Assignment of Funds Page 3

---

 

8. Notice of Federal Tax Lien No. B-1018, embracing and covering the taxes assessed against said Michael J. Smith under the Federal Unemployment Tax Act for the years 1951 and 1952 was filed by the United States of America in the office of the Recorder of Deeds, St. Louis County, Missouri, on November 14, 1955, and in the office of the Recorder of Deeds of and for the City of St. Louis, Missouri, on November 10, 1955. Said Notice of Federal Tax Lien reads as does Notice of Federal Tax Lien No. B-1019, noted in part in paragraph 5 herein above.

[Lien for Withholding Taxes]

9. The said withholding taxes due for the fourth quarter of 1953 and the first quarter of 1954 from said Michael J. Smith to the United States of America were assessed against said Michael J. Smith on December 15, 1955, upon an Assessment Certificate signed by E. P. Dennehy, Assessment Officer of the Office of the District Director of Internal Revenue, St. Louis, Missouri. The amount of the assessment for the fourth quarter of 1953 is $574.89 in taxes, $143.72 in penalties, and $64.56 in interest, totaling $783.17. At the time of trial, the additional sum of $18.37, as interest, was due upon this assessment.

The amount of the assessment for the first quarter of 1954 is $444.91 in taxes, $111.23 in penalties, and $43.36 in interest, totaling $599.50. At the time of trial, the additional sum of $14.06, as interest, was due upon this assessment.

10. The said assessments of and for withholding taxes were based upon withholding tax returns, and the liabilities shown to be due thereupon, prepared by said Michael J. Smith and handed to Bennie LaPresta, Collection Officer of the Office of the District Director of Internal Revenue, St. Louis, Missouri, on December 9, 1955, by said Michael J. Smith for filing. No payment accompanied either of said returns.

11. At the time of giving these withholding tax returns to Bennie LaPresta, said Michael J. Smith knew that the Office of the District Director of Internal Revenue, St. Louis, Missouri, intended to and contemplated the filing of a Notice of Levy upon this plaintiff; and said Michael J. Smith, when he gave said returns to Bennie LaPresta, requested that the Notice of Levy include the withholding tax liabilities shown to be due on the said withholding tax returns.

12. Notice of Federal Tax Lien B-1112, embracing and covering said withholding tax assessments for the fourth quarter of 1953 and the first quarter of 1954 was filed by the United States of America in the Offices of the Recorder of Deeds for the City of St. Louis and for St. Louis County , Missouri , on December 20, 1955 .

[Defendant's Claim]

13. On December 17, 1955 the plaintiff received, by registered mail, a letter, dated December 16, 1955 , from the defendant Galt, said letter reading as follows:

" December 16, 1955

Joseph A. Sheehan Plumbing Company 4351 Delmar Blvd. St. Louis , Missouri

Gentlemen:

Enclosed please find copy of a written agreement between Michael J. Smith and the undersigned, dated September 1, 1955 , which I understand you have known about for some time. This copy is for your file record and is furnished to you so that you will have accurate knowledge of the contents thereof.

Under and by virtue of the terms of this agreement, Mr. Smith is now indebted to me for a balance of money advanced for his payroll on your job in the sum of $4042.00 and for which I expect to be reimbursed as per this agreement.

Therefore, demand is hereby made upon you to pay me the sum of $4042.00 out of any moneys or balances that may be due and owing to Michael J. Smith on account of the work he is now doing for you. As I understand it, the moneys herein advanced and so demanded by me to Mr. Smith were actually entered into the construction of the work he has been doing for you as a sub-contractor and was used to meet his payrolls thereon.

Thanking you in advance for your kind cooperation, I remain

Very truly yours,

/s/ Martin E. Galt, Jr.

Martin E. Galt

MEG/jw

Encl."

14. Attached to said registered letter and received with it by the plaintiff on December 17, 1955 , is a copy of an Agreement For Financing Payroll dated September 1, 1955 , entered into by said Michael J. Smith and the defendant Galt within the State of Missouri . The said Agreement reads as follows:

" September 1, 1955

For and in consideration of the promise and agreement of Martin E. Galt to advance a total sum of money not to exceed $4,700.00 from time to time as needed to meet necessary payroll expenses on a sewer construction job on the Riverview Gardens High School under sub-contract with J. A. Sheehan Plumbing Company, I the undersigned Michael J. Smith do hereby contract, agree and promise to repay the sum of money so advanced for payroll within 90 days from this date with interest at rate of 8% per annum.

It is further understood and agreed by the undersigned that in the event that payments are not made to the lender as above provided then that this agreement shall be and constitute an assignment of all and retained moneys or percentages of money due and payable to the undersigned by the J. A. Sheehan Plumbing Company on said construction work.

Michael J. Smith"

15. Plaintiff did not, prior to December 17, 1955 , and its receipt of the registered letter and accompanying copy of the Agreement between said Michael J. Smith and defendant Galt, receive any notice of said Agreement of September 1, 1955 .

16. Under his agreement with said Michael J. Smith, defendant Galt advanced said Smith the sum of $1,500.00 on September 2, 1955; the sum of $580.00 on September 13, 1955; the sum of $335.00 on September 21, 1955; the sum of $475.00 on September 26, 1955; the sum of 500.00 on September 29, 1955; the sum of $350.00 on October 4, 1955 and again on October 6, 1955; the sum of $790.00 on October 25, 1955, and the sum of $620.00 on November 2, 1955. Said Smith made the following payments on and against said advancements: $500.00 on September 30, 1955 and $1,900.00 on October 19, 1955 .

17. The Michael J. Smith who entered into said agreement of September 1, 1955 with the defendant Galt is the same person as the Michael J. Smith against whom the United States of America assessed taxes, as found in paragraphs 3, 4, 6, and 9 herein above.

18. On May 18, 1955 , this same Michael J. Smith entered into a contract with the plaintiff, said Smith agreeing and promising therein to construct sanitary and storm sewers on the Riverview Gardens High School job as subcontractor for the plaintiff.

19. When the plaintiff was served with the Notice of Levy by the United States of America on December 15, 1955 , plaintiff was indebted to said Michael J. Smith on account of services performed by him under said subcontract in the sum of $5,494.87, which said sum the plaintiff has deposited in the registry of this Court. Plaintiff also owed this said sum to said Michael J. Smith on December 17, 1955 , when the plaintiff received the registered letter, and attachment thereto, from defendant Galt, as found in paragraphs 13 and 14 herein above.

