Alaska2

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[59-1 USTC ¶9203]George H. Bentley and H. J. Bentley, Plaintiffs v. Rob ert W. Kirbo, et al., Defendants

District Court, Dist., Alaska, 4th Judicial Div., No. 10,069, 169 FSupp 38, 12/29/58

[1954 Code Sec. 6323]

Liens for taxes: Priority over local tax liens, mortgagees and judgment creditors.--Liens for federal taxes were inferior to a tax lien of the Fairbanks (Alaska) Independent School District which attached before notice of the federal tax lien was filed. The federal tax liens were also subordinate to the lien of a judgment for a mortgage debt and to the liens of other judgment creditors on judgments rendered and docketed prior to the filing of notices of the federal tax liens.

George B. McNabb, Jr., Fairbanks , Alaska , for plaintiffs. Jay A. Rabinowitz, Assistant United States Attorney, Fairbanks, Alaska, for defendant and cross-complaint United States of America. Dickerson Regan, Assistant Attorney General, Juneau , Alaska , for defendant and cross-claimant Alaska Employment Security Commission. Maurice T Johnson, Fairbanks , Alaska , for defendant and cross-claimant Fairbanks Independent School District . Rob ert J. McNealy, Fairbanks , Alaska , for defendant K & L Distributors, Inc

Opinion

HODGE, District Judge:

Plaintiffs in this action secured a judgment against the defendants Frank Caruso, Jack Maitland, and Betty Maitland on July 8, 1958 , upon offer of Judgment by said defendants pursuant to Rule 68 F. R. C. P. for indebtedness owing by the defendants to plaintiffs and for foreclosure of a mortgage covering certain items of such judgment. That portion of the judgment to the effect that the mortgage constitutes a lien against the premises described in the complaint paramount to any right, title or interest of the defendants and foreclosing the same was thereafter stricken by Order of this Court pending the determination of the priority of the several liens involved herein, which issue upon hearing was submitted to the undersigned Judge of the above-entitled Court for determination.

[Liens Described]

The several liens asserted by the complaint and the several cross-claims herein are in substance as follows:

1. Judgment, in favor of plaintiffs and against the defendants Frank Caruso, Jack Maitland and Betty Maitland, this cause, entered July 11, 1958 , consisting of five component parts, as follows:

(a) For the sum of $13,580.01, plus interest from July 1, 1958 upon principal sum of $12,259.50, at 8% per annum, representing balance due on premissory note secured by real and chattel mortgage executed by defendants Kirbo, Anne Chepes, and Thomas, covering premises described as the Fireside Club, and assumed by judgment debtors, dated January 13, 1956, recorded as real estate mortgage and filed as chattel mortgage same date;

(b) In the sum of $458.00, plus interest from June 30, 1958 , at 8% per annum, representing insurance premium paid on mortgaged premises, secured by terms of said mortgage;

(c) In the sum of $7,000.00, plus accrued interest to July 1, 1958, in the sum of $297.50, plus interest upon principal sum from said date at 6% per annum, on account assignment of proceeds of contract of purchase and sale between defendants Kirbo and Chepes, as sellers, and defendants Caruso and Maitland as purchasers, assignment dated September 15, 1957; contract not recorded;

(d) In the sum of $600.00, plus interest from July 10, 1958 , at 6% per annum, for rentals due under a lease, assigned to plaintiffs, for months of April to July, inclusive, 1958;

(e) For plaintiffs' costs, not taxed.

2. Tax liens of the United States of America , for withholding and income taxes assessed by Commissioner of Internal Revenue against defendants Jack Maitland and Frank Caruso, as follows:

                                                      Date Assessment         Date Notice of

Lien No.             Period            Amount           List Received         tax lien filed

175,186             
6-30-57
         $1,856.45                 
8-15-57
                
9-23-57

180,005             
9-30-57
          3,576.16                  
4-4-58
                
4-30-58

179,870            
12-31-57
          1,593.48                  
2-7-58
                
4-22-58

175,387                1956            564.61                 
8-23-57
                
9-27-57

plus interest, penalties and costs provided by law; subject to one year right of redemption;

