523 U.S. 517 (1998), 96-1613, United States v. Estate of Romani

Docket Nº:No. 96-1613
Citation:523 U.S. 517, 118 S.Ct. 1478, 140 L.Ed.2d 710, 66 U.S.L.W. 4295
Party Name:UNITED STATES v. ESTATE OF ROMANI et al.
Case Date:April 29, 1998
Court:United States Supreme Court
 
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Page 517

523 U.S. 517 (1998)

118 S.Ct. 1478, 140 L.Ed.2d 710, 66 U.S.L.W. 4295

UNITED STATES

v.

ESTATE OF ROMANI et al.

No. 96-1613

United States Supreme Court

April 29, 1998

Argued January 12, 1998

CERTIORARI TO THE SUPREME COURT OF PENNSYLVANIA

Syllabus

After a third party perfected a $400,000 judgment lien under Pennsylvania law on Francis Romani's Cambria County real property, the Internal Revenue Service filed notices of tax liens on the property, totaling some $490,000. When Mr. Romani died, his entire estate consisted of real estate worth only $53,001. Because the property was encumbered by both the judgment lien and the federal tax liens, the estate's administrator sought the county court's permission to transfer the property to the judgment creditor in lieu of execution. The court authorized the conveyance, overruling the Federal Government's objection that the transfer violated the federal priority statute, 31 U.S.C. § 3713(a), which provides that a Government claim "shall be paid first" when a decedent's estate cannot pay all of its debts. The Superior Court of Pennsylvania affirmed, as did the Pennsylvania Supreme Court. The latter court determined that there was a "plain inconsistency" between § 3713 and the Federal Tax Lien Act of 1966, which provides that a federal tax lien "shall not be valid" against judgment lien creditors until a prescribed notice has been given, 26 U.S.C. § 6323(a). The court concluded that the 1966 Act effectively limited § 3713's operation as to tax debts, relying on United States v Kimbell Foods, Inc., 440 U.S. 715, 738, which noted that the 1966 Act modified the Government's preferred position in the tax area and recognized the priority of many state claims over federal tax liens.

Held:

Section 3713(a) does not require that a federal tax claim be given preference over a judgment creditor's perfected lien on real property. Pp. 522-534.

(a) There is no dispute about the meaning of either the Pennsylvania lien statute or the Tax Lien Act. It is undisputed that, under the state law, the judgment creditor acquired a valid lien on Romani's real property before his death and before the Government served notice of its tax liens. That lien was therefore perfected in the sense that there is nothing more to be done to have a choate lien. E. g., United States v City of New Britain, 347 U.S. 81, 84. And a review of the Tax Lien Act's history reveals that each time Congress has revisited the federal tax lien, it has ameliorated pre-existing harsh consequences for the delinquent taxpayer's other secured creditors. Here, all agree that by

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6323(a)'s terms, the Government's liens are not valid as against the earlier recorded judgment lien. Pp. 522-524.

(b) Because this Court has never definitively resolved the basic question whether the federal priority statute gives the United States a preference only over other unsecured creditors, or whether it also applies to the antecedent perfected liens of secured creditors, see, e. g., United States v Vermont, 377 U.S. 351, 358, n. 8, it does not seem appropriate to view the issue here as whether the Tax Lien Act has implicitly amended or repealed § 3713(a). Instead, the proper inquiry is how best to harmonize the two statutes' impact on the Government's power to collect delinquent taxes. Pp. 524-530.

(c) Nothing in the federal priority statute's text or its long history justifies the conclusion that it authorizes the equivalent of a secret lien as a substitute for the expressly authorized tax lien that the Tax Lien Act declares "shall not be valid" in a case of this kind. On several occasions, this Court has concluded that a specific policy embodied in a later federal statute should control interpretation of the older federal priority statute, despite that law's literal, unconditional text and the fact that it had not been expressly amended by the later Act. See, e. g., Cook County Nat. Bank v United States, 107 U.S. 445, 448-451. United States v Emory, 314 U.S. 423, 429-433, and United States v Key, 397 U.S. 322, 324-333, distinguished. So too here, there are sound reasons for treating the Tax Lien Act as the governing statute. That Act is the later statute, the more specific statute, and its provisions are comprehensive, reflecting an obvious attempt to accommodate the strong policy objections to the enforcement of secret liens. It represents Congress' detailed judgment as to when the Government's claims for unpaid taxes should yield to many different sorts of interests (including, e. g., judgment liens, mechanic's liens, and attorney's liens) in many different types of property (including, e. g., real property, securities, and motor vehicles). See § 6323. Indeed, given this Court's unambiguous determination that the federal interest in the collection of taxes is paramount to its interest in enforcing other claims, see Kimbell Foods, Inc., 440 U.S., at 733-735, it would be anomalous to conclude that Congress intended the priority statute to impose greater burdens on the citizen than those specifically crafted for tax collection purposes. Pp. 530-534.

