United States v. Bradley
Decision Date | 08 August 1963 |
Docket Number | No. 20023.,20023. |
Citation | 321 F.2d 224 |
Parties | UNITED STATES of America, Acting by and through the INTERNAL REVENUE SERVICE, Appellant, v. William R. BRADLEY, Trustee, Appellee. |
Court | U.S. Court of Appeals — Fifth Circuit |
Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Atty., Dept. of Justice, Washington, D. C., H. M. Ray, U. S. Atty., Oxford, Miss., Frederick E. Youngman, Joseph Kovner, Attys., Dept. of Justice, Washington, D. C., for appellant.
John E. Stone, Jackson, Miss., Leon L. Porter, Jr., Clarksdale, Miss., for appellee.
Before PHILLIPS,* WISDOM and GEWIN, Circuit Judges.
This is an appeal by the United States from an order of the District Court for the Northern District of Mississippi affirming the opinion of the Referee in Bankruptcy, wherein he found that certain state and county tax liens, having arisen prior in time to certain United States tax liens, are superior to the latter and are to be paid out of the limited assets held by the trustee before the latter.
The United States argues that, although the local liens did arise first in time, the United States liens take first claim to the assets because the United States liens became perfected choate liens as of the day of assessment, while the local liens require attachment or levy before becoming choate, and only choate liens which were first in time may take precedence over such perfected United States liens. The United States further argues that the question of whether a lien is choate depends not on state law, but is always a federal question.
At the outset, the Federal Priority Statute, 31 U.S.C.A. § 1911 must be put aside. Numerous cases have held that this statute does not apply in bankruptcy proceedings, and that it yields to § 67 of the Bankruptcy Act. See In re Taylorcraft Aviation Corp., 168 F.2d 808 (6 Cir., 1948); In re Knox-Powell-Stockton Co., 100 F.2d 979 (9 Cir., 1939); Reese, Inc. v. U. S., ex rel. Collector of Internal Revenue, 75 F.2d 9 (5 Cir., 1935); Bennett-Ireland, Inc. v. American Alum. Products, 59 Wash.2d 670, 369 P.2d 957 (1962); United States v. Sampsell, 153 F.2d 731 (9 Cir., 1946). See also Collier on Bankruptcy, 14th Ed. § 67.24 at p. 264:
We look then to the Bankruptcy Act:
It is clear that neither of these sections answers the question before us, i. e., whether United States tax liens are superior to state tax liens which arose prior to the United States liens. We therefore look for guidance to the statutes creating the liens. The United States liens are created by the Internal Revenue Code of 1954.
The state liens are created by the following state statutes, Mississippi Code of 1942 (Recomp.):
It will be seen that both the United States and the State statutes are clear and definite on the question of when the liens arise. However, neither provides any guidance as to priority. The United States concedes that the State liens arose first, but argues that since the State did no attach the bankrupt's property or levy on it prior to bankruptcy, the State's liens are imperfect, and are in fact nothing more than inchoate general liens. It is difficult to understand how the State liens are inchoate, because there has been no attachment or levy, while the United States liens upon which there has likewise been no attachment or levy, are choate. The United States cites several cases as authority for its contention that before the lien can be perfected and made specific, the following three conditions must exist: (1) the identity of the lienor must be certain; (2) the amount of the...
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