United States v. Lord

• Decision Date: 16 May 1957
• Docket Number: Civ. A. No. 1669.
• Citation: 155 F. Supp. 105
• Parties: UNITED STATES of America v. William S. LORD as Administrator of the Estate of Israel Goldman, Anne Goldman, City Savings Bank of Laconia, N. H., Town of Gilford, N. H., The City of Laconia, Isidor Blickman.
• Court: U.S. District Court — District of New Hampshire

155 F. Supp. 105

UNITED STATES of America v. William S. LORD as Administrator of the Estate of Israel Goldman, Anne Goldman, City Savings Bank of Laconia, N. H., Town of Gilford, N. H., The City of Laconia, Isidor Blickman.

Civ. A. No. 1669.

United States District Court D. New Hampshire.

May 16, 1957.

Maurice P. Bois, U. S. Atty., Concord, N. H., William Maynard, Asst. U. S. Atty., Concord, N. H., Fred Siegel, Office of Regional Counsel, U. S. Treasury Department, Boston, Mass., for plaintiff.

H. Thornton Lorimer, Concord, N. H., for City Savings Bank of Laconia, N. H.

A. Gerard O'Neill, Laconia, N. H., for the City of Laconia.

Irving S. Zinker, Brooklyn, N. Y., Sulloway, Hollis, Godfrey & Soden, James B. Godfrey, Concord, N. H., for Isidor Blickman.

CONNOR, District Judge.

This is an action initiated by the United States to determine the merits of all claims to and liens upon certain real estate and personal property situate in the Town of Gilford, and the City of Laconia, County of Belknap, New Hampshire. The defendants were properly served either within the district under the provisions of Rule 4, Federal Rules of Civil Procedure, 28 U.S.C., or without the district under the provisions of 28 U.S.C. § 1656 (see also 26 U.S.C. § 7403(b)). All entered appearances except Anne Goldman, against whom the clerk entered default on August 7, 1956. Rule 55(a), F.R.C.P.

On June 1, 1951, the Commissioner of Internal Revenue Service made an assessment of taxes upon the income of Israel Goldman and Anne Goldman for each of the calendar years, 1943, 1944, 1945, and 1946. Notice of liens for the collection of these taxes (26 U.S.C. § 6321) against the taxpayers' real estate and personal property involved in this action was recorded at the Registry of Deeds for Belknap County on October 10, 1951, and again on January 23, 1952. The realty was then in the name of Anne Goldman as sole owner in fee simple.

The tax assessments by the United States are as follows:

                                  Israel Goldman and Anne Goldman
                  Taxable                                                  Unpaid
                  Periods           Amounts              Payments          Balance
                  1943       Taxes         $1,571.36
                             Penalties         78.57
                             Interest         680.08      $49.95         $ 2,280.06
                  1944       Taxes          3,834.53
                             Penalties      1,917.27
                             Interest       1,429.49        none           7,181.29
                  1945       Taxes          8,907.34
                             Penalties      4,453.67
                             Interest       2,786.16        none          16,147.17
                                                                        ___________
                                                            Total        $25,608.52
                                      Israel Goldman individually
                  1946       Taxes         $3,645.69
                             Penalties      1,822.85
                             Interest         921.61        none         $ 6,390.15
                                       Anne Goldman individually
                  1946       Taxes         $3,328.08
                             Penalties      1,664.04
                             Interest         841.32        none         $ 5,833.44
                

At the time the United States recorded its liens, the property was subject to a duly recorded mortgage from Anne Goldman to City Savings Bank of Laconia, one of the defendants. This mortgage was dated September 21, 1949, and secured payment of a promissory note of the same date, signed by Anne Goldman and Israel Goldman, in the amount of $24,000, payable on demand with interest at five percent. At the time the United States filed its liens, there was a balance of $21,000 due on this note.

On October 1, 1953, subsequent to the recording of the Government's liens, Anne Goldman mortgaged the premises to Sally K. Shafron. This second mortgage was later foreclosed, and on December 5, 1955, Isidor Blickman, a defendant in this case, bought in the property at the foreclosure sale, thus becoming the record title holder of the equity of redemption. On April 11, 1956, the real property and personalty were seized by the United States under the provisions of 26 U.S.C. § 6331, and on June 19, 1956, this complaint was entered and Daniel E. Donovan, Jr., of Concord, was appointed receiver of all the property. 26 U.S.C. § 7403(d).

