Oregon

---

 

[75-2 USTC ¶9614]In re: The Bank of California, National Association, Plaintiff v. United States of America, et al., Defendants United States of America, Interpleader-Appellant v. Murray S. Weber, Interpleader-Appellee

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 74-1261, 520 F2d 302, 7/8/75, Affirming District Court, 74-1 USTC ¶9110

[Code Sec. 6323]

Lien for taxes: Priority against judgment creditor: Notice of perfected state lien.--The appellate court, in affirming the decision of the District Court, stated that a creditor obtained the status of a judgment lien creditor under Oregon law by registering his unopposed California judgment in Oregon. Therefore, he had priority over any subsequent liens of the United States for taxes.

Murray S. Weber, Santa Monica , Calif. , for plaintiff. Scott P. Crampton, Assistant Attorney General, Meyer Rothwacks, Department of Justice, Washington, D. C. 20530, for defendants.

Before DUNIWAY and CHOY, Circuit Judges, and SKOPIL, District Judge. ^*

Opinion

SKOPIL, District Judge:

The Bank of California (the Bank) filed this interpleader action to resolve competing claims of the U. S. C. Government (Government) and appellee, Murray S. Weber, to $25,000 of a fund held by the Bank. The Government appeals from the District Court order awarding the entire $25,000, plus interest, to Weber. We have jurisdiction under 28 U. S. C. §§ 1291 and 1294.

The question presented is whether a holder of a foreign judgment becomes a "judgment lien creditor" under 26 U. S. C. §6323(a) upon registration of the judgment before its becomes final in the registering state.

On April 28 and 29, 1965, the Government filed notices of tax liens against Peter Jacobsen for 1956 through 1958 income tax assessments and levied upon a fund (the Fund) of $118,536.25 held by the Bank in Portland, Oregon, for Jacobsen's account. The Bank was served with notices of the levy but withheld the Fund in apprehension of possible competing claims. (By stipulation of the parties, all but $25,000 of the Fund was released to satisfy the 1956-58 taxes which are no longer in dispute.)

The Government made further income tax assessments against Jacobsen for the years 1959 through 1964 and filed lien notices under those assessments on April 22, 1969 . The Government notified the Bank of that lien on May 1, 1969 , but did not file notice in the District of Columbia , as Section 6323(f)(2) requires in the case of a taxpayer residing outside the United States , until January 13, 1970 . At that time Jacobsen resided in Australia .

Weber's competing claim is based on a California court judgment on confession against Jacobsen entered April 18, 1969 . On April 22, 1969 , Weber filed a petition and motion to register the judgment in Oregon under the Uniform Enforcement of Foreign Judgments Act. O. R. S. 24.010 et seq. Also on April 22, 1969 , the Oregon court entered an "Order for Registration of Judgment" and issued an "Execution" and a "Notice of Garnishment", which were served on the Bank on Portland . That court entered an "Order for Final Registration of Judgment" on January 5, 1973 .

In the interpleader action filed on April 1, 1971 , Weber claimed priority over the Government's tax liens. He argued that he was a "judgment lien creditor" under Section 6323(a) of the Internal Revenue Code by virtue of the Oregon writ of execution issued before the Government filed notice required by Section 6323(f)(2).

The Government contended that Weber did not become a judgment lien creditor under Section 6323(a) until the registered California judgment became a final judgment in Oregon because only then could a perfected judgment lien attach to the property in Oregon .

The District Court held that Weber became a judgment lien creditor in Oregon before the Government perfected its tax lien for 1959-1964. We agree.

The conflict between the federal tax lien and the state lien arises under 26 U. S. C. §6323(a), which states:

"The [federal tax] lien . . . shall not be valid as against any . . . judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Secretary or his delegate."

Subsection (f) requires notice of a lien on personal property to be filed in the state in which the property is situated. Personal property is deemed situated in the state in which a taxpayer resides or, if the taxpayer resides outside the United States , in the District of Columbia .

