Washington

---

 

[64-2 USTC ¶9761]True's Oil Company, a Washington corporation, Plaintiff v. United States of America , et al., Defendants

U. S. District Court, East. Dist. Wash. , No. Div., Civil Action No. 2362, 9/10/64

[1954 Code Secs. 6321-6323]

Lien for taxes: Priority of creditors: Bulk sale proceeds: State law.--Tax liens of the United States, which were filed after the filing of a Bulk Sales Affidavit by the delinquent taxpayer-vendor, attached to and became a lien upon the remaining balance of the bulk sale proceeds after taxing agencies entitled to first priority payment from the proceeds of the bulk sale under state law and creditors next entitled to payment from the bulk sale proceeds under state law, received their share of the sale proceeds.

Keith, Winston & Repsold, 514 Spokane & Eastern Bldg., Spokane , Wash. , for Plaintiff. Frank R. Freeman, United States Attorney, 334 Federal Bldg., Spokane, Wash. Rob ert A. Southwell, 415 Spokane & Eastern Bldg., Spokane, Wash., R. G. McBroom, 1231 Old National Bank Bldg., Spokane, Wash., for defendants.

Findings of Fact and Conclusions of Law

POWELL, District Judge:

The above action came on for trial before the undersigned Judge sitting without a jury on June 1, 1964 . Plaintiff was represented by Leo J. Driscoll of Keith, Winston & Repsold, and Defendants, United States of America , was represented by Carroll D. Gray, Assistant United States Attorney. Defendant, James L. Kennedy, who had been adjudged to be in default, was present in the capacity of a witness. Pursuant to prior stipulation and order, Defendant, Lee E. Tracy, was not present but remained subject to the order of this Court. The Agreed Pretrial Order and the facts admitted therein were considered, testimony was introduced on behalf of the Plaintiff and on behalf of Defendant, United States of America, and thereafter trial was continued until June 25, 1964. Trial was then resumed and completed, both parties having rested, and the matter having been submitted, and the Court having announced its oral decision, and being fully advised in the premises, now makes and enters the followind:

Findings of Fact

I. True's Oil Company is a Washington corporation, maintaining offices in Spokane County , Washington , and has performed all conditions precedent to the commencement of this action. James L. Kennedy and Lee E. Tracy are residents of Spokane County , Washington .

II. Within the period of the governing statutes of limitations and on and prior to December 14, 1962, Defendant, James L. Kennedy, became indebted and was indebted to Plaintiff, True's Oil Company, in the amount of $2,019.08 on account of commodities, goods, wares and merchandise furnished by Plaintiff to Defendant Kennedy for use and sale at an automotive station operated by Defendant Kennedy at North 1918 Division Street, Spokane, Washington.

III. On or about December 14, 1962 , Defendant Kennedy effected a sale and transfer in bulk within the contemplation and provisions of R. C. W. 63.08 by selling to Defendant Tracy a substantial portion of the stock of goods, wares, merchandise, fixtures and equipment located at the aforesaid service station, and Defendant Tracy thereupon took possession of the same. The agreed purchase price was to be the recognized value of the said fixtuers and equipment, plus sixty per cent (60%) of the recognized retail sales price of the inventory (goods, wares and merchandise). The said purchase price was then calculated to be $2,971.44, which sum was thereafter discovered to be erroneous in that it included one hundred per cent (100%) rather than sixty per cent (60%) of the retail sales price of the inventory. Said purchase price should have been calculated to be $2,649.77. At the time of said sale and transfer the Defendant Kennedy provided and furnished a Bulk Sales Affidavit to Defendant Tracy, a true copy of which was filed on December 14, 1962 , as Document No. 905371B with the Spokane County Auditor.

IV. On December 14, 1962 , pursuant to agreement between True's Oil Company, Tracy and Kennedy, Tracy purchased said Cashier's Check No. 10519940, drawn by the North Spokane Branch of the Seattle-First National Bank, payable to True's Oil Company and James L. Kennedy, in the amount of $2,471.44. Tracy then delivered said check to True's Oil Company, upon agreement of True's Oil Company, Tracy and Kennedy that True's Oil Company would utilize and disburse the proceeds thereof in accordance with and as required by the Washington State Bulk Sales Law.

