California2
Page2
And from these
facts it is recommended as follows:
Conclusions
of Law
I
The Court has
jurisdiction of the parties and the subject matter.
II
The
United States of America
acquired liens on all property and all rights to property of the Pacific
Islands Navigation Company, including the M. V. MARQUESA, on
June 7, 1957
in the sum of $2,387.95 together with penalties and interest, and on
October 30, 1957
in the sum of $231.96 plus interest.
III
The
assessments of taxes due the City of Long Beach and County of Los
Angeles from the Pacific Islands Navigation Company did not become fixed
and choate in amount before the third Monday in July of 1957.
IV
Any liens
which either the County of Los Angeles or City of Long Beach might have
acquired by their seizure of June 12, 1957, of the vessel Marquesa, were
relinquished by them on August 26 and October 15, 1957. This Court did
not enter any order preserving the lien of said parties without the
possession of the vessel.
V
The claims of
the three parties hereto relate to taxes and none is maritime in nature.
Therefore, among said claimants, the order of priority with respect to
perfected and choate liens, is "first in time, first in
right." Inchoate liens or claims are entitled to share pro rata in
the proceeds after satisfaction of the choate liens.
VI
It is hereby
recommended that the following distribution be made:
1. There first
be paid to the City of
Long Beach
the sum of $285.20, pursuant to stipulation and order, in settlement of
its claim for wharfage;
2. There next
be paid to the United States the full amount of its two assessments of
taxes, the sum of $2,488.57 together with interest at the rate of 38¢
per day on its lien for Withholding and Social Security taxes for the
first quarter, 1957, and the sum of $240.06 with respect to said taxes
for the second quarter, 1957, with interest at the rate of 4¢ per day,
all interest computed from January 9, 1958;
3. That the
sum of $44.60 be paid to Ruth M. Albers in full payment for Reporter's
fees; and that the sum of $ . . . . be paid to Barbara Warner, Special
Master.
4. That any
amount remaining after making the foregoing payments be divided between
the City of Long Beach and the County of Los Angeles in the proportion
that the unpaid assessment of each bears to the sum of the unpaid
assessments of the two of them and that distribution in such proportion
be made to them.
Order
Approving Commissioner's Supplemental Report on Relative Priorities of
the City of
Long Beach
,
County
of
Los Angeles
and
United States of America
.
The
supplemental Report of the Commissioner having been filed, and a hearing
upon objections thereto having been heard,
IT IS HEREBY
ORDERED, ADJUDGED AND DECREED:
I
That the
Commissioner's Supplemental Report on relative priorities of the City of
Long Beach
,
County
of
Los Angeles
, and
United States of America
is approved.
II
That the sum
of $285.20 be paid to the City of
Long Beach
in settlement of its claim for wharfage.
III
That the
United States of America be paid the full amount of its two assessments
of taxes, the sum of $2,488.57, together with interest at the rate of
$.38 per day on its lien for withholding and Social Security taxes for
the first quarter, 1957, and the sum of $240.06 with respect to said
taxes for the second quarter 1957, with interest at the rate of $.04 per
day, all interest computed from January 1958.
IV
That the sum
of $44.60 be paid to Ruth M. Albers in full payment for reporters' fees.
V
That the sum
of $175.00 be paid to Barbara Warner, Special Commissioner, for
Commissioner's fees.
VI
That the
amounts remaining after making the foregoing payments be divided between
the City of Long Beach and the County of Los Angeles in the proportion
that the unpaid assessment of each bears to the sum of the unpaid
assessments of the two of them and that distribution in such proportion
be made to them.
[56-2 USTC
¶9939]
United States of America
, Plaintiff v. S. Alexander Company, Inc., a Corporation, et al.,
Defendants
U.
S. District Court, for the So. Dist. Calif., Cen. Div., Civil No.
16896-TC, 7/20/56
[1939 Code Sec. 3672--corresponding to 1954 Code Sec. 6323]
Priority of liens: Priority of state taxes.--General and special
Los Angeles County and City of Los Angeles taxes for 1946-1949, levied
against real property owned by taxpayer, became choate liens before
January 3, 1949, the date of assessment of federal withholding and
federal insurance contributions taxes against the taxpayer. The taxes,
penalties and interest owed the county and city amounted to $372.86;
those owed the federal government amounted to $16,413.74 taxes and
$23,550.57 penalties, interest and lien fees. A tax sale of the property
in 1952 by the
County
Tax Collector
to Publix Title Co. for $970 was void. The property is ordered to be
sold at public auction, the proceeds to be applied first to the
marshal's fees and expenses of sale, second to the costs incurred in
this action by the Publix Title Co., third to the Publix Title Co. for
$372.86, fourth to the costs incurred in this action by the United
States, and fifth to the United States for its claim for taxes,
penalties, etc., any remainder to be paid into the court to await proper
disposition by the court.
Laughlin E.
Waters, United States Attorney, Edward R. McHale, Assistant United
States Attorney, Chief, Tax Division, 808 Federal Building, Los Angeles
12, Calif., for plaintiff. Leo Goodman, Gizella L. Allen, for Publix
Title Co. Harold W. Kennedy, County Counsel, Andrew O. Porter, Deputy
County Counsel, for County of Los Angeles.
Findings
of Fact, Conclusions of Law and Judgment and Order of
Sale
CLARKE,
District Judge:
The above case
came on for trial on February 16, 1956, and again on March 2, 1956,
before the Honorable Thurmond Clarke, United States District Judge,
sitting without a jury, presiding, the plaintiff represented by Laughlin
E. Waters, United States Attorney for the Sourthern District of
California, Edward R. McHale, Assistant United States Attorney, Chief,
Tax Division, the defendant Publix Title Company by its attorneys, Leo
Goodman and Gizella L. Allen, the defendant County of Los Angeles by its
attorneys, Harold W. Kennedy, County Counsel, and Andrew O. Porter,
Deputy County Counsel, the defendants Al Fletcher and M. C. Fletcher,
doing business under the fictitious firm name and style of Al Fletcher
Collection Service, having filed an answer but not having appeared, the
State of California and City of Los Angeles having disclaimed, and the
dismissals having been entered of all fictitious defendants and of
defendant Mae Liddy, and the defaults having been entered of the
defendants A. Noah Borah, Title Insurance and Trust Company, a
corporation, Creditors House, a corporation, Velvatone Stucco Products
Co., Inc., a corporation, The Doctors Business Bureau, Samuel Bucholtz,
S. Alexander Company, Inc., a corporation, Buddy Centman, Frances
Centman, and E. B. Grant, and the defendant, R. A. Riddell, District
Director of Internal Revenue, having filed a disclaimer herein, and a
notice of lis pendens having been recorded with the County Recorder of
Los Angeles County on July 6, 1954, the Court having considered the
evidence, the pleadings, the stipulations of the parties, now makes its
findings of fact and conclusions of law as follows:
Findings
of Fact
I. The
plaintiff is a corporate and sovereign body politic.