[Intervenor Had No Evidence]

20. No admissible evidence was adduced by the intervenor, Division of Employment Security, State of Missouri , in support of its alleged and pleaded claim to the sum of money deposited by the plaintiff in the registry of this Court.

21. Reasonable allowance to the plaintiff as and for attorney's fees in this case is the sum of $350.00.

Conclusions of Law

1. This Court has jurisdiction of the parties and of the complaint.

2. Plaintiff is entitled to a reasonable allowance of $350.00, as and for its attorney's fees to be paid out of the sum of money deposited by it in the registry of this Court; it is also entitled to recover out of said sum the sum of $35.08, which it has expended as and for taxable court costs in this proceeding.

[Intervenor Gets Nothing]

3. Intervenor, Division of Employment Security, State of Missouri , is not entitled to any part of the sum of money deposited by the plaintiff in the registry of this Court.

4. The Agreement between defendant Galt and Michael J. Smith of September 1, 1955 constitutes, among other things, an assignment to said defendant Galt by said Smith of all earned and retained moneys or percentages of money due and payable to said Smith by the plaintiff on account of and under the subcontract entered into by and between the plaintiff and said Smith on or about May 18, 1955.

5. The said assignment comes within the provisions of Chapter 410 of the Revised Statutes of the State of Missouri .

6. By reason of Section 410.020, R. S. Mo., 1949, V. A. M. S., and the failure of defendant Galt to give to the plaintiff notice at any time sooner, the said assignment to said defendant Galt was not good as to creditors of said Smith including the United States of America, until December 17, 1955, when notice of the said assignment was given to the plaintiff by defendant Galt by registered mail.

7. Notice of the assessment having been given, and demand having been made for its payment by the United States of America to Michael J. Smith, under and by reason of the provisions of Sections 6321 and 6322, Title 26, USCA (Internal Revenue Code 1954), the United States of America acquired a lien for assessed Individual Income Taxes due for the year 1954 on May 31, 1955, on and against the indebtedness of the plaintiff to said Michael J. Smith under the subcontract then in existence by and between the plaintiff and said Smith.

8. Notice of the assessment having been given, and demand having been made for its payment by the United States of America to Michael J. Smith, under and by reason of the provisions of Sections 6321 and 6322, Title 26, USCA (Internal Revenue Code 1954), the United States of America acquired a lien for assessed Individual Income Taxes due for the year 1952 on July 8, 1955, on and against the indebtedness of the plaintiff to said Michael J. Smith under the subcontract then in existence by and between the plaintiff and said Smith.

9. Notice of the assessment having been given, and demand having been made for its payment by the United States of America to Michael J. Smith, under and by reason of the provisions of Sections 6321 and 6322, Title 26, USCA (Internal Revenue Code 1954), the United States of America acquired a lien for assessed Federal Unemployment Taxes due for the years 1951 and 1952 on August 31, 1955.

10. Said Michael J. Smith was a resident of the County of St. Louis, Missouri all during the months of July through December of the year 1955.

11. Under and by virtue of the provisions of Section 6323, Title 26, USCA (Internal Revenue Code 1954), and Section 14.010 R. S. Mo., 1949, B. A. M. S., these said liens, referred to in paragraphs 7, 8 and 9 herein above, of the United States of America were good as to defendant Galt on November 14, 1955, when the United States of America filed notice of Federal Tax Lien B-1019 and notice of Federal Tax Lien B-1018 in the office of the Recorder of Deeds of and for the County of St. Louis, Missouri.

12. By reason of the said filing of said notices of Federal Tax Lien, B-1019 and B-1018, on November 14, 1955, these said tax liens of the United States of America are entitled to priority of payment from and out of the sum of money deposited by the plaintiff in the registry of this Court ahead of any claim to said sum by defendant Galt arising by reason of his agreement with said Michael J. Smith of September 1, 1955.

13. Under and by reason of the provisions of Sections 6321 and 6322, Title 26 USCA (Internal Revenue Code 1954), the United States of America acquired a lien for assessed Withholding Taxes for the fourth quarter of 1953 and the first quarter of 1954 on December 15, 1955 .

14. These said liens for Withholding Taxes were good and perfected as against defendant Galt on December 15, 1955 , when the United States of America served a Notice of Levy embracing the Withholding Taxes, and other taxes as to which liens existed, upon the plaintiff.

15. By the said service of the Notice of Levy upon the plaintiff on December 15, 1955, the United States of America seized, and reduced to its constructive possession, the indebtedness of the plaintiff to said Michael J. Smith under the subcontract between them of May 18, 1955, which indebtedness at said time was sufficient to satisfy the taxes shown to be due in said Notice of Levy.

[Service of Notice of Levy Not Premature]

16. The service of the Notice of Levy, as it covered and embraced the assessed withholding taxes due for the fourth quarter of 1953 and the first quarter of 1954, upon the plaintiff on December 15, 1955, was authorized, and was not premature, notwithstanding the provisions of Section 6331, Title 26, USCA, since Michael J. Smith, for whose benefit the provisions relating to notice and demand which are contained in said section are made, waived the notice and demand provisions and requirements of that said section by requesting that the United States of America include his withholding tax liabilities for these quarters in the Notice of Levy served upon the plaintiff, and by filing his returns for these said tax periods when he did unaccompanied by any remittances.

17. By reason of the service of the Notice of Levy on December 15, 1955 upon the plaintiff, the tax liens of the United States of America which arose on account of the assessed withholding taxes due by Michael J. Smith for the fourth quarter of 1953 and the first quarter of 1954 are entitled to priority of payment from and out of the sum of money deposited by the plaintiff in the registry of this Court before and ahead of payment of any sum to said defendant Galt on account of his claim arising under his Agreement with said Michael J. Smith of September 1, 1955.

18. The United States of America is entitled to a judgment to recover the sum of money deposited by the plaintiff in the registry of this Court, less the sum of $350.00 awarded to the plaintiff as an allowance for its attorney's fee, and, further, less the sum of $35.08, to be reimbursed to the plaintiff, on account of moneys it has expended as and for taxable court costs.