V. As of December 14, 1962, separate and apart from any claims of the United States, the following amounts were and are now owing to the following creditors of James L. Kennedy d/b/a Kennedy's Whitehouse, North 1918 Division Street, Spokane, Washington:

Personal Property Taxes, 

Spokane

County ................................          $ 102.50

City of 

Spokane

, garbage & refuse

services ..............................              8.60

Wash. Water Power Co. utilities to

12/14/62
 ..............................            270.36

U. S. Rubber Co., Merchandise .........             81.63

True's Oil Company, Merchandise .......          2,019.08

TOTAL .................................         $2,482.17

 

VI. On or about February 13 and 14, 1963, the United States duly served Notices of Levy, upon True's Oil Company and Defendant Tracy, advising that the United States claimed a tax lien against all property or rights to property belonging to Defendant Kennedy, pursuant to assessments of February 4, 1963 and February 11, 1963, in the respective amounts of $1,360.95 and $1,690.99, totalling $3,051.94. Said taxes, plus interest as provided by law, are now due and owing by Defendant Kennedy to the United States .

VII. At the time of service of said tax levies the said cashier's check had not been cashed or presented for payment, but was being held by Plaintiff for the benefit of the bulk sale creditors, pursuant to the aforesaid agreement between True's Oil Company, Tracy and Kennedy. The revenue officer serving said tax levies advised True's Oil Company that the United States claimed proceeds of the said check as represented by the said check.

VIII. In addition to the said cashier's check, Defendant Tracy was and is obliged to pay the remaining balance of the purchase price of $178.33, and is ready and willing to do so, but he is uncertain whether said funds should be paid to the United States or to the other bulk sales creditors in view of the service of said tax levies.

IX. The United States duly assessed the following taxes, penalties and interest against the Defendant Kennedy:

                                                               Date Notice of

                            Taxable         Assessment               Tax Lien

Nature of Tax                Period               Date                  Filed         Unpaid Balance

Withholding ......          9/30/62             2/4/63                2/13/63              $1,360.95

Withholding ......         12/31/62            2/11/63                2/13/63               1,690.99

FUTA .............             1962            2/15/63                                        194.61

                                                                                           $3,246.55

 

X. Said taxes were duly assessed by a delegate of the Secretary of the Treasury. Notice of said assessments, demand for payment and filings of notices of liens therefor with the Auditor of Spokane County, Washington, were duly made.

XI. Under the laws of the United States of America, Defendant Kennedy was obliged to pay to the United States the following amounts for income taxes (withholding), Social Security Taxes (FICA) and Unemployment Taxes (FUTA) on account of wages earned by employees who worked for Kennedy, during the periods indicated, at the service station operated by him at North 1918 Division Street.

Third Quarter, 1962:

Withholding ..............          $ 665.47

FICA .....................            342.37

Sub-Total ................         $1,007.84

Less Payment .............            206.10

Balance ..................          $ 801.74

Fourth Quarter, 1962:

Withholding ..............           $524.30

FICA .....................            246.37

FUTA .....................             97.30

                                     $867.97

 

Kennedy failed to pay such monies to the United States .

On account of his failure to timely make payment of the foregoing amounts, the United States has additionally assessed and claims the following amounts for penalty and interest:

Third Quarter, 1962:

Penalty ..................         $120.15

Interest to 
2/4/63
 .......           12.81

Fourth Quarter, 1962:

Penalty ..................         $ 14.04

Interest to 
2/11/63
 ......            1.56

                                   $148.56

 

XII. The parties stipulated and agreed that in the event the Court rules in Plaintiff's favor, an order may be entered directing Defendant Tracy to pay the sum of $178.33 (being the remaining unpaid balance of the purchase price due on the bulk sales transaction between Defendants Tracy and Kennedy referred to above) as directed by the Court, i.e., either to the Plaintiff for distribution to the bulk sales creditors in the same manner as distribution of the cashier's check referred to above or to the Treasurer of the United States or part to both, depending on the Court's ruling as to the parties entitled thereto; further that payment by Defendant Tracy, pursuant to the order of the Court, shall constitute compliance on Defendant Tracy's part with respect to any duty owing by him as to such specified monies on account of the conflicting claims thereto by the parties to this action. Defendant Tracy remains subject to the order of the Court all as provided in the prior stipulation and order.

