Business Title Corp. v. Division of Labor Law Enforcement
| Decision Date | 14 October 1975 |
| Citation | 125 Cal.Rptr. 1,52 Cal.App.3d 199 |
| Court | California Court of Appeals Court of Appeals |
| Parties | , 36 A.F.T.R.2d 75-6219, 75-2 USTC P 9867 BUSINESS TITLE CORPORATION, Plaintiff, v. DIVISION OF LABOR LAW ENFORCEMENT, State of California, et al., Defendants and Appellants, United States of America, Defendant and Respondent. Civ. 44420. |
For Opinion on Hearing, see 132 Cal. Rptr. 454,553 P.2d 614.
Lazar, Friedman, Stahl & Jabin, Evelle J. Younger, Atty. Gen., and Thomas Scheerer, Deputy Atty. Gen., for defendant and appellant Div. of Labor Law Enforcement, State of Cal.
Denison & Kightlinger and John P. Kightlinger, Los Angeles, for defendant and appellant Los Angeles Hotel-Restaurant Employer-Union Welfare Fund.
Lipsig, Rosenfield, Temkin & Leff and Robert G. Leff, Beverly Hills, for defendant and appellant William H. Temkin, Jr.
Scott P. Crampton, Asst. U. S. Atty. Gen., Gilbert E. Andrews, Crombie J. D. Garrett and Stephen M. Gelber, Attys., Tax Div., Dept. of Justice, William D. Keller, U. S. Atty., and Charles H. Magnuson, Asst. U. S. Atty., for defendant and respondent.
Coulter, Vernoff & Brewer and George P. Coulter, Pasadena, as amicus curiae for plaintiff, and for Gramercy Escrow Company, Grover Escrow Corporation, Professional Escrow Services and Service Escrow Co.
Three defendants appeal from a judgment in an interpleader action. 1 The action was commenced in the superior court for Los Angeles County by Business Title Corporation against the United States, 2 the Division of Labor Law Enforcement of the State of California, the Los Angeles Hotel-Restaurant Employer-Union Welfare Fund (hereinafter 'Union Welfare Fund'), Mating Game, Inc., 3 William Temkin, Sanford Orling and Peter Rooney.
The verified complaint alleged: On October 6, 1971, at Los Angeles, Mating Game, Inc., entered into a written escrow agreement with 12319 Corporation whereby Mating Game agreed to sell to 12319 Corporation an on-sale general liquor license for a cocktail lounge business, with the license to remain at the business premises; pursuant to Bus. & Prof.Code § 24074, buyer and seller opened an escrow, and plaintiff was named as escrow holder; the total purchase price of the liquor license was $10,500.00, which sum was deposited in escrow by the buyer prior to transfer of the license; during the course of the escrow, and before May 24, 1972 (when the Department of Alcoholic Beverage Control notified plaintiff of transfer of the license to the buyer), plaintiff received claims from the seller's creditors, including the defendants; defendant United States served on plaintiff a notice of levy and a notice of federal taxes due in the sum of $3,329.89 on account of tax delinquencies of the seller; defendants Division of Labor Law Enforcement, Union Welfare Fund, Temkin, Orling and Rooney presented claims totaling $8,171.04 for wages due the seller's employees; the State Board of Equalization and the Department of Human Resources Development presented claims totaling $2,328.96; as these latter claims must be paid to accomplish transfer of the license, plaintiff paid them from the funds on deposit in escrow; after transfer of the license, plaintiff mailed notices to the creditors informing them that the cash in escrow was insufficient to pay all creditors in full.
The complaint further alleged: plaintiff holds in escrow the sum of $8,141.04, which represents the purchase price of $10,500.00 less payment of $2,328.96 to the priority creditors, and less $30.00 paid as attorney's fees for a legal opinion regarding the proper placement of creditors' claims under § 24074; plaintiff claims no right, title or interest in or to the cash in escrow, except to recover its costs and attorney's fees incurred in the interpleader action; plaintiff is subject to conflicting claims to the fund in escrow by the United States and by the other defendants, whose wage claims are given first priority under § 24074.
Plaintiff sought judgment requiring defendants to interplead and litigate among themselves their respective rights to the case in escrow; plaintiff also sought attorney's fees and costs.
Each of the defendants filed an answer to the complaint. The United States mover for summary judgment in its favor for the amount of federal tax owing by the seller. Affidavits in support of the motion were filed showing that such tax was assessed on September 24, 1971, and that notice of the resulting federal tax lien was filed with the Los Angeles County Recorder and with the California Secretary of State, on October 21, 1971.
