Recordation of Interest Page4

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[62-1 USTC ¶9335] United States of America , Plaintiff v. William Johnson, June Johnson and Violet McAfee, et al., Defendants

U. S. District Court, Dist. Ariz. , No. Civ.-3671-Phx., 200 FSupp 589, 12/18/61

[1954 Code Sec. 6321]

Tax liens: Property the subject of an oral trust.--Taxpayer's interest in certain real property which his mother had conveyed to him in 1955 upon his oral promise to reconvey and for his use for security purposes only was not "property" or a "right in property" upon which a government tax lien could attach. The 1958 reconveyance which was made after the notice and recordation of these tax liens did not affect the rights of the government, but did serve to execute the oral trust, thus making parol evidence admissible.

Arthur Ross, Assistant United States Attorney, Phoenix , Ariz. , for plaintiff. Shelley and Johnson, Mesa , Ariz. , for defendants.

Opinion Granting Motion of the Defendant, Violet McAfee, for Summary Judgment

DAVIS, District Judge:

This is an action by the United States of America, under 26 USCA 7401 and 7403 and 28 USCA 1340 and 1345, seeking a money judgment against the defendants, William Johnson and June Johnson, his wife, for certain unpaid taxes, and the enforcement of a lien for such taxes against certain real property claimed by the defendant, Violet McAfee (the mother of the defendant, William Johnson).

The Johnsons defaulted, but the defendant McAfee appeared, filing a verified answer and counter-claim alleging that she was the true owner of the real property described, and praying that the plaintiff's lien be declared of no force or effect on said property.

[Defendant's Motion]

Thereafter, the defendant McAfee filed a motion for summary judgment accompanied by an affidavit setting forth facts in support of her position.

The attorneys for both parties stipulated that the Court could consider the depositions of Violet McAfee and William Johnson in determining the motion for summary judgment.

The verified counter-claim of Violet McAfee, together with the affidavit executed by her in support of her motion for summary judgment, sets forth facts of an evidentiary nature, and which, if presented upon a formal hearing, are sufficient to constitute basis for determination in her behalf. Further, they are all supported by the depositions of Violet McAfee and William Johnson. These allegations of the defendant McAfee are not controverted by verified pleadings or counter-affidavits of the plaintiff.

[No Issue of Fact]

For the purpose of determining whether any issue of fact exists which would prevent the granting of a motion for summary judgment, the facts set out in the moving party's affidavit showing that she is entitled to judgment must be accepted as true, when not met by counter-affidavits or testimony. The status of the parties is covered quite accurately in Barron & Holtzff, §1235, pp. 146, 147 and 148 as follows:

"* * * In other words the opposing party must show a plausible ground for his claim or defense. * * * The mere denial of the moving party's contentions, without showing any facts admissible in evidence, raises no issue of fact. The opposing party must show how he will support his contentions that issues of fact are present. But he need not submit all his evidence and it is sufficient if he shows that he has evidence of a substantial nature, as distinguished from legal conclusions, to dispute that of the moving party on material factual issues."

The record contains nothing from the plaintiff in this respect. No issue of fact being raised, the motion for summary judgment may properly be considered.

Facts

[Ownership of the Property]

The affidavit of Violet McAfee and her deposition and the deposition of William Johnson show: That she owned the real property in question prior to the year 1955; the transfer of said property to her son, William, on June 1, 1955, subject to a real estate mortgage to State Mutual Savings & Loan for $2,781.79; the execution of the new mortgage to First Federal Savings & Loan Association for $6,295.00, used to pay off the State Mutual mortgage, and the balance of which was kept by her son, William Johnson; her continuous occupancy of the premises during the period in question; that her son, William Johnson, resided in Virginia and in Las Vegas, Nevada, and did not occupy the property; that she did not pay rent to her son; that she paid the proportion of monthly payments to First Federal attributable to the funds used to pay off the State Mutual mortgage, and on occasion paid the entire monthly payments; that she received all the rent from the small house on the premises; that she received nothing for the conveyance to her son, except his promise to recovey after using the property as security for the loan from First Federal; that she paid all the taxes while title was in her son; that upon the death of her second husband her son reconveyed the property to her promptly at her request; that she requested the reconveyance in order to file for her widow's tax exemption; and that she was unaware of the plaintiff's lien when this was done.

[Significant Dates]

The deed from Violet McAfee to her son was recorded June 1, 1955 . The mortgage to First Federal Savings & Loan Association was recorded on July 17, 1955 . The assessments and notices of tax liens were made in May and July of 1957; and recorded September 11, 1957 , in the office of the County Recorder of Maricopa County , Arizona , being the county in which the real estate involved in the controversy was located. The reconveyance of the property from William Johnson to Violet McAfee was recorded April 30, 1958 . The complaint was filed May 19, 1961 .

[Lien Provisions]

A federal tax lien attaches to all property and rights to property belonging to the taxpayer, whether real or personal. 26 USCA §6321.

The rights of plaintiff under its lien are to be established as of the date on which the assessments were made or the lien recorded, namely, in May, July and September 1957. The subsequent reconveyance of the property from William Johnson to the defendant McAfee on April 30, 1958 could not operate to change the rights of the plaintiff as they existed prior to that conveyance.

[Fee v. Oral Trust]

The primary question to be determined is whether the interest of William Johnson in the realty in 1957 is "property" or a "right in property" upon which the plaintiff's lien could attach and become prior and superior to the interest of Violet McAfee in such property.

It is the contention of Violet McAfee that William Johnson held bare legal title to the property, with the equitable interest at all times held by him in trust for her benefit. Plaintiff disputes this, claiming that such a trust relationship cannot be shown by parol evidence. In support of this position, plaintiff cites Rogers v. Greer, 70 Ariz. 264, 219 P. 2d 760; Wright v. Young, 20 Ariz. 46, 176 P. 583. The Arizona decisions are also clear that to establish an express trust in reality there must be evidence by some writing. Solomon v. Solomon, 62 Ariz. 311, 157 P. 2d 605. Murillo v. Hernandez, 281 P. 2d 786. This line of cases, however, involves controversies between the purported trustee and purported beneficiary (or claimants under one or the other), in an attempt to establish the existence of a trust. McAfee contends that here there has been a performance of the trust which takes the question out of the statute of frauds, and out of the rule with respect to parol evidence. Stewart v. Damron, 63 Ariz. 158, 160 P. 2d 321.

[Parol Evidence Admissible]

We think this is correct and that the instant case is governed by Parker v. Gentry, 66 Ariz. 189, 185 P. 2d 767, where the Arizona Court held that oral testimony is admissible to establish that an express trust once existed, and that at the time of filing the action the trust has been fully executed and performed, and that nothing remains for the trustee to do.

It is clear that the legal title showed of record in William Johnson on September 11, 1957 , when the tax lien was recorded, and that William Johnson did not reconvey the property to Violet McAfee until April 30, 1958 .

The plaintiff has emphasized that the only evidence to be made available is from the parties interested in defeating the government's claim, but there is nothing inherently improbable in the testimony of the defendants to the effect that a mother transferred legal title to the property in question to her son to enable him to execute a real estate mortgage and borrow money, with the understanding that the property was to be used for that purpose only, and that it was to be reconveyed to the mother by the son after the mortgage loan transaction was completed. The plaintiff has not indicated it has any evidence to the contrary.

[Similar Case]

The circumstances of this case are strikingly similar to Kingsbury v. Christy, 21 Ariz. 559, 192 P. 2d 1114 (1920) where Christy tried to set aside a conveyance from Mrs. West to her son-in-law, Kingsbury, claiming it to have been made in fraud of creditors of Mrs. West. Testimony established the property was originally Kingsbury's; had been transferred to Mrs. West by him for special limited purposes, and upon her agreement to retransfer it to Kingsbury whenever requested. Such retransfer was attacked by the creditors of Mrs. West. The Court said:

"The conveyances [from Kingsbury to Mrs. West] being without consideration, a resulting trust was created, and the superior right to the lots in question remained in the defendant Kingsbury. 10 Am. & Eng. Law, pp. 4, 5, and cases there cited. Such being the case, the lots did not belong to the defendant West, and it was no fraud on her creditors for her to reconvey the legal title to the rightful owner.

"The plaintiff could not complain that he was injured by the transfer because he had no right to take the property of the defendant Kingsbury to satisfy his judgment against the defendant West."

[Holding]

It is the opinion of the Court that at the time the federal lien was filed of record the property described as the East 150 feet of Lot Thirteen (13) JOHNSON ADDITION, according to the plat of record in the office of the Maricopa County Recorder in Book 58 of Maps, page 17, located in Maricopa County, Arizona, was neither "property" or "a right in property" of the taxpayer, William Johnson; that the plaintiff's lien is of no force and effect with respect thereto; and that the defendant, Violet McAfee, is entitled to relief sought in her counter-claim.

Defendant is directed to prepare and present a formal written judgment in conformity herewith, and providing with respect to the parties in this action that Violet McAfee is the owner of the premises in question, free and clear of any lien of plaintiff, subject only to the lien of the mortgage of First Federal Savings & Loan Association.

 

 

[62-1 USTC ¶9181] Hartford Accident and Indemnity Company, Plaintiff v. United States of America , Defendant

U. S. District Court, East. Dist. N. C., Raleigh Div., Civil Action No. 1088, 12/29/61

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

Priority of surety's chattel mortgage: Attachment to machinery and materials at construction site only.--Of the proceeds of a sale of the machinery, equipment, tools and materials of a contractor who defaulted in performance of a contract, the surety who guaranteed payment of labor and materials furnished and who held a valid prior-recorded chattel mortgage was entitled to the portion received from the sale of the equipment and materials located at the construction site and the United States was entitled, because of its tax lien, to the portion realized from the sale of machinery and materials located elsewhere.

Dr. I. Beverly Lake, Fletcher & Lake, 1008 Capital Club Bldg., Raleigh, N. C., for plaintiff. Irvin B. Tucker, Jr., Assistant United States Attorney, Raleigh , N. C., John Burzio, Department of Justice, Washington 25, D. C., for defendant.

Findings of Fact, Conclusions of Law and Judgment

CRAVEN, JR., District Judge:

This Cause coming on to be heard before the undersigned District Judge presiding at the December 11, 1961, Special Term of the United States District Court for the Eastern District of North Carolina, Raleigh Division, the Court sitting without a jury, upon the stipulation of the parties and evidence offered by the parties, the Court makes the following findings of fact:

1. This is an action by the Hartford Accident and Indemnity Company to recover from the United States $2,062.99 with interest, which amount the plaitniff alleges was wrongfully seized and taken from it by the United States, acting through its revenue agent and collection officers, and which the United States contends was subject to a lien in favor of the United States for taxes claimed by it to be due to it from the M. C. Pickler Construction Company, Inc., which lien the United States claims had first priority.

[Performance Bond Registered]

2. On or about April 10, 1953, M. C. Pickler Construction Company, Inc., hereinafter called Pickler, applied to Hartford Accident and Indemnity Company, hereinafter called Hartford, for the execution by it, as surety, of a bond for the performance by Pickler of a certain construction contract with the Cumberland County Board of Education, and for the payment of labor and material claims in connection therewith. This document was registered by the plaintiff in the office of the Register of Deeds of Moore County, North Carolina, on May 21, 1954, in Book 192, at Page 527, pursuant to the statutes of North Carolina (G. S. 47-20 and 47-20.2).

3. On June 11, 1954, the United States caused to be recorded in the office of the Register of Deeds of Moore County, pursuant to the provisions of Sections 3670 and 3672 of the Internal Revenue Code of 1939, and North Carolina General Statutes, Section 44-65, a notice of lien in the amount of $1,901.96, against Pickler for taxes alleged to be due from it to the United States.

[Default and Seizure]

4. Pickler later defaulted in the performance of the construction contract and the plaintiff, under the compulsion of its bond, was compelled to incur expense and pay claims of creditors of Pickler for labor and materials furnished in the performance of the contract in the total amount of $10,695.48. Pickler having failed to reimburse the plaintiff for this loss, the plaintiff on or about November 27, 1954 , by claim and delivery proceedings instituted in the Superior Court of Wake County, North Carolina, seized all of the machinery, equipment, plant, tools and materials of Pickler.

5. The plaintiff advertised, as required by the law of North Carolina , the articles of equipment and other personal property so taken by it from Pickler for sale at the office of Pickler in Pine Bluff , Moore County , North Carolina , on December 4, 1954 .

6. On December 3, 1954 , the plaintiff, through its attorneys, was notified by the United States , acting through Marshall Claiborne, its Internal Revenue Agent and Collector, that the United States had a lien on all of the property so advertised by the plaintiff for sale. At that time, the plaintiff and the defendant, through their respective attorney and agent, agreed that the sale advertised for December 4, 1954, would be conducted as advertised, provided that the proceeds of the sale, to the extent necessary, would be paid over to the United States with the understanding that the plaintiff's right to contest the claim of the United States to such funds, would not thereby be impaired.

7. The property so advertised was sold pursuant to such advertisement on December 4, 1954 , and of the proceeds $2,062.99 was so paid over to Edward E. Hubbard, Collection Officer of the United States , pursuant to the said agreement. The payment of the above sum to the defendant's Collection Officer was made under protest.

8. On March 13, 1956 , the plaintiff delivered by mail to the defendant at its office for the collection of Internal Revenue in Greensboro , North Carolina , its petition for a refund of the amount so paid to the defendant under protest. The receipt of this petition for refund was duly acknowledged by letter of P. K. Sanders, District Director, dated March 15, 1956 , a copy of which was introduced in evidence and marked Exhibit D.

