Wrong Name Page3

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[81-2 USTC ¶9482]Pioneer National Title Insurance Company, a Corporation authorized to transact business in New Jersey , and Frank Banko, Plaintiffs v. United States of America (Internal Revenue Service); Joseph Caruso and Lauralie Caruso, formerly Lauralie Imbergamo, Defendants

U. S. District Court, Dist. N. J., Civil Action No. 80-1343, 5/18/81

[Code Sec. 6323]

Tax liens: Validity of lien: Filing of notice: Name change.--A federal tax lien was valid against a purchaser of real property where the IRS fully complied with the statutory requirements governing the filing of the notice of lien by filing and indexing the notice under the taxpayer-seller's married name but not also under the name she used at the time she acquired the property. Code Sec. 6323 clearly provides that a notice of tax lien properly filed under the name of the taxpayer is sufficient to validate the lien against all property owned by the taxpayer, under whatever name acquired. Further, because the deed received by the purchaser and the title insurer identified the taxpayer under both names, the purchaser and title insurer could easily have discovered the lien and thus had constructive notice of the lien's existence.

Sanford E. Chernin, Chernin & Freeman, 1075 Easton Avenue, Somerset, New Jersey 08873, for plaintiffs. Steven R. Toscher, Department of Justice, Washington , D. C. 20530 for defendants. Dennis J. Avigliano, Somerset Sussex Legal Services, 36 Grove Street , Somerville , New Jersey 08876 , for Lauralie Caruso.

Opinion

DEBEVOISE, District Judge:

This action is brought pursuant to 28 U. S. C. §2409a to quiet title to real property in which the United States claims a federal tax lien or, in the alternative, to recover against the sellers of the property for misrepresentation as to the existence of the tax lien. Plaintiffs are Frank Banko, purchaser of the real property in question, and Pioneer National Title Insurance Company, his title insurer. Named as defendant in the quiet title action is the United States of America and as defendants in the misrepresentation action, Lauralie and Joseph Caruso. Jurisdiction to consider the quiet title claim lies under 28 U. S. C. §1346; pendent jurisdiction is presumably invoked with respect to plaintiffs' related state law claims against the Carusos.

The matter is now before the court on plaintiffs' motion and the United States ' cross-motion for summary judgment on the quiet title claim. Plaintiffs also move for summary judgment on their state claims.

In order to prevail on a motion for summary judgment, the moving party must make an affirmative showing based upon the pleadings, depositions, answers to interrogatories, admissions on file, affidavits and uncontested exhibits that "there is no genuine issue of material fact and that he is entitled to judgment as a matter of law." Rule 56, Federal Rules of Civil Procedure. The opposing party "may not rest upon the mere allegations or denials of his pleadings, but his response, by affidavits or as otherwise provided in [Rule 56] must set forth specific facts showing that there is a genuine issue for trial." DeLong Corp. v. Raymond International, Inc., 622 F. 2d 1135 (3d Cir. 1980). Once the party opposing the motion has met this burden, all reasonable inferences of fact must be drawn in his favor. Adickes v. Kress & Co., 398 U. S. 144, 147 (1970); Small v. Seldow's Stationery, 617 F. 2d 992, 994 (3d Cir. 1980).

I. The Action to Quiet Title. The facts pertinent to the quiet title action have been placed before the court in the form of uncontested exhibits and the uncontested affidavit of an official of the Internal Revenue Service. None of the material facts being in dispute, the matter is ripe for summary judgment.

A. Facts: On June 14, 1972 , Lauralie Imbergamo, a single woman, purchased from one Wilson C. Shurts a parcel of land located at 51 Readington Road , Somerville , New Jersey and somewhat less than an acre in size. On August 4, 1973 , Lauralie Imbergamo married Joseph Caruso and assumed his surname. On September 11, 1978 , some five years later, the Carusos conveyed the land to Frank Banko, plaintiff in the present action. The bargain and sale deed identified the sellers as "Lauralie I. Caruso, formerly Lauralie Imbergamo . . . and Joseph Caruso, her husband." When the Carusos and Frank Banko closed on the land on September 20, 1978, Lauralie Caruso signed an "Affidavit of Title" in which she stated that "[s]aid premises are now free and clear of all taxes, incumbrances or liens by mortgage, decree, judgment, statute or otherwise, of every nature and description. . . ."

As it turned out, the premises were not free and clear of all encumbrances. In 1977, the Internal Revenue Service had made assessments against Lauralie and Joseph Caruso for unpaid federal income taxes for the years 1973, 1974 and 1975, together with penalties and interest. When the Carusos failed to pay the amount due on demand, a tax lien arose by statute, in favor of the United States , "upon all their property and rights to property. . . ." See 26 U. S. C. §§ 6321, 6322. To perfect the lien against the taxpayers' property in Somerset County, the Internal Revenue Service filed a "Notice of Federal Tax Lien" in the Somerset County Courthouse, Somerville, New Jersey, covering "all property and rights to property" belonging to Joseph and Lauralie Caruso. Under New Jersey law, the tax lien was required to be indexed under the taxpayers' name, here "Caruso". See N. J. S. A. 46:16-13. The Carusos have yet to pay the federal taxes which they owe and, as of January 16, 1981, the amount due the Internal Revenue Service was $7,521.88. At the time the Carusos' property was purchased by Frank Banko, therefore, it was encumbered to a significant degree, and a cloud now rests upon the title.

Frank Banko's title to the property located at 51 Readington Road is insured by Pioneer National Title Insurance Company, a co-plaintiff in this action. Pioneer alleges in the complaint that it conducted a title search of the property prior to the September 20, 1978 closing. It failed in that search, however, to discover the federal tax lien recorded under the name "Caruso".

B. The Law: It is plaintiffs' contention that the tax lien which attached to the premises located at 51 Readington Road upon the Carusos' failure to pay their back taxes is not valid against the current owner, Frank Banko, because the Internal Revenue Service did not properly file its "Notice of Tax Lien" within the meaning of applicable federal statutes. Specifically, plaintiffs argue that the notice should have been filed under the name "Imbergamo" rather than "Caruso" in order to permit its discovery in a reasonably diligent title search. The United States argues that the lien was properly filed and is enforceable against the current owner.

Under the Internal Revenue Code of 1954, 26 U. S. C. §1 et seq., a lien upon all property owned by an individual automatically comes into existence if the individual neglects or refuses after demand to pay any tax for which he is liable. 26 U. S. C. §6321. The lien arises at the time of assessment and continues "until the liability for the amount so assessed . . . is satisfied or becomes unenforceable by reason of lapse of time." 26 U. S. C. §6322. Despite the fact that a lien is created at the time an assessment is made, however, the Code provides that the lien shall not be valid against a purchaser of the encumbered property until a proper notice is filed. 26 U. S. C. §6323(a). The requirements for proper notice are contained in Section 6323(f) of the Code. The question presented in this case is whether the notice filed by the Internal Revenue Service against the Carusos' property met these requirements so as to become enforceable against a subsequent purchaser of the property.

