323 U.S. 353 (1945), 65, United States v. Waddill, Holland & Flinn, Inc.

Docket Nº:No. 65
Citation:323 U.S. 353, 65 S.Ct. 304, 89 L.Ed. 294
Party Name:United States v. Waddill, Holland & Flinn, Inc.
Case Date:January 02, 1945
Court:United States Supreme Court

Page 353

323 U.S. 353 (1945)

65 S.Ct. 304, 89 L.Ed. 294

United States


Waddill, Holland & Flinn, Inc.

No. 65

United States Supreme Court

Jan. 2, 1945

Argued November 10, 1944



1. Under R.S. § 3466, claims of the United States against an insolvent debtor who has made an assignment for the benefit of creditors held entitled to priority over liens here asserted under Virginia law by a landlord for rent and by a municipality for taxes. P. 355.

2. Whether a lien created by state statute is of such character as to bring it within a claimed exception to the priority of the United States under R.S. § 3466 is a federal question. P. 356.

182 Va. 351, 28 S.E.2d 741, reversed.

Certiorari, 322 U.S. 722, to review the affirmance of a decree determining the priority of payment of claims of creditors.

MURPHY, J., lead opinion

MR. JUSTICE MURPHY delivered the opinion of the Court.

The issue here is whether, in a state proceeding under a general assignment for benefit of creditors, Section 3466 of the Revised Statutes, 31 U.S.C. § 191, gives priority to a claim of the United States over a landlord's lien and a municipal tax lien.

Mrs. Oeland Roman, the assignor, operated a restaurant in Danville, Virginia, on premises leased from respondent, Waddill, Holland & Flinn, Inc. On June 19, 1941, she executed a general deed of assignment to a trustee for

Page 354

the benefit of creditors, specifically conveying all personal property, fixtures, and equipment used by her in the conduct of the restaurant and located on the premises. This property remained on the premises until sold by the trustee on July 12, 1941. After deduction of appropriate administrative expenses, a sum of $1,407.29 remained. Four creditors claimed priority of payment from this amount.

(1) The United States claimed the sum of $1,559.63, plus interest, representing certain unpaid federal unemployment compensation taxes and a debt arising out of a Federal Housing Administration transaction.

(2) The Virginia Unemployment Compensation Commission made a tax claim of $66.38, plus interest. The Commission's claim, however, was conceded to be subordinate to that of the United States, and need not be further considered here.

(3) The City of Danville claimed $300.55 as personal property taxes still unpaid. On July 2, 1941, the City Collector distrained on all of the property on the leased premises.

(4) The landlord, Waddill, Holland & Flinn, Inc., claimed $1,500.00 for six months' rent due and to become due. The assignor's lease from this firm ran for five years beginning January 1, 1937, at a monthly rental of $250.00. On July 1, 1941, twelve days after the deed of assignment was executed, the firm obtained the issuance of a distress warrant for 3 2/5 months' past due rent and an attachment for 2 3/5 months' future installments of rent. On the same day, the firm levied the warrant and attachment on the assignor's property located on the leased premises.

The trustee under the general assignment filed a petition in the Corporation Court of Danville, reciting the various claims and requesting advice as to the proper distribution. That court held that the landlord was entitled to priority in payment over the claims of the United States and the

Page 355

Virginia Unemployment Compensation Commission, but that its claim was subordinate to that of the City of Danville for taxes in the sum of $222.31. On appeal by the...

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