Having made and entered the foregoing Findings, the Court Does hereby make the following:

Conclusions of Law

1. The Bulk Sales Law of the State of Washington requires the purchaser of goods, wares and merchandies received pursuant to a transfer and sale in bulk to pay the proceeds of such sale in the following manner:

A. First, as a first priority payment, to such taxing agencies as are accorded priority by such act.

B. Next, to the limited class of creditors mentioned in and accorded protection by the act.

C. Last and finally, any sums remaining after payment of A and B above is to be paid to the Bulk Sales Vendor.

2. The United States of America (Internal Revenue Service) is not one of the taxing agencies accorded first priority under the Bulk Sales Law of the State of Washington , nor, under the circumstances in this case, was it one of the specific limited classes of creditors entitled to listing or protection under such Bulk Sales Law.

3. The listing of the United States of America for any purpose in the Bulk Sales Affidavit delivered by Vendor Kennedy to purchaser Tracy was in fact erroneous and result of mistake and a nullity under the law, and did not of itself create any right or interest of the United States in such proceeds of sale as against the creditors, nor did it oblige the creditors and taxing agencies protected by such act to share or pro-rate the proceeds of sale with the United States.

4. At no time subsequent to the Bulk Sale did the Defendant, James L. Kennedy, have any interest or property right in the proceeds of sale which were subject to or attached by the subsequently assessed tax lien claim of the United States, except to the extent that the proceeds of sale actually exceeded the aggregate of the protected taxes and creditor's claims referred to in Paragraph 1 above of these Conclusions of Law.

5. Under the agreement of the December 14, 1962, between Kennedy, Tracy and True's Oil Company, the said Plaintiff, True's Oil Company, assumed the obligation of a trustee as to the cashier's check delivered to it, and was and is required to distribute it to the taxing agencies and creditors in the same manner as a bulk sales purchaser is directed by the Bulk Sales Law, and Defendant Kennedy was only a nominal joint party payee of the cashier's check, his name appearing only as a formality.

6. A. The taxing agencies entitled to first priority payment from the proceeds of the bulk sale and the amounts owing to them are as follows:

Spokane
 
County

 (Personal Property

Taxes) ...............................         $102.50

State of 

Washington

 (Paid from

other sources) .......................               0

 

B. The creditors next entitled to payment from the proceeds of such sale and the amounts ascertained to be owing to each are as follows:

Wash.

 Water Power (Services:

Utilities to 
12/14/62
) ................         $ 270.36

U. S. Rubber Company (Merchandise) ....            81.63

City f 

Spokane

 (Serv: Garbage

and refuse) ...........................             8.60

True's Oil Company (Merchandise) ......         2,019.08

 

C. The lien of the United States attached to and became a lien upon the remaining balance of the bulk sales proceeds in the amount of $167.60.

7. Defendant Kennedy shall be required to endorse the cashier's check releasing all interest thereto, but should he fail or refuse to do so upon demand and request by the Plaintiff or its representatives, the Plaintiff may then present such check to Mr. R. V. Tortorelli, who shall serve as a special official of this Court to make such endorsement on behalf of James L. Kennedy, and with the same effect as if done by James L. Kennedy.

 

 

[56-1 USTC ¶9138]Don Fleming, Respondent, v. Bruce Brownfield et al., Defendants, United States of America , Appellant

In the Supreme Court of the State of Washington, 290 P2d 993, November 17, 1955

Appeal from a judgment of the superior court for Walla Walla County, No. 40576.

[1939 Code Secs. 3670-3672--similar to 1954 Code Secs. 6321-6323]

Priority of liens: Mechanic's and materialman's lien v. federal tax lien.--The plaintiff filed his mechanic's and materialman's lien pursuant to state statute against the defendant's real property on September 18, 1953 . The Government filed its lien for unpaid withholding--FICA taxes against the defendant on October 6, 1953 . The Court held that plaintiff's lien was not specific and perfected under Federal law at the time the Federal tax lien attached to the property and, hence, was inferior to it.