Although the particular question here is one of first impression, principles established under the federal choateness doctrine govern its resolution generally:

"As against a recorded federal tax lien, the relative priority of a state lien is determined by the rule 'first in time is first in right,' which in turn hinges upon whether, on the date the federal lien was recorded, the state lien was "specific and perfected.' A state lien is specific and perfected when 'there is nothing more to be done . . . --when the identity of the lienor, the property subject to the lien, and the amount of the lien are established'. 'Thus, 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 [[54-1 USTC ¶9191] 347 U. S. 81, 84, 86 (1954)]. These determinations are of course federal questions. United States v. Waddill Co. [45-1 USTC ¶9126], 323 U. S. 353, 356-357 (1945)." United States . v. Equitable Life Assurance Society [66-1 USTC ¶9444], 384 U. S. 323, 327-28.

The critical turn in the Government's course of reasoning is its argument that Weber did not become a judgment lien creditor until the final Oregon judgment on his petition to register the California judgment because he lacked legal authority to dispose of the Fund before that time. Registration of the California judgment only gave him authority to levy on the Fund. O. R. S. 24.030, 24.060, 24.130.

The Government argues that an Oregon lien is not perfected against a federal tax lien until the lienor can actually seize the property. Bank of Lebanon v. J. & W. Lumber Co. [69-1 USTC ¶9151], 252 Or. 407, 448 P. 2d 367 (1968). The Government contends that Bank of Lebanon held that no seizure may be made without a final Oregon judgment.

Bank of Lebanon is distinguishable on its facts. It was not concerned, as we are, with a judgment lien. That case involved a state admin istrative lien upon which no seizure can be made until the lien is perfected by a court decree.

Weber's petition could support a seizure without such a decree. He was restricted only from disposing of the property without one. Hehr v. Tucker, 256 Or. 254, 472 P. 2d 797 (1970). In Hehr the Court stated that

"The right to levy under the above statute is the same right that the holder of a domestic judgment has against the property of a judgment debtor. '* * * [T]he rights of the judgment creditor are those which stemmed from the procedure appropriate to garnishment after, not before, judgment.'"

The Government contends that this language is deceptively broad because it was fashioned to avoid Sniadach v. Family Finance Corp., 395 U. S. 337 (1969), due process problems. According to the Government, the Oregon registration statutes do not equate the rights of a foreign judgment holder with those of a domestic judgment holder.

Weber complains that the Government's challenge to the quality of his lien is based upon hair-splitting technical distinctions which are misleading and alien to the spirit of governing treasury regulations.

"The determination of whether a person is a . . . judgment creditor, entitled to the protection of Section 6323(a) shall be made by reference to the realities and the facts in a given case rather than to the technical form or terminology used to designate such person." Reg. §301.6323-1(a)(2)(ii).

Weber claims he held a valid judgment lien by satisfying the three requirements of the Choateness Doctrine: He had (1) a valid judgment in a court of record and of competent jurisdiction, (2) to recover specifically designated property or for a certain sum of money, and (3) he perfected a lien upon such judgment on the property involved. Reg. §301.6323-1(a)(2)(i)(b).

We agree. The Oregon petition for registration was vulnerable to challenge only on limited grounds such as fraud or lack of jurisdiction. Gipson, et al. v. Epps, 352 S. W. 2d 45, 49 ( Mo. 1961); see 50 C. J. S., Judgments §891.

The attachment lien in United States v. Security Trust and Savings Bank, 340 U. S. 47 (1950), is clearly distinguishable from Weber's lien. There the attachment lien had not yet ripened into a judgment. It was "merely a lis pendens notice that a right to perfect a lien [existed]". 340 at 50.