3. Liens of Employment Security Commission of Alaska, for employer contributions assessed against said defendants under the Alaska Employment Security law, as to which judgment by default entered herein on November 24, 1958 , as follows:

Period ending            Amount         Date lien filed

3-31-58
                 $315.89                 
5-19-58

9-30-58
                  437.43                  
8-8-58

plus interest provided by law:

4. Lien of Fairbanks Independent School District, for real estate and personal property taxes assessed against the mortgaged premises for the year 1957, in the amount of $260.00, plus penalty, $26.00, and interest to date, $38.32 (Taxes assessed for the year 1958 were also claimed, but have since been paid, and are no longer a matter of claim);

5. Judgment lien in favor of Eve Boyanchek and against defendants Kirbo and Chepes, assumed by above defendants, in Cause No. 8882, this Court, entered and docketed January 21, 1957, in the sum of $2,937.03, plus interest and costs; partially satisfied except for balance of $790.00;

6. Judgment lien in favor of K & L Distributors, Inc., a corporation, and against said defendants, in Cause No. 9947, this Court, entered June 18, 1958 , and docketed June 19, 1958 , in the sum of $3,060.83, plus interest and costs.

7. Attachment of personal property consisting of stock of goods and beverage dispensary license, the personal property of said defendants (not covered by above mortgage), served July 10, 1958 , for the sum of $21,935.51.

[Validity of Property Tax Lien]

None of these lien claims are contested except that of the Fairbanks Independent School District . The plaintiffs in reply to such cross-claim admit the assessment and levy of such taxes but deny that any taxes were assessed against the plaintiffs by the School District on this property and allege that the plaintiffs' lien is therefore paramount to such tax lien. Both the plaintiffs and School District have orally moved for summary judgment pursuant to Rule 56 F. R. C. P., which issue needs first to be determined.

It appears from the pleadings and a bill of particulars furnished by the School District that the taxes in question were assessed in the name of the defendants Frank Caruso, Jack Maitland and Betty Maitland, doing business as the Fireside Club, who were then lessees and in possession of the property assessed, and not against the legal owners of said property. The taxes were assessed on August 1, 1957 , and notice of levy was given November 1, 1957 . The applicable statute which became effective July 1, 1957 , is contained in Chapter 154 S. L. A. 57, Sec. 59, being Sec. 37-3-54 A. C. L. A. Supp. This statute provides that property in the School District subject to taxation shall be assessed "in the name of its owner of record" but also provides that the laws relative to the levy and collection of taxes by municipal corporations are extended and made applicable to independent school districts. See. 3 of the same Act, being Sec. 16-1-112(b) A. C. L. A. Supp. provides as to municipal corporations that real property shall be assessed to the owner of record as shown in the records of the United States Commissioner and Exafficio Recorder of the Precinct and provides further that:

"No assessment be invalidated by a mistake, omission or error in the name of the owner of the real property assessed, if the property is correctly described."

There is no question here but that the property was correctly described.

If the quoted provision of the statute is applicable here, such error in the name of the owner of the property does not invalidate the lien of the tax. If not, the common law rule to the same effect would apply, for it is held that in jurisdictions where the tax is assessed against the property, the name of the owner or reputed owner is required as an aid to the identification of the property assessed so that a mistake in the name of the owner or reputed owner or in the name of the person against whom an assessment is made will not invalidate the lien of the assessment. 64 C. J. S. Municipal Corporations 769, Sec. 2048; McQuillin, Municipal Corporations Vo. 16, Sec. 44.104; Hunt v. Dekin, 64 N. Y. S. 2d 187. Therefore, it would appear that the lien of the assessment is valid against the property despite the error in the name of the owner, although doubtless no personal liability may be claimed against the true owner of record as likewise provided by such statute. The motion of the School District for summary judgment foreclosing the lien of the tax assessed is granted.