19. The United States of America is entitled to recover its taxable court costs in the sum of $81.20 from defendant Galt.

 

 

[57-1 USTC ¶9226]Three Mountaineers, Inc., Plaintiff v. G. H. Ramsey, Max M. Dalton, W. H. Howze, Graybar Electric Company, Incorporated, and The United States Government, Defendant

U. S. District Court, West. Dist. N. C., Asheville Div., Civil No. 1561, 143 FSupp 888, 9/13/56

[1954 Code Sec. 6323]

Priority of federal tax lien: Funds allegedly assigned to creditor.--An electrical contractor wished to acquire from a supplier various materials it needed in order to fill a contract for a customer. Because the supplier did not wish to extend the contractor further credit, it was agreed that payments by the customer for the work should be made through checks made payable jointly to the contractor and the supplier until the latter was reimbursed for the materials furnished. The court holds that this was not a valid assignment of funds, and that the federal tax lien against the contractor for withholding taxes, social security taxes, and insurance contributions had priority.

Uzzell and DuMont, Asheville , N. C., for plaintiff. Joel B. Adams, Asheville, N. C., for Graybar Electric Company, Inc. J. M. Baley, Jr., United States District Attorney, Hugh Monteith, First Assistant United States District Attorney, Asheville, N. C., for United States Government.

Memorandum Opinion

WARLICK, District Judge:

This is an Inter-pleader Action instituted under 28 USCA 1335 and has to do with certain claims made to a fund now on deposit with the Clerk of this court. Plaintiff having paid into the Registry of this court $1,219.48; This sum represents the balance due under the contract by plaintiff for work done for it by the Asheville Electric Company. Jurisdiction is vested in the court under 28 USCA 2410. The amount involved is $500 or more. The essential facts are not disputed, and two questions apparently are involved:

1. "Was a valid assignment made by the Asheville Electric Company to Graybar Electric Company of money to become due to the Asheville Electric Company under their contract with plaintiff?"

2. "Does such assignment, if valid, take priority over the tax liens of the United States ?"

Plaintiff is a North Carolina corporation having its principal place of business at Asheville , and is engaged in the manufacture of fine wood products.

[Financing Arrangement]

G. H. Ramsey and Max M. Dalton were partners and did business as the Asheville Electric Company, engaged primarily in general electric work, and as such were awarded a contract based on a valuable consideration to supply the materials, labor, etc., and complete the work that plaintiff desired done in renovating its business and manufacturing properties in Asheville. After securing such contract from plaintiff, and during the month of September, 1955, G. H. Ramsey, representing the Asheville Electric Company, approached a representative of the defendant, Graybar Electric Company, seeking to effect some means by which he and his associate could secure the various electrical supplies that would be needed by them in performing their contract with the plaintiff.

Graybar Electric Company, Inc., is a New York corporation and maintains a place of business in Asheville , in the Western District of North Carolina. W. H. Howze, who originally made claim to the fund, or a part thereof, and filed answer, had withdrawn his claim before the trial of the issues involved and is not now a party thereto.

At that time the Asheville Electric Company was in default with Graybar in the approximate amount of $6,000.00 which had been temporarily adjusted by the execution of notes to be paid every fifteen days at the rate of $500 at each pay period. Asheville Electric had no open account credit with Graybar at this particular time, and for the purpose of finding the actual facts without prejudice I am inserting the evidence, stenographically reported at the trial, so that a determination of the status of the contract can best be known. The controversy hinges on this evidence. (Testimony of John E. David.)

"Q. Did anyone from the Asheville Electric Company approach you in September or October, 1955, with regard to a job at a plant being constructed by the Three Mountaineers?

"A. They did.

"Q. Who approached you, Mr. David?

"A. Mr. Ramsey.

"Q. Is that the Mr. Ramsey who is here in the courtroom?

"A. It is.

"Q. Tell us as well as you can rememper when this happened and what, if anything, was said between you and Mr. Ramsey.

"A. I have it in my files. I immediately put it on paper at the time I talked with him. He said he had a job--

"Q. When was that?

"A. This was on September 27th. To be specific, 1955.

"Q. 1955?

"A. Yes. Said he had a job that would run approximately $5,500.00. That he needed $3,000.00 in material, roughly, to complete it, and they wanted to know if we could possibly work out any arrangement to handle it; and I, of course, told him at the time that we could not give you open account credit in view of your present status with us, and I was also aware of other outstanding indebtednesses, and that the only way we could possibly consider handling it would be on a guarantee basis from Three Mountaineers, and that a double endorsement basis would be acceptable provided the check was drawn for double endorsement.

"I received a letter from Mr. Lashley on that same day acknowledging this and said the check would be drawn for double endorsement. I, in turn, acknowledged his letter and asked that the check be sent to the attention of Mr. Coyner, of our Ashesville office. And I believe that about covers it."

During the trial Graybar introduced Exhibits 1, 2 and 3 which have to do with the alleged assignment which I incorporate herein as relevant facts, tending to show the exact status of the purported agreement.

"THREE MOUNTAINEERS, INC.

Post Office Box 5066 Asheville , North Carolina

For identification:

Defendant Graybar's Exhibit No. 1

* * *

September 27, 1955

"Graybar Electric Co. 221 Patton Ave. Asheville N. C.

Attention: Mr. John English.

"Gentlemen:

"We have given the contract for electric wiring in our new plant buildings to Ashville Electric Company, and Mr. G. Henry Ramsey has asked us to tell you that he has requested all checks and payments for work done on this contract be made payable jointly to Graybar Electric Co., and Asheville Electric Company for double endorsement.

"We understand Mr. Ramsey has discussed this with you and we suggest you make proper notation on your records.

"Cordially yours,

"THREE MOUNTAINEERS, INC.

By: W. H. Lashley (s)

W. H. Lashley

"WHL/bb

cc to Asheville Electric Co."

"CC: H. S. Corey, Jr.

K. H. Coyner

C. T. Alley

For identification:

Defendant Graybar's Exhibit #2

October 3, 1955

"Mr. W. H. Lashley Three Mountaineers, Inc. P. O. Box 5066 Asheville , N. C.

Re: Asheville Electric Co.

