Union Planters National Bank v. Godwin

• Decision Date: 12 April 1956
• Docket Number: Civ. A. No. 3036.
• Citation: 140 F. Supp. 528
• Parties: UNION PLANTERS NATIONAL BANK, Plaintiff, v. Olin S. GODWIN, Director, et al., Defendants, United States of America, Intervenor.
• Court: U.S. District Court — Eastern District of Arkansas

140 F. Supp. 528

UNION PLANTERS NATIONAL BANK, Plaintiff, v. Olin S. GODWIN, Director, et al., Defendants, United States of America, Intervenor.

Civ. A. No. 3036.

United States District Court E. D. Arkansas, W. D.

April 12, 1956.

Rieves & Smith, Henry S. Wilson, West Memphis, Ark., for plaintiff.

Osro Cobb, U. S. Atty., and James W. Gallman, Asst. U. S. Atty., Little Rock, Ark., for defendants and intervenor.

LEMLEY, District Judge.

This cause is before the Court upon the motion for summary judgment filed herein by the defendants, Olin S. Godwin, District Director of Internal Revenue for the State of Arkansas, and John S. Lea, Acting District Director, and by the Intervenor, United States of America, which motion has been submitted upon the pleadings in the case and written briefs.

Union Planters National Bank, a national banking institution, brought this action against the defendants to recover possession of a certain automobile, formerly the property of one Bill Kaplan, which it had purchased at an execution sale conducted by the Sheriff of Crittenden County, Arkansas, pursuant to a judgment of the Circuit Court of said county, and which was subsequently seized by the defendants in partial satisfaction of an unpaid federal tax liability of Kaplan. After the action had been instituted, the United States intervened. The facts in the case are not in dispute, and may be summarized as follows:

On November 9, 1954, the United States filed with the Circuit Clerk of Crittenden County a notice of tax lien against Kaplan pursuant to the provisions of 26 U.S.C.A. § 3672(a), as amended by Act of October 21, 1942, 56 Stat. 957, and of Act 316 of the General Assembly of the State of Arkansas for 1941, Ark.Stats.1947, § 51-101 et seq. The Government made no attempt, however, to comply with the recording provisions of Section 60 of Act 142 of 1949, Ark.Stats. § 75-160, which is the Arkansas version of the Uniform Motor Vehicle Administration, Certificate of Title and Anti-theft Act.

Subsequently, the plaintiff obtained a judgment at law against Kaplan in the Circuit Court of Crittenden County, where Kaplan resided and where the vehicle in question was located, and thereafter said vehicle was seized and sold under execution, the plaintiff becoming the purchaser at the sale. Still later agents of the federal Internal Revenue Service seized the vehicle, over plaintiff's protest, on account of Kaplan's tax liability that has been mentioned. After this seizure of the automobile this suit was filed.¹

Before undertaking to set out and discuss the theories of the respective parties, we deem it well to briefly abstract the statutes, both federal and state, here involved:

Since the Government filed its notice of tax lien in November of 1954, the applicable federal statutes will be found in the 1939 edition of the Internal Revenue Code, 26 U.S.C.A., as amended prior to the effective date of the 1954 Internal Revenue Code. All references to 26 U. S.C.A. are to the 1939 edition thereof.

The Government's tax lien here involved is based upon 26 U.S.C.A. § 3670, which provides that if any person liable to pay any tax due the Government neglects or refuses to pay the same after demand, the amount thereof, including interest, costs and penalties, "shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." 26 U.S.C.A., § 3671, provides that, as between the Government and the taxpayer, the lien arises when "the assessment list is received by the collector and shall continue until the liability for such amount is satisfied or becomes unenforceable by reason of lapse of time." As to creditors and purchasers, however, 26 U.S.C.A. § 3672(a) (1), as amended, provides that such lien shall not be valid as to such persons until notice thereof has been filed, "* * * In the office in which the filing of such notice is authorized by the law of the State or Territory in which the property subject to the lien is situated, whenever the State or Territory has by law authorized the filing of such notice in an office within the State or Territory".² Section 3672(a) (2) then goes on to provide that if the State or Territory fails to provide by law an office within which such notice may be filed, the same may be filed in the "* * * office of the clerk of the United States district court for the judicial district in which the property subject to the lien is situated".

