Paul v. United States, 8987-8991.

• Decision Date: 08 April 1942
• Docket Number: No. 8987-8991.,8987-8991.
• Parties: PAUL et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Sixth Circuit

127 F.2d 64 (1942)

PAUL et al. v. UNITED STATES.

Nos. 8987-8991.

Circuit Court of Appeals, Sixth Circuit.

April 8, 1942.

Edward Reid, Jr., and John H. Witherspoon, both of Detroit, Mich. (Miller, Canfield, Paddock & Stone, of Detroit, Mich., on the brief), for appellant, Detroit Bank.

Herbert J. Rushton, Edmund E. Shepherd, and Daniel J. O'Hara, all of Lansing, Mich., for appellants State of Michigan and Jno. J. O'Hara.

Wm. E. Dowling and Samuel Brezner, both of Detroit, Mich., for appellants Wayne County and Jacob P. Sumeracki, Treas.

Paul E. Krause and John H. Witherspoon, both of Detroit, Mich., for appellants City of Detroit and Albert E. Cobo, Treas.

Charles A. Lorenzo, of Detroit, Mich., for appellants John W. Paul, and others.

Morton K. Rothschild, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key, J. Louis Monarch, and Carl J. Marold, Sp. Assts. to Atty. Gen., and John C. Lehr, of Detroit, Mich., on the brief), for the United States.

Before ALLEN, MARTIN, and McALLISTER, Circuit Judges.

McALLISTER, Circuit Judge.

For estate tax on the estate of John P. Paul, deceased, the government claims a lien superior to the liens and claims of appellants, who seek review of the order of dismissal of their complaint, entered by the District Court. Appellants include the State of Michigan, County of Wayne, and City of Detroit, claiming liens based upon unpaid taxes, accruing subsequent to the death of Mr. Paul; the Detroit Bank, formerly the Detroit Savings Bank, with a claim on certain mortgages executed by decedent; and on other mortgages executed after his death, by his successors, and thereafter foreclosed; and the children of decedent. The latter, however, have filed no brief and it is unnecessary to review their contentions in the District Court. The substance of the claim asserted against the government is that its lien depends upon demand, which was not made; and, moreover, as against the mortgagee, that the lien is not valid because of failure to file notice by the Collector of Internal Revenue, as prescribed by statute.

Appellants contend that the government is not entitled to priority of lien, relying upon Sec. 3186 of the Revised Statutes as amended by Sec. 613(a) of the Revenue Act of 1928, c. 852, 45 Stat. 791, which provides as follows:

"If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount * * * shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person. Unless another date is specifically fixed by law, the lien shall arise at the time the assessment list was received by the collector and shall continue until the liability for such amount is satisfied or becomes unenforceable by reason of lapse of time.

"(b) Such lien shall not be valid as against any mortgagee, purchaser, or judgment creditor until notice thereof has been filed by the collector —

"(1) in accordance with 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 provided for the filing of such notice; 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 provided for the filing of such notice; or

"(3) in the office of the clerk of the Supreme Court of the District of Columbia, if the property subject to the lien is situated in the District of Columbia.

"(c) Subject to such regulations as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may prescribe, the collector of internal revenue charged with an assessment in respect of any tax —

"(1) May issue a certificate of release of the lien * * *.

"(d) A certificate of release or of partial discharge issued under this section shall be held conclusive that the lien upon the property covered by the certificate is extinguished.

"(e) The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may by regulation provide for the acceptance of a single bond complying both with the requirements of section 272(j) of the Revenue Act of 1928 (relating to the extension of time for the payment of a deficiency), or of any similar provisions of any prior law, and the requirements of subsection (c) of this section.

"(f) Subsections (c), (d), and (e) of this section shall apply to a lien in respect of any internal-revenue tax, whether or not the lien is imposed by this section." 26 U.S.C.A. Int.Rev.Acts, page 461.

The government contends that the issues in this case are governed by Sec. 315(a) of the Revenue Act of 1926, c. 27, 44 Stat. 9, 26 U.S.C.A. Int.Rev.Acts, page 253, relating to the estate tax, which provides: "Unless the tax is sooner paid in full,...