Fact-Finding Page5

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Richard A. Kaye, Kaye & Fialkow, 18 Tremont, Boston , Mass. , for defendants-appellants. Rob ert I. Waxman, Richard M. Rob erts, Acting Assistant Attorney General, Lee A. Jackson, Joseph Kovner, Department of Justice, Washington, D. C. 20530, W. Arthur Garrity, Jr., United States Attorney, William B. Duffy, Jr., Assistant United States Attorney, Boston, Mass., for plaintiff-appellee.

Before ALDRICH, Chief Judge, and MCENTEE and COFFIN, Circuit Judges.

Opinion of the Court

MCENTEE, Circuit Judge:

This is an appeal from the granting of the government's motion for summary judgment in an action to foreclose a federal tax lien. The basic issue is whether the district court was right in concluding as a matter of law that a fund in the possession of the defendant, Parlane Sportswear Co., Inc., (Parlane) was the property of the defendant taxpayer, Del Ray Sportswear, Inc., (Del Ray) to which the tax lien would attach.

The essential facts are these. Parlane and a company known as Sherry Hill Sportswear, Inc., (Sherry Hill) not a party to this action, are manufacturers of ladies sportswear. Del Ray does contract work for both companies. Del Ray had tax troubles and on October 2, 1962 the Internal Revenue Service made an assessment against it for an unpaid withholding tax deficiency. On the same day the government also gave notice and made a demand for payment of the assessment. Payment not having been received, a notice of federal tax lien was filed with the Town Clerk of Whitman, Massachusetts, on November 2, 1962, ¹ and a Notice of Levy was served on Parlane or November 8. ² On said date Del Ray had work in process for Parlane and Sherry Hill. The next day it completed the work it was doing for Sherry Hill but was unable to deliver it because of insufficient funds to pay its employees for the work done. Thereupon an arrangement was made between Del Ray and Parlane whereby the latter advanced the necessary payroll funds to Del Ray ³ with the understanding that the money to be received from Sherry Hill would be turned over to Parlane. At the same time Parlane took an assignment of all funds due Del Ray from Sherry Hill for this work. Del Ray's employees having been paid, the goods were delivered to Sherry Hill and later that day (November 9) Sherry Hill's checks for $1,747.27, payable to Del Ray, were delivered to Parlane's attorney who deposited them in his account and made remittance to his client. The record does not show that Parlane had any dealings with Sherry Hill in regard to this matter prior to November 9 when Sherry Hill delivered the checks. Subsequently, the government brought suit against Del Ray, Parlane and its attorney and obtained a default judgment against Del Ray for $12,180.61. It then moved for summary judgment against Parlane and its attorney to foreclose its tax lien against the fund of $1,747.27 held by Parlane.

In granting summary judgment the district court ruled that the government acquired a valid lien against the personal property of Del Ray on November 2, 1962; that the fund in the possession of Parlane is the property or right to property of Del Ray and that the lien of the United States having been duly recorded takes priority over the rights of Parlane. Accordingly, the court ordered that the tax lien be foreclosed against the fund of $1,747.27 and that Parlane turn over this fund to the government in partial satisfaction of its judgment against Del Ray. The defendants Parlane and its attorney appeal from this judgment.

Under Rule 56(c) of the Federal Rules of Civil Procedure summary judgment shall be rendered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

In considering the correctness of a summary judgment as we do here, this court must view the case in a light most favorable to the party against whom the motion has been granted. Poller v. Columbia Broadcasting, 368 U. S. 464 (1962); Manganaro v. Delaval Separator Co., 309 F. 2d 389, 391 (1st Cir. 1962). The government based its motion upon the complaint and answer, a deposition of the president of Parlane, affidavits of the District Director of Internal Revenue and an Assistant United States Attorney and a certified copy of the recorded notice of federal tax lien. The defendants filed a counter affidavit made by the president of Parlane, This counter affidavit set forth, amongst other things, that Sherry Hill, Parlane and Del Ray are all members of the new New England Sportswear Manufacturers' Association and as such are parties to an agreement between the association and the union, Section 33 of which reads as follows:

"MANUFACTURER RESPONSIBLE FOR WAGE PAYMENTS: Each Employer member of the Association who employs contractors shall be responsible to the members of the Union for the payment or underpayment of their total wages for work done by them on garments made for the Employer, providing such liability shall be limited to wages or underpayment for one full week and provided further that notice of default is given to the Association or the Employer within ten (10) days after such default."

Defendants maintain that under the above section of the agreement, ⁴ Sherry Hill had an obligation to meet Del Ray's payroll because Del Ray was doing work for Sherry Hill and that this coupled with the events that followed, raised a genuine issue of material fact as to whether the money owed by Sherry Hill was the property or right to property of Del Ray. Thus, they argue, the district court erred in granting summary judgment. In support of its position the defendants advance two alternative contentions under either of which they claim Parlane is entitled to the fund in question. First, they say that since Sherry Hill was obligated to pay Del Ray's employees under Section 33 of the union agreement, when Parlane paid these employees on November 9, it in effect made a loan to Sherry Hill and when Sherry Hill delivered its checks to Parlane's attorney later that day it was actually making payment of this loan. Their second contention rests on the theory of equitable assignment and constructive trust. They argue that since Parlane assumed Sherry Hill's obligation in paying Del Ray's employees, the payment of Sherry Hill to which the government lays claim was due not to Del Ray but to its employees; that Del Ray's only interest in it was as trustee for its employees; that when Parlane paid the employees an equitable assignment was effected in favor of Parlane and the fulfillment of this trust could only occur by delivering the fund to Parlane. Thus, they conclude the government is not entitled to the fund since it acquired no greater interest in it than Del Ray had.