"Dear Mr. Lashley:

"We wish to acknowledge with thanks your letter of September 27th addressed to the attention of Mr. John English with our Asheville office in which you state that all future payments made to the Asheville Electric Company will be drawn jointly in the name of Graybar Electric Company.

"Please send these checks to our Asheville office to the attention of Mr. Coyner who will be able to expedite endorsements for all parties concerned.

"Thank you for your cooperation.

"Yours very truly,

"Credit Manager

"JEDavid/mhn

"CC: Asheville Electric Co."

* * *

"THREE MOUNTAINEERS, INC.

Post Office Box 5066 Asheville , North Carolina

For identification:

Defendant Graybar's Exhibit No. 3

* * *

October 6, 1955

"Graybar Electric Company, Inc. 120 West Morehead Street Charlotte 1, N. C.

Attention: Mr. J. E. David

"Dear Mr. David:

"Judgment from your letter of October 3, I am inclined to think that my letter of September 27 was not quite clear.

"I did not say that all future payments to the Asheville Electric Company would be made payable jointly with Graybar Electric Company, Inc. I believe you will find that I said, payments to Asheville Electric Company for work done on our new plant buildings would be drawn jointly.

"Cordially yours,

"THREE MOUNTAINEERS, INC.

By: /s/ W. H. Lashley

W. H. Lashley

"WHL/bb

cc to Asheville Electric Company"

On Graybar's approval of this plan various electrical supplies were furnished by it as requested by Asheville Electric and were accordingly billed to Asheville Electric Company, with a notation in the upper left hand corner "Three Mountaineers Joo". The first material was delivered on September 28, 1955 , and the last was billed out to Asheville Electric on February 6, 1956 . The total costs of the supplies furnished by Graybar to Asheville Electric being $3,928.85. There is a balance now due Graybar on account of the supplies purchased from it and delivered to Asheville Electric in the sum of $1,664.94. Three payments were made on the supplies furnished, one for October for $495.99, another for the amount furnished during November and December in the sum of $390.52, and the last payment being on January 6, 1956, for $1,335.72. Cash discounts taken account for the difference in the amount shown.

Before each payment was received from plaintiff, Ramsey, representing the Asheville Electric would go to the office of Graybar and would be given the amount due for supplies furnished to that date, and on getting the bill therefor, would take it to the Three Mountaineers who would then issue check for that amount, less the cash discount,--making the checks payable to Asheville Electric and Graybar Electric Company as joint payees. Ramsey would then take the check to the office of Graybar Electric Company, endorse, it, and would leave the check with Graybar and credit would be accordingly given for the previous purchases. Each check received was in full for the amount then due to Graybar, so that on January 12, when the check for $1,335.72 was endorsed by Asheville Electric and delivered to Graybar, the account at that time was paid in full, with the possible exception of an item of $40 which evidently had been overlooked. The amount now claimed by Graybar is for electrical supplies furnished to Ashville Electric after January 12, 1956 .

During the period involved Graybar agreed with Asheville Electric that $1,000 could be paid by Three Mountaineers to it so that certain amounts due by it for labor could be paid. Accordingly two checks were drawn by Three Mountaineers, each payable to Asheville Electric Company and delivered to it for the purposes intended. One check was for $600; another for $400. These two checks were given on different occasions. At the time each was delivered Asheville Electric had fully paid Graybar for all supplies previously furnished to it.

[Federal Tax Liens]

The United States lays claim to the fund on deposit on account of certain federal tax liens covering withholding taxes, social security taxes, and insurance contributions due it from Asheville Electric Company, which at the time of this trial amounted to $1,381.61, with interest from July 15, 1956. This is a balance due on the first quarter of 1955 for $287.56, assessed on June 23, 1955, and recorded in the office of the Register of Deeds of Buncombe County, on September 9, 1955, and an additional balance for the second quarter of 1955 of $1,094.05, assessed on September 15, 1955, the assessment being recorded in the Registry of Buncombe County on November 4, 1955.

On February 13, 1956 , agents representing the Internal Revenue Department seized the business and all of the assets of the Asheville Electric Company and every of the obligations due to it. Among the accounts levied on was the account of Three Mountaineers, as it was among those named by Mr. Ramsey as being obligated for materials furnished and work done.

Graybar contends that it is entitled to have the fund on deposit determined as its property for that it holds a valid assignment, and that no part of the fund was ever at any time the property of the Asheville Electric Company.

The government contends that no such assignment existed and that the amount paid into the Registry was property which at all times belonged to the Asheville Electric Company and that its liens are such that it is entitled to have paid to it the full amount herein.

The liens asserted by the United States stem from 26 USCA, Sections 6321, 6322 and 6323. Section 6321 provides:

"If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person."

Section 6322 provides that the lien imposed by Section 6321 arises at the time the assessment is made and continues until the liability for the amount so assessed is satisfied or becomes unenforceable by reason of lapse of time.

Section 6323 provides that the lien shall not be valid against any mortgagee, pledgee, purchaser or judgment creditor until notice thereof has been filed by the Secretary or his delegate in the office designated by the law of the state in which the property subject to lien is situated or may be found. It is therefore obvious under Section 6321 that the lien of the United States takes effect upon all property and rights of property belonging to the person liable for said tax.

The statutes covering collection of taxes are broad and comprehensive and Congress intended to subject all of a taxpayer's property except that specifically exempt to the payment of taxes. Bank v. Vidal, 114 Fed. (2d) 382.

[Was the Fund Assigned?]

The claim of Graybar Electric Company arises wholly from an alleged assignment to it by the Asheville Electric Company, of the fund formerly due by Mountaineers and now lodged in the registry of this court. In that narrow sphere the rights of the parties must be determined.

What constitutes an assignment and its validity involves the law of North Carolina , and the decisions of its Supreme Court. Erie R. Co. v. Tompkins, 304 U. S. 817.

The question of priority and the force and effect of liens of the United States for unpaid taxes and the validity thereof, is always a federal question to be finally determined by the courts of the United States . U. S. v. Acri, 348 U. S. 239 [211] [55-1 USTC ¶9138].

The Supreme Court of North Carolina has often dealt with the question of an assignment, and it is firmly established that unless expressly prohibited by statute or in contravention of some principle of public policy, all ordinary business contracts are assignable, and that a contract for money to become due in the future may be assigned. Chemical Co. v. McNair, 139 N. C. 326, 51 S. E., 949; Trust Co. v. Williams, 201 N. C. 464, 160 S. E. 484; Fertilizer Works v. Newbern 210 N. C. 9, 185 S. E. 471; Bank v. Jackson , 214 N. C. 582, 586.

