National Sur. Corp. v. Sharpe, 604

• Citation: 236 N.C. 35,72 S.E.2d 109
• Decision Date: 22 August 1952
• Docket Number: No. 604,604
• Court: United States State Supreme Court of North Carolina
• Parties: NATIONAL SURETY CORP. et al. v. SHARPE et al.

Page 109

72 S.E.2d 109

236 N.C. 35

NATIONAL SURETY CORP. et al. v. SHARPE et al.

No. 604

Supreme Court of North Carolina.

Aug. 22, 1952

John M. Spratt, York, S. C., and G. S. Steele, Rockingham, for the plaintiff, York Mills, Inc., appellant.

W. D. Sabiston, Jr., Carthage, for the claimant, American Woolen Co., appellant.

Johnson & Johnson, Aberdeen, and W. D. Sabiston, Jr., Carthage, for the claimants, Artistic Weaving Co. et al., appellants.

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McKeithen & McConnell, Pinehurst, for the claimant, Esso Standard Oil Co., appellee.

W. Clement Barrett, Carthage, for the claimants, Gouger Electric Company and the employees of the receiver, appellees.

ERVIN, Justice.

The order of distribution consigns the claims of the York Mills and the eleven appealing judgment creditors to the lowest category. The assignments of error assert that the claims of these parties are of high dignity; that as such they are entitled to preference in the distribution of the assets in the hands of the receiver over nearly all the claims assigned to the preceding classes of priority; and that in consequence the court erred to the prejudice of the appellants in relegating their claims to positions inferior to such other claims. In addition, the assignments of error declare that there is neither a factual nor a legal basis for the claim of the United States for damages for the supposed breaches of contracts allegedly made by the receiver with governmental agencies.

It is plan, therefore, that this appeal necessitates a review of virtually all of the provisions of the order of distribution. In performing this judicial task, however, we will not give the twenty nonappealing judgment creditors mentioned in paragraph 4 of the statement of facts any greater relief than that afforded them in the court below even if we conclude that the presiding judge committed error in putting them in the lowest category of creditors. The non-appealing judgment creditors have acquiesced in the order of distribution. As a general rule, an appellate court will not grant relief to a party who has not appealed or complained of the judgment. Van Dyke v. Aetna Life Insurance Co., 173 N.C. 700, 91 S.E. 600; 5 C.J.S., Appeal and Error, § 1835.

The first question presented by the assignments of error involves these subsidiary inquiries:

1. What were the relative rights of the creditors whose claims antedate the receivership at the time of the appointment of the receiver?

2. To what extent, if any, have those rights been changed or impaired by events occurring during the receivership?

In determining the relative rights of the pre-existing creditors against the defendants and their property at the time of the appointment of the receiver, recourse must be had to relevant federal statutes and state laws. Since constitutionally enacted federal statutes take precedence over state laws under the supremacy clause of the Constitution of the United States, we will first refer to the pertinent federal statutes. Art. VI, Sec. 2, U.S.Const.

These statutes and the decisions interpreting them are set forth in the numbered paragraphs which follow.

1. The statute codified as 31 U.S.C.A. § 191, which had its genesis in the Act of Congress of March 3, 1797, stipulates that '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 the United States shall be first satisfied; and the priority established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.'

2. Whenever an insolvent is indebted to the United States and a receiver is put in charge of his property, 31 U.S.C.A. § 191 comes into play, and the debts due to the United States must be first satisfied. People of State of Illinois ex rel. Gordon v. Campbell, 329 U.S. 362, 67 S.Ct. 340, 91 L.Ed. 348; Bramwell v. United States Fidelity & Guaranty Co., 269 U.S. 483, 46 S.Ct. 176, 70 L.Ed. 368; United States v. Oklahoma, 261 U.S. 253, 43 S.Ct. 295, 67 L.Ed. 638; Leggett v. Southeastern People's College, 234 N.C. 595, 68 S.E.2d 263; Bishop v. Black, 233 N.C. 333, 64 S.E.2d 167. This

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is true because putting a receiver in charge of an insolvent debtor's property constitutes an act of bankruptcy. 11 U.S.C.A. § 21, sub. a(5); People of State of Illinois ex rel. Gordon v. Campbell, supra; Manufacturers' Finance Co. v. Mckey, 294 U.S. 442, 55 S.Ct. 444, 79 L.Ed. 982.