Although the federal tax lien statute is intended to secure "prompt and certain collection of taxes due the United States from tax delinquents", Congress has harnessed that collection power against judgment creditors with thr requirement that prior notice be given. 340 U. S. at 51-52. Under the with the requirement that prior notice of Foreign Judgments Act, Weber's lien has substantially the same status as a domestic judgment. While technical considerations leave this case in precarious balance, the "realities and the facts" give decisive weight to the taxpayer's position.

The judgment of the District Court is affirmed.

^* Honorable Otto R. Skopil, Jr., United States District Judge for the District of Oregon, sitting by designation.

 

 

[69-1 USTC ¶9151]Bank of Lebanon, an Oregon banking corporation, Plaintiff v. J & W Lumber Co., an Oregon corporation, Defendant, State Compensation Department, Successor in Interest to State Industrial Accident Commission, and J. N. Peet, Department of Employment Commissioner of the State of Oregon, Respondents, United States of America, Appellant Nice Electric Co., an Oregon corporation, substituted for Eoff Electric Company, an Oregon corporation, Plaintiff v. J & W Lumber Co., an Oregon corporation Defendant, State Compensation Department, Successor in Interest to State Industrial Accident Commission, and J. N. Peet, Department of Employment Commissioner of the State of Oregon, Respondents, United States of America, Appellant State Compensation Department, Successor in Interest to State Industrial Accident Commission, Respondent v. J & W Lumber Co., an Oregon corporation, Defendant, J. N. Peet, Department of Employment Commissioner of the State of Oregon, Respondent, United States of America, Appellant

Ore. Supreme Court, Department 2, Dkt. No. 21234, 448 P2d 367, 12/11/68

[Code Sec. 6323]

Line for taxes: Priorities: Federal v. state lien: Oregon.--A federal tax lien had priority over a state lien even though the latter had been filed before the date that the federal tax lien arose--the date that federal taxes had been assessed. Under state law, the state's lien did not become choate until a decree to enforce it had been entered and such was not entered until after the date of the assessment of the federal taxes. BACK REFERENCES: 69FED ¶5362.943.

Rob ert Y. Thornton, Attorney General, Cliff A. Allison, Wallace Carpenter, Assistant Attorneys General, Salem, Ore., for State Compensation Department; E. Nordyke, Murley M. Larimer, Assistant Attorneys General, Salem, Ore., for Department of Employment, respondents. Edward Lee Rogers, Mitchell Rogovin, Assistant Attorney General, Lee A. Jackson, Karl Schmeidler, Washington, D. C. 20530, Sidney I. Lezak, United States Attorney, Portland, Ore., for U. S.

Before PERRY, Chief Justice, and SLOAN, GOODWIN, HOLMAN and LUSK, Justices.

SLOAN, Circuit Judge:

Plaintiff, Bank of Lebanon, started this suit to foreclose a mortgage on property owned by defendant J & W Lumber Co. Other lienholders were named as party defendants including the State Compensation Department, the Commissioner of the Department of Employment and the United States . The mortgage has long since been foreclosed and the property sold. What remains is a contest between the state agencies just named and the United States as to the priority of liens of the state agencies versus tax liens of the United States . There are excess proceeds from the sale of personal property remaining after the satisfaction of the mortgage to satisfy only one of these lien claimants. The trial court awarded priority to the state agencies. The United States appeals.

[State v. Federal Liens]

The state liens and their enforcement are, of course, the product of state statutes. ¹ The federal lien is for unpaid federal taxes and is governed by federal statutes. ²

The competition between the federal and state liens in the instant case occurs because the state agencies filed lien notices, as required by the applicable statutes, prior to the date the federal taxes were assessed. 26 USCA §6322, set out in the margin, states that the lien dates from the date of assessment. However, the United States claims that the state liens did not become choate until a decree to enforce the lien had been entered as provided by the state statute. This is referred to as the doctrine of choateness. This is stated to mean that the date on which the applicable law permitted the lienholders to actually seize the liened property fixes the date of priority. United States v. Security Trust & Sav., 1950, [50-2 USTC ¶9492] 340 U. S. 47, 71 S. Ct. 111, 95 L. ed. 53. The trial court held that the doctrine did not apply in this case. In this appeal, we understand the state to admit that the doctrine does apply but the state agencies claim their liens were perfected when the lien notices were filed and were enforceable without judicial process. We cannot agree.

