Potter v. United States, Civ. A. No. 1313.
| Decision Date | 31 March 1953 |
| Docket Number | Civ. A. No. 1313. |
| Citation | 111 F. Supp. 585 |
| Parties | POTTER v. UNITED STATES et al. |
| Court | U.S. District Court — District of Rhode Island |
Morris S. Waldman, Wm. C. H. Brand, Providence, R. I., for plaintiff.
Thomas J. Capalbo, Asst. U. S. Atty. for District of Rhode Island, Westerly, R. I., for defendants.
This is an action brought by Charles W. Potter, of East Providence, Rhode Island, against the United States of America, by which the plaintiff, a mortgagee, is attempting to establish the priority of a mortgage held by him from Harry Crawshaw's Grill, Inc., over certain federal tax liens filed by the defendant for taxes due from said Harry Crawshaw's Grill, Inc. The complaint prays for a declaratory judgment, pursuant to the provisions of 28 U.S.C.A. § 2201, determining the rights of the parties and their respective priorities to the property of said corporation.
In its answer the defendant asks that it be granted judgment establishing the priority of its lien as against the claim of the plaintiff; that its lien be foreclosed pursuant to the provisions of § 3678 of the Internal Revenue Code and § 2410(c) of Title 28 U.S.C.A.; and that the amount due the defendant for said taxes be ordered paid.
The matter was submitted to the Court for decision on an agreed statement of facts and on oral arguments. The essential facts are substantially as follows: On June 29, 1949, Harry Crawshaw's Grill, Inc., a Rhode Island corporation, executed and delivered a promissory note to Margaret Crawshaw in the sum of $11,000, bearing interest at the rate of 5 per cent per annum on the unpaid balance. The note was payable in monthly installments of $329.68, the first payment being due on July 9, 1949. This promissory note was also signed by Harry L. Wilcox, who was the president and treasurer of the corporation. To secure payment of this note, the corporation executed a mortgage on certain personal property, consisting of restaurant equipment, located at 22 Waterman Avenue, East Providence, Rhode Island. This mortgage was duly recorded in the Town Clerk's Office in said Town of East Providence. Assessment lists were received by the Collector of Internal Revenue, at Providence, Rhode Island, on May 22, 1950, December 4, 1950, and March 7, 1951, disclosing that the above corporation, Harry Crawshaw's Grill, Inc., owed to the defendant the amount of $2,201.17 in withholding and F.I. C.A. taxes. Following the receipt of each assessment list, the Collector of Internal Revenue notified the taxpayer, Harry Crawshaw's Grill, Inc., of the tax due, and requested payment thereof.
On April 12, 1951, the defendant, under its Internal Revenue Laws, filed with the Town Clerk of the Town of East Providence, an original notice of a tax lien dated April 11, 1951, against said Harry Crawshaw's Grill, Inc.
The corporation defaulted in the payment of its mortgage note to Margaret Crawshaw, and the latter, through her attorneys, commenced foreclosure proceedings against the personal property which had served as security for the mortgage.
Thereupon Harry L. Wilcox and Doris L. Wilcox approached the plaintiff, to whom they were already personally indebted in the sum of $1,000, and requested and importuned him to advance to the corporation sufficient funds to pay off the balance due to Margaret Crawshaw on said promissory note. At that time the balance on the note, including costs and counsel fees, amounted to $3,867.
The plaintiff, being completely ignorant of the existence of the tax lien filed by the defendant, advanced to the corporation the above sum of $3,867, which was then used to pay the balance of the note of June 29, 1949. As a result of this payment, the foreclosure proceedings against the corporation's personal property were stopped, and the said mortgage was discharged.
The corporation then delivered to the plaintiff a note, dated August 3, 1951, in the sum of $4,867. This sum included not only the $3,867 which had been advanced by the plaintiff to discharge the original mortgage, but included an additional sum of $1,000, which represented the unsecured debt owed by Harry L. Wilcox and Doris L. Wilcox to the plaintiff. This new note for $4,867 was payable to the plaintiff on demand, with interest at the rate of 8 per cent, and was signed by the corporation and by Harry L. Wilcox and Doris L. Wilcox. As security for this new note the corporation executed a mortgage to the plaintiff on the same personal property which had previously served as security for the earlier note. This personal property mortgage was duly recorded on August 6, 1951, with the Town Clerk of the Town of East Providence.
At the time the plaintiff received the above note and mortgage, he had no personal knowledge concerning the lien filed on April 12, 1951, by the defendant, and the mortgage on the said personal property contained a warranty that it was free and clear of all encumbrances.
No payments on the corporation's note of August 3, 1951, either of principal or interest, were ever made to the plaintiff, and in the early part of October 1951, the attorneys for the plaintiff made a written demand on the debtors for payment of the note. This demand was not complied with, and on November 20, 1951, the plaintiff, through his attorneys, commenced foreclosure proceedings against the mortgaged personal property.
It was also on November 20, 1951, that the defendant, under a duly issued warrant for distraint, based upon the lien it had filed on April 12, 1951, seized said personal property in East Providence, for non-payment of the taxes above referred to, the balance of said taxes at that time being $1,857.42.
On December 5, 1951 the plaintiff commenced his action in this Court, and by a stipulation entered into by the parties, the defendant was authorized to sell the mortgaged personal property under its seizure and distraint, and to deposit the net receipts of the sale in the registry of the Court to await the final judgment and determination by the Court of the respective rights of the parties in this matter. In accordance with the terms of this stipulation the personal property above referred to was sold on December 17, 1951, and the sum of $3,400 which was realized from the sale was deposited in the registry of the Court.
To establish the priority of his claim over that of the defendant, the plaintiff relies on the theory of conventional subrogation. Priority is claimed, however, only to the extent of $3,867, that being the amount advanced by the plaintiff to discharge the previous mortgage on the corporation's personal property. This was the same property upon which the defendant had filed its lien, unknown to the plaintiff. The plaintiff contends that the defendant is in no worse position now than it was before the discharge of the old mortgage, and that the plaintiff, having advanced the funds to discharge that mortgage, and having become the...
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U.S. v. Beauchamp, Case No. 07-211 S.
...of equitable subrogation. Though this concept is a flexible one and has been recognized in this District, see Potter v. United States, 111 F.Supp. 585, 588-89 (D.R.I.1953), it is an open question whether the Court could apply it in these circumstances to allow subrogation to a mortgage once......
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Peterson v. United States, C 81-0021J.
...cases reveals little support for the plaintiff's argument and discloses considerable reason for a contrary result. Potter v. United States, 111 F.Supp. 585 (D.R.I.1953), cited by plaintiff, deals with the rights of a third party who subrogated himself to the rights of a mortgagee whose inte......
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United States v. Halton Tractor Company
...even in the absence of an assignment. The facts in this case are almost precisely the same as those in the case of Potter v. United States, D.C.R.I., 111 F.Supp. 585. That case is useful here because of its clearly reasoned exposition of the rules relating to the right of subrogation, and b......
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First Nat. Bank & Trust Co., Woodbury v. MacGarvie
...be determined upon the same plane and with the same equitable attitude accorded claims in competition therewith. Cf. Potter v. United States, 111 F.Supp. 585 (D.C.R.I.1953). Secondly, it is a fundamental principle of the conflict of laws that legal consequences attaching to a right of redem......