Petition of Gilbert Associates

• Decision Date: 01 July 1952
• Parties: , 52-2 USTC P 9473, 42 A.F.T.R. 483 Petition of GILBERT ASSOCIATES, Inc.
• Court: New Hampshire Supreme Court

Page 499

90 A.2d 499

97 N.H. 411, 52-2 USTC P 9473, 42 A.F.T.R. 483

Petition of GILBERT ASSOCIATES, Inc.

Supreme Court of New Hampshire.

July 1, 1952.

Rehearing Denied July 30, 1952.

John J. Sheehan, U. S. Dist. Atty., Peterborough, and Robert D. Branch, Asst. U. S. Dist. Atty., Concord (Mr. Branch orally), for the claimant United States of America.

Philip H. Faulkner and George R. Hanna, Keene (Mr. Hanna orally), for claimant Town of Walpole.

DUNCAN, Justice.

The chronology of events affecting the rights of the claimants was as follows: April 1, 1947 town property tax, $612.95; April 1, 1948 town property tax, $690.85; August 6, 1948, notice of tax lien filed by United States of America; August 24, 1948 defendant's property advertised for 1947 property taxes; September 25, 1948 defendant's property sold for 1947 tax; April 1, 1949 town property tax, $383; August 12, 1949 temporary receivers appointed; August 23, 1949 defendant's property advertised for 1948 property tax; September 24, 1949 defendant's property sold for 1948 tax; January 30, 1950 permanent receiver appointed; April 1, 1950 town property tax, $421. The dates of assessment of the annual property taxes do not appear.

The town's exception to the decree that the claim of the United States has priority over the claim of the Town for the 1949 tax has been expressly waived.

The United States takes the position that the defendant's machinery was personal property, and relies upon the decision in Flack v. Byse Agency, Inc., 96 N.H. 335, 76 A.2d 788, for the proposition that no lien for taxes attaches to personalty. This argument is sufficiently answered by statute. Machinery is taxable as real estate, R.L. c. 73, § 8; Kolodny v. Laconia, 96 N.H. 337, 76 A.2d 507, and as such is made subject to a lien 'for all taxes thereon.' R.L. c. 80, § 17. If it may be personal property for purposes other than taxation the force of the tax statute is not affected. Kolodny v. Laconia, supra; O'Donnell v. Meredith, 75 N.H. 272, 73 A 32; Hedding etc., Ass'n v. Epping, 88 N.H. 321, 322, 323, 189 A. 347. The tax becomes due on April 1, R.L. c. 74, § 1; c. 75, § 1; Saidel v. Felsher, 83 N.H. 582, 145 A. 782, is required to be assessed before July 1, R.L. c. 77, § 9, amended by Laws 1947, c. 221, and is secured by a lien upon the real estate upon which it is assessed continuing 'until one year from October first following the assessment.' R.L. c. 80, § 17. It is settled by our decisions that the assessment of a tax is in the nature of a judgment, enforced by a warrant instead of an execution. Boody v. Watson, 64 N.H. 162, 167, 9 A. 794; Jaffrey v. Smith, 76 N.H. 168, 171, 80 A. 504; Nottingham v. Newmarket Mfg. Co. 84 N.H. 419, 151 A. 709. See also, Automatic Sprinkler Corp. v. Marston, 94 N.H. 375, 54 A.2d 154. In execution of the warrant real estate and property taxable as such may be sold in foreclosure of the statutory lien. R.L. c. 80, § 18. The defendant's machinery was properly taxed as real estate, and was subject to the lien in such case provided.

The liens which the United States seeks to enforce arise under the provisions of 26 U.S.C.A. § 3670, providing that a tax which the taxpayer neglects or refuses to pay shall be a lien in favor of the United States 'upon all property and rights to property * * * belonging to such person.' Such lien arises when the assessment list is received by the collector, § 3671, subject to the qualification that it 'shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed' in the office of the Clerk of the United States District Court. § 3672. It is argued that the Town does not come within the class of persons entitled to the benefit of the latter section, while the Town asserts that it is protected as a 'judgment creditor.'