Section 6323(f)(1) of the Internal Revenue Code provides that, in the case of real property, notice must be filed "in one office within the State (or the county, or other governmental subdivision), as designated by the laws of such State, in which the property subject to the lien is situated." New Jersey law designates as the proper location for filing a tax lien "the office of the county recording officer," here the Somerset County Clerk's Office. N. J. S. A. 46:16-13. There is no dispute that the notice of lien on the Carusos' property was filed in the proper location.

Section 6323(f)(3) of the Code provides that "the form and content of the notice . . . shall be prescribed by the Secretary [of the Treasury]" and that "[s]uch notice shall be valid notwithstanding any other provision of law regarding the form or content of a notice of lien." In accordance with this authority, the Secretary has published regulations which require simply that "[t]he notice . . . shall be filed on Form 668, 'Notice of Federal Tax Lien under Internal Revenue Laws'." It is undisputed as well that the notice of lien on the Carusos' property was filed on Form 668, and pursuant to that form listed the amounts owing under the taxpayers' names.

Section 6323(f)(4) of the Code, as amended on November 6, 1978 , provides for indexing of the tax lien, under certain circumstances, in the local registry of deeds. If state law provides that a deed is not valid against a bona fide purchaser unless it has been "recorded in a public index at the place of filing in such a manner that a reasonable inspection of the index will reveal the existence of the deed" and if the state maintains an adequate federal tax lien index, a tax lien will not be considered properly filed "unless the fact of filing is entered and recorded in the index . . . in such a manner that a reasonable inspection of the index will reveal the existence of the lien." By the terms of the amendment, however, this indexing requirement applies only to interests in real property acquired after November 6, 1978 , and therefore does not cover the property purchased by Frank Banko from the Carusos on September 20, 1978 . At the time of Frank Banko's purchase, Section 6323(f)(4) required simply that the fact of a lien's filing be recorded "in a public index at the district office of the Internal Revenue Service for the district in which the property subject to the lien is situated." It is not disputed that the lien was properly filed in the local IRS office. (See affidavit of D. A. Rosa, ¶9).

Plaintiffs argue that, even though the technical requirements of Section 6323(f) may have been fulfilled, the lien should nevertheless be invalidated because the federal statutory scheme itself is inadequate to put a real estate purchaser on notice of a tax lien incurred by the seller where the seller has at some point in the past changed his or her name. It is plaintiffs' contention that a reasonable notice scheme would require the filing or indexing of a tax lien not only under the name of the taxpayer but also under the name in which "record title" to the property stands. In this case, they argue, the lien should have been filed under the name in which the property subject to the lien was purchased, "Imbergamo".

In support of their argument, plaintiffs rely upon a number of cases holding that a federal tax lien may be invalidated if the Internal Revenue Service misspells or otherwise materially alters a taxpayer's name in its notice of lien such that a "reasonable and diligent search" by the purchaser would not reveal the existence of the lien. See F. P. Baugh, Inc. v. Little Lake Lumber Co. [61-2 USTC ¶9726], 297 F. 2d 692 (9th Cir.), cert. den. 370 U. S. 909 (1962); Richter's Loan Co. v. United States [56-2 USTC ¶9706], 235 F. 2d 753 (5th Cir. 1956); Haye v. United States [79-1 USTC ¶9192], 461 F. Supp. 1168 (C. D. Cal. 1978); United States v. Sirico [66-1 USTC ¶9209], 247 F. Supp. 421 (S. D. N. Y. 1965); United States v. Ruby Luggage, 142 F. Supp. 701 (S. D. N. Y. 1954). These cases, however, stand for a proposition altogether different from that which plaintiffs assert in this action. In each of the cited cases, the Internal Revenue Service failed to correctly identify in its notice the taxpayer against whom its lien was asserted and the question before the court was whether, despite lack of adherence to the exact terms of the statute, there was "substantial compliance" such that the statute's aim of constructive notice to the purchaser was achieved. Under these circumstances, courts have uniformly construed the statute to require identification of the taxpayer with sufficient accuracy to place a reasonably diligent title searcher on notice of the lien's existence.

Here, however, plaintiffs do not argue that the Internal Revenue Service altered or misspelled the taxpayers' name in its notice of lien and thereby failed to substantially comply with the statute. Rather they argue that the statute itself should be broadly construed to require filing and indexing of a federal tax lien not only under the name of the taxpayer but also under any other name in which the taxpayer may at one time have acquired property. Section 6323(f) of the Internal Revenue Code, however, clearly provides that a notice of tax lien properly filed under the name of the taxpayer is sufficient to validate the lien against all property owned by the taxpayer, under whatever name acquired. It is a well-established canon of statutory construction that a statute clear on its face will be interpreted in accordance with its plain meaning absent "rare and exceptional circumstances." Rubin v. United States , -- U. S. --, 49 U. S. L. W. 4103, 4104 ( January 21, 1981 ). If Congress had wished to impose upon the Internal Revenue Service the duty to locate a deed for every piece of real property owned by a delinquent taxpayer, determine the name under which it was acquired, and file a separate notice of tax lien for each such name, it would presumably have done so. Since it did not, this court may not impose such a requirement. Cf. Northwest Airlines, Inc. v. Transport Workers Union of America , -- U.S. --, 49 U. S. L. W. 4383, 4388-89 ( April 20, 1981 ).

Even if the statute applicable to plaintiff's purchase provided, as it now provides, that a lien may be invalid unless indexed "in such a manner that a reasonable inspection of the index will reveal the existence of the lien", plaintiffs would still not be entitled to recover on the facts of this case. Plaintiffs Frank Banko and his title insurance company knew perfectly well the name under which the property was held prior to the September 20, 1978 sale because the deed they received identified the sellers as "Lauralie I. Caruso, formerly Lauralie Imbergamo . . . and Joseph Caruso, her husband." Armed with this information, plaintiffs could easily have discovered the federal tax lien. It can be stated as a matter of law that a reasonably diligent title investigation entails searching for tax liens under any name which the searcher knows to have been used by the seller prior to parting with his property. Had such an investigation been undertaken here, it would have turned up the notice of lien filed by the Internal Revenue Service under the name, "Caruso". Even under the statute as amended, therefore, plaintiff would be charged with constructive notice of the federal tax lien outstanding against the Carusos, and the lien would be valid and enforceable against him.

