Florida2

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[2000-1 USTC ¶50,482] In re Ronald Joseph Clark and Lucy Y. Clark, Debtors. Marie E. Henkel, Trustee, Plaintiff v. Florida Department of Revenue, United States of America, William R. Decker, Inc., Whispering Oaks Realty Group, Ltd., and NCNB National Bank of Florida, Defendants

U.S. Bankruptcy Court, Mid. Dist. Fla., Orlando Div., 97-00253-6B7, 4/13/2000

[Code Sec. 6323 ]

Tax liens: Priority: State tax warrant: Notice not required: Judgment lien creditor.--

A federal tax lien against married debtors for the husband's unpaid employment tax liabilities was filed before a state ( Florida ) tax warrant became a lien and, thus, had priority over the state lien. No applicable exception required the IRS to file a notice of lien in order to have priority over the state lien. The state, as the tax warrant holder, was not a purchaser, holder of a security interest, or mechanic's lienor. The state also was not a judgment lien creditor since the tax warrant was not a judgment obtained in a court, but rather a statutory remedy to collect delinquent taxes.

ORDER GRANTING MOTION BY UNITED STATES FOR SUMMARY JUDGMENT

BRISKMAN, Bankruptcy Judge:

This cause came on for hearing on Wednesday, March 8, 2000 , at 1:00 p.m. , upon the Motion by the Defendant United States for Summary Judgment. Based on the arguments presented and the memoranda filed, the Court makes the following Findings of Fact and Conclusions of Law:

FINDINGS OF FACT

1. Ronald Joseph Clark and Lucy Y. Clark initially filed for relief under Chapter 11 of the Bankruptcy Code on January 10, 1997 , and subsequently converted their case to Chapter 7. Marie E. Henkel, Plaintiff, was appointed as and continues to serve as trustee.

2. On the petition date, Ronald Joseph Clark owned real property located in Orange County , Florida , together with a Quonset hut constructed thereon, located at 202 E. 7th Street , Bithlo , Florida .

3. The Trustee sold the property pursuant to an Order Granting Amended Motion to Sell Property of the Estate, entered by this Court on September 29, 1997 . The Order authorized the Trustee to pay off the recorded mortgages, specified property taxes, and the costs of sale. The Order directed that the putative liens of the Defendants were transferred to the remaining proceeds of the sale, which are held by the Trustee in a segregated interest-bearing account pending a determination of the extent, validity and priority of the liens. The remaining proceeds as of September 1, 1999 totaled $20,796.08 ("Proceeds").

4. Ronald Joseph Clark is indebted to the United States for unpaid employment taxes for the third quarter of 1993.

5. Although the United States issued notice and made demand for payment as required by law, the Debtor's tax liability remained unpaid.

6. This liability was assessed on October 3, 1994 .

7. On March 9, 1995 , the United States filed a Notice of Federal Tax Lien for this liability with the County Comptroller , Orange County , Orlando Florida . The Comptroller recorded this Notice in Official Records Book 4864, Page 2861.

8. The amount of the unpaid tax liability secured by the lien, as of February 14, 2000 , was $22,819.44, including interest and penalties to that date.

9. The Florida Department of Revenue filed two tax warrants with the Clerk of the Orange County Circuit Court against the Debtor, Ronald Joseph Clark.

10. The first warrant, #01942660016 for $2,577.00, was recorded with the Orange County Comptroller on October 7, 1994, in Official Records Book 4806, Page 1488.

11. The second warrant, #01963000267 for $15,951.86, was recorded with the Orange County Comptroller on January 8, 1997, in Official Records Book 5182, Page 3038.

12. A default was entered against defendant William R. Decker, Inc. on December 17, 1999 in this adversary proceeding.

13. A default was entered against defendant Whispering Oaks Realty Group, Ltd. on March 2, 2000 in this adversary proceeding.

14. Defendant NCNB National Bank of Florida has stipulated that it has no interest in the proceeds of this case, as its judgment is not against the Debtor. Consequently, this Court will dismiss Defendant NCNB from this adversary proceeding by separate order.

CONCLUSIONS OF LAW

1. When a person liable to pay a tax neglects or refuses to pay it after a demand for payment, Internal Revenue Code Section 6321 imposes a lien upon all property of the delinquent taxpayer. 26 U.S.C. §6321.

2. Section 6322 specifies that the lien arises when the tax is assessed. 26 U.S.C. §6322.

3. Once the tax lien arises, federal law governs the priority of competing liens. Griswold v. United States [95-2 USTC ¶50,419], 59 F.3d 1571, 1575 (11th Cir. 1995); see also Aquilino v. United States [60-2 USTC ¶9538], 363 U.S. 509, 513-14 (1960).

4. The basic rule in determining priority of liens is that "the first in time is the first in right." United States v. McDermott [93-1 USTC ¶50,164], 507 U.S. 447, 449 (1993); United States v. City of New Britain [54-1 USTC ¶9191], 347 U.S. 81, 85 (1954); Central Bank v. United States [93-2 USTC ¶50,586], 833 F.Supp. 892, 895 (M.D. Fla. 1993).

5. The Florida Department of Revenue is empowered to issue a warrant for delinquent taxes and to mail the warrant to the clerk of the county circuit court where any property of the taxpayer is located. Fla. Stat. §212.15(4).

6. Upon receipt of the warrant, the clerk must record it, whereupon the amount of the warrant becomes a lien on any real or personal property of the taxpayer in the same manner as a recorded judgment. Id.

7. The Federal Tax Lien against Ronald Joseph Clark's property arose on October 3, 1994 , the date the tax was assessed. 26 U.S.C. §6322.

8. The lien created by Florida 's first tax warrant did not arise until October 7, 1994 , the date it was recorded.

9. Thus the Federal Tax Lien arose four days before the amount of Florida 's tax warrant became a lien.

10. The Federal Tax Lien therefore has priority over the lien created by Florida 's tax warrant.

11. None of the exceptions of 26 U.S.C. §6323 that would require the United States to first file a Notice of Federal Tax Lien in order to have priority over the lien created by Florida's tax warrants apply because the state of Florida, as a holder of a tax warrant, is not a purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor.

