United States v. Saidman

• Decision Date: 01 March 1956
• Docket Number: No. 12623.,12623.
• Citation: 97 US App. DC 344,231 F.2d 503
• Parties: UNITED STATES of America, Appellant, v. Harry SAIDMAN, Trustee, Lobel Enterprises, Inc., et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

97 US App. DC 344, 231 F.2d 503 (1956)

UNITED STATES of America, Appellant, v. Harry SAIDMAN, Trustee, Lobel Enterprises, Inc., et al., Appellees.

No. 12623.

United States Court of Appeals District of Columbia Circuit.

Argued November 14, 1955.

Decided March 1, 1956.

Petition for Rehearing Denied March 30, 1956.

Petition for Rehearing Denied on April 23, 1956.

Mr. Fred E. Youngman, Sp. Asst. to the Atty. Gen., with whom Messrs. Ellis N. Slack and A. F. Prescott, Sp. Assts. to the Atty. Gen., and Leo A. Rover, U. S. Atty., Harold H. Greene and Lewis Carroll, Asst. U. S. Attys., were on the brief, for appellant.

Mr. Henry E. Wixon, Asst. Corp. Counsel for the District of Columbia, with whom Messrs. Vernon E. West, Corp. Counsel, and Chester H. Gray, Principal Asst. Corp. Counsel, were on the brief, for appellee District of Columbia. Mr. Hymie Nussbaum, Asst. Corp. Counsel, also entered an appearance for appellee District of Columbia.

Mr. Ralph H. Deckelbaum, Washington, D. C., with whom Messrs. Bernard Margolius and Carleton U. Edwards, II, Washington, D. C., were on the brief, for appellee Square Deal Market Co., Inc.

Before BAZELON, WASHINGTON and BASTIAN, Circuit Judges.

Appellant's Petition for Rehearing In Banc Denied March 30, 1956.

Petition for Rehearing In Banc Filed by Appellee Square Deal Market Co., Inc. Denied on April 23, 1956.

WASHINGTON, Circuit Judge.

This appeal presents these questions: whether under Section 3466 of the Revised Statutes, 31 U.S.C.A. § 191, the claim of the United States for unpaid taxes is entitled to prior payment (1) over a landlord's lien for rent created by Section 45-915 of the D.C.Code, 1951, and (2) over a tax claim of the District of Columbia given priority by Section 47-2609, D.C.Code, 1951.

Lobel Enterprises, Inc. operated a grocery business in the District of Columbia on premises leased from Square Deal Market, Inc. On August 17, 1953, alleging that it was unable to pay its debts in full, Lobel assigned all of its property in trust to an assignee for the benefit of creditors. The assignee sold the assets on September 14, 1953, and, after payment of the expenses of administration, there remains in the hands of the successor trustee Saidman the amount of $1,548.81 for distribution to creditors.

On the date of the assignment Lobel was indebted to its landlord in the amount of $900 on account of two monthly rental payments of $450 each due July 1, 1953, and August 1, 1953. Lobel was also indebted on the date of the assignment to the United States for unpaid Federal taxes in the amount of $934.88, plus interest, and to the District of Columbia for unpaid sales and compensating-use taxes in the amount of $753.93, plus interest. Each of these creditors urged that its claim was entitled to prior payment from the available fund. The successor trustee filed his final account which was referred to the Auditor of the District Court. The Auditor recommended that the balance of $1,548.81 available for creditors be distributed to pay the landlord's claim of $900 in full and to pay the claim of the United States to the extent of $648.81, the amount remaining. Objections were filed to the Auditor's report by both the United States and the District of Columbia. After a hearing, the District Court ordered that the landlord's claim be paid in full, and that the District of Columbia take the remainder of the fund, or $648.81. The United States has appealed, claiming that Section 3466 of the Revised Statutes gives it priority over the claims of both the landlord and the District of Columbia.

I. Priority as between the United States and the landlord.

Section 3466 of the Revised Statutes, 31 U.S.C.A. § 191, provides that —

"Whenever any person indebted to the United States is insolvent * * * the debts due to the United States shall be first satisfied; and the priority established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof * * *."

Its purpose is to secure adequate public revenue to sustain the public burdens, and it is to be construed liberally to effectuate that purpose.¹ United States v. Emory, 1941, 314 U.S. 423, 426, 62 S. Ct. 317, 86 L.Ed. 315. The section gives an "absolute priority" to "the payment of indebtedness owing the United States, whether secured by liens or otherwise." United States v. City of New Britain, 1954, 347 U.S. 81, 85, 74 S.Ct. 367, 370, 98 L.Ed. 520. Its words "are broad and sweeping and, on their face, admit of no exception to the priority of claims of the United States." United States v. Waddill Co., 1945, 323 U.S. 353, 355, 65 S.Ct. 304, 306, 89 L. Ed. 294.

