United States District Court, W.D. Washington, Seattle
ORDER REGARDING CROSS MOTIONS FOR SUMMARY
S. Lasnik United States District Judge.
matter comes before the Court on the “United States of
America's Motion for Summary Judgment Against William P.
Schmidt, Sufian Hamad, and Riverton Holding, LLC” (Dkt.
# 48) and “Defendant Sufian Hamad and Riverton Holding,
LLC's 2nd Motion for Summary Judgment” (Dkt. # 50).
On June 27, 2016, the United States filed this lawsuit
seeking to foreclose on federal tax liens on a parcel of real
property located at 4010 S. 130th Street, Tukwila, WA 98168
(the “4010 Property”). Defendant Schmidt, who owned
the property until 2011, has not paid federal taxes since
2001. In October 2010, the United States made its first
assessment against him for the unpaid taxes, penalties, and
interest. After the assessments began but before federal tax
liens were recorded, Mr. Schmidt conveyed his interest in the
4010 Property to defendant Sufian Hamad, who subsequently
transferred it to his wholly-owned company, Riverton Holding,
LLC. The United States argues that its assessments give it a
priority interest in the 4010 Property because the putative
purchasers did not pay adequate and full consideration for
the property and/or that the transfer is invalid under the
Uniform Fraudulent Transfer Act, RCW 19.40.041. Both the
United States and the Hamad defendants seek summary judgment
in their favor.
Schmidt has not responded to the United States' motion
for summary judgment against him. Although Mr. Hamad
summarily disputes the procedures used to assess the tax
liabilities against Mr. Schmidt and the amounts claimed, he
offers no evidence to dispute the records showing that notice
was sent or to rebut the presumption of correctness that
attaches to the assessments. See Huff v. U.S., 10
F.3d 1440, 1445 (9th Cir. 1993). In addition, Mr. Hamad and
Riverton Holding lack standing to challenge an assessment
made against a third-party. Al-Kim, Inc. v. U.S.,
650 F.2d 944, 947 (9th Cir. 1979) (“Neither the
Internal Revenue Code nor the decisions of this court support
any right of third parties to contest the merits of a tax
assessment.”). The Court therefore finds that defendant
William P. Schmidt is indebted to the United States in the
amount of $660, 428.38 as of June 20, 2016, less any
subsequent payments or credits, plus interest and other
statutory additions as provided by law. The remaining
question is whether the 4010 Property can be seized to pay
the outstanding liability. The answer to that question
depends on (a) whether Mr. Hamad and/or Riverton Holding
purchased the property from Mr. Schmidt for adequate and full
consideration in money or money's worth and (b) whether
Mr. Hamad and/or Riverton Holding purchased the property in
good faith and for reasonably equivalent value.
judgment is appropriate when, viewing the facts in the light
most favorable to the nonmoving party, there is no genuine
issue of material fact that would preclude the entry of
judgment as a matter of law. The party seeking summary
dismissal of the case “bears the initial responsibility
of informing the district court of the basis for its
motion” (Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986)) and “citing to particular parts of
materials in the record” that show the absence of a
genuine issue of material fact (Fed. R. Civ. P. 56(c)). Once
the moving party has satisfied its burden, it is entitled to
summary judgment if the non-moving party fails to designate
“specific facts showing that there is a genuine issue
for trial.” Celotex Corp., 477 U.S. at 324.
The Court will “view the evidence in the light most
favorable to the nonmoving party . . . and draw all
reasonable inferences in that party's favor.”
Krechman v. County of Riverside, 723 F.3d 1104, 1109
(9th Cir. 2013). Summary judgment should be granted where the
nonmoving party fails to offer evidence from which a
reasonable jury could return a verdict in its favor.
FreecycleSunnyvale v. Freecycle Network, 626 F.3d
509, 514 (9th Cir. 2010).
reviewed the memoranda, declarations, and exhibits submitted
by the parties,  the Court finds that there are issues of
credibility, knowledge, and intent that preclude the entry of
judgment as a matter of law regarding enforcement of the lien
on the 4010 Property and that the parties' sweeping
arguments regarding limitations periods and laches are wholly
Schmidt and Mr. Hamad have known each other for over twenty
years. They met when Mr. Hamad was an employee of U.S. Bank
where Mr. Schmidt sought a loan to purchase property. In
2001, Mr. Hamad started developing real estate, buying land,
designing and constructing buildings, and renting them out.
Mr. Schmidt, who is an iron worker, taught Mr. Hamad to weld.
The two men worked together on a number of projects through
1995, Mr. Schmidt purchased the 4010 Property and another
piece of property located at 13001 41st Avenue South,
Tukwila, WA 98168 (the “13001 Property”). He used
the 4010 Property as his residence and workshop and rented
units in the building to various commercial tenants. The
13001 Property was purchased as an investment: Mr. Schmidt
worked to remodel the property between his ironworker jobs.
Schmidt stopped filing federal income tax returns in or
around 2001. Ten or twelve years ago, he became interested in
certain fringe alternative theories regarding, among other
things, the 14th Amendment, the demise of the gold standard,
and the jurisdiction of various taxing authorities. Mr.
Schmidt began attending seminars and apparently became
convinced that he should take steps to divest himself of
ownership of assets while at the same time retaining control
over their beneficial use. In June 2006, Mr. Schmidt signed a
contract and declaration of trust purporting to place certain
unidentified property into a trust created for his own
benefit. Dkt. # 48-3 at 5-14 (the schedules identifying the
property placed in the trust were not submitted).