12. The State of Florida is not a "judgment lien creditor" under section 6323(a), because a "judgment lien creditor" is a person who has obtained a valid judgment in a court of record and competent jurisdiction, to recover specifically designated property or a certain sum of money. Litton Indus. Automation Sys., Inc. v. Nationwide Power Corp. [97-1 USTC ¶50,236], 106 F.3d 366, 373 (11th Cir. 1997) (quoting Treas. Reg. §301.6323(h)-1(g)). A tax warrant, however, is not a judgment obtained in a court, but rather is a statutory remedy to collect delinquent taxes.

Based on these Findings of Fact and Conclusions of Law, it is hereby ORDERED, ADJUDGED and DECREED as follows:

That the Motion by United States for Summary Judgment is hereby GRANTED;

That the Federal Tax Lien that arose on October 3, 1994 has priority over Florida 's tax warrants;

That Defendant William R. Decker, Inc. has no claim to the Proceeds, and has been defaulted;

That Defendant Whispering Oaks Realty Group, Ltd. has no claim to the Proceeds, and has been defaulted;

That Defendant NCNB National Bank of Florida has no claim to the Proceeds, and will be dismissed by separate Order;

That the Proceeds remain in their segregated account and be distributed at closing in accordance with 11 U.S.C. §724(b); and

That a separate judgment conforming with this order shall be entered pursuant to Bankruptcy Rule 9021.

DONE and ORDERED.

FINAL JUDGMENT

This action came on for hearing before the Court, Honorable Arthur B. Briskman, Bankruptcy Judge, presiding, and the issues having been duly heard and a decision having been duly rendered,

It is Ordered and Adjudged

1. That the United States , by virtue of its Federal Tax Lien arising on October 3, 1994 , is entitled to priority to the Proceeds over the State of Florida 's tax warrants;

2. That Defendant William R. Decker, Inc. has no claim to the Proceeds, and has been defaulted;

3. That Defendant Whispering Oaks Realty Group, Ltd. has no claim to the Proceeds, and has been defaulted;

4. That Defendant NCNB National Bank of Florida has no claim to the Proceeds; and

5. That the Proceeds remain in their segregated account and be distributed at closing in accordance with this Final Judgment and 11 U.S.C. §724(b)

 

 

[79-2 USTC ¶9517]Bryan Toyota of Lauderdale, Inc., etc., Plaintiff v. Fort Lauderdale Toyota, Inc., etc., et al., Defendants

U. S. District Court, So. Dist. Fla. , No. 77-6062-Civ-WMH, 6/23/79

[Code Sec. 6323]

Lien for taxes: Priority: Federal v. state tax lien: Florida.--A federal tax lien was found to have priority over a Florida state tax lien for delinquent sales taxes. Because the State of Florida failed to acquire the status of a judgment creditor by following the procedures provided under state law for obtaining such status, it did not fall within any of the classes of persons whose perfected claims have priority over a federal tax lien.

Raymond A. Doumar, Allsworth, Doumar, Schuler, Padula & Lavstrom, 1177 S. E. Third Ave., Fort Lauderdale, Fla. 33316, Charles L. Curtis, 200 S. E. First St., Miami, Fla. 33131, for Fort Lauderdale Toyota, Jacob V. Eskenazi, United States Attorney, Miami, Fla. 33132, George T. Rita, Department of Justice, Washington, D. C. 20530, for U. S., Edwin J. Stacker, Assistant Attorney General, The Capitol, Tallahassee, Fla. 32304, for the State of Florida, Department of Revenue, Fred C. Bamman, 5100 North Federal Highway, Fort Lauderdale, Fla. 33308, for Madsen, Sapp, and Barnes, Barry G. Roderman, 3201 Griffin Road, Fort Lauderdale, Fla. 33312, for All Florida Sanitation, Leo Adderley, Friedman, Britton, Cohen, Kaufman, Zinkow, Benson & Schantz, 800 Southeast First National Bank Bldg., Miami, Fla. 33131, for Southeast First National Bank, Gore Newspapers, Standard Auto Bumper Corp., Bruce A. Weihe, Ferrero, Middlebrooks & Houston, P. O. Box 14604, Fort Lauderdale, Fla. 33302, for Barnett Bank, Paul R. Regensdorf, P. O. Drawer 7028, Fort Lauderdale, Fla. 33338, for Florida Power and Light, E. Louis Fields, 1699 East Oakland Park Blvd., Fort Lauderdale, Fla. 33334, for Waste Management, Inc., Susan Lebow Weinberg, 2430 West Oakland Park Blvd., Fort Lauderdale, Fla. 33311, for Oakland Toyota, John F. Howard, P. O. Drawer 1659, Sebring, Fla. 33870, for Foreign Parts, Ltd., Peter J. Forman, Gustafson, Stephens, Ferrif, Forman & Hall, 1415 East Sunrise Blvd., Ft. Lauderdale, Fla., 33304, for B & L Paint Supply, Barry A. Mandelkorn, Ruden, Barnett, McCloskey & Schuster, 25 South Andrews Ave., Ft. Lauderdale, Fla. 33302, for Wingate Automotive, Lawrence M. Flaster, 1507 N. W. 47th Ave., Lauderhill, Fla. 33313, Allan Taylor, 609 South Andrews Ave., Fort Lauderdale, Fla. 33301, for Pamela Digiacomo, Douglas S. Lambeth, Landmark Bank Bldg., Fort Lauderdale, Fla. 33394, for Rutledge Enterprises, Inc.

Order

HOEVELER, District Judge:

On December 7, 1978 , the Court entered an order granting Plaintiff's motion to allow interpleader. At a status conference held on January 18, 1979 , all parties still claiming an interest in the funds deposited into the registry of the Court were requested to file memoranda of law in support of their respective claims to priority.