William B. Bantz and William M. Tugman, for appellant. Ringhoffer & Ringhoffer, for respondent.

WEAVER, Justice:

This case presents a problem of priority between a mechanic's and materialman's lien and a tax lien of the United States of America . The Federal lien is based upon unpaid taxes due under the Federal insurance contributions act (26 U. S. C. 1952 ed. §§ 1400-1432) and unremitted withholding taxes, 26 U. S. C. 1952 ed. §3661.

[Facts]

Between June 22, 1953 , and July 29, 1953 , plaintiff furnished labor and materials for the construction of a house at the request of defendant Bruce Brownfield.

September 18, 1953 , plaintiff filed in the office of the county auditor a claim of lien in the sum of $2,184 against the real property. This lien was filed pursuant to RCW 60.04.060.

October 6, 1953 , the United States filed in the office of the county auditor "Notice of Federal Tax Lien Under Internal Revenue Laws," No. 26,587, for "Withholding--FICA Taxes" in the sum of $1,136.01.

November 27, 1953 , the government filed another lien, No. 28,016, for $313.70, covering an additional tax period.

Plaintiff commenced this action to foreclose his lien.

The government appeals from the trial court's decree ordering the real property sold and the proceeds, after payment of the cost of sale, applied first to the satisfaction of plaintiff's lien for labor and materials, and then to the satisfaction of the liens of the United States.

[Appellant's Theories]

Appellant urges the superiority of its liens upon two theories: one, that it is entitled to priority under the provisions of the internal revenue code (26 U. S. C. 1952 ed. §§ 3670-3672); and two, that it is entitled to priority by reason of the statutory provision which governs debts owed to the United States by an insolvent. (31 U. S. C. 1952 ed. §191.)

Since appellant's liens filed in the county auditor's office state that they are made "pursuant to the provisions of Sections 3670, 3671, and 3672 of the Internal Revenue Code . . .," we direct our attention to a consideration of these statutes.

26 U. S. C. 1952 ed. §3670. Property subject to lien:

"If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount . . . 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."

26 U. S. C. 1952 ed. §3671. Period of lien:

"Unless another date is specificallv fixed by law, the lien shall arise at the time the assessment list was received by the collector and shall continue until the liability for such amount is satisfied or becomes unenforceable by reason of lapse of time."

26 U. S. C. 1952 ed. §3672:

"Such lien shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed by the collector."

Since we find it necessary to refer to 31 U. S. C. 1952 ed. §191 in this opinion, we set forth the pertinent portion of it.

"Whenever any person indebted to the United States is insolvent . . . the debts due to the United States shall be first satisfied."

The lien provided by §3670, supra, covers only tax debts; it arises regardless of the solvency of the taxpayer; and it attaches at the time the assessment list is received by the collector.

Although §3670 creates a lien in favor of the government, it does not confer priority on this lien. As related to other liens, its priority is determined by the principle that:

[Cases Cited]

`The first in time is the first in right.'" United States v. New Britain , 347 U. S. 81, 98 L. Ed. 520, 74 S. Ct. 367 (1954) [54-1 USTC ¶9191].

Copies of appellant's liens were admitted in evidence by stipulation of counsel that they were

". . . copies of the liens filed [in the office of the county auditor] by the United States Government on the dates shown in the lower left hand corner of each one of them, one being filed November 27, 1953 and the other being filed October 6, 1953."

We find no evidence in the record before us to support appellant's claim that the assessment upon which its lien No. 26,587 is based was received by the collector on September 3, 1953 . Hence, appellant's lien is not entitled to priority by reason of §3671, supra. However, since it was necessary that the collector receive the assessment list from the commissioner before it could be filed in the office of the county auditor, we will accept the date of filing as the date the list was received. See 26 U. S. C. 1952 ed. §§ 3640-3641.

Patently, respondent is not a "mortgagee, pledgee, purchaser, or judgment creditor," as enumerated in §3672, supra. Since his lien was filed in the county auditor's office eighteen days before appellant's lien was filed, its priority depends upon the principle of "first in time," provided it meets the criteria of those liens entitled to priority.

