United States v. Fidelity-Philadelphia Trust Co., 71-1277.
Citation | 459 F.2d 771 |
Decision Date | 02 May 1972 |
Docket Number | No. 71-1277.,71-1277. |
Parties | UNITED STATES of America, Appellant, v. FIDELITY PHILADELPHIA TRUST CO. et al. |
Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Issie Jenkins, Department of Justice— Tax Division, Washington, D. C., for appellant.
Samuel Kagle, Philadelphia, Pa., for appellees.
Before McLAUGHLIN, VAN DUSEN and ALDISERT, Circuit Judges.
This appeal by the government from an order of the district court, 321 F. Supp. 7, awarding $5,000 to attorney claimants from an escrow fund requires us to decide whether the claimants had perfected an attorney's lien under Pennsylvania law and were, therefore, entitled to priority over a federal tax lien.
The government brought an action in the district court seeking to enforce a 1964 levy on an escrow account in the Fidelity-Philadelphia Trust Company, held in the names of Samuel Kagle and Frank Truscott, Attorneys, for the benefit of O'Brian Buick, Inc., or Carl H. O'Brian and/or Miriam O'Brian, his wife. In 1961, a delegate of the Secretary of the Treasury made an assessment of $116,158.67 for 1947, 1948, and 1949 corporate income taxes against O'Brian Buick, Inc., and in 1963, an assessment of $83,423.89 for 1951, 1952, and 1953 personal income taxes, penalties and interest against the O'Brians. It was alleged that there was some $22,000.00 in the account. Named with the bank as defendants were Truscott, Kagle and Attorney George D. Kline, because they had asserted a claim to a portion of the funds as attorneys' fees.
The funds on deposit represented proceeds from a 1956 sale of the assets of O'Brian Buick, Inc., whose stock was owned by Carl O'Brian and Jules DeHaan. Because the sellers were in disagreement over the proposed distribution of the proceeds, the purchaser imposed as a condition to the sale the creation of an escrow account in the names of Attorneys Truscott and Kline representing O'Brian, and Attorney Myron Jacoby representing DeHaan. After the account was opened, Kagle succeeded Jacoby as DeHaan's attorney.
In their brief filed in this court, appellees assert:
The legal services for which claim is made consisted of negotiations with respective clients as to conflicting claims; adjustment of claims of creditors, including accountants; and the preservation of corporate records in a center city office for use by accountants and the respective parties and for the use and benefit of agents of The Internal Revenue Service who were investigating the affairs of O\'Brian and DeHaan.
The district court found for the lawyer claimants:
When a lien under state law has acquired sufficient substance and has become so perfected as to defeat a later arising or later filed federal tax lien is a matter of federal law. United States v. Pioneer American Ins. Co., 374 U.S. 84, 88, 83 S.Ct. 1651 (1963); United States v. Acri, 348 U.S. 211, 213, 75 S.Ct. 239, 99 L.Ed. 264 (1955). Under federal law a state lien is "perfected in the sense that there is nothing more to be done to have a choate lien—when the identity of the lienor, the property subject to the lien, and the amount of the lien are established." United States v. New Britain, 347 U.S. 81, 84, 74 S.Ct. 367, 369, 98 L.Ed. 520 (1954).
A federal tax lien is a perfected, choate lien on the date the lien arises. United States v. Security Trust & Savings Bank, 340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53 (1950); United States v. New Britain, supra. The lien arises at the time of assessment and continues until the liability is satisfied or becomes unenforceable. 26 U.S.C. § 6322. Here it was uncontroverted that assessment was made on December 1, 1961, on the corporation, on November 9, 1962, on Mr. O'Brian, and on June 14, 1963, on both O'Brians. The priority of a lien created by state law depends upon the time it attached to the property and became choate. Thus, to obtain priority over the federal lien, it became the burden of the attorney claimants to prove (1) they had a lien under Pennsylvania law, and (2) that it was perfected prior in time to the 1961, 1962, and 1963 assessments.