[Federal Law]

"The effect of a lien in relation to a provision of federal law for the collection of debts owing the United States is always a federal question. Hence, although a state court's classification of a lien as specific and perfected is entitled to weight, it is subject to reexamination by this Court. * * *." United States v. Security Trust & Sav., supra, 340 U. S. at 50, 71 S. Ct. at 113, 95 L. ed. at 56. The decisions of the Supreme Court, therefore, control our decision.

It is not disputed that, by the federal statutes, the federal lien dates from the date of the assessment of the tax. And it is the rule that "* * * [t]he assessment is given the force of a judgment, and if the amount assessed is not paid when due, admin istrative officials may seize the debtor's property to satisfy the debt." This the admin istrators may do without any judicial or other preliminary procedure. Bull v. United States, 1935, [35-1 USTC ¶9346] 295 U. S. 247, 260, 55 S. Ct. 695, 699, 79 L. ed. 1421, 1427.

[Seizure of Property]

The United States relies on these and similar cases to claim priority because the state statutes do not permit the state agencies to actually seize the liened property until a decree foreclosing the liens has been entered and that the decree foreclosing the state liens in the instant case was not entered until after the date of the assessment of the federal taxes. The United States claims priority because it had the first right to seize the property and, therefore, the federal liens are first in time. We must agree. We read the above-cited cases, as well as United States v. Vermont, 1964, 377 U. S. 351, 84 S. Ct. 1267, 12 L. ed. 2d 370, to hold that unless the state liens, when they were first filed, afforded the same right of admin istrative seizure as permitted by the federal statutes or unless the state lien notices provided the equivalent of a judgment lien, then the federal liens are prior.

There is some confusion in the Supreme Court opinions in deciding some of these cases but we are convinced that clarity of the determination of priority will be better achieved if we adhere to the following statement in United States v. Vermont, supra, 377 U. S. at 358, 359, 84 S. Ct. 1271, 1273, 12 L. ed. 2d 375, 376:

"* * * Moreover, unlike those cases in which the Security Trust [United States v. Security Trust and Savings Bank, supra, 340 U. S. 47] rationale was applied to subordinate liens on the ground that judgment has not been obtained prior to the time the federal lien arose, ^* it is as true of Vermont's lien here ^* as it was of the federal lien in New Britain [United States v. New Britain , 1954, [54-1 USTC ¶9191] 347 U. S. 81, 74 S. Ct. 367, 98 L. ed. 520] that 'The [ Vermont ] assessment is given the force of a judgment, and if the amount assessed is not paid when due, admin istrative officials may seize the debtor's property to satisfy the debt.' Bull v. United States [35-1 USTC ¶9346], 295 U. S. 247, 260." (*Footnotes omitted).

[Conclusion]

The Oregon statutes do not permit an admin istrative seizure of the property described in the lien notices nor does the notice of lien create the equivalent of a judgment lien. The state statutes require the further procedure specified in the statutes of a foreclosure proceeding before the property may be actually seized. The state liens simply do not afford the same right to seize the liened property that is granted to the federal tax collectors. For that reason we decide that the federal liens at issue here are prior in time to the state liens.

The state also relies on Gower v. State Tax Commission, 1956, 207 Ore. 288, 296 P. 2d 162, 296 P. 2d 239, where, on similar chronological facts, it was held that state liens created to collect unpaid income taxes were prior in time to federal tax liens. In Gower the state statute was §110.1623 OCLA, which provided that the State Tax Commission could issue a warrant for the recovery of unpaid income taxes and that such warrant would be docketed in the appropriate county judgment docket records and would thereafter have the effect of a judgment lien. The difference between §110.1623 OCLA and the statutes involved in the instant case provide a clear distinction between the Gower case and the instant case.