9. On September 19, 1956 , the plaintiff, through its attorneys, filed its claim and demand with the General Accounting Office in Washington, D. C., as shown by its letter of that date, offered in evidence as Plaintiff's Exhibit F.

10. A federal tax assessment for withholding and Federal Insurance Contribution Act taxes for the quarter ending March 31, 1954 , was made against M. C. Pickler Construction Co., Inc., on May 14, 1954 , in the sum of $1,901.96. Notice and demand was made on the same date. Notice of tax lien was filed on June 11, 1954 , with the Register of Deeds, Moore County , North Carolina . A levy in the sum of $2,062.99 for said taxes, including interest penalty and lien fee, was served on Mr. Franklin T. Dupree, counsel for Hartford Accident and Indemnity Company on December 4, 1954 .

[Location of Assets Seized]

11. The machinery, equipment, plant, tools and materials of Pickler Construction Company, Inc., so seized and sold by the plaintiff on December 4, 1954, included a number of articles which at some time subsequent to the execution by Pickler Construction Company, Inc., of the above mentioned application, and prior to the termination of work by the Company upon the Swan's Creek School job, were upon or about the site of the work contemplated by the contract referred to in the application or elsewhere for the purpose thereof, and also included certain articles which were not so located and used. The articles which were never so located or used were sold at the said sale for a total of $1,730.00. The remainder of the proceeds of the sale were derived from the articles which were so located and used. Of the total sum of $2,062.99 paid over by the plaintiff to the United States upon its demand as above set forth, $332.99 represented proceeds of the sale of those articles which were so located and used.

[Conclusions]

Upon these facts, the Court makes the following conclusions of law:

1. The application, dated April 10, 1953 , introduced in evidence as the plaintiff's Exhibit A, and recorded on May 21, 1954 , in the office of the Register of Deeds of Moore County, North Carolina, is a valid chattel mortgage under the laws of the State of North Carolina .

2. Of the total sum of $2,062.99 paid over to the United States by the plaintiff, the United States is entitled to retain $1,730.00, and the plaintiff is entitled to recover from the United States $332.99, together with interest from December 4, 1954, and the costs of this action.

IT IS, THEREFORE, ORDERED AND ADJUDGED that the plaintiff have and recover of the United States the sum of $332.99, together with interest thereon from December 4, 1954 , and the costs of this action to be taxed by the Clerk, pursuant to Section 2412(b) of Title 28 of the United States Code.

 

 

[61-1 USTC ¶9469] United States of America , Plaintiff v. Donald Edward Slater et al., Defendants

U. S. Dist. Court, So. Dist. Calif., Central Div., No. 913-60 WM Civil, 5/17/61

[1954 Code Secs. 6323 and 7403]

Action to enforce liens: Foreclosure of lien: Priority of mortgagee's lien.--The government was entitled to judgment that the defendant's real estate be sold to satisfy taxes, but the government was to participate in the proceeds of the sale only after payment of the marshal's fees and a prior-recorded lien represented by a note and a trust deed.

Francis C. Whelan, United States Attorney, and Rob ert H. Wyshak and Lillian W. Stanley, Assistant United States Attorneys, 808 Federal Bldg., Los Angeles 12, Calif., for plaintiff. Randall Boyd, Michael E. Smithwick, Paul E. Burgett, and Richard Secrest, Security First National Bank, 561 S. Spring St., Los Angeles, Calif., Donald J. Burdine, Alfred Grossman, and Arthur G. Bowman, 433 S. Spring St., Los Angeles, Calif., Paul E. Iverson and Iverson and Hogoboom, Suite 1222, Rowan Bldg., 458 S. Spring St., Los Angeles, Calif., and Stephen K. Tamura, Cunty Counsel, and Seymour S. Pizer, Deputy County Counsel, Santa Ana, Calif., for defendants.

Findings of Fact and Conclusions of Law

MATHES, District Judge:

The above-entitled case came on for hearing on plaintiff's motion for summary judgment before the Honorable William C. Mathes, United States District Judge, presiding, the plaintiff being represented by Francis C. Whelan, United States Attorney, and Lillian W. Stanley, Assistant United States Attorney, Tax Division; and the defendants, Security First National Bank and Equitable Trust Company, being represented by Randall Boyd, Michael E. Smithwick, Paul E. Burgett, Richard Secrest, Donald J. Burdine, Alfred Grossman, Arthur G. Bowman, Iverson and Hogoboom and Paul E. Iverson; the defendants, County of Orange and City of Fullerton, being represented by Stephen K. Tamura, County Counsel, and Seymour S. Pizer, Deputy; and the defendant, State of California, having filed a disclaimer herein; and the defendants, Donald Edward Slater, also known as Donald E. Slater, and Leona Slater, having been regularly served with process and having failed to appear and answer the complaint and their defaults having been duly entered; and the Court having considered the pleadings, affidavits, and documents on file herein and the briefs and arguments of the parties, now, therefore, decides as follows:

Findings of Fact

1. This is a civil action in which the United States seeks to foreclose its tax liens on real property and to obtain a deficiency judgment against the taxpayer-defendant, Donald Edward Slater, also known as Donald E. Slater.

2. This action is commenced pursuant to §§ 7401 and 7403 of the Internal Revenue Code of 1954 at the direction of the Attorney General of the United States, with the authorization and sanction, and at the request of the Commissioner of Internal Revenue, a delegate of the Secretary of the Treasury of the United States.

3. The property which is the subject of this action is described as:

"Lot 75 of Tract No. 1611, in the City of Fullerton , County of Orange , State of California , as per map recorded in book 56 pages 22 to 25 inclusive of Miscellaneous Maps, in the Office of the county recorder in said county."

4. The taxpayer-defendant, Donald Edward Slater, also known as Donald E. Slater, and his wife, Leona Slater, reside within the jurisdiction of this Court.

5. The defendants Security First National Bank, a corporation, successor to Security First National Bank of Los Angeles , and Equitable Trust Company, a corporation, successor in interest to Los Angeles Trust & Safe Deposit Company, maintain offices for the transaction of business within the jurisdiction of this Court.

6. The taxpayer-defendant, Donald E. Slater, is presently the owner of the subject real property.

7. A delegate of the Secretary of the Treasury assessed against the defendant the taxpayer, Donald E. Slater, Federal internal revenue taxes of the type, for the taxable period, in the amounts, and on the dates, shown below, on which dates liens of the United States of America arose against all property and rights to property of the taxpayer, as provided in §§ 6321 and 6322 of the 1954 Internal Revenue Code; that shortly thereafter notice of each tax assessed was given to the taxpayer and demand was made upon the taxpayer for the payment of each tax so assessed; the taxpayer, after notice and demand paid only those amounts shown in the table below and no more, and remains indebted to the United States of America for the balance, together with subsequently accruing penalties and interest provided by law; that on the dates specified below Notices of Tax Lien were duly filed in the office of the County Recorder of Orange County, California, pursuant to Section 6323 of the 1954 Internal Revenue Code; that there remains due, owing and unpaid to the United States of America on each lien the sum shown in the last money column, which represents the balance of the assessed tax plus subsequently accruing interest through May 15, 1961; that further interest accumulates from said date at the statutory rate of six per centum per annum, which amounts to $5.51 per day, until paid; that lien filing fees of $9.00 have been incurred.

8. By reason of a note and trust deed recorded August 31, 1955, in Book 3194 at page 219 of Official Records of Orange County, defendant Security First National Bank, as beneficiary, and Equitable Trust Company as Trustee, have a lien on the subject property in the sum of $10,980.27 which lien is prior in time and in right to the income tax lien asserted by the plaintiff herein.

9. Under California law, 1961-62 City of Fullerton and County of Orange taxes became a lien on the subject property on the first Monday in March, 1961, which under California law has priority over the liens of defendants Security First National Bank and Equitable Trust Company.

Conclusions of Law

1. This Court has jurisdiction of this action under Title 28, United States Code §§ 1340 and 1345, and under §7402(a) of the Internal Revenue Code of 1954.

2. There is now due, owing and unpaid to the plaintiff United States of America from the defendant Donald Edward Slater, also known as Donald E. Slater, the sum of $33,653.52, together with interest and statutory additions thereon as provided by law in the amount of $8,206.07, making a total of $41,859.59 as of May 15, 1961, plus interest at the rate of $5.51 per day from May 15, 1961, until the date of judgment, and interest thereafter as provided by law; that the sum of $44.00 has been incurred by plaintiff for costs of suit herein; that the United States of America has valid and subsisting liens for the aforesaid amounts upon the following described property located in the County of Orange, State of California:

Lot 75 of Tract No. 1611, in the City of Fullerton , County of Orange , State of California , as per map recorded in book 56 pages 22 to 25 inclusive of Miscellaneous Maps, in the office of the county recorder of said county.

3. Plaintiff is entitled to judgment that the entire property above described shall be sold by the Marshal of this Court, pursuant to Title 28, United States Code, §2001, in the manner prescribed by the laws of the State of California and according to the rules and practice of this Court, with the proceeds from said sale to be applied as follows:

FIRST: For the payment of the the Marshal's fees, disbursements and expenses of said sale;

SECOND: For payment to the defendants Security First National Bank and Equitable Trust Company of $10,980.27.

THIRD: For payment to the plaintiff United States of America for its costs in the sum of $44.00 to be taxed herein.

FOURTH: For payment to the plaintiff United States of America in an amount not to exceed the sum of $33,653.52, together with interest and statutory additions thereon as provided by law in the amount of $8,206.07, making a total of $41,859.59 as of May 15, 1961, plus interest at the rate of $5.51 per day from May 15, 1961, until the date of judgment, and interest thereafter as provided by law.

 

 

[61-1 USTC ¶9319]United States of America, Plaintiff v. Leonard Friedman, Administrator of the Estate of Carlyle H. Scott, deceased; Mabel N. Scott; First Federal Savings and Loan Association; Victor Scott, and Marjorie Tobias, Defendants

U. S. District Court, So. Dist. Fla., Miami Div., No. 9536-M-Civil, 2/7/61

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

Lien for taxes: Validity against mortgagee: Taxpayer's equitable estate in property.--The Government's unrecorded tax lien attached to the taxpayer's equitable estate in the property but was not entitled to a priority as against the recorded mortgage of the mortgagee. The Government's prayer that the property by sold was denied on the grounds that it had failed to prove that the taxpayer's beneficial interest is, or was, of value and has failed to show sufficient reason for the sale of such property for the satisfaction of its tax lien. BACK REFERENCES: 61FED ¶5362.828.

E. Coleman Madsen, United States Attorney, Box 1070, Miami, Fla., and Richard M. Rob erts, Chief, Claims Section, Tax Division, Department of Justice, Washington 25, D. C., for plaintiff. Harvey Klein and Eugene Tannenbaum, Biscayne Bldg., Miami, Fla., for M. Scott, V. Scott, and M. Tobias. Blackwell, Walker & Gray, First Federal Bldg., Miami, Fla., for First Federal Savings and Loan Association, Leonard Friedman, Seybold Bldg., Miami, Fla., pro se.

Findings of Fact and Conclusions of Law

LIEB, District Judge:

THIS CAUSE came on to be tried by the Court, sitting without a jury. The Court has heard testimony, considered the exhibits and considered the briefs of counsel for the respective parties and now makes the following Findings of Fact and Conclusions of Law.

Findings of Fact

1. On August 23, 1946 , there was assessed as a deficiency on the income of the taxpayer for the calendar year 1939 the following taxes, interest and penalty:

Taxes .......         $4,043.26

Interest ....          1,545.08

Penalty .....          1,010.82

                      $6,599.16

Of this amount $5,047.66 remained unpaid on February 4, 1957 . Notice and demand were made on the taxpayer on August 23, 1946 .

2. There is no evidence in the record of this case to support the allegation of Paragraph 8 of the Amended Complaint herein that the lien claimed by the Plaintiff was ever filed in the office or records of the Clerk of the Circuit Court of Dade County, Florida, nor is there any admission thereof by the parties Defendant.

3. On the 10th day of September, 1948, by warranty deed between J. B. Ford and Barbara E. Ford, his wife, and Mabel Morris Scott the said Mabel Morris Scott became the owner in fee simple of certain real property at 9208 Dickens Avenue , Miami Beach , Florida , further described as:

Lot Two (2) in Block Thirteen (13) of ALTOS DEL MAR NO. 5, according to the Plat thereof, recorded in Plat Book 8, Page 92, of the Public Records of Dade County, Florida;

4. Parties have stipulated that the record title to the said property has remained unchanged in the said Mabel N. Scott at all times since the date of the said deed.

[Action for Homestead Rights]

5. On April 15, 1951, Carlyle H. Scott and his wife, Defendant Mabel N. Scott, instituted a suit in the Circuit Court of the Eleventh Judicial Circuit of the State of Florida in and for Dade County against The Bank of Manhattan Company, as Defendant, praying for a decree finding that the said property was the homestead of the said Carlyle H. Scott and exempt from execution upon a certain judgment against him held by the said Bank of Manhattan Company. In support of the claim of Carlyle H. Scott, the Complaint alleged the following:

"(1) The Plaintiffs are each residents of Miami Beach , Dade County , Florida , and each of the Plaintiffs is over the age of 21 years. The Defendant, BANK OF THE MANHATTAN COMPANY is a New York corporation, having its principal place of business in New York City , New York .

