Brief for the United States — United States v. Waddill, Holland & Flinn, Inc.

Supreme Court brief1945

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Tar Unrrep Svargs or AMERICA, PERTIONER

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Wapvitn, Homann & Fruvs. Inc., et ar.

“ON WRIT or crate /RARI TO THE SUPREME COURT. OF

“APPEALS OF VIRGINIA

BRIEF FOR THE UNITED STATES |

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‘ INDEX S

“4

Opinions below. - ~~ - --. , : said aaleeuah< que be Die 1

Jurisdiction... .-----. wan naan tana cen Gene ceneanes<g-- 1

Question presented. Be pee Piet Sal pale Habaln mii eae 2.-

Statutes involved _ - - - eae nel Ae ree Me 3 2.

. Statement_-_--- . . Pus. 2

Specification of errors tot be-urged — 5

- Summary of argument... --- --.--+------------------ . §/

Argument:

aan eee, EEE NA NEE TDE COE Ace 7

- I, Under the applicable deciajons of this C ourt, the debt

due to the United States is an i) priority in

payment over the landlord’s lien. - shane ake gies i]

1. ‘The,debt secured is not apaciie. ie TRUE ae

‘2. The goods subject to the lien are not specific. 18

Il. The lien of the City of Danville for taxes is-not entitled

es - to priority as against the claim of the United States_- 22

Ili. Recognizing: liens of the character involved in tho °

instant case as superior to the priority conferred on 3

.the United States by *R. S. 3466 would improperly

_ permit states to substitute - their own priority

scheme for that directed by C ongress.. een e eke <7 ee

REO EEE EG GATE BO SERENE EMT TOSES AR

Appendix. .'..-.---------- niet Ses itinn Skit d 29 —

CITATIONS

Cases: — S

American Exchange ‘Bank'v. Goodlee R. Corp., 135 Va. 204_. 16,

: ; 17, 19

Atlantic Ins.'Co.v. Conard, Fed. Cas. No. 627. ___-- 1

Beaston v. Farmers’ Bank; 12 Pet. 102_-...-.- ~~... te a 10, 11

Bradford v. Graham,,287 Fed- $88... -.-:..:----.------- 21

Bramwell v. U. S. Fidelity &G waronty Co, 269 U. 8.483. | 25:.

Brannon, In re, 62 F.2d) 959-. SP RNS CES. SE a PI ow 21

Brent v. Bank of Washington, 10 Pet, te 596 ee Sovc cows) ees oe

Carey vs Keith, Inc., 250 N. Y. 2i6--—--. -------- : 14

Chambers v. Hrggins, 169 Va. 345. : : Sate ,

Conard ¥. Atlaniic Insurance Co., 4 Pet. 386 10.14. 32

Conard’v. Nicoll, 4. Pet, 291- 5 ie | Pee

Conard v. Pacific Insurance Cs. 6 Pet. 262. mee

Decker.v. Decker Building Material Co., 118 N. J. Ey. 177- 24

Dime Deposit Bank v. Wescott, 113 Va. 567... ~~ -------- 19

: Se (i) ;

606949—-44—---J

- il

Cases Continued. : he Page

Dingest- “Rum Coal Co. v Saas Eagle Coal Co., 108 W. Va.

a eos pk Sf ts > ge ie ad enn 0 ep 5 19

a Drewry v. Baugh ‘and Sons, . 150 Va. 304. Las | Oe er 23

Dudley's Case, Fed. Cas. No. 4114 : matis 11

- Emory v. St. James Distillery, 1438. W. (24) 318, reversed,

” . United States v. Einory, 314 U. 8. 423_-... 22-22 2. -+- 26

Brnst v. Guarantee Millwork, Inc., 200 Wash. 1952. Pacem _ 26

- Ferris v. Chie-Mint Gum, Co., 14 Del. Ch. 262__.-- ae. 27

Field v. United States, 9 Pet. 182- Sipsceat nn © IQAT, 28-

Fishburne v. Eugeldove, 91 Va. 548-_ __ - ~~ 20

Geiger’ 8s Adm’r v. Harman's F t-Va130-—— : Soar

Gerson v. Shubert Theatre Oey. 7 F. Supp. SO Aa 2 Le ; 15.