[Priority of Liens]

We come now to the important matter of determining the priority of the several liens. There is no applicable Alaska statute governing this situation nor any reported Alaska decisions on this express subject. With respect to the priority of the lien between the United States and the mortgage and judgment liens the statute is clear. Sec. 6321 Internal Revenue Code of 1954 provides that all taxes levied under the Internal Revenue Laws shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to the taxpayer. However, Sec. 6323 further provides that the lien imposed by Sec. 6321 shall not be valid as against any mortgagee or judgment creditor until notice thereof has been filed by the Secretary or his delegate in the office designated by the law of the state or territory in which the property subject to the lien is situate for the filing of such notice, which would be the Recorder for the Precinct. Hence such lien is inferior to the lien of the judgment creditor herein representing the mortgage debt and the lien of any judgment rendered and docketed prior to the filing of such notices of lien.

With respect to the priority of the several tax liens, express provision is made by Congress for priority of debts due to the United States in cases where the person indebted is insolvent. 31 U. S. C. A. Sec. 191; Sec. 3466 Revised Statutes. The application of such statute in cases of bankruptcy is fully discussed in a recent decision of the District Court for the First Division, District of Alaska, in the case of Secretary of the Treasury of the United States v. Alaska Plywood Corporation, et al., No. 7829-A, filed December 2, 1958 [59-1 USTC ¶9114], in which it is held that under such statute the lien of the Alaska Employment Security Commission is not entitled to priority over tax liens of the United States. However, there is no suggestion in the record of this case that the taxpayers and judgment debtors are insolvent.

Under these circumstances and in cases of judicial sale of property it is held that the priority of liens is determined by the principal of "the first in time is the first in right," and that the priority of each statutory lien must depend on the time it attached to the property in question and became choate. United States v. New Britain , 347 U. S. 81, 85 [54-1 USTC ¶9191]; Southern Ohio Bank & Trust Co. v. Bolce, 135 N. E. 2d 382 [56-1 USTC ¶9600]; 30 Am. Jur., Internal Revenue, 276, Sec. 220; Anno. 174 A. L. R. 1398. Hence the Federal tax liens are entitled to priority over the liens of the Employment Security Commission, but not that of the School District .

The liens of the Alaska Employment Security Commission appear to be correctly claimed by counsel as effective in accordance with the dates of filing of notices of such lien. Under the provisions of Sec. 51-5-148 A. C. L. A. Supp., the claim for any contributions due under such Act shall be a lien in favor of the Territory against all the real and personal property of the employer and the real and personal property used with the permission of the owner in prosecuting the business of the employer; but in order to constitute a lien, the Commission must file notice thereof with the U. S. Commissioner and Recorder, which then constitutes constructive notice to "subsequent purchasers and encumbrancers."

The statute with relation to the tax lien of the Fairbanks Independent School District provides that the lien of such tax shall be prior to all other liens and encumbrances, except unpaid taxes previously imposed and levied by any taxing unit. Sec. 37-3-54 A. C. L. A. Supp., above. This statute further provides that the liens shall be effective from and after July 1 of the year in which they are levied; but in this instance the taxes were not assessed until August 1 and the lien became effective on that date.

The right of the Legislature to make such tax liens prior to all others, giving them priority over a mortgage or other lien, appears to be well settled. 51 Am. Jur., Taxation, 881, 887, Secs. 1010, 1016. Hence the lien of the School District is prior to the mortgage debt and judgment liens. However, there is no lien on personal property assessed, prior to distraint.

With relation to judgment liens, the Alaska Statute provides that from the date of docketing a judgment in the District Court where rendered, such judgment shall be a lien upon all of the real property of the defendant within the recording district wherein the District Court maintains such judgment docket. Sec. 55-9-61 A. C. L. A. Supp. The priority of such judgment liens depends, therefore, upon the date of entry and docketing of such judgments.

I find, therefore, that the several liens involved in this action are entitled to priority upon judicial sale in the following order:

First. Tax lien of the Fairbanks Independent School District (Item 4, above) for the year 1957, with interest and penalty, lien effective August 1, 1957, limited to real property only, and to that portion of the tax assessed against the real property.

Second. That portion of the judgment rendered herein representing the mortgage debt to plaintiffs, including insurance premiums paid (Items 1(a) and 1(b), above), with interest and costs, against all real property and chattels covered by the mortgage.

Third. Judgment in favor of Eve Boyanchek (Item 5, above), with interest and costs, lien effective Jan. 21, 1957 , against real property only.

Fourth. Tax liens of the United States (Item 2, above), with interest, penalties and costs, filed variously from September 27, 1957, to April 30, 1958, against both real and personal property.