Because the Internal Revenue Service fully complied with the statutory requirements governing the filing of a notice of lien and because plaintiffs in any event had constructive notice of the tax lien's existence, the lien is valid against the purchaser within the meaning of Section 6323(a) of the Internal Revenue Code. On the basis of the undisputed facts, therefore, the United States is entitled to judgment as a matter of law. Plaintiffs' motion for summary judgment will be denied insofar as it seeks to quiet title and the cross-motion of the United States will be granted.

II. The Misrepresentation Action.--As to plaintiffs' alternative state law claim against the Carusos for misrepresentation, it is evident from the complaint that facts do not exist to support diversity jurisdiction. Presumably, therefore, plaintiffs seek to invoke the pendent jurisdiction of this court. Where state and federal claims "derive from a common nucleus of operative fact" and a plaintiff "would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole." United Mine Workers v. Gibbs, 383 U. S. 715, 725 (1966) (emphasis in the original); see also Owen Equipment & Erection Co. v. Kroger, 437 U. S. 365 (1978); Tully v. Mott Supermakets, Inc., 540 F. 2d 187 (3d Cir. 1976). Where the federal issues do not appear to be substantial, however, considerations of comity require that the state law questions be left for the state courts to decide. Moreover, "if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well." United Mine Workers v. Gibbs, supra, at 726.

In light of the foregoing rules, it is clear that this court may not exercise its pendent jurisdiction to consider the state law claims raised by the plaintiffs, having dismissed the only viable federal claim. The remaining count of plaintiffs' complaint will therefore be dismissed for lack of subject matter jurisdiction, pursuant to Rule 12(h)(3) of the Federal Rules of Civil Procedure.

The United States Attorney is requested to submit a form of order in accordance with this opinion.

 

 

[81-1 USTC ¶9406] United States of America , Plaintiff v. Carolyn Sue Clark, Defendant

U. S. District Court, So. Dist. Fla., Case No. 78-8241-CIV-EBD, 3/27/81

[Code Sec. 6323]

Lien for taxes: Validity: Filing of notice: Wrong name.--A tax lien was not valid against a subsequent mortgagee where the government failed to refile its Notice of Tax Lien after notification that the taxpayer-prior owner of the property had changed her name following her remarriage. A reasonable inspection would not reveal the lien.

Ileana M. Romeu, Department of Justice, Washington , D. C. 20530, for plaintiff. Joel M. Aresty, 2400 Amerifirst Building, One S. E. Third Avenue, Miami, Florida 33131, Roger H. Harper, 260 S. E. 5th Avenue, Delray Beach, Florida 33444, O. Edgar Williams, Jr., 2826 East Oakland Park Boulevard, Fort Lauderdale, Florida 33307, for defendant.

Order

DAVIS, District Judge:

This action is before the Court on cross motions for summary judgment between the plaintiff and one defendant, Amerifirst Federal Savings and Loan Association (formerly First Federal Savings and Loan Association of Miami). The plaintiff seeks to satisfy a tax lien by foreclosure on two pieces of property, which for convenience sake will be referred to as Bel Marra and Palm Beach Farms.

I. Background

It is undisputed that Carolyn Sue Clark was assessed $37,848.40 on June 25, 1973, and that a Notice of Tax Lien was filed by the United States on October 26, 1973, listing her by that name and giving as her address the Palm Beach Farms property. On December 12, 1974 , Carolyn (the purpose for not using a surname will quickly become apparent) was divorced, and took full title to Palm Beach Farms exclusively in her name. On February 8, 1975 , Carolyn married Roger Harper, and adopted her new husband's surname.

The government's lien on Palm Beach Farms is not at issue in these summary judgment motions. Regarding Bel Marra, what is important is that Carolyn changed her surname by her marriage to Roger.

The plaintiff received notice of Carolyn's new name as early as May 25, 1975 , when Roger Harper advised the Internal Revenue Service by letter that he wished to transfer the lien on Palm Beach Farms so as to facilitate its sale. Despite this notice, the I. R. S. did not refile the Notice of Tax Lien to reflect that all property owned then or in the future by Carolyn Sue Harper was subject to a federal tax lien.

On June 4, 1975 , Carolyn Harper (using that last name) acquired the Bel Marra property. The ensuing sequence of sales and first, second and third mortgages need not be detailed here except for two events involving the defendant Amerifirst: it took a mortgage on Bel Marra February 6, 1976 , and later foreclosed, purchasing the property for itself at the foreclosure sale, June 16, 1978 . Amerifirst had no actual knowledge of the tax lien against Carolyn at the time the mortgage was issued, and no knowledge then that Carolyn Harper was once Carolyn Clark. ¹

The United States claims it has an interest in Bel Marra superior to that of Amerifirst by virtue of the lien notice filed October 26, 1973. Defendant Amerifirst claims its interest is superior because it had neither actual nor constructive notice of the lien when it issued the mortgage February 6, 1976.

II. Discussion

The question presented is whether the United States could rely on its Notice of Tax Lien when the Notice, because of events known to the government subsequent to the filing, failed to give a diligent defendant actual or constructive notice of the lien. The parties have agreed that this issue is appropriate for summary judgment. The Court concurs, and concludes that the United States may not rely on the Notice.

The filing requirements for a Notice of Tax Lien exist to protect the wary. See I. R. C. §§ 6323(a), 6323(f). The failure of a person to find a properly-filed Notice will not render the government's claim inferior to that of a subsequent purchaser or mortgagee, but when a party has actual or constructive notice of a previously-filed lien, the government's claim will be superior to interests acquired after the filing. I. R. C. §6323(b); see, e.g., Hannus v. United States, 60-2 U. S. Tax Cas. (CCH) ¶9574 (W. D. Wash. 1958) (divorced woman conveyed encumbered property under her former married name; lien notice filed in that name).

When a party does not have actual notice of a tax lien, as here, the question becomes one of whether the appropriate constructive notice was given. Usually, constructive notice is given when the Notice of Tax Lien is filed in the proper place and under the correct name and address of the liable person. See I. R. C. §6323(f); Treas. Reg. §301.6323(f)-1 (1976). The government can make minor errors in its filings and still give the required notice. E.g., Richter's Loan Co. v. United States [56-2 USTC ¶9706], 235 F. 2d 753 (5th Cir. 1956) ("Friedlander" misspelled "Freidlander"); United States v. Jane B. Corp. [58-2 USTC ¶9924], 167 F. Supp. 352, 355 (D. Mass. 1958) ("Inc." omitted; lien would be discovered by "any prudent person" searching proper record).