It is difficult to see how defendants can prevail on either of these theories. To begin with, there is nothing in the record to support their underlying contention that an obligation had arisen under Section 33 of the union agreement whereby Sherry Hill was required to pay Del Ray's employees for the work performed. There is no showing that Sherry Hill knew the wages on its work were unpaid or that any notice of default was given to the association or to Sherry Hill as provided in Section 33. It seems to us that such a showing must be made before any such obligation arises under the union contract. Certainly Sherry Hill never requested any such loan from Parlane nor under the facts of this case can any be implied. Furthermore there is no indication that Sherry Hill needed money. On the contrary, Sherry Hill paid what it owned upon receipt of the goods from Del Ray. It is clear that any payment by Sherry Hill here was for goods delivered to it by Del Ray and not for unpaid wages. It is equally clear from the record that the reason for Parlane's advance of payroll funds to Del Ray or to its employees was that Del Ray was doing work for Parlane and not because of Del Ray's work for Sherry Hill. ⁵ On these facts there is no basis for finding that either a loan or a trust in favor of Parlane came into existence as claimed here.

The defendants cite Commissioner v. Court Holding Co. [45-1 USTC ¶9215], 324 U. S. 331 (1954), for the proposition that in tax matters the substance of a transaction will prevail over the form used by the parties. From our examination of the record the substance of the transaction in question here is that Parlane advanced certain funds so that Del Ray could meet its payroll upon the understanding that the money Del Ray received from Sherry Hill would be turned over to Parlane. Pursuant thereto it then took a simple assignment ⁶ of Sherry Hill's debt to Del Ray. This was done after the government's lien had been recorded and notice of levy had been given to Parlane.

We find that as a matter of law the government is entitled to the fund in question and that the district court did not err in granting summary judgment.

Affirmed.

¹ Del Ray, a Massachusetts corporation, had a place of business in Whitman.

² This notice apprised Parlane of Del Ray's tax liability and notified it that all property and rights to property in its possession belonging to Del Ray were being levied upon and seized for satisfaction of this tax liability.

³ In his counter affidavit, the president of Parlane stated that his company advanced these payroll funds by delivering individual checks to the Del Ray employees.

⁴ It is undisputed that Parlane and Sherry Hill are employers and Del Ray is a contractor under this section of the agreement.

⁵ As stated by its president in his deposition, Parlane advanced money to Del Ray for payroll "when Del Ray notified us . . . that they were unable to make their payroll and the work was going to be stopped unless payroll would be paid . . .." When asked what Parlane's interest was in advancing money to Del Ray to meet its payroll, he replied "They had my work in process. I had given them . . . substantial amounts of garments . . .. And once work has begun in a contract shop and it's in process it's practically impossible to take it from that shop and give it to some other shop to finish . . .."

⁶ The president in his deposition and also in his counter affidavit referred to this as an assignment.

 

 

[76-2 USTC ¶9674] United States of America , Plaintiff v. Berchal Wendell Denny, et al., Defendants

U. S. District Court, So. Dist. Ill. , No. Div., No. P-CIV-75-58, 9/7/76

[Code Secs. 6323 and 7403]

Tax lien: Enforcement: Foreclosure: Notice requirement.--The District Court held that the government could not foreclose on a tax lien against real estate unless all persons (not just the taxpayer) having liens or claiming interest are made parties to the proceedings. Therefore, the Government's motion for summary judgment was allowed as to the taxpayer's liability, since it was clearly established that taxpayer was responsible for collecting and paying over withholding and F. I. C. A. taxes.

Rob ert J. Kauffman, Assistant United States Attorney, Peoria, Ill., John Tjaden, Department of Justice, Washington, D. C. 20530, for plaintiff. Elmo E. Koos, 1122 Jefferson Bldg., Peoria , Ill. , for defendants.

Decision and Order

MORGAN, District Judge:

The United States of America seeks to reduce an alleged tax assessment to judgment and foreclose a tax lien against certain described real estate, pursuant to Sections 7402 and 7403 of the Internal Revenue Code of 1954, as amended, 26 U. S. C. §§ 7402, 7403. The complaint alleges that the action is authorized by the Secretary of the Treasury and is directed by the Attorney General, as is required by Section 7401. Named as defendants are Berchal W. Denny, as the taxpayer, Milburn and Inez Riddle, as the alleged record owners of the real estate, Joe Wayne Denny, Gerald Lee Denny, and Mackinaw Savings and Loan, as possible claimants to some interest in the real estate. All individual defendants appeared through the same counsel and moved to dismiss. The motion was denied on September 9, 1975 , and those defendants thereafter answered on September 19, 1975 . Both the Government and the individual defendants have now moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.

The Government claims right to summary judgment on the issues of liability, amounts due, and foreclosure of the lien; and the defendants claim right to judgment on the ground that the action is barred by the applicable statute of limitations. The Government argues that the taxpayer, Berchal Denny, has admitted facts in interrogatories propounded to him that would support a judgment of liability, and that the amount of the assessment is supported by affidavit. Defendants argue that the action is barred for the reason that the assessments were made more than six years ago. The Government responds that the defendants waived this defense, and even if there was not a waiver, the running of the period of limitations was tolled by the offers in compromise.