Fifth. Lien of the Employment Security Commission of Alaska (Item 3, above), with interest, filed May 19, 1958 , as to both real and personal property.

Sixth. Judgment in favor of K & L Distributors, Inc. (Item 6, above) with interest and costs, lien effective June 19, 1958 , against real property only.

Seventh. Attachment of personal property, this cause (Item 7, above), except as to beverage dispensary license discussed below, served July 10, 1958 .

Eighth. Those portions of the judgment herein representing assignment of proceeds of contract of purchase and sale, and rentals due under lease (Items 1(c) and 1(d) above), effective July 11, 1958 , as to real property only.

Ninth. Lien of the Employment Security Commission of Alaska (Item 3 above) with interest, filed August 8, 1958 , as to both real and personal property.

Wherever attorney's fees have been previously allowed as costs as to any of the above items, such may be included in the liens above. No such fees are included or claimed in plaintiffs' judgment herein. Fees may be allowed the cross-claimant Fairbanks Independent School District as prayed for, in accordance with Rule 25 of the rules of this Court. No such fees are claimed by the other cross-claimants herein.

[Attachment of Liquor License]

Finally, it appears that a beverage dispensary liquor license issued to the defendants Jack and Betty Maitland and Frank Caruso has been attached by the plaintiffs in this cause, and also by the plaintiff K & L Distributors, Inc., in Cause No. 9947, above referred to, and that in the latter case a bond was posted to release said attachment.

It has been held in this jurisdiction that a liquor license is not a property right but a personal privilege, which therefore would not be subject to attachment. United States v. Bordenalli (D. C. Third Divn.), 15 Alaska 88; In re application of Harris (D. C. Third Divn.), 15 Alaska 250. In any event, there is no vested right in the grant or its continuance, Bordenelli v. United States (CCA 9) 16 Alaska 185, 194, 233 Fed. (2d) 120, and this Court is informed that subsequent to such attachments a new license has been issued to the plaintiffs herein covering the same premises by order of the Board of Liquor Control, pursuance to Chap. 131, S. L. A. 1957. Hence aside from those considerations of public interest and public policy which may otherwise prohibit the attachment of such licenses for debt, this question is now moot. Boggess v. Berry Corporation (CCA 9) 16 Alaska 256, 233 Fed. (2d) 389. The attachments must therefore be released, and the bond in Cause No. 9947 exonerated.

Judgment and order of sale amending the judgment entered herein on July 11, 1958 , may be presented in accordance with this Opinion. No findings of fact will be necessary.

 

 

[59-1 USTC ¶9114]Secretary of the Treasury of the United States of America, plaintiff v. Alaska Plywood Corporation, a corporation; United States of America; Territory of Alaska; Employment Security Commission of Alaska; and George W. Rogers, Trustee of Alaska Plywood Corporation, a corporation, defendants

U. S. District Court, Dist. Alaska, Div. No. 1 at Juneau, No. 7829-A, 167 FSupp 857, 12/2/58

[1954 Code Sec. 6323]

Lien for taxes: Priority of various liens determined.--After unsuccessful attempts to reorganize taxpayer under the Bankruptcy Act, the court ordered the foreclosure of real and chattel mortgages originally held by the Reconstruction Finance Corporation and now held by the Secretary of the Treasury of the United States. After recording of the mortgages, employment taxes were incurred by the taxpayer under the Alaska Employment Security Act. The United States had filed tax liens between April 15, 1954 , and May 28, 1956 . The Employment Security Commission of Alaska filed its liens for contributions in 1954-1956. It is held that the lien of the Alaska Employment Security Commission is not entitled to priority superior to the United States mortgage lien or the United States tax liens.

Rob ertson, Monagle & Eastaugh, M. E. Monagle, for plaintiff. Faulkner, Banfield & Boochever, F. M. Doogan, for Alaska Plywood Corporation. Roger G. Connor, United States Attorney, and Jerome A. Moore, Assistant United States Attorney, for United States of America. Attorney General, Territory of Alaska , Jack O'Hair Asher, for Territory of Alaska . Dickerson Regan, for Employment Security Commission of Alaska . Thomas B. Stewart, for George W. Rogers, Trustee of Alaska Plywood Corporation.

