U.S. v. Waddill, Holland & Flinn
| Decision Date | 24 January 1944 |
| Docket Number | Record No. 2733. |
| Citation | 182 Va. 351 |
| Court | Virginia Supreme Court |
| Parties | UNITED STATES OF AMERICA, ET AL. v. WADDILL, HOLLAND & FLINN, INCORPORATED, ET AL. |
Present, Campbell, C.J., and Hudgins, Gregory, Browning, Eggleston and Spratley, JJ.
1. UNITED STATES — Claims Due United States — Effect of Statute Giving Right of Priority. — 31 U.S.C.A., section 191, giving the United States a right of priority of payment out of the assets of an insolvent debtor or one who makes a voluntary assignment, creates no lien upon the debtor's property in favor of the United States but merely confers upon the government a right of priority of payment out of such property in the hands of the debtor's assignees, or their representatives, under the conditions specified in the statute.
2. UNITED STATES — Claims Due United States — Due Right to Priority Became Fixed — Case at Bar. — In the instant case, a suit by a trustee in a deed of assignment for the benefit of creditors to determine the priority of payment of claims, the lower court held that the claims should be paid in the following order: (1) City of Danville, for personal property taxes; (2) landlord of the assignor, for six months' rent due and to become due; (3) the United States, for debts due by assignor; (4) Virginia Unemployment Compensation Commission, for unemployment compensation taxes due by the assignor. The United States contended that it was entitled to priority of payment of its claim before those of the other creditors, under 31 U.S.C.A., section 191, giving the United States a right of priority of payment out of the assets of an insolvent debtor or one who makes a voluntary assignment.
Held: That the right of the United States, if any, to priority became fixed at the date of the delivery of the deed of assignment, and, if not preferred at that time, the claims of the other creditors were subordinate to those of the government.
3. ASSIGNMENTS FOR THE BENEFIT OF CREDITORS — Order of Payment of Claims — Not Affected by Subsequent Attachment and Distraint — Case at Bar. — In the instant case, a suit by a trustee in a deed of assignment for the benefit of creditors to determine the priority of payment of claims, the lower court held that the claims should be paid in the following order: (1) City of Danville, for personal property taxes due; (2) landlord of the assignor, for six months' rent due and to become due; (3) the United States, for debts due by assignor; (4) Virginia Unemployment Compensation Commission, for unemployment compensation taxes due by the assignor. Shortly after the delivery of the deed of assignment the landlord levied a distress warrant for accrued rent and an attachment for the installments of rent. On the following day the collector of taxes for the city distrained the personal property of the assignor on the premises leased by the assignor for personal property taxes due. The United States contended that it was entitled to priority of payment of its claim before those of the other creditors, under 31 U.S.C.A., section 191, giving the United States a right of priority of payment out of the assets of an insolvent debtor or one who makes a voluntary assignment.
Held: That, since the right of the United States became fixed at the date of the delivery of the deed of assignment, the rights of the landlord and the city must be determined irrespective of the attachment and distraint levied on the debtor's property after the delivery of the deed of assignment.
4. UNITED STATES — Claims Due United States — Acquisition by Another Creditor of Specific and Perfected Lien. — If, before the Federal government's right of priority under 31 U.S.C.A., section 191 attaches, a creditor acquires a specific and perfected lien on the property of the insolvent debtor, the estate of the latter is, for all practical purposes, diminished to the extent of the claim secured by such lien, and the government's right attaches only to the residue.
5. LANDLORD AND TENANT — Lien for Rent — At Common Law. — At common law the landlord had no lien upon any property of his tenant as security for rent prior to the levy of a distress warrant.
6. LANDLORD AND TENANT — Lien for Rent — Statutes Give Fixed and Specific Lien. — Sections 5519, 5523 and 5524 of the Code of 1942, by clear implication, given the landlord a lien which is fixed and specific, and not one which is merely inchoate, and such a lien exists independent of the right of distress or attachment, which are merely remedies for enforcing it.