The United States and the State of Florida have each filed memoranda asserting their respective priority claims. No other party having filed a memorandum with the Court, the question of entitlement to the interpleaded funds is reduced to a controversy solely between the federal and state governments. ¹

The federal government claims some $42,196.05, plus interest, for withholding and FICA taxes and for federal unemployment taxes. A Notice of Federal Tax Lien was filed with the Clerk of the Circuit Court of Broward County on January 4, 1977 , and a notice of levy was served on Bryan Toyota on January 7, 1977 .

The State claims some $27,638.92 (through January 15, 1979 , with interest thereafter accruing at the rate of $6.48 per day), constituting unpaid sales taxes, together with interest and penalties thereon.

Pursuant to Section 6321 of the Internal Revenue Code of 1954, ² a lien arises in favor of the United States when a taxpayer neglects or refuses to pay his tax upon assessment and after notice and demand. This lien arises at the time of the assessment and attaches to all property of the taxpayer, whether real or personal.

The tax lien of the federal government is good against all the world, except those persons designated in §6323(a) of the Code. ³ As to those persons--purchasers, holders of security interests, mechanic's lienors, and judgment lien creditors--the lien is not valid until notice thereof is filed in the place indicated by 26 USC §6323(f). Persons within the excepted classes whose claims have been perfected prior to the filing of the notice of tax lien have a priority position to the lien of the federal government.

Florida Statutes §212.15(3) ⁴ provides a specific method by which the State of Florida may acquire the status of a judgment lien creditor as to delinquent taxes. The Department of Revenue is empowered, indeed it has a duty, to issue a warrant for the amount of the tax due, together with interest, penalties, etc. The warrant is to be mailed to the clerk of the circuit court of the county where taxpayer's property is located. Upon recording of the warrant by the clerk of the circuit court, its amount becomes a lien on any property of the taxpayer in the same manner as a recorded judgment.

The record in this case does not reveal that the State followed the procedure mandated by the statute to collect the delinquent sales taxes. The existence of this specific statutory procedure for obtaining the priority status of a judgment lien creditor undercuts the State's argument that the amount representing the unpaid sales taxes was the property of the State of Florida ab initio; and the State's failure to follow the outlined procedure precludes its priority as a judgment lien creditor.

Since the State cannot bring itself within any of the other classes of person excepted by §6323(a), the United States has priority by virtue of its duly filed notice of tax lien. It is therefore,

ORDERED AND ADJUDGED that the tax lien of the United States of America shall be first satisfied out of the interpleaded funds deposited in the registry of the Court, the balance, if any, to be paid to the State of Florida . It is further

ORDERED AND ADJUDGED that the United States shall within ten days of the date of this order submit an appropriate form of judgment, for the amount of its tax lien, plus interest accrued to date.

¹ Defendant Oakland Toyota, Inc. filed a "Response to Order Allowing Interpleader" requesting, inter alia, that the Court determine that its claim in the amount of $1,137.41 is superior to that of the other Defendants. No authority was cited for its claim of superior right, no memorandum of law accompanied it, and no response was filed to the governmental Defendants' priority claims. The Court must, therefore, conclude that the claim of priority has been abandoned and/or is without basis in the law.

² 26 USC §6321 provides:

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

³ 26 USC §6323(a) is as follows:

Purchases [sic], holders of security interests, mechanic's lienors, and judgment lien creditors. The lien imposed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Secretary or his delegate.

⁴ The full text of that section is as follows:

All taxes collected under this chapter shall be remitted to the department. The department is empowered, and it shall be its duty, when any tax becomes delinquent or is otherwise in jeopardy under this chapter, to issue a warrant for the full amount of the tax due or estimated to be due, with the interest, penalties and cost of collection, directed to all and singular the sheriffs of the state, and mail the warrant to the clerk of the circuit court of the county where any property of the taxpayer is located. Upon receipt of the warrant, the clerk of the circuit court shall record it, and thereupon the amount of the warrant shall become a lien on any real or personal property of the taxpayer in the same manner as a recorded judgment. The department may issue a tax execution to enforce the collection of taxes imposed by this chapter and deliver it to any sheriff. The sheriff shall thereupon proceed in the same manner as prescribed by law for executions and shall be entitled to the same fees for his services in executing the warrant to be collected. The department may also have a writ of garnishment to subject any indebtedness due to the delinquent dealer by a third person in any goods, money, chattels, or effects of the delinquent dealer in the hands, possession, or control of the third person in the manner provided by law for the payment of the tax due. Upon payment of the execution, warrant, judgment or garnishment, the department shall satisfy the lien of record within thirty days. [Emphasis added].

 

 

[78-2 USTC ¶9482]In the Matter of: Grace Furniture Corp., Bankrupt

U. S. District Court, So. Dist. Fla. , Case No. 76-1222-BK-CA-B, 2/10/78

[Code Sec. 6323--result unchanged by 1976 Tax Reform Act]

Lien for taxes: Priority: County tax lien.--A federal tax lien was held to have priority over a county tax lien because the federal lien was the first to become choate. The court found that the county's lien for personal property taxes became choate only when a state court authorized levy and seizure, and not on the date the owner of the property was required to file a county tax return.

Michael P. Maguire, 2600 Douglas Rd. , Coral Gables , Fla. for bankrupt.

Order Determining Relative Priority of Tax Liens Under §67c(3)

BRITTON, Bankruptcy Judge:

The case is here for a determination of the relative priorities of the tax claims of Dade County (Claim no. 21) and the United States (Claim no. 33). The parties have been heard. The facts are not disputed.

It is agreed that the County claim up to the amount of $1,019.16 and the United States claim up to the amount of $4,309.01 are entitled to the tax lien priority provided by §67c(3) of the Act (11 U. S. C. §107). The funds on hand are not sufficient to pay both. The sole question to be resolved, therefore, is the relative priority of these two liens.

