Edison Bank v. Mayer
| Decision Date | 27 February 1962 |
| Docket Number | Civ. A. No. 1055-60. |
| Citation | 202 F. Supp. 620 |
| Parties | The EDISON BANK, Plaintiff, v. Joseph J. MAYER, District Director of Internal Revenue Service, etc., Defendant, and United States of America, Intervenor. |
| Court | U.S. District Court — District of New Jersey |
Wilentz, Goldman, Spitzer & Sills, Perth Amboy, N. J., for plaintiff.
David M. Satz, Jr., U. S. Atty., Newark, N. J., for defendant.
The jurisdiction of this Court under 28 U.S.C. § 1340 is invoked by the plaintiff for a declaration that it has a lien prior to that of the United States of America for unpaid Internal Revenue taxes upon the proceeds of sale of certain motor vehicles covered by a chattel mortgage given to the plaintiff by the taxpayer to secure a loan from the plaintiff Bank.
The Court finds the following stipulated facts:
Plaintiff (Bank), is a banking institution incorporated under the laws of the State of New Jersey. On March 5, 1959 the Bank loaned to Walter Rasmussen, individually and trading as Rasmussen and Sons, the sum of $10,000, as security for the repayment of which the borrower executed and delivered to the Bank a chattel mortgage of that date, covering three certain motor vehicles, described in the schedule annexed to the mortgage. Possession of the mortgaged chattels was retained by the mortgagor. The mortgage was duly recorded in the office of the Clerk of Middlesex County, in which both Bank and borrower are located, on March 6, 1959. A record of the mortgage transaction was also made upon the certificates of ownership of the mortgaged vehicles as required by N.J.S. 39:10-11, subd. C, N.J.S.A.
Assessments of Federal Income and Federal Withholding taxes against the chattel mortgagor were duly made by the District Director of Internal Revenue at Newark, New Jersey, and notice of said assessments, stating the amounts and demanding payment thereof was given to the taxpayer and filed with the Register of Deeds for Middlesex County, New Jersey. The particulars of said assessments, including the dates on which liens for said Federal Taxes were filed, are as follows:
Date of
Filing
Type of Tax Balance Date of Date of Notice
Tax Period Due Assessment Demand of Lien
Income 1956 $5,582.00 3/27/59 4/ 3/59 7/31/59
Withholding 3Q 1959 6,429.21 12/18/59 12/18/59 4/14/60
Income 1957 7,511.76 12/24/59 12/24/59 5/17/60
Income 1957 235.22 3/25/60 3/25/60 6/27/60
Withholding 4Q 1959 106.36 6/24/60 6/24/60 None
Withholding 1Q 1960 36.35 9/16/60 9/16/60 None
Withholding 1Q 1960 2,205.47 6/ 3/60 7/ 1/60 9/20/60
(To the figures in the "Balance Due" column are to be added accrued interest from date of assessment, as provided by law.)
Subsequent to the loan which was secured by the chattel mortgage, further loans were made by Bank to the taxpayer which were evidenced by promissory notes respectively dated, in the face amounts and upon which there are balances due, as follows:
Face
Date of Note Amount Balance Due
7/ 6/59 $ 700.00 $10.85 plus interest
2/29/60 26,180.00 $4,201.54 plus interest from 7/1/60
4/12/60 4,241.76 $1,773.64 " " " "
The indebtedness secured by the chattel mortgage had been reduced by May 25, 1960, to the sum of $3,500.00. For the payment of this balance taxpayer gave a new promissory note, dated May 25, 1960, which recited that the amount thereof was secured by the chattel mortgage covering the motor vehicles previously referred to. There is a balance due on the last mentioned note of $1,000.00 with interest thereon from January 27, 1960. In exchange for the $3,500 note, the note of March 5, 1959 (which had been secured by the chattel mortgage) was returned to the maker.
On October 23, 1960, the mortgagor defaulted upon his indebtedness to the Bank, and the Bank took possession of the motor vehicles listed in the chattel mortgage. Due notice was given by the Bank that the vehicles would be sold at public sale on November 9, 1960. Prior to the noticed sale date, the Internal Revenue Service seized the mortgaged chattels pursuant to 26 U.S.C. §§ 6331 and 6335. Pursuant to agreement between counsel for the Bank and for the Internal Revenue Service, the mortgaged vehicles were sold by the Bank on November 9, 1960, for the sum of $7,900., which has been deposited in an escrow account in the Bank, subject to the determination of priority therein. It was also stipulated that the Bank incurred an expense of $48.00 in caring for the mortgaged vehicles prior to their sale.
In New Jersey, a chattel mortgage is a mere security for the payment of the debt secured thereby. Farrow v. Ocean County Trust Co., 1938, N.J.Sup., 121 N.J.L. 344, 2 A. 2d 352, 354.
Despite the giving of the chattel mortgage, the mortgagor therein retained title and possession of the mortgaged vehicles, and his interest therein was a property interest which could be subjected to the lien of a subsequent mortgage or of a levy under a judgment. Therefore, the interest of the...
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