Bushway's Estate, In re

• Court: New Hampshire Supreme Court
• Writing for the Court: DUNCAN
• Citation: Bushway's Estate, In re, 218 A.2d 49, 107 N.H. 135 (N.H. 1966)
• Decision Date: 30 March 1966
• Parties: , 17 A.F.T.R.2d 892, 66-1 USTC P 9411 In re George H. BUSHWAY ESTATE.

Page 49

218 A.2d 49

107 N.H. 135, 17 A.F.T.R.2d 892, 66-1 USTC P 9411

In re George H. BUSHWAY ESTATE.

Supreme Court of New Hampshire.

Argued Feb. 1, 1966.

Decided March 30, 1966.

Burns, Bryant & Hinchey and Paul R. Cox, Dover (Paul R. Cox, Dover, orally), for executor as amicus curiae.

Richard M. Roberts, Acting Asst. U.S. Atty. Gen., Lee A. Jackson and Joseph Kovner, Attorneys, Washington, D.C., and Louis M. Janelle, U.S. Atty., for United States of America.

Perkins, Holland & Donovan, Execter (Robert B. Donovan, Exeter, orally), for Merchants Nat. Bank of Newburyport, Mass DUNCAN, Justice.

The certified questions arise out of a petition filed by the executor seeking instructions structions as to the proper distribution of the assets of the estate in his hands, the same being insufficient to satisfy the outstanding claims against the estate. The parties before us are in substantial agreement concerning their relative rights.

By virtue of 31 U.S.C.A. § 191 (s. 3466 of Revised Statutes), the obligation to the United States has priority over other claims against the insolvent estate, except as to specific property of which the debtor has been divested of either title or possession before insolvency. Thelusson v. Smith, 2 Wheat. 396, 462, 4 L.Ed. 271; United States v. Gilbert Associates 345 U.S. 361, 366, 73 S.Ct. 701, 97 L.Ed. 1071; United States v. Atlantic Municipal Corp., 212 F.2d 709 (5th Cir.1954). Cf. United States v. Vermont, 377 U.S. 351, 84 S.Ct. 1267, 12 L.Ed.2d 370. See Annot. 5 L.Ed. 929, 933-935; United States v. Boston & Berlin Transp. Co., 237 F.Supp. 1004, 1009 (D.C.N.H.1964).

The fact that the claim of the United States was presented to the Commissioner more than six months after his appointment (see RSA 557:7 (supp)) is no bar to priority. Timely notice of the tax deficiency was given to the executor on December 12, 1963. 31 U.S.C.A. § 192; King v. United States, 379 U.S. 329, 85 S.Ct. 427, 13 L.Ed.2d 315; Viles v. Commissioner, 233 F.2d 376 (6th Cir.1956). See 26 U.S.C.A. § 6321. The limitation of the state statute cannot bar the federal claim, presented before distribution. Reconstruction Finance Corp. v. Faulkner, 100 N.H. 192, 193, 122 A.2d 263; W. T. Jones & Co. v. Foodco Realty, Inc., 318 F.2d 881, 888 (4th Cir.1963).

It is not questioned that possession of the collateral held by the bank was transferred to it well before filing of notice of the tax lien, and accordingly the bank's right to retain its security interest in unchallenged. 26 U.S.C.A. §§ 6321, 6323; 9 Merten, Law of Federal Income Taxation, s. 54.44. See Mass. G.L. Anno., Ch. 106, § 9-305; RSA 382-A:9-305 (Uniform Commercial Code). Beside the collateral standing in the name of the estate the bank holds other security for the same indebtedness. Under the statute, its claim should not be allowed in the insolvency proceedings unless the commissioner estimates the total security to be of less value than the debt. RSA 557:15. If so estimated, only the amount of its claim which exceeds the value of the security should be allowed as unsecured, and the bank may surrender the security to the executor for liquidation if dissatisfied with the commissioner's estimate of value. RSA 557:16.

The certified questions, which need not be set out here, are answered as follows: The claim of the Internal Revenue Service has priority over the claims of other creditors, except as to so much of the claim of Merchants National Bank as is secured by the collateral pledged to it. The funds in the hands...