Opinion

KELLY, District Judge:

This matter has been brought before this Court for the determination of the priority of the various liens involved herein, and briefs have been submitted by the Alaska Employment Security Commission, the Assistant United States Attorney, representing the United States in connection with federal tax liens, and the Secretary of the Treasury as the holder of the real estate mortgage and the chattel mortgages.

[Priority of Liens]

The pleadings in this case disclose that the Alaska Plywood Corporation, on February 12, 1953 , made, executed and delivered to the Reconstruction Finance Corporation, the predecessor of the plaintiff in this action, a good and sufficient real and chattel mortgage to secure the repayment of the note and the performance of the terms and conditions of the mortgage and note. Said mortgage was recorded as a real property mortgage and filed for record as a chattel mortgage in the Office of the Recorder at Juneau , Alaska , February 25, 1953 . On April 2, 1953 , the said Alaska Plywood Corporation made, executed and delivered a supplemental chattel mortgage to the Reconstruction Finance Corporation, which supplemental chattel mortgage was filed for record in the Office of the Recorder at Juneau , Alaska , on April 5, 1953 . The United States of America filed tax liens against the Alaska Plywood Corporation on and between April 15, 1954 , and May 28, 1956 . The Employment Security Commission of Alaska filed its liens for contributions during the years 1954, 1955, and 1956. The Territory of Alaska filed its liens during 1955 and 1956. From the pleadings and the briefs filed herein, it is apparent to this Court that the only question here involved is the priority to be given to the Alaska Employment Security Commission's lien for unpaid contributions pursuant to Sec. 523 of the Alaska Employment Security Act (Sec. 51-5-158 ACLA C. S. 1958).

The Employment Security Commission admits that all Employment Security taxes became due after the filing of the R. F. C. mortgage. They also admit that the Commission did not file its liens until after certain of the federal assessment lists had been received by the collector. They also admit that certain tax liens of the Territory, for other territorial taxes, were filed prior to filing of the Employment Security Commission's tax liens under Sec. 514 of the Alaska Employment Security Act. In spite of these admissions, however, the Employment Security Commission claim priority over the mortgage lien and base their claim for priority not upon Sec. 514 and the lien filed thereunder, but upon Sec. 523 of the Act (Sec. 51-5-158 ACLA C. S. 1958) which provides for lien upon all assets of the employer in the event of insolvency which "lien will be prior to all other liens or claims except prior tax liens, liens filed under Sec. 514 herein, and claims for remuneration of service of not more than $250.00 to each claimant, earned within six months of the commencement of the proceeding. The mere existence of a condition of insolvency . . . shall cause such a lien to attach without action on behalf of the Commission or the Territory."

This section further provides that "In the event of an employer's adjudication in bankruptcy, . . . under the Federal Bankruptcy Act of 1898, as amended (11 USCA 1 et seq.), contributions then or thereafter due shall be entitled to such priority as provided in that Act, as amended."

[Bankruptcy Proceedings]

Proceedings had previously been begun in this court for the reorganization of the Alaska Plywood Corporation under the Bankruptcy Act and these proceedings are entitled "In the Matter of Alaska Plywood Corporation, Debtor," the court number being Bankruptcy-213. No reorganization was perfected and after several unsuccessful attempts, the trustee finally concluded that it would be impossible to reorganize the corporation and so he petitioned for a dismissal of the proceedings, or an order adjudicating the debtor bankrupt under Section 236(2) of the Bankruptcy Act. Accordingly, an order was entered by this Court on the 6th day of June, 1958, dismissing the proceeding instituted under Chapter 10 of the Bankruptcy Act, said dismissal to be effective upon the entry of a final decree therein discharging the trustee and closing the estate. This order further granted leave to the Secretary of the Treasury of the United States , acting through the Office of Defense Lending as successor to the Reconstruction Finance Corporation, to proceed with the foreclosure of its real and chattel mortgages upon the property and assets of the debtor, subject to certain conditions set forth in said order. This Court later, in the above bankruptcy proceeding, in an opinion determining the allowance of certain fees and expenses in connection with the reorganization proceedings, (-- Fed. Supp. --) expressed doubt as to whether a sale of the secured assets of the corporation would yield sufficient funds to satisfy the mortgage completely. However, it does not appear that there has ever been an adjudication of the insolvency of the defendant Alaska Plywood Corporation. There has been no distribution of any of the employer's assets pursuant to an order of any court, including any receivership, probate, legal dissolution or similar proceedings, and no assignment for the benefit of creditors, composition, or other similar proceedings.

