United States v. Williams

• Court: U.S. District Court — Middle District of North Carolina
• Writing for the Court: Trivette, Holshouser & Mitchell, North Wilkesboro, N. C., for State of North Carolina
• Citation: United States v. Williams, 139 F.Supp. 94 (M.D. N.C. 1956)
• Decision Date: 06 March 1956
• Docket Number: Civ. A. No. 186.
• Parties: UNITED STATES of America, Plaintiff, v. T. H. WILLIAMS, Alice M. Williams, Individually and as Partners Trading as Williams Motor Company; State of North Carolina, The Northwestern Bank of Wilkes County, S. V. Tomlinson, R. L. Woodies, Ward Kenerly, Mildred Kenerly and G. W. Badgett, Defendants.

139 F. Supp. 94

UNITED STATES of America, Plaintiff, v. T. H. WILLIAMS, Alice M. Williams, Individually and as Partners Trading as Williams Motor Company; State of North Carolina, The Northwestern Bank of Wilkes County, S. V. Tomlinson, R. L. Woodies, Ward Kenerly, Mildred Kenerly and G. W. Badgett, Defendants.

Civ. A. No. 186.

United States District Court M. D. North Carolina, Wilkesboro Division.

March 6, 1956.

H. Brian Holland, Asst. Atty. Gen., Andrew D. Sharpe, Carrington Williams, Special Assts. to Atty. Gen., Edwin M. Stanley, U. S. Atty., Greensboro, N. C., for plaintiff.

Trivette, Holshouser & Mitchell, North Wilkesboro, N. C., for State of North Carolina.

Whicker & Whicker, North Wilkesboro, N. C., Woltz & Barber, Mt. Airy, N. C., for defendants other than State of North Carolina.

WARLICK, District Judge.

This is an action in which plaintiff seeks a recovery for income taxes, penalties, and interest, allegedly owed by T. H. Williams individually for the years 1944 through 1947, in the sum of $14,859.94, and against Alice M. Williams, his wife, in the sum of $15,544.29 for the same years, and against both T. H. Williams and Alice M. Williams, jointly for the sum of $1,276.55, due for the year 1943, and for federal unemployment taxes additionally due by the Williams Motor Company, a partnership, composed of T. H. Williams and Alice M. Williams for the years 1951 and 1952, in the sum of $659.94. The taxpayers do not contest their tax liability to the plaintiff and the cause is to be determined and the answer found from the claims filed, their priority and validity in and to a certain sum of money, a surplus from a trustee's sale of the property of the taxpayers.

In 1945 and again in 1947 T. H. Williams and wife, Alice M. Williams, sole partners in the Williams Motor Company, executed two certain deeds of trust conveying all of their real and personal property other than some household and kitchen furniture of small value, to certain trustees named in the instrument, to secure a certain indebtedness of $32,000, then due to the Northwestern Bank, a North Carolina banking institution, and one of the defendants herein. These deeds of trust were properly placed to record in the public registry of Wilkes County, North Carolina, where the lands were situate and where the personal property was located. Both deeds of trust were prior in time and recordation to any alleged lien herein considered.

On December 3, 1947, the State of North Carolina recorded two certificates of income tax liability; one for $1,997.26 against Alice M. Williams, representing income tax, penalties and interest for the years 1943 to 1946, inclusive, and another for $1,690 against T. H. Williams for the same years, 1943 to 1946, inclusive, with the Clerk of the Superior Court of Wilkes County, and again on November 2, 1950, an additional sales tax liability against Williams and wife for $4,324.82 was filed by the State. This amount being for sales tax from October 1, 1947 to September 30, 1950.

On May 10, 1950 Williams and wife executed and delivered to S. V. Tomlinson an additional deed of trust in the sum of $507.74, on certain of the real estate which was embraced in the prior deeds of trust to the Northwestern Bank. This deed of trust was properly filed and recorded.