3. Section 191 of Title 31 of the United States Code Annotated does not create a lien upon the insolvent debtor's property in favor of the United States, but merely confers upon the United States a right of priority in payment out of the property in the hands of the receiver. Bramwell v. United States Fidelity & Guaranty Co., supra; United States v. Oklahoma, supra; Beaston v. Farmers' Bank of Delaware, 12 Pet. 102, 9 L.Ed. 1017; United States v. Fisher, 2 Cranch 358, 2 L.Ed. 304. The priority of the United States arises upon the appointment of the receiver. People of State of Illinois ex rel. Gordon v. Campbell, supra; Leggett v. Southeastern People's College, supra; Bishop v. Black, supra. As a consequence, 31 U.S.C.A. § 191 does not give the United States priority over a bona fide conveyance made by the debtor before the receivership, or over a prior specific lien embracing specific property of the debtor as contradistinguished from a general lien covering all his property. People of State of Illinois ex rel. Gordon v. Campbell, supra; Beaston v. Farmers' Bank of Delaware, supra; Brent v. Bank of Washington, 10 Pet. 596, 9 L.Ed. 547; Field v. United States, 9 Pet. 182, 9 L.Ed. 94; Conard v. Atlantic Ins. Co. of New York, 1 Pet. 386, 7 L.Ed. 189; Thelusson v. Smith, 2 Wheat. 396, 4 L.Ed. 271; 75 C.J.S., Receivers, § 284.

4. Taxes due the United States constitute debts within the provision of 31 U.S.C.A. § 191 that debts due the United States shall be first satisfied in case of a debtor's insolvency. Com. of Massachusetts v. United States, 333 U.S. 611, 68 S.Ct. 747, 92 L.Ed. 968; People of State of Illinois ex rel. Gordon v. United States, 328 U.S. 8, 66 S.Ct. 841, 90 L.Ed. 1049; United States v. Texas, 314 U.S. 480, 62 S.Ct. 350, 86 L.Ed. 356; Stripe v. United States, 269 U.S. 503, 46 S.Ct. 182, 70 L.Ed. 379; Price v. United States, 269 U.S. 492, 46 S.Ct. 180, 70 L.Ed. 373.

5. The statutes now embodied in Sections 3670 and 3671 of Title 26 of the United States Code Annotated, which constitute a revision of the Act of Congress of july 13, 1866, give the United States a lien for taxes due it. Section 3670 provides that if any person liable to pay a tax to the United States neglects or refuses to pay such tax after demand, the amount (including any interest, penalty, additional amount, or addition to such tax, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights of property, whether real or personal, belonging to such person. Under Section 3671, the lien for federal taxes arises at the time the assessment list is received by the collector of internal revenue unless another date is specifically fixed by law, and continues until liability for the tax is satisfied or becomes unenforceable by reason of lapse of time.

6. Under these statutes, unrecorded federal tax liens are accorded priority over all persons except those given protection by the subsequently enacted statute mentioned in the next paragraph. United States v. Security Trust & Savings Bank, 340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53; United States v. Snyder, 149 U.S. 210, 13 S.Ct. 846, 37 L.Ed. 705; United States v. Barndollar & Crosbie, 10 Cir., 166 F.2d 793; United States v. Sampsell, 9 Cir., 153 F.2d 731; MacKenzie v. United States, 9 Cir., 109 F.2d 540; United States v. Fisher, D.C., 93 F.Supp. 73; United States v. Caldwell, D.C., 74 F.Supp. 114; United States v. Record Pub. Co., D.C., 60 F.Supp. 194; Filipowicz v. Rothensies, D.C., 43 F. Supp. 619.

7. Section 3672 of Title 26 of the United States Code Annotated, which is a re-enact-ment and extension of an Act of Congress of March 4, 1913, specifies that the federal tax lien created by Sections 3670 and 3671 'shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed

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by the collector--(1) In the office in which the filing of such notice is authorized by the law of the State or Territory in which the property subject to the lien is situated, whenever the State or Territory has by law authorized the filing of such notice in an office within the State or Territory; or (2) In the office of the clerk of the United States district court for the judicial district in which the property subject to the lien is situated, whenever the State or Territory has not by law authorized the filing of such notice in an office within the State or Territory'. North Carolina has provided by statute that 'Notices of liens for internal revenue taxes payable to the United States * * * may be filed in the office of the register of deeds of the county * * * within which the property subject to such lien is situated.' G.S. § 44-65.

8. Under Section 3672 of Title 26 of the United States Code Annotated, the date of the filing of the notice of a federal tax lien controls in a controversy respecting priority as between the United States and a judgment lien creditor, a mortgagee, a pledgee, or a purchaser. Board of Sup'rs of Louisiana State University v. Hart, 210 La. 78, 26 So.2d 361, 174 A.L.R. 1366; Tildesley Coal Co. v. American Fuel Corporation, 130 W.Va. 720, 45 S.E.2d 750. As a...