S. D'ANTONI, INC. v. Great Atlantic & Pacific Tea Co., Inc.

• Decision Date: 05 July 1974
• Docket Number: No. 73-2357.,73-2357.
• Citation: 496 F.2d 1378
• Parties: S. D'ANTONI, INC., Plaintiff, v. The GREAT ATLANTIC AND PACIFIC TEA COMPANY, INC., Defendant. UNITED STATES of America, Intervenor-Appellant, v. FRUEHAUF TRAILER DIVISION, et al., Creditors-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

496 F.2d 1378 (1974)

S. D'ANTONI, INC., Plaintiff, v. The GREAT ATLANTIC AND PACIFIC TEA COMPANY, INC., Defendant.

UNITED STATES of America, Intervenor-Appellant, v. FRUEHAUF TRAILER DIVISION, et al., Creditors-Appellees.

No. 73-2357.

United States Court of Appeals, Fifth Circuit.

July 5, 1974.

John R. Schupp, Asst. U. S. Atty., Chief, Civ. Div., Gerald J. Gallinghouse, U. S. Atty., New Orleans, La., for IRS.

Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, William S. Estabrook, Jane M. Edmisten, Elmer J. Kelsey, Tax Div., Dept. of Justice, Washington, D. C., for intervenor-appellant.

Charles L. Chassaignac, New Orleans, La., for Fruehauf.

Frank J. Stich, Jr., New Orleans, La., for White Motor Corp.

William W. Messersmith, III, New Orleans, La., for Int'l Harvester Co.

Joseph E. Friend, New Orleans, La., for Uniroyal.

George V. Baus, New Orleans, La., for N. E. England.

Sam Monk Zelden, New Orleans, La., for Mydland.

Peter A. Feringa, Jr., New Orleans, La., for creditors-appellees.

Harvey J. Lewis, New Orleans, La., for S. D'Antoni, Inc. Carl J. Schumacher, Jr., New Orleans, La., for The Great Atlantic & Pac. Tea Co.

Before RIVES, GEWIN and RONEY, Circuit Judges.

RONEY, Circuit Judge:

In this contest between judgment lien creditors and a United States tax lien, we are called upon to determine the correct place for filing a notice of tax lien in Louisiana to ensure a priority claim as to the personal property of a corporate tax debtor over the corporation's judgment lien creditors. The controlling statute, 26 U.S.C.A. § 6323, requires such tax notice to be filed where "the principal executive office of the business" is located. In this case, the Government filed in the Louisiana parish in which the only business office of the debtor was located. The District Court held that the Government's notice should have been filed in the parish containing the debtor corporation's "registered office" — the address designated in its incorporation papers. We reverse.

The personalty at stake in this case is the money paid into the registry of the District Court by the Great Atlantic & Pacific Tea Company, Inc. in settlement of a breach of contract action brought by S. D'Antoni, Inc., the debtor corporation. Before suit was filed, and before the other creditors involved in this case reduced their claims against D'Antoni to judgment, the United States recorded a series of notices of federal tax liens in the mortgage records of the office of the Clerk of Court of Jefferson Parish. Subsequently, the judgment creditors caused D'Antoni's interest in the suit against A & P to be seized by writs of Fieri Facias. The United States intervened, claiming priority based on the notices recorded in Jefferson Parish. Fruehauf Trailer Division, Fruehauf Corporation (representing the other judgment lien creditors under an agreement to prorate the fund should Fruehauf prevail) argued that the Government had filed in the wrong place and should have filed the notices either in Orleans Parish or with the clerk of the federal district court.

The general tax lien of the Government, which arises as soon as taxes are assessed and which attaches to all property and rights to property of the tax debtor, prevails against all other unperfected liens with a few statutory exceptions, including judgment lien creditors. Whenever the lien of the United States competes with that of such a protected party, it must be determined whether the United States filed notice of its lien in the proper place prior to the time the competing lienor established his status as a judgment lien creditor. If the tax lien notices, filed before Fruehauf et al. established their status as judgment lien creditors, were filed in the appropriate office, the Government is entitled to priority under the first in time, first in right doctrine. See United States v. Pioneer American Insurance Co., 374 U.S. 84, 83 S.Ct. 1651, 10 L.Ed. 2d 770 (1963); United States v. New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L. Ed. 520 (1954). If filed in the incorrect place, the notices are without effect and Fruehauf obtains priority.