Our characterization of the lien for labor and materials, as specific and perfected at a given time, is controlling in all matters in which the laws of this state are paramount. However, a different rule applies when a Federal statute is involved. Although the supreme court of the United States was speaking of the priority of a lien claimed by reason of the statutory provision which governs debts owed to the government by an insolvent (31 U. S. C. 1952 ed. §191), it said:

"It is a matter of federal law as to whether a lien created by state statute is sufficiently specific and perfected to raise questions as to the applicability of the priority given the claims of the United States by an act of Congress. If the priority of the United States is ever to be displaced by a local statutory lien, federal courts must be free to examine the lien's actual legal effect upon the parties. A state court's characterization of a lien as specific and perfected, however conclusive as a matter of state law, cannot operate by itself to impair or supersede a long-standing Congressional declaration of priority." United States v. Waddill, Holland & Flinn, 323 U. S. 353, 89 L. Ed. 294, 65 S. Ct. 304 (1945) [45-1 USTC ¶9126].

Prior to 1950, numerous Federal lower courts had denied the supremacy of Federal tax liens under §3670 over antedating rival liens for county taxes, contingent right of set off, equitable lien or right of set off, garnishments, local tax liens, landlord's lien, attachment liens, wage assignments, and the like. In at least three cases, mechanics' and materialmen's liens which had been recorded pursuant to state statutes were held to have priority over antedating Federal liens under §3670, supra. In re Taylorcraft Aviation Corp., 168 Fed. (2d) 808 (C. C. A. 6th; 1948) [48-1 USTC ¶9288]; In re Caswell Constr. Co. , 13 Fed. (2d) 667 (N. D. N. Y.; 1926) [1 USTC ¶189]; The River Queen, 8 Fed. (2d) 426 (E. D. Va.; 1925)

In the Taylorcraft case, supra, the circuit court recognized that the security had been enhanced by labor and material for which the lien was claimed; and that it would be in the nature of unjust enrichment to permit its defeat by a lien subsequent in time.

In United States v. Security Trust & Sav. Bank, 340 U. S. 47, 95 L. Ed. 53, 71 S. Ct. 111 (1950) [50-2 USTC ¶9492], the creditor's attachment lien and subsequent judgment straddled the date of the Federal tax lien. Under the California statute, the creditor's attachment gave rise to a lien on the realty, effective when recorded. The California court had previously held that a subsequent judgment lien merged with the attachment lien and related back to the time when the attachment lien was recorded.

No question of insolvency being involved, the lien asserted by the government stemmed from 26 U. S. C. 1946 ed. §§ 3670-3672, quoted supra.

The court relied upon a decision of the supreme court of California , wherein it is stated:

"The attaching creditor obtains only a potential right or a contingent lien." Puissegur v. Yarbrough 29 Cal. (2d) 409, 412, 175 P. (2d) 830 (1946).

The United States supreme court said:

"Examination of the California statute shows that the above is an apt description. The attachment lien gives the attachment creditor no right to proceed against the property unless he gets a judgment within three years or within such extension as the statute provides. Numerous contingencies might arise that would prevent the attachment lien from ever becoming perfected by a judgment awarded and recorded. Thus the attachment lien is contingent or inchoate--merely a lis pendens notice that a right to perfect a lien exists.

"Nor can the doctrine of relation back--which by process of judicial reasoning merges the attachment lien in the judgment and relates the judgment lien back to the date of attachment--operate to destroy the realities of the situation. When the tax liens of the United States were recorded, Morrison did not have a judgment lien. He had a mere 'caveat of a more perfect lien to come.' New York v. Maclay, 288 U. S. 290, 294."

After quoting the statutes we are considering, the court continued:

"In cases involving a kindred matter, i. e., the federal priority under R. S. §3466 [31 U. S. C. 1952 ed. §191], it has never been held sufficient to defeat the federal priority merely to show a lien effective to protect the lienor against others than the Government, but contingent upon taking subsequent steps for enforcing it. Illinois v. Campbell, supra, 374 [329 U. S. 362, 97 L. Ed. 1076, 73 S. Ct. 705 (1946)]. If the purpose of the federal tax lien statute to insure prompt and certain collection of taxes due the United States from tax delinquents is to be fulfilled, a similar rule must prevail here. Accordingly, we hold that the tax liens of the United States are superior to the inchoate attachment lien of Morrison."