It is conceded by the United States that the mortgage of City Savings Bank of Laconia, having been duly recorded before the recording of the tax liens, has priority over the tax liens. 26 U.S.C. § 6323. This priority, of course, extends only to proceeds gathered from the sale of the real estate, since the mortgage does not cover personal property. The bank insists, however, that in addition to the $21,000 owing on the mortgage, it also is entitled to priority on certain items, including interest, premiums on fire insurance, and expenditures on tax redemption, totaling $2,418.02.¹ These will be dealt with in the order presented. A federal lien for income taxes takes priority over claims and liens arising subsequent thereto. Knox v. Great West Life Assurance Co., 6 Cir., 212 F.2d 784; Grand Prairie State Bank v. United States, 5 Cir., 206 F.2d 217; United States v. Ridley, D.C., 127 F. Supp. 3. Whether interest due after the recording of the liens should be allowed involves legal and equitable considerations. The statutory form of mortgage secures not only the principal but also the interest. The mortgage is valid against subsequent creditors, RSA 477:7, and the term "mortgage" would seem to include interest. Its payment is as much of the contract between the mortgagee and mortgagor as the payment of the principal. The principal plus the payment of interest thereon as it accrued, evidenced by the note, was the entire obligation, and secured on the execution of the mortgage. United States v. Sampsell, 9 Cir., 153 F.2d 731, 736. It is significant that the Government may force a sale of the property and pay senior creditors, thus stopping the running of interest.

The item claimed is in the sum of $831.25 due on July 2, 1956,—a sum representing something short of one year's interest, and indicating that other interest charges had been met since the recording of the tax lien. While it was within the power of the mortgagee to foreclose and thus prevent the running of interest, it hardly can be called wilful neglect or undue delay.² This factor, when considered with the failure of the Government to prosecute the claim, would equitably require that this item be considered a part of the mortgage.

This item, plus such interest as accumulated to the date of the final distribution, is allowed as a priority with the mortgage debt.

The remaining claims of the bank are not to be entitled to like disposition but are to have priority only as to the claim of the holder of the equity of redemption. While it is true that he neither requested nor affirmatively approved the payment of the insurance premiums or the taxes, he was a tentative beneficiary of them so long, at least, as his equity was of value. The taxes would be a burden which would have to be met, and his interest to the extent that it could be established was protected in the insurance coverage.

Despite the fact that the Government's liens were recorded prior to the creation of the second mortgage under which he holds the equity of redemption, defendant Blickman asserts that they should not have priority over his claim. It is his contention that the United States knew of his purchase of the deed of foreclosure of the second mortgage, knew that he intended to and did advance sums of money to improve the premises, and encouraged him to believe that settlement of the tax claim shortly would be reached. No sufficient evidence was offered that would tend to show that the United States acted with anything but good faith, and there is no basis for ruling that the United States is estopped from asserting its claim. Nor is there any merit to Blickman's counterclaim (dismissed as to bank) and request for affirmative relief. His allegations that the Government converted his property by an illegal seizure without due process of law are not only unsubstantiated by the record but are entirely in error in the light of the statute (26 U.S.C. § 6331) and the order of this court dated June 19, 1956.

Another assertion made by defendant Blickman is that the United States has already agreed to compromise the tax assessment upon which the liens are based. The Government holds a sum of money totaling $3,728.85, which Blickman claims was accepted in part payment and is now held as a partial performance of the compromise agreement. The money in question is the accumulation of several deposits made by the Goldmans toward a proposed settlement. Before the Government either accepted or rejected the proposal, Anne Goldman withdrew the offer preparatory toward making another. The Government has never returned the money because during the pendency of the first offer Israel Goldman died and it has asked this court to rule as to its proper distribution. Since the money was originally deposited only toward a compromise settlement and not in part payment of the entire assessment, the United States may not apply any of it in satisfaction of the liens. There was no testimony as to who provided the funds for...