In Motz v. Stowe 83 N. C. 434, 439, the court applied the general principle that anything written, said, or done for value in pursuance of an agreement to place a fund out of the owner's control and to appropriate it for the benefit of another, constitutes an equitable assignment. Trust Co. v. Construction Co., 191 N. C. 664, 667.

"In equity a present assignment of money having a potential existence but not yet due will operate on the fund as soon as it is acquired." Mike v. Guaranty Co., 299 N. C. 370, 372.

It can thus be seen that such claim to the fund herein as is asserted by Graybar Electric could be the subject of a valid assignment under the laws of North Carolina . Inquiry therefore, is directed to the thought whether the parties in their contract actually effected a valid assignment. It would seem from a careful analysis of the evidence, which is specifically brought forward in this decision, that the most the parties agreed to when the Asheville Electric made application for an extension of credit by Graybar Electric was that Graybar was agreeable to furnish the needed supplies to Asheville if Three Mountaineers would be found willing to execute its checks for the work done under its contract with Asheville Electric, to Asheville Electric and Graybar Electric, as joint payees. This seems to have met the requirements of Graybar and evidently was acceptable to the Three Mountaineers and afforded at least a convenient and well high certain means of payment for the supplies furnished. It, however, did not take into consideration intervening liens which could be filed by interested parties. Rising no higher than that source I am of the opinion that this purported contract did not constitute a valid assignment, in law or in equity, and that the fund paid into the registry by Three Mountaineers was subject to being impressed by the lien filed by the United States.

Having thus held, it would appear unnecessary to discuss further the several very interesting points which are set out in the brief of the government as reasons assigned for its right to the fund. I consequently forego that discussion.

Counsel will submit decree carrying into effect the government's right to recover the amount deposited with the court.

The cost of this action is to be deducted by the Clerk before paying out the fund to the proper authorities.

 

 

[54-2 USTC ¶9516]Alfred G. Tate, doing business as T & L Construction Company, and Aaron Karchmer and Gertrude Karchmer, Partners, doing business as Karchmer Pipe and Supply Company, Plaintiffs v. Sohio Petroleum Company, a corporation, Defendant

In the United States District Court for the Eastern District of Illinois, Civil action No. 2463, June 23, 1954

Lien for taxes: Priority of tax lien to assignment.--Taxpayers were owed funds for the construction of a pipeline. Taxpayers assigned their rights under the construction contract to third parties. Taxpayers also owed taxes to the federal government. The District Court decided, in a proceeding for the balance of the funds due to taxpayer, that the government's lien for taxes was superior to that of the assignee.

Murray & Stephens, Old National Bank Building , Centralia , Ill. , for plaintiffs. Kramer, Campbell, Costello & Wiechert, First National Bank Building, East St. Louis, Ill., Fordyce, Mayne, Hartman, Renard & Stribling, 506 Olive Street, St. Louis, Mo., for defendant.

Findings of Fact and Conclusions of Law

PLATT, District Judge:

The plaintiffs Aaron Karchmer and Gertrude Karchmer and Alfred G. Tate having filed a Bill of Complaint; the Court having stayed this cause pending arbitration; the parties having agreed to waive this stay order and arbitration; the United States of America, intervenor, having filed an intervening complaint; the Eck Miller Contract Company having intervened by the consent of the parties and order of the Court; the defendant Sohio Petroleum Company having filed its answer to the Bill of Complaint; and the plaintiffs Aaron Karchmer, Gertrude Karchmer and Alfred G. Tate having filed their reply to the answer of defendant Sohio Petroleum Company, the Court hereby finds the facts and states the conclusions of law as follows:

Findings of Fact

1. That on September 12, 1951 , the defendant Sohio Petroleum Company entered into a written contract with Plaintiff Alfred G. Tate, d/b/a T & L Construction Company, for the construction of a pipeline near Cloverport , Kentucky , all as more fully set out in plaintiffs' Bill of Complaint, marked Exhibit "A".

2. That the defendant Sohio Petroleum Company has admitted by its answer that it is now indebted under the terms of said contract in the amount of Twelve thousand five hundred ninety and 07/100 ($12,590.07) Dollars for work performed by Alfred G. Tate under said contract.

3. That by reason of an assignment by the said Alfred G. Tate to Aaron Karchmer and Gertrude Karchmer of an amount payable to Alfred G. Tate under the terms of said contract, the defendant Sohio Petroleum Company is indebted to Aaron Karchmer and Gertrude Karchmer, assignees and plaintiffs in this case, in the amount of Nine thousand six hundred one and 93/100 ($9,601.93) Dollars, and that said assignment in the total amount of Nine thousand six hundred one and 93/100 ($9,601.93) Dollars is superior and prior to the liens, attachments and distraints of intervenor United States of America, who heretofore filed an intervening complaint and liens against funds in the hands of defendant Sohio Petroleum Company and held by it for the account of Alfred G. Tate.

4. That the said liens, attachments and distraints of the intervenor United States of America in the amount of Four hundred eighty-eight and 14/100 ($488.14) Dollars are superior and prior to said assignment to plaintiffs Aaron Karchmer and Gertrude Karchmer, and that defendant Sohio Petroleum Company is therefore indebted to the United States of America in that amount by reason of said intervenor's liens, attachments and distraints.

5. That the said garnishment of the Eck Miller Contract Company, intervenor, as set out in defendant's answer, in the amount of Two thousand five hundred and no/100 ($2,500.00) Dollars is superior and prior to said assignment to plaintiffs Aaron Karchmer and Gertrude Karchmer, and that defendant Sohio Petroleum Company is therefore indebted to the Eck Miller Contract Company in the amount of Two thousand five hundred and no/100 ($2,500.00) Dollars by reason of said garnishment.

6. That the defendant Sohio Petroleum Company is in no way, manner, or form, indebted to plaintiff Alfred G. Tate.

7. That this Court has jurisdiction of the subject matter and of the persons of defendant Sohio Petroleum Company and plaintiffs Alfred G. Tate and Aaron Karchmer and Gertrude Karchmer, the United States of America, and the Eck Miller Contract Company.