Recently, in Haye v. United States [79-1 USTC ¶9192], 461 F. Supp. 1168 (C. D. Cal. 1978), a lien against Manuel Castillo had been filed as being against Manual Castello. The Court held that the misspelling, which resulted in the lien being recorded nine pages from the appropriate place, would not give notice to a reasonable and diligent searcher. Thus, the Court granted the plaintiff purchaser's motion for summary judgment. Id. at 1175; cf. F. P. Baugh, Inc. v. Little Lake Lumber Co. [61-2 USTC ¶9726], 297 F. 2d 692 (9th Cir. 1961), cert. denied, 370 U. S. 909 (1962) (filing insufficient to place reasonably prudent person on inquiry); Holt v. United States, 73-2 U. S. Tax Cas. (CCH) ¶9680 (D. D. C. 1973) (state lost priority to federal government because it filed under corporation's former name).

The question here--whether the government is required to refile a Notice once it becomes aware of a name change--does not fit precisely within the holding of any reported decision. The language of the Internal Revenue Code, however, provides the answer. The government's filing of lien notices where there is an adequate state system of indexing real property, as there is here, must be done "in such a manner that a reasonable inspection of the index will reveal the existence of the lien." I. R. C. §6323(f)(4) (emphasis added).

Here, the remarriage of Carolyn Clark (of which the Internal Revenue Service received notice) resulted in a situation where there was no reasonable opportunity for a prudent person dealing with the delinquent taxpayer to ascertain the existence of a federal tax lien. A "reasonable inspection" would not reveal the lien. Thus, the government's lien is of no effect against the subsequent mortgagee because the Notice did not comply with I. R. C. §6323(f)(4). See Haye v. United States, 461 F. Supp. at 1175; Annot., 3 A. L. R. 3d 633, 634 (1965); cf. Adams v. United States , 420 F. Supp. 27, 30 (S. D. N. Y. 1976) (clerk misfiled Notice; government could not reasonably be expected to do anything further). It is therefore

ORDERED AND ADJUDGED that Amerifirst's motion for summary judgment is GRANTED, and the United States ' motion for summary judgment is DENIED. The defendant Amerifirst (formerly First Federal of Miami), is hereby DISMISSED from this action. Greer and the Fordhams (the other Bel Marra defendants) are also DISMISSED from this cause. Amerifirst's counterclaim against the United States , its crossclaims against Carolyn Sue Clark (a/k/a Harper), the Fordhams and Greer, and its third party complaints against Roger Harper and the Lawyers Title Guarantee Fund are DISMISSED as moot and without prejudice. It is further

ORDERED AND ADJUDGED that Lawyers Title's motion to dismiss the third party complaint against it is DENIED, as moot in view of the above dismissal.

¹ By contrast, when Carolyn sold Palm Beach Farms, the deed was from "Sue Harper (formerly Carolyn Sue Clark)" to the grantees. The deed also specified that the Palm Beach property was the same which had been conveyed to Carolyn Clark and her former husband in 1970.

 

 

[66-1 USTC ¶9209] United States of America , Plaintiff v. Assunta Sirico, Joseph Coniglio, Gloria Coniglio, and the Brooklyn Federal Savings & Loan Association, Defendants

U. S. District Court, So. Dist. N. Y., 65 Civil 2643, 247 FSupp 421, 12/7/65

[1954 Code Sec. 6323]

Tax liens: First initial v. first name: Constructive notice to mortgagee.--A tax lien was filed with the proper county officer against George and A. Sirico. A. Sirico's first name was Assunta. The lien notice gave their true address which was the address of the property against which the lien was asserted. The lien was superior to the rights of the subsequent mortgagee. Since the correct surname was listed and her residence address corresponded with the premises subject of the title search, the subsequent mortgagee was charged with constructive notice of the lien because due diligence, i.e., an examination of the records, would have disclosed the existence of the lien.

Rob ert M. Morgenthau, United States Attorney, Edward L. Smith, Assistant United States Attorney, United States Courthouse, Foley Square, New York, N. Y., for plaintiff. Kalman V. Gallop, Morris Permut, 170 Broadway, New York , N. Y., for defendant.

Opinion

EDWARD WEINFELD, District Judge:

The government moves for summary judgment in this action to foreclose a tax lien on the real property at 1005 Swinton Avenue , Bronx County , New York . The motion is opposed by defendant Brooklyn Federal Savings & Loan Association, the first mortgagee of the premises.

The owner of the property was Assunta Sirico. She and her husband, George, were the taxpayers. A notice of tax lien was filed in March 1959 in the office of the Register, Bronx County . The first mortgage, which was executed by the taxpayers' grantees, also defendants herein, was recorded in December 1962. Notwithstanding that the federal tax lien was filed more than three years before the mortgage was recorded, the mortgagee contends its lien is superior. The basis of its contention is an alleged misdescription in the notice of the federal tax lien filed by the District Director of Internal Revenue and in its recordation by the Register of New York City, in that one of the taxpayers, Assunta Sirico, was referred to only by the initial of her first name, that is, as "A. Sirico," rather than by her full name. The notice of lien described the taxpayers, husband and wife, as "George and A. Sirico." The recordation on the official docket of the Register's office is as follows: ¹

Reg's No.              Date         AM           PM         Name of Taxpayer                   Residence

                                                          Sirico, George            1005 Swinton Avenue

    342            Mar. 24                    
1:56
        Sirico, A.                   
Bronx
, N. Y.

 

Apparently, when a title search was made prior to the placement of the first mortgage, the tax lien was overlooked. There is no dispute that the notice of lien was filed in the proper index and that the correct address of the taxpayers, which corresponds to the premises in question, was set forth. Thus the issue is whether an otherwise valid and properly recorded notice of the federal tax lien is subordinated as against a subsequent mortgage solely by reason of the fact that the taxpayer's initial instead of her full first name is set forth.

The mere fact that a full name is not given or that there is an addition, omission or substitution of letters in a name, or even errors, does not, in and of itself, invalidate the notice. ² The essential purpose of the filing of the lien is to give constructive notice of its existence. ³ The test is not absolute perfection in compliance with the statutory requirement for filing the tax lien, ⁴ but whether there is substantial compliance sufficient to give constructive notice and to alert one of the government's claims. ⁵

Upon the facts here presented, it is difficult to understand how one searching the records of the Register's office could have missed the notice of tax lien. Not only was the correct surname of the taxpayer listed, but her residence address corresponded with the premises which was the subject of the title search. The filing of the lien under the circumstances here presented was adequate to give constructive notice to interested persons.

The motion is granted.

¹ The Lien Law of New York State provides that when a notice of a Federal tax lien is filed with the recording officer, "the entry shall show the name and residence of the taxpayer named in the notice, . . . the date of filing and the total amount of tax, interest and penalty." N. Y. Lien L. §241.

² Richter's Loan Co. v. United States [56-2 USTC ¶9706], 235 F. 2d 753, 755 (5th Cir. 1956); Hannus v. United States [60-2 USTC ¶9574], (W. D. Wash. 1958). But cf. Continental Investments v. United States [53-2 USTC ¶9625], 142 F. Supp. 542 (W. D. Tenn. 1953).

