Beverly Hills Bancorp., 752 F.2d 1334, 1337 (9th Cir.1984). On remand a trial court may consider issues not decided by the appellate court explicitly or by necessary implication. Id. (quoting Liberty Mutual Insurance Co. v. EEOC, 691 F.2d 438, 441 (9th Cir.1982)). 31 Here, we could not decide in the previous appeal the correct amount to be paid by the government to redeem the Second Trust Deed. The question of Little's compliance with procedural requirements for requesting reimbursement for payments to a senior lienor was left open by our mandate. The district court's consideration of this issue was within the scope of the remand and did not vary or exceed our mandate. See In re Sanford Fork & Tool Co., 160 U.S. 247, 255-56, 16 S.Ct. 291, 293, 40 L.Ed. 414 (1895). 32 Little's assertion that the district court was required to ignore the Treasury Regulation procedures in considering the amount-of-redemption issue is without merit. We are aware of no authority in support of such a novel twist on the law of the case doctrine. The district court properly concluded that Little had failed to comply with the procedural requirements governing his request for reimbursement of a payment made to a senior lienor. 33 V. Application of the Law of the Case Doctrine to Previous Determinations of Government Title 34 Finding that Little failed to comply with valid Treasury Regulations in seeking reimbursement does not end our inquiry. His noncompliance with reimbursement procedures does not mean that the government's tendered redemption automatically conveyed clear title to the property, free of any encumbrance. 35 It is necessary to determine the government's interest in the property based on its tendered redemption under the Second Trust Deed. 36 In the previous appeal, we affirmed the district court as to the status of the government's title upon redemption and after foreclosure. Little v. United States, 704 F.2d 1100, 1108 (9th Cir.1983). We take this opportunity to resolve an apparent inconsistency between our prior holding and that of the district court. 37 That court apparently overlooked an important fact in determining the status of the government's title. The government's title after redemption under the Second Trust Deed was subject to the First Trust Deed. The court erred when it concluded that the government's title was free and clear of any encumbrances after the Trust Deed foreclosure and sale. The government's title remained subject to the First Trust Deed. Section 7425(b) does not require or permit the destruction of this First Trust Deed when the nonjudicial foreclosure sale was held without proper notice to the government. It provides only that such sale shall ... be made subject to and without disturbing [the government's] lien or title. 26 U.S.C. Sec. 7425(b)(1). 38 In the prior appeal we correctly held that the title acquired by the United States upon its redemption of the property [under the Second Trust Deed] was not disturbed by the subsequent [First Trust Deed] foreclosure and sale of the property. Little, 704 F.2d at 1107-08 (emphasis added). However, we failed to recognize explicitly that the government's title upon redemption was subject to the First Trust Deed and remained so encumbered after the First Trust Deed foreclosure (of which the government had no notice). We must interpret our prior holding to mean that the government's title was not free and clear of encumbrances (specifically the First Trust Deed). 3 39 This interpretation is compelled by the nature of our prior remand. We recognized Little's claim for reimbursement of the $60,000 [Little paid] to obtain the beneficial interest in the first deed of trust, a senior encumbrance on the property which was not extinguished by the [Second Trust Deed] foreclosure sale. Id. at 1108 (emphasis added). We understood that the government obtained an encumbered title upon redemption and that the subsequent First Trust Deed foreclosure, invalid as to the government, left that encumbered title undisturbed. Id. at 1107-08. This conclusion should be read as a correction of the district court's erroneous conclusion that the government title was free and clear after the First Deed foreclosure. 40 We find that the government's title upon redemption under the Second Trust Deed was subject to the First Trust Deed. The subsequent foreclosure of the First Trust Deed and sale (invalid as to the government for lack of notice) did not disturb this title. The government's title remained subject to the First Trust Deed.VI. Government's Interest Upon Redemption 41 The final question is what property interest was acquired by the government upon redemption. Because Little failed to comply with reimbursement procedures, the correct redemption amount is equal to the purchase price plus interest and excludes any payments to a senior lienor. The property interest redeemed and acquired by the government is equivalent to that held by Little after the Second Trust Deed foreclosure: title to the property, subject to the First Trust Deed. See 26 U.S.C. Sec. 7425(d)(3)(C); Treas.Reg. Sec. 301.7425-4(c)(3); Olympic Federal Savings & Loan Association v. Regan, 648 F.2d 1218, 1220 (9th Cir.1981) (when redeeming under Sec. 7425(d), the government takes subject to encumbrances existing at the time the redemptionee acquired the property). This encumbered title is unaffected by the subsequent First Trust Deed foreclosure and sale of which the government had no notice. 26 U.S.C. Sec. 7425(b)(1). The correct redemption amount does not convey clear title to the government. 42 The government may now obtain unencumbered title only by reimbursing Little for his payments to a senior lienor. See Treas.Reg. Sec. 301.7425-4(b)(4)(iii) (IRS discretion to reimburse upon the resolution of the disagreement as to the amount properly payable); Loftus, 504 F.2d at 1078 (where government made original tender under good faith belief that payments to senior lienor need not be reimbursed, government should be given reasonable period after decision upon remand to perfect its original redemption tender). 43 Despite our holding on the issue of Little's compliance with Treasury Regulations, the government's title upon redemption under the Second Trust Deed is encumbered by the First Trust Deed until it reimburses Little for his payments to the holder of that First Trust Deed. 4