II. This is an
action for the collection of Internal Revenue taxes brought at the
request of the Attorney General of the
United States
and authorized and sanctioned by the United States Commissioner of
Internal Revenue.
III. The
defendant S. Alexander Company, Inc., is a corporation organized and
existing under and by virtue of the laws of the State of California; the
defendants City of Los Angeles, California; County of Los Angeles,
California; Los Angeles County Flood Control District; and State of
California are corporate bodies politic.
IV. The
defendant Builders' Finance Service, a co-partnership, is a
co-partnership composed of Sam Mesler and A. Noah Borah, with a place of
business in the City and
County
of
Los Angeles
, State of
California
.
V. Defendants
Sam Mesler, A. Noah Borah, Buddy Centman, Frances Centman, Samuel
Bucholtz, and Edward Martin, are residents of the
County
of
Los Angeles
, State of
California
.
VI. The
defendant Creditors House is a corporation organized and existing under
and by virtue of the laws of the State of
California
, and has a place of business in the City and
County of Los Angeles
,
California
.
VII. The
defendant The Doctors Business Bureau is a co-partnership composed of J.
A. Slaughter and A. S. Trigg with a place of business in the City and
County
of
Los Angeles
, State of
California
.
VIII. The
defendant Title Insurance and Trust Company, a corporation, is a
corporation organized and existing under and by virtue of the laws of
the State of
California
and maintains its principal place of business in the City of Los
Angeles, California.
IX. The
defendant Velvatone Stucco Products Co., Inc., a corporation, is a
corporation which plaintiff is informed and believes is organized under
the laws of the State of
California
.
X. At all
times from
June 3, 1947
, to
May 1, 1950
, S. Alexander Company, Inc., a corporation, was the owner and was in
possession of the following described real property located in the
County and City of
Los Angeles
, State of
California
:
PARCEL 1:
Lot 7 in block 30 of Tract No. 6478, in the City and
County
of
Los Angeles
, State of
California
, as per map recorded in book 68 pages 93 to 99 inclusive of Maps, in
the office of the county recorder of said county.
EXCEPT that
portion described as follows: Beginning at the northwesterly corner of
said lot 7; thence southerly in a direct line to a point in the
southerly line of said lot, distant 5.00 feet easterly from the
southwest corner of said lot, containing 63 square feet of land, more or
less, as condemned for flood Control purposes by decree of condemnation
recorded in book 40075 page 304, Official Records.
XI. The
Commissioner of Internal Revenue assessed the following federal
withholding and federal insurance contributions taxes against the
defendant, S. Alexander Company, Inc.:
XII. The
Commissioner's several assessment lists carrying the assessment of said
withholding and federal insurance contributions taxes were received in
the office of the Collector of Internal Revenue on the dates set forth
in the paragraph of these findings next preceding. The Collector of
Internal Revenue issued notices and demands for payment of said taxes to
the taxpayer S. Alexander Company, Inc., on the dates set forth in said
paragraph, but that notwithstanding said notices and demands for payment
no part of said taxes nor the interest thereon has been paid.
XIII. On
May 1, 1950
, there was recorded in the Official Records of Los Angeles County as
deed No. 3168, a deed of said real property by S. Alexander Company,
Inc., a corporation, to Builders' Finance Service, a co-partnership.
XIV. There was
recorded in the Official Records of Los Angeles County on
July 25, 1950
, as deed No. 3517, a conveyance by Builders' Finance Service, a
co-partnership, by Sam Mesler and A. Noah Borah to R. A. Riddell,
Collector of Internal Revenue.
XV. A Notice
of Pendency of the above-entitled action was recorded in the Official
Records of Los Angeles County on
July 6, 1954
.
XVI. General
and special Los Angeles County and City of Los Angeles taxes were levied
against said real property for the fiscal years 1946-1947, 1947-1948,
and 1948-1949, and were assessed to S. Alexander Company, Inc.; said
levies became choate liens upon said real property before the third day
of January, 1949; said texes were not then paid and became delinquent;
the total amount of taxes, penalties and interest to and including
March, 1956, assessed against said real property is $372.86.
XVII. H. L.
Byram,
County
Tax Collector
, in each year following said delinquencies, and at the times prescribed
by law, took those steps necessary to effect a sale by operation of
California
statutory law [Section 3436 of the Rev. and Tax. Code] to the State.
More than five years thereafter, that is,
July 1, 1952
, the tax collector, pursuant to Rev. and Tax. Code §3511, executed a
deed of said property to the State of California, which deed was
recorded on the 5th day of September, 1952, in the office of the County
Recorder, Los Angeles County, California, in Book 39803, Page 65.
XVIII. On the
31st day of March, 1954, pursuant to the provisions of the state tax
statutes, H. L. Byram, Tax Collector of Los Angeles County, sold at
public auction said real property to the defendant, Publix Title
Company, for the sum of $970.00, and on March 31, 1954, H. L. Byram, Tax
Collector of Los Angeles County, executed a tax deed dated March 31,
1954, conveying said real property to Publix Title Company; said deed
was recorded April 30, 1954, in Book 44469, Page 84, of the Official
Records of Los Angeles County.
XIX. The
following persons filed in the Clerk's Office of the County of Los
Angeles, California, a Certificate of Fictitious Name on
November 16, 1949
, as Number 160324, which disclosed that Buddy Centman, E. D. Grant, A.
Noah Borah, Sam Mesler, Samuel Bucholtz and Edward Martin were doing
business under the name of Builders' Finance Service.
XX. On
July 14, 1950
, Builders' Finance Service, a co-partnership by Sam Mesler and A. Noah
Borah, executed a deed of said property to R. A. Riddell, Collector of
Internal Revenue. Said deed was on the same day acknowledged and was
recorded on
July 25, 1950
, in Book 33782, page 225 of the Official Records of Los Angeles County,
California; said deed was recorded at the request of Builders' Finance
Service.
XXI.
