Macatee, Inc. v. United States

Decision Date30 June 1954
Docket NumberNo. 14840.,14840.
PartiesMACATEE, Inc. v. UNITED STATES.
CourtU.S. Court of Appeals — Fifth Circuit

Harry I. Freedman, Dallas, Tex., for appellant.

Dudley J. Godfrey, Jr., Ellis N. Slack, Alonzo W. Watson, Jr., Special Assts. to the Atty. Gen., H. Brian Holland, Asst. Atty. Gen., John C. Ford, Asst. U. S. Atty., Dallas, Tex., Heard L. Floore, U. S. Atty., Fort Worth, Tex., for appellee.

Before STRUM and RIVES, Circuit Judges, and DAWKINS, District Judge.

RIVES, Circuit Judge.

Macatee, Inc. filed this action against the United States of America pursuant to the provisions of 28 U.S.C.A. § 2410 to foreclose a lien on real property on which the United States also claimed a lien. The lien of Macatee, Inc. was a statutory attachment lien obtained by the issuance of a writ of attachment and levy thereof on September 15, 1952, followed by return of the officers pursuant to Article 6662 of the Revised Civil Statutes of Texas. On April 24, 1953, Macatee, Inc. obtained judgment in the attachment suit against A. W. Lagow in the sum of $6,505.49.

The United States asserted claims against A. W. Lagow for employment and social security taxes (Federal Insurance Contribution Act, see 26 U.S.C.A. § 1400 et seq.) The pertinent facts concerning those claims may be most readily grasped from the following schedule:

                                                               Date Collector   Date of
                                             Date of receipt   gave notice of   filing
                                             by Collector      assessment and   notice of
                                             of certified      made demand      tax lien
                               For period    assessment        for payment on   with County
                  Amount         ending      lists             taxpayer         Clerk
                  ----------------------------------------------------------------------------
                  $ 2,420.63   3rd Qtr. of   May 19, 1952      May 15, 1952     Sept. 23, 1952
                                 1951
                  $   127.43   4th Qtr. of   May 19, 1952      May 15, 1952     Sept. 23, 1952
                                 1951
                  $19,516.57   2nd Qtr. of   Aug. 5, 1952      July 31, 1952    Jan.   9, 1953
                                 1951
                  $20,463.61   3rd Qtr. of   Aug. 5, 1952      July 31, 1952    Jan.   9, 1953
                                 1951
                

The district court found that the liens for taxes of the United States on the property of Lagow were superior to Macatee's attachment lien and ordered the property sold pursuant to 28 U.S.C.A. §§ 2001, 2002, and the proceeds of sale to be paid into the registry of the court and distributed, first to the payment of court costs, second to the payment of the claims of the United States, third to the payment of the judgment to Macatee, Inc., and lastly the balance, if any, to A. W. Lagow.

Appellant's first contention is that, since its attachment lien was levied upon specific property of Lagow and notice of the writ and return filed with the County Clerk of Dallas County before the United States filed its notices of tax liens with the County Clerk, the attachment lien is superior to the liens of the United States. In considering this contention, we must assume that appellant's attachment lien created by Texas law was a choate lien under the laws of that State and was a specific and perfected lien under federal law. United States v. Liverpool & London & Globe Ins. Co., 5th Cir., 209 F.2d 684.1 The relative priority of the liens here involved is then to be determined by applying the test of "the first in time is the first in right." United States v. City of New Britain, Conn., 347 U.S. 81, 74 S.Ct. 367; United States v. Liverpool & London & Globe Ins. Co., supra; United States v. Albert Holman Lumber Co., 5 Cir., 206 F.2d 685, rehearing denied 208 F.2d 113. Application of that test to the undisputed facts of this case establishes that the tax liens of the United States were first in time and, therefore, prior in right. The assessment lists as to the taxes due the United States were received by the Collector on May 19, 1952 and August 5, 1952. Thereupon, under the provisions of Section 3671 of the Internal Revenue Code2 liens arose in favor of the United States and, under the provisions of Section 3670, such liens extended to "all property and rights to property, whether real or personal, belonging to such person." Macatee's lien could have arisen no earlier than September 15, 1952, the date its suit was filed and the writ of attachment was issued. Accordingly, the liens for federal taxes arose before Macatee's attachment lien.