Under section 6323(a), a federal tax lien is not valid as against a judgment lien creditor until notice thereof has been filed in accordance with the requirements of subsection (f).¹ Subsection (f) requires notice of a tax lien against personal property to be filed in the one office designated by state law for the governmental subdivision in which the personalty is situated. Personal property is deemed to be situated at the residence of the delinquent taxpayer and the residence of a corporate taxpayer is deemed to be "the place at which the principal executive office of the business is located." 26 U.S.C.A. § 6323(f)(2). If a state has not designated an appropriate office, the notice is to be filed with the clerk of the federal district court for the district in which the property is situated. Louisiana law provides that federal tax lien notices are to be recorded in the mortgage records of the parish "within which the property subject to such lien is situated." La. Stat.Ann., Rev.Stat. § 52:51.² The controlling question before us is, therefore, whether D'Antoni's "principal executive office" was located in Jefferson or Orleans Parish.

The facts are not in dispute. D'Antoni conducted all of its business from its Jefferson Parish location. Its Orleans Parish address, on the other hand, was the "registered office" designated in its incorporation papers and the home address of its president and vice-president, who were also incorporators, directors, and major stockholders.

The District Court held that "principal executive office" referred to D'Antoni's registered office in Orleans Parish, relying heavily on Gill Trailer & Equipment Rentals, Inc. v. S. D'Antoni, Inc., 267 So.2d 242 (La.Ct.App.1972). That case concerned the same issue and the same debtor involved herein. The Louisiana Court of Appeal held that notice had to be filed in Orleans Parish, concluding from legislative history that

when Congress used the term "principal executive office" to designate the residence of a corporation for purposes of 26 U.S.C. § 6323, they intended to refer to the statutory residence which varying state statutes assign to corporations. In Louisiana the statutory residence of a corporation is its registered office.

267 So.2d at 246 (footnote omitted).

After the District Court decided this case, however, and subsequent to the filing of the appeal, the Supreme Court of Louisiana reversed the Court of Appeal on the ground that the clear and unambiguous letter of the law should not be disregarded "under the pretext of pursuing its spirit" through the legislative history. La., 282 So.2d 714, 716 (1973), cert. denied, 415 U.S. 957, 94 S.Ct. 1485, 39 L.Ed.2d 572 (1974).

Although we are not bound by the Louisiana Supreme Court's decision, as indeed the District Court correctly recognized,³ and conversely the state supreme court did not consider itself bound by the federal District Court's decision,⁴ it may be of some relief to those who cherish predictability in the law to find that we agree with the reasoning of the Louisiana Supreme Court so that henceforth, the law in this particular can be similarly administered in both federal and state forums.

Inasmuch as Fruehauf was not in the state litigation and it asserts an additional argument not considered by the state tribunals, it is in order that we discuss briefly the arguments made before us.

Fruehauf relies, as did the Louisiana Court of Appeal, on the legislative history of the Federal Tax Lien Act of 1966 which enacted the "principal executive office" test. The Senate Finance Committee reported that the purpose of revision was to benefit both creditors and the Government by eliminating, through specific rules, existing uncertainty over the proper filing location. To that end

the amendment requires notice of a tax lien to be filed where a taxpayer resides, and not at his domicile, as presently contended by the Internal Revenue Service, because of the difficulty in determining a person\'s domicile, based as it is on (among other things) his state of mind. On the other hand, for purposes of determining the residence of corporations and partnerships, the amendment provides specific rules for determining their residence. Under the amendment, the residence of a corporation or a partnership is deemed to be the place at which its principal executive office is located. This is the most readily identifiable of all the offices that a business may maintain, appearing, as it does, on the annual reports filed with most States and on similar returns, and avoids the uncertainty of determining which of the many business offices that a taxpayer may maintain is its principal one.

S.Rep.No.1708, 89th Cong., 2d Sess. (1966), 1966 U.S.Code Cong. & Admin. News, pp. 3722, 3732.

There is substantial merit in Fruehauf's argument that the address listed in the incorporation papers presents an objective standard which would avoid uncertainty and might increase the likelihood of actual notice to creditors of federal tax liens. In the case of a corporation with multiple offices, any test directed at determining the most important office is to some extent subjective. Creditors and the Government could in good faith reach different conclusions as to the appropriate location for filing of federal tax liens. The difficulty with this argument is that, despite the legislative history, it contravenes the plain words of the statute. Section 6323 does not refer, as it easily could have, to the address used to incorporate the business; it speaks of "the principal executive office of the business." The natural import of the statutory language is the headquarters of the business — the office at which the major executive decisions affecting the business are made.

Further, the passage from the legislative history quoted above reveals that Congress...