Defendants Al Fletcher and M. C. Fletcher, doing business under the
fictitious firm name and style of Al Fletcher Collection Service,
secured a judgment in the Municipal Court of Los Angeles, Judicial
District of the Court of Los Angeles, State of California in Action No.
993660 in the sum of $133.60 against the defendant S. Alexander Company,
Inc., a corporation; an abstract of said judgment was recorded September
6, 1950, with the County Recorder of Los Angeles County in Official
Records in Book 34226, page 187; there remains due, owing and unpaid to
said defendants from the S. Alexander Company, Inc., the sum of $182.80,
plus interest as provided by law.
XXII. The
correct amount of taxes, penalties and costs that should be paid upon
redemption, to discharge the tax and assessment liens of all taxing
agencies and revenue districts, had not the purported sale been held, is
the sum of $372.86.
And from these
facts, the Court concludes as follows:
Conclusions
of Law
I. The Court
has jurisdiction of this action and the parties hereto.
II. General
and special Los Angeles County and City fo Los Angeles taxes levied
against said real property for the fiscal years 1946-1947, 1947-1948,
and 1948-1949, in the total amount of $372.86, taxes, penalty, and
interest became choate liens before the third day of January, 1949, and,
therefore, are first in order of time and priority.
III. Liens of
the
United States
against the S. Alexander Company, Inc., first arose on
January 3, 1949
, on the date the assessment lists signed by the Commissioner were
received by the Collector of Internal Revenue at
Los Angeles
,
California
. Internal Revenue Code of 1939, §3670. Said liens totaled the sum of
$16,413.74, together with penalties and interest and are second in order
of priority and in time against the real property.
IV. On
May 1, 1950
, defendant S. Alexander Company, Inc., a corporation, conveyed said
real property to Builders' Finance Service, a co-partnership. On
July 14, 1950
, Builders' Finance Service, a co-partnership, conveyed said real
property to R. A. Riddell, Collector of Internal Revenue, as further
security for the tax indebtedness of S. Alexander Company, Inc., to the
Government.
V. The deed by
H. L. Byram, County Tax Collector, to the State of California which was
executed on July 1, 1952, and recorded on September 5, 1952, was void
and ineffective because at that time the United States of America had
acquired tax liens against the property, and, furthermore, the title to
the property had been conveyed to its agent, R. A. Riddell, Collector of
Internal Revenue. For the same reason, purported sale on March 31, 1954,
of the parcel of property to the defendant Publix Title Company was void
and ineffective and did not convey and right, title or interest in said
property to Publix Title Company.
VI. Said tax
deed and tax sale having been void, the defendant Publix Title Company
is subrogated to the rights of the County and City of
Los Angeles
under the tax assessments for the fiscal years 1946-1947, 1947-1948, and
1948-1949.
Judgment
and Order of
Sale
In accordance
with the foregoing findings of fact and conclusions of law, it is
ordered, adjudged and decreed:
1. The County
of
Los Angeles
and the City of
Los Angeles
had first and prior liens against the following described real property
located in the County and City of
Los Angeles
, State of
California
:
PARCEL
1: Lot 7 in block 30 of Tract No. 6478, in the City and
County
of
Los Angeles
, State of
California
, as per map recorded in book 68 pages 93 to 99 inclusive of Maps, in
the office of the county recorder of said county.
EXCEPT
that portion described as follows:
Beginning
at the northwesterly corner of said lot 7; thence southerly in a direct
line to a point in the southerly line of said lot, distant 5.00 feet
easterly from the southwest corner of said lot, containing 63 square
feet of land, more or less, as condemned for flood Control purposes by
decree of condemnation recorded in book 40075 page 304, Official
Records,
in
the total amount of $372.86, for taxes, penalties and interest, after
payment of which to the County and City, the defendant Publix Title
Company, became subrogated to their priority. Said amount is first to be
satisfied out of the proceeds of the sale of the said real property;
2. The tax
deed heretofore issued by the Tax Collector of the County of Los
Angeles, State of California, to Publix Title Company, a corporation,
defendant herein, dated July 1, 1952, and recorded in Book 39803, page
65, Official Records, County of Los Angeles, California, with respect to
the property described in paragraph 1, is void and said deed is set
aside;
3. The
plaintiff, United States of America, has liens upon the real property
described in the complaint for taxes due the United States in the sum of
$16,413.74, together with penalties, interest, and lien fees, in the sum
of $23,550.57, which lien is prior and superior to the liens of all
other parties hereto, except Publix Title Company, set forth in
paragraph 1 hereinabove;
4. That said
real property or so much thereof as may be necessary to sell be, and the
same is hereby, ordered to be sold by the United States Marshal at
public auction pursuant to Title 28, U. S. C., Section 2001, et seq.,
and the proceeds of sale be paid, as follows:
First:
To the payment of Marshal's fees, disbursements, and expenses of sale;
Second:
To the costs incurred in this action and by the defendant Publix Title
Company, taxed by the Clerk of this Court, in the sum of $.....;
Third:
To the defendant Publix Title Company, the sum of $372.86;
Fourth:
To the costs incurred in this action by the plaintiff
United States of America
, taxed by the Clerk of this Court in the sum of $90.40;
Fifth:
To the
United States of America
the sum of $23,550.57, together with interest thereon at the rate of six
per cent per annum until paid;
Sixth:
Any surplus remaining thereafter to be paid into Court to await proper
distribution by the Court.
5. That at
such sale any of the parties hereto shall be allowed to bid for such
real property, and that defendant Publix Title Company shall be allowed
a credit on its bid in the amount of its first and prior lien;
6. That upon
such sale, said Marshal shall issue his Certificate of Sale of said
property to purchaser at said sale; that upon the sale of said property
and delivery of deed as aforesaid, by the Marshal of this Court to the
purchaser at said sale after the expiration of the periods of
redemption, the plaintiff, the defendants, and all persons claiming or
to claim from or under them, and all persons having liens subsequent to
the first and prior liens of the Publix Title Company, by judgment or
decree upon the land described therein, and their personal
representatives, and all persons having any lien claimed by or under
such subsequent judgment or decree, and their heirs or personal
representatives, and all persons claiming under them, and all persons
claiming to have acquired any estate or interest in said premises
subsequent to the filing of notice of pendency of this action with the
Court, be forever barred and foreclosed of and from all equity of
redemption in claim of, in, and to said premises and every part and
parcel thereof; that if any of the parties to this action, who may be in
possession of said premises, or in any part thereof, or any person who,
since the commencement of this action, has come into possession thereof,
to such purchaser or purchasers upon the production of the Marshal's
deed for such premises, or any part thereof, a writ of assistance may,
without further notice, be issued to compel such delivery to the
purchaser or purchasers;
7. That the
United States Marshal is hereby ordered and directed to sell the real
property pursuant to the foregoing judgment and to make a return of sale
to this Court, and the Clerk of the Court is ordered to transmit to the
Marshal a copy of this judgment.