On July 19, 1952, a judgment for $2,000 was docketed against T. H. Williams and wife by G. W. Badgett, in the office of the Clerk of the Superior Court of Wilkes County.

That on or before November 19, 1952, and on succeeding dates thereafter during 1953, certain assessments were levied for taxes due plaintiff by defendants Williams and wife. Notice of these liens were forwarded and were duly recorded in the office of the Register of Deeds for Wilkes County, being placed to record for that Williams and wife had failed to pay on proper demand being made.

During July 1953 all and every of the personal property used by Williams and wife in the operation of the Williams Motor Company was levied upon by the Sheriff of Wilkes County under a legally issued process by the Clerk of the Superior Court under a judgment docketed against them, and on being exposed to public sale was sold and delivered to the high bidder, the defendant, Mildred Kenerly.

In February 1954 the two deeds of trust executed by Williams and wife to the Northwestern Bank were foreclosed and all of their property with the exception of the household and kitchen furniture, was sold and delivered to the purchasers thereof. Resulting from such foreclosure sale and after payment of all costs and the other expenses, the trustee for the Northwestern Bank held a surplus of $6,625.33 and being unable to determine to whom this surplus belonged, paid it to the Clerk of the Superior Court of Wilkes County. The State of North Carolina then brought a Special Proceeding under General Statutes, Sec. 45-21.32 of North Carolina, to have it legally determined which of the creditors holding the recorded liens were entitled to the remaining assets. The United States was not a party to this proceeding, and though it offered suggestions on the receipt of a letter from the Trustee, it took no part therein and was not bound thereby. In said hearing the Clerk of the Superior Court ordered that the sum of $677.61 be paid to the defendant Tomlinson in view of the unpaid amount under that deed of trust. That the remainder of said fund in the sum of $5,940.58 be paid to the State of North Carolina, on its tax claims.

Thereafter on August 17, 1954, this action was instituted and though it originally sought a lien foreclosure action, on being advised that the property had actually been sold, plaintiff moved to amend its complaint so that the liens of the plaintiff could be transferred to the proceeds thereof and if such proceeds had been distributed, that such defendant receiving said surplus be decreed a holder of said funds in trust. This motion was granted.

R. L. Woodies, a defendant, made no appearance, either personally or through counsel.

The State of North Carolina filed its tax certificates as is provided for in General Statutes of North Carolina, Sec. 105-242, subsec. (3).

The plaintiff filed its tax liability claim under 26 U.S.C.A. § 3672 of the Internal Revenue Code.

For quite a number of years the Commissioner of Revenue for North Carolina, acting pursuant to General Statutes, Sec. 105-417.1, had entered into agreements with the plaintiff for the purpose of co-ordinating the administration and collection of taxes imposed by the plaintiff and by the defendant, State of North Carolina, and in consequence of said agreement had notified the plaintiff of the tax deficiency of Williams and wife, and such information resulted in the tax liability certificates being filed by the plaintiff herein. Very often plaintiff reciprocated and accordingly gave the Revenue Department of North Carolina information of a like nature.

The plaintiff contends it is entitled to recover the amount which was paid to the State of North Carolina under the judgment of the Clerk of Court of Wilkes County. That its claim amounts to $32,340.72, plus interest and penalties. That its liens filed are valid. The defendants, Williams and wife were insolvent at the time of the matters herein found, and that in addition thereto each committed an act of bankruptcy. That the tax liens of the defendant, the State of North Carolina, though prior in time of recordation, were not specific and did not constitute the State a judgment creditor under 26 U.S.C.A. § 3672. That Section 3466 of the Revised Statutes, 31 U.S.C.A. § 191 gives priority to its claim over the recorded tax liabilities due the State of North Carolina.

North Carolina contends that its tax certificates were filed and recorded prior in time to the tax liens of plaintiff; That under the North Carolina law these tax certificates being filed with the Clerk of the Superior Court and cross indexed, became judgments of the Superior Court and rose to the dignity of a specific lien on all property owned by Williams and wife and that such lien was...