Notwithstanding the unqualified preference given by Section 3466, persons claiming that they held a perfected and specific lien on the debtor's property have frequently contested the right of the United States to have the debts due it satisfied first. The Supreme Court has, however, never decided whether the absolute priority accorded by Section 3466 would be overcome by a fully perfected and specific lien upon the property, since it has always found that the lien involved was not sufficiently specific and perfected. United States v. State of Texas, 1941, 314 U.S. 480, 484-486, 62 S.Ct. 350, 86 L.Ed. 356, and cases there cited; United States v. Waddill Co., supra, 323 U.S. at page 355, 65 S.Ct. 304; People of State of Illinois ex rel. Gordon v. Campbell, 329 U.S. at pages 370-371, 67 S.Ct. 340; United States v. Gilbert Associates, 1953, 345 U.S. 361, 365, 73 S. Ct. 701, 97 L.Ed. 1071. United States v. Waddill Co. indicates that for this purpose a lien is not sufficiently specific when, on the date of the assignment, the lien has not been actually asserted, and the amount of the lien or the precise property to which the lien has attached is unknown or unascertainable, 323 U.S. at pages 357-358, 65 S.Ct. 340, 89 L.Ed. 294; and that a lien is not perfected when, on the date of the assignment, the debtor has not been divested of title to, or possession of, the property involved. 323 U.S. at pages 358-359, 65 S.Ct. 340. Other cases reiterate that the priority of the United States is not destroyed where the lien-holder has not taken possession of, or acquired title to, the debtor's property subject to the lien prior to the time when Section 3466 becomes effective.² See Spokane County v. United States, 1929, 279 U.S. 80, 93-94, 49 S.Ct. 321, 73 L.Ed. 621; United States v. State of Texas, 314 U.S. at page 488, 62 S.Ct. 350, 86 L.Ed. 356; People of State of Illinois ex rel. Gordon v. Campbell, 329 U.S. at page 376, 67 S.Ct. 340, 89 L.Ed. 294; United States v. Gilbert Associates, supra. In the last case the Supreme Court said, 345 U.S. at page 366, 73 S.Ct. at page 704:

"In claims of this type `specificity\' requires that the lien be attached to certain property by reducing it to possession, on the theory that the United States has no claim against property no longer in the possession of the debtor. Thelusson v. Smith, 2 Wheat. 396, 4 L.Ed. 271. Until such possession, it remains a general lien. There is no ground for the contention here that the Town had perfected its lien by reducing the property to possession. * * * The taxpayer had not been divested by the Town of either title or possession. The Town, therefore, had only a general, unperfected lien."

In this case the District Court concluded as a matter of law that the landlord had a "specific lien" on specific property. No conclusion was stated that the lien was "perfected." The landlord contends, however, that its lien was both specific and perfected. Our first task is then to ascertain whether this contention is correct, under the tests laid down by the Supreme Court for our guidance.³

The lien of the landlord arose under Section 45-915 of the D.C.Code, 1951, which gives a landlord a

"tacit lien for his rent upon such of the tenant\'s personal chattels, on the premises, as are subject to execution for debt, to commence with the tenancy and continue for three months after the rent is due and until the termination of any action for such rent brought within said three months."

The lien may be enforced under Section 45-916⁴ by attachment issued on affidavit; by execution on the chattels, after judgment against the tenant, wherever they are found; and by action against any purchaser of the chattels with notice of the lien.

We said in Moses v. Labofish, 1942, 76 U.S.App.D.C. 401, 402, 132 F.2d 16, 17, that the lien is created by the statute and exists independently of the several means of enforcement.⁵ But for present purposes this is not enough. In the Waddill case, the Supreme Court noted that the landlord's lien there involved had been declared by the Supreme Court of Appeals of Virginia to be a fixed and specific statutory lien on all goods found on the premises, not merely an inchoate lien, and "`that such a lien exists independent of the right of distress or attachment, which are merely remedies for enforcing it'". 323 U.S. at page 356, 65 S.Ct. at page 306, 89 L.Ed. 294. Yet it held that this did not determine whether the lien was "sufficiently specific and perfected to raise questions as to the applicability" of the Federal priority. 323 U.S. at pages 356-357, 65 S. Ct. at page 306. Its conclusion was that the landlord's lien was unspecific and unperfected in its actual legal effect, and was therefore inferior to the claim of the United States.

While Section 45-915 of the Code creates a lien, described as tacit, for rent for three months upon such of the personal chattels on the premises as are subject to execution for debt, the section does not state that the lien shall have priority nor does it purport to place title to, or possession of, the chattels in the landlord. The landlord may acquire title to or possession of the chattels on which the lien exists by following the first or second method prescribed by Section 45-916 for enforcing...