[Perfected Liens]

Thus, the distinction between "specific and perfected" liens and "inchoate" liens, which has long been used in the interpretation and application of 31 U. S. C. 1952 ed. §191 (concerning priority of government liens against assets of insolvents), was engrafted upon the interpretation of 26 U. S. C. 1952 ed. §§ 3670-3672, although these statutes do not subordinate or even mention inchoate lien.

The Security Trust case, supra, immediately became the subject of distingushment. Many inferior courts began to hold that the various liens held to be prior to Federal tax liens before the decision in the Security Trust case, were, in fact, perfected and choate under state statutes, and hence, still had priority over the tax lien of the government. This is illustrated by Petition of Gilbert Associates, 97 N. H. 411, 90 A. (2d) 499 (1952) [52-2 USTC ¶9473]; United States v. Liverpool & London & Globe Ins. Co., 209 Fed. (2d) 684 (C. A. 5th; 1953) [54-1 USTC ¶9132] ( Texas garnishment lien held prior to Federal tax lien); and United States v. Acri, 109 Fed. Supp. 943 (N. D. Ohio 1952) [53-1 USTC ¶9104], affirmed per curiam 209 Fed. (2d) 258 (C. A. 6th; 1953) [54-1 USTC ¶9225] ( Ohio attachment lien held prior to Federal tax lien).

In United States v. Gilbert Associates, 345 U. S. 361, 97 L. Ed. 1071, 73 S. Ct. 701 (1953) [53-1 USTC ¶9291], the court reversed the supreme court of New Hampshire. Although the New Hampshire court had designated the town's taxes "in the nature of a judgment" under the laws of the state, the supreme court rejected this designation when considered in the light of the Federal question involved. It denied that the town's taxes were entitled to priority pursuant to 26 U. S. C. 1946 ed. §3672.

Since the debtor was insolvent, the court based the priority of the Federal tax lien upon 31 U. S. C. 1946 ed. §191, saying:

"Where the lien of the Town and that of the Federal Government are both general, and the taxpayer is insolvent, §3466 [31 U. S. C. 1946 ed. §191] clearly awards priority to the United States ."

In United States v. New Britain , 347 U. S. 81, 98 L. Ed. 520, 74 S. Ct. 367 (1954) [54-1 USTC ¶9191], the supreme court stated that

". . . certain of the City's tax and water-rent liens apparently attached to the specific property and became choate prior to the attachment of the federal tax liens."

This is apparently the first time that the supreme court has found or recognized the existence of specific and perfected liens.

The New Britain case, supra, however, does not represent a reversal of reasoning nor a shift in the rationale of United States v. Security Trust & Sav. Bank, supra.

Although the supreme court of Ohio has designated the state attachment process as "an execution in advance" (see Rempe & Son v. Ravens, 68 Ohio 113, 67 N. E. 282 (1903)), the United States supreme court reversed the Acri case, supra, upon the authority of United States v. Security Trust & Sav. Bank, supra, holding that a tax lien of the United States is entitled to priority over an Ohio attachment lien when the Federal tax lien was recorded subsequent to the date of the attachment lien, but prior to the date the attaching creditor obtained judgment. United States v. Acri, 348 U. S. 211, 99 L. Ed. 193, 75 S. Ct. 239 (1955) [55-1 USTC ¶9138].

United States v. Liverpool & London & Globe Ins. Co., supra, shared the same fate. The United States supreme court reversed the circuit court and held that Federal tax liens are entitled to priority over a Texas garnishment lien when the tax liens are recorded subsequent to the date of the garnishment lien, but prior to the date the garnishor obtained judgment. United States v. Liverpool & London & Globe Ins. Co., 348 U. S. 215, 99 L. Ed. 195, 75 S. Ct. 247 (1955) [55-1 USTC ¶9136].