I digress momentarily to explain that this bankruptcy petition was filed on August 3, 1976 . The balance of the County's claim is for 1976 taxes, which the County concedes (at least for the purpose of this case) did not become choate before the petition was filed. Notices of the federal tax lien for the balance of the United States claim were not filed until after the petition and, therefore, the United States concedes (at least for the purpose of this case) it did not become choate before the petition. 26 U. S. C. §6323.

It is agreed that the priority of tax liens under 67c(3) depends upon which lien first became choate and that a lien becomes choate when one can establish (1) the identity of the lienor, (2) the identity of the property subject to the lien, and (3) the amount of the lien. United States v. New Britain [54-1 USTC ¶9191], 347 U. S. 81, 84, 74 S. Ct. 367, 98 L. Ed. 520 (1954).

It is also agreed that the United States lien as to $4,309.01 (this sum includes $118.75 interest) became choate between June 21 and June 28, 1976 , when the taxes which were the subject of these two liens were assessed.

The identity of the lienor, for the County lien, was established on January 1 of the tax year, 1975, in this instance. §197.056, Florida Statutes.

The amount of the County's lien became established when Florida personal property taxes become due and payable, November 1 of the tax year, 1975, in this case. §197.012, Florida Statutes.

The property subject to the County's lien became established, according to the County, on April 1 of the tax year, when the owner is required to file a tax return listing all of his property. §193.062, Florida Statutes. The United States argues that this element was not established until the State court entered an order allowing the collector to "seize so much of the tangible personal property of the taxpayers who are listed in the petition as is necessary to satisfy the unpaid [1975] taxes". Section 197.086, Florida Statutes. This order was entered on June 14, 1976 .

If tangible personal property is removed from the county, the collector may immediately issue a warrant for its seizure in the other county. Also, if the collector "has reason to believe that the property is being, or has been, removed or disposed of so as to prevent or endanger the payment of taxes thereon" he may attach the property immediately. Section 197.092, Florida Statutes. It is conceded that these unusual circumstances are not established in this case.

I agree with the United States that the County tax lien did not become choate in this case until June 14, 1976 , when the State court authorized levy and seizure in payment of the tax. Until that point, the County's lien was not enforceable and the property subject to the lien is restricted to "the tangible personal property of the taxpayers" who are found to be delinquent by that order.

In United States v. Bond [60-2 USTC ¶9532], 4 Cir. 1960, 279 F. 2d 837, 841 the Court reviewed the choate lien test cases at length and concluded:

"In establishing the 'choate lien test', these cases have developed exacting requirements, the substance of which is to require that the state created liens be specific to the point that nothing further need be done to make the lien enforceable."

In E. C. Rob inson Lumber Co. v. Hughes, E. D. Mo. 1972, 355 F. Supp. 1363, 1369, the Court, somewhat more recently, framed the test in much the same terms:

"Thus the lienor must either have obtained judgment on the lien or it must be enforceable against the property by summary proceedings."

That point is not reached in Florida with respect to the personal property tax lien until the Circuit Court hearing and order required by §197.086, Florida Statutes, absent the unusual circumstances provided for under §197.092, Florida Statutes, where property is removed from the county. That point was reached in this case on June 14, 1976 , before the United States lien became choate.

It follows that the trustee is directed to pay the Dade County Tax Collector up to $1,019.16 as a tax lien priority under §67c(3) of the Act and, if the assets then permit, to pay the United States up to $4,309.01 upon its claim. The remainder of Claims no. 21 and 33 are denied.

 

 

[55-1 USTC ¶9484] United States of America , Plaintiff v. Jack E. Miller et al., Defendants

In the United States District Court for the Southern District of Florida, Tampa Division, Case No. 2402-Civ.-T, Filed April 14, 1955

[1939 Code Sec. 3672--changed in 1954 Code Sec. 6323]

U. S. tax liens: Validity against mortgagees: Property tax advances: Foreclosure: Order of payment.--In a final decree of foreclosure in a suit filed by the United States and a cross-complainant, the mortgage given by taxpayers to the cross-plaintiff was declared to be a prior and superior lien over federal tax liens filed against the property on February 9, 1952 and March 10, 1952, part of which was secured by another mortgage on the property. It was ordered that the proceeds of sale when made should be distributed and paid in the following order: (1) Costs of suit, (2) amount of principal and interest on mortgage held by cross-plaintiff, including ad valorem property taxes advanced by it for 1952-1954, and (3) balance to U. S. to the extent of the federal tax claims, penalties and interest.

James L. Guilmartin, United States Attorney, Vernon W. Evans, Jr., Assistant United States Attorney, Tampa, Fla., for plaintiff. Joseph M. Paniello, Gregory & Cours, 302 Wallace S. Building, Tampa, Fla., for defendant, Maas Brothers, Inc. Cutler and Mittle, 218 Marine Bank Building, Tampa, Fla., for defendant, Wholesale Plumbing Supply Corp. Herbert W. Miller, Assistant General Counsel, c/o Florida Industrial Commission, Caldwell Building, Tallahassee, Fla., for defendant, State of Florida Industrial Commission. B. L. Cooper, William Earle Tucker, etc., 204 Stovall Professional Building, Tampa, Fla., for defendant, Hughes Supply Co., Inc. Grazier, Fielding, Greene & Coit, 700 First Federal Building, St. Petersburg, Fla., for defendant, First Federal Savings & Loan Assn., St. Petersburg, Fla. Richard W. Ervin Attorney General, Fred M. Burns, Assistant Attorney General, and John D. Moriarty, Special Assistant Attorney General for C. M. Gay, Comptroller, State of Florida. William C. Cramer, Pinellas County , Fla. , for defendant, Board of County Commissioner, Pinellas County , Fla.