"(2) On a certain date, to-wit: September 10, 1948 , the Plaintiff, CARLYLE H. SCOTT, became the beneficial owner of the following described property, lying and being in Dade County , Florida :--

Lot Two (2) in Block Thirteen (13) of ALTOS DEL MAR No. 5, according to the Plat thereof, recorded in Plat Book 8, Page 92, of the Public Records of Dade County, Florida; together with electric refrigerator, electric range, electric dish washer, venetian blinds and cornices. Said property is also known as 9208 Dickens Avenue , Miami Beach 41, Florida .

"(3) The above described property was placed in the name of Mabel Morris Scott (this is the same person as the Plaintiff, MABEL N. SCOTT) under Warranty Deed from J. B. Ford and Barbara E. Ford, his wife, which deed is dated September 10, 1948, and recorded September 14, 1948, in Deed Book 3059, Page 151 of the Public Records of Dade County, Florida.

"(4) Each of the Plaintiffs has been a resident of Miami Beach , Florida , since sometime prior to September 10, 1948 .

"(5) On or about September 10, 1948, the Plaintiffs, CARLYLE H. SCOTT and MABEL N. SCOTT moved into the house located on the above described property and have resided in said house from that time up to the date of the filing of this Bill of Complaint.

"(6) Plaintiff, CARLYLE H. SCOTT, is the head of the family and is the sole person contributing to the support of the Plaintiff, MABEL N. SCOTT.

"(7) The money with which the above described property was purchased was furnished by Plaintiff, CARLYLE H. SCOTT, and all mortgage payments, improvements and maintenance expenses have been paid by Plaintiff, CARLYLE H. SCOTT.

"(8) The above described property is the homestead of CARLYLE H. SCOTT and has been the homestead of CARLYLE H. SCOTT since September 10, 1948 .

"(9) The Defendant, Bank of The Manhattan Company, obtained a Final Judgment against the Plaintiffs, Mabel N. Scott and Carlyle H. Scott in the Civil Court of Record in and for Dade County , Florida , case No. 44781, on January 16, 1951 ."

6. On June 14, 1951 , a declaratory decree was entered in the suit mentioned in Paragraph 5 above finding that:

"1. That this Court has jurisdiction of the parties and the subject matter hereof.

"2. That the Decree Pro Confesso heretofore entered against BANK OF THE MANHATTAN COMPANY, a New York corporation, be and the same is hereby ratified, approved and confirmed in all respects.

"3. That the plaintiff, CARLYLE H. SCOTT, is hereby declared to be the beneficial owner of the following described property and that the said CARLYLE H. SCOTT is further declared to have been the beneficial owner of said property since September 10, 1948:

`Lot Two (2) in Block Thirteen (13) of ALTOS DEL MAR NO. 5, according to the Plat thereof, recorded in Plat Book 8, Page 92, of the Public Records of Dade County, Florida; together with electric refrigerator, electric range, electric dish washer, venetian blinds and cornices. Said property is also known as 9208 Dickens Avenue , Miami Beach 41, Florida .'

"4. That the above described property is hereby declared to have been the homestead of the Plaintiff, CARLYLE H. SCOTT, since September 10, 1948 , in accordance with the Constitution and Statutes of the State of Florida .

"5. That the aforesaid property as the homestead of CARLYLE H. SCOTT is hereby declared to be exempt from execution under that certain Judgment rendered on January 16, 1951, in favor of the Plaintiff in the case of BANK OF THE MANHATTAN COMPANY, a corporation, plaintiff, v. MABEL N. SCOTT and CARLYLE H. SCOTT, defendants, Case No. 44,781, in the Civil Court of Record, in and for Dade County, Florida.

"6. That the aforesaid property as the homestead of CARLYLE H. SCOTT is hereby declared to be exempt from execution on any and all other judgments that may have been obtained against CARLYLE H. SCOTT and MABEL N. SCOTT, his wife, or either of them, from September 10, 1948, to the date of this Final Decree.

"Done and Ordered in Chambers at Miami , Dade County , Florida , this 13th day of June, 1951.

/s/ Charles A. Carroll

Circuit Judge"

[Execution of Mortgage]

7. On January 22, 1957, the said Carlyle H. Scott and his wife, Mabel Morris Scott, executed and delivered their mortgage upon the said property to the Defendant, First Federal Savings and Loan Association of Miami, to secure payment of a Mortgage Note in the amount of $13,700.00, which Mortgage was duly recorded on January 22, 1957, in official Records Book 35 at Page 67, in the office of the Clerk of the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida.

8. Carlyle H. Scott died on March 1, 1957 , and the Defendant, Leonard Friendman, is the duly appointed and qualified Administrator of his estate.

9. There is due and owing to the Plaintiff from the estate of Carlyle H. Scott the sum of $5,047.66, plus interest thereon as provided by law.

10. At the time of his death, Carlyle H. Scott was the owner of a beneficial interest in the real property described in Finding of Fact No. 3 herein.

Conclusions of Law

1. The Court has jurisdiction of this cause and of the parties thereto.

2. A valid Federal tax lien was acquired on August 31, 1946, on the taxpayer's then existing property, which lien attaches to all property thereafter acquired by the taxpayer, Carlyle H. Scott.

3. Plaintiff failed to prove that the said tax lien was ever recorded in the records of the Clerk of the Circuit Court of the Eleventh Judicial Circuit in and for Dade County , Florida .

4. The Mortgage of the Defendant, First Federal Savings and Loan Association, upon the said property is entitled to priority over the tax lien of the Plaintiff.

5. Plaintiff is entitled to a Judgment against the Defendant, Leonard Friedman, as Administrator of the Estate of Carlyle H. Scott, deceased, in the amount of $5,047.66, plus interest thereon as provided by law.

6. Plaintiff has failed to prove that the real property involved herein has a value in excess of the amount of the claims holding priority over the tax lien of the Plaintiff.

7. Although Carlyle H. Scott was the owner of a beneficial interest on the said real property, Plaintiff failed to prove that said beneficial interest is, or was, of value and has failed to show sufficient reason for direction of sale of said property and is not entitled to have the property sold for the satisfaction of its said lien. U. S. v. Cox, N. D. Ga., 1953, [54-1 USTC ¶9136] 119 F. Supp. 147.

Counsel for Plaintiff will prepare Judgment in accordance with the foregoing submitting it to counsel for the Defendants for approval as to form only.

 

 

[60-1 USTC ¶9289]United States of America, Plaintiff v. W. Monroe Smith, doing business as "Cuz" Smith Realty Co.; Myra H. Smith; Equitable Building and Loan Association; B. & W. Lumber Co., Inc.; John Ratterree & Co.; St. Paul Mercury Insurance Co.; Iowa Hardware Mutual Insurance Co.; A. J. Harvey; Edward C. Prenzel, doing business as Prenzel System Co.; Southern States Supply Company; Florence E. Price; W. H. Corder; and the Citizens and Southern National Bank, Defendants

U. S. District Court, East. Dist. S. Car., Col. Div., Civil Action No. AC-249, 12/23/59

[1954 Code Sec. 6323]

Lien for taxes: Priorities: Mortgage: Judgment creditors.--A mortgage which was executed before tax assessments were made had priority over the lien for taxes. The tax lien was, however, superior to judgments which were filed after the tax assessments had been made.

N. Welch Morrisette, Jr., United States District Attorney, and George E. Lewis, Assistant United States Attorney, Columbia, S. C., for United States. Joe E. Berry, Jr., Security Federal Building , Columbia , S. C., for W. Monroe Smith and Myra H. Smith. Roger M. Heyward, Security Federal Building , Columbia , S. C., for Southern States Supply Company. Rob inson, McFadden & Dreher, 1213 Washington Street , Columbia , S. C., for The Citizens & Southern National Bank. Fulmer & Barnes, Barringer Building , Columbia , S. C., for St. Paul Mercury Insurance Company. E. Ellison Walker, 802 Barringer Building, Columbia , S. C., for Iowa Hardware Mutual Insurance Company. Frank L. Taylor and Eugene F. Rogers, 1213 Washington Street, Columbia, S. C., for B. and W. Lumber Company, Clarke W. McCants, Jr., 501 Carolina Life Building, Columbia, S. C., for Edward C. Prenzel, d/b/a Prenzel System Company.

Findings of Fact, Conclusions of Law and Decree of Foreclosure and Sale

TIMMERMAN, District Judge:

This is an action by the United States of America to set aside the conveyance of certain real estate hereinafter more fully described, which said conveyance was made by defendant W. Monroe Smith to his wife, the defendant Myra H. Smith. The remaining defendants were made parties to this action by virtue of certain judgments held by each of them against the defendant W. Monroe Smith, which judgments constituted liens against the real estate herein concerned. This action further seeks the foreclosure of certain tax liens against the defendant W. Monroe Smith and to subject the real estate to sale for the satisfaction of said taxes.

Upon reading the Amended Report of the Standing Master Frank B. Gary, Esquire, heretofore filed on November 17, 1959 , and after due consideration thereof and the record of this case, I hereby find and conclude as follows:

1. That this action was heretofore commenced on December 23, 1958 ; service was duly made on the defendants as shown by the Returns of Service of the United States Marshal on file herein; the Lis Pendens was duly filed on December 24, 1958 , and this Court has jurisdiction of the parties and of the subject matter.

2. That the defendant W. Monroe Smith is indebted to the United States of America in the sum of Two thousand four hundred eighty-four and 56/100 ($2,484.56) Dollars, plus interest until paid as provided by law, for withholding taxes, Federal Unemployment taxes and FICA taxes as set forth in plaintiff's Complaint, the assessments for same having been made on May 31, 1957 and June 14, 1957, and Notices of said liens having been filed in the office of the Clerk of Court for Lexington County on August 19, 1957 and December 12, 1957, respectively.

[Fraudulent Conveyance]

3. That on April 26, 1957 , the defendant W. Monroe Smith by deed conveyed to his wife, the defendant Myra H. Smith, the following described tract of land for the recited consideration of "Five and no/100 Dollars and love and affection":

"All that certain piece, parcel or tract of land, together with the improvements thereon, situate, lying and being in School District #2, Brookland-Cayce Township, in the County of Lexington, in the State of South Carolina, containing four and one-tenty (4.1) acres, and being more definitely described and delineated upon a Plat prepared for Ola Tanner by A. L. Lown, Surveyor, or November 16, 1956, and recorded in the office of the Clerk of Court for Lexington County in Plat Book 42-G at page 240. Said Tract of land bounding and measuring as follows: On the North by Highway #215, and running thereon one hundred thirty-four (134') feet, on the Northeast by lands of Paxton Chavis and running thereon three hundred seventy-four (374') feet, on lands of Marshall Lewis also, and running thereon three hundred ninety-two (392') feet, on the South by lands of Williamson and running thereon three hundred eighty-two (382') feet, and on the West by lands of Medlin and running thereon seven hundred (700') feet. Said Tract being the identical land heretofore conveyed to W. Monroe Smith by Ola Tanner by her Deed dated November 24, 1956, and recorded in the said Clerk's office in Deed Book 8-V at page 259."

4. That the tax liabilities hereinabove set forth had accrued and were debts owing to the plaintiff at the time of the said conveyance which left the defendant W. Monroe Smith without money or other properties with which to satisfy his debts.

5. That the said conveyance was made in fraud of creditors and is therefore null and void.

[Mortgage Lien]

6. That the defendant Equitable Building and Loan Association has a lien on the subject property by virtue of that certain real estate mortgage made and executed on March 18, 1957, on which there is a blance due of $1,120.79 as of August 31, 1959, and which is not being foreclosed in this action.

[Judgment Liens]

7. That the defendant B. & W. Lumber Company, Inc. has a lien on the subject property by virtue of a judgment rendered in its favor and against the defendant W. Monroe Smith in the principal amount of $870.52, said judgment having been filed on June 28, 1957, and bearing Judgment Roll No. 10,276 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

8. That the defendant John Ratterree & Company has a lien on the subject property by virtue of a judgment rendered in its favor and against the defendant W. Monroe Smith in the principal amount of $771.02, said judgment having been filed on September 11, 1957, and bearing Judgment Roll No. 10,329 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

9. That the defendant Iowa Hardware Mutual Insurance Company has a lien on the subject property by virtue of a judgment rendered in its favor and against the defendant W. Monroe Smith in the principal amount of $455.75, said judgment having been filed on October 24, 1957, and bearing Judgment Roll No. 10,388 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

10. That the defendant St. Paul Mercury Insurance Company has a lien on the subject property by virtue of a judgment rendered in its favor and against the defendant W. Monroe Smith in the principal amount of $891.99, said judgment having been filed on December 26, 1957, and bearing Judgment Roll No. 10,426 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

11. That the defendant A. J. Harvey has a lien on the subject property by virtue of a judgment rendered in his favor and against the defendant W. Monroe Smith in the principal amount of $1,742.00, said judgment having been filed on January 3, 1958, and bearing Judgment Roll No. 10,448 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

12. That the defendant Edward C. Prenzel, doing business as Prenzel System Company, has a lien on the subject property by virtue of a judgment rendered in its favor and against the defendant W. Monroe Smith in the principal amount of $94.54, said judgment having been filed on February 6, 1958, and bearing Judgment Roll No. 10,475 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

13. That the defendant Southern States Supply Company has a lien on the subject property by virtue of a judgment rendered in its favor and against the defendant W. Monroe Smith in the principal amount of $310.20, said judgment having been filed on April 11, 1958, and bearing Judgment Roll No. 10,525 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

14. That the defendant The Citizens and Southern National Bank of Columbia, South Carolina, has a lien on the subject property by virtue of a judgment rendered in its favor and against the defendant W. Monroe Smith in the principal amount of $603.14, said judgment having been filed on April 23, 1958, and bearing Judgment Roll No. 10,540 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

15. That the defendant Florence E. Price has a lien on the subject property by virtue of a judgment rendered in her favor and against the defendant W. Monroe Smith in the principal amount of $1,000.00, said judgment having been filed on April 23, 1958, and bearing Judgment Roll No. 10,541 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

16. That the defendant W. H. Corder has a lien on the subject property by virtue of a judgment rendered in his favor and against the defendant W. Monroe Smith in the principal amount of $1,220.00, said judgment having been filed on November 18, 1958, and bearing Judgment Roll No. 10,723 in the office of the Clerk of Court of Common Pleas for Lexington County, Lexington, South Carolina.