[57-2 USTC
¶9925]Jefferson Standard Life Insurance Company, a Corporation,
Appellant v. United States of America, H. L. Byram, County Tax Collector
of Los Angeles County, and George T. Goggin, Trustee of Stockholders
Publishing Company, Inc., a Corporation, Bankrupt, Appellees
(CA-9),
U. S. Court of Appeals, 9th Circuit, No. 15,349, 247 F2d 777, 8/21/57,
Reversing and remanding unreported District Court decision
[1954 Code Sec. 6323(a)]
Lien for taxes: Priority as to mortgage lien on bankrupt's
property.--At the time the bankrupt corporation filed its petition
in bankruptcy, the Jefferson Standard Life Insurance Co., the United
States and the Los Angeles County Tax Collector had liens upon its
property. These liens attached to the proceeds of the sale of its
property by the referee in bankruptcy. It was conceded that as between
Jefferson Standard's prior mortgage lien and the Government's subsequent
lien for taxes, Jefferson Standard had priority by virtue of 1954 Code
Sec. 6323(a). The court held that the lien of Jefferson Standard had
priority over that of the Los Angeles County Tax Collector and that
Jefferson Standard was entitled to post-bankruptcy interest.
Honorable
William M. Byrne, District Judge, Meserve, Mumper & Hughes, Leo E.
Anderson, Los Angeles, Calif., for appellant. Charles K. Rice, Assistant
Attorney General, A. F. Prescott, Karl Schmeidler, Attorneys, Department
of Justice, Washington, D. C., Laughlin E. Waters, United States
Attorney, Edward R. McHale, Assistant United States Attorney, Los
Angeles, Calif.; Andrew O. Porter, Deputy County Counsel, Harold W.
Kennedy, County Counsel, County of Los Angeles; Craig, Weller &
Laugharn, Los Angeles, Calif., for appellees.
Before
STEPHENS, Chief Judge, and DENMAN and POPE, Circuit Judges.
[Opinion
in Full Text]
POPE, Circuit
Judge:
This is an
appeal from an order affirming the order of a referee in bankruptcy
fixing and determining the respective rights and priorities of the
appellant Jefferson Standard Life Insurance Company, the United States,
and the Los Angeles County Tax Collector, in and to the proceeds of a
trustee's sale of all the assets of Stockholders Publishing Company,
Inc., the bankrupt.
On
December 31, 1954
, the date of the petition in bankruptcy, the three priority claimants
mentioned had liens upon all of the property, real and personal, of the
named bankrupt. The lien which first attached was that of Jefferson
Standard. On the date of the bankruptcy there was owing to it
$351,223.74 secured by deed of trust and chattel mortgage upon all of
the bankrupt's property, which instruments were executed, filed and
recorded
December 1, 1945
.
The lien next
attaching was that of the
United States
for corporate income and excess profits taxes for the years 1945-44-45,
with interest and penalties, in the sum of $288,608.58. This lien
attached on
March 14, 1952
, when the local collector received the Commissioner's assessment list.
Third in order
of time was the claim of
Los Angeles
County
for real and personal property taxes for the year 1954-1955 which became
a lien on the bankrupt's real estate on
March 1, 1954
. The amount owing on these taxes on the date of bankruptcy was
$15,384.10.
In the course
of the bankruptcy proceedings, the trustee, pursuant to authority
granted him, sold all of the real and personal property assets of the
bankrupt estate free and clear of all liens, such liens upon said
property being transferred to the proceeds of sale without impairment.
The proceeds of sale amounted to $382,500, and since the sum thus
realized was insufficient to pay the three lien claimants in full, the
trustee petitioned the referee for a determination of the nature,
extent, amount, validity, priority and right to participate in the sales
proceeds of the three lien claimants mentioned.
[Referee's
Ruling]
Upon hearing,
the Referee held that the sum of $351,223.74 owing to Jefferson Standard
upon its mortgage and deed of trust had priority over the claim and lien
of the United States for taxes due it; and that the sum last mentioned
should first be set aside for Jefferson Standard, the balance of the
proceeds of the sale to be paid to the United States for application
upon the taxes due it. However, it was ordered that from the sum of
$351,223.74, thus set aside for Jefferson Standard, the sum of
$15,384.10, the amount of the County's claim, should be paid to the
County
Tax Collector
.
Here, upon
appeal from the district court's affirmance of this order, Jefferson
Standard makes two principal points: first, that the orders erred in
giving priority to the County's lien; and second, that the Referee's
order erroneously denied the appellant's claim for post-bankruptcy
interest upon its indebtedness computed to the dates of payment. 1
As between
Jefferson Standard's prior mortgage lien and the Government's subsequent
lien for taxes, it is conceded here that Jefferson Standard has
priority. (Title 26
U. S.
C. A. §6323(a)). 2
The Referee's order that the amount owing to the County should be paid
out of funds found due and tentatively set aside for Jefferson Standard
was based upon his determination that "the lien of the
County
of
Los Angeles
, by
California
law, is superior to the lien of
Jefferson
." We are of the opinion that this is not a correct statement of
the California law, and that in consequence, the order directing payment
of the county taxes out of sums which otherwise would be available for
payment of the debt owing to Jefferson Standard must be reversed.
The Referee
cited as authority for his version of the California law the cases of Dougherty
v. Henarie, 47 Cal. 9, and Courtney v. Byram, 54 Cal. App. 2d
769, 129 P. 2d 721. Neither case is in point here. Although each case
contains language which seems to suggest approval of a general rule that
a tax lien in
California
is
Superior
to a prior mortgage or other contract lien, neither of those cases
involved any such question. Later
California
cases have completely negatived the suggestions made in the dicta in the
cases relied on by the Referee. In the Dougherty case, the sole
question presented was whether a tax deed issued upon a sale for state
and county taxes conveyed a superior title free of the liens of a street
assessment bond. The court's decision that the tax deed gave clear title
was based upon the explicit language of a
California
statute which declared that a tax deed "shall convey to the grantee
absolute title to land described . . . free and clear of all
encumbrances . . . whatever . . ." It will be noted that the
language here quoted referred to the effect of a tax deed. It is true
that by way of dictum the opinion of the court referred to "the
necessity of collecting revenue for the support of the Government",
and said that this "imperatively requires that the lien for taxes
shall take precedence over all other liens". But it is well
established that
California
does not go along with any such broad rule, sometimes recognized in
other jurisdictions, that a lien for taxes is superior to all other
liens, ex proprio vigore, even in the absence of a statute so
declaring, or because of some principle that tax liens are liens of a
"superior dignity".