Conclusions of Law

1. By reason of said indebtedness of Sohio Petroleum Company to the plaintiffs Aaron Karchmer and Gertrude Karchmer, IT IS ORDERED that a judgment should be entered on plaintiffs' Complaint in the amount of Nine thousand six hundred one and93/100 ($9,601.93) Dollars in favor of plaintiffs Aaron Karchmer and Gertrude Karchmer and against defendant Sohio Petroleum Company.

2. That by reason of said indebtedness of the defendant Sohio Petroleum Company to the intervenor the United States of America, IT IS ORDERED that judgment should be entered on the intervenor United States of America's intervening complaint in the amount of Four hundred eighty-eight and 14/100 ($488.14) Dollars in favor of said intervenor and against defendant Sohio Petroleum Company.

3. That by reason of said indebtedness of the defendant Sohio Petroleum Company to the intervenor Eck Miller Contract Company, IT IS ORDERED that a judgment should be entered on the Eck Miller Contract Company's garnishment in the amount of Two thousand five hundred and no/100 ($2,500.00) Dollars in favor of said Eck Miller Contract Company and against defendant Sohio Petroleum Company.

4. That the indebtedness of defendant Sohio Petroleum Company to Aaron Karchmer and Gertrude Karchmer in the amount of Nine thousand six hundred and one and 93/100 ($9,601.93) Dollars, arising by virtue of said construction contract with Alfred G. Tate and said assignment from Alfred G. Tate to Aaron Karchmer and Gertrude Karchmer is the entire amount owed by defendant Sohio Petroleum Company on account of said contract and said assignment either to plaintiffs Aaron Karchmer and Gertrude Karchmer or Alfred G. Tate, and that upon payment of said amount by Sohio Petroleum Company to Aaron Karchmer and Gertrude Karchmer, said Sohio Petroleum Company will be released and discharged from all claims, liens, demands, actions and causes of action arising out of or in any way based upon said contract or said assignment and which have been or may be asserted by any person, firm, or corporation.

5. That the indebtedness of defendant Sohio Petroleum Company to the intervenor the United States of America in the amount of Four hundred eighty-eight and 14/100 ($488.14) Dollars is the entire amount owed by said Sohio Petroleum Company to the United States of America by virtue of the liens, attachments and distraints of the said United States of America against funds held by Sohio Petroleum Company for the account of Alfred G. Tate, and that upon payment of said amount by defendant Sohio Petroleum Company to the United States of America, said defendant will be released and discharged from any and all claims, liens, demands and causes of action of the United States of America arising out of said liens, distraints and attachments, and said liens, distraints and attachments will be released and discharged forthwith.

6. That the indebtedness of defendant Sohio Petroleum Co. to the intervenor Eck Miller Contract Company in the amount of Two thousand five hundred and no/100 ($2,500.00) Dollars is the entire amount owed by Sohio Petroleum Company to the Eck Miller Contract Company by virtue of the garnishment filed by the Eck Miller Contract Company against funds held by Sohio Petroleum Company for the account of Alfred G. Tate, and that upon payment of said amount by defendant Sohio Petroleum Company to the Eck Miller Contract Company, Sohio Petroleum Company will be released and discharged from any and all claims, liens, demands, and causes of action of the Eck Miller Contract Company arising out of said garnishment and attachment, and said defendant will be released and discharged forthwith.

IT IS SO ORDERED this 23rd day of June, 1954, and counsel will submit appropriate judgment in accordance therewith.

 

 

[60-2 USTC ¶9567]F. B. Kozak, Plaintiff v. John T. Mead, d/b/a John T. Mead Construction Company, Lois J. Mead, Jefferson Oil Company, Bordens Sani Seal Dairy, Quality Door and Lumber Company, Firestone Stores, Cernek Brothers, Dunn Tile, Block and Supply Company, Peter Bender, Herbert A. Moe, parent, and Gary Moe, minor, and District Director of the Internal Revenue Service, Detroit, Michigan, Defendants

Mich. Circuit Court, Saginaw Cty., Chancery, No. 33167, 12/3/59

[1954 Code Sec. 6323]

Lien for taxes: Priority of liens: Judgment creditor's lien not perfected.--Service of summons by a judgment creditor on January 15, 1958, in a garnishment action, was invalid under the state statute. Therefore, the tax lien of the Federal Government filed January 28, 1958 , took priority.

[1954 Code Sec. 6323]

Lien for taxes: Priority of liens: Assignment for past due consideration.--Claim based on an assignment for a past due consideration was subordinate to a Federal tax lien.

Doozan, Scorsone & Trogan, 827 North Michigan Avenue , Saginaw , Mich. , for plaintiff. Daniel E. Clark and Howard A. Maturen, Jr., Assistant Prosecuting Attorneys, Saginaw, Mich., for Bordens Sani Seal Dairy. Elmer L. Pfeifle, Jr., Assistant United States Attorney, 807 Federal Bldg., Detroit 26, Mich. , for District Director of Internal Revenue and Intervening plaintiff. Rob ert R. Day, 802 Court Street, Saginaw, Mich., for Dunn Tile Block & Supply Co. Rob ert E. Bright, Merrill Bldg., Saginaw, Mich., for Cernek Brothers. Joseph L. Scorsone, Second National Bank Bldg., Saginaw , Mich. , for Firestone Stores.

Opinion of the Court

HUFF, District Judge:

This case involves a bill of interpleader in which petitioner asks the Court to decide which of several claimants are entitled to certain money that he holds in his possession and is willing to pay as ordered by the Court for services performed by one John T. Mead, and that upon such payment petitioner be relieved from further liability to the said John T. Mead and his various creditors.

Of course, the money thus to be disposed of in this proceeding is not sufficient to satisfy all the creditors of the said John T. Mead and as a consequence it becomes necessary for this Court to determine the priority in which the various creditors shall be paid from the funds available.

At a hearing upon a proposed decree in this matter, a number of interested parties appeared and presented to the Court their claims to the money held by petitioner and admittedly subject to the order of this Court for distribution. Since that time only the intervening plaintiff petitioner, United States of America, and the intervening Firestone Stores have filed anything further in support of their respective contentions, and it now appears that none of the other creditors of the said John T. Mead are able to establish a legal right to the balance of the funds involved in this particular action.

