United States v. City of Greenville

• Citation: 118 F.2d 963
• Decision Date: 07 April 1941
• Docket Number: 4749.,No. 4748,4748
• Parties: UNITED STATES v. CITY OF GREENVILLE et al. (two cases). UNITED STATES v. WOODSIDE et al.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

118 F.2d 963 (1941)

UNITED STATES v. CITY OF GREENVILLE et al. (two cases).

UNITED STATES v. WOODSIDE et al.

Nos. 4748, 4749.

Circuit Court of Appeals, Fourth Circuit.

April 7, 1941.

Courtnay C. Hamilton, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key, Sp. Asst. to Atty. Gen., and Oscar Henry Doyle, U. S. Atty., of Anderson, S. C., on the brief), for appellant.

Wilton H. Earle, of Greenville, S. C. (A. C. Mann, of Greenville, S. C., on the brief), for appellees.

Before PARKER, SOPER and DOBIE, Circuit Judges.

PARKER, Circuit Judge.

This is an appeal in two suits instituted under R.S. 3207, 26 U.S.C.A. Int.Rev.Code, § 3678, to foreclose liens of the United States for income taxes due by Robert I. Woodside and John T. Woodside on real estate owned by them. The court below held that tax claims of the State of South Carolina and the County of Greenville and tax and special assessment claims of the City of Greenville were liens prior to the liens of the United States and accordingly directed the distribution of funds received in the foreclosure suit to the payment of these claims to the exclusion of the claims of the United States. From this judgment the United States has appealed.

The facts are that income taxes due the United States were assessed against Robert I. Woodside for the years 1920, 1921, 1924 and 1925 in the aggregate amount of $15,364.03 and against John T. Woodside for the years 1920, 1921, 1925 and 1926 in the amount of $52,182.63. The assessment list, as to each taxpayer, was received by the Collector of Internal Revenue for the district and was filed in his office May 20, 1930, and demand upon taxpayer for payment was duly made. Subsequently these suits were filed for the foreclosure of the liens so obtained and the lands subject to the liens were sold by the marshal under order of court. The tax claims of the state, city and county represent taxes assessed against this property subsequent to the year 1930, and the same is true as to the special assessment claims of the City of Greenville, with the exception of an item of $835.75 assessed in 1929, as to which the United States concedes priority of lien to the city. The proceeds of the lands sold are not sufficient to satisfy the claims for taxes; and the question is squarely presented whether the liens of the United States have priority over the liens of the state, county and city for taxes and special assessments subsequently assessed or whether these are to be given priority over the antecedent liens acquired by the United States.

The decision of the learned judge below accorded priority to the liens of the state, county and city on the ground that they were specific liens against the property, whereas the liens of the United States were general liens; but we see no basis for this distinction. It is true, of course, that the state, county and city taxes were assessed against the specific property and became liens upon it. S.C.Code of 1932, §§ 2569, 2571 and 7470. And the same is true of the paving assessments made by the city. Code § 7376. Beatty v. Wittekamp et al., 171 S.C. 326, 172 S.E. 122. But these liens were acquired subsequent to the acquisition of the liens of the United States for income taxes, which became liens upon the property, no less valid than if they had been assessed against the property itself, as soon as the assessments were filed in the office of the Collector of Internal Revenue. R.S. § 3186, as amended by the Act of May 29, 1928, c. 852, § 613, 45 Stat. 875, 26 U.S.C.A. Int.Rev. Code, §§ 3670, 3671, 3672, provides:

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

"(b) Such lien shall not be valid as against any mortgagee, purchaser, or judgment creditor until notice thereof has been filed by the collector —

"(1) in accordance with the law of the State or Territory in which the property subject to the lien is situated, whenever the State or Territory has by law provided for the filing of such notice; or

"(2) in the office of the clerk of the United States District Court for the judicial district in which the property subject to the lien is situated, whenever the State or Territory has not by law provided for the filing of such notice; or

"(3) in the office of the clerk of the Supreme Court of the District of Columbia, if the property subject to the lien is situated in the District of Columbia."

To say that the lien provided by this statute is a general lien on all the property of the taxpayer does not help in the solution of the problem presented; for a lien is not deprived of validity because it attaches to a number of pieces of property instead of to a single piece, nor is it for that reason to be subordinated to a junior lien attaching to a single piece of property. When properly perfected, the lien under the statute constitutes a charge upon specific property of the taxpayer for the satisfaction of which that property may be sold under proceedings instituted for the purpose. As said in Metropolitan Life Ins. Co. v. United States, 6 Cir., 107 F.2d 311, 313, "The Federal statutes create specific liens for taxes and as a corollary give a specific remedy for their removal and when such liens once attach, they may be lifted only as provided thereunder." Such lien is clearly not a mere inchoate lien, or right to lien, as held in Gerson et al. v. Shubert Theater Corp., D.C., 7 F.Supp. 399; for not only was it deemed necessary in the statute itself to provide that the lien should not be valid against any mortgagee, purchaser or judgment creditor until the proper filing of notice, but provision also was made by the Act of June 29, 1939, 53 Stat. 882, 26 U.S.C.A. Int.Rev.Code, § 3672(b), that, notwithstanding the filing of such notice, such lien should not be a valid lien upon certain described securities as against mortgagees, pledgees or purchasers, if they were holders for an adequate and full consideration and "without notice or knowledge of the existence of such lien." No such provisions would be necessary if the lien were intended to be a mere inchoate right to a lien which would attach to specific property only after proceedings had been instituted for its enforcement.

After the lien provided by the statute attaches, the property has in a sense two owners, the taxpayer and, to the extent of the lien, the United States. Com'r v. Coward, 3 Cir., 110 F.2d 725, 727. The lien cannot be affected by state legislation respecting the recording or registering of mortgages or liens. United States v. Snyder, 149 U.S. 210, 13 S.Ct. 846, 37 L.Ed. 705; In re Dartmont Coal Co., 4 Cir., 46 F.2d 455. Nor can it be affected by homestead, spendthrift trust or stock transfer acts of the states. Staley v. Vaughn, Tex.Civ. App., 50 S.W.2d 907; In re Rosenberg's Will, 269 N.Y. 247, 199 N.E. 206, 105 A.L.R. 1238; United States v. Rosenfield, D.C., 26 F.Supp. 433; Cannon v. Nicholas, 10 Cir., 80 F.2d 934. And we think it equally clear that, without the consent of Congress, it cannot be affected by the exercise of state...