It cannot be doubted that the interpretation of the statute is a question of federal law. United States v. Security Trust & Savings Bank, 340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53. Judgment creditors in order to be protected must have judgments which are secured by liens, Miller v. Bank of America, 9 Cir., 166 F.2d 415, and under the statute such liens are entitled to priority only when they attach before notice of the federal lien is filed in compliance with section 3672. The liens of the Town for taxes for the years 1947 and 1948 clearly arose before August 6, 1948, the date upon which notice of the liens of the United States was filed with the Clerk of the District Court. In the light of the principle that a tax assessment is in this jurisdiction a judgment no reason is appearent why the Town does not qualify as a judgment creditor within the meaning of the federal statute. Jaffrey v. Smith, supra; In re Northwest Wood Products Co., 7 Cir., 168 F.2d 639. The liens of the Town, having attached prior to the filing of notice of the federal liens, were not affected by them because of the provisions of section 3672. Moreover, under the provisions of section 3670, liens of the United States arising after the liens of the Town would attach only to the interest of the defendant in the property as it then stood. After April 1 of any year, or at least after assessment for such year, Dana v. Colby, 63 N.H. 169, title to the machinery was encumbered by the lien of the Town for the tax for such year, R.L. c. 80, § 17, supra; Saidel v. Felsher, supra; and the defendant was thereby divested of its rights to the extent of the lien. It does not appear that the liens of the United States arose before the rights of the defendant were thus diminished.

The United States further relies upon 31 U.S.C.A. § 191, which provides in part: 'Whenever any person indebted to the United States is insolvent * * * the debts due to the United States shall be first satisfied; * * *.' This section creates no lien in favor of the United States but affects priority only. United States v. O'Dell, 6 Cir., 160 F.2d 304. Although the question has never been determined by the United States Supreme Court, the decisions of that court strongly indicate that the priority established by this section may be overcome by a 'fully perfected and specific lien.' Illinois ex rel. Gordon v. Campbell, 329 U.S. 362, 370, 67 S.Ct. 340, 345, 91 L.Ed. 348. See also, Spokane County v. United States, 279 U.S. 80, 49 S.Ct. 321, 73 L.Ed. 621; New York v. Maclay, 288 U.S 290; United States v. Knott, 298 U.S. 544, 56 S.Ct. 902, 80 L.Ed. 1321; United States v. Texas, 314 U.S. 480, 62 S.Ct. 350, 86 L.Ed. 356; United States v. Waddill, Co., 323 U.S. 353, 65 S.Ct. 304 89 L.Ed. 294; United States v. Security Trust & Savings Bank, supra. In State v. Woodroof, 253 Ala. 620, 630, 46 So.2d 553, 561, the rule was stated as follows: 'as applied to a * * * claim of a lien for taxes, such lien is specific and perfected, if the amount of it has been fixed by a proceeding which is binding and conclusive at the date of receivership, and not open for change in any sort of proceeding which might arise thereafter; and that the lien upon the property which was received by the receiver was not dependent upon any contingency, nor subject to selection, shift or change, and nothing remained to be done then or thereafter to make such lien complete, specific or perfect, or to liquidate the debt, and nothing could be done thereafter to discharge the debt or subordinate such lien but full payment of the debt.'

The effect of the federal statute depends upon the status of the lien at the time when insolvency occurs. Massachusetts v. United States, 333 U.S. 611, 68 S.Ct. 747, 92 L.Ed. 968. For purposes of this case that time was August 12, 1949, so far as the record discloses, that being the date upon which temporary receivers were first appointed. As the brief of the United States appears to recognize, in order to overcome the priority established by section 191, a lien must be definite in three respects, as of 'the crucial time.' (1) The identity of the lien owner, (2) the amount of the lien, and (3) the property...