Defendants have raised the defense of limitations for the first time in their motion for summary judgment. A plea of limitations is an affirmative defense required to be raised in the responsive pleading. Rule 8(c), F. R. Civ. P. Failure to do so amounts to waiver of the defense. Roe v. Sears, Roebuck & Co., 132 F. 2d 829 (7th Cir. 1943); Baker v. Chicago , Fire and Burglary Detection, Inc., 489 F. 2d 953 (7th Cir. 1973). The default might possibly have been cured by amendment under Rule 15, F. R. Civ. P., but there has been no request for leave to amend.

Even if the court could now consider the statute of limitations as a defense, the running of the period was clearly tolled as to Berchal Denny by the offers in compromise made and signed by him. Section 6502 of the Internal Revenue Code provides that a proceeding to collect an assessment must be brought within six years, but the period may be extended by agreement. Attached to the Government's brief in opposition to defendants' motion are three offers in compromise. One of the offers is dated as accepting a waiver of the statute of limitations on November 14, 1966 . Berchal Denny agreed to suspend the running of the statute for the pendency of the offer and one year thereafter. The offer was withdrawn on April 28, 1971 . The statute was therefore tolled from November 14, 1966 to April 28, 1972 . The assessments were made for the last quarter of 1964 and the first quarter of 1965 on May 21, 1965 , and for the second quarter of 1965 on July 14, 1965 . This action was brought on July 1, 1975 , and is therefore within the six-year period.

Upon consideration of the pleadings, answers to interrogatories, and affidavits on file, the court finds that there is no genuine issue of material fact as to the liability and amount owed by Berchal Denny to the Government. Denny has admitted sufficient facts to make him responsible for amounts of withholding taxes and taxes imposed against him under the Federal Insurance Contributions Act. Denny admitted that he operated a business as a sole proprietor, kept and maintained all records, prepared the payroll and tax returns, and was aware that taxes were not being paid over to the Government. The Government has submitted the affidavit of Ira S. Loeb, District Director of Internal Revenue, to support the submitted amount. Berchal Denny has not submitted any opposing affidavit and only states in his answers to interrogatories that he does not know the unpaid balance. Loeb's affidavit purports to list all payments made by Denny and a resulting unpaid balance of taxes, interest, and penalties as of April 30, 1976 , of $84,727.63, with a daily accrual of interest thereafter of $10.98, for a total of $86,034.25 as of August 27, 1976 .

The Government asks that the court enter judgment of foreclosure and order a sale of the property described in the complaint and a distribution of Berchal Denny's one-half interest, to satisfy the lines of the United States and the liability of Denny. Notices of the tax liens on the assessments of the last quarter of 1964 and the first quarter of 1965 were filed on June 22, 1965 , and refiled July 9, 1970 in Tazewell County , where the property is located. The notice of the tax lien for the second quarter of 1965 was filed July 21, 1965 , and refiled October 20, 1970 . Milburn and Inez Riddle obtained an interest in the subject property by a deed dated July 3, 1965 , and recorded July 6, 1965 in Tazewell County . The Riddles have paid the real estate taxes and mortgage payments since that time. They took title subject to the tax liens filed on June 22, 1965 , and free from the lien filed July 21, 1965 . 26 U. S. C. §6323(a). Though the Riddles claimed an interest in their answers to interrogatories, the final pretrial memorandum submitted on behalf of the individual defendants states that the Riddles have conveyed the property to their grandchildren, Joe Wayne Denny and Gerald Lee Denny.

What interest Mackinaw Savings and Loan may claim has not been shown. While served with summons and copy of the complaint, they have not answered. They may, of course, hold a sound first mortgage lien.

Defendants oppose the prayers for judgment of foreclosure and order for sale of the subject property on the ground that Berchal Denny's wife, Doris, had an individual one-half interest in the property, which is not subject to sale. Section 7403(a) of the Internal Revenue Code authorizes suits "to enforce the lien of the United States . . . or to subject any property of whatever nature, of the delinquent, or in which he has any right, title or interest, to the payment of such tax or liability." This provision has been interpreted to allow sale of not only the interest of the taxpayer but also the property itself in which others may have an interest. See United States v. Trilling [64-1 USTC ¶9292], 328 F. 2d 699 (7th Cir. 1964), where the sale of joint tenancy property was upheld, rather than merely the taxpayer's interest.

The court interprets the Government prayer for an order for sale as directed to the entire property and not just the taxpayer's or his grantee's interest. Section 7403 requires, however, that all persons having liens or claiming an interest in the property be made parties. 26 U. S. C. §7403(b). The issue of whether Doris Denny does have an interest in the property now raised by defendants in their memorandum in opposition to the Government's motion, may not be ignored. No sworn material or documents having been presented on this issue, or on the true interests, if any, of Joe Wayne Denny and Gerald Lee Denny and Mackinaw Savings and Loan, summary judgment to foreclose the tax liens and order a sale of the property simply cannot be granted. If the government does seek to sell the property itself, which would seem the only practical course, Doris Denny must be made a party. Only then can the court make findings as to the true present interests in the property and order distribution of the proceeds of a sale pursuant to Section 7403(c) of the Internal Revenue Code.

Accordingly, IT IS ORDERED that defendants' motion for summary judgment is DENIED, the Government's motion for summary judgment is ALLOWED as to the defendant Berchal Denny's liability and the amount thereof, and judgment is entered for the Government and against the defendant Berchall Denny in the amount of $86,034.63.