7. ASSIGNMENTS FOR THE BENEFIT OF CREDITORS — Order of Payment of Claims — Priority of Landlord's Claim Over That of United States — Case at Bar. — In the instant case, a suit by a trustee in a deed of assignment for the benefit of creditors to determine the priority of payment of claims, the lower court held that the claims should be paid in the following order: (1) City of Danville, for personal property taxes due; (2) landlord of the assignor, for six months' rent due and to become due; (3) the United States, for debts due by assignor; (4) Virginia Unemployment Compensation Commission, for unemployment compensation taxes due by the assignor. The United States contended that it was entitled to priority of payment of its claim before those of the other creditors, under 31 U.S.C.A., section 191, giving the United States a right of priority of payment out of the assets of an insolvent debtor or one who makes a voluntary assignment.
Held: That under sections 5519, 5523 and 5524 of the Code of 1942, the claim of the landlord was entitled to priority of payment over that of the United States.
8. ASSIGNMENTS FOR THE BENEFIT OF CREDITORS — Order of Payment of Claims — Subordination of Landlord's Lien to City's Lien for Taxes — Case at Bar. — In the instant case, a suit by a trustee in a deed of assignment for the benefit of creditors to determine the priority of payment of claims, the lower court held that the claims should be paid in the following order: (1) City of Danville, for personal property taxes due; (2) landlord of the assignor, for six months' rent due and to become due; (3) the United States, for debts due by assignor; (4) Virginia Unemployment Compensation Commission, for unemployment compensation taxes due by the assignor.
Held: That, under section 5524 of the Code of 1942, the lower court correctly subordinated the landlord's lien to the lien of the city for personal property taxes assessed against the specific chattels on the leased premises.
9. MUNICIPAL CORPORATIONS — Municipal Taxation — Lien. — A city has a lien on specific chattels against which personal property taxes were assessed.
10. UNEMPLOYMENT COMPENSATION — Lien for Payroll Taxes — Priority of Lien of Landlord — Case at Bar. — In the instant case, a suit by a trustee in a deed of assignment for the benefit of creditors to determine the priority of payment of claims, the lower court held that the claims should be paid in the following order: (1) City of Danville, for personal property taxes due; (2) landlord of the assignor, for six months' rent due and to become due; (3) the United States, for debts due by assignor; (4) Virginia Unemployment Compensation Commission, for unemployment compensation taxes due by the assignor. The Unemployment Compensation Commission contended that it was entitled to priority of payment over the claim of the landlord by virtue of section 1887(106), (c) of the Code of 1942, which makes payroll taxes a lien against an employer's assets but preserves the priority of "any mortgage, deed of trust or other lien duly perfected prior to the date the contributions" accrued.
Held: That the lien of the landlord was a "lien duly perfected" within the meaning of the statute, since the landlord's lien related back to the beginning of the tenancy and therefore was perfected prior to the accrual of the commission's claim for contributions.
Appeal from a decree of the Corporation Court of the Leigh, judge presiding.
The opinion states the case.
F. S. Tavenner, Jr., and Henry T. Clement, for the appellants.
Abram P. Staples, Attorney General, Kenneth C. Patty, Assistant Attorney General, Crews & Clement and E. Walton Brown, for appellees.
On June 19, 1941, Oeland R. Roman, who operated a restaurant in the city of Danville, executed and delivered to Earle Garrett, as trustee, a deed of assignment for the benefit of the assignor's creditors. The deed conveyed to the trustee all of the personal property and fixtures which had been used by the assignor in the conduct of the business and which were then located on the premises. It authorized the trustee to sell such personal property and out of the proceeds thereof to "pay as preferred claims such creditors as are given a lien or preference by law, or those having a valid lien upon the property conveyed or some part thereof".
On July 1, 1941, Waddill, Holland & Flinn, Incorporated, the owner of the premises which had been occupied by the assignor, under a written lease for a five-year term, commencing January 1, 1937, and reserving a rental of $250 per month, levied a distress warrant on the assignor's personal property on the premises for accrued rent of $850 for three and two-fifths months. On the same day it levied an attachment on the same personal property for future instalments of rent for two and three-fifths months in the sum of $650.
On July 2, 1941, the Collector of Taxes for the city of Danville distrained the personal property on the premises for personal property taxes assessed thereon for the years 1939, 1940, and 1941, amounting in all to the sum of $222.31.
No sale was held under the distress warrant, attachment, or distraint for taxes, but pursuant to the terms of the deed of trust, the trustee sold the property of the assignor for the sum of $1,680.80, which is conceded to have been the fair value thereof. He then filed in the court be...
To continue reading
Request your trial