The decree must be reversed and a decree entered in keeping with this opinion.

¹ The lien statute for the State Compensation Department, ORS 656.564, for example, provides for liens upon the real and personal property of a non-paying employer, ORS 656.564(3) provides for filing notice of the liens with the county clerk. Subsection (4) of that statute provides the method of enforcing the lien. It is the crucial part of the statute and reads:

"The department shall, within six months from the filing of the statement, commence a suit to cause such lien to be foreclosed in the manner provided by law for the foreclosure of other liens on real or personal property." The state statutes in respect to the other disputed liens are substantially the same.

² 26 USCA §6321. Lien for taxes.

"If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person."

26 USCA §6322. Period of lien.

"Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made * * *."

26 USCA §6331. Levy and distraint.

"(a) Authority of Secretary or delegate.--If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary or his delegate to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. * * *."

* * *

"(b) Seizure and sale of property.--The term 'levy' as used in this title includes the power of distraint and seizure by any means. A levy shall extend only to property possessed and obligations existing at the time thereof. In any case in which the Secretary or his delegate may levy upon property or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible or intangible)."

 

 

[56-1 USTC ¶9444]Terry, Respondent v. Title & Trust Company, Respondent, and United States of America , Intervenor and Appellant

In the Supreme Court of the State of Oregon , No. 5629, 295 P2d 161, March 21, 1956

Appeal from Circuit Court, Multnomah County .

[1939 Code Secs. 3670, 3671--substantially similar to 1954 Code Secs. 6321, 6322; 1939 Code Sec. 3672--changed in 1954 Code Sec. 6323]

Priority of U. S. tax liens: Lessor's lien: Insolvent debtor: Application of Sec. 3466.--The tax lien of the United States was superior to the claim of a lessor against taxpayer's estate asserted by reason of a clause in a prior lease with taxpayer which gave lessor a lien and mortgage on all lessee's property on the premises during the term of the lease. The State Court holds that Sec. 3466 of Rev. Stat., 31 U. S. C. A., No. 191, gives the federal lien supremacy where, as here, the competing lien is that of a creditor of an insolvent debtor and such lien is also inchoate. Rationale of companion case of Gower v. State Tax Commission, 56-1 USTC ¶9443, followed.

Harry Marselli, Washington, D. C. (H. Brian Holland, Assistant Attorney General, Ellis N. Slack, A. F. Prescott, Fred E. Youngman, Special Assistants to the Attorney General, on brief), for appellant. Rob ert Clapperton, Portland , Ore. (M. H. Clark, Portland , Ore. , was with him on brief), for defendant and respondent.

In Banc.

LATOURETTE, Justice:

The question presented by this appeal is whether under the facts and the law the tax liens of the United States for unpaid federal taxes assessed against the estate of Anie M. Brown, deceased, are superior to the claim of Title and Trust Company against her estate for unpaid rent. The Title and Trust Company claims priority by reason of the following clause in a lease antedating the claim of the United States government between its predecessor in interest, as lessor, and Anie M. Brown, as lessee, to-wit:

"To secure the performance of all of the obligations of this lease to be by Lessee performed, including the payment of rental, the Lessee does hereby give to Lessor a lien and mortgage on all furniture, furnishings, trade fixtures and equipment at any time during the life of this lease placed in the premises by Lessee * * *."

It is conceded that the estate of Anie M. Brown is insolvent. Section 3466 Rev. Stat. (Int. Rev. Code, Title 31, §191) gives federal supremacy in any situation involving an insolvent debtor and competing creditors and especially where the lien is inchoate, such as we have in the present case. See opinion in the case of Gower v. State Tax Commission, this day written [56-1 USTC ¶9443].

Reversed.