[Federal Government Has Priority]

There is not much doubt, in the Court's opinion, that there will eventually be a complete distribution of the mortgagor's assets by reason of the foreclosure of the mortgage and the sale of those assets. It appears to this Court that where these conditons exist, the federal government is entitled to payment, from available assets, before the Employment Security Commission of the state. Sec. 191 (31 U. S. C. A.) provides as follows:

"Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or admin istrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed."

The Employment Security Commission, however, point out that under the territorial law the mere fact of the existence of a condition of insolvency, without any action whatever upon the part of the territory, shall cause a lien to attach and that such lien "will be prior to all other liens or claims except prior tax liens, liens filed under Sec. 514 herein, and claims for remuneration of service of not more than $250.00 to each claimant earned within six months of the commencement of proceedings." The Commission rely heavily upon the decision of the Supreme Court of Ohio in Southern Ohio Sav. Bank & Trust Co. v. Bolce, 135 N. E. 2d 382 [56-1 USTC ¶9600], and suggest that this Court arrive at a similar solution in deciding the questions in this case, although the Commission recognizes that the United States Supreme Court, in the case of Illinois v. Campbell, 329 U. S. 362, held that a state lien for unemployment compensation taxes was not sufficiently perfected to defeat the government's priority. There seems to be no question but that mortgage and judgment liens are of course prior to the federal tax lien by federal law; further, that the federal tax liens are superior to local or state tax liens, and in the Ohio case above cited, the court went further and held that the local or state tax liens were superior to the mortgage and judgment liens by state law.

This Court does not feel that the effort to arrive at some sort of an equitable conclusion, as was attempted by the Supreme Court of Ohio in Southern Ohio Sav. Bank & Trust Co. v. Bolce, supra, is the answer to the problem we face, and prefers to follow the reasoning of the United States Supreme Court in the case of Illinois v. Campbell , supra.

The claim of the Employment Security Commission is inchoate and where such claims have not been perfected by federal standards by reducing the liened property to possession, the federal liens seem to be entitled to priority. U. S. v. Gilbert Associates, 345 U. S. 361 [53-1 USTC ¶9291]; U. S. v. New Britain, Conn., 347 U. S. 81 [54-1 USTC ¶9191]; U. S. v. Scovil, 348 U. S. 218 (1955) [55-1 USTC ¶9137]; U. S. v. Colotta, 350 U. S. 808 (1955) [55-2 USTC ¶9680]; U. S. v. White Bear Brewing Co., 350 U. S. 1010 (1956) [56-1 USTC ¶9440]; U. S. v. Vorreiter, 355 U. S. 15 (1917) [57-2 USTC ¶9956].

Furthermore, under Title 31, U. S. C. A., Sec. 191, when a debtor is insolvent the claims of the United States are entitled to priority.

We therefore hold that the lien of the Alaska Employment Security Commission is not entitled to priority superior to the United States mortgage lien or the United States tax liens herein.

 

 

 

[56-2 USTC ¶9695]Boston Insurance Company, Northern Assurance Company, and National Fire Insurance Company, Plaintiffs v. H. Frank Stubbs; Arthur R. Knodel; Fritz Schadde, L. H. Rogers and L. E. Sticha; Jesse D. Lander and Paul K. Cook; and John T. McLaughlin, Director, Unemployment Insurance Division, Territory of Alaska, Defendants

U. S. District Court, West. Dist. Wash. , So. Div., No. 1846, 3/20/56

[1939 Code Sec. 3672(a)--similar to 1954 Code Sec. 6323(a)]

Collection: Lien for taxes: Validity against creditors: Fact-finding.--Federal tax liens on insurance proceeds were valid and prior to the following claims: an attorneys' lien for services in settling the fire insurance claim arising when a fire occurred at taxpayers' Club Cafe, writs of attachment and notices of garnishment by a bakery and another creditor, and a lien by the Employment Security Commission of Alaska based upon an assignment of the proceeds of the insurance claim.