IT IS FURTHER ORDERED that genuine issues of material fact exist as to the interests in the subject property, and the Government's motion for summary judgment to foreclose the tax lien and to order a sale of the property is DENIED.

 

 

[64-1 USTC ¶9365] United States of America , Plaintiff v. Lyle E. Stewart, et al., Defendants

U. S. District Court, No. Dist. Ill. , West. Div., Civil No. 62 C 53, 12/12/63

Tax liens: Priority: Judgment creditors: Sellers.--Federal tax liens filed on September 2, 1955 against real estate of a delinquent taxpayer were subordinate to the claims of the sellers of the real estate in an agreement for deed originally recorded April 13, 1953, but were superior to a judgment lien arising July 18, 1956. Federal tax liens filed August 30, 1956 were subordinate to the judgment lien arising July 18, 1956, but were superior to a judgment lien arising November 24, 1958.

J. Crawford, Assistant U. S. Attorney, U. S. Court House, Chicago , Ill. , for plaintiff. R. Canfield, Rockford, Ill., for L. & M. Stewart; J. C. Saladino, South Beloit, Ill., for H. & D. Raehl; Reno, Zahn, Folgate & Skolrood, Rockford, Ill., for P. Latham; P. Appel, Assistant Attorney General, Chicago, Ill., for Dir. of Labor, State of Ill.; R. Yalden, Rockford, Ill., for Acme Redi-Mix Concrete Co.; Pedderson, Menzimer & Conde, Rockford, Ill., for City Lumber & Supply, defendants.

Findings of Fact and Conclusions of Law

DECKER, District Judge:

This cause having been tried before this Court on October 29, 1963, on the issues raised by the Complaint of the United States of America and the answers of defendants Harley and Della Raehl, City Lumber and Supply Company and Acme Ready Mix Concrete Company, all of which parties were represented at trial by counsel; the other defendants filing answers in this action and having claimed liens against the real estate described in the Complaint of the United States not having appeared at trial and the Court having considered the evidence and the stipulation entered into by and between the United States and defendant-taxpayer Lyle Stewart and his wife, defendant Maxine Stewart, makes the following findings of fact and conclusions of law:

1. The real estate described in paragraph VIII of the Complaint of the United States was purchased by defendants Lyle E. and Maxine M. Stewart from defendants Harley and Della Raehl on April 13, 1953, pursuant to an agreement for deed duly filed with the Recorder of Winnebago County, Illinois, on April 13, 1953.

2. A second agreement for deed between Harley and Della Raehl, as vendors, and Maxine M. Stewart, as purchaser was entered into on October 26, 1955, in the amount of the balance due under the agreement for deed dated April 13, 1953, and was duly filed with the Recorder of Winnebago County, Illinois, on November 30, 1955.

3. The amount due Harley and Della Raehl under the agreement for deed dated October 26, 1955, is $8,096.16.

4. Maxine M. Stewart has entered into a stipulation in this cause stating that she makes no claim to and has no interest in the real estate described in paragraph VIII of the Complaint.

5. Lyle E. Stewart has been assessed by the United States for unpaid withheld F. I. C. A. and withheld income taxes plus interest for which notice of tax liens were filed with the Recorder of Winnebago County, Illinois, as follows:

                                                                    Notice         Notice of

                                                  Date of              and          Tax Lien

Tax Period                      Amount         Assessment           Demand             Filed

6-30-53 .......               $ 768.71            5-28-54           6-2-54            9-2-55

9-30-53 .......               2,829.28            5-28-54           6-2-54            9-2-55

12-31-53 ......                 874.13            5-28-54           6-2-54            9-2-55

9-30-54
 .......               2,923.48           
12-23-54
          
1-11-55
            
9-2-55

12-31-54
 ......               1,773.01            
4-29-55
          
5-11-55
            
9-2-55

12-31-54
 ......                 328.23            
9-23-55
          
9-26-55
           
8-30-56

3-31-55
 .......               3,716.32            
9-29-55
         
10-13-55
           
8-30-56

                            $13,213.16

                        plus statutory

                              interest

 

6. On July 18, 1956 , Judgment for the plaintiff in the amount of $3,415.41 was entered by the Circuit Court of Winnebago County, Illinois, in a case entitled Acme Ready Mix Concrete Co., plaintiff v. Lyle E. Stewart and Maxine M. Stewart, defendants.

7. On July 18, 1963 , execution was issued on the Judgment described above.

8. On June 18, 1963, a Judgment reviving the Judgment of July 18, 1956, was entered in favor of Acme Ready Mix Concrete Co., plaintiff, and against Lyle E. Stewart and Maxine M. Stewart, defendants, in the amount of $3,599.33 which amount reflects payments made and interest accrued on the original judgment.

9. On October 9, 1963 , execution was issued on the revived judgment entered in favor of Acme Ready Mix Concrete Co.

10. On November 24, 1958, judgment for the plaintiff in the amount of $2,016.20 was entered by the Circuit Court of Winnebago County, Illinois, in a case entitled City Lumber & Supply Co., plaintiff v. Lyle E. Stewart, defendant.

11. On February 20, 1959 , execution was issued on the judgment entered in favor of City Lumber & Supply Co.

12. Defendants Harley and Della Raehl, legal titleholders to the real estate described in the Complaint, have consented, by their attorney in open Court, to the judicial sale of the real estate free and clear of their lien.

Conclusions of Law

1. This Court has jurisdiction of the subject matter of the action brought by the United States and the parties named therein.