13001 Property contained a single family residence and a
dilapidated four-car garage. In July 2006, the City of
Tukwila issued a final demolition order regarding the garage
structure, but Mr. Schmidt did not have the funds to comply
and was facing daily penalties. Mr. Schmidt approached Mr.
Hamad about becoming a co-owner of the property. He offered
Mr. Hamad the portion on which the garage stood, while Mr.
Schmidt would retain ownership of the remaining two-thirds.
Mr. Schmidt calculated the sale price of $30, 000 by dividing
the assessed value of the land ($90, 000) by three. Mr. Hamad
agreed to pay $30, 000, but negotiated a reduction based on
whatever fees and penalties the City of Tukwila would assess
(which the parties estimated to be $15, 000). The plan was
that Mr. Hamad would fund the demolition of the existing
garage and construct a new garage with a workshop on top. For
his part, Mr. Schmidt hoped to avoid further penalties from
the City and thought he could use the $15, 000 he received in
the deal to pay off his federal tax liability.
Hamad was aware that Mr. Schmidt “was into the whole
trust thing” and believed that the 13001 Property was
held by a personal trust. Dkt. # 48-2 at 120. At Mr.
Schmidt's request, the transfer of an interest in the
13001 Property would involve the creation of a new trust, the
13001 Land Trust, through which Mr. Schmidt's Iron Man
Trust would retain a 2/3 interest and Mr. Hamad's
Baumeister, LLC, would hold a 1/3 interest. Mr. Hamad paid
the $15, 000 purchase price in three installments, the last
of which was dated October 3, 2006. Later that month, the
parties entered into a Co-Venture Agreement. The agreement
promised the formation of a land trust, set forth the basic
covenants of the parties, and included a diagram showing the
intended division of the property. Dkt. # 48-4 at 2-3. In
January 2007, the parties entered into a purchase and sale
agreement, and Mr. Hamad hired an escrow agent to close the
sale. Dkt. # 48-4 at 23-36. A statutory warranty deed was
recorded on February 12, 2007. Dkt. # 16-2 at 5. The deed
specifies a sales price of $15, 000. When Mr. Hamad submitted
his demolition and building plans to the City of Tukwila, it
waived the fees and penalties that had accrued. Mr. Hamad
paid the $15, 000 that had been withheld to Mr. Schmidt.
United States points out that there are a number of problems
with the documents related to the sale of 1/3 of the 13001
Property to Mr. Hamad. For instance, the Co-Venture Agreement
was between Iron Man Trust and Baumeister, LLC, but there is
no indication that Iron Man Trust ever had a recorded
interest in the 13001 Property. The essential terms of the
purchase and sale agreement are spread over various
documents, and it is not clear whether the 13001 Land Trust
ever came into existence. In addition, Mr. Hamad failed to
obtain a title report to determine whether there were any
existing encumbrances on the property and waited until
February 2007 to record his own interest in the property. The
delay in recording proved disastrous for Mr. Hamad. At the
same time he was investing $150, 000-$170, 000 in the
development of the new garage/workshop structure on the 13001
Property, Mr. Schmidt was encumbering the property with a
$240, 000 mortgage and Deed of Trust, dated October 27,
Hamad learned about the mortgage in 2007. When confronted,
Mr. Schmidt assured Mr. Hamad that he would pay off the
mortgage and that it would not affect Mr. Hamad's
interest in the property. At some point Mr. Schmidt stopped
making payments on the mortgage, however, and the trustee
under the Deed of Trust posted and recorded a Notice of
Trustee's Sale in July 2009. Mr. Hamad again confronted
Mr. Schmidt, who promised to make Mr. Hamad whole. Mr.
Schmidt and a friend he made at one of the tax seminars he
attended attempted to stall or prevent the foreclosure by
recording a mishmash of documents, including liens and quit
claim deeds, some of which Mr. Hamad signed in one capacity
or another. Dkt. # 48-4 at 47; Dkt. # 16-2 at 12-14. Mr.
Schmidt hoped that the investment he made with the $240, 000
he obtained using the 13001 Property as collateral would
double and he would be able to pay back the loan. By 2011,
however, he had to acknowledge that he had lost it
Mr. Schmidt offered to sell Mr. Hamad the 4010 Property in
exchange for a release from all liability related to the
13001 Property. A purchase and sale agreement, dated April
13, 2011, identifies the seller as Mr. Schmidt and the buyer
as Riverton Holding. The agreement specifies that both
Riverton Holding and Mr. Hamad “waive or release all
claims it and he might otherwise have against William Paul
Schmidt arising from or related to the prior foreclosure of
property located at 13001 - 41st Ave. S., Tukwila,
Washington.” Dkt. # 50-1 at 10. The recorded deed shows
that Mr. Hamad is the grantee. Riverton Holding was not
formed until April 2012. Mr. Hamad transferred the 4010
Property to Riverton Holding by quit claim deed on June 18,
Mr. Hamad took over the 4010 Property, it was in such bad
shape that he did not feel right collecting rent from the
commercial tenants or Mr. Schmidt, who lived in one of the
units. He has since made extensive repairs and upgrades: he
started collecting rent again in August 2012.
2013, Mr. Hamad was reviewing a website of foreclosure sales
and saw that the 13001 Property was listed. He made a minimum
bid of $150, 000, which was ultimately ...