In 1941 the General Assembly of the State of Arkansas, acting under the authority of the federal enabling act that has been mentioned,³ adopted the Uniform Federal Tax Lien Registration Act, Act 316 of 1941, hereinafter sometimes called simply Act 316, Section 1 of which provides that notices of such liens shall be filed in the office of the Circuit Clerk of the county or counties within the State where the property subject to the lien is located; and there is no question that the Government filed its notice of lien involved in this case in full compliance with that statute.

In 1949 the General Assembly adopted the Uniform Motor Vehicle Administration, Certificate of Title, and Anti-theft Act, Act 142 of 1949, which will hereinafter sometimes be called simply Act 142, Section 60(a) of which reads as follows: "No conditional sale contract, conditional lease, chattel mortgage, or other lien or encumbrance or title retention instrument upon a registered vehicle, other than a lien dependent upon possession, is valid as against the creditors of an owner acquiring a lien by levy or attachment or subsequent purchasers or encumbrances sic with or without notice until the requirements of this article has sic been complied with." Section 60(b) provides that, "There shall be deposited with the department Arkansas State Revenue Department a copy of the instrument creating and evidencing such lien or encumbrance, which instrument is executed in the manner required by the laws of this State with an attached or endorsed certificate of a notary public stating that the same is a true and correct copy of the original and accompanied by the certificate of title last issued for such vehicle." Subsection (d) of Section 60 provides that if the vehicle in question is subject to registration under the Act but has not been registered, the certified copy of "the instrument creating such lien or encumbrance shall be accompanied by an application by the owner in usual form for an original registration and issuance of an original certificate of title." Subsection (e) provides that after the documents that have been referred to are received by the Department, the latter shall issue a new certificate of title showing the name of the owner and all liens to which the vehicle is subject. Subsection (f) requires the Department to maintain an appropriate index of all lien, encumbrance, or title retention instruments filed as provided by the preceding subsections.

Section 61(a) of the Act states that the filing of the documents mentioned "and the issuance of a new certificate of title as provided" shall constitute constructive notice of all liens and encumbrances against the vehicle described therein to creditors of the owner, to subsequent purchasers and encumbrancers, except such liens as may be authorized by law dependent upon possession. It is further provided in that subsection that if the documents referred to in Section 60 are received by the Department within 10 days of the date of execution thereof, the constructive notice shall date from the time of execution of said documents, otherwise from the time of their receipt and filing.

Section 61(b) provides that the method set forth above "shall be exclusive except as to liens dependent upon possession and any said lien or encumbrance or title retention instrument filed as herein provided and any documents evidencing the same are hereby exempted from the provisions of law which otherwise require or relate to the recording or filing of instruments creating or evidencing title retention or other liens or encumbrances upon vehicles of a type subject to registration hereunder."

As has been stated, the Government complied with the recording provisions of Act 316 but made no effort to comply with Act 142; it is the theory of the plaintiff that the two acts are in direct conflict as far as notices of federal tax liens on automobiles are concerned, and that to that extent the latter statute repealed the former, and that the Government to validate its lien against subsequent purchasers of Kaplan's car was required to comply with Act 142. This is denied by the Government, which contends that its compliance with Act 316 was sufficient. Those conflicting contentions present the only question for decision here.

Since 26 U.S.C.A. § 3672(a) (1) makes specific reference to State law as determinative of where notices of federal tax liens shall be filed, provided that a particular State has made provision for the filing of such notices, it is necessary for us in order to dispose of this case to construe Sections 60 and 61 of Act 142 so as to determine whether or not, insofar as motor vehicles are concerned, they have repealed or supplanted Section 1 of Act 316. From our consideration of the provisions and purposes of the two statutes in question, and particularly of the recording scheme contemplated by Sections 60 and 61 of Act 142, we are satisfied that these sections were not intended to apply to federal tax liens, and that there is no conflict between them and Act 316, and that it was not the intention of the Legislature to repeal Act 316 as it related to automobiles or otherwise. Hence, the Government's motion must be sustained.

In taking this question up it should first be pointed out and emphasized that when Act 316 was adopted, the Legislature was acting with specific reference to federal tax liens, which are involuntary and which extend to and affect all of the delinquent taxpayer's...