³ Goldstein v. Bankers Commercial Corp. [57-1 USTC ¶9596], 152 F. Supp. 856, 861 (S. D. N. Y. 1957), aff'd on opinion below, [58-2 USTC ¶9662] 257 F. 2d 48 (2d Cir. 1958).

⁴ 26 U. S. C. §6323.

⁵ Goldstein v. Bankers Commercial Corp. [57-1 USTC ¶9596], 152 F. Supp. 856, 861 (S. D. N. Y. 1957), aff'd on opinion below, [58-2 USTC ¶9662] 257 F. 2d 48 (2d Cir. 1958). The sufficiency of the notice is a question of federal law, `notwithstanding any law of the State or Territory regarding the form or content of a notice. . . .'" United States v. Union Cent. Life Ins. Co. [62-1 USTC ¶9103], 368 U. S. 291, 296 (1961). Accord, 26 U. S. C. §6323(b); United States v. Rasmuson [58-1 USTC ¶9399], 253 F. 2d 944, 946-47 (8th Cir. 1958); F. P. Baugh, Inc. v. Little Lake Lumber Co. [60-2 USTC ¶9757], 185 F. Supp. 628, 630 (N. D. Cal. 1960), aff'd in part and rev'd in part on other grounds, [61-2 USTC ¶9726] 297 F. 2d 692 (9th Cir. 1961), cert. denied, 370 U. S. 909 (1962).

 

 

[74-2 USTC ¶9814] United States of America , Plaintiff v. Glen Upton, Inc. et al., Defendants

U. S. District Court, West. Dist. Mo. , West. Div., No. 20717-1, 378 FSupp 1028, 7/17/74

[Code Sec. 6323]

Liens for taxes: Filing notice of tax lien: Wrong name.--Government tax liens for the first three quarters of 1969 did have priority over taxpayer's claim with respect to certain real property belonging to Lane Co. Lane Co. had lost its corporate charter in January 1969 and the government had filed the tax liens in the name of the company's president. There was actual notice of these liens. However, the government filed a tax lien for the fourth quarter in the company's name. There was neither actual nor constructive notice with regard to this lien so the government did not have priority in this instance.

Mary A. Schneider, Thomas H. Stahl, Assistant United States Attorney, Kansas City, Mo., for plaintiff. Jack N. Bohm, 950 Home Savings Bldg., Kansas City , Mo. , Dean Arnold, Bagby, Benjamin & Arnold, 2330 Commerce Towner, Kansas City , Mo. , for defendants.

Memorandum and Order

OLIVER, District Judge:

The present cause is an action brought to foreclose a federal tax lien against a parcel of real property purchased by the defendant from the taxpayer. With regard to the government's claim, which is separately considered pursuant to Rule 42(b) of the Rules of Civil Procedure, the parties have agreed that no oral evidence need be presented and have submitted the case on a stipulated factual record. We have carefully reviewed the Stipulation and the briefs of the parties and make the following findings of fact and state the following conclusions of law:

I. Findings of Fact

The parties' Stipulation established that:

1. On May 12, 1960 , Lane Body and Frame Co. was formed as a corporation under Missouri law.

2. On September 6, 1968 , Lane Body and Frame Co. executed a Deed of Trust concerning the parcel of real property in issue to William Asjes as Trustee for Linwood Mortgage Company in the amount of $25,000.

[Corporate Charter Revoked]

3. On January 15, 1969 , the Missouri Secretary of State declared the corporate records, privileges and franchises of Lane Body and Frame Co. forfeited and cancelled and the corporation dissolved as of January 1, 1969 .

4. On and as of April 24, 1969 , pursuant to an Application for Rescinding Forfeiture submitted by Lane Body and Frame Company's last president, Lee B. Hill, the Missouri Secretary of State rescinded the previously described forfeiture and Lane Body and Frame Co. was restored to good standing on the records of the said Secretary of State.

[Tax Liens Filed]

5. On August 27, 1969 , the Internal Revenue Service received an Employer's Qurarterly Federal Tax Return concerning Lane Body and Frame Co., Inc., from Lee B. Hill who gave his title as "owner;" the return shows a tax due of $2,538.35 for the first quarter of 1969. Also on August 27, 1969 the Internal Revenue Service received as second Employer's Quarterly Federal Tax Return concerning Lane Body and Frame Co., Inc. (on a preaddressed form) from Mary Ann Hill as secretary-treasurer; the return shows a tax due of $3,414.41 for the second quarter of 1969.

6. On September 15, 1969 , the Linwood Mortgage Company foreclosed the lien of a Deed of Trust between Lane Body and Frame Co. and Linwood Mortgage Company and William Asjes, Trustee, upon the parcel of real property in issue and sold same for $25,000 to the Linwood State Bank.

7. On December 26, 1969, the Internal Revenue Service received an Employer's Quarterly Federal Tax Return concerning Lane Body and Frame Co., Inc. (on a pre-addressed form) from Lee B. Hill who gave his title as "Pres.;" the return shows a tax due of $2,442.09 for the third quarter of 1969.

8. On October 3, 1969 and October 17, 1969 and December 26, 1969 the United States made assessments (designated as "23C Date") for unpaid withholding taxes against Lane Body and Frame Co., Inc., for, respectively, the second quarter, the first quarter, and the third quarter of that year; during the period November 4, 1969 and March 17, 1970, payments were received by Internal Revenue concerning the above assessments. There remains due and owing the following amounts (which do not include interest): $800 for the first quarter; $2,800 for the second quarter; $2,547.87 for the third quarter, and $2,249.73 for the fourth quarter.

9. On October 3, 1969 , and October 17, 1969 , and December 26, 1969 , the United States gave notice of the assessments described in the preceding paragraph to Lane Body and Frame Co., Inc., and demanded payment thereof for, respectively, the second quarter, the first quarter, and the third quarter of 1969. As indicated in the preceding paragraph some payments were received by Internal Revenue.

10. On January 15, 1970 , the Missouri Secretary of State declared the corporate rights, privileges and franchises heretofore conferred upon Lane Body and Frame Co. forfeited and cancelled as of January 1, 1970 .

11. On January 19, 1970 , Lane Body and Frame Co. and Harry W. Allen, the latter as surety, filed a bond in the amount of $5,500 in the Circuit Court of Jackson County in order to have an opportunity to redeem the parcel of real property in issue.

12. On March 20, 1970 the Internal Revenue Service received an Employer's Quarterly Federal Tax Return concerning Lane Body and Frame Co., Inc., (on a pre-addressed form) which return is not signed or dated; the return shows a tax due of $2,232.33 for the fourth quarter of 1969.

