Vermont

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[81-1 USTC ¶9116] United States of America v. Richard J. Levasseur and Hazel L. Levasseur, d/b/a Trailright Manufacturing & Welding Company; Frank Stiles; Guy Wilson Agency, Inc., and Charles Adams

U. S. District Court, Dist. Vt., Civil Action File No. 77-85, 9/18/80

[Code Sec. 6323]

Tax liens: Priority: Competing interests: State law: Requirements.--The District Court determined that under both Vermont state law and the federal statutory law governing tax liens, the federal tax liens imposed on the real property of the taxpayer took precedence over the interest claimed by a third party judgment creditor. This was so because the lien claimed by the third party was derived by levy of execution on a default judgment against the taxpayer and contained no description of the property to be levied upon. Thus, because the federal law requires that a lien must describe the property, the court held that there was no valid levy of execution upon the property.

United States Attorney, Jerome J. Niedermeier, Assistant United States Attorney, Rutland , Vt. , John P. McAllister, David J. Curtin, Department of Justice, Washington , D. C. 20530, for plaintiff. Louis A. Fucci, Fucci, Fucci & Fucci, P. O. Box 355, White River Jct., Vt. 05001, for Richard J. and Hazel L. Levasseur, David W. Reeves, Thomas P. Wright, 4 The Green, Woodstock, Vt. 05091, for Hazel Levasseur, John A. Burgess, 1256 Market St., San Francisco, Calif., 94102, for Frank Stiles, Lawrence Niles, Niles, Johnson & Gibbs, 61 Central St., Woodstock, Vt. 05091, for Guy Wilson.

Supplemental Memorandum of Decision

HOLDEN, Chief Judge:

This case came on for hearing on the plaintiff's motion for partial summary judgment to dispose of the issues remaining for adjudication following the court's memorandum of decision filed March 17, 1980 . The mother requests the court to adjudge that the federal "tax liens attach to the interest of the taxpayer Hazel Levasseur in the subject real estate and are entitled to first priority. . . ."

The plaintiff appeared by John P. McAllister, attorney for the Tax Division, Department of Justice. The defendants Hazel L. Levasseur and her successor in interest, Charles Adams, appeared by David W. Reeves. The defendant Guy Wilson Agency, Inc., appeared by Alexander Meiklejohn. The Government's extensive memorandum in support of its motion was not opposed by answering briefs. However, the defendants who appeared were afforded the opportunity to state their positions orally.

The court's prior decision, referred to above, established that the plaintiff's tax assessments made June 26, 1970 , November 20, 1970 , and December 18, 1970 , are valid, enforceable, and secured by federal tax liens properly filed June 2, 1975 under the applicable federal statutes. Two of the tax liens covering the assessments for the fourth quarter 1969 and the first quarter 1970 were erroneously released by the Internal Revenue Service by the filing on June 6, 1977 of a certification of release in the office of the clerk for the two of Royalton , Vermont , where the taxpayer Levasseur's real property is situated. The release was subsequently revoked and the liens were reinstated on June 14, 1978 , pursuant to the provisions of Section 6325(a) and (f)(1)(A) of the Internal Revenue Code of 1954, with notices mailed to the taxpayers at their last known address. Following the court's decision of March 17, 1970 , the defendant Hazel Levasseur conveyed her interest in the subject property to her son, Charles Adams, in trust for her benefit. Adams has since been joined as an additional defendant.

The uncontested facts further appearing in the record presented to the court establish that on September 26, 1975 the defendant Guy Wilson Agency, Inc., filed in the town clerk offices at Bethel and Barnard, Vermont, a writ of attachment on a complaint and summons in an action brought against the defendants Richard and Hazel Levasseur in the Windsor Superior Court. On November 6, 1975 , the Wilson Agency moved for an additional writ of attachment against the Levasseur's property located in Royalton , Vermont , but withdrew the motion on November 21, 1975 . The state action proceeded to judgment against the Levasseurs by default entered December 29, 1975 . Execution on the judgment was returned unsatisfied with a notation in the return that a copy of the writ of execution was filed by the chief deputy sheriff in the town clerk's office at Royalton on March 1, 1976 . There has been no further action on the part of the judgment creditor in the suit of Guy Wilson Agency, Inc. v. Richard J. and Hazel Levasseur.