Final Decree of Foreclosure

WHITEHURST, District Judge:

The above entitled cause having come on to be heard on February 28, 1955, on final hearing upon the complaint heretofore filed for the foreclosure of mortgage and tax liens held by the plaintiff and upon the cross-complaint for foreclosure of a mortgage held by the defendant and cross-plaintiff, First Federal Savings and Loan Association of St. Petersburg, Florida, and the Court having heard the evidence produced by the United States of America, plaintiff, and the defendant and cross-plaintiff, First Federal Savings and Loan Association of St. Petersburg, Florida, and the defendant-mortgagors, Jack E. Miller and Dorothy Miller, having failed to answer, and the remaining party defendants having filed answers to the complaint of the plaintiff but having failed to appear and produce evidence of the things and matters alleged in said answers, and the Court being fully advised in the premises, it is

ORDERED, ADJUDGED AND DECREED: 1. That the plaintiff is entitled to maintain this suit, and the Court has jurisdiction of the subject matter and the parties hereto.

2. That the mortgage of the defendant and cross-plaintiff, First Federal Savings and Loan Association of St. Petersburg, Florida, was duly and legally executed, delivered and recorded; that the note thereby secured was also properly executed and delivered, and said note and mortgage constitute a good, valid, and subsisting lien upon the mortgaged property hereinafter described.

[Property Taxes]

3. That the defendant, First Federal Savings and Loan Association of St. Petersburg, is entitled to recover from the defendants, Jack E. Miller, also known as John Edward Miller, and Dorothy E. Updegrove Miller, and the lands described in the bill of complaint are subject to, a lien for an indebtedness composed of the following sums:

Principal and interest to February

28, 1955 ..............................         $ 9,770.87

Taxes advanced for 1952 ...............             170.20

Taxes advanced for 1953 ...............             169.69

Taxes advanced for 1954 ...............             379.92

Insurance advanced ....................              43.18

Total amount due ......................         $10,533.86

 

3-a. That in addition to the sums hereinbefore mentioned, defendant is entitled to recover interest on the amount of $10,533.86 at the rate of 6% per annum from and after February 28, 1955, to date of foreclosure sale if this decree be not satisfied within three (3) days from the date hereof.

3-b. That all of the sums hereinbefore set forth are secured by the lien of defendant's mortgage and constitute a prior and superior lien in favor of defendant, First Federal Savings and Loan Association of St. Petersburg, against the mortgage premises mentioned in the plaintiff's bill of complaint.

[Federal Tax Claims]

4. That the tax liens of the plaintiff, United States of America, filed February 9, 1952, and March 10, 1952, were duly and legally executed and recorded and are based upon lawful and valid tax assessments made by the lawful authorities of the United States in accordance with the laws and regulations of the United States relative thereto.

5. That the mortgage given by the defendants, Jack E. Miller, also known as John Edward Miller, and Dorothy Miller, also known as Dorothy E. Updegrove Miller, to secure the tax assessment resulting in tax lien filed for record February 9, 1952, in the amount of $2,698.84 was duly and legally executed, delivered, and recorded, and that the said tax liens and mortgage all constitute good, valid, and subsisting liens upon the mortgaged property hereinafter described.

6. That the said mortgage given by the defendant-mortgagors to the plaintiff, United States of America, is in default, and the United States of America is entitled to recover from the defendants, Jack E. Miller, also known as John Edward Miller, and Dorothy Miller, also known as Dorothy E. Updegrove Miller, and the lands hereinafter described are subject to, a lien for an indebtedness composed of the following sums:

Principal (taxes, penalties and interest) ....         $2,473.84

Interest at 6% on taxes and penalties

from 
March 14, 1952
, to February

28, 1955 .....................................            363.27

Total ........................................         $2,837.11

 

That tax assessment for additional income taxes for the year 1950 assessed against the defendants, Jack E. Miller, also known as John Edward Miller, and Dorothy Miller, also known as Dorothy E. Updegrove Miller, upon which tax lien was filed on March 10, 1952, has not been paid after demand therefor, and the said defendants are in default thereon, and the United States of America is entitled to recover from said defendants, and the lands hereinafter described are subject to, a lien for an indebtedness composed of the following sums:

Additional income taxes assessed for

the year 1950, including penalties

and interest as of 
March 10, 1952
 ........         $1,019.60

Interest on taxes and penalties at 6%

per annum from 
March 10, 1952
, to

February 28, 1955
 ........................            168.87

Total ....................................         $1,188.47

 

6-a. That in addition to the sums hereinbefore mentioned, plaintiff, United States of America, is entitled to recover interest on the amount of $4,025.58 at the rate of 6% per annum from and after February 28, 1955, to date of foreclosure sale if this decree be not satisfied within three days from the date hereof.

7. There is also due and owing from the defendants, Jack E. Miller and Dorothy Miller, the costs of this suit found to be in the amount of $112.30, and in addition thereto costs incurred in advertising and sale of the property hereinafter described.

[Mortgage Lien Superior ]

8. That the lien of First Federal Savings and Loan Association of St. Petersburg on the mortgaged property hereinafter described is prior, superior, and paramount to all rights, claims, liens, interest, encumbrances, and equities of the plaintiff cross-defendant, United States of America, Jack E. Miller, also known as John Edward Miller, and Dorothy Miller, also known as Dorothy E. Updegrove Miller, defendants, and all other party defendants and all persons claiming by, through, or under any of said defendants since the filing of the lis pendens herein.

9. The lien of the plaintiff and cross-defendant, United States of America, on the mortgaged property hereinafter described is subordinate and inferior to the lien of the First Federal Savings and Loan Association of St. Petersburg, but is prior, superior, and paramount to all rights, claims, liens, interests, encumbrances, and equities of all other defendants and all persons claiming by, through or under any of said defendants since the filing of the lis pendens herein.