13. On March 20, 1970, the United States made an assessment for unpaid withholding taxes against Lane Body and Frame Co., Inc., for the fourth quarter of 1969.

14. On March 20, 1970, the United States gave notice of the assessment described in the preceding paragraph to Lane Body and Frame Co., Inc., and made demand for payment thereof. There remains due and owing (without interest) the sum of $2,249.73.

[Lien Filed Under Company's Name]

15. On April 8, 1970, the United States filed a Notice of Federal Tax Lien listing the taxpayer as "Lee B. Hill DBA Lane Body and Frame Co., Inc.," and concerning Federal Withholding (941) taxes for the first three quarters of 1969. This notice was filed with the Jackson County Recorder of Deeds under "Hill."

16. On April 14, 1970, the United States filed a Notice of Federal Tax Lien listing the taxpayer as "Lane Body and Frame Co., Inc.," and concerning Federal withholding taxes for the fourth quarter of 1969. This notice was filed with the Jackson County Recorder of Deeds under "Lane."

17. As of December 9, 1970, McDaniel Title Company, agent for Title Insurance Company of Minnesota, made a title search on the Application of Swope Parkway National Bank for a loan policy as concerns the parcel of real property in issue; as the result of this search, it was aware of the Notice of Federal Tax Lien filed on April 8, 1970 against Lee B. Hill DBA Lane Body and Frame Co., Inc. However, McDaniel Title Company failed to search for and become aware of the Notice of Federal Tax Lien filed on April 14, 1970 against Lane Body and Frame Co., Inc.

[Contract to Purchase Land ]

18. On September 14, 1970, Glen Upton, Inc., by Glen A. Upton, entered into a Real Estate Contract with Lane Body and Frame Co., Inc., by Lee B. Hill to purchase the parcel of real property in issue for $40,000. In order to make this purchase, Glen Upton, Inc., had approached the Swope Parkway National Bank to secure a loan. At no time did Glen Upton, Inc., or any of its officers or employees check with the Jackson County Recorder to determine if any notices of federal tax lien were filed affecting the property.

19. Also, on September 14, 1970, a "trustee's corporation warranty deed" was executed by "L. B. Hill and Mary Ann Hill, Trustees of Lane Body and Frame Co., as the sole surviving officers and members of the last board of directors of Lane Body and Frame Co., a dissolved corporation." This deed was signed in the name of "Lane Body and Frame Company, Inc." by L. B. Hill "Trustee and former president" and Mary Ann Hill, "Trustee and former secretary" of "Lane Body & Frame Co., a dissolved corporation." This deed conveyed whatever right Lane Body and Frame Co., Inc., or Lee B. Hill or Mary Ann Hill had in the parcel of real property in issue to Glen Upton, Inc.

20. Also, on September 14, 1970 , a Deed of Trust was executed by Glen Upton, Inc., in favor of Swope Parkway National Bank to secure the afore-described loan of $40,000.

21. On September 15, 1970 , a Deed of Release was executed by William Asjes, Trustee for Linwood Mortgage Company, concerning the parcel of real property in issue.

22. Also on September 15, 1970, the Swope Parkway National Bank, with regard to the Glen Upton, Inc., loan, wrote checks to the following entities in the following amounts: $9,502.73 to Lane Body and Frame Co., Inc.; $1,228.30 to the County Collector; $351.36 to the City Treasurer; $760.03 to the Swope Parkway National Bank; $349.15 to the City Treasurer and $23,157.58 to Linwood Mortgage Company.

23. On September 16, 1970 Lee B. Hill signed and delivered to McDaniel Title Company for itself and Title Insurance Company of Minnesota a document entitled "Indemnity Agreement" referring to the Notice of Tax Lien filed on April 8, 1970 . In this document Lee B. Hill states that the said lien was filed upon him individually and not against Lane Body and Frame Co., and that "the said claimed lien and amount [are] for a personal obligation of the undersigned and not an obligation of said dissolved corporation * * *." Moreover, the document recites that "Lee B. Hill is presently, and has been in the past, making payments thereon his said individual tax obligation, under his agreement with the Government, lienor, to ultimately discharge the same * * *." The document further refers to the sale of the real estate in issue and states that "Lee B. Hill agrees to indemnify and save harmless McDaniel Title Company and Title Insurance Company of Minnesota from any and all claims * * *."

24. On September 17, 1970 William Asjes, Trustee, delivered a Deed of Redemption from the foreclosure of the Deed of Trust concerning the parcel of real property in issue.

25. Also on September 17, 1970 , "Lane Body and Frame, Inc., by Trustee former Pres. Lee B. Hill" cashed the check received from Swope Parkway National Bank.

II. Conclusions of Law

1. Jurisdiction of this action is conferred upon this Court by Title 28, United States Code, Sections 1340 and 1345, and Title 26, United States Code, Section 7402.

2. The Internal Revenue Service may properly impose a tax lien on the parcel of real property in issue as security for tax liabilities incurred by the statutory trustees of Lane Body & Frame Co., Inc., in operating the business between January 1, 1969 and April 24, 1969 .

3. The Internal Revenue Service may properly impose a tax lien on the parcel of real property in issue as security for tax liabilities incurred by Lane Body & Frame Co., Inc., between April 25, 1969 and December 31, 1969 .

4. The Notice of Federal Tax Lien filed on April 8, 1970, listing the taxpayer as "Lee B. Hill DBA Lane Body & Frame Co., Inc." and covering the first three quarters of 1969, met the statutory requirement of notice set forth in 26 U. S. C. §6323.

5. The Notice of Federal Tax Lien filed on April 14, 1970 listing the taxpayer as "Lane Body & Frame Co., Inc." and covering the fourth quarter of 1969, does not meet the statutory requirement of notice set forth in 26 U. S. C. §6323.

6. The tax lien against the parcel of real property in issue for the first three quarters of 1969 is valid and prior to any rights which subsequently accrued to the defendant.

7. The tax lien against the parcel of real property in issue for the fourth quarter of 1969 is not valid as against the rights of defendant as a purchaser.

8. The United States is entitled to foreclose its lien in the amount of $6,147.87 plus statutory interest thereon upon the parcel of real property in issue.

III. Discussion

The initial question presented is whether in view of the forfeiture by the Missouri Secretary of State of the Lane Body & Frame Co., Inc. corporate charter for the period from January 1 to April 24, 1969, a lien for taxes incurred during that period may be imposed under 26 U. S. C. §6321 upon the parcel of property purchased by defendant.