2. Each defendant named in the Complaint of the United States other than Lyle E. and Maxine M. Stewart, Harley and Della Raehl, Acme Ready Mix Concrete Co., and City Lumber & Supply Co., are defaulted for failure to appear and offer evidence in support of their respective positions and a judgment order will issue accordingly.

3. Lyle Stewart is indebted to the United States in the amount of $13,213.16 plus interest allowed by law.

4. The purchaser's interest in the real estate described in the Complaint, acquired in the name of Lyle Stewart and Maxine Stewart on April 13, 1953 , through the agreement for deed, is the property of Lyle Stewart only.

5. Following are the valid and subsisting liens against the real estate described in the Complaint in the order of priority:

(a) First, the claim of defendants Harley and Della Raehl in the agreement for deed originally recorded on April 13, 1953 , and due thereon the amount of $8,096.16 as of October 29, 1963 .

(b) Second, the federal tax lien of the United States filed on September 2, 1955 , in the amount of $9,168.61 plus 6% per annum statutory interest from September 2, 1955 .

(c) Third, the judgment lien arising July 18, 1956, in favor of Acme Ready Mix Concrete Co., in the amount of $3,599.33 plus 5% per annum statutory interest from June 18, 1963.

(d) Fourth, the federal tax lien of the United States filed on August 30, 1956 , in the amount of $4,044.55 plus 6% per annum statutory interest from August 30, 1956 .

(e) Fifth, the judgment lien arising November 24, 1958, in favor of City Lumber & Supply Co., in the amount of $2,016.20 plus 5% per annum statutory interest from November 24, 1958.

6. The Court concludes that the real property described in the Complaint should be sold and the proceeds distributed in accordance with the priorities stated above.

 

 

[61-2 USTC ¶9600]Dean Morgensen and D. J. Morgensen, dba Morgensen Lumber Company, Plaintiffs v. Ralph Wright, dba W & L Construction Company, et al., Defendants

District Court, Oklahoma County , Okla. , No. 144,800, 4/12/61

[1954 Code Sec. 6323]

Collection of taxes: Priority of liens: Accounts receivable: Fact finding.--A default judgment was entered against the taxpayer who failed to appear after being summoned. On the basis of evidence presented by the Government and creditors of the taxpayer, the court determined the order of priority which existed on a sum of money paid into the court by the defendant, a debtor of the taxpayer. The court then ordered disbursement of the money in the order of priority, and awarded judgments to the Government and a creditor against the taxpayer.

James E. Work, Withington, Shirk, Nichols & Work, Colcord Bldg., Oklahoma City, Okla., for plaintiffs. Leonard L. Ralston, Federal Bldg., Oklahoma City , Okla. , for intervenor plaintiff. David C. Johnston, Lytle, Johnston & Soule, Commerce Exchange Bldg., Oklahoma City, Okla., for defendant.

Journal Entry of Judgment

MILLS, District Judge:

The above entitled action comes on regularly for trial on the 6th day of April, 1961, plaintiffs appearing by their attorneys, Withington, Shirk, Nichols & Work; intervenor plaintiff, United States of America, appearing by Leonard L. Ralston, Assistant United States Attorney; intervenor, International Paper Company, appearing by its attorneys, Lytle. Johnston & Soule; and defendant, Merl Tufford, Jr., although being three times called in open court, failing to appear in person or by counsel.

All parties present announce ready for trial and having waived a trial by jury, present the matter to the court for determination.

The court finds that the defendant, Merl Tufford, Jr., was personally served with summons on August 12, 1958, and that said defendant has failed to plead, demur or answer to the petition of plaintiff or the petition in intervention of the United States of America and International Paper Company, and is hereby adjudged to be in default and all allegations therein against him taken as confessed.

[Fact Finding]

The parties present introduce their evidence and rest, and the court having heard the evidence and argument of counsel, having examined the pleadings and files and being fully advised in the premises, finds:

1. That as of the date of commencement of this action the defendant, Ralph Wright, dba W & L Construction Company, was indebted to defendant, Merl Tufford, Jr., doing business as Tufford Drywall Company, in the sum of Five Thousand Eight Hundred Ninety-nine and 51/100 Dollars ($5,899.51); that pursuant to an order entered herein on the 24th day of February, 1961, said defendant, Ralph Wright, dba W & L Construction Company, deposited with the Clerk of this Court the sum of Five Thousand Five Hundred Forty-nine and 51/100 Dollars ($5,549.51), representing the amount due defendant, Merl Tufford, Jr., less the sum of Three Hundred Fifty Dollars ($350.00) allowed by this court to defendant, Ralph Wright, dba W & L Construction Company, as and for reasonable and necessary attorneys' fees incurred by said defendant in this cause, and that said defendant was absolved from any and all liability arising out of the transactions involved in this action.

2. That the deposit of Five Thousand Five Hundred Forty-nine and 51/100 Dollars ($5,549.51) made with the Clerk of this Court by defendant, Ralph Wright, dba W & L Construction Company, shall be applied in satisfaction of the costs of this action and to the extent possible in satisfaction of the claims of the parties herein in accordance with the priorities herein established, and that the parties not receiving payment in full shall have judgment against defendant, Merl Tufford, Jr., for the balance remaining due.