[Priorities]

17. That the liens of the United States are subordinate and junior to the lien of the mortgage held by defendant Equitable Building and Loan Association.

18. That the United States is not entitled to compel foreclosure of the mortgage on the subject premises, and that the sale of said premises must be made subject to the lien of said mortgage.

19. That the defendant W. Monroe Smith is entitled to a homestead exemption in the proceeds of sale as against all of the judgment creditor defendants, but not as against the United States of America for its lien for taxes.

20. That the present value of the inchoate right of dower of defendant Myra H. Smith is the sum of Two hundred fifty and no/100 ($250.00) Dollars, all parties to this action having agreed thereto as shown by the file herein.

IT IS, THEREFORE

ORDERED, ADJUDGED AND DECREED

1. That the plaintiff United States of America have judgment against the defendant W. Monroe Smith for the sum of Two thousand four hundred eighty-four and 36/100 ($2,484.36) Dollars, plus interest until paid as provided by law.

2. That the conveyance dated April 26, 1957 of the property herein described from the defendant W. Monroe Smith to the defendant Myra H. Smith was fraudulent as to creditors and is therefore null and void, and the defendant Myra H. Smith is hereby divested of her title to said property and the same is hereby revested in the defendant W. Monroe Smith.

3. That the claims of plaintiff constitute a lien against the property herein concerned and if said claims be not paid before the 20th day following the filing of the Decree herein, that plaintiff have judgment of foreclosure of its liens against the said defendants, and the defendants and all persons claiming by, through or under them be, and they are hereby, forever barred and foreclosed of all right, title, interest and equity of redemption in and to the said premises hereinabove described, or to any part thereof; that after public notice as hereinafter provided, the said premises be sold subject to the lien of the mortgage of Equitable Savings and Loan Association hereinabove set forth, by the United States Marshal for the Eastern District of South Carolina at public auction at the Lexington County Courthouse in Lexington, South Carolina during the usual hours of public sale on the first Monday in February next, or the earliest possible subsequent sales day on the following terms, to wit: for cash, the successful bidder to be required to deposit immediately as evidence of good faith cash or certified check in the amount of five (5) per cent of said bid. If the plaintiff be the successful bidder at said sale, the amount of its indebtedness may be used as the equivalent of cash. Should the successful bidder fail to comply with the said bid within thirty (30) days from the date of sale, the deposit of five (5) per cent hereinabove referred to shall be forfeited, and immediately and without further order the United States Marshal shall readvertise and resell the premises at the earliest possible sales day thereafter on the same terms and conditions, and at the risk of the defaulting bidder. The plaintiff may be the purchaser at the said sale or any resale.

[Tax Sale ]

4. That the said United States Marshal give notice according to law of the time and place of said sale and the terms thereof by advertisement in The State Newspaper, Columbia, South Carolina, and The Columbia Record, Columbia, South Carolina, newspapers of general circulation in the County of Lexington, State of South Carolina, once a week for three consecutive weeks, the last publication to be not more than three weeks, nor less than one week prior to the said sale, and by posting notices thereof upon the Courthouse door at the County Courthouse, Lexington County, South Carolina, and at least three other public places in the said Lexington County.

5. That upon compliance by the purchaser with his bid, and with the terms of sale, the said United States Marshal will make, execute and deliver to the purchaser a good and sufficient deed of conveyance of the property hereinabove described, subject to the above mentioned mortgage of Equitable Savings and Loan Association; and that the purchaser be let into possession of the premises forthwith upon production of his, her, its, or their said deed.

6. That the proceeds of said sale shall be applied by the United States Marshal first to the payment of the costs and expenses of the said sale and of the within action; including the sum of One hundred fifty ($150.00) Dollars to be paid to Frank B. Gary, Esquire, Standing Master; next, to the payment of Two hundred fifty and no/100 ($250.00) Dollars to the defendant Myra H. Smith in lieu of dower; next, from that portion of the balance remaining which exceeds One thousand ($1,000.00) Dollars, to the payment of the amount hereinabove found to be due the defendant B. and W. Lumber Company, Inc., with interest according to law; next, to the payment of the sum of One thousand nine hundred ninety-one and 4/100 ($1,991.04) Dollars, together with inteerst from August 19, 1957, to the plaintiff United States of America; next, from any amount remaining in excess of One thousand ($1,000.00) Dollars, to the payment of the amount hereinabove found to be due John Ratterree and Company; next, from any amount remaining in excess of One thousand ($1,000.00) Dollars, to payment of the amount hereinabove found to be due the defendant Iowa Hardware Mutual Insurance Company; next, to payment of Four hundred ninety-three and 52/100 ($493.52) Dollars, together with interest from December 12, 1957, to the plaintiff United States of America; next, from any amount remaining in excess of One thousand ($1,000.00) Dollars, to payment of the amount hereinabove found to be due the defendant St. Paul Mercury Insurance Company; next, from any amount remaining in excess of One thousand ($1,000.00) Dollars, to payment of the amount hereinabove found to be due the defendant A. J. Harvey; next, from any amount remaining in excess of One thousand ($1,000.00) Dollars, to payment of the amount hereinabove found to be due the defendant Edward C. Prenzel, doing business as Prenzel System Company; next, from any amount remaining in excess of One thousand ($1,000.00) Dollars, to payment of the amount hereinabove found to be due the defendant Southern States Supply Company; next, from any amount remaining is excess of One thousand ($1,000.00) Dollars, to the amount found to be due the defendant The Citizens and Southern National Bank of Columbia, South Carolina; next, from any amount remaining in excess of One thousand ($1,000.00) Dollars, to the payment of the amount hereinabove found to be due the defendant Florence E. Price; and last, from any amount remaining in excess of One thousand ($1,000.00) Dollars, to the amount hereinabove found to be due the defendant W. H. Corder.

7. That the balance remaining, if any, be held subject to the further order of this Court.

 

 

[59-2 USTC ¶9740]Citizens National Bank of Lubbock, Plaintiff v. Tom Carver's Inc., et al., Defendants, H. K. McDowell, United States Marshal, Garnishee: United States of America , Intervenor

Texas District Court, Lubbock County, No. 31,248-A, 10/6/59

[1954 Code Sec. 6323]

Lien for taxes: Priority of judgment creditor.--A bank, as judgment creditor, had a claim which was prior to that of the United States for taxes. Therefore, the bank may recover the entire amount held for the account of the taxpayer by the United States marshal, obtained in garnishment proceedings, since the bank's claim exceeds the amount so held.

Klett, Evans, Trout & Jones, Myrick Building , Lubbock , Tex. , for plaintiff. Snodgrass & Calhoun, 417 Petroleum Building, Amarillo , Tex. , for defendant. W. B. West, III, United States Attorney, Melvin M. Diggs, Assistant United States Attorney, 206 United States Court House, Fort Worth Tex. , for garnishee.

Judgment

DENTON , Judge:

On the 7th day of July, 1959, in the above court, came on to be heard the above entitled and numbered cause, and came the plaintiff and announced ready for trial.

And came the garnishee, H. K. McDowell, who had previously filed answer herein as required by law, and it appearing to the court from such answer, that the garnishee H. K. McDowell, United States Marshal, and in his capacity as United States Marshal, is indebted to the defendant Tom Carver's Inc., in the sum of $4,856.49, and further, that in the cause of Citizens National Bank of Lubbock, plaintiff, v. Tom Carver's Inc., et al., defendant, Number 31,248 in this court, the plaintiff, on the 28th day of April, 1959, recovered a judgment against said defendant Tom Carver's Inc., and others, in the sum of $18,484.48, together with 6% interest thereon from the 28th day of April 1959, and $53.75 costs, and that said judgment is still unsatisfied and there is more than $4,856.49 remaining unpaid on said judgment.

[Lien for Taxes]

And it appearing to the court that on or about the first day of July 1959, the United States of America, acting by and through W. B. West, its District Attorney for the Northern District of Texas, pursuant to the request of the United States Commissioner of Internal Revenue, and the direction and authorization of the Attorney General of the United States, filed a petition in intervention herein, in which petition the United States of America set up a claim to the above described funds in the hands of the Marshal, said claim on behalf of the Bureau of Internal Revenue, and the Treasury Department of the United States, claiming liens against said fund in behalf of the Internal Revenue Bureau of the United States of America, and claiming that such claim was prior to the claim of the plaintiff, and also on the above named date of July 7, 1959, came the said United States of America, by its attorneys and announced ready for trial.

[Priority]

And after hearing the evidence and considering the pleadings and hearing and considering the argument of counsel, the court is of the opinion that the plaintiff and garnishor, Citizens National Bank of Lubbock, holds a claim which is prior to the claim held by the United States of America to the funds in the hands of the United States Marshal, and that the plaintiff has the prior and greater right to the funds in question.

It is therefore ordered, adjudged and decreed that the plaintiff, Citizens National Bank of Lubbock do have and recover of and from the garnishee, Hobert K. McDowell, as United States Marshal, the sum of $4,856.49, which amount does not exceed plaintiff's judgment against defendant Tom Carver's Inc., et al., with interest thereon and all costs, including those in this proceeding; for which let execution issue; and it is further ordered, adjudged and decreed that the collect on of any such indebtedness due by the said garnishee to the said defendant or any of them, under this judgment, shall be a bar to any recovery from said garnishee of such part of such indebtedness by said defendants or any of them.

To which action and ruling of the court, the intervenor, the United States of America, did object and except in open court and give notice of appeal to the Court of Civil Appeal for the Seventh Supreme Judicial District at Amarillo, Texas.

 

 

[59-2 USTC ¶9495]Old Colony Insurance Company of Boston, Massachusetts, Plaintiff v. Alfred Goldberg and Samuel Blumberg, individually and as co-partners doing business as The Tropic Bar and Patio, Annie Altieri Peek and Joseph P. Peek, her husband, and Jacksonville Gas Corporation, Defendants and United States of America, Intervenor

U. S. District Court, South. Dist. Fla. , Jacksonville Div., No. 2658-Civil-J, 5/14/59

[1954 Code Sec. 6323]

Lien for taxes: Priority of judgment creditor: Disposition of partners' fire insurance proceeds.--Taxpayer-partners operated a bar in rented premises. Part of the personal property in the bar was owned by the lessor, who carried insurance on the building but not on her personal property therein. After a fire which destroyed the building and contents, the insurance company deposited the insurance proceeds on the taxpayer's personal property with the court for settlement of creditors' claims, including a lien for taxes owed by each partner. There was also a tax lien against one of the partners for taxes on another business. The court holds that the fund should be applied (after deduction of court costs) first to payment of a judgment creditor, and next to the $10 federal tax liens against the partners, the remainder of the fund to be applied equally to each partner. The amount is to be paid to one partner, but the other partner's share is to be paid to the United States on account of his taxes due on the other business, which exceed his share of the insurance proceeds. The lessor has no interest in the fund.

Marks, Gray, Yates & Conroy, 1321 Graham Building , Jacksonville , Fla. , for plaintiff. J. L. Lee, 137 East Forsyth, Jacksonville , Fla. , for Alfred Goldberg. Fred Butler, 1309 Barnett Bank Building , Jacksonville , Fla. , for A. & J. Peek. McCarthy, Lane & Adams, 423 Atlantic National Bank Building, Jacksonville , Fla. , for Jacksonville Gas Corp.

Findings of Fact and Conclusions of Law

SIMPSON, District Judge:

This cause was tried to the Court without a jury, and all questions of law and fact submitted. Thereupon, the Court now makes the following

Findings of Fact

1. The original plaintiff, Old Colony Insurance Company of Boston, Massachusetts, instituted this interpleader suit in the Circuit Court for Duval County, Florida, on October 26, 1953, in order to have the Court decide which of several claimants should receive the proceeds of its fire insurance policy No. 555272 issued to the defendants Alfred Goldberg and Samuel Blumberg, d/b/a The Tropic Bar and Patio. An original defendant was Laurie W. Tomlinson, as District Director of Internal Revenue, at Jacksonville , Florida . The suit was duly removed by said officer of the United States to this Court under the provisions of Title 28 U. S. Code, Section 1442(a)(1). Jurisdiction is present.

2. The defendant Annie Altieri Peek, joined by her husband, Joseph P. Peek, leased the premises known as The Tropic Bar and Patio for a 5-year term commencing April 1, 1947 , to the defendant Goldberg and one Silverman. During the leasehold, Silverman's interest in the partnership and as lessee was acquired by the defendant Samuel Blumberg, and at all times pertinent thereafter Blumberg and Goldberg operated the premises as a partnership d/b/a The Tropic Bar and Patio. A renewal agreement extending the lease for an additional 5 years was executed by the Peeks to Goldberg and Samuel Blumberg on June 21, 1952 . (The lease and the renewal agreement appear in the record as Evidentiary Exhibit No. 1). The monthly rental under the renewal was fixed at $200.00 per month, and the provisions of the original lease were incorporated in the renewal. The lessees agreed thereunder to deliver the premises upon the termination of the lease or any extension thereof in as good condition as when received, ordinary wear and tear, decay and damages by the elements only excepted. There was a further provision to keep the buildings on the premises fully insured against fire, and the lessors agreed that in the event the premises or buildings thereon were destroyed by fire that the lessees might use the entire proceeds from such insurance policy to rebuild or restore such buildings. The renewal agreement fixed the amount of insurance on the buildings required to be kept by the lessees as not less than $6,000.00. Attached to the original lease was an inventory of personal property on the premises belonging to the lessors.

