Kirkman Furniture Co., In re, 593

• Decision Date: 27 February 1963
• Docket Number: No. 593,593
• Court: North Carolina Supreme Court
• Parties: , 11 A.F.T.R.2d 1502, 63-2 USTC P 9509 In the Matter of KIRKMAN FURNITURE COMPANY, a corporation, In State Court Receivership. UNITED STATES of America, Appellant, v. Ben L. HERMAN, State Court Receiver et al., Appellees.

Page 471

129 S.E.2d 471

258 N.C. 733, 11 A.F.T.R.2d 1502,

63-2 USTC P 9509

In the Matter of KIRKMAN FURNITURE COMPANY, a corporation,

In State Court Receivership.

UNITED STATES of America, Appellant, v. Ben L. HERMAN, State Court Receiver et al., Appellees.

No. 593

Supreme Court of North Carolina.

Feb. 27, 1963

Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Joseph Kovner and Fred E. Youngman, Attorneys, Department of Justice, and William H. Murdock, U. S. Atty., for appellant, United States of America.

Arch K. Schoch, High Point, for Receiver, appellee.

Charles W. McAnally, High Point, for North Carolina National Bank, appellee.

Forrest E. Campbell and William D. Branham, Greensboro, for Guilford County and City of High Point, appellees.

DENNY, Chief Justice.

The appellant has preserved no exceptions entered in the court below nor has it set out any assignments of error in the record on appeal. Even so, since we allowed certiorari, we will examine the record proper to determine whether or not there is error of law appearing thereon adversely affecting the rights of the appellant as between it and the appellees who are parties to the appeal. Schloss v. Jamison, 258 N.C. 271, 128 S.E.2d 590; Logan v. Sprinkle, 256 N.C. 41, 123 S.E.2d 209; Cratch v. Taylor, 256 N.C. 462, 124 S.E.2d 124; Holden v. Holden, 245 N.C. 1, 95 S.E.2d 118.

Counsel who argued the case before this Court on behalf of the appellant stated to the Court that the only parties to this appeal are those on whom notice of its petition for writ of certiorari were served. Consequently, the only question presented for our consideration and determination is whether or not the order of distribution entered in the Municipal Court of the City of High Point and affirmed in the Superior Court of Guilford County was erroneous in any respect as between the appellant and those lienholders who are parties to this appeal. It follows, therefore, that we will not consider or undertake to determine whether or not there was error in the preference given to the claims of the wage earners entered in the Municipal Court of the City of High Point on 31 January 1961. The order with respect to the priority given to such wage earners stands unchallenged on this appeal, notwithstanding our decision in Leggett v. Southeastern People's College, 234 N.C. 595, 68 S.E.2d 263.

The Congress of the United States in 1797 enacted a statute conferring upon the government a right of priority in payment out of the assets of an insolvent debtor of all claims due the United States. There has been no substantial change in this statute in the meantime, which is now R.S. 3466, 31 U.S.C.A. § 191, the pertinent part of which reads as follows: 'Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied.'

'It is well settled that the priority statute does not create a lien upon the debtor's property in favor of the United States, but merely confers upon the government a right of priority in payment out of that property in the hands of the debtor's assignees or other representatives, under the conditions specified in the statute. It follows that if, before the right of priority of the United States accrues under the statute, the debtor parts with his property, either absolutely or conditionally by way of mortgage or other liens, or involuntary liens are acquired against the property, the priority of the United States does not attach to such property, and the claims of the transferee, mortgagee, or other lienee are superior to that of the United States, at least where the lien so created or acquired is a specific lien upon specific property, as contradistinguished from a general lien upon all the property of the debtor. While the lower federal courts have followed the foregoing rule, the Supreme Court of the United States has declared that it has not yet decided whether a specific and perfected lien will be accorded priority against the United States under Revised Statutes section 3466. However, it is well settled that, even though section 3466 does not creat a lien upon the debtor's property in favor of the United States, a claim of the United States within the scope of the statute is entitled to priority as against a pre-existing inchoate lien on the debtor's property. For the purposes of the federal statute, a preexisting lien is inchoate and not specific, unless it is definite, as of the crucial time of insolvency, in at least three respects: (1) the identity of the lienor, (2) the amount of the lien, (3) and the property to which it attaches. * * * ' (Emphasis added.) 29 Am.Jur., Insolvency, section 77, page 346 et seq. Bramwell v. United States Fidelity & Guaranty Co., 269 U.S. 483, 46 S.Ct. 176, 70 L.Ed. 368; United States v. Emory, 314 U.S. 423, 432, 62 S.Ct. 317, 86 L.Ed. 315; 44 C.J.S. Insolvency § 14e(1) (b), page 374.

The priority of the United States, under the provisions of the above statute, attaches upon the appointment of a voluntary or involuntary receiver, People of State of Ill. ex rel. Gordon v. Campbell, 329 U.S. 362, 67 S.Ct. 340, 91 L.Ed. 348, or upon the date of the debtor's assignment for the benefit of creditors, United States v. Waddill, Holland & Flinn, 323 U.S. 353, 65 S.Ct. 304, 89 L.Ed. 294; United States v. Texas, 314 U.S. 480, 62 S.Ct. 350, 86 L. Ed. 356; Price v. United States, 269 U.S. 492, 46 S.Ct. 180, 70 L.Ed. 373; In re Mitchell's Restaurant (1949), 31 Del.Ch. 121, 67 A.2d 64; Spokane Merchants' Ass'n v. State, 15 Wash.2d 186, 130 P.2d 373; National Surety Corp. v. Sharpe, 236 N.C. 35, 72 S.E.2d 109; Bishop v. Black, 233 N.C. 333, 64 S.E.2d 167.

However, the right to priority of payment under the above statute does not give the government any lien or right that may be enforced 'against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed by the collector' in accordance with the provisions of 26 U.S.C.A. § 6323 (formerly 26 U.S.C.A. § 3672).

As we construe the record before us, the debtor, Kirkman Furniture Company, conditionally parted with its title to all the real estate involved by executing a deed of trust thereon to a trustee to secure a loan of $10,000 from the North Carolina National Bank (formerly Security National Bank), which deed of trust was executed and filed of record on 26 November 1958, nearly two years prior to the appointment of the receiver in this action.

Furthermore, all the delinquent taxes now due Guilford County and the City of High Point had become a lien on the real estate of the debtor prior to the appointment of the receiver for the debtor on 13 September 1960. G.S. § 105-280; G.S. § 105-325; G.S. § 105-340. Moreover, all taxes due ...