[1939 Code Sec. 3672(a)--similar to 1954 Code Sec. 6323(a)]

Collection: Lien for taxes: Attorneys' fees of interpleading insurance company.--Insurance companies brought an interpleader action against the creditors of taxpayers to determine the disposition of the proceeds from taxpayers' insurance claim settlement. They were not entitled to attorneys' fees and costs in view of the fact that Federal tax liens were valid and prior to the claims of all other creditors. Liverpool & Globe Insurance Co., 55-1 USTC ¶9136, 348 U. S. 215, was followed.

Clarke, Clarke & Albertson, New World Life Building , Seattle , Wash. , for plaintiff. Charles P. Moriarty, United States Attorney, Guy A. B. Dovell, Assistant United States Attorney, for intervenor.

Complaint in Interpleader (Filed October 14, 1954 )

BOLDT, District Judge:

Come now the plaintiffs and, for cause of action in interpleader, state:

[Suit to Collect Fire Insurance]

I. That plaintiffs, and each of them, are insurance companies, duly authorized to write policies of insurance covering property in the Territory of Alaska and that each of said plaintiffs issued a policy of insurance naming Bert Adams and Mary Adams, d.b.a. Club Cafe, as insureds and covering their interest in said Club, or its contents, which was located in Fairbanks, Alaska, against the hazard of loss by fire in accordance with the terms and conditions of said policies.

II. That a fire occurred at said Club on or about the 28th day of December, 1950, as a result of which said insureds made claim against the plaintiff insurance companies under the aforementioned insurance policies as to which claim plaintiff companies denied liability, and that the insureds thereafter instituted suit against said insurance companies for the purpose of endeavoring to collect said claim, the suit being Cause No. 1745 in the records of the above-entitled Court.

III. That in said action the insurance companies, in addition to pleading defenses as to any liability, also pleaded affirmatively that various liens, attachments and garnishments had been filed against said insurance claim, as more specifically hereinafter referred to; that in said Cause No. 1745 a stipulation of settlement was entered into between the parties, a copy of which is hereto attached marked "Exhibit A" and by reference made a part hereof the same as if set forth in full herein, whereby settlement was agreed upon in the amount of $3,000.00, which said sum was to be paid into court in an interpleader action in order that the rights of the respective claimants to said fund could be therein adjudicated, and that this action is brought pursuant to said settlement stipulation.

[Claims of Creditors]

IV. That the defendants, H. Frank Stubbs and Arthur R. Knodel are citizens and residents of the State of Washington, residing in Pierce County, Washington; that they were attorneys of record for the insured in said Cause No. 1745 and are claiming an attorneys' lien on said fund for their services in the amount of $1,500.00, plus advanced costs and expenses.

V. That the defendants, Fritz Schadde, L. H. Rogers and L. E. Sticha, are citizens and residents of the Territory of Alaska, residing at Fairbanks, Alaska, and that they are, or were, doing business as the North Pole Bakery, and that in Cause No. 6698 in the District Court for the Territory of Alaska, Fourth Division, they caused a writ of attachment and notice of garnishment to be served upon the Insurance Commissioner of the Territory of Alaska as process agent for the insurance companies which are plaintiffs in this action, setting forth that Norbert Adams and wife were indebted to them in the sum of $1,997.73, together with interest and costs, and purporting to attach any indebtedness from said insurance companies to the said Norbert Adams and wife.

VI. That the defendants, Jesse D. Lander and Paul K. Cook, are citizens and residents of the Territory of Alaska, residing at Fairbanks, Alaska, and that in Cause No. 6672 in the District Court for the Territory of Alaska, Fourth Division, they caused a writ of attachment and notice of garnishment to be served upon the Insurance Commissioner of the Territory of Alaska as process agent for the insurance companies which are plaintiffs in this action, setting forth that Norbert Adams, Sr., is indebted to them in the sum of $4,870.35, together with interest and costs, and purporting to attach any indebtedness from said insurance companies to the said Norbert Adams.