10. Unless the defendants, Jack E. Miller, also known as John Edward Miller, and Dorothy Miller, also known as Dorothy E. Updegrove Miller, shall within three days from the entry of this decree pay to the First Federal Savings and Loan Association of St. Petersburg the sums hereinbefore specified, to wit, $10,533.86, and unless the said defendants shall pay to the United States of America the sums hereinbefore specified, to wit, $4,025.58, and all other costs of this suit as aforesaid, the said mortgaged property, to wit:

Lot 9, less the east two (2) feet of said lot 9 of Revised Plat of High School Addition to St. Petersburg, according to plat recorded in Plat Book 22, Page 19, Public Records of Pinellas County, Florida, otherwise known as, 2439 8th Ave. No., St. Petersburg, Florida,

shall be sold to the highest and best bidder for cash at public outcry before the east door of the Court House of Pinellas County, at Clearwater, Florida, free and clear and discharged of and from any and all claims, liens, encumbrances, rights, equities, and interests of any and all the parties defendant hereto and of any and all persons, firms and corporations claiming by, through, or under them, or any of them, since the filing of the lis pendens herein, at a sale to be held by the United States Marshal for the Southern District of Florida, or his duly authorized deputy, and who is to report his acts and doings in that behalf to this Court. The United States Marshal, or his authorized deputy, is hereby directed to publish a notice of sale once a week for four consecutive weeks prior to the sale in a newspaper of general circulation published in Pinellas County, Florida, and to hold the sale on a day specified within the legal hours of sale, said sale to be made to the highest and best bidder for cash, subject to the right reserved to the First Federal Savings and Loan Association of St. Petersburg and to the United States of America to bid on said property and apply the indebtedness of the defendants, Jack E. Miller, also known as John Edward Miller, and Dorothy Miller, also known as Dorothy E. Updegrove Miller, to either or any bids so made.

[Order of Payment]

11. Upon receipt of the purchase price bid at the sale, the Marshal shall make a report to this Court of the sale for confirmation. After the sale has been confirmed the Marshal is directed to make and execute a good and sufficient Marshal's deed conveying the property hereinbefore described to the purchaser thereof. The Marshal is directed after confirmation to disburse the proceeds of the sale, as follows:

First: Pay to the Clerk of this Court the costs of the suit in the amount of $112.30, as hereinbefore specified.

Second: Pay to the United States Marshal for the Southern District of Florida, Tampa Division, the costs incurred by said United States Marshal in advertising and sale of the property hereinbefore described.

Third: The Marshal is directed to pay to the First Federal Savings and Loan Association of St. Petersburg the sum of $10,533.86, as hereinbefore specified.

Fourth: The Marshal is directed to pay to the United States of America the sum of $4,025.58, as hereinbefore specified, or so much of said amount as the proceeds from the sale will satisfy.

That in the event any surplus remains after payment to the First Federal Savings and Loan Association of St. Petersburg and the United States of America, said surplus shall be deposited in the registry of this Court subject to the further order of this Court, and in that event the Clerk of this Court is directed to give notice to all other defendants herein in order that said defendants might by appropriate pleadings make claim to such portions of said surplus as may be due them.

12. Upon confirmation of the sale, the defendants, Jack E. Miller, also known as John Edward Miller, and Dorothy Miller, also known as Dorothy E. Updegrove Miller, and all claimants by, through, or under them, or any of them, shall stand and be forever foreclosed and barred of and from any and all estates, rights, titles, interests, claims, demands, and equities of redemption in and to the said mortgaged property, and, upon production of the deed of said United States Marshal, all and singular the defendants and claimants as aforesaid shall surrender up and yield possession of said property to the purchaser thereof at said sale, or his agent thereunto authorized.

[Deficiency Judgments]

13. In the event the proceeds of the sale of the above described mortgaged property are not sufficient after the payment of the legal costs accruing in this case, the defendant and cross-plaintiff, First Federal Savings and Loan Association of St. Petersburg, and the plaintiff, United States of America, shall each take a deficiency decree against the defendants, Jack E. Miller, also known as John Edward Miller, and Dorothy Miller, also known as Dorothy E. Updegrove Miller, and that such decree shall be a lien upon all the personal and real property of said defendants.

14. This Court retains jurisdiction of this cause for the purpose of making any and all further orders and decrees herein as may be meet and agreeable to equity, including the entry of order confirming the sale hereinabove provided for and the entry of a deficiency decree when and if such confirmation and deficiency decree shall appear proper.

Order (April 22, 1955)

The motion of the defendant, FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF ST. PETERSBURG for an order allowing inclusion in the final decree pending in this cause of the sum advanced by said defendant for payment of 1954 ad valorem taxes coming on this day to be heard, and it appearing to the Court that the defendant, First Federal Savings and Loan Association of St. Petersburg, in order to protect its lien and to prevent penalties from being assessed, was obliged to advance the sum of THREE HUNDRED SEVENTY-NINE AND 92/100 ($37.92) DOLLARS in payment of the taxes due on the property sought to be foreclosed herein; and it further appearing to the Court that the defendant should be reimbursed for such advance made prior to the entry of the final decree by this Court, and the defendant, First Federal Savings and Loan Association of St. Petersburg, having submitted to this Court receipt of the payment of said taxes, and the Court being otherwise fully advised in the premises;

IT IS HEREBY ORDERED, ADJUDGED AND DECREED, as follows: 1. That the motion of the defendant, First Federal Savings and Loan Association of St. Petersburg, be granted; and

2. That the defendant, First Federal Savings and Loan Association of St. Petersburg, be allowed the sum of THREE HUNDRED SEVENTY-NINE AND 92/100 ($379.92) DOLLARS as a necessary expenditure by the defendant for payment of 1954 ad valorem taxes due and payable on the land sought to be foreclosed herein, and that the same be made a part of the final decree.

 

 

[55-1 USTC ¶9373]United States of America, Plaintiff v. Maurice A. Sturm, Mary Sturm, his wife, Penn Mutual Life Insurance Company, a Corporation, the State of Florida, the County of Dade, and the City of Miami, Florida, a Municipality, Defendants

In the United States District Court for the Southern District of Florida, Miami Division, No. 4673-M-Civil, March 18, 1955

[1939 Code Sec. 3672--similar to 1954 Code Sec. 6323]

Lien for taxes: Validity against third parties: County's real estate taxes and mortgagee's lien.--The order of priority determined is (1) delinquent real estate taxes owed to the county, (2) the mortgagee's lien, the mortgage having been duly recorded, and (3) the lien of the United States.