[State Corporation Law]

V. A. M. S. §351.525 sets forth the procedure to be followed in the forfeiture of corporate charters:

If any corporation:

(1) Fails to comply with the provisions of this chapter with respect to registration, the filing of its antitrust affidavit, the filing of its annual report, or the payment of its annual franchise tax on or before the thirty-first day of December;

(2) Procures its franchise through fraud practiced upon the state;

(3) Has continued to exceed or abuse the authority conferred upon it by law, or has continued to violate any section or sections of the criminal code of the state of Missouri after a written demand to discontinue the same shall have been delivered by the secretary of state to the corporation, either personally or by mail; (If mailed, the notice shall be deemed to be delivered five days after it has been deposited in the United States registered mail in a sealed envelope addressed to such corporation at its registered office in this state.)

(4) After written notice by the secretary of state to the last known address, has failed for sixty days to appoint and maintain a registered agent in this state; or

(5) After written notice by the secretary of state to the last known address, has failed for sixty days after change of registered officer or registered agent to file in the office of the secretary of state a statement of such change;

the corporate rights and privileges of the corporation shall be forfeited, and the secretary of state shall thereupon cancel the certificate, or license, of the corporation by appropriate entry on the margin of the record thereof, whereupon all the powers, privileges and franchises conferred upon the corporation by the certificate, or license, shall [be] subject to rescission as provided in this chapter, cease and determine; and the secretary of state shall notify the corporation by mail, addressed to its registered office, as disclosed by the records of his office, that its corporate existence and rights in this state have been forfeited and canceled, and the corporation dissolved subject to rescission as provided in this chapter; and the directors and officers in office when the forfeiture occurs shall be the trustees of the corporation, who shall have full authority to wind up its business and affairs, sell and liquidate its property and assets, pay its debts and obligations and to distribute the net assets among the shareholders; and the trustees as such shall have power to sue for and recover the debts and property due the corporation, describing it by its corporate name, and may be sued as such; and the trustees shall be jointly and severally responsible to the creditors and shareholders of the corporation to the extent of its property and effects that shall have come into their hands.

Defendants argues that this statute requires that the trustees immediately wind up the corporate affairs, that continuation of the business by the trustees is improper, and that business liabilities incurred by the trustees after forfeiture are their personal liabilities rather than corporate liabilities. This is an unnecessarily narrow reading of the statute.

[Time to Wind Up Affairs]

Forfeiture of a corporation's charter under V. A. M. S. §351.525 does not mean that corporate affairs must immediately cease. Indeed, it is clear that even where the trustees choose to wind up the corporation, the business may have to be carried on for some time in order to protect corporate assets. Cf. Eaton, Yale & Towne, Inc. v. Sherman Industrial Equipment Co., 316 F. Supp. 435 (E. D. Mo. 1970). Liabilities incurred in the normal course of business subsequent to forfeiture should be considered corporate liabilities, especially where, as here, the forfeiture is quickly rescinded, the corporation's actual operations continue unabated, and creditors have no notice of the break in the corporation's legal status. Cf. Schneider v. Best Truck Lines, 472 S. W. 2d 655, 659 ( Mo. 1971); Mo. Atty. Gen. Op. No. 40.

[Validity of Liens]

Given this conclusion, the remaining question is whether the steps taken by the IRS were legally sufficient to protect the government's rights. The validity of the tax lien against the defendant, a subsequent purchaser, is controlled by 26 U. S. C. §6323(a), which states:

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.

Subsection 6323(f)(3), referred to above, states:

The form and content of the notice referred to in subsection (a) shall be prescribed by the Secretary or his delegate. Such notice shall be valid notwithstanding any other provision of law regarding the form or content of a notice of lien.

It is clear from these sections that, in order for a valid tax lien to arise, a notice in the form prescribed by the Secretary must be filed. In the present case, the notices filed for each of the four quarters were submitted on Form 668 "Notice of Federal Tax Lien under Internal Revenue Laws," as required by the applicable regulation, 26 C. F. R. §6323-1(a)(3) (1973). On the form filed on April 8, 1970 , for the first three quarters of 1969, in the space provided for "Name of Taxpayer" the IRS inserted "Lee B. Hill dba Lane Body & Frame Co., Inc." On the notice filed on April 14, 1970 , for the fourth quarter of 1969, however, the name of "Lane Body & Frame Co., Inc." was inserted in that space. The question is whether either of these descriptions accurately set forth the name of the "Taxpayer," as required by Form 668 and §6323.

Under 26 U. S. C. §6901(a) transferees of corporate assets, who are liable at law or in equity for the transferor's debts, are similarly liable for taxes due from the transferor. The transferee is therefore the "taxpayer" within the meaning of the Internal Revenue Laws and taxes can be assessed against him as if it were an original liability. Cf. Drew v. United States [66-2 USTC ¶9739], 367 F. 2d 828 (Ct. Cl. 1966). However, the transferee is liable only to the extent that state law imposes liability on him for general corporate debts. See, i. e., Southern Arizona Bank & Trust Co. v. United States [67-2 USTC ¶9722], 386 F. 2d 1002 (Ct. Cl. 1967), cert. den. 391 U. S. 967 (1968).

[Company's Legal Representative]

The liability of statutory trustees in the event of forfeiture is stated in V. A. M. S. §351.525, supra. That section makes clear that upon forfeiture the trustees become the corporation's legal representatives. Watkins v. Mayer, 103 S. W. 2d 566 ( Mo. 1937). As such, they are proper parties against whom legal action for the collection of corporate debts may be brought, though they are liable only to the extent of remaining corporate assets. See, e.g., State of Missouri ex rel. Darr v. A. B. Collins & Co., 34 F. Supp. 550 (W. D. Mo. 1940); State ex rel. McDowell v. Libby, 175 S. W. 2d 171 ( Mo. 1943); Auffenberg v. Hafley, 457 S. W. 2d 223 ( Mo. 1970). A notice of tax lien filed subsequent to forfeiture would therefore properly list the trustees as "taxpayers." The notice filed in the name of "Lee B. Hill dba Lane Body & Frame Co., Inc.," On April 8, 1970 was sufficient to comply with this requirement. See United States v. Siroco [66-1 USTC ¶9209], 247 F. Supp. 421 (S. D. N. Y. 1965).

Not only was this filing legally proper but it was also actually sufficient to notify the parties of the IRS claim. Defendant was well aware at the time of purchase of the property herein involved that Lee B. Hill was the trustee and legal representative of the defunct corporation, as evidenced by the signatures on the warranty deed of "L. B. and Mary Ann Hill, trustees of Lane Body & Frame Co." While the record before us may not establish that defendant had actual knowledge of the tax liens filed on April 8, 1970 , at the time of purchase, they cannot properly claim that any lack of knowledge was caused by the manner in which the notice was filed. Indeed, the fact that McDaniel Title Company ran its title search under the name of "Hill" and actually found the tax lien demonstrates that corporate status and proper filing procedures were readily apparent. For these reasons, we conclude that the notice of tax lien filed on April 8, 1970 for the first three quarters of 1969 is valid against defendant as a subsequent purchaser of the property.