It is true that notices of the tax liens were filed by the Collector with the County Clerk on September 23, 1952 and January 9, 1953, after the writ of attachment had been levied. The filing of such notices, however, was necessary to protect only against the persons named in the statute, 26 U.S.C.A. § 3672, that is "as against any mortgagee, pledgee, purchaser, or judgment creditor". See United States v. Security Trusts & Savings Bank, 340 U.S. 47, 53, 71 S.Ct. 111, 95 L.Ed. 53 (concurring opinion of Mr. Justice Jackson); United States v. City of New Britain, Conn., 347 U.S. 81, 88, 74 S.Ct. 367. The notices of tax liens were filed with the County Clerk prior to the time Macatee reduced its claim against the taxpayer to judgment.

Appellant's second contention is that the only demands for payment by the Collector were made prior to the receipt of the assessment lists and were insufficient because, according to appellant's contention, the lien for unpaid taxes upon the property of a delinquent taxpayer does not arise in favor of the United States until the Collector makes demand for payment after he receives the assessment list.3 The cases cited by the appellant sustain the proposition that a demand for payment of unpaid taxes is a condition precedent to the enforcement of a lien in favor of the United States upon the property of a delinquent taxpayer. It is true, also, that 26 U.S. C.A. § 3655 requires the Collector to notify the taxpayer after he has received the list of taxes from the Commissioner. The purpose of requiring such a notice and demand is for the protection of the taxpayer. In re Baltimore Pearl Hominy Co., 4 Cir., 5 F.2d 553, 555. It has little or no relation to determining priority of liens between the United States and other lienholders. If a demand after receipt of the assessment list by the Collector is essential, the demand would relate back to the date of such receipt and the lien would take priority from that date. See 26 U.S.C.A. § 3671, quoted in footnote 2, supra. Cf. Citizens National Trust & Savings Bank of Los Angeles v. United States, 9 Cir., 135 F.2d 527.

Appellant insists that, under Section 3670 of the Internal Revenue Code, 26 U.S.C.A. § 3670,4 the lien does not arise until the taxpayer has neglected or refused to pay the tax after demand. That section does not, however, require that the demand be made after the receipt of the assessment list. It requires only that the taxpayer be "liable" to pay the taxes and that he "neglects or refuses to pay the same after demand".

Appellant's argument seems to be based on the old theory of ad valorem taxation, that there must be a formal act of assessment before liability for a tax arises, 51 Am.Jur., Taxation, Section 647, Footnote 11. That does not generally hold true as to excise taxes, id. Section 649, Footnote 16. Chief Judge Hutcheson of this Court, when a district judge, wrote as follows concerning income taxes:

"As to the first question, while it is true that as to ad valorem taxes there must be a formal act of assessment by the officers, or board of officers, elected or appointed for that purpose, which must be made a matter of record before liability for a tax arises (26 R.C.L. § 297), liability for income taxes arises, and in some sense it may be said that they accrue, at the time the gains, profits, and income passed into the hands of the recipient. The return is required in any case before the day of the levy, so that it is clear that the tax is due — that is, that the recipient of the gains, profits, and income is liable for it — before it is assessed, as the return is only to ascertain if the liability exists, and its extent. 26 R.C.L. § 127." United States v. Proctor, D.C.So.Dist.Texas, 286 F. 272, 273-274.

The Court of Claims has noted more than once that "Taxes may be and often are collected without assessment". Meyersdale Fuel Co. v. United States, 44 F.2d 437, 446, 70 Ct.Cl. 765; Muir v. United States, 3 F.Supp. 619, 621, 78 Ct.Cl. 150; Pioneer Coal & Coke Co. v. United States, 14 F.Supp. 661, 669, 83 Ct.Cl. 200. It has been observed that "The federal income tax system is based upon a theory of self-assessment. It is a basic principle of that system that a taxpayer is under a duty to correctly report his taxable income and to pay the...

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