City of Dallas, Texas v. United States, 23160.

• Decision Date: 12 December 1966
• Docket Number: No. 23160.,23160.
• Citation: 369 F.2d 645
• Parties: CITY OF DALLAS, TEXAS, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

369 F.2d 645 (1966)

CITY OF DALLAS, TEXAS, Appellant, v. UNITED STATES of America, Appellee.

No. 23160.

United States Court of Appeals Fifth Circuit.

December 12, 1966.

Ted P. MacMaster, Max E. Noller, Asst. City Attys., N. Alex Bickley, City Atty., Dallas, Tex., for appellant.

Richard M. Roberts, Act. Asst. Atty. Gen., Lee A. Jackson, Atty., Dept. of Justice, Washington, D. C., Melvin M. Diggs, U. S. Atty., Abilene, Tex., W. E. Smith, Asst. U. S. Atty., Fort Worth Tex., Joseph Kovner, Jeanine Jacobs, Attys., Dept. of Justice, Washington, D. C., Mitchell Rogovin, Asst. Atty. Gen., W. E. Smith, Asst. U. S. Atty., of counsel, for appellee.

Before BROWN, COLEMAN, and AINSWORTH, Circuit Judges.

COLEMAN, Circuit Judge:

This is an appeal from the Judgment of the District Court which affirmed the findings and opinion of the Referee in Bankruptcy that a tax lien in favor of the United States was superior to a municipal personal property tax lien in favor of the City of Dallas. We affirm.

On and after January 1, 1963, the taxpayer was located and doing business in the City of Dallas, his personal property being subject to advalorem taxes lawfully imposed by the city.

On August 13, 1963, taxpayer filed a petition in bankruptcy.

On May 2, 1963, May 10, 1963, and July 15, 1963, the District Director of Internal Revenue assessed and made demand upon the bankrupt for payment of income, withholding, and F.I.C.A. taxes amounting to $8,318.41. From the date of the assessments, the United States had a lien upon all property and rights to property belonging to the taxpayer, §§ 6321 and 6322, Internal Revenue Code of 1954; 26 U.S.C., §§ 6321 and 6322.

The first meeting of creditors was held September 10, 1963, a trustee was elected, and the estate was thereafter liquidated. After the costs of administration had been paid there remained the sum of $1475.32, which is the subject of the competing liens of the United States, above described, and of the City of Dallas, which we shall now describe.

There is no dispute that by § 194 of its Home Rule Charter Dallas had a tax lien on the property as of January 1, 1963, for taxes to be levied the following September.¹ Obviously, the exact amount of the lien was unknown and could not be known until the levy was made on September 16, 1963.

The Government therefore argues, and the District Court held, that since the City's lien was not certain in amount on the dates the federal liens were perfected it was inchoate and inferior to the federal lien.

United States By and Through Internal Revenue Service v. Bradley, 5 Cir., 1963, 321 F.2d 224, is not decisive because it was there stipulated that the amount of state taxes was certain.

Although there has been authority to the contrary,² we regard it as being now well settled that an inchoate right cannot defeat a federal tax levy, United States, v. City of New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520 (1954); United States v. Security Tr. & Savings Bk., 340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53 (1950); United States v. Allen, 5 Cir., 1964, 328 F.2d 377; 94 A.L.R.2d 748, at 771.

The City of Dallas says, however, that the amount of its lien was made definite, certain, and therefore choate, by the provisions of § 44-12 of the Revised Code of Civil and Criminal Ordinances of the City of Dallas, as amended by Ordinance 9581 of December 26, 1962.³ We agree that if these provisions are applicable then the amount of the taxes as of January 1, and consequently the amount of the lien, was definite and certain.

The problem is found in the following language in the last paragraph of the Ordinance:

"The provisions of this ordinance shall be in force and effect during the interim period hereinabove mentioned provided such taxes are actually paid prior to enactment of the Tax Levy Ordinance, and shall be operative only during that interim period, and shall be superceded by that ordinance when passed as to that particular year. This ordinance shall have prospective application and shall continue in full force and effect from year to year until modified or repealed."

We think this language plainly provides that the interim levy (and thus the interim lien) shall apply only if "such taxes are actually paid prior to enactment of the Tax Levy Ordinance."

Of course, the taxes were not so paid.

It necessarily followed, as the ordinance states, that the levy and lien as of January 1, 1963, were never operative and were superseded by the levy ordinance of September 16, 1963. But by that time the federal tax liens had attached.

Nor is the City's position helped by assuming that the bankruptcy adjudication had the effect of an involuntary sale within the meaning of the phrase "in the event the property is sold voluntarily, involuntarily, or in the custody of the law." (See note 3). The thing which triggers the indeterminate January-September lien is an event which occurred subsequent to the perfection of the said tax lien. Until that moment it was potential only. And that is not enough.

The basic principle of first in time, first in right, thus gave superiority to the federal liens and the Judgment of the District Court must be

Affirmed.

1 "Sec. 194. A lien is hereby created on all property, personal and real, in favor of the City of Dallas, for all taxes, ad valorem, occupation or otherwise. Said lien shall exist from January 1st in each year until the taxes are paid. Such lien shall be prior to all other claims, and no gift, sale, assignment or transfer of any kind,...