3. Defendant, Merl Tufford, Jr., is indebted to the United States of America in the sum of Two Thousand Three Hundred Twenty-eight and 74/100 Dollars ($2,328.74), as evidenced by a tax lien filed December, 1957, and that the claim of the United States of America for said amount shall be given priority No. 1; that defendant, Merl Tufford, Jr., is indebted to International Paper Company in the amount of Three Thousand Forty-two and 10/100 Dollars ($3,042.10), and that said claim of International Paper Company in said amount shall be given priority No. 2; that defendant, Merl Tufford, Jr., is indebted to the United States of America in the amount of Three Thousand Three Hundred Eleven and 45/100 Dollars ($3,311.45), as evidenced by a tax lien filed June, 1958, and that the claim of the United States of America for said amount shall be given priority No. 3; that defendant, Merl Tufford, Jr., is indebted to Dean Morgensen and D. J. Morgensen, dba Morgensen Lumber Company, in the amount of Seven Thousand Four Hundred Seventy-seven and 55/100 Dollars ($7,477.55), together with interest at eight percent (8%) per annum from June 1, 1958, and that the claim of said Dean Morgensen and D. J. Morgensen, dba Morgensen Lumber Company, for said amount shall be given priority No. 4.

[Determination of Priorities]

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED as follows:

1. The Clerk of this Court shall disburse the deposit of Five Thousand Five Hundred Forty-nine and 51/100 Dollars ($5,549.51) made by Ralph Wright, dba W & L Construction Company, as follows:

a. In payment of all costs of this action, accrued and accruing.

b. To the United States of America Two Thousand Three Hundred Twenty-eight and 74/100 Dollars ($2,328.74).

c. To International Paper Company, a corporation, Three Thousand Forty-two and 10/100 Dollars ($3,042.10).

d. To the United States of America the balance remaining for application as a credit on the tax lien in the amount of Three Thousand Three Hundred Eleven and 45/100 Dollars ($3,311.45).

2. Defendant, the United States of America, shall have and recover a judgment against defendant, Merl Tufford, Jr., for the sum of Three Thousand Three Hundred Eleven and 45/100 Dollars ($3,311.45), together with interest thereon as by law provided, less such amount as shall be paid to the United States of America by virtue of paragraph d above.

3. Plaintiffs, Dean Morgensen and D. J. Morgensen, dba Morgensen Lumber Company, shall have and recover a judgment against defendant, Merl Tufford, Jr., in the amount of Seven Thousand Four Hundred Seventy-seven and 55/100 Dollars ($7,477.55), together with interest at eight percent (8%) per annum from June 1, 1958, until paid.

4. Ralph Wright, dba W & L Construction Company, be and he is hereby discharged without cost from any further liability herein.

 

 

[65-1 USTC ¶9344] United States of America v. Emzy T. Barker et al.

U. S. District Court, West. Dist. Tex. , Austin Div., Civil No. 1419, 2/5/65

[1954 Code Sec. 6323]

Tax liens: Priorities.--Two tracts of land owned by delinquent taxpayers were found not to constitute their homestead. The court, therefore, assigned the order of priority of liens, including liens for federal income, withholding and unemployment taxes, against such property on the basis of the dates such liens were perfected.

Ernest Morgan, United States Attorney, Federal Bldg., San Antonio, Tex., for plaintiff. C. W. Trueheart, Trueheart, McMillan & Russell, Bank of Commerce Bldg., San Antonio, Tex., James L. Cutcher, Barkley & Cutcher, Box 751, Taylor, Tex., Thomas M. Bullion, Melasky & Bullion, 121 E. Second, Box 1068, Taylor, Tex., J. R. Owen, County Attorney, P. O. Box 46, Georgetown, Tex., for defendants.

Findings of Fact and Conclusions of Law

A. Findings of Fact

FISHER, District Judge:

The facts established by pleadings, exhibits, stipulations, admissions and evidence are:

(1) This suit is commenced at the direction of the Attorney General of the United States , with the authorization of and at the request of the Commissioner of Internal Revenue, a delegate of the Secretary of the Treasury of the United States , and is brought by virtue of Sections 7401, 7402 and 7403 of the Internal Revenue Code. This Court has jurisdiction under 28 United States Code, 1345.

(2) James L. Cutcher, Dudley Barker, Emzy Barker, Ruth Barker and Mahon B. Garry reside in Williamson County , Texas .

[Vendors' Liens]

(3) On or about June 16, 1955, Emzy T. Barker, defendant herein, acquired by warranty deed from John O. Tarr, approximately 103.07 acres of land in Williamson County, Texas. The land so conveyed is fully described in the warranty deed from Mr. Tarr to Mr. Barker, a copy of which is attached to the complaint as "Exhibit A", and incorporated therein by reference as if fully set out herein. Said deed having been recorded in Volume 406, Page 176 of the Deed Records of Williamson County, Texas. A vendor's lien in favor of Mahon B. Garry, Guardian, defendant herein, was retained in said deed, which said vendor's lien is the first and superior lien on said 103.07 acre tract. That as alleged in paragraph III of this defendant's cross-action, notes 5-10 of said series in the sum of $2,000 each are due, owing and unpaid. That the total principal and interest due and owing on said notes as of June 24, 1964, amount to $12,289.45; that interest on the principal accrues at the rate of $1.64 per day and that said notes provide for attorneys' fees in the amount of 10% of the principal and interest due and owing on the same.