Pennsylvania recognizes two types of attorneys' liens: a charging lien and a retaining lien. To establish a charging lien "it must appear (1) that there is a fund in court or otherwise applicable for distribution on equitable principles, (2) that the services of the attorney operated substantially or primarily to secure the fund out of which he seeks to be paid, (3) that it was agreed that counsel look to the fund rather than the client for his compensation, (4) that the lien claimed is limited to costs, fees or other disbursements incurred in the litigation by which the fund was raised and (5) that there are equitable considerations which necessitate the recognition and application of the charging lien." Recht v. Urban Redevelopment Authority of Clairton, 402 Pa. 599, 608, 168 A.2d 134, 138-139 (1961).
The record is far from clear as to the precise role played by the attorneys in attending their principals during the negotiations leading up to the sale. Mr. Kline testified:
Even if this established the claim of Truscott and Kline, this testimony does not justify the claim of Mr. Kagle who said:
Because there is nothing in the record to indicate that Mr. Kagle succeeded to Mr. Jacoby's interest, his claim must be predicated upon services performed after the fund was created.
The attorney account was created when the purchaser of the corporate assets insisted as a condition of the sale that the proceeds be held by respective counsel until conflicting claims of their clients were resolved. The sole purpose of the account was to preserve the fund pending resolution of the conflicting claims of Jules DeHaan and Carl O'Brian.
Assuming that claimants presented sufficient evidence to establish they had created the fund, there is no testimony in the record that there was any agreement between the parties and their clients that they could look to the fund for their fee. As stated in Recht, supra, 168 A.2d at 139:
A further examination of the record fails to disclose any indication, averment, or conclusion that there was any agreement between Attorney Nicklas and Recht that counsel would look to the fund for his compensation. The only statement in the record in that regard is the finding and conclusion of the court below that the fee claimed by Attorney Nicklas for his services was just and reasonable. An agreement to look to the fund for compensation is essential to the recognition of a charging lien and this requirement is not satisfied by a finding of the court that the fee or amount claimed is just and reasonable.
Indeed, there is testimony from claimant Truscott1 that, at least at one time, they did not look to the fund for payment:
To continue reading
Request your trial-
US v. JHW & Gitlitz Deli & Bar, Inc.
...12 United States v. City of New Britain, 347 U.S. 81, 85, 74 S.Ct. 367, 370, 98 L.Ed. 520 (1953); United States v. Fidelity Philadelphia Trust Co., 459 F.2d 771, 773-74 (3d Cir. 1972); MDC Leasing Corp. v. New York Ins. Underwriting Ass'n, 450 F.Supp. 179, 181 (S.D.N.Y. 1978), aff'd mem., 6......
-
NEVADA R. & S. CO. v. United States Dept. of Treasury IRS
...assessment is made. The lien attaches to all property and rights to property at the time it arises. See United States v. Fidelity Philadelphia Trust Co., 459 F.2d 771 (3rd Cir. 1970); Kuffel v. United States, 103 Ariz. 321, 441 P.2d 771 (1968). Thus, the date upon which the tax lien will at......
-
Adco Service, Inc. v. Graphic Color Plate
...out of the fund. Cf. Sprague v. Ticonic Nat. Bank, 307 U.S. 161, 59 S.Ct. 777, 83 L.Ed. 1184 (1939). United States v. Fidelity Philadelphia Trust Co., 459 F.2d 771 (3 Cir. 1972), is also pertinent. In that case the contest for lien priority was between attorneys who represented a taxpayer i......
-
Piontek v. Ceritano
...also, United States v. Equitable Life Assurance Society, 384 U.S. 323, 86 S.Ct. 1561, 16 L.Ed.2d 593 (1966); United States v. Fidelity Phila. Trust Co., 459 F.2d 771 (3 Cir. 1972). Indeed, a somewhat similar argument to that advanced above was rejected in the Pioneer case, supra, 374 U.S. a......