3. The defendant Goldberg procured insurance on the buildings as the lease required, but because of the occurrence of certain fires, this insurance was cancelled, and Goldberg was not successful in procuring other insurance. He so advised Mrs. Peek. She procured a $3,000.00 fire insurance policy on the building, which policy expired in November, 1952. The premium cost thereof was repaid to her by Goldberg on March 5, 1952 . Under date of December 21, 1952 , Mrs. Peek procured a 5-year fire insurance policy in the amount of $3,000.00 on the building, and on February 1, 1953 , billed Goldberg for $86.16, the first year's premium cost, requesting payment by a note written on the bill to her of her insurance brokers. (Defendant Peek's Exhibit No. 2). This note requested that Goldberg send his check for the amount. Goldberg says that he verbally agreed to pay the same, but Mrs. Peek insists she did not accept this verbal promise. It is stipulated that Goldberg had not paid. I find that Mrs. Peek looked to Goldberg for payment of this amount and that the procurement of this insurance was treated and accepted by the parties to the lease as compliance with the undertaking of the lessees to keep the buildings insured.

4. After the lessees bought an Aerosonic piano, a $650.00 gas heater, an expensive bar, bar stools, beer cooler and other items for the business, they took out the policy in dispute here, insuring the chattels on the premises for $2500.00, the dates of coverage being May 23, 1952 through May 23, 1953.

5. On May 20, 1953 , the buildings and contents were completely destroyed by fire. Proofs of claim of loss were thereafter submitted by Alfred Goldberg and Samuel Blumberg, the inventory submitted by them being Exhibit No. 4 in evidence. This inventory shows cost of the various items in a total amount of $10,595.00. $1550.00 of these items are marked on the inventory "Peek", and the items not so marked are stated to be the property of Goldberg and Blumberg. The proof of loss claimed a value of $6400.00 for the personal property listed on the inventory.

[Lien for Taxes]

6. The original defendant, Laurie W. Tomlinson, as District Director of Internal Revenue at Jacksonville, filed with the plaintiff May 26, 1953, levies, warrants for distraint and notices of Federal tax liens under the Internal Revenue laws of the United States, claiming that Goldberg and Blumberg, d/b/a The Tropic Bar and Patio, were indebted to the United States in the amount of approximately $1867.76, with interest, and demanded of Old Colony payment of such sums from any moneys or credits due and owing by Old Colony to the defendants Goldberg and Blumberg.

[Creditor's Claim]

7. Jacksonville Gas Corporation, in 1951, sold to Goldberg and Blumberg an overhead gas heater under a retain title lien originally in the amount of $508.99. This heater was destroyed in the fire of May 20, 1953 , at which time the amount of the Jacksonville Gas Corporation's lien was $155.36. This defendant entered suit in the Civil Court of Record of Duval County , Florida , against Samuel Blumberg on this account and recovered judgment therefor in the amount of $176.76. Said judgment was recorded in Judgment Lien Record Book 51, Page 72 of the Duval County records, on September 23, 1953 , and execution thereon was issued and levied against Samuel Blumberg September 26, 1953 . Writ of garnishment after judgment was issued and served on Old Colony on October 2, 1953 . This judgment remains unsatisfied, and the interpleaded funds are the only apparent source of its payment. The interest to date thereon is $59.70, making a total of this claim of $236.46.

8. The amount paid into the Circuit Court of Duval County by the original plaintiff Old Colony was $2500.79, representing the face amount of the policy plus $.79 for 3 days unearned premium. When the amount on deposit was transferred from the Registry of the Circuit Court to the Registry of this Court, the Clerk of the Circuit Court deducted therefrom, as his fees, the sum of $15.00 so that the original amount paid into the Registry of this Court was $2485.79. By this Court's order of June 19, 1954 , the Clerk of this Court was directed to pay to Old Colony attorneys fees of $375.00, plus $44.00 Clerk's and Sheriff's costs, a total of $419.00, and this original plaintiff was dismissed. The funds now in the registry of the Court, therefore, total $2066.79.

[Taxes of Another Business]

9. The same order dismissed the original defendant, Laurie W. Tomlinson, and granted the motion of the United States of America to intervene in order to assert its claimed tax liens. Its intervening complaint asserts that the defendants here, Goldberg and Blumberg, d/b/a The Tropic Bar and Patio, and Samuel Blumberg and Edward Blumberg, d/b/a the Flamingo Show Club, are justly indebted to the United States in the amount of $2875.90, with interest thereon. The major portion of these tax liens and assessments as set out in the complaint of the United States are against Samuel Blumberg and Edward Blumberg, d/b/a the Flamingo Show Club, an entirely separate enterprise conducted in Orlando , Florida . As of the date of trial, it was stipulated that these taxes are now paid down to $1382.42, of which approximately $10.00 represents unpaid assessments against Alfred Goldberg and Samuel Blumberg d/b/a The Tropic Bar and Patio, and the remaining $1372.42 is against Samuel Blumberg and Edward Blumberg, d/b/a the Flamingo Show Club.

10. The items marked "Peek" on the inventory (defendant Peek's Exhibit No. 4) were eliminated in determining the settlement under the Old Colony policy. The value of $6400.00 placed in the proof of loss was arrived at by discounting the remaining items by approximately one-third. No property belonging to Mrs. Peek, therefore, was taken into account in determining the loss of chattels in the May 1953 fire.

Conclusions of Law

1. Mrs. Peek is not entitled to any part of the $2066.79 remaining on deposit in the registry of this Court as proceeds of the Old Colony policy. She insured the buildings, and collected these proceeds, making it impossible for Goldberg and Blumberg to rebuild. She did not rebuild, and the leasehold was at an end. She had a statutory lien for any unpaid rent, under Florida Statutes 83.08(2), against personal property of the lessee usually kept on the premises, but this lien does not extend to insurance proceeds from injury to or destruction of the chattels (See 32 Am. Jur., Sec. 604, Page 482).

The lease does not contain an obligation to keep her personal property on the premises insured, only the buildings. She insured the building herself, billed the lessees for the premium, and collected these proceeds.

The obligation set forth in the lease to return the premises in as good condition as received, "ordinary wear and tear, decay and damages by the elements excepted", does not enlarge but simply makes express, the common law obligation of a bailee (as to personalty), or a lessee (as to realty) to use due care. The bailee or lessee is not made an insurer, by this language. It cannot give rise to a lien, equitable or otherwise, upon these insurance proceeds (see R. F. C. v. Peterson Bros., 5 C. A., 160 Fed. (2d) 124).

Although my Finding No. 10 above is that the personal property owned by Mrs. Peek was not taken into account in the payment for this loss, I do not consider this finding controlling or necessary. The lessees were, with Mrs. Peek's consent, using her property in their daily business, and had an insurable interest in it. Its loss would cause expense, inconvenience, and a serious disruption in business to them. Therefore, even if a portion of the insurance proceeds had been for loss of this property, Mrs. Peek would be no better off. As owner, if she wanted it insured she also had an insurable interest, and could insure it. She did not insure it with the lessees by any terms of the lease.

No attempt is made here to strike a balance between lessor and lessees, or to state either's rights against the other in a common law suit (in a forum having jurisdiction). I deal only with what is before me, the right to the funds in this Court's registry. Mrs. Peek will be denied recovery in the judgment herein.

[Judgment Creditor Has Priority]

2. The Jacksonville Gas Corporation holds a valid judgment for the unpaid balance on a chattel to which it held title, destroyed in this fire. The judgment was recorded, execution thereon placed in the hands of the Sheriff of Duval County, and writ of garnishment served on Old Colony prior to the institution of the interpleader suit. This judgment claim, with interest to date, totalling $236.46, will be directed to be paid by the accompanying judgment.

[Taxes]

3. Deducting this figure, $236.46, from the registry fund, $2066.79, leaves $1830.33. On oral argument, Government counsel urged that the Government levies and assessments against Samuel Blumberg and Edward Blumberg. d/b/a the Flamingo Show Club, as well as those against Alfred Goldberg and Samuel Blumberg, d/b/a The Tropic Bar and Patio, are a lien on these insurance proceeds.

The assessment lists reached the Collector's (now the Director's) office in February, March and April, prior to the fire loss in May. The Government's tax lien became fixed on those dates, or at the latest, when they were recorded in Duval and Orange Counties in March, April, and May.

Government counsel now concedes that the assessments against the two Blumbergs, d/b/a the Flamingo Show Club, may not be collected from the Tropic Bar partnership, but only against Samuel Blumberg's share as a partner in the proceeds. (See B. A. Lott, Inc. v. Padgett, 153 Fla. 308, 14 So. 2d 669, 670). Stated another way, the Flamingo assessments are an individual debt of Samuel Blumberg.

The unpaid assessments of the Tropic Bar partnership is $10.00, and the judgment herein will order this secured claim paid. Deducting this from the last figure, $1830.79 (supra) leaves $1820.79. But for the Government assessments, this would be ordered paid to Alfred Goldberg and Samuel Blumberg, d/b/a The Tropic Bar and Patio, the named insureds in the insurance policy No. 555272. But the Government assessment lien against the Flamingo partnership, stipulated now to be $1382.42, attached to Samuel Blumberg's share of these proceeds, one-half thereof, or $910.17. The judgment herein will direct payment to Alfred Goldberg, individually, of $910.16, and payment to the United States of America of $910.17, to apply against the assessment liability of Samuel Blumberg, as a partner in Samuel Blumberg and Edward Blumberg, d/b/a the Flamingo Show Club (see B. A. Lott, Inc., v. Padgett, supra).

Final Judgment

Following full trial and the submission of all issues of law and fact to the Court, and in accordance with Findings of Fact and Conclusions of Law filed herein, it is

CONSIDERED, ORDERED and ADJUDGED that the Clerk of this Court is hereby directed to dispose of the remaining funds deposited in the Registry of the Court by the original plaintiff herein, Old Colony Insurance Company of Boston, Massachusetts, being the proceeds of fire insurance policy No. 555272 issued by said original plaintiff to Alfred Goldberg and Samuel Blumberg, d/b/a The Tropic Bar and Patio, as the named insureds in said policy, now consisting of $2,066.79, as follows:

1. The defendants Annie Altieri Peek and Joseph P. Peek, her husband, are denied recovery of any portion of said funds, and shall take nothing under the claim asserted by their answer herein.

2. Jacksonville Gas Corporation, a corporation, has a valid lien against said insurance proceeds arising from its Civil Court of Record judgment, execution and writ of garnishment against the original plaintiff, issued and served October 2, 1953, said judgment being of record in Judgment Lien Record Book 51, Page 72 of the public records of Duval County, Florida, in the amount of $176.76. Interest thereon to date is $59.70, making a total due of $236.46. The Clerk of this Court is directed to disburse to Jacksonville Gas Corporation, and its counsel of record, Messrs. McCarthy, Lane and Adams, from the said Registry funds, the sum of $236.46.

3. The Clerk of this Court is directed to disburse from said Registry funds to the United States of America, the sum of $10.00 representing the unpaid amount of the Government's valid assessment lien against Alfred Goldberg and Samuel Blumberg, d/b/a The Tropic Bar and Patio, and further to pay to the United States of America from said Registry funds the additional sum of $910.17, said payment to apply against the Government's assessment lien of $1382.42 against Samuel Blumberg and Edward Blumberg, d/b/a The Flamingo Show Club.

4. The Clerk of this Court is directed to pay the remainder of said funds in the Registry of this Court, $910.16, to Alfred Goldberg, individually, and his counsel of record, J. L. Lee, Esquire.

 

 

[57-2 USTC ¶10,044]Edwin Leipert et al., Plaintiffs v. R. C. Williams & Company, Inc. et al., Defendants

U. S. District Court, So. Dist. N. Y., Civ. No. 96-92, 161 FSupp 355, 11/15/57

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

Lien for unpaid taxes: Validity against third parties: Purchasers under contract.--Plaintiffs, purchasers of separate lots and bungalows in a real estate development, brought this proceeding to quiet title to their real estate holdings, alleging that, among other things, the United States claimed a tax lien upon their respective properties. By its answer and cross-claim the government claimed a lien as to only those properties to which the owners thereof had not recorded their deeds prior to November 28, 1949, the date of the docketing of the government's lien in the county clerk's office, and the question presented is whether the plaintiffs were "purchasers" within the meaning of 1939 Code Sec. 3672(a). The Court held that the government's lien was invalid as to those contract purchasers who acquired deeds prior to November 28, 1949 (whether recorded or not prior to that date), since New York state law provided that only subsequent bona fide purchasers for value were protected against unrecorded deeds. The government's lien was valid, however, as to all contract purchasers who did not acquire a deed to their properties prior to November 28, 1949 .

Angelo M. Torrisi, for plaintiffs. Goldstein & Goldstein, for defendant Sharpe (Monticello, N. Y.), Constantine Regusis, for defendant Phoenix Assurance Co., Ltd., and Paul W. Williams, United States Attorney, Nicholas Tsoucalas, Assistant United States Attorney, New York City, N. Y., for defendant United States.