Grant Co. Vv. Snead, se cctesac 21

Gurfein v. Howell, 142 Vao197___. _- pated a 20

. Hancock vy. Whitehall, Etc. Co., 100 Va. 443... *..---- 18,20 |

Hogen v. Callas, 139 Va. 137 -- - - a eins SEN EO

Kelly v. Worsham, 160 Ve. 275____- eae 19

- Lillie ‘Laurie, The, 50 Fed. 219... ey wat 12

- Lincoln Chair & Novelty Co., paged of, 274 N. £ 353. oe ee 15, 24

Marshall v. New -York,.254 U.S. 380... ---..-------.---- 14

Michigan v. U nited States, 317 v. Sere 9, 17, 25

. Mosby v. Leeds, 3 Call. 439 (7 Va. 380) _ _- aes 19

Nathan v. Giles, 5 Taunt. 558___- : - gexaak 12

New. Orleans, City of v. es 134 F. (2d) 399» ee : oe

‘New York v. Maelay, 288 U. S. 290. _.. ° 6,

he 8, 9, 11, 12, 13, 14, 21, 22, 24, 25

- New York Terminal Co, v: Gaus, 204.N. Y: 512-. ue 14

North River Coal & Wharf Co. y, ‘McWilliams Bros., Inc., 59°.

F. (24) 979 (are = “hori Lion alas 14,

People of New York vy. U nited States, 106 F.. (2d) 210. 2. - - 15

- Predmont Corp. v. Gaingoville-& ae R. Co., 30 F. (2d)

525 __- ; Shaye

Postmaster Ginaial ¥. Robbins, Fed. Cas. No. i314. aes

Price v. United States. 269. U.S. 492_- 3 eg 7,8

Prince v. Bartlett, 8 Cranch ws ; — 10

Prudence Corp. v: Geist, 316 U.S. 89_. . 26

_ Reese, Claude D., Ine. v. Unite States, 75 F.(2d) 9... 21

Savings Society v. Multnomah County, 169 U.S. 421__ 10, 11

Sola Electric Co. v. Jefferson Co., 317 U.S. 173_- rot 26

Spokane County v. Unsied States, 279 U.S. 80_- ie |

: . 12, i3, 17, 21, 25

Spokane Merchants’ Ass'n v. State, 15 Wash. (2g 186 24, 26

State v. Wynne, 134 Tex. 455. - : 27

Thelusson v. Smith, 2 Wheat. 396. _ - 6, 9, 10,°11, i2

Tropi ical Printing Co. v: Unton Title Guarantee Co., 180 ‘

La. 702_° = : . eae +24

U.S. FP. & G. Cod*. Sweeney, 80 F. 62d) ae oe ee

United States v. Canal Bank, Fed. Cas. No. 14715 ; pels

ee ee TN ee

ER.

° ,.

TERT Sg eS

ares

United States v. Teras, 314.U. S 480... - iW BPs :

» ; ” 8, 9,10, 11, 12, 13, 15, 18, 20, 21, 22,

Vardewater v.- Mills, 19 Hows 82. 17 ux 2

Wate ©. Piseelt, To Va. G76... . 25 = 2 oko sea ee :

West Coast Power Co. v. So. Kansas Gas Co. , 20 Del. Ch. 130.

West Side Paper Co., In re, 162 Fed. 110 ;

Wickham v. Richmond Spike Co., 107 Va. 44,

Williamson v. Payie, 103 Va. 551. yee .

Statutes: : oe

Act of 1748, c. 15, sees. 5, 6 (Va. Laws 1752) _. ‘i

_ Act ‘of March 3, 1797, sec. 5 (1 Stat. 515)_.-

Act of March 2, 1799, see. 65 (1 Stat. 676) __ i

Act of 8 Anne, ce. 14; see. 1 > ae :

Revised Statutes, sec. 3466 (31 U.S. C. see. 191)____.

1 Virginia Revised Code (1819) p. 448__-

Virginia Code (1887), see. 2792_ __ -

: oo Code (1919), see. 5524- _ _ - J

Virginja Code of 1936: ;

; - Sec. 5519-7

e ' See. 5519-5523 =e

Sec. 5522

Sec. 5523 , 16

See. 5524- a _ 16,

» See, $697. ...-..: ;

Nee. 5528

: See. 5783 :

See. 651%.