Plaintiff moved for an order dismissing it from the action upon deposit in court of the escrowed fund of $8,141,04, and for an order allowing plaintiff to deduct from such fund the sum of $642.00 as attorney's fees and costs incurred in prosecuting the interpleader action. (Code Civ.Proc. § 386.6, subd. (a).) From the fund in escrow, the trial court granted plaintiff $400.00 as attorney's fees and $42.00 as costs 'without prejudice to later determination as to whose interest ultimately to bear said costs.' Plaintiff was ordered to deposit $7,699.04 (the balance of the fund remaining after deduction of the attorney's fees and the sum allowed for costs) with the clerk of the court. The court further ordered that plaintiff be dismissed from the action upon making such deposit.
Prior to the hearing of the United States' motion for summary judgment, all of the interpleaded defendants entered into the following stipulation of facts: after escrow was opened on October 6, 1971, for the transfer of Mating Game's liquor license, the following wage claims were submitted to plaintiff by defendants: October 15, 1971, claim of Union Welfare Fund for $1,650.00; January 18, 1972, claim of Division of Labor Law Enforcement for $1,418.85; May 5, 1972, claim of Temkin for $3,952.19, claim of Orling for $575.00 and claim of Rooney for $575.00; on June 13, 1972, the United States served on plaintiff a notice of levy for federal taxes due from Mating Game, Inc., in the total amount of $3,329.89; 4 on the same date, the United States also served on plaintiff a 'Notice of Federal Taxes Due' and a 'Final Demand.' each in the amount of $3,329.89.
The trial court granted the motion for summary judgment, directing the clerk to pay to the United States from the interpleaded fund, the sum of $3,170.88 plus interest and penalties. The court further ordered that the attorney's fees and costs awarded to plaintiff were not to be apportioned against the sum payable to the United States.
Thereafter, defendants Temkin, Orling and Rooney moved for summary judgment disposing of the balance of the interpleaded fund. The trial court granted the motion 'as to wage claim defendants,' and ordered that, after payment of the tax lien of the United States and the costs of interpleader, the remaining funds were to be apportioned among the wage claimants in the proportion that each claim bore to the total wage claims.
Findings of fact and conclusions of law were signed and filed. 5 The trial court found, as facts: plaintiff deposited into the registry of the court the sum of $7,699.04; such interpleaded fund is insufficient to pay the claims asserted against it by defendants; on September 24, 1971, a delegate of the Secretary of the Treasury made an assessment against Mating Game, Inc., for withholding and federal insurance contribution taxes in the sum of $2,889.77, plus: delinquency penalty, $144.49; failure to deposit penalty, $96.32; failure to pay penalty, $14.45; and interest, $25.85, for a total assessment of $3,170.88; in addition to this sum, defendant United States is entitled to accrued interest of $349.66, as of August 1, 1973, on the principal amount of tax assessed, for a total of $3,520.54, with interest to continue accruing after August 1, 1973, 6 at the rate of 52 cents per day; notice of the assessment and demand for payment were sent to Mating Game, Inc., on September 24, 1971; notice of federal tax lien (which arose upon assessment 7) was filed with the recorder for Los Angeles County, and with the California Secretary of State, on October 21, 1971; by virtue of the assessment, Mating Game, Inc., is indebted to the United States in the sum of $3,170.88, plus accrued interest; defendant Division of Labor Law Enforcement has a wage claim of $1,418.85 against the interpleaded fund and is entitled to 17.36 percent of the sum remaining after payment of the claim of the United States; defendant Union Welfare Fund has a claim of $1,650.00 against the fund, and is entitled to 20.19 percent of the sum remaining after payment of the claim of the United States; defendants Temkin, Orling and Rooney have claims of $3,952.19, $575.00 and $575.00, respectively, against the fund for a total of $5,102.19, and such defendants are entitled collectively to 62.45 percent of the fund remaining after payment of the claim of the United States.
As conclusions of law, the court determined: the claims of defendants Division of Labor Law Enforcement, Union Welfare Fund, Temkin, Orling and Rooney are wage claims having first priority under Bus. & Prof. Code § 24074; the Twenty-first Amendment of the United States Constitution is not applicable in this case; accordingly, under the Supremacy Clause (art. VI) of the United States Constitution, the priority accorded a tax lien of the United States under 26 U.S.C. §§ 6321 and 6323, subd. (a), prevails over any priority set forth in Bus. & Prof. Code § 24074; the lien of the United States for unpaid taxes and interest therefore must be paid from the interpleaded fund before the claims of the other defendants are paid; the attorney's fees and costs awarded to plaintiff may not be allocated against the recovery of the United States, but have priority over the wage claims.
Judgment was entered awarding the United States, out of the interpleaded fund, the sum of $3,520.54, plus...
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Professional Bar Co., Inc., Matter of
...v. Finale, 39 Cal.App.3d 777, 783-84, 114 Cal.Rptr. 562, 566-67 (1st Dist. 1974); cf. Business Title Corp. v. Division of Labor Law Enforcement, 52 Cal.App.3d 199, 125 Cal.Rptr. 1 (2d Dist. 1975). SMITH, Circuit Judge (dissenting): I respectfully dissent. The result seems to me inconsistent......