In Home
Owners Loan Corporation v. Hansen, 38 Cal. App. 2d 748, 102 P. 2d
417, 419, the court reviewed the California cases, including the Dougherty
case, and pointed out that later California decisions disclose that the
dictum of the Dougherty case was not California law, saying (p.
420): "The decisions in both the Guinn and Bolton
cases dispel any doubt as to whether California follows the rule of law
that tax liens are ex proprio vigore superior to a pre-existing
mortgage or other contract liens. These cases definitely hold that a
paramount lien for unpaid taxes depends solely upon legislative
enactment. We are of the opinion that these last-mentioned cases
correctly state the law and that a specific expression of the
legislative intent is necessary for tax liens to take precedence over
pre-existing mortgage or other contract liens."
The Referee's
opinion quotes from Courtney v. Byram, supra, a statement
somewhat similar to that in the Dougherty case suggesting that
the lien of taxes is superior to the obligations of private debts. The
case involved no such question. In
Fresno
County
v. Commodity Credit Corporation, 9 Cir., 112 Fed. (2d) 639, this
court was presented with an argument that a
California
county's lien for unpaid taxes was superior to the prior lien of the
Commodity Credit Corporation upon certain cotton situated in the county.
The argument, similar to the dictum in the Courtney case, was
that a tax obligation in
California
was entitled to priority in payment regardless of whether it had been
given any such preference by statute. We there reviewed the California
cases and rejected the argument that the California courts have adopted
a "superior dignity" rule which would give a claim for taxes
some inherent priority over ordinary obligations whether secured or
unsecured, and whether they existed before or after the tax obligation
arose. We there said (p. 641): "Whatever may have been said
concerning the 'superior dignity' principle in earlier cases on liens on
real property is overruled by the holding in Guinn v. McReynolds,
177 Cal. 230, 232, 170 P. 421, 422, where a real estate mortgage lien
was held superior to a subsequently created tax lien on the same
property, not expressly made a first lien, for expenditures for
eradication of disease and pests in orchards and elsewhere. . . . But
the authorities declare, virtually without dissent, that even a tax lien
is not entitled to rank ahead of a pre-existing mortgage, or other
contract lien, unless the legislative enactment creating the tax lien
has given it priority."
[Property
Mortgage Has Priority Over Tax Lien]
It is thus
apparent that contrary to the view taken by the Referee, the law in
California
is that "even a tax lien is not entitled to rank ahead of a
pre-existing mortgage, or other contract lien, unless the legislative
enactment creating the tax lien has given it priority." Smith v.
Addiego, 54
Cal.
App. 2d 230, 129 P. 2d 953, 957.
An examination
of the
California
statutes readily discloses that there is no legislative enactment which
gives
Los Angeles
County
's claim for the taxes involved in this case any priority over Jefferson
Standard's prior mortgage. As stated in the leading case of Guinn v.
McReynolds, 177 Cal. 230, 170 P. 421, 422: "The general rule
for fixing the relative rank of liens is declared by §2897 of the Civil
Code, which declares that: 'Other things being equal, different liens
upon the same property have priority according to the time of their
creation, except in cases of bottomry and respondentia.' This
rule will govern unless, in any given case, the statute prescribes
otherwise."
§3712 of the
California Revenue and Taxation Code expressly provides that with
respect to a sale of tax-deeded property by the Tax Collector, that
"the deed conveys title to the purchaser free of all encumbrances
of any kind existing before the sale", with certain exceptions not
here relevant. That statute, it will be noted, has reference only to the
effect of such tax deeds. The cases applying it are cited in Helvey
v. Sax, 38
Cal.
2d 21, 24, 237 P. 2d 269, 271. There is no similar statute giving
priority to liens such as that of
Los Angeles
County
. It follows therefore that Jefferson Standard's mortgage has priority
as provided in Civil Code §2897, quoted in the Guinn case, supra.
The court below was in error in affirming the Referee's order for
payment to the Los Angeles County Tax Collector from funds which
otherwise would have been payable to Jefferson Standard.
This brings us
to the question of the right of the appellant to post-bankruptcy
interest. The Referee and the trial court in denying appellant's claim
for such interest relied upon this court's decision in Beecher v.
Leavenworth State Bank, 192 Fed. (2d) 10. This court has now held in
Palo Alto
Mutual Savings & Loan v. Williams, Trustee, (-- Fed. (2d)
--), (decided
May 20, 1957
), that a secured creditor in the position of Jefferson Standard is
entitled to post-bankruptcy interest. While in the
Palo Alto
case such interest was allowed to the date of sale, the reasoning of
that decision would require that in this case Jefferson Standard be
allowed post-bankruptcy interest calculated to the dates of payment.
The order of
the district court is reversed and the cause is remanded with directions
to vacate the order of the Referee and to grant the prayer of the
appellant's petition for review.
1
Appellant was paid $335,839.64 on
September 1, 1955
, during the pendency of the proceedings before the Referee. The
$15,384.10 was held in the custody of the court pending the outcome of
these proceedings.
2
"§6323(a) Invalidity of lien without notice.--Except as otherwise
provided in subsection (c), the lien imposed by §6321 shall not be
valid as against any mortgagee, pledgee, purchaser, or judgment creditor
until notice thereof has been filed by the Secretary or his delegate--*
* *."
[63-1 USTC
¶9240]
United States of America
, Appellant v. Frank J. Fahrenkamp, and Fierina G. Fahrenkamp, and Bob
Taylor, Collector of Delinquent Personal Property Taxes for
Polk County
,
Arkansas
, Appellees
(CA-8),
U. S.
Court of Appeals, 8th Circuit, No. 17,119,
2/1/63
[1954 Code Sec. 6323]
Priority of liens: Chattel mortgage lien: Dragnet clause:
Subrogation.--The court reversed the judgment of the trial court in
dismissing the intervention of the Government in asserting a tax lien.