Memorandum

RYAN, District Judge:

Each of the plaintiffs on different dates from 1938 through 1948 purchased separate lots and bungalows at Smallwood, Sullivan County, New York, in a real estate development owned by A. N. Smallwood and Ruth Smallwood, and A. N. Smallwood Company and Smallwood, Inc., their successors in interest. Annexed hereto as Exhibit A is a statement conceded to be correct giving the dates on which each of the plaintiffs executed a contract of purchase, the name of the vendor, the price, the date of the delivery of the deed and that of the recording of it.

Plaintiffs filed this suit in the Supreme Court of the State of New York , Sullivan County , under Section 2401(a), 28 USCA and Sec. 500, Art. 15, N. Y. Real Property Law, to quiet title to the realty they had purchased alleging that the United States claimed a tax lien upon the properties, that the People of the State of New York might have a claim or possible lien for unpaid taxes due from Smallwood Inc. and that the other defendants claimed an interest in or lien upon the properties as judgment creditors of the vendors. The suit was removed to this Court upon petition filed by the United States under Secs. 1444 and 1446, 28 USCA. Annexed hereto as Exhibit B is a statement, conceded to be correct, giving the names of the judgment creditors and debtor, the amounts of their respective judgments and the date of the recording or docketing of the judgments. Annexed hereto is Exhibit C--a statement of assessed and unpaid taxes due the United States , the amount of assessment, including interest and penalty, the date of notice and demand for payment and the date of the receipt by the Collector of the assessment list.

We are asked to determine the rights of the defendants United States, Gertrude Sharpe, Phoenix Assurance Co., Ltd. and Sun Oil Company (all of whom appeared and answered) vis â vis the plaintiffs and of each of them as to the others. Defendants R. C. Williams & Company, Inc. and Spaulding Bakeries, Inc. have not appeared; The State of New York has but has asserted no claim.

Plaintiffs are admitted to be purchasers for value and to have been in actual possession of the respective parcels they had separately contracted to purchase from the date of the contract. No factual issue is presented on the motions now made under Rule 56 for summary judgment by plaintiffs and defendant United States and defendant judgment creditors.

Let us first consider the claim of the United States .

The tax lien attached to all real property of the taxpayer including after acquired property. Section 3670, 26 USCA; Glass City Bank v. United States, 326 U. S. 265 [45-2 USTC ¶9449]. This lien attached on the dates the assessment lists were received by the Collector (Sec. 3671; Citizens State Bank v. Vidal, 114 Fed. (2d) 380 (C. A. 10, 1940) [40-2 USTC ¶9603]; [for these dates see Ex. C] This lien had priority over all except mortgagees, pledgees, purchasers and judgment creditors, as to whom it was not valid until filing in the office of the Clerk of Sullivan County, New York, (Sec. 3672). This filing was not done until November 28, 1949 . The contracts of purchase of the various plaintiffs were executed at various dates from July 30, 1938 (Veser and another, Claim No. III comp.) to September 25, 1948 (Blessing, claim No. XVII comp.) The assessment lists were received by the Collector from December 30, 1946 to December 27, 1948 .

The United States by its answer and cross-claim asserts a valid and subsisting lien on only ten of the parcels in suit, those in Counts I through IX, and Count XIV of the complaint. It is to be noted that plaintiff owners of parcels in Counts X, XI, XII, XIII, XV, XVI, XVII & XVIII, as to which the Government does not now assert any lien, had recorded their deeds prior to November 28, 1949, the date of the docketing of its lien in the County Clerk's Office of Sullivan County.

The question is whether the plaintiffs (I-IX & XIV) were purchasers within the meaning of Sec. 3672 prior to the filing of the tax lien on November 28, 1949 .

All the plaintiffs had signed contracts to purchase prior to that date; all had entered into possession and all had made installment payments on account of the price. Deeds had been delivered prior to November 28, 1949 to four of these--Nos. 3, 5, 6 and 9--and to the others after that date. For purposes of determining the validity of the Government's lien under Sec. 3672 the plaintiffs must be placed in two groups--those to whom deeds were not delivered until after the filing of the lien on November 28--(which includes plaintiffs in counts 1, 2, 4, 7, 8 and 14);--and those to whom deeds had been delivered prior to that date--that is plaintiffs in counts 3, 5, 6 and 9. The first group were not purchasers within Section 3672, for they had not acquired title prior to the filing. United States v. Scovil, 348 U. S. 218, 221 [55-1 USTC ¶9137]. Their contracts of purchase (one of which is annexed to the complaint) did not operate to convey title. This was an agreement by which the plaintiffs separately and individually agreed to purchase and the Smallwood as owner agreed to sell. It provided that "the relation between the parties shall be that of landlord and tenant," that in default of payments provided to be made the seller might, "enter upon the premises, take possession and remove property from said bungalow as for non-payment of rent," and "retain all instalments previously paid as and for compensation for the use of said property." It was also specifically provided that "this contract shall not be recorded and if recorded shall become ipso facto null and void," and that the plaintiff (buyer) would not "sell, transfer or dispose of said premises or incumber the same in any manner during the life of this contract and until the full price is paid hereunder."

The legal effect of the contracts, insofar as that bears upon the "relative priority of the lien of the United States for unpaid taxes is . . . always a federal question." United States v. Acri, 348 U. S. 211 (1955) [55-1 USTC ¶9138]. Absent delivery of deed the plaintiffs did not become purchasers within Section 3672. All the plaintiffs acquired a vendee's lien as of the time the contracts were executed, but that lien was not prior to that of the Government when filed.

The plaintiffs to whom a deed had been delivered prior to November 28, 1949 stand, however, in a different position. It is the Government's contention that as to these plaintiffs its tax lien is a valid and subsisting lien because the deeds were not recorded until after the filing of the Government's, and that in order for these plaintiffs to be afforded the protection of Sec. 3672 they must also be the grantees of recorded deeds. The short answer to this contention is that Section 3672 contains no such provision, (Cf., R. F. Ball Construction Co. v. Jacobs, 140 Fed. Supp. 60, 65 [56-1 USTC ¶9514] (affd. C. A. 5, 1956), 239 Fed. (2d) 384 [57-1 USTC ¶9269]), and there is no need for any attempt at "judicial law-making" (New England Coal & Coke Co. v. Rutland R. Co., 143 Fed. (2d) 179, 189 (C. A. 2); see also dissenting opinion of Clark, C. J., in Hollander v. United States, C. A. 2, No. 246, Oct. Term 1956, dec. Oct. 1, 1957. Underwood v. United States , 37 Fed. Supp. 824, cited by the Government is inapposite; there the decision was reached by application of local statute (Art. 6627 of the Revised Civil Statutes of Texas) which provided that the deed of trust in suit was void as to all creditors because it was not recorded. New York has no similar statute; under Sec. 291 of the Real Property Law only subsequent bona fide purchasers for value are protected against unrecorded deeds.

I conclude that the Government's tax lien has priority over the deeds of plaintiffs in Counts 1, 2, 4, 7, 8 and 14 and has not priority over those of plaintiffs in Counts 3, 5, 6 and 9.

With respect to the defendant judgment creditors, the United States lien has priority only over the judgment of the defendant Sun Oil Company. However, since we shall hold that the plaintiffs' titles have priority over the judgment creditors' liens, this holding creates a situation which is of no comfort to plaintiffs. It is a strange and anomalous result arising from the difference in the applicable laws to the rights of the parties in this suit.

This brings me to a consideration of the relative priority of the liens of the judgment creditors among themselves and as between the various plaintiffs. Here, we are to be guided solely by local law and even in the absence of diversity we have jurisdiction because of the necessity of adjudging these claims as incidental to a determination of the rights of the Government under its lien.

Section 510(1), N. Y. C. P. A., provides that a judgment is a charge upon, for ten years after filing the judgment roll, the real property and chattels real of the judgment debtor.

The judgment of the defendant Gertrude Sharpe was docketed on September 30, 1949 ; that of Phoenix Assurance Co. Ltd. on August 18, 1949 and that of Sun Oil on January 3, 1951 . Prior to the entry of any of these judgments the plaintiffs had signed their respective contracts to purchase and had entered into possession of the premises. Under the terms of the contracts they could not file or record them as provided for by New York law--Section 294 NYCPA, but their possession was constructive notice to all of their rights in the realty they occupied. Moyer v. Hinman, 13 N. Y. 180; Phelan v. Brady, 119 N. Y. 587.

The plaintiffs upon execution of the contracts and installment payments thereunder became vested with an equitable interest in the realty (Elterman v. Hyman, 192 N. Y. 113) and the vendor's title was burdened with that interest which attached to the realty as a lien. The judgment creditors were not possessed of the rights of "purchasers in good faith" within Section 291 of the Real Property Law and the failure of plaintiffs to file or record their contracts would not, even absent possession, operate to affect their liens so as to render them subordinate to judgments subsequently docketed.

But the judgment creditors urge that in any event the liens of the plaintiffs should be held prior only to the extent of payments actually made under their contracts before the docketing of the judgments. They maintain that with the docketing of the judgments the plaintiffs were on constructive notice of the claims of the creditors and further payments made did not enjoy the protection given to those payments made prior to such notice. New York law is to the contrary, for

"Payments by the vendee, pursuant to an executory contract, are not to be considered as a fresh dealing with the vendor respecting the land, but are to be referred to the original contract." Trustees of Union College v. Wheeler, 61 N. Y. 88, 108-9.

In that case it was held that a ruling that would make it necessary on each payment made by a person holding under a contract to examine the record to see whether any transfers had in the meantime taken place would be "to the last degree inconvenient" and "unsound in principle."

I conclude that under New York law the judgments are not liens on the realty in suit and should be so declared.

Motions are disposed of as indicated herein; let appropriate judgment be settled on notice providing no costs to any of the parties.

[57-1 USTC ¶9493] United States of America , Plaintiff v. Floyd A. Reitter, DeEtte Reitter, Klaas Mulder, and Tillie Mulder, Defendants

U. S. District Court, Dist. Minn. , Fourth Div., Civil, No. 5508, 1/21/57

[1939 Code Secs. 3672 and 3678--similar to 1954 Code Secs. 6323 and 7403]

Enforcement of lien for taxes: Priority over claims of transferee.--Deficiencies, penalties and interest were assessed against the taxpayers. On May 10, 1952 , the Collector filed notice of the tax assessment and lien with the register of deeds of the county in which real estate owned by the taxpayers was located. In December, 1952, the taxpayers transferred their title to the property. The court held that the tax lien was superior to any rights of the transferees, and that the United States was entitled to enforce the lien against the property to satisfy the balance due.

George E. MacKinnon, United States Attorney, and Kenneth G. Owens, Assistant United States Attorney, St. Paul, Minn., for plaintiff. No appearance for defendants.

Findings of Fact, Conclusions of Law and Order for Judgment

NORDBYE, District Judge:

The above entitled matter came duly on for trial before the Honorable Gunnar H. Nordbye, Chief Judge of the United States District Court for the District of Minnesota, in the Federal Courts Building , Minneapolis , Minnesota , on Monday, January 14, 1957 . George E. MacKinnon, United States Attorney, and Kenneth G. Owens, Assistant United States Attorney, appeared for and on behalf of the plaintiff and there were no appearances by or on behalf of the defendants or any of them.

The Court having heard the testimony of the witness produced by plaintiff and upon all the files, records, proceedings and evidence herein, and being duly advised in the premises, hereby makes Findings of Fact, Conclusions of Law and Order for Judgment.

Findings of Fact

I. The plaintiff is a corporation sovereign and a body politic.

II. This action arises under the Internal Revenue Laws of the United States , is authorized by the Commissioner of Internal Revenue and is brought under the direction of the Attorney General of the United States .

III. An income tax assessment was made by the Commissioner of Internal Revenue, assessing deficiencies in income tax for the year 1949 against Floyd A. Reitter and DeEtte Reitter in the sum of $2,864.76 tax, $716.19 penalty and $257.83 interest. The assessment list containing the assessment was signed by the Commissioner on September 20, 1951 , and received by the Collector of Internal Revenue on September 24, 1951 . Notice and Demand were made on September 14, 1951 , giving notice to said taxpayers that the tax was owing and demanding that they pay said tax in full.

IV. Of said assessment there remains unpaid the sum of $3,112.88 and defendants Floyd A. Reitter and DeEtte Reitter and each of them owe to plaintiff the said sum together with interest to January 14, 1957, of $996.12 and interest from January 14, 1957, to the date of entry of judgment herein and thereafter until paid at the rate of 51 cents per day.

V. On May 10, 1952 , the Collector of Internal Revenue caused notice of the said tax assessment and lien to be filed with the Register of Deeds, Renville County , Olivia , Minnesota , which notice recited the assessment and stated the United States had a tax lien on all of the property of the defendants Floyd A. and DeEtte Reitter.

VI. Prior to September 27, 1947 , and continuously on and thereafter until about December 31, 1952 , Floyd A. Reitter and DeEtte Reitter were the owners of record of that real property described as follows:

Lots Five (5) and Six (6) in Block C in Kirwan's Addition to the Village, now City of Renville, according to the plat thereof on file and of record in the office of the Register of Deeds in and for the County of Renville and State of Minnesota.

VII. On September 24, 1952 [1951], a lien of the United States for taxes attached to the above described property by reason of the facts previously set out in paragraph 3 hereof.

VIII. On or about December 31, 1952 , Floyd A. Reitter and DeEtte Reitter being husband and wife transferred their title to the said real property to defendants Klaas Mulder and Tillie Mulder who now hold record title thereto.