The intervening petitioner, United States of America , insists that under notices of tax liens against John T. Mead, filed January 28, 1958 , it is entitled to receive $250.45 for 1956 taxes with an assessment date of June 6, 1957 , and $309.51 for 1956 taxes with an assessment date of November 8, 1957 . The intervening Firestone Stores, however, claims that it is entitled to a prior payment of $193.49 from the remaining money subject to the jurisdiction of the Court because of a judgment which it obtained against John T. Mead on March 22, 1957 , and subsequent garnishment actions commenced to collect such judgment on January 15, 1958 and February 7, 1958 .

Under the provisions of section 6323 of the Internal Revenue Code, the United States Government tax lien became effective against such "judgment creditors" as the intervenor Firestone Stores when it was filed on January 28, 1958 . For the purposes of this suit, the intervening Firestone Stores lien against the personal property which is the subject of this suit became effective upon the institution of valid garnishment proceedings against the present petitioner F. S. Kozak. If the Firestone Stores garnishment action of January 15, 1958 was valid, it preceded the United States of America 's notice of tax lien filed January 28, 1958 ; if invalid, the United States notice of tax lien of January 28, 1958 obviously has priority over Firestone Stores garnishment action of February 7, 1958 . In other words, a controlling question for this Court to determine here is the validity of the Firestone Stores garnishment proceedings of January 15, 1958 in the Saginaw Municipal Court against John T. Mead as the principal defendant and F. S. Kozak as the garnishee defendant.

Inasmuch as it appears from the stipulation of material facts recently filed in this case by the interested parties that service of summons in the Saginaw Municipal Court garnishment action of January 15, 1958 was improperly made on "Rev." Weindjewski rather than the party petitioner, F. S. Kozak, who was the proper garnishee defendant, and that there was no showing of a compliance with the statute for substituted service on "some one in the family," as provided by law (Michigan Statutes Annotated 27.3199), service was defective. The Court therefore acquired no jurisdiction and no valid lien of garnishment was created (Laidlaw v. Morrow, 44 Mich. 547, headnote 2; Kerchieff v. Copening, 335 Mich. 153). That particular action in garnishment also was defective in that it was made returnable on the same day it issued and so was not in conformity with the statute requiring a "summons returnable in not less than four days." The effort to correct these defects by the second garnishment proceeding of February, 1958 clearly came too late to overcome the Federal tax lien which had become effective when filed on January 28, 1958 . The intervening Firestone Stores, therefore, established no valid lien of garnishment through its proceedings of January 15, 1958 in the Saginaw Municipal Court. As a consequence, the intervening plaintiff, United States of America , is entitled to receive from the funds still available in this court, through the present action of interpleader, the sums secured by its notice of tax liens filed January 28, 1958 prior to payment to the intervening Firestone Stores under its garnishment of February 7, 1958 .

It now appears undisputed that the claim of the defendant Cernek Brothers is based upon an assignment from John T. Mead for a past due consideration and is therefore subordinate to the tax lien of the United States Government (section 6323, Internal Revenue Code; Filipowicz v. Rothensies, 43 F. Supp. 619 [42-1 USTC ¶9300]).

A decree may be entered in accordance with the proceedings heretofore taken in this matter as amplified by this opinion.

 

 

[77-1 USTC ¶9426]Lee Chagra v. United States of America

U. S. Dist. Court, West . Dist. Tex. , El Paso Div., EP-74-CA-29, 3/4/77

[Code Secs. 6321-6323--result unchanged under '76 Tax Reform Act]

Lien for taxes: Taxpayer's attorney-creditor: Validity of lien: Notice of lien: Creditor as "purchaser."--Inasmuch as an assignment of tangible personal property as overdue payment of compensation to a tax debtor's attorney postdated a federal tax lien, the government's tax claim took precedence over the assignee's interest in the property, which the government properly levied on and sold. The tax lien would have been invalid, for omission to file notice of the lien, with respect to a purchaser from the taxpayer. In the instant case, however, the assignment was not for present consideration and the assignee was therefore not a purchaser. Franklin Federal Savings & Loan Association, DC, 56-1 USTC ¶9495, 140 F. Supp. 286, followed.

Towner Leeper, 444 Executive Center Blvd., Suite 112 , El Paso , Tex. 79902 , for plaintiff-appellant. Frank Walker, Assistant United States Attorney, El Paso , Tex. , for defendant-appellee.

Findings of Fact and Conclusions of Law Findings of Fact

WOOD, Jr., District Judge:

1. This Court enters as Findings of Fact those facts stipulated to by agreement of the parties filed on June 4, 1974 , and August 1, 1974 , with the exception of Stipulation of Fact No. 3 of the set of Stipulations filed on August 1, 1974 , which is modified as designated in Finding of Fact No. 2, infra.

2. Mr. and Mrs. Johnson were indebted to plaintiff for legal services in an amount in excess of $8,000.00 and, on November 22, 1974, Mrs. Johnson transferred her contractual interest in one 1974 Cadillac purchased from Bailey Cadillac. A copy of Mrs. Johnson's assignment is attached hereto as Court's Exhibit "A". Bailey Cadillac, Inc. was notified of the transfer.

Conclusions of Law

1. Regardless of the Stipulation of parties to the contrary, the Court must view all matters contained in the record and determine the effective date of transfer from the date of the instrument pertaining thereto, i. e., November 2, 1974 .

2. The United States Government acquired a valid tax lien upon the property of the tax debtor at the time of the assessment, November 21, 1973 . 26 U. S. C., Sec. 6322.

3. The tax lien imposed by Section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic's lien or judgment lien creditor until notice thereof which meets the requirements of Subsection (f) has been filed by the Secretary or his delegate. 26 U. S. C., Section 6323(a). Nowhere in the record does it appear that Notice of the tax lien as required by the aforementioned Section has been filed.

4. The assignment by the taxpayer to plaintiff in the instant case was for past due consideration and, accordingly, the assignee could not be considered a purchaser for purposes of Section 6323 providing that the Government's lien for taxes shall not be valid as against any purchaser until notice thereof has been filed by the Collector. U. S. v. Franklin Federal Savings & Loan Association [56-1 USTC ¶9495], 140 F. Supp. 286 (D. C. Pennsylvania, 1956).