The trial court had found that property not specifically described in a
chattel mortgage was covered by a "dragnet" clause and that
the chattel mortgage was superior to the Government's lien. However, the
case was remanded for additional consideration on the issue of
subrogation by assignment of the chattel mortgagee.
[1954
Code Sec. 6323]
Priority of liens: State property taxes.--The trial court held
that a county was entitled to recover property taxes in a foreclosure
proceeding. This was reversed in the absence of any evidence
establishing the existence or priority of the property tax lien.
Norman
Sepenuk, Department of Justice, Washington 25, D. C. (John R. Jones,
Jr., Acting Assistant Attorney General, Lee A. Jackson, David O. Walter,
Department of Justice, Washington 25, D. C., Charles M. Conway, United
States Attorney,
Rob
ert C. Johnson, Assistant United States Attorney, Fort Smith, Ark., on
brief), for appellant. Joe H. Hardegree, Philpot Bldg., Mena, Ark., Ben
Core, P. O. Box 530, De Queen, Ark. (Frank Fahrenkamp, Fierina
Fahrenkamp, pro se, on brief), for appellees.
Before
SANBORN, VAN OOSTERHOUT and MATTHES, Circuit Judges.
MATTHES,
Circuit Judge:
The principal
question for determination on this appeal is whether certain personal
property not specifically described in a chattel mortgage executed by
Duncan, Dieckman and Duncan Mining Company, a corporation (Duncan), was
nevertheless covered by the lien of the mortgage because of the
so-called "dragnet" clause contained therein. 1
The chattel mortgage, executed on
March 4, 1959
, was recorded on
March 23, 1959
, and concededly the lien as to all property specifically
described in the mortgage was superior to the lien of the United States
Government against
Duncan
for unpaid withheld taxes. The trial court held that the undescribed
property was also covered by the mortgage, and hence, in practical
effect, the Government's claim was destroyed. For the purpose of this
appeal by the Government, the facts, as fully set forth in the opinion
of the trial court, W. D. Ark., [62-1 USTC ¶9411] 205 F. Supp. 921
(1962), will suffice, and since the facts are in the main undisputed,
they need only be briefly summarized here.
The chattel
mortgage conditionally conveyed to C. C. Bell, for the purpose of
securing a loan to
Duncan
in the amount of $15,000: one Manganese Mill complete, building, motors,
jigs and water pump; one set of scales, six jack hammers; three
compressors; and seven trucks, all of which was specifically described.
At the time the mortgage was executed,
Duncan
was the conditional owner and in possession of one Ford Loader and two
Caterpillar Loaders. As security for the unpaid purchase prices of the
respective loaders, the Merchants National Bank of
Fort Smith
,
Arkansas
, held the conditional sales contract to the Ford Loader, and C. I. T.
Credit Corporation held the conditional sales contract to the two
Caterpillar Loaders. None of the three loaders was described in or
referred to in the chattel mortgage nor covered by the mortgage lien
unless it was the intention of the parties that the loaders should be
encompassed within the mortgage by virtue of the "dragnet"
clause.
Fierina G.
Fahrenkamp, wife of Frank J. Fahrenkamp, appellees herein, acquired the
chattel mortgage from C. C. Bell on
March 6, 1959
. At the request of Duncan, on August 21, 1959, Frank J. Fahrenkamp, an
officer and a stockholder in Duncan, paid the balance due Merchants
National Bank ($617) and the balance due C. I. T. ($2,561.14) on the
conditional sales contracts. Fahrenkamp purchased drafts payable to
these creditors, and forwarded the drafts to Duncan, who delivered them
to the Bank and C. I. T. and obtained the conditional sales contracts in
return.
[Suit
For Personal Judgment]
In May, 1961,
when Duncan was being pressed by its creditors, the Fahrenkamps filed an
action in the Chancery Court of Polk County, Arkansas, against the
Duncan Corporation, seeking a personal judgment for the balance due them
both under the mortgage lien and the conditional sales contracts, and
for an order directing the sale of all of the personal property above
referred to. The Government, as a creditor of
Duncan
, intervened in that action and thereafter removed the cause to the
United States District Court. None of Duncan's other creditors
intervened in the action except the tax collector for Polk County,
Arkansas, who filed a claim for alleged unpaid county taxes due from
Duncan for the years 1959 and 1960.
Pending the
trial, the court directed that all of the personal property be sold and
appointed a special commissioner to conduct the sale. The three loaders
were sold for a total of $6,500, which, together with the proceeds from
the sale of the property described in the mortgage, was deposited in the
registry of the court.
The court
rendered judgment in favor of the Fahrenkamps and against Duncan for the
balance due them; held that the chattel mortgage covered the three
loaders by virtue of the "dragnet" clause, and dismissed the
Government's intervention; directed that the sum of $321.34 be paid out
of the proceeds to Polk County, Arkansas; and further directed that the
remainder of the fund, after payment of certain expenses, be paid to the
Fahrenkamps to apply upon their judgment against Duncan.
There is no
controversy on this appeal as to the personal judgment against
Duncan
, and since the Government concedes that the lien of the chattel
mortgage antedated and is superior to its lien, it makes no claim to the
proceeds from the sale of the specifically described property. The
issues are: (1) whether the lien of the mortgage extended to the three
loaders so that the Fahrenkamps are entitled to the $6,500 derived
therefrom: (2) if not, whether the Fahrenkamps were subrogated to the
rights of the Bank and C. I. T. so as to be entitled to be paid
$3,178.24 out of the $6,500; and (3) whether the court erred in holding
that a lien existed in favor of Polk County, Arkansas, on the personal
property which was the subject of the foreclosure action, and that such
lien was superior to the Government's lien.
["Dragnet"
Clause]
The trial
court, predicating its decision upon the theory that the
"dragnet" clause of the mortgage covered the three loaders in
question, apparently was of the opinion that the loaders did not become
the property of Duncan Corporation until August 21, 1959, the day on
which Fahrenkamp paid off the existing indebtedness on them; that then,
as after-acquired property, the loaders became subject to the original
mortgage; and thus, that the Fahrenkamps' claim to the loaders based
upon the mortgage (recorded March 23, 1959) had priority over the
Government's claim first filed on August 13, 1959.