James L. Guilmartin, United States Attorney (by J. Edward Worton, Assistant United States Attorney), for plaintiff. Henry M. Sinclair, Harry Zukernick, for Maurice A. Sturm. Norman K. Schwarz, for Mary Sturm.

Judgment

HOLLAND , Chief Judge:

This case came on regularly before me for trial this 7th day of March, 1955, and counsel for the United States, Maurice A. Sturm, Mary Sturm, and the County of Dade having appeared, and counsel for Dr. Maurice A. Sturm having consented in open court to the entry of a judgment against Maurice A. Sturm in the amount of $59,039.07, and having consented to the entry by the Court of a decree of foreclosure against the real property described in the mortgage annexed to the complaint, sale under such decree of foreclosure to be postponed for the period of three years, provided payments in satisfaction of the judgment herein entered are made by Dr. Maurice A. Sturm as follows:

$5000.00 on the entry of this decree, receipt of which is hereby acknowledged by the attorney for the United States ,

$5000.00 six (6) months from the entry of this decree,

$8173.18 one year from the date of the entry of this decree, and

$8173.18 each four (4) months thereafter until the total amount for which judgment is hereby entered has been paid in full.

Counsel for Mary Sturm having filed in the cause a stipulation under which the said Mary Sturm releases all her right, title, and interest in and to the real property described in the mortgage annexed to the complaint and having consented to tne entry of the within judgment, and counsel for the County of Dade having appeared and consented to the entry of judgment, provided that on any foreclosure sale the proceeds be applied first to the payment of delinquent taxes on the real property described herein owing to the said County of Dade, now, on motion of James L. Guilmartin, Esquire, United States Attorney, and Edmund C. Grainger, Jr., Esquire, Special Assistant to the Attorney General, of counsel, it is

ORDERED, ADJUDGED, and DECREED: 1. This Court has jurisdiction of the subject matter and the parties hereto.

2. That judgment against Maurice A. Sturm in favor of the United States of America be entered forthwith in the amount of $59,039.07, and it is further

ORDERED 3. That the mortgage described in and attached as an exhibit to the complaint herein was duly and legally executed, acknowledged, delivered, and recorded and the three (3) notes thereby secured were also properly executed and delivered. Such notes and mortgage herein constitute a good and valid first lien upon the mortgaged property hereinafter described, subject to the rights of the County of Dade .

4. The lien of the plaintiff, United States of America, is prior, superior, and paramount to all rights, claims, liens, interest, encumbrances, and equities of defendants Maurice A. Sturm, Mary Sturm, and any and all persons claiming through and under either or both of them.

5. Defendant Maurice A. Sturm has paid in partial satisfaction of the within judgment on the entry of this decree the sum of $5000.00. The balance of said judgment in the amount of $54,039.07 is to be paid as specified hereinabove.

6. In the event there is a default in any of the payments required to be made hereunder, which default is not cured within five (5) days, the said mortgaged property, to-wit:

"All that part Lots 12-13 & 14 Blk 3H Isl No. 3-3rd Revised Plat Sunset Islands recorded Plat Bk 40 P 8 Pub Rec Dade Co. Fla-more particularly described as follows: Begin at the southeasterly corner Lot 13 said corner being located on the westerly line Bay Ave-thence northwesterly along the westerly line of Bay Ave a distance of 50.97' to a point-thence westerly in a straight line to a point located on the shore line of Biscayne Bay said point being 121/2' northwesterly from the southwesterly corner of Lot 14 said corner being also the northwesterly corner Lot 13 thence southeasterly along the shore line of Biscayne Bay a distance of 100.97' to a point located on said shore line of Biscayne Bay said point being 121/2' southeasterly from the southwesterly corner of Lot 13 thence northeasterly in a straight line to the point of beginning, said premises being known as 2312 Bay Avenue, Sunset Isle No. 3, Miami Beach, Florida."

shall be sold to the highest and best bidder for cash, at public outcry before the North front door of the United States Post Office Building, Miami, Dade County, Florida, free, clear, and discharged of and from any and all claims, liens, encumbrances, rights, equities, and interest of any and all of the party defendants hereto, and of any and all persons, firms, or corporations, claimed by, through, or under them, or any of them, at the sale to be held by Paul G. Hyman, Esquire, who is hereby appointed Special Master of this Court to make said sale and to report his accounts and doings in that behalf to this Court with all convenient speed. Said Special Master is hereby directed to publish notice of sale thereof once a week for four (4) consecutive weeks prior to the aforementioned sale, in a newspaper published in Dade County , Florida .

[Foreclosure Sale Suspended]

7. So long as the payments required to be made in satisfaction of the judgment are made as required hereunder, the foreclosure sale herein ordered shall be suspended, except that in the event of the death of Maurice Sturm, notwithstanding any of the other provisions herein, said foreclosure sale shall be held within thirty (30) days thereafter unless payment of the then remaining balance of the judgment shall be made prior thereto.

8. So long as the payments required to be made hereunder are made on the dates specified, or within five (5) days thereafter, this judgment shall be without interest, but in the event of default in payment which is not cured within five (5) days, judgment interest at the rate of six percent (6%) per annum on the unpaid balance of the judgment, from the date of entry to the date of default, shall become due and owing to the plaintiff.

9. Upon receipt of the purchase bid at any sale held herein, the Special Master shall make report to this Court of said sale for confirmation, and after confirmation the Special Master shall disburse and apply the proceeds as may then be ordered.

10. Upon confirmation of the sale, the defendants and all claims by, through, or under them, with the exception of the County of Dade, shall stand and be foreclosed and barred of and from any and all estates, rights, titles, interest, claims, demands, and equities of redemption in and to the said mortgaged property and permises and every part and parcel thereof with the appurtenances, and upon production of the deed of the Special Master, all and singular, the defendants aforesaid shall surrender and yield possession of the said property to the purchasers thereof at the said sale, or to his agent thereunder authorized.