(4) On or about September 1, 1956, Emzy T. Barker, defendant herein, acquired by warranty deed from C. M. Partain and wife, Dora Partain, and T. J. Partain, two tracts of land totaling approximately 95.59 acres in Williamson County, Texas. The land so conveyed is fully described in the warranty deed from C. M. Partain and wife, Dora Partain, and T. J. Partain, to Emzy T. Barker, a copy of which is attached to the complaint as "Exhibit B." Said deed was recorded in Volume 419, Page 172, Deed Records of Williamson County, Texas. A vendor's lien was retained in said deed and is further evidenced by Deed of Trust filed for record and recorded in Volume 110, Page 581 of the Deed of Trust Records of Williamson County, Texas. A copy of said Deed of Trust is attached to the complaint as "Exhibit C." W. W. Barker subsequently acquired the vendor's lien evidenced by "Exhibit B" and "Exhibit C" and Emzy Barker and wife, Ruth Barker, on or about May 18, 1961, executed their Deed of Trust evidencing this transaction, said deed of trust being recorded in Volume 117, Page 344 of the Deed of Trust Records of Williamson County, Texas. A copy of said Deed of Trust being attached to the complaint as "Exhibit D", which indebtedness and lien was in renewal and extension of the original vendor's lien and is the first and superior lien on said property. On or about October 5, 1963 , W. W. Barker transferred the vendor's lien on the property evidenced by "Exhibit B" attached to the complaint, to Dudley Barker. That the total balance due to Dudley Barker under said lien is $7,048.24 principal and interest as of June 24, 1964 . The note provides for 10% attorneys' fees, and interest on the said principal accrues at the rate of $1.96 per day, all of which said defendant and cross-plaintiff is entitled to recover from defendant Emzy T. Barker.

[Government's Liens]

(5) Defendants Emzy T. Barker and Ruth Barker are indebted to the United States of America for Federal Income and Withholding and Unemployment Taxes in the following amounts and the assessments were made and recorded all as follows:

                                                               Date Tax Liens

                                                                     filed in

                                                    Date of        Williamson

                    Period        Amount         Assessment            County

Income ....           1955    $ 6,325.98             
4-3-59
            
4-9-59

Income ....           1956      4,856.83             
4-3-59
           
4-29-59

Income ....           1957      1,940.46             
8-1-58
            
9-3-58

WFT .......         4Q1961        704.43            
3-16-62
           
6-19-62

WFT .......         1Q1962        779.50            
5-11-62
           
6-19-62

WFT .......         3Q1962        311.86            
4-12-63
            
5-7-63

WFT .......           1962        601.72            
4-19-63
           
5-28-63

FUT .......           1961      1,643.53            
3-23-62
            
5-2-62

FUT .......           1962         92.72            
1-25-63
           
3-15-63

                              $17,257.03

[Judgment Lien]

(6) Ferguson Truck and Trailer Leasing, Inc., obtained a judgment in the 45th District Court of Bexar County , Texas , on September 15, 1958 , in Cause No. F-115,745, styled Ferguson Truck and Trailer Leasing, Inc., v. Emzy Barker and Emzy Barker Truck Lines in the amount alleged in paragraph II of Ferguson Truck and Trailer Leasing, Inc.'s cross-action. On October 17, 1958 , abstract of said judgment was duly filed and duly recorded in the office of the County Clerk of Williamson County , Texas . Said judgment has never been satisfied, and Ferguson Truck and Trailer Leasing, Inc. is still the owner and holder of said claim and lien. The amount of the judgment recovered by cross-acting plaintiff, Ferguson Truck and Leasing, Inc., against the defendant Emzy T. Barker and Emzy Barker Truck Lines, Inc., jointly and severally, on September 15th, 1958 , was $61,880.22, with $10,000 attorneys' fees, and interest on both of said amounts from that date at the rate of 6% per annum.

[Property Tax Liens]

(7) Defendant and cross-plaintiff Jack Gillum and the taxing units represented by him as alleged in his cross-action have a valid and subsisting lien for taxes for the years 1961, 1962 and 1963 against the 95.59 acre tract with the total sum due of $423.00 and against the 103.07 acre tract $704.59 due and such liens became effective and affixed on January 1 of each of said years.

[ Homestead Not Involved]

(8) The property in question (being the 95.59 acre tract to the west of the 1101/2 acre tract on which the defendants Emzy T. Barker and wife, Ruth Barker, have lived continuously since 1951, and the 103.07 acre tract to the south of said 95.59 acre tract) have not at any time since the filing and recording of Ferguson Truck & Leasing, Inc.'s abstract of judgment lien in Williamson County on October 17, 1958, constituted the homestead of said defendants on account of these things:

(a) The Barkers (husband and wife and younger unmarried son, B. B. Barker), have lived in the house, so marked on the deposition plat, located on the 1101/2 acre tract, ever since December, 1951, and this younger son (B. B. Barker) has farmed the south 55 acres of this 1101/2 acre tract, the Barkers having, since their deed of July 28, 1958, to Emzy's brother, Dudley Barker, occupied and used this 1101/2 acre tract under a verbal arrangement with the latter that they would pay the taxes and pay him $1,000 a year;

(b) Though neither one of the two tracts involved (the 103.07 acre and the 95.59 acre tract) was bought for the purpose at the time of making them a home place yet later he decided to build on the south 3 acres of the 103.07 acre tract and worked a bulldozer there for two days, clearing it in 1958, but has never done anything since then for want of financing, and the photographs show no signs of a home, and the tax collector's certificate shows no claim of homestead through 1962 on these tracts and sworn exemption claim on the 1101/2 acre tract in 1956 and 1958;

(c) The Barkers have never lived on the 103.07 acre or the 95.59 acre tracts, nor used them (except as shown in (b) above) and the last time he did any farming on these tracts was about 1960, and they did not construct any improvements on these tracts and did not even have a garden there, and these two tracts are farmed by their son, E. T. Barker, III, who is married, has a family, and lives at Dell Valley, and he does not do this on a cropper or sharing basis, though Emzy Barker sometimes works for his son and is paid like any other hand;