United States v. Scovil, 348 U. S. 218, 99 L. Ed. 197, 75 S. Ct. 244 (1955) [55-1 USTC ¶9137]. Although the debtor was insolvent, the supreme court found it unnecessary to pass upon the effect of 31 U. S. C. 1952 ed. §191. Under 26 U. S. C. 1952 ed. §§ 3670-3672, it held that a landlord's lien under the statutes of South Carolina "was only a caveat of a more perfect lien to come, as we have so often held in other cases."

Our statute requires that one claiming a lien for labor and materials commence an action to enforce the lien within eight calendar months after the notice of lien is filed. RCW 60.04.100. In such an action, the owner of the property may, and often does, dispute the amount of the lien. In the instant case, the recorded lien is for $2,184. After trial, the lien was reduced to $2,124.

[Conclusion]

In so far as it is necessary in this case to determine the priority of our statutory mechanic's and materialman's lien (authorized by RCW 60.04.060) and a subsequent attaching lien of the Federal government (under 26 U. S. C. 1952 ed. §§ 3670-3672 and 31 U. S. C. 1952 ed. §191), we are constrained to hold, in view of the authorities we have discussed, that respondent's lien was not specific and perfected under Federal law at the time Federal tax lien No. 26,587 attached to the property, and hence, is inferior to it.

On trial of this action, the government conceded that respondent's lien was superior to Federal tax lien No. 28,016. A party, including the United States , cannot urge error on a ruling or judgment made with express or implied consent. United States v. Star Constr. Co., 186 Fed. (2d) 666 (C. A. 10th; 1951).

In view of the negotiations between the internal revenue agent and the debtor concerning his failure to pay his taxes, we believe the evidence is sufficient to warrant a finding that demand for payment of taxes was made.

Our attention is directed to several decisions of this court, In re Carroll Constr. Co, 41 Wn. (2d) 317, 249 P. (2d) 234 (1952) [53-1 USTC ¶9176]; Spokane Merchants' Ass'n v. State, 15 Wn. (2d) 186, 130 P. (2d) 373 (1942) [42-2 USTC ¶9827]; Palace Fish & Oyster Co. v. Bean, 32 Wn. (2d) 56, 200 P. (2d) 753 (1948) [49-2 USTC ¶9366]; and Ernst v. Guarantee Millwork, 200 Wash. 195, 93 P. (2d) 404 (1939).

In the Carroll case, we held that a lien for taxes on personal property was specific and perfected when the director of the state's employment security department caused notice of lien to be filed with the county auditor and took priority over a tax lien of the Federal government which attached subsequently. The United States supreme court granted a writ of certiorari and vacated the judgment. The case was remanded "for consideration in the light of United States v. Gilbert Associates, 345 U. S. 361 [53-1 USTC ¶9291]." United States v. Carroll Constr. Co., 346 U. S. 802, 98 L. Ed. 333, 74 S. Ct. 22 (1953) [53-2 USTC ¶9611].

With one exception, the other cases involve priority between various state statutory liens for taxes and the Federal tax lien. The instant case involves only the priority of the mechanic's and materialman's lien under RCW 60.04.060. Our decision is limited thereto.

In the Ernst case, supra, an individual was held to have a specific lien for labor under Rem. Rev. Stat., §§ 1149 and 1153 (cf. RCW 60.32.010; RCW 60.32.050). This court held that she was entitled to priority over the government's lien for taxes under U. S. Rev. Stat. §3466 (31 U. S. C. 1952 ed. §191). In view of the recent decisions of the United States supreme court which we have analyzed, the Ernst case may no longer be authority for this principle.

That portion of the decree granting priority to the lien of respondent over lien No. 26,587 of the United States is reversed. Upon foreclosure of the liens and sale of the property, the proceeds therefrom shall be applied first, to costs of selling said property; second, to payment of that portion of appellant's judgment against the debtor represented by lien No. 26,587; third, to payment of respondent's judgment; and fourth, to payment of that portion of appellant's judgment against the debtor represented by lien No. 28,016.

It is so ordered.

HAMLEY, Chief Justice, SCHWELLENBACH, DONWORTH, and OTT, Justices, concur.