The question for decision is the priority of the tax liens asserted by the IRS on lands of the taxpayer Hazel L. Levasseur in the Town of Royalton , Vermont . At the hearing on this issue the taxpayer joined in the plaintiff's contention that the tax liens have priority over any interest in the subject premises asserted by the defendant Guy Wilson Agency .

The question of priority between competing interests to a delinquent taxpayer's property concerning a federal tax lien and an interest arising by application of state law is governed by federal law. Aquilino v. United States [60-2 USTC ¶9538], 363 U. S. 509, 513-14 (1960). However, the nature of the interest claimed is a matter of state law. See Morgan v. Commissioner [40-1 USTC ¶9210], 309 U. S. 78, 82 (1940). To achieve ascendency, a state created lien must be "choate" in the sense that the interest is perfected. The requirements of the federal law in this respect are that the lien must specifically set forth: (1) the identity of the lienor, (2) a description of the property sought to be subjected to the lien and (3) the amount of the lien. United States v. City of New Britain [54-1 USTC ¶9191], 347 U. S. 81, 84 (1954).

The lien claimed by the Guy Wilson Agency is that derived by levy of execution on the default judgment against the Levasseurs.

It is provided in 12 V. S. A. §2783:

When the officer holding an execution for collection is directed by the creditor, his agent, or attorney, to levy the same on the real estate of the debtor, he may lodge in the office where by law a deed of such real estate is required to be recorded, a certified copy of the execution, with a certificate thereon, under his hand, stating that he is directed to levy the same on such real estate, designating the same as it would be described in case of the attachment of real estate.

To effect an attachment of real estate, compliance with the provisions of 12 V. S. A. §3291 is required. This statute provides:

When real estate is attached, in addition to serving the party whose estate is attached, the officer shall leave a true and attested copy of the attachment, with a description of the estate so attached, in the office where by law a deed of that estate is required to be recorded.

The execution and officer's return filed on behalf of the Guy Wilson Agency contained no description of the estate of the Levasseurs sought to be levied upon. The unsatisfied writ of execution directed to the sheriff, refers only to the "goods, chattels and lands of said defendants, within your precinct. . . ." The court holds there was no valid levy of execution on the subject property in the Town of Royalton , as required by 12 V. S. A. §§ 2783 and 3291.

Moreover, even if it could be said, contrary to the court's holding, that the description given in the execution was in some way sufficient under the statutes referred to above, the property would not be held to satisfy the execution after the expiration of five months from March 1, 1976 . Such is the force and effect of 12 V. S. A. §2784. ¹

In sum, the court holds that under federal law and the related applicable provisions of the law of Vermont , the federal tax liens imposed on the real property interests of the taxpayer Hazel Levasseur take precedence over the interest claimed by the defendant Guy Wilson Agency, Inc.

The Clerk is directed to enter judgment for the plaintiff. The United States may recover from the defendants Levasseur according to the assessments made by the Internal Revenue Service, exclusive of the assessment made February 6, 1970 , together with its costs and accrued interest. It may proceed to enforce collection under the applicable provisions of the Internal Revenue Code of 1954, consistent with the court's opinion of March 17, 1980 , as supplemented by this decision stated above.

¹ §2784. Estate held five months

The real estate thus designated shall be held to satisfy such execution for the term of five months from the time of lodging the copy thereof, as provided in section 2783 of this title. When encumbered by previous attachments, the lien thus created shall remain, after the removal of such encumbrance, as if the estate had been attached on mesne process by the creditor in such execution.