Union Cent. Life Ins. Co. v. Peters

• Decision Date: 16 September 1960
• Docket Number: J,No. 8,8
• Parties: , 6 A.F.T.R.2d 5613, 60-2 USTC P 9697 UNION CENTRAL LIFE INSURANCE COMPANY a Corporation organized and existing under and by virtue of the laws of the State of Ohio, Plaintiff and Appellee, v. Robert G. PETERS, Jr., and Helen R. Peters, his wife, Defendants, and United States of America, Defendant and Appellant. une Term.
• Court: Michigan Supreme Court

Page 196

105 N.W.2d 196

361 Mich. 283, 6 A.F.T.R.2d 5613,

60-2 USTC P 9697

UNION CENTRAL LIFE INSURANCE COMPANY a Corporation organized and existing under and by virtue of the laws of the State of Ohio, Plaintiff and Appellee, v. Robert G. PETERS, Jr., and Helen R. Peters, his wife, Defendants and United States of America, Defendant and Appellant.

No. 8, June Term.

Supreme Court of Michigan.

Sept. 16, 1960.

Charles K. Rice, Asst. U. S. Atty. Gen., Lee A. Jackson, George F. Lynch, Moshe Schuldinger, Attys., Dept. of Justice, Washington, D. C., Frederick W. Kaess, U. S. Atty., Elmer L. Pfeifle, Jr., Asst. U. S. Atty., Detroit, for defendant-appellant.

Clark, Klein, Brucker & Waples, Detroit, for plaintiff-appellee.

Before the Entire Bench.

BLACK, Justice.

The defendant United States appeals from a decree foreclosing a real estate mortgage, executed by defendants Peters as mortgagors in favor of plaintiff as mortgagee. ¹ The decree grants supremacy of the lien of the mortgage, to extent of all sums due and to become due according to its tenor, over competing federal liens for income taxes Mr. and Mrs. Peters failed to pay for the tax periods 1952, 1953 and 1955.

It is stipulated, 'apart from the legal questions raised in this action relating to priority of liens,' that plaintiff's said mortgage 'is a valid and subsisting first lien' upon the mortgaged premises. It is stipulated also that two of the three liens claimed by the United States were recorded only in the office of the clerk of the proper United States District Court, and it is agreed further that the third of such liens (No. P-1697), which is based on 1955 income taxes owing by Mr. and Mrs. Peters, was not recorded in the register of deeds office until July 12, 1957. Shortly thereafter plaintiff revenue code of 1954 (title 26 U.S.C.A. §§ the terms of the mortgage, unpaid local taxes previously levied against the mortgaged premises. The sum so paid by plaintiff was $646.89.

Refer to §§ 6321, 6322 and 6323 of the revenue code of 1954 (title 26 U.S.C.A. § 6321, 6322 and 6323). Thereunder these federal liens arose against 'all property and rights to property' of the taxpayers. Said section 6323 provides that such lien 'shall not be valid as against any mortgagee * * * until notice thereof has been filed * * * in the office designated by the law of the State or Territory in which the property subject to the lien is situated * * *.' When the events giving rise to this litigation occurred, it was provided by Michigan law (C.L.1948, § 211.521) 'That whenever the collector of internal revenue * * *, shall desire to acquire a lien in favor of the United States for any tax payable to the United States against any property, real or personal, within the state of Michigan * * *, he is hereby authorized to file a notice of lien, setting forth the name and the residence or business address of such taxpayer, the nature and the amount of such assessment, and a description of the land upon which a lien is claimed, in the office of the register of deeds in an for the county or counties in Michigan in which such property subject to such lien is situated * * *.' None of the federal liens for unpaid income taxes owing by Mr. and Mrs. Peters were recorded, according to Michigan statute, excepting as previously noted.

Two questions are presented. Such questions, taken from the respective briefs, are as follows:

'1. Should a federal tax lien against Robert G. Peters and wife, which was not filed with the Register of Deeds of Oakland County in accordance with the requirements of the Michigan recording statute, be allowed to take priority over the mortgage executed by Robert G. Peters and wife to the Appellee?'

'2. Whether the federal tax liens are entitled to priority over payments made by the mortgagee for local taxes, as well as over payments for such taxes which the mortgagee might make in the future during the redemption period following foreclosure?'

First: For an affirmative answer to stated question 1 defendant United States relies particularly on United States v. Rasmuson, 8 Cir., 253 F.2d 944. For a negative answer to such question plaintiff relies principally on Youngblood v. United States, 6 Cir., 141 F.2d 912. Rasmuson and Youngblood were not reviewed by the Supreme Court and it is conceded, with respect to the specific question each court considered, that the Supreme Court has not spoken save only by opposing analogies counsel have pressed upon us. Having considered the briefs and arguments addressed to stated question 1, we accept Youngblood's reasoning and application of our statute as decisive. The question is therefore answered by adoption of the following conclusion of the court of appeals of the sixth circuit (Youngblood, at page 915 of report):

'United States v. Snyder, 149 U.S. 210, 13 S.Ct. 846, 37 L.Ed. 705, adds no force to the Government's contention for the reason that, while it was there held that the tax system of the United States is not subject to the recording laws of the states, the Acts of Congress since that decision have required recording of United States tax liens:

first, in accordance with the law of the state where the property subject to lien is situated; and, later and presently, in the office in which the filing of notices is authorized by the state law. Upon obvious principles of comity, the Congress of the United States has provided for compliance by the Government with state recording laws. The notice of tax lien involved in this controversy does not so comply.'

Second: This is the more difficult question. Much though we might agree with the plaintiff mortgagee that a decision to subordinate its mortgage-provided lien, for expenditures made and to be made for protection of its primary lien, is bound to impede if not demoralize the so-called mortgage business in Michigan, there appears no alternative than that of due application of what is known in authoritative federal decisions as the 'test of choateness.' In plain backyard words, the 'test of choateness' as applied in cases as at bar means that a properly recorded business lien, or other lien created by operation of local law and duly recorded (if record is required), will...