Sec. 6519_ 4 ee .

Virgimia Code (1942) see, 5524_- as ea |

Miscellaneous: -

Wi Jones, Liens, sees. 1676 et seq..--.. rahe Cae tete we

: Rot hee

”

Cases—continued. .

United States ¥, Dunean, Fed. oy No. =

United| States v. Emory, 314 U.S. 423. /

United \States v. Hooe, 3-C ranch ye Mae

v nited \States v. Knott, 298 U. S. 544__

United States v.-Oklahoma, 26 U. 8. 253 =: <3

United States v. Reese, 131 F. (2d) 466...

89.

United States v: State Bank of North Carolina, 6 Pet. 29.

United Statés v. Summerlin, 310 U.S. 414

24,

16,

| Inthe Supreme Gour af he ite Bins

‘OcroseR TERM, 1944 of

No. 65

Tue Unirep States oF AMERICA, PETITIONER

Vv.

WappitL, Hottanp & FLINN, INC., BT AL.

| } ,

ON WRIT OF CERTIORARI TO THE SUPREME COURT OP.

; APPEALS OF. VIRGINIA

BRIEF FOR THE UNITED STATES —

__: OPINIONS BELOW

: . P s

The opinion of the Corporation Court of the

City of Danville, Virginia’ (R. 26-34) is unre-

ported. The opinion of the Supreme Court of.

Appeals_of_Virginia (R. 36-44) is reported in 182

Va. 351. .

JURISDICTION

The judgment of the Supreme C part of Appeals

of Virginia was entered on January 24, 1944. (R.

45). The petition. for a writ of certiorari was

filed on “April 24, 1944, and was granted on May

29, 1944 (R. 46). ‘The jurisdiction ‘of this Court

(1) aah

2 .

rests upon- Section 237 (b) of the Judicial. Code,

as amended by the Act of Fe ‘bruary 13, 1925.

QUESTION PRESENTED -

Whether, inca state proceeding under a general

assignment for benefit of creditors, a landlord’s

len gor six months’ rent- due and to become due,

and. the Hen of a municipality. for unpaid taxes,

both created by,state law, take precedence in pay-

ment over a debt due the United States, the prior

.payment of which is direc ted by Section 3466" of .

the Revised Statutes. e ; ‘

STATUTES INVOLVED

Section 34060 of the Revised Statutes, and the

: applicable ‘portions of the Viyginia statutes in-

volved, are set forth in the oo, infra, pp.

29-35 >.

- STATEMENT

Mrs. Ocland Roman’ was doing business under

the trade name of Roman's Restaurant. Danville,

Virginia, on premises leased from: respondent’

Wadadill, Holland & Flinn, Ine. (R215). On June

19, dl, Mrs. ‘Roman executed a géneral deed of

assignment te a trustee for the benefit ef cred-

itors (R. 15-17), specitieally ‘conveying all per-

sonal property, fixtures, and equipment. used byed .

the assignor in the conduet of the restaurant and

located on its premises (R. 15, 26-27). ‘The prop-

erty assigned was duly sold by the trustee, and

after the deduction of appropriate administrative

s .

Belt) <a ahs

— COU

. . .

ee ee a

To wo oig Gest ee

. : ae : aa ; oo ete)

expenses, there remained the sum of $1, 407.29

(R, 28). Aside from debts due to general ¢red--

itors, the assignor was indebted te the following,

each of whom claimed priority. of payment in the

wee ree respectively set forth: *

(1) The Unitéd States, $1,559.63, plus inte rest ;

(2) Virginia Unemployment ¢ ompenantion:

Commission, for taxes for 1940. and 1941, $66.38,

plus interest ; ‘a | :

(3) City of Danville, for personal. property

taxes for 1939-1941, $300.55; and :

(4) Waddill,. Holland & Flinn, — Ine... six

months’ rent due and to become due ah, 300.00.

(R. 27-28.)