[Notice Not Provided]

It also follows from the above discussion that the lien for the fourth quarter, filed in the name of "Lane Body & Frame Co., Inc." on April 14, 1970 , is not valid. The "taxpayers" on that date were the trustees, and a notice of tax lien would be proper only if drawn in their names. It is irrelevant whether this Court believes it reasonable to have also checked under the corporate name, since the lien imposed by §6323 is valid only if the required notice is filed.

IV. For the reasons stated, it is

ORDERED that within ten (10) days the government shall prepare an appropriate judgment in accordance with this opinion, submit the same to counsel for defendant for approval as to form, and thereafter to the Court for entry.

 

 

[61-2 USTC ¶9726]F. P. Baugh, Inc., a California corporation, Appellant v. Little Lake Lumber Company, aka Little Lake Lumber Co., a partnership; United States of America, et al., Appellees

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 17,230, 297 F2d 692, 10/18/61, Affirming and reversing in part District Court, 60-2 USTC ¶9757, 185 F. Supp. 628

[1954 Code Sec. 6323]

Priority of liens: Mortgagee: Sufficiency of notice.--On the basis of an assessment for withholding and F. I. C. A. taxes made against three partners doing business as Little Lake Lumber Company, the District Director filed a federal tax lien with the county recorder. The lien listed the name of the taxpayer as "Chas. E. McCulloch et al.", and indicated that his address was "Little Lake Lumber Co., Box 271 Willits Calif. ". The lien did not indicate the names of the other two partners. The Court held that the mortgagee had priority over the government in the interests of these partners in the assets. The Court further held that a lien confers priority only on the taxpayers listed on the lien, and refused to apply the doctrine of constructive notice even though there are facts on the lien which warrant its application.

Falk, Johnson & Cleland, Ukiah, Peter L. Townsend, San Francisco , Calif. , for appellant. Louis F. Oberdorfer, Assistant Attorney General, Lee A. Jackson, A. F. Prescott, Fred E. Youngman, Kenneth Levin, Department of Justice, Washington 25, D. C., Laurence E. Dayton, United States Attorney, Charles Elmer Collett, Assistant United States Attorney, San Francisco, Calif., for appellee.

Before CHAMBERS and MERRILL, Circuit Judges, and KILKENNY, District Judge.

Opinion

KILKENNY, District Judge:

Appellant seeks to foreclose a chattel mortgage and deed of trust on certain property in California . The United States of America , respondent here, filed a counterclaim for foreclosure of an alleged tax lien. The lower court [60-2 USTC ¶9757] found for respondent and held that the notice of tax lien was sufficient to place a reasonable prudent person on inquiry and that if inquiry had been made, the person so inquiring would be inevitably led to the conclusion that the Government was claiming a lien on the property of all of the parties doing business as Little Lake Lumber Company and on the property of the partnership itself.

On the 23rd day of November, 1955, an assessment for Withholding ¹ and F. I. C. A. ² taxes was made by the respondent against C. E. McCulloch, Jr., H. W. Bryan and M. L. Kramer, dba Little Lake Lumber Company.

On January 13, 1956 , the District Director of Internal Revenue caused a form designated "NOTICE OF FEDERAL TAX LIEN UNDER INTERNAL REVENUE LAWS" to be filed with the County Recorder of Mendocino County , California . On said date this instrument was indexd in the general index--grantors, defendants, etc., to Charles E. McCulloch and on another page of the index to Little Lake Lumber Company. Said notice read, in part, as follows:

"Pursuant to the provisions of Sections 6321, 6322, and 6323 of the Internal Revenue Code of 1954, notice is hereby given that there have been assessed under the Internal Revenue laws of the United States against the following-named taxpayer, taxes (including interest and penalties) which after demand for payment thereof remain unpaid, and that by virtue of the above-mentioned statutes the amount of said taxes, together with penalties, interest, and costs that may accrue in addition thereto, is a lien in favor of the United States upon all property and rights to property belonging to said taxpayer, to-wit:

NAME OF TAXPAYER

Chas. E. McCulloch et al.

RESIDENCE OR PLACE OF BUSINESS

Little Lake Lumber Co. Box 271 Willits Calif.

* * *"

(Italics added)

Little Lake Lumber Company is a partnership organized under the laws of the state of California . The title to the property was in the name of said partnership. After said filing and on April 25, 1956, the partnership, for a valuable consideration, made, executed and delivered to appellant a chattel mortgage and deed of trust, which instruments secured the payment of certain promissory notes. These instruments are the basis of the foreclosure proceedings.

After proper assessment the United States has a lien upon all property and rights to property, whether real or personal, belonging to any person liable to pay the tax. ³ However, with certain exceptions not here applicable, this lien has no validity against a mortgagee until a proper notice has been filed. ⁴

[Sufficiency of Notice]

It is conceded that the California Recording Statutes ⁵ meet the requirements of the Federal legislation. For that matter, the filing of the alleged notice by the District Director recognizes the conformity of the California legislation on the subject. Therefore the only matter we have for determination is the sufficiency of the notice of lien and the effect, if any, of the alleged constructive notice of the lien. Federal law determines the priority of competing liens asserted against the taxpayer's "property" or "rights of property." United States v. Vorreiter [57-2 USTC ¶9956], 355 U. S. 15; United States v. White Bear Brewing Co. [56-1 USTC ¶9440], 350 U. S. 1010; Aquilino v. United States [60-2 USTC ¶9538], 363 U. S. 509.

Acting under the authority granted by Congress ⁶ the Commissioner of Internal Revenue promulgated a regulation, effective December 30, 1954, which included a form of notice of lien as follows:

§301.6323-1

* * *

"(3) Form of notice. The form to be used for filing the notice of lien shall be Form 668, 'Notice of Federal Tax Lien Under Internal Revenue Laws.' Such notice, filed in the office designated by the law of a State or Territory, shall be valid notwithstanding any law of the State or Territory regarding the form or content of a notice of lien. For example, the omission from the notice of lien of a description of the property subject to the lien will not affect the validity thereof, even though the law of the State or Territory requires that the notice of lien contain a description of the property subject to the lien.

* * *

The form of notice used in this case was printed by the Government Printing Office in January, 1955, is designated Form No. 668, and is obviously the form referred to by the Commissioner in the above regulation.

[Lien Must Disclose Name of Taxpayer]

It is clear that the Commissioner interpreted the legislation as requiring him to provide a form which would disclose the names of the taxpayers with reasonable preciseness. The contemporaneous construction of a statute by those charged with its admin istration is entitled to great weight. C. I. R. v.