IX. The title to the said real property now held by Klaas Mulder and Tillie Mulder who are husband and wife is subject and subordinate to the lien of the United States .

X. That pursuant to Title 28 U. S. C. Section 1655 service was duly made on defendants Floyd A. Reitter and DeEtte Reitter of and pursuant to the Order of the Court dated July 9, 1956, said defendants being duly and personally served as were the defendants Klaas Mulder and Tillie Mulder then and still the persons in possession of the said real property.

XI. None of the defendants named in the caption hereof have answered or otherwise appeared herein and are in default in the premises.

Conclusions of Law

1. This court has jurisdiction herein under and by reason of Section 7403, Internal Revenue Code of 1954, and 28 U. S. C. Section 1655.

2. Plaintiff , United States of America , is entitled to judgment adjudging it to have a tax lien upon the following described real estate, to wit:

Lots Five (5) and Six (6) in Block C in Kirwan's Addition to the Village, now City of Renville, according to the plat thereof on file and of record in the office of the Register of Deeds in and for the County of Renville and State of Minnesota.

superior to any right, title or interest held or claimed by Floyd A. Reitter, DeEtte Reitter, Klaas Mulder and Tillie Mulder.

3. That the plaintiff, United States of America, is entitled to enforce the said tax lien against the above described real estate in accordance with law and the provisions of Section 7403, Internal Revenue Code of 1954, to satisfy the balance due on the said tax lien in the amount of $3,112.88 plus interest to January 14, 1957, in the sum of $996.12 and interest thereafter and until sale hereunder at the rate of 51 cents per day, together with costs herein in the amount of $66.00. If the above described real estate is sold for the purpose of enforcing the said tax lien, the proceeds of the sale shall be distributed according to the respective interests of all parties herein.

4. The Court herein retains jurisdiction upon the application of the United States to make such further orders, judgments and decrees respecting the enforcement of the said tax lien by sale and otherwise as may be needful in the premises.

Let Judgment Be Entered Accordingly.

 

 

[56-2 USTC ¶9731] United States of America v. Junius Turner Anthony, et al.

U. S. District Court, Mid. Dist., N. C., Winston-Salem Div., May Term 1956, Civ. No. 570, 5/10/56

[1939 Code Sec. 3672(a)--substantially unchanged in 1954 Code Sec. 6323]

Lien for taxes: Validity against mortgagees, etc.: Notice of tax lien filed after Deed of Trust.--On December 6, 1948, taxpayer executed and delivered to a lumber company a Deed of Trust against certain tracts of land as security for notes, which Deed of Trust was recorded on December 13, 1948. On December 6, 1948 , taxpayer executed a Deed of Trust to another creditor and the Deed of Trust was also recorded. The assessment list for the taxes assessed against taxpayer was received by the Collector on November 20, 1949 , and the notice of the tax lien filed on November 26, 1949 . Held, the tax lien is subordinate to the liens of the creditors.

Edwin M. Stanley, Greensboro , N. C., for United States . Brock & Brock and Hall & Zachery, Mocksville, N. C., for Junius T. Anthony.

Findings of Fact

HAYES, District Judge:

The Court after hearing the evidence and argument of counsel finds the following facts:

The Court finds all facts alleged and admitted in the pleadings and then makes the further specific findings:

1. The Commissioner of Revenue duly assessed against the defendant, Junius Turner Anthony, on or about October 11, 1949 taxed for the violation of the Internal Revenue Laws with respect to distilled spirits in the amount of $2,055.33, no part of which has been paid by the taxpayer and that the entire amount thereof is due and owing to the plaintiff; that the assessment list was received by the Collector of Internal Revenue for the Greensboro, North Carolina District on November 17, 1949; that notice of said assessment and demand for payment was made on the defendant, Junius Turner Anthony, on November 20, 1949 and that notice of the tax lien was filed with the Register of Deeds of Forsyth County, where the defendant resides, on November 26, 1949.

2. That the defendant, Junius Turner Anthony, is the owner of the five tracts of land in Forsyth County , North Carolina described in paragraph nine of the Complaint.

3. That on December 6, 1948 Junius Turner Anthony executed and delivered to E. R. Snyder, Trustee for Snyder Lumber Company, a Deed of Trust against the tracts of land above described for the purpose of securing payment of an indebtedness thereon in the sum of $2,000.00 with interest from December 6, 1948 which Deed of Trust was duly recorded in the office of the Register of Deeds of Forsyth County in December 13, 1948; that there has been no payment made on said indebtedness by Junius Turner Anthony except $63.91 which was paid November 19, 1954.

[Payments by Daughter]

4. That Ida Anthony Glenn made the following payments to Snyder Lumber Company, to-wit: September 29, 1951, $60.00; Oct. 29, 1951, $50.00; Dec. 4, 1951, $50.00; Jan. 9, 1952, $20.00; Mar. 20, 1952, $20.00; May 31, 1952, $20.00; Aug. 23, 1952, $20.00; Sept. 30, 1952, $20.00; Oct. 4, 1952, $20.00; Dec. 30, 1952, $20.00; Feb. 28, 1953, $20.00; May 2, 1953, $20.00; Aug. 5, 1953, $15.00; Oct. 31, 1953, $15.00; Feb. 3, 1954, $15.00; that these payments were made by Ida Anthony Glenn from money which she worked out and with the expectation and understanding that as soon as arrangement could be worked out a loan would be obtained on the property through a lending company at which time the papers for the property would make it her property and that the payments were not made on her part with the intention of being a gift to her father but in an effort to save the home as a place for her father but with her being the owner of the property; the payments made by her were not actually credited on the notes but were entered on the ledger sheet of the Snyder Lumber Company's account with J. T. Anthony; that Ida Anthony Glenn tried to get a loan through a lending agency so as to pay off all indebtedness to the Snyder Lumber Company but that no lending agency would agree to handle it on account of the lien which the Government had filed against Junius Turner Anthony. The total of these payments made by Ida Anthony Glenn is $385.00.

5. The Court finds that the line to the Snyder Lumber Company is for the full sum of $2,000.00 with interest thereon at 6% from December 6, 1948 less $63.91 paid on Nov. 19, 1954 and that this lien is a prior lien against the real estate described in the pleadings to that of the United States of America and it further finds that since Ida Anthony Glenn was unable to complete the transaction by negotiating a loan on the property that she is entitled to be reimbursed by the Snyder Lumber Company for the installments that she has theretofore paid to it and that upon satisfaction of the debt in full from the sale of the land to the Snyder Lumber Company that it be required to reimburse her to the extent of $385.00.

6. The Court finds that on the 6th day of December 1948 Junius Turner Anthony executed a Deed of Trust as set forth in the pleadings to secure Mrs. Nellie D. Hall in the sum of $436.00 with interest thereon at 6% which Deed of Trust was duly recorded in the office of the Register of Deeds in Book 529 at page 204 in Forsyth County and on which there have been no payments made and that the total amount due on the Deed of Trust is $436.00 at 6% interest from December 6, 1948 and this lien is a lien prior to that of the United States.

Conclusions of Law

Now upon these Findings of Fact the Court concludes that the tax assessed against the defendant, Junius Turner Anthony, is a valid tax and constitutes a lien against the real estate described in the pleadings.

That it is subordinate to the lien of Snyder Lumber Company and the lien of Mrs. Nellie D. Hall and that the property should be sold to satisfy the liens and from the proceeds pay in full the cost of this action including the expenses of sale and apply the proceeds according to the liens and priorities above set forth and the surplus, if any, to Junius Turner Anthony.

 

 

[55-2 USTC ¶9731]Joseph Starr, Petitioner v. Commissioner of Internal Revenue, Respondent

(CA-7), In the United States Court of Appeals for the Seventh Circuit, No. 11299. October Term and Session, 1955, 226 F2d 721, November 2, 1955

Petition for review of decision of the Tax Court of the United States .

[1939 Code Sec. 293(b)--substantially unchanged in 1954 Code Sec. 6653(b)]

Failure to report income: Side payments or royalties: Fraud.--In a trial of taxpayer for income tax evasion, the Tax Court found that certain side-payments were made to taxpayer and not reflected in his returns for 1943 and 1944, and that such deficiencies were due to fraud and an intent to evade tax. On review, the Court of Appeals made the following findings: (1) A three year delay by the Tax Court in rendering its decision, after conclusion of all the testimony, did not constitute reversible error; (2) there is no constitutional requirement that discovery procedures be made available to litigants; (3) exclusion of the testimony of two Government agents did not amount to a denial of due process. In affirming the decision of the Tax Court, the Court of Appeals holds that such decision is amply supported by the evidence.

Jack H. Oppenheim, 208 South La Salle Street , Chicago , Ill. , for petitioner. H. Brian Holland, Ellis N. Slack, John Potts Barnes, Rob ert N. Anderson, David O. Walter, Washington, D. C., for respondent.

Before DUFFY, Chief Judge, and MAJOR and LINDLEY, Circuit Judges.

DUFFY, Chief Judge:

The Starr Pen Company was a partnership organized in 1935 by members of the Starr family. During 1943 and 1944 Joseph Starr, hereinafter called taxpayer, had a 70 per cent interest in the partnership, and Samuel Starr and Jack Starr each had a 15 per cent interest therein. The distributive income of the partnership was its net income after allowances for the salaries of the partnership. The business of the partnership was the sale at wholesale of fountain pens and sets of fountain pens and mechanical pencils. The partnership did not manufacture any of the merchandise which it sold.

The Commissioner determined deficiencies for the years 1943 and 1944 claiming that the partnership received "black market" payments from one of its customers, and that the taxpayer failed to report any part thereof in his individual tax returns for those years. After an extended trial the Tax Court [13 TCM 277, CCH Dec. 20,236(M)] found the customer King, Larson and McMahon did make "side-payments" in cash to Starr Pen Company by paying to taxpayer the sum of $223,198.80 and to his partner, Samuel Starr, the sum of $12,000.00; that such payments were not reflected in taxpayer's returns for 1943 and 1944, and that such deficiency was due to fraud and an intent to evade tax.

The Tax Court found that Martin King, upon behalf of King, Larson and McMahon (hereinafter called K L & M) and taxpayer upon behalf of Starr Pen Company, entered into an oral agreement about April 15, 1943 whereby Starr Pen Company would sell large quantities of fountain pens and pen and pencil sets to K L & M. That in addition to regular invoice prices which would be paid by check, K L & M would make specified side-payments also referred to as royalties. The Tax Court found that the procedure used in making such payments was that checks of K L & M would be prepared at King's direction, payable to cash. King would cash the checks at a bank and receive currency in large denominations such as bills for $500 and $1000. King would then place the currency for each payment in an envelope and turn same over to taxpayer. In a few instances the currency was paid to taxpayer's brother, Samuel Starr.

[3-Year Delay]

It is the claim of taxpayer that he did not have a fair trial before the Tax Court. He first complains that after the conclusion of the testimony the Tax Court delayed three years before making its decision. As we understand taxpayer's argument on this point, the decision in this case depended in large part upon the credibility of witnesses, and taxpayer claims the long delay worked to his disadvantage.

Certainly a delay of three years in making a decision in the case at bar is deplorable. However, we do not think it follows that we should hold this unfortunate delay was some kind of reversible error with the result that we would send the case back to the Tax Court which would involve a still further period of delay.

[Discovery Denied]

Taxpayer claims he was denied due process because of two rulings of the Tax Court. Prior to trial he filed a motion that he "be permitted to obtain discovery, by depositions and otherwise, of all matters not privileged, which would aid petitioner in the preparation for trial." In this connection taxpayer requested, in the alternative, (1) the Tax Court revise its rules of practice by permitting discovery procedures, or (2) that the Court enter an order permitting discovery in the instant case. Taxpayer's motion for discovery was denied.

Taxpayer concedes the Federal Rules of Civil Procedure are not applicable in the Tax Court. It is also without dispute that there is no statute or court rule authorizing discovery procedure in that Court.

Discovery procedure has improved the admin istration of justice and speeded the disposition of civil cases in both state and federal courts. However, it has never been held that the Constitution of the United States requires that discovery procedure be adopted by any court. We are unwilling to make any such decision. In our view, no constitutional question is involved. Furthermore, we think the request that the Tax Court modify its rules was addressed to a matter that was purely discretionary with that court. Board of Tax Appeals v. United States , D. C. Cir., 37 Fed. (2d) 442. We hold that taxpayer was not denied due process because the Tax Court refused to grant his motion for discovery.

[Witnesses]

Taxpayer subpoenaed as witnesses upon the trial two special agents of the Intelligence Unit of the Bureau of Internal Revenue. One of them, Edmund, had spent several months investigating the operations of taxpayer's business. The second agent, Worchester, had started his investigation of K L & M about a week prior to trial. The Court ruled that neither agent would be required to testify.

After taxpayer had subpoenaed the special agents he stated to the Court the subjects upon which he desired to question them. As to agent Edmund he stated he wanted "First, to ask what procedures he followed, what he did as to bank deposits, bank statements, and whether he required the petitioner to account for every bank deposit that he had made * * *. And whether he took a list of all the customers of the petitioner during the year 1943, that is before the period of sales by Conklin and Starr, to King, Larson & McMahon, during that period and after that period. Whether or not he didn't make an extensive investigation for the purpose of determining whether there was any evidence whatsoever that petitioner had asked any person or any customer, any single one of them, for any such thing known as a side payment or royalty or overage, anything of that sort. * * * I also intended to ask him whether he didn't make a complete, thorough and exhaustive search and audit of the petitioner's net worth, and as to any property, both real property and personal property, tangible and intangible, petitioner may have had an interest in."