11. The allegations made by defendants Maurice A. Sturm and Mary Sturm in Paragraphs 5 and 6 of their answer filed herein, with respect to agents and officials of the Bureau of Internal Revenue are hereby withdrawn.

12. This Court retains jurisdiction of this cause for the purpose of making any and all other orders and decrees therein as may be necessary, including an order confirming the sale hereinabove provided for.

 

 

[54-1 USTC ¶9392] United States of America , Appellant v. Atlantic Municipal Corporation, Appellee

(CA-5), In the United States Court of Appeals for the Fifth Circuit., No. 14785, 212 F2d 709, May 11, 1954

Appeal from the United States District Court for the Southern District of Florida.

Liens: Priority among tax liens.--A local government, whose tax lien was perfected on January 1, 1949 , claimed a priority over the United States , whose lien was perfected on May 31, 1949 , and sued to recover the proceeds of a bankruptcy sale. The court upheld the local lien as prior in time, and rejected the United States' contention that the Federal Priority Statute, §3466, would give the United States priority, as it held that that statute applied only against unsecured debts.

H. Brian Holland, Assistant Attorney General, Ellis N. Slack and Alonzo W. Watson, Jr., Special Assistants to Attorney General, all of Washington, D. C., and James L. Builmartin, United States Attorney, Tampa, Fla., for appellant. O. B. McEwan, Orlando , Fla. , for appellee.

Before HUTCHESON, Chief Judge, and HOLMES and BORAH, Circuit Judges.

HUTCHESON, Chief Judge:

This is another of the many cases involving (1) conflicting claims to priority of liens ¹ and (2) Specific and Perfected Liens v. Federal Priority in Receiverships, ² which have lately engaged the attention of this court and the Supreme Court.

Submitted on an agreed statement of facts, ³ this case presents a single question for decision. As appellee correctly states it in its brief, this question is: Whether the District Court erred in holding that, on distribution of the proceeds of all property of an insolvent taxpayer corporation, the holder of a tax lien certificate issued by the County of Orange, Florida, for 1949 ad valorem taxes which became a lien on the taxpayer's real property on January 1, 1949, is entitled to priority as against an income and excess profits tax claim of the United States which became a lien on May 31, 1949 and was duly filed in the Public Records of Orange County, Florida, on June 1, 1949.

Appellant, invoking both the Federal Tax Lien Statute, 26 U. S. C. Secs. 3670-3672 and the Federal Priority Statute, Sec. 3466, 31 U. S. C., Sec. 191, insists: (1) that lien for lien, the tax lien of the United States primes that of the appellee, and requires priority in payment, and (2) that if this is not so, the debtor being insolvent, Section 3466 accords priority in payment to debts due the United States for taxes.

[Government's First Argument]

On its part, as a conclusive answer to appellant's first claim, appellee points: to the showing in the agreed statement of facts that its claim is supported by a specific and perfected lien which primes, that is, is prior in time to, the tax lien of the United States; and to the law as most recently declared in United States v. New Britain , 347 U. S. at page 85:

"* * * We believe that priority of these statutory liens is determined by another principle of law, namely, 'the first in time is the first in right.' As stated by Chief Justice Marshall in Rankin v. Scott, supra:

'The principle is believed to be universal, that a prior lien gives a prior claim, which is entitled to prior satisfaction, out of the subject it binds, unless the lien be intrinsically defective, or be displaced by some act of the party holding it, which shall postpone him in a Court of law or equity to a subsequent claimant.' 12 Wheat., at 179.

This principle is widely accepted and applied, in the absence of legislation to the contrary. 33 Am. Jur., Liens, Sec. 33; 53 C. J. S., Liens, Sec. 10b. We think that Congress had this cardinal rule in mind when it enacted Sec. 3670, a schedule of priority not being set forth therein. Thus the priority of each statutory lien contested here must depend on the time it attached to the property in question and became choate.

"The United States in claming priority for all its liens relies heavily on two recent cases from this Court, United States v. Security Trust & Savings Bank, supra, and United States v. Gilbert Associates, 345 U. S. 361 [53-1 USTC ¶9291]. We do not think they are inconsistent with our decision in this case."

As an equally conclusive answer to appellant's second claim, based on Sec. 3466, the debt priority statute, appellee, citing the cases and the Yale Law Review Article cited in note 2, supra, invokes the established rule, expressed by way of dicta and applied at least negatively with complete uniformity, that this statute has no application to a valid specific and perfected, a fully choate lien.

We find ourselves in full agreement with both of appellee's contentions. Of its first contention, that its lien is superior to the lien of the United States, it is sufficient to say that: in the New Britain case the Supreme Court, reconciling its opinions dealing with, and clarifying the law as to, the relative priorities of federal and other liens, has finally dissipated and dispersed the mists of doubt and confusion in and by which the question has been shrouded and obscured, and that since, upon the agreed facts the lien of appellee is a perfected and choate lien, prior in time to the lien of the United States, it is superior in law to the claim of the United States qua lien.

[Government's Second Argument]

It is also clear that appellee's second contention, that Section 3466, the debt priority statute, may not, under the agreed facts, be availed of by the United States , is equally well taken. This statute applies only as against unsecured debts, that is debts not secured by a specific and perfected lien. It has never been, we think it will never be, applied as it is sought to be applied here, to accord payment to a debt due the United States in preference to a claim secured by a lien which is prior in time and superior in law to the lien of the United States securing the debt for which preferential payment is sought.

The article in the Yale Law Journal, referred to above, was written before the Supreme Court had decided the cases set out in Note 2. In it the writer clearly and correctly thus set down the then state of the law:

"In the early leading case of Thelusson v. Smith, the Court stated as dictum that 'the United States are to be first satisfied; but then, it must be out of the debtor's estate' ⁴ and added that property 'divested out of the debtor . . . cannot be made liable to the United States.'