VII. That John T. McLaughlin is Director of the Unemployment Insurance Division of the Territory of Alaska and that on April 3, 1951, the said N. J. Adams executed an assignment of the proceeds of his insurance claim in favor of the Employment Security Commission of Alaska in the amount of $850.11, and that said Employment Security Commission filed on June 7, 1951, lien No. 124609 in the amount of $901.46, which said lien purported to be against all property or funds of the said N. J. Adams.

[Claim of Government]

VIII. That the Internal Revenue Department of the United States filed in the Commissioner's office at Fairbanks, Alaska, and served on the Insurance Commissioner of Alaska as process agent for the insurance companies the following notices of lien and levies as against Norbert Adams:

"Lien No. 20074, dated May 28, 1951 , in the amount of $1,462.38;

"Lien No. 19628 dated March 9, 1951 , in the amount of $2,474.84;

"Notice of Levy dated November 10, 1951 , under Liens No. 20751 and No. 21075, in the amount of $1,479.39,"

and that the said Internal Revenue Department has, through its authorized counsel, signified its intention of intervening in the above-entitled action for the purpose of asserting its said liens and levies and claims of priority as to the fund paid into court in this action.

IX. That, as herein above set forth, adverse claimants of diverse citizenship are claiming an interest in the insurance proceeds herein before referred to and that, although ample time has been allowed, said claimants have been unable to agree among themselves as to their respective priorities on the division of said fund, and that plaintiffs, having no knowledge of the respective rights and priorities of said claimants and being desirious of avoiding the possibility of multiple liability, do hereby deposit into court the full amount due under the settlement stipulation in Cause No. 1745, to wit, the sum of $3,000.00, in order that there may be an adjudication as to the respective rights of the claimants and that plaintiffs may receive a full and complete release of liability to any party.

X. That an order should be entered by this Court prohibiting the defendants, and each of them, from instituting or continuing any suit, action, claim or process against the insurance companies relating to the funds herein paid into court except by filing their responsive pleadings and claims in this interpleader action.

XI. That there should be no proceedings in this action until sufficient time has elapsed for the Department of Internal Revenue of the United States to intervene and assert its claim under its aforesaid liens and levies.

[Claim by Insurance Companies for Attorneys' Fees]

XII. That $300.00 is a reasonable sum to be allowed plaintiffs in this interpleader action out of the funds paid into court for the services of their attorneys in connection with the institution and maintenance of this interpleader action.

WHEREFORE, plaintiffs pray that an order be entered discharging plaintiffs, and each of them, from any and all liability to all defendants arising out of the insurance policy and fire loss referred to in Cause No. 1745 of the records of the above-entitled court, and that appropriate orders be entered prohibiting the defendants, and each of them, from proceeding against the plaintiffs in relation to said fund or claims in any other cause and proceeding, and that plaintiffs be allowed the sum of $300.00 for the services of their attorneys and their costs and disbursements out of the funds paid into the court in this proceeding.

Order and Judgment (March 20, 1956)

[Conclusions]

This matter coming on regularly to be heard before the above-entitled Court, and upon due consideration of the Pre-trial Order entered this day, and briefs and arguments thereon, it is hereby

ORDERED, ADJUDGED and DECREED that the entire fund remaining to wit $2,000.00 on deposit in the registry of the court in this action belongs to the United States of America by virtue of the priority of its valid liens thereon for taxes due from Norbert J. and Mary J. Adams, and it is further

ORDERED, ADJUDGED and DECREED that the Clerk of the Court pay to the United States of America all of said funds, to wit $2,000.00 and it is further

ORDERED, ADJUDGED and DECREED that plaintiffs, Boston Insurance Company, Northern Assurance Company and National Fire Insurance Company, are hereby discharged from all further liability with respect to that fund, and the claims thereto of all parties other than the United States of America are hereby foreclosed, and it is further

ORDERED, ADJUDGED and DECREED that the request of the interpleading plaintiffs for their attorneys' fees and costs be denied on the authority of the decision of the Supreme Court of the United States in United States v. Liverpool & Globe Insurance Company, 348 U. S. 215 [55-1 USTC ¶9136].