Taxpayer's counsel also stated he wanted to ask Edmund whether he had gone to other cities in following leads, and he then stated "In other words, in summary, I intended to ask him just exactly what he did in the course of his work as an agent of the Intelligence Unit to investigate the petitioner in relation to the charges that have been made by respondent's witnesses in this case." The information which taxpayer desired to obtain from Worchester was stated in very general terms, and pertained to the recently commenced investigation of K L & M.

Government's counsel objected to the witnesses testifying and cited Treasury Regulation 12, ¹ reading as follows:

"Whenever a subpoena shall be served upon them" (meaning employees of the Internal Revenue) "they will, unless otherwise expressly directed appear in court in answer thereto and respectfully decline to produce the records or give the testimony called for on the ground of being prohibited therefrom by the regulations of the Treasury Department. Officials disobeying these instructions will be dismissed from the service and may incur criminal liability."

The inherent conflict between the necessity of keeping some official governmental records confidential and the intense desire that justice be done between litigants has given rise to many perplexing questions which the courts have found difficult to solve. ² Considerations of national security or other public interest are often of controlling importance. Governmental privilege against disclosure of official information often has been asserted.

We do not reach the question whether under any circumstances a special agent of the Intelligence Unit of the Treasury Department can be compelled to disclose the manner in which he conducted an investigation and to produce papers and documents that he may have obtained. It is apparent from the statement of taxpayer's counsel to the Court indicating the testimony which he sought to elicit from the agents, that such evidence was neither relevant nor material to the issues in this case. Of what moment was it that the agent may have made an investigation as to taxpayer's net worth? True it is that in many cases where direct testimony is unavailable, the Commissioner may be required to rely upon the net worth theory to show the existence of income. However, in the case at bar, the Commissioner was relying upon direct testimony as to the assets, source and amount of unreported income.

It also was immaterial as to the procedure which the agent followed in checking the records of the taxpayer. If there was anything in those records that was material to the issues of this case, the records themselves were the best evidence. Here, no demand was made for the production of any specific documents or records. It was apparent taxpayer's counsel was attempting to indulge in a "blind fishing expedition." Gordon et al. v. United States , 341 U. S. 414, 419. We hold, under the circumstances of this case, the exclusion of the testimony of the two governmental agents did not amount to such unfairness as to result in a denial of due process to taxpayer.

On the merits we think the Tax Court's findings that cash side payments above invoice prices made to taxpayer, or to his brother for the Starr Pen Company are supported by substantial evidence. King positively testified that he made such payments. Although taxpayer denied receiving same there was much additional corroborating evidence that such payments were, in fact, made. The trial court was entitled to disbelieve the testimony of the taxpayer that he, at no time during the period in question, received side payments or royalties. Far from being erroneous we think the findings are amply supported by the record.

The judgment of the Tax Court is Affirmed.

¹ The validity of regulations forbidding disclosure promulgated by the Secretary of the Treasury, was established in Boske v. Comingore, 177 U. S. 459 which holding was followed in United States ex rel. Touhy v. Ragen, 340 U. S. 462, 469, 471.

² See Bowman Dairy Co. et al. v. United States, et al., 341 U. S. 214; United States ex rel. Touhy v. Ragen, 340 U. S. 462; Rosen et al. v. United States, 245 U. S. 467; Ex parte Sackett, 9 Cir., 74 Fed. (2d) 922; In re Valecia Condensed Milk Co., 7 Cir., 240 Fed. 310.

 

 

[39-2 USTC ¶9595]E. A. Bannister, Plaintiff, v. Yakima-Shoshone Mining Company, a corporation, and United States of America, Defendants

District Court of the United States in and for the District of Idaho, Northern Division, No. 1397, Decided June 15, 1939

Mortgaged property: Lien of U. S.--Where a note and mortgage as to real property were executed on October 6, 1930 (the mortgage being recorded on October 17, 1930), a lien for stamp tax, the assessment list as to which was received by the Collector on July 2, 1931, notice of the lien of the United States being recorded thereafter, is not valid against the mortgagee seeking to foreclose the mortgage. The mortgage is held to have been valid as given for ample consideration, and action to foreclose is held timely.

Sydney Livesey, and Nat U. Brown, Yakima , Washington , attorneys for the plaintiff. John A. Carver, United States District Attorney, and E. H. Casterlin and Paul H. Boyd, Assistants to United States District Attorney, all of Boise, Idaho, for the defendant, United States of America. Charles E. Horning, Wallace , Idaho , attorney for Bertha Palmer.

Opinion

CAVANAH, District Judge:

The plaintiff brings this action to foreclose a real estate mortgage which he asserts was given by the defendant Company on October 6, 1930, to secure the payment of a promissory note in the sum of $25,000.00 of the Company's, given for moneys advanced by the plaintiff to it.

The plaintiff and G. A. Mosebar were the payees and mortgagees, and on December 31, 1935 Mosebar assigned and transferred all of his interest in the note and mortgage to the plaintiff as the plaintiff and advanced to the defendant Company all of the moneys due and covered by the note.

At the time of the execution of the note and mortgage the plaintiff was the President and Director and Mosebar was a Director and Treasurer of the defendant Company. On October 6, 1930 , the Board of Directors of the defendant Company held a meeting and authorized the execution of the note and mortgage and a chattel mortgage also securing the note, on which value of the chattels was $2,500.00. On July 2, 1931, and after the recording of the mortgage on October 17, 1930, the Commissioner of Internal Revenue in the District of Washington issued an assessment certificate against the defendant Company in the the sum of $5,046.37 on account of documentary stamp tax due the United States, and on the same day had recorded its notice of tax lien, under the revenue laws, in the office of the County Recorder of Shoshone County, Idaho.

Thereafter, on September 7, 1934 , and February 19, 1936 , offers in compromise of the assessment were made by the defendant, which were rejected.

The defendants urge that (a) Plaintiff's alleged cause of action is barred by Section 5-216 I C A; the 5-year limitation statute of the State; (b) Lack of consideration for the note; (c) A fiduciary relationship existing between plaintiff and the Company and that plaintiff violated the trust which makes the transaction void, and (d) the United States urges further that its lien for the tax assessment is superior to the claim of the plaintiff.

The note and mortgage were executed on October 6, 1930 , and became due two years after date. Thereafter on January 6, 1934, the defendant Company entered into an agreement in writing with George Harding as Trustee, whereby it granted to him as Trustee, an option to purchase certain shares of its capital stock upon the performance of certain conditions by the parties, and that a percentage of the amount to be paid to the Company derived from ores extracted from the mines should be first paid on the mortgage and open account indebtedness of the Company, and the Company further agreed to procure the consent of the mortgagee to extend the payment of the mortgage as to enable the contract to be carried out by the parties. The defendant Company, after being authorized by its Board of Directors, acknowledged the agreement before a Notary Public, and the plaintiff, mortgagee, signed the same by; "approved, Edward A. Bannister, mortgagee, principal $25,000.00 plus accrued interest at 8% from October 6, 1930 ."

The conditions of the written agreement are numerous but an analysis of them discloses that the Company was desirous of selling a certain interest in its mining property to Harding by issuing to him a certain number of shares of its capital stock to be paid for in the manner provided for in the agreement, after the mortgage and the open account indebtedness of the Company were first paid, within three years, and the defendant Company agreed therein; "Said first party agrees that it can procure the consent of mortgagee or encumbrancers upon said mining property and creditors holding open accounts against first party to so extend such obligations as to enable this contract to be carried out by the first party and second party, in accordance with its terms, and that first party will as evidence thereof, cause said mortgagee or encumbrancers and the creditors holding open accounts to endorse their approval on a duplicate original hereof, as a consent to extension and making of payment as herein stated." By the terms of the written agreement the Company, mortgagor, was to be benefited and especially so in securing an extension of time in the payment of plaintiff's note and mortgage, as they were then due, and payment thereof could have been demanded and proceedings brought to foreclose the mortgage. It agreeing by the written agreement to secure an extension of time of the payment of the mortgage and its open accounts, it thereby acknowledged the indebtedness evidenced by the note and mortgage here sued upon, and agreed for its use and benefit that 551/2% of the returns from ore to be extracted under the agreement, from the mine be applied upon the mortgage, and that it would secure an extension of time for payment of the mortgage. That seems all that is required by Section 5-238 I C A which provides: "No acknowledgment or promise is sufficient evidence of a new or continuing contract by which to take the case out to the operation of this chapter, unless the same is contained in some writing, signed by the party to be charged thereby; but any payment of principal or interest is equivalent to a new promise in writing, duly signed to pay the residue of the debt." And even if that provision of the Idaho statute applies to the note and mortgage, executed in the State of Washington, the defendant company, mortgagor, complied with the provision of the written agreement and secured the approval in writing, of the plaintiff, mortgagee, to it, for it appears that on the original agreement, the plaintiff approved it and the condition of the extension of time in payment of his note and mortgage by, "approved, George A. Bannister, mortgagee, principal $25,000.00 plus accrued interest at 8% from October 6, 1930."

If the Idaho Statute applies, its Supreme Court has held that if a definite and clear acknowledgment of the existence of an agreement and liability was had which was not at the time barred by the statute of limitation carries with it an implied promise to pay the debt and fixes a new date from which the statute begins to run, Dern v. Olsen, 18 Idaho 358, 110 Pac. 164.

A further reference to the written agreement will disclose that it provides that Harding was to commence certain work not later than May 1, 1934, and continue a certain amount thereof each year for three years, and a certain amount of the net smelter returns for each of the three years to be paid to the defendant Company, therefore when the plaintiff mortgagee approved and accepted the terms and conditions of the written agreement, the Company, mortgagor, was granted an extension of three years within which to pay the mortgage, until January 6, 1937, and the present action having been started August 31, 1938, the five year limitation statute had not run, although the original parties to the written agreement appear to be the defendant Company and Harding, yet it contains a provision that if the mortgagees, among which was plaintiff, accepted and approved its conditions wherein an acknowledgment of the debt and extension of time of payment is provided and the plaintiff mortgagee did so in writing, then he steps in and becomes one of the parties to the agreement.

Now, as to the second contention that the note and mortgage lacks consideration because the same were signed by plaintiff when President and a Director of the defendant Company and were made payable to him is untenable when we read the undisputed evidence as to the circumstances under which they were given. The defendant Company was at the time the note and mortgage were given, without funds to carry on its operations and pay its obligations which were then due. The plaintiff was financially deeply interested in the Company and seemed to be the only one who was available and willing to advance funds to meet the Company's obligations. The funds of the Company were not loaned to him, nor did he by advancing them to it, which made up the consideration of the note and mortgage, involve a disadvantage to the Company but was for its benefit, in order to bring the transaction under the rule of violating a trust relation.

The facts in the case of Riley v. Callahan Mining Company, 28 Idaho 523, are different than those here for in that case the officers of the Company loaned the corporate funds to themselves, so the Board of Directors here realizing the situation naturally authorized the execution of the note and mortgage to secure the plaintiff for the amounts he advanced from time to time to the Company. Nothing illegal or improper appears from such a transaction where no fraud was practiced or advantage taken of the Company and therefore the law does not make it illegal for the Company through its Board of Directors to borrow money from one of its officers, if done bona fidely. It is natural for an officer who is interested in the Company to loan funds to it when it is stranded. The plaintiff did not act in a conflicting capacity for the extension agreement and the loaning of the money to the Company, by him, were for the benefit of it. The plaintiff testified that he had paid out for the Company at least $24,900.00 which has not been paid.

The next question involves the contention of the United States that its lien for the assessment is superior and prior to the mortgage lien of the plaintiff. The provision of the United States Statute under which the United States claims a prior lien are sections 1561 and 1562 Title 26 U S C A. Section 1561 provides: "Unless another date is specifically fixed by law, the lien shall arise at the time the assessment list was received by the collector and shall continue until the liability for such amount is satisfied or becomes unenforceable by reason of lapse of time." And Section 1562 provides: "Such lien shall not be valid as against any mortgagee, purchaser, or judgment creditor "until notice thereof has been filed by the collector * * *." It will be observed that these two provisions of the statute, while providing for a lien for the federal tax assessment, they do not state a special priority and "the time the lien shall arise is at the time the assessment list was received by the collector * * * and such lien shall not be valid as against any mortgagee * * * until notice thereof has been filed by the collector." The date of the mortgage lien was October 6, 1930 and the date that the assessment list was received by the collector was July 2, 1931, and the date that the notice was filed by the collector was on October 2, 1931, which under the evidence and the provisions of the Statute, is subordinate to the mortgage lien and is not valid as against any mortgagee.

The asserting of the lien under the statute by the United States does not interfere with existing valid liens, as the statute recognizes that. Such is the case under statutes and facts analogous in proceedings in bankruptcy, reorganizations and receiverships. Miners Savings Bank of Pittston , Pa. v. Joyce et al., 97 Fed. (2) 973; In re Falmestock Mfg. Co., 7 Fed (2) 777.

In view of the expressed provisions of sections 1561 and 1562 referred to and the evidence, the lien for the tax assessment is not a preference as against the mortgage or prior thereto where the mortgage was made prior and in good faith by the debtor Company, to secure a private debt.

Accordingly decree will be entered in favor of the plaintiff foreclosing his mortgage for the balance shown by the evidence to be due him of $24,900.00 principal and interest less $2,500.00, the value of the chattels under the chattel mortgage, and $1,250.00 attorney's fee, and costs against the defendant Company.