547 Pa. 41, 688 A.2d 703, affirmed.

Stevens, J., delivered the opinion of the Court, in which Rehnquist, C. J., and O'Connor, Kennedy, Souter, Thomas, Ginsburg, and Breyer, JJ., joined. Scalia, J., filed an opinion concurring in part and concurring in the judgment, post, p. 535.

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Kent L. Jones argued the cause for the United States. With him on the briefs were Acting Solicitor General Waxman, Acting Solicitor General Dellinger, Assistant Attorney General Argrett, Deputy Solicitor General Wallace, William S. Estabrook, and Joan I. Oppenheimer.

Patrick F. McCartan argued the cause for respondent Romani Industries, Inc. With him on the brief were Gregory G. Katsas and Lawrence L. Davis.

Justice Stevens delivered the opinion of the Court.

The federal priority statute, 31 U.S.C. § 3713(a), provides that a claim of the United States Government "shall be paid first" when a decedent's estate cannot pay all of its debts.[1] The question presented is whether that statute requires that a federal tax claim be given preference over a judgment creditor's perfected lien on real property even though such a preference is not authorized by the Federal Tax Lien Act of 1966, 26 U.S.C. § 6321 et seq.

I

On January 25, 1985, the Court of Common Pleas of Cambria County, Pennsylvania, entered a judgment for $400,000 in favor of Romani Industries, Inc., and against Francis

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J. Romani. The judgment was recorded in the clerk's office and therefore, as a matter of Pennsylvania law, it became a lien on all of the defendant's real property in Cambria County. Thereafter, the Internal Revenue Service filed a series of notices of tax liens on Mr. Romani's property. The claims for unpaid taxes, interest, and penalties described in those notices amounted to approximately $490,000.

When Mr. Romani died on January 13, 1992, his entire estate consisted of real estate worth only $53,001. Because the property was encumbered by both the judgment lien and the federal tax liens, the estate's administrator sought permission from the Court of Common Pleas to transfer the property to the judgment creditor, Romani Industries, in lieu of execution. The Federal Government acknowledged that its tax liens were not valid as against the earlier judgment lien; but, giving new meaning to Franklin's aphorism that "in this world nothing can be said to be certain, except death and taxes,"[2] it opposed the transfer on the ground that the priority statute (§ 3713) gave it the right to "be paid first."

The Court of Common Pleas overruled the Government's objection and authorized the conveyance. The Superior Court of Pennsylvania affirmed, and the Supreme Court of the State also affirmed. 547 Pa. 41, 688 A.2d 703 (1997). That court first determined that there was a "plain inconsistency" between § 3713, which appears to give the United States "absolute priority" over all competing claims, and the Tax Lien Act of 1966, which provides that the federal tax lien "shall not be valid" against judgment lien creditors until a prescribed notice has been given. Id., at 45, 688 A. 2d,

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at 705.[3] Then, relying on the reasoning in United States v Kimbell Foods, Inc., 440 U.S. 715 (1979), which had noted that the Tax Lien Act of 1966 modified the Federal Government's preferred position in the tax area and recognized the priority of many state claims over federal tax liens, id., at 738, the court concluded that the 1966 Act had the effect of limiting the operation of § 3713 as to tax debts.

The decision of the Pennsylvania Supreme Court conflicts with two Federal Court of Appeals decisions, Kentucky ex rel. Luckett v United States, 383 F.2d 13 (CA6 1967), and Nesbitt v United States, 622 F.2d 433 (CA9 1980). Moreover, in its petition for certiorari, the Government submitted that the decision is inconsistent with our holding in Thelusson v Smith, 2 Wheat. 396 (1817), and with the admonition that " '[o]nly the plainest inconsistency would warrant our finding an implied exception to the operation of so clear a

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command as that of [31 U.S.C. § 3713],' " United States v Key, 397 U.S. 322, 324-325 (1970) (quoting United States v Emory, 314 U.S. 423, 433 (1941)). We granted certiorari, 521 U.S. 1117 (1997), to resolve the conflict and to consider whether Thelusson, Key, or any of our other cases construing the priority statute requires a different result.

II

There is no dispute about the meaning of two of the three statutes that control the disposition of this case. It is therefore appropriate to comment on the Pennsylvania lien statute and the...

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