Inasmuch as
the loaders were conditionally owned by
Duncan
and in its possession when the mortgage was executed, we seriously doubt
that merely because absolute title thereto was not in
Duncan
at that time, the loaders were, for the purpose of the mortgage,
after-acquired property. 2
But whether such property be viewed as an antecedent or a subsequent
acquisition, we are satisfied that it was not covered by the mortgage.
Under
Arkansas
law, it is clear that "dragnet" provisions are not favored and
are construed rather strictly. National Bank of Eastern Arkansas v.
Blankenship, E. D. Ark., 177 F. Supp. 667, 673 (1959), aff'd, 8
Cir., 283 F. 2d 574 (1960); Berger v. Fuller, 180
Ark.
372, 377, 21 S. W. 2d 419, 421 (1929). The
Arkansas
rule as to whether "other indebtedness" is secured by a
chattel mortgage by virtue of the "dragnet" clause, is
concisely stated as follows:
"Where
a mortgage is given to secure a specific debt named, the security will
not be extended as to antecedent debts unless the instrument so provides
and identifies those intended to be secured in clear terms, and, to be
extended to cover debts subsequently incurred, these must be of the same
class and so related to the primary debt secured that the assent of the
mortgagor will be inferred. The reason is that mortgages, by the use of
general terms, ought never to be so extended as to secure debts which
the debtor did not contemplate." Hendrickson v. Farmers Bank
& Trust Company, 189
Ark.
423, 434, 73 S. W. 2d 725, 729 (1934).
["Other
Property"]
No sound
reason appears why the same rule should not apply to "other
property," and indeed, the rule as to after-acquired property has
been so applied. Holt v. Gregory, 219
Ark.
798, 244 S. W. 2d 951 (1952). Thus, if it be assumed that the
undescribed loaders in controversy were antecedent property, the
mortgage did not apply thereto since the mortgage not only failed to
clearly identify the loaders, but also failed to include even the
slightest reference to them. National Bank of
Eastern Arkansas
v. Blankenship, supra, 177 F. Supp. 667, aff'd, 283 F. 2d 574; Hendrickson
v. Farmers Bank & Trust Company, supra, 73 S. W. 2d 725.
If, as the
trial judge apparently concluded, the loaders were subsequently-acquired
property, in order to be covered by the "dragnet" clause they
would have to be of the same class as the property specifically listed
and so related to it that the consent of the parties to its inclusion
might be inferred. National Bank of
Eastern Arkansas
v. Blankenship, supra, 177 F. Supp. 667, aff'd, 283 F. 2d 574. It is
the province of the court to declare the rights of the parties in
conjunction with their expressed intention, interpreting each mortgage
according to its particular language in the light of the surrounding
circumstances. Hollan v. American Bank of Commerce & Trust
Company, 168
Ark.
939, 272 S. W. 654 (1925). See also American Bank & Trust Co. v.
First Nat. Bank of
Paris
, 184
Ark.
689, 43 S. W. 2d 248 (1931). We believe that the loaders are of the same
class as the other mining equipment specifically denominated in the
mortgage, but cannot agree with the lower court on the crucial question
relating to the intention of the parties. Fully cognizant of this
Court's hesitancy to reverse a federal district judge on a question
pertaining to the application of local law, National Bank of Eastern
Arkansas v. General Mills, Inc., supra, 283 F. 2d 574, 576-577; Homolla
v. Gluck, 8 Cir., 248 F. 2d 731 (1957), under the circumstances of
this case, we nevertheless feel compelled to differ with the trial
court's interpretation of the mortgage agreement to which the
Arkansas law was applied. A survey of the record reveals nothing from
which it can be inferred that the parties intended the mortgage to
encompass subsequently-acquired equipment not listed in the agreement.
In fact, in the complaint, the Fahrenkamps' sole claim to the loaders
was based upon the allegation that Frank J. Fahrenkamp had assumed the
security instruments covering the loaders at the time he paid the
balance that Duncan Corporation owed on the loaders to the holders of
the conditional sales contracts. In the reply to the Government's
complaint in intervention, the Fahrenkamps reiterated their allegation
that they had a lien on the loaders "by virtue of the assumption of
the conditional sales contracts theretofore held by creditors of the
Defendant Corporation," and again, there was no assertion
whatsoever that the loaders were covered by the original mortgage
agreement. As to this property, the trial proceedings remained focused
upon the question whether Frank J. Fahrenkamp was entitled to be
subrogated to the rights of the previous holders of the conditional
sales contracts until near the completion of the trial when the Court,
sua sponte, interjected the "dragnet" clause theory.
[Testimony
Reviewed]
C. C. Bell,
the original mortgagee, was not called upon to testify as to the
intention of the original parties to extend the lien of the mortgage to
subsequently-acquired property, and the Fahrenkamps presented no
evidence on which to base such an inference. In fact, the testimony of
both Donald Duncan, an officer of Duncan Corporation, and Frank J.
Fahrenkamp is utterly inconsistent with the conclusion that the loaders
were covered by the "dragnet" clause. The following direct
examination of
Duncan
is particularly enlightening:
"Q.
Did that mortgage cover all of the property, the personal property that
we owned by Duncan, Dieckman and Duncan Mining Company?
"A.
No, sir.
"Q.
Now, you also are familiar, I believe, with these three loarders in
question here, being a Ford Loader and two Caterpillar Loaders, are you
not?
"A.
Yes.
"Q.
Now, were those covered under that mortgage?
"A.
To my knowledge they wasn't."
During
direct examination Fahrenkamp responded in a similar manner:
"Q.
All right. Mr. Fahrenkamp, the mortgage which you came to be the holder
of, the chattel mortgage from Duncan, Dieckman and Duncan Mining Company
describes certain property that was legally owned by the corporation.
Now, then, did the corporation have any equipment or property which was
not covered by that mortgage?
"A.
Yes, I believe the loaders and the compressors that I loaned them some
money on to pay--that I paid off, sent checks down to pay off was
equipment that wasn't in the original mortgage."
Although
it might be argued that these statements merely refer to the fact that
the loaders were not specifically denominated in the original
mortgage, neither this testimony nor any other evidence in the record,
affirmatively demonstrate an intention for the original mortgage lien to
be extended to cover the loaders in question.
However, we
believe that the Fahrenkamps are entitled to further consideration on
their original theory of subrogation. Although this issue was pleaded
and actually litigated, in view of the conclusion reached by it, the
trial court did not expressly determine the subrogation issue. While
there was evidence relating thereto, we make no determination as to the
sufficiency of the evidence to establish subrogation by assignment, nor
do we decide whether under the facts and circumstances Frank J.