__-—Phe assignor’s lease - ‘hom. WwW ‘addill, Holland &

~Fhnn ran for a period of five years beginning

~ January +,, 1937-at-a— monthly “rental of $250.00, ae =

(R. 27). On July 1, 1941, 12 days after the deel

e of assignment Was exec nited, the anaes obtained

fhe 1 issuance of a distress warrant for 324 months’

past due rent amounting to $850, and an attach-

ment for 2"; months’ Future instalknents of rent

amounting to F650 1 (R. 25, 28); on the same day

< The sum of $1,550.63 as comprised Gf ° the following

items: Femeral U nemploymmit Compensation taxes for the

year 1940, $209.30; hke taxes for-the- “Year 1941. $71.70;

‘and adebt arising out of 4 Z ke ral Housing Administration

transaction, S1Z7S. 63 (R, No controversy @Xx Xists as to

the correctness of these pcan c that theyavere due and -

owing to the United States: prior to the date when the

assignment -was made.

»9

a : . 4

the landJord levied the warrant and attachment on

~ the assignor’s property located on the le ed

premises’(R, 22, 27): On July 2, 1941, the City

Collector? of Danville distrained all of. the Pprop-.

erty on the leased premises for personal prop-

‘erty taxes ‘amounting to $301.45 due from the

_ assignor to the City of. Danville for the years

1939-1941, comprising $226.81 due on the furni-

"ture, fixtures, and merchants’ capita 1€.

| _ “restaurant, and ‘$74.64 due on other ‘personal

f. | property (R. 28). < 7 ee .

Sa On April 20, 1942, the trustee urider the general

assignment. filed a petition in the Corporation —-

Court of Danville, Virginia, in whiclfRe recited.

~ the various claims for priority. and requested ad-

vice as to the proper distribution te be made of

the funds in his hands (R. 9-13). The landlord °

answered, ¢laiming priority in payment -over all

other claims | against the fund “by virtue. ‘of the

levy of said attachment, and, distress warrant”.

againsf the’ property of the assignor on “the leased .°

premises (R. 22). The Unemployment C ompensa-

tion La of Vi irginia, an instrume ntaltty

of the ¢ ‘ommonwealth of Virginia, answered, ad-

mitting the priority of the United States ‘but

claiming priority ever beth the City of Danville

| and the landlord (R. 23-24). The United States

pwc claimliug priority: over all other claim-

- ants (R. 24-25). On Jamiary 5, 1943, the Cor pora-

tion Court of Danville: entered judgment, holding

- that the landlord Was entitled to priority in pay-

ys Ae

ment over the debts due the United States and the

| Unemployment Compensation Commission of Vir-

ginia but that its claim was subordinate to that of

the City. of Danville for ‘taxes in the sum_of.

$222.31 (R. 34-85). The Corporation Court con-

cluded that a municipal tax assessed against. spe-

cific chattels, such as furniture and equipment, was

“a paramount ‘and specific lien as a matter of state _

law (R.33). In computing. the amount of the city’s.

~~ taxes entitled to-priority, it deducted from the total

taxes of $3801.45 the tax of $4.50 assessed on mer-

chants’ capital ($1.50 for each of the three years

“in question )* and ‘ the tax of. $74.64 assessed on

other personal property of the aAIGUOE, apparently.

on the gr ound that they were not specific liens (R.

28, 33). The United States appealed: to’ the.

Supreme Court of Appeals of Virginia “(R. 1-9),-

_ which affirmed the distribution ordered by ‘the Cor-

be poration Court (R. 36-44).

a hie “A

: SPECIFICATION OF ERRORS TO BE URGED.

The. Supreme Court of Appeals of Virginia

" erred: 2 :

(1) In holding that under R. S. 3466,:a debt due

‘the United States is subordinate in payment to a

e landiord’s claim for rent which under Virgmia

law. is secured by a lien “upon the debtor’s

_ property.

(2) In holding that a landlord's lien ‘for rent

under Virginia law upon per sonal property on the

leased premises, even without levy of distress or

+ 606949-—44—— 2

eae 6

; : . (a3

attachment, entitles the landlord to priority out of

the proceeds of such ‘property, as ieee ae a’ debt

| due to the United States. ~

(3) In failing ‘to hold that under R. S. 3466

and this Court’s decisions thereunder, the debt due

the United Stages is entitled to priority over the ..

claim of the landlord for rent and the.claim of the

City of Danville for taxes. oe

= SUMMARY OF ARGUMENT

i Ss Ri ee eee

Gee Sot eae

This Court has 1 never sustained, over the sg

ity conferred upon the United States by R.

e466, the claim of any creditor net having toate to ~

. or possession of the property: ‘as to Which he -as-

serts priority, Of. Thelusson v, Smith, 2 Wheat.