5. The United States Government, pursuant to the Federal tax lien, had a superior claim to the automobile as the assignment occurred after the initiation of the Federal tax lien and, accordingly, levy and sale by the United States Government was proper.

6. Pursuant to the above, Judgment should be entered with costs in favor of the United States Government.

Judgment

On this the 2nd day of March, 1977, came on for consideration the above styled and numbered cause upon Stipulations of Fact agreed to by the respective parties and dated June 4, 1974 , and August 1, 1974 .

After carefully considering the aforementioned Stipulations and in accordance with the Findings of Fact and Conclusions of Law entered pursuant thereto, it is hereby ORDERED, ADJUDGED AND DECREED that the plaintiff take nothing; that the action be DISMISSED on the merits and that the defendant, United States of America, recover of and from the plaintiff, Lee Chagra, its costs of action.

 

 

[56-1 USTC ¶9495] United States of America , Plaintiff v. Franklin Federal Savings and Loan Association, Sidney Kirschner, Rob erta Kirschner, Defendants, Luzerne Lumber Company, Inc., Intervening Defendant

In the United States District Court for the Middle District of Pennsylvania, Civil Action No. 4776, 140 FSupp 286, April 30, 1956

[1939 Code Sec. 3670--similar to 1954 Code Sec. 6321; 1939 Code Secs. 3671-3672--changed in 1954 Code Secs. 6322-6323; 1939 Code Sec. 3710-- similar to 1954 Code Sec. 6332]

Validity of tax liens against mortgagees, etc.: Assignment for past due consideration: Summary judgment.--On January 11, 1952, taxpayer-debtor assigned certain credits or funds owing to him by defendants A and B for the purpose of securing a pre-existing indebtedness owing to C, the intervenor-creditor, for building materials previously sold to taxpayer on credit. On May 22, 1952 , a warrant for restraint for collection of income taxes against taxpayer was issued. On June 11, 1952, notices of lien and levy were served on A and B who contended that they were not indebted to taxpayer on May 22, 1952, by reason of the assignment to C, although they were still in possession of the funds. It was held that the Government's lien dated from the date the assessment list was received by the Collector, which date was prior to taxpayer's assignment. Since the assignment was not for any present consideration, C, as assignee, could not be considered a purchaser within the recording acts. Summary judgment was allowed in favor of the Government against A and B by reason of their failure to surrender the fund as required by 1939 Code Sec. 3710.

J. Julius Levy , United States Attorney, Federal Building , Scranton , Pa. , for plaintiff. Joseph J. Saintz , Miners Bank Building , Wilkes-Barre , Pa. , for defendants. Al J. Kane, Brooks Building , Wilkes-Barre , Pa. , for intervening defendant.

Opinion

WATSON, District Judge:

In this action the government requests judgment against the defendants, the Franklin Federal Savings and Loan Association and Sidney Kirschner and Rob erta Kirschner, in the amount of $2736.00 with interest from July 11, 1952. The government's claim is based upon Section 3710 of the Internal Revenue Code of 1939, 26 U. S. C. A. §3710, which provides:

"(a) Requirement. Any person in possession of property, or rights to property, subject to distraint, upon which a levy has been made, shall, upon demand by the collector or deputy collector making such levy, surrender such property or rights to such collector or deputy unless such property or right is, at the time of such demand, subject to an attachment or execution under any judicial process.

(b) Penalty for violation. Any person who fails or refuses to so surrender any of such property or rights shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of the taxes (including penalties and interest) for the collection of which such levy has been made, together with costs and interest from the date of such levy."

[The Facts]

The Commissioner of Internal Revenue duly assessed certain taxes against one Lewis H. Dixon and assessment lists containing these assessments were received by the Collector of Internal Revenue. On May 22, 1952, a warrant for distraint for the collection of taxes assessed against Dixon was issued, and on June 11, 1952, notices of lien and levy were served on the defendants, the Franklin Federal Savings and Loan Association and Sidney and Rob erta Kirschner, who were indebted to Dixon in the sum of $2736.00. The defendants contend that on May 22, 1952, when the warrant for distraint was issued, they were not indebted to Dixon for the reason that on January 11, 1952 Dixon assigned credits in the sum of $2700.00 against the Franklin Federal Savings and Loan Association and the Kirschners to the Luzerne Lumber Company, Inc.

On March 31, 1954, an order was entered by this Court permitting the Luzerne Lumber Company, Inc. to intervene as a defendant. On the same date the intervening defendant filed its motion for summary judgment, which is now before the Court for disposition.

Paragraphs 8 and 9 of intervening defendant's motion for summary judgment admit that the sum of $2736.00 is still in the possession of the Franklin Federal Savings and Loan Association, and had not been turned over to the intervening defendant, Luzerne Lumber Company, Inc., on June 11, 1952, when notice of lien and levy was served on the association and the Kirschners. Attached to the intervening defendant's motion, and identified as "Intervening Defendant's Exhibit #1", is a photostatic copy of the assignment dated January 11, 1952 . It should be noted that the assignment states that Lewis H. Dixon, "in consideration of the sum of $2700.00 now justly due and owing by me to the Luzerne Lumber Company . . . for lumber and building materials furnished to and used by me in the erection and construction of that certain dwelling or building for Sidney Kirschner and Rob erta Kirschner . . . and for better securing of the said sum to the said Luzerne Lumber Company . . ." assigns to the Luzerne Lumber Company the sum of $2700.00 "to be paid out of the balance now due and owing to me" by the Kirschners "for carpenter labor and materials furnished by me" to the Kirschners. This instrument of assignment clearly indicates by its language that the assignment was not made for any present consideration but for the securing of the payment of a preexisting indebtedness between Dixon and the Luzerne Lumber Company, for lumber and building materials previously sold by the Luzerne Lumber Company to the taxpayer Dixon on credit.

At the hearing on the motion for summary judgment, the United States Attorney presented pertinent assessment lists, showing the dates on which the assessments against Dixon were made by the Commissioner of Internal Revenue, the dates on which the assessment lists were received by the Collector of Internal Revenue for the Twelfth Collection District, the amount of the assessments, and the present balance. It should be noted that the remaining assessments total in excess of $2736.00, the sum owed by the Kir