Fahrenkamp is entitled to be subrogated under legal or equitable
principles. This determination should in the first instance be made by
the trial court.
As previously
indicated, the court also found that Polk County, Arkansas, was entitled
to recover $321.34 for taxes due on the property of Duncan Corporation
and ordered that amount paid to it out of the funds in the registry of
the court. But the record is barren of any evidence to establish the
existence or priority of the county's lien, United States v. Buffalo
Savings Bank (U. S. Sup Ct. Jan. 7, 1963) [63-1 USTC ¶9166]; United
States v.
New Britain
[54-1 USTC ¶9191], 347
U. S.
81 (1954), and no one appeared on behalf of the county at either the
trial or on this appeal. Accordingly, we cannot allow the judgment in
favor of
Polk
County
to stand.
The judgment
of the court dismissing the intervention of the Government and ordering
the full amount of $6,50 to be paid to the Fahrenkamps is reversed, and
the cause is remanded for additional consideration by the court solely
on the subrogation issue, with the right of the interested parties to
present additional evidence if the trial court deems such presentation
necessary. The judgment in favor of
Polk County
,
Arkansas
, is reversed. In all other respects the judgment is affirmed.
1
The pertinent part of the "dragnet" clause is "* * *
together with all equipment of any kind and character used in connection
therewith, and all additions, betterments and repairs made or to be made
to or upon said property, * * *."
2
At the time the mortgage was executed
Duncan
had possession of the loaders, had considerable equity in them, and
could have specifically included them within the mortgage, subject to
the conditional sales contracts. A purchaser of property under a
conditional sales contract has such an interest in the property that he
may mortgage it. Roachell v. Gates, 185
Ark.
350, 47 S. W. 2d 35 (1932); Howell v. Thew Shovel Co., 184
Ark.
777, 43 S. W. 2d 366 (1931); Loden v. Paris Auto Co., 174
Ark.
720, 296 S. W. 78 (1927); Thornton v. Findley, 97
Ark.
432, 134 S. W. 627 (1911). See also Cloud Oak Flooring Co. v. J. A.
Riggs Tractor Co., 223
Ark.
447, 266 S. W. 2d 284 (1954).
[72-1 USTC
¶9193]
United States of America
, Plaintiff v.
City of Los Angeles
,
California
, Defendant Counterclaimant v. State of
California
, Franchise Tax Board, Defendant to Counterclaim
U.
S. District Court, Central Dist. Calif., Civil No. 70-2860-AAH, 1/18/72,
336 F. Supp. 1014)
[Code Secs. 6323 and 6332]
Lien for taxes: Priority of liens: Federal excise taxes: California
state income taxes: State as judgment creditor: Interest on fund.--A
lien for Federal excise taxes had priority over an unrecorded California
lien for state income taxes, since the State did not by reason of its
lien become a judgment creditor. The city which held the fund to which
the lien attached was not liable for interest from the date of its
refusal to pay the fund to the Government, since it was awaiting a
determination of the priority of the liens.
Rob
ert L. Meyer, United States Attorney, Charles H. Magnuson, Lawrence V.
Brookes, Assistant United States Attorneys, Los Angeles, Calif., for
plaintiff. Roger Arneberg, City Attorney, John A. Daly, Assistant City
Attorney, Ronald Tuller, Deputy City Attorney, Los Angeles, Calif., for
defendant and counterclaimant. Evelle J. Younger, Attorney General,
Philip C. Griffin, Mark W. Jordan, Deputy Attorneys General, for
defendant to counterclaim.
Decision,
Findings of Fact and Conclusions of Law, and Order For Judgment For
Plaintiff
HAUK, District
Judge:
Rob
ert L. Meyer, United States Attorney, Los Angeles, Charles H. Magnuson,
Assistant United States Attorney, Chief, Tax Division, Los Angeles, and
Lawrence V. Brookes, Assistant United States Attorney, Los Angeles,
attorneys for Plaintiff.
Roger
Arneberg, City Attorney, Los Angeles, John A. Daly, Assistant City
Attorney, Los Angeles, and Ronald Tuller, Deputy City Attorney, Los
Angeles, attorneys for Defendant and Counterclaimant.
Evelle J.
Younger, Attorney General of the State of California, Philip C. Griffin
and Mark W. Jordan, Deputy Attorneys General for the State of
California, attorneys for Defendant to Counterclaim.
This is an
action for enforcement of Internal Revenue levy and for collection of
Internal Revenue taxes for failure to honor levy. Jurisdiction is
conferred upon this Court by 28 U. S. C. Sections 1340 and 1345 and 26
U. S. C. Section 740. The specific question posed is whether a tax lien
of the United States, hereafter the Government, perfected prior to and
superior to a State tax lien is subordinated by the State lien under the
State's theory that their lien is that of a judgment creditor which
under Federal law, takes priority over a Government lien which has not
been filed.
[Facts]
The facts are
not in dispute. On
March 4, 1970
, the Los Angeles Police Department arrested Ronald Holman and pursuant
to a valid search warrant seized from him $13,320.03 in
United States
currency. At the time of his arrest, Ronald Holman had in his possession
ten pounds of hashish and marihuana. On
March 5, 1970
, before
3:30
p. m., the United States Internal Revenue Service made a jeopardy
assessment for excise tax (marihuana) in the amount of $16,000.00 and on
the same day left a notice and demand at his last known address. On
March 5, 1970, the California Franchise Tax Board issued a jeopardy
assessment for personal income taxes in the amount of $14,500.00 and on
the same day, sent a notice of assessment to the last known address of
Ronald Holman.
On March 5,
1970, at 3:30 p. m., the California Franchise Tax Board served the Los
Angeles Police Department with an Order to Withhold Tax in the amount of
$14,500.00 based on its jeopardy assessment, and at 5:18 p. m., the
United States Internal Revenue Service served them with a Notice of Levy
in the amount of $16,000.00 based on its jeopardy assessment.
On
March 6, 1970
, at
8:20
a. m., the Internal Revenue Service filed its Notice of Federal Tax Lien
with the Los Angeles County Recorder and on
March 25, 1970
, final demand for payment of levy was served upon the Los Angeles
Police Department. Subsequently, the Government filed this action
against the City of
Los Angeles
alleging that the City had refused to honor the levy and was continuing
to refuse to surrender to the Government the currency which they had
seized at the time of Holman's arrest. The City counterclaimed against
the State of
California