(d) The Barkers, for some undefined time, kept nine cows on the pasture indicated on the 95.59 acre tract, and later, for some undefined time, kept some nine cows for neighbors there, but these two tracts were all fields with the exception of right around the house, and there was never any fence between the two tracts, and the only fence between the 95.59 acre tract and the 1101/2 acre tract was way up on the pasture and only down to where the hen brake is, and the 95.59 acre tract was conveyed to the Barkers on September 1, 1956, subject to a life estate in the grantors, G. M., Dora and T. J. Partain, "in the home [on that tract], chicken yard and chicken house, and the right of ingress and egress for as long as either one of them shall live."

(e) Plaintiff's complaint in paragraph VIII alleges that the defendant Capitol Feed & Milling Co., Inc., claims title to both of the two tracts involved under an unrecorded conveyance dated February 11, 1963, and Emzy Barker, on inquiry about this, testified that he gave this deed as collateral, just for security, on account of the money this concern furnished him the last year he farmed, and said deed was given only to secure that concern in an indebtedness, and was not intended to actually convey title to the land, this matter being handled by his attorney, Mr. Cutcher.

(9) At no time has Emzy Barker or his wife ever filed or made any statutory form of declaration of any property as their homestead and the records of the tax assessor and collector of Williamson County reflect a sworn claim of homestead tax exemption by Emzy Barket on the 1101/2 acre tract in 1956 and 1958, and no such claim was made by either of them with respect to the two tracts of 103.07 acres and 95.59 acres until 1963.

B. Conclusions of Law

[Order of Priority of Liens]

(1) As a matter of law, the property in question, being two tracts of 95.59 acres (Tract A), and 103.07 (Tract B), has not at any time in question since October 17, 1958 (the date of the filing and recording of cross-acting defendant Ferguson Truck and Leasing, Inc.'s judgment) constituted the homestead of Emzy T. Barker and Ruth Barker.

(2) The holders of the vendor's lien notes (cross-acting plaintiffs Mahon B. Garry, Guardian, and Dudley Barker) take priority over all parties with respect to such lien indebtedness, including 10% attorneys' fees, since such attorneys' fees are specified in amount. The claim of plaintiff for income tax indebtedness on the part of the defendants Emzy T. Barker and wife, Ruth Barker, for the year 1957 in the sum of $1,940.46, assessed on August 1, 1958, on which the tax lien was duly filed on September 3, 1958, takes priority over the judgment lien debt of cross-acting plaintiff Ferguson Truck and Trailer Leasing, Inc., which was duly recorded on October 17, 1958, as well as priority over the tax lien indebtedness due cross-acting plaintiff, Gillum, and otherwise the claim of cross-acting plaintiff Ferguson Truck and Leasing, Inc. takes priority over the balance of the claim on the part of plaintiff United States of America, though subsequent to the tax lien indebtedness due cross-acting plaintiff Gillum.

 

 

[66-2 USTC ¶9721]United States of America to the use of James R. Undlin, doing business as Pioneer Fixture Company, Plaintiff v. Roscoe-Ajax Construction Co., Inc., etc., et al., Defendants Murray Mill & Manufacturing Co., Inc., Third Party Plaintiff v. R. L. Stephenson Factors, et al., Third Party Defendants. United States of America , Intervenor

U. S. District Court, No. Dist. Calif. , So. Div., Civil No. 42792, 10/30/66

[1954 Code Sec. 6323]

Lien for taxes: Agreement among creditors: Distribution of proceeds: Interpleader.--A stipulation between the U. S. and a factor that the U. S. was entitled to $2,014.69, the amount of tax liens against property of a creditor from whom the factor purchased invoices, and that the factor was entitled to the remaining $5,739.86 out of the total fund held by the debtor of $7,754.55 was confirmed. Each of the parties was entitled to the stipulated amounts. Further held, that the debtor owed the creditor nothing from the fund of $7,754.55 which he originally owed the creditor.

Arguello, Giometti & McCarthy, Keil Bldg., 244 Kearny St. , San Francisco , Calif. , for plaintiff. Attorney General, 6000 State Bldg., San Francisco, Calif., for lien claimant; Oakes & Horton, 935 Bank of America Bldg. San Diego, Calif., for Murray Mill & Mfg. Co., Inc.; Thelen, Marrin, Johnson & Bridges, 19th Floor, 111 Sutter St., San Francisco, Calif.; J. W. Ehrlich, 333 Montgomery, San Francisco, Calif.; Surrey, Karaski, Gould & Greene, Woodward Bldg., Washington, D. C.; Oakes & Horton, 935 Bank of America Bldg., San Diego, Calif., for St. Paul Fire & Marine Ins. Co.; for third party defendants. Cecil F. Poole, United States Attorney, San Francisco , Calif. , for U. S.

Findings of Fact and Conclusions of Law

MATHER, District Judge:

This cause having come before the Court upon the motions of third party defendant R. L. Stephenson Factors, filed May 25, 1966, and of intervenor United States of America, filed July 6, 1966, for summary judgment upon the Counterclaim for Interpleader of defendant and third party plaintiff Murray Mill & Manufacturing, Inc., filed January 25, 1965; and the motions having been ordered submitted for decision upon the papers and memorandums of file, the Court makes its Findings of Fact as follows:

Findings of Fact