Exchange Nat. Bank of Tulsa v. Davy
| Decision Date | 07 January 1936 |
| Docket Number | No. 1050.,1050. |
| Citation | 13 F. Supp. 226 |
| Parties | EXCHANGE NAT. BANK OF TULSA v. DAVY et al. |
| Court | U.S. District Court — Northern District of Oklahoma |
Joseph L. Hull, Charles E. Bush, and James E. Bush, all of Tulsa, Okl., for plaintiff.
C. E. Bailey, U. S. Atty., and Chester A. Brewer, Asst. U. S. Atty., both of Tulsa, Okl., for the United States.
This is an action for the foreclosure of a real estate mortgage against Claude W. Davy, and Leona Davy, his wife, in which the United States of America was joined as a defendant, because of the filing of a notice of income tax lien for income tax levied and assessed against Davy for the taxable year 1930. The evidence established the following facts: On May 7, 1930, a trust agreement was entered into between Davy and the Exchange Trust Company, and Davy deposited $20,000 in the trust estate. On November 13, 1930, the Exchange Trust Company, trustee for Davy, invested $7,000 in notes executed by one Mason, the same being a part of a loan of $8,000 made by the Exchange National Company to Mason, which was secured by a mortgage on real estate in the city of Tulsa. The trustee received a participation of $7,000 in the $8,000 mortgage from the Exchange National Company. On January 22, 1932, Davy borrowed $7,000 from the Exchange National Bank, plaintiff herein, and executed his note in that amount as evidence of the indebtedness. On the same date he executed an assignment to plaintiff, assigning all the assets in his trust estate, and notice of the assignment was served on the Exchange Trust Company by the bank. The assignment was not placed of record. On June 8, 1932, the trustee instituted suit for the foreclosure of the mortgage, which resulted in judgment, and sale of the property. The trustee was the purchaser at the sale, and on November 10, 1932, a sheriff's deed was executed to the Exchange Trust Company, trustee for Davy, conveying the property foreclosed. On June 29, 1933, the Exchange Trust Company became insolvent, and its assets were turned over to the state bank commissioner. On November 11, 1933, Davy revoked his trust agreement with the Exchange Trust Company. On February 10, 1934, the state bank commissioner executed a special warranty deed, conveying the real estate to Davy, and delivered the deed to an agent of the Exchange National Bank. On February 23, 1934, the plaintiff delivered the deed to Davy and took from him a real estate mortgage, covering the property described in the deed, to secure the payment of the $7,000 indebtedness. The mortgage was placed of record March 2, 1934. The notice of income tax lien was filed in the office of the county clerk of Tulsa county, Okl., and in the office of the clerk of the United States District Court for the Northern District of Oklahoma, on December 22, 1932. The question presented is one of priority. The bank was the holder of the assignment of the beneficial interest in the trust property prior to the filing of the notice of income tax lien, which property consisted of a participation in a chose in action, a note secured by real estate mortgage. The trust property had been converted into real estate, by foreclosure of the mortgage, before the notice of income tax lien was filed, but the notice was filed for record prior to the delivery of deed to the property to Davy and the execution and delivery of the real estate mortgage by Davy to the bank. Plaintiff had an assignment of the trust, which was a lien upon an equitable estate. Davy, as beneficiary, had equitable title to the trust property; the Exchange Trust Company had bare legal title to the property, as trustee. The assignment of the trust estate was given to secure the payment of the indebtedness. It was an equitable lien. Davy continued as owner of the equitable estate in the trust, subject to the lien of plaintiff, until he revoked the trust agreement, resulting in the transfer of legal title to the property by the state bank commissioner, to the beneficial owner, but subject to the equitable lien of plaintiff. Because of the assignment of the trust to the bank, and notice thereof to the trustee, the deed was not delivered to Davy, but was given to the plaintiff, who in turn delivered it to Davy when given a mortgage upon the property. As soon as Davy's title was changed from equitable to legal, the bank obtained a legal lien in substitution of its equitable lien. The evidence establishes that the bank did nothing to waive its lien, but, on the contrary, was diligent in preserving its security, and obtained a real estate mortgage in place of its equitable lien, as soon as the debtor was in a position to execute such a mortgage.
The question for determination is whether the filing of notice of income tax lien subsequent to the assignment of the trust estate, which was not recorded, but prior to the recording of the real estate mortgage, creates a prior right in the United States to payment out of the property over the lienholder.
The income tax lien, sought to be foreclosed in this action, was created by Act of May 29, 1928, § 613 (a) (45 Stat. 875, 26 U.S.C.A. § 115 see 26 U.S.C.A. § 1560), which provides a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to the person liable for the payment of taxes. The effective time of the lien is also fixed in the act. Subsection (b) of section 115, 26 U.S.C.A. (see 26 U.S.C.A. § 1562) provides that the lien shall not be valid as against any mortgagee, purchaser, or judgment creditor until notice has been filed. Provision is made for filing notice in accordance with the laws of the state, or in the office of the clerk of the United States District Court in the district in which the property subject to the lien is situated. In the instant case notice was properly filed in accordance with the statute.
It is noteworthy that the act provides that the lien shall not be valid as against any mortgagee until notice has been filed. It does not provide...
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