—. $96. Tt has consister itly deel: red that toy pre —

the lien must at. least be ‘specific and perfected.’

Upon. ani ilvsis’ of the attributes give n by Vi iter

law to the statutory hen here asserted, is

xpparent that the lien is ne more “spec ae sh

perfected than those. in’ New York v. Maclay,

\ 288 U. S. 290), and: ee States v.. Texas, 314 -

ise .S. 480, which we re he i inferior to the claim of

i. the United States. Thus neither the amount se-

cured by the landtyrd® s Tien nor the property to

/ which it attaches’ is specific, and the heti_is*en-

fore eable’ by eee judicial in character.

il ‘i ; we :

' The same ‘codgider ations attach to the vity’ s tax

lien. That tien. like

rgsaeissh ea E

‘wise fails to attach to specific

arora e.

eadl

° 7

‘possession, amounts

property. and c@gnot take precedence over the

‘priority of the United States. _ A

III

_A state statute declaring the order of priority

N :

of payment of various classes of ereditors cannot

disregard the command of R. S. 3466. We submit

that a state cannot achieve the same results by -

indirection merely by using the terminology of

hem: —Phe'declaration-of-a-statut ery Hen, sieh-as

those here asserted, which is neither specifie nor

perfected and involves no transfer of title or:

effect to no more than a

declaration by thefstafe of the order of priority,

which cannot ovefride the contrary priory pre-

seribed by R.S. JA66.

| ARGUMENT 7

Ind roduetory— Section +3466 of the Revised,

Statutes (31 U. S.. C. 191), infra, p. 29, pro-

vides: thatthe debts due to the United: States

‘shali be first Satistie ol “wit never. any person ms |

. debted ‘to the United States, “not having suffi-

cient. property to pay all his debts, makes a

voluntary. assignme nt ‘thereof.’’* Here, Mrs.

Roman, bei ing 2 debtor to the United States and

“hot having sufficient property: to pay aul her

2 This provision was eon from Section 5 of the Ts of

March 3, 1797 (1 Stat. 515) and Section 65 of the Act of

March 2, 1799 (1 Stat. 676). For earlier legislation on the

subject, see Price v. United States, 269 U.S. 482. 500-501,

| debts, made a voluntary: assignment of her Prop

erty for the benefit of creditors.’ ‘

While recognizing that the ee of the United.

States to priority under R. S. 3466 became fixed

at the date of ‘the as snnbanecetst: (United States v

Oklahoma, 261 U. S. 253, 260); ang that other

claimants; if not preferred at that tink, could not

thereafter obtain a. preference, (New York vy.

Maclay, 288 U. S. 290, 293; United States v.’:

Texas, 314 U. S..480, 486), the ®ourt below held .

that under Virginia law a landlord has a “fixed

and specific’ lien for six months’ rent. against all

property of the tenaht located onthe leased se 3

ises, irrespective of .attachment or distraint ; *

that the trustees took the a assighor’s_ property sub-

ject to that lien, which continued to attach to the:

-» proceeds of the property; and that the landlord.

_ Was entitled to payment out of such proceeds ahead

of the United’ States. The court further held:

that the claim of the City of Danville for taxes

‘It was not questioned at any mage of the proceedings be-:

_low that the ¢ laims of che Unite-* States. here involved. (see

fn. 1, xwpra, p.3) are * ‘debts due to the United. States” within:

_the meaning of R. S. 3466, both in respect of the gaxes (Price

ve United States, 269 Ul S. 492) and the F al Housing

Administration claims (/’nited States v. Summerlin, 310

“UL S/ 414: United Statex v. Emory; 314 U.S. 423). Nor was

it questioned that the nature of the assignment was such as to

‘render R. S..5466 applicable: |

" * Since the doctrine of relation back may not be applied i in

derogation of R.-S. 3466 (New York v. Maclay, 288 U.S . 290,

293), the court.below correctly held that the landlerd’s subse-

quent distieind and attachment added nothing to the claims

of the landlord and the city vis-a-vis the U —* “Mates

(R. 38).

ao eres g.. - A

was, as a matter of Virginia law, superior to the

-landlord’s claim, butt-found it_unnecessary to

determine whether the city’s claim was superior

to that of the United States, since the landlord's

claim would exhaust all available funds.” Cf. Spo-

kan County v. United States, 279 U.S. 80, 91.

We Submit that the decision of the court below,

‘stbordinating the claim: of the United States to

“those of -the landlord and municipality, is é¢on-

_trary to the decisions of this Court in. Thelasson

oe Smith, 2 Wheat. 396; New York v. Maclay, 288..

U. S. 290; and United States v. Teaas, 314 U.S

480. We further submit that the decision® ee a

state court as to the type of lien which a land-

‘lord possesses’ utider state law. and the. rights’

~ which he acquires thereby, is not controlling in

‘determining whether the lien is superior to the

priority conferred on the-United States by R..S.

3466. Field: ¥. United States, 9 Pet. 182, 201;

United States Vv. Oklahoma, 261 U. 8. gy. P60:

Spokane County y. United States: 279 U.S. 80,

- 90; cf. Michigan v. United States, 317 U.S. 338,

340. Wat ay ee we

“UNDER THE APPLICABLE DECISIONS OF THIS COURT,

THE DEBT DUE a) THE UNITED STATES ~* is ENTITL ED

TO. PRIORITY IN PAYMENT OVER THE LANDLORD'S

LIEN

In considering the scope of the priority’ con:

_ ferred upon the United, States by Section 65 of the

"Act of March 2, 1799 (which thereafter became

_ S. 3466),. thi is Court early held thie United .

States entitled ic _priority over a eveditor having

‘an earlier judgment lien, and declared that the -

words of the ‘statute ‘are as general as any which -

could, have been used”” and-give the Government’s

claim preference over ‘fall debts’ due [from a

debtor of the United States] to individuals, what-

ever may be iheir dignity. suk Thelusson v. Smith,

2 Wheat. 396, 425; see also United States v. Terag, |

314 U.S. 480, 484. The only exception which the

Theli

of the

because it had in good faith been conveyed, mort-

gaged, or seized under a fie rt : focias before the

preference of the United States accrued, could be

sald to se no longer part: of ~. the debtor’ 's estate

Cibid.).- ' .

Other cases have sisoordinsty held. that a mort-

son case recognized to the absolute priority

United States w was as teeproperty which,

gagee and i &® prior attaching. credjtor “are enti-

‘tled to. prior satisfaction out of the mortgaged or

attac hed property, These exceptions ‘are’ based ,

upon the theory that there has been an ac tual con- -

ve yane e or-divestment of” the mortgaged: « ir at-

tae he d property of the debtor prior to the acerual

of the’ Gover nment’s pre ference. /See Conard vy.

£2 ‘onuerd v. Atlantic Janeen 4 ompany, 1 Pet. 336;

Conard v. Nicoll, 4 Pet. 291: Conard vy. Pacifilé Insurance Co.,

6 Pet. 262: see Unite d Ntates v. F100 .3 Cranech 73. 90: Field ,

United Nfats N« 9 Pet. 182, VOL: Bre ntv. Bank of Wushing-

fon, TO Pet. 596, 611-6lz: Savings Soeite ty wv. Multnomah

County, 169 U.S. 421, 428... mete .

“Prince Vv. Bartlett, 8 Cranch 431: Beaston v. Farmers’

Bank, 12 Pet. 102, 135-136; United States v. Canal-Bank,

Fed. Cas. No. TN6 (D. Me. S44). | <

— Thelusson v. Smith n

ary os : Ll

Atlantic Insurance Co. Pet. 286, 441; Brent v.

Bank of W ashington,” 10 Pet. 596, 612; Beaston

v. Farmers’ Bank, 12 Pet. 102, 136; Savings So- |

ciety Vv. Multnomah ¢ ‘ounty, 169 U. S. 421, 428.

In New York v. Maclay, 288 U. S. 290; 293-294,

the niortgage cases were so explained, and doubt

was @xpressed whether the result would be the

same in jurisdictions where a mortgage. is regarded

as creating.a hen only. And in United. States v.

Texas, 314 U.S. 480, 484, 485, 486, the mortgage

cases were described as ‘fan exception’? to the

command of R. 8. 3466 whose ‘current vitality”

was considered open to question.’

* Some early cireuit court: decisions have suggested that

ay have been overruled or disapproved

by Conard v. AtlanXe Insurance Co.,1 Pet. 386, and Brent

LV. Bank of Washingtau, 10 Pet. 596. See Dudley's Case,

. Fed. Cas..No. 4114 at pp. 1154-1155 CE. D. Pa. 1842)5°

. United States vy. Duncan, Fed, Cas. No. 15003 at pp. 935-936

(D. Ill. 1850); ef. Postmaster Gene ral Nv. Robbins, Fed. Cas.

No, 11214 at p, 1127 (D. Me. 1829). Neither case Is incon:

-ststent with the Zhe/usson case.. The ¢ 'onard case, — h af-

firmed 4 decision at cirenit. | Aitentie Tnx, Co. ¥. €C onard,

Fed. ‘Cas. No. 627 (D. Pa. 1827)) by Mr. Juitive Wash-

ington, the author of the opinion in Thelusson.v. Sanith, .

involved an assignment of bills of lading which was held

operative te pass equitable title to the goods and thus to place

the creditor in the position of a mortgagee. The Brent case

-Was a suit by executors of the debtor to compel a creditor.

bank to transfer to them’ on its books, Shares of its stock

owned by the debtor ‘The decision was rested on the power

of the bank under its charter to refuse to transfer the stock

until the debts due it were paid: the bank was accordingly in

a position analegous to thet of a lrenor in possession, and

the priority ef the U nited States wes held not to attach .

because the stock nevér came into the hands of the debtor's

executors,

——

12 ca

_ Whatever may be the rule as to mortgages, if

regarded as conveyances, this Court has consist-

ently reserved the question whether a specific, per-

fected lien, actompanied by possession, can pre-

vail “over the ‘Government’s statutory priority.

Conard vy. Atlantie Insurance Co., 1 ‘Pet. 386 ;

Spokane County v. United States, 279 U- S. 80,

91; New York.v. Maclay, 288 U.S. 290; United

States v..Tezas, 314 U. 8. 480. It has never

sustained, against the priority of the United:

Nothing said in either case casts doubt upon the decision

in Thelusson ¥. Smith. The Brent case merely reserves the |

question’ whether the Government's ‘priority will defeat a

general.or specific lien. And the discussion in the Conard

case is addressed primarily to the contention. there advanced,

that the statutory priority of the United States is “superior —

- toany lien; and even to-an actual mortgage” (1 Pet. at p. 441).

. Thelusson ¥. Smith was held not to support that broad con-

- tention, the Court pointing out that the Thelusson case it-

self reserved, the case of a mortgage, and adding that “it. has

hever yet been decided by this court, that the priority of the

United States wili divest a specific lien, attached to a thing,

whether it be accompanied by: possesion or tiot” (1 Pet. at p.

441). In support of its further statement (p. 442) that “be-

fore such decision is made, it will deserve very grave delibera-

tion,” the Court cited Nathan vy. (riles, 5 Taunt. 558, 574, a case

of a lienor in possession, and the only illustrations which it

gave of nonpossessory liens which might possibly override the

priority of the United States were certain maritime. liens

not governed by common-law rules (see Vandewater vy. Mills,

19 How. 82, 89; IT Jones, Liens, secs. 1676 et seq.) and en-

titled in admiralty to priority even over an earlier mortgage

(The Lillie Laurié, 4 Fed. 219, 291. (C. C. E. Tex.)). In

short, the proposition whose decision would “deserve very —

-grave deliberatia®” was that no lien short of a conveyance

would withstand the priority of the United’ States.

States, an asserted lien created by state statute

and supported by neither title ner possession. In

recent years, the Court-has. consistently upheld the

priority of the United States over such statutory.

liens. Spokane County v. United States, 279 U.S

0; New York.v. Maclay, 288 U. S. 290; United

States v-Knott, 298 -U. S. 544: United States Vv.

Teras, 314 0.8. 480, While it has done so on the

ground that the liens there in question were not

‘“specifie and, perfected,” one consideration which

has been given great weight in reaching that con-

clusion has-been the wanit of title or possession in

the creditor. Thus, in New York vy. Maclay, 288

U.S. 290, 293-294, the lien for’ New York state’ :

franehise taxes was held subordinate ‘‘untess

seizure by a marshal or somé other equivalent act -

has made the lien specifi@ and brought ‘about a

change of title. or. possession.” And in United

‘States v. Te ras, r U. S. 480, 188. the Court ruled

that ‘Texas’ lien for taxes could not ‘prevail over

the federal claim’ smee the state law “did not of

its own foree divest nae taxpayer of either title or

“possession. ’ (See \f . 14, infra, p. 24-)

We submit that: ce landlord’s Jien here as-.

‘serted fails to satisfy the requirement of these

cases. Tt does niet purport to divest the debtor

of title er possession, And it does not even meet -

the eriteria of a. “specific and perfected lien’!

which this Court has: announced ‘as'a sine qua non

to the lienor’s right to prevail. |

HOMO 94 3

. : ‘

“

In Ne ew York Vv. Maclay, 288, U.S. 290, the New

York corporate fr anchise tax, which under state —

law was-a lien upon all’ real and personal prop- |

erty of the corporation, superior to existing niort-

gages (New York Teeminal Co. Vv. Gaus, 204 N.Y.

512, 514 (1912) : Carey v. Keith, Ine., 25) N..Y°

216 (1929); ef. Marshell vy. New York, 2 254 U.S.

380, 383-384), and binding upon the. property in

the hands of subsequent purchase rs, was neverthe-

less held “not so perfec ted or specific as ‘to change

the rule of distvibution”? ander R:S; 3466, on the

eround, among others, that the, exact amount of:

the tax had not. been ascertained ‘so that the len

was inchoate «(288 U.S S. at 292-293): -The Court

expressly reserved the question, whether the

United States would be entitled to priority if the

lien were specific and perfected.’ Likewise, in

*The C ireuit Court of Appe als for the Second Cirenit had 3

also upheld the priority of: the. ‘Usited al

North River Coal co Wharf a ov. MeW chic Bros.. Ine..

ag F, (2d) O70. 981 ) saying: gS : ‘ '

While it Is clear that in the present, case the t taxes’ die

the state of New: York prior to the receivership were a

general Lien upon the real‘and persons property of the

defendant at the time wheti the receivers were appointed,

the question is not whether these taxes are statutor y liens

of some sozt. but whethér they are such liens as the courts

of-the United States have recognized as entetled to pri-

ority Over-c limes due the government.

Bo Kis ey. * * * 3

In view of the sweeping: provis lons of Rev. St. § 3466.

BLU. S. ¢. ALS 197), it seemscuntlike ly that it was in-

te ee to relies the mere statutery. dec ‘laration by a state

of a genera] liewto give the latter.a preference-over debts

and taxes dine the govarnme nt. Neithér the decisions

a —

United States y. Knott, 298 U.S. 544, the claim

of the United States was held superior as) te

securities deposited with the State ‘Treasurer of’

Florida to secure claims of creditors there. Al-

though specific property was thus outside the

debtor's vosséssion and pledged to secure a par-—

ticular class of claims, the lien was held not to be-

*Speeific and perfected” because the. identity of

‘the- creditors entitled to resort to the -see ubities

Was not esti blished at the time when the priority

of the United States attached. :

Cert: inity as to the amount due, however . as not

} enough. Even where the amount of the tax had

been definitely ascertained and liquidated prior

to the accrual of the priority of the United

States, the Court of Appeals of New York, in

Matter of Lincoln Chair & Novelty Co., 274 N.Y.

393, 308 (1997), held that the tax lien remained

gene) ral and unperfected insofar as .R. S. 5466 was

concerned, because ho specific property Had been.

se ized oY appropriated and. set apart from the

general property of the debtor for the satisfae-

tion of the tax. (See also People of New York

v. United States, 106 Be (2d) 210, 212.(C. C. A.

Ye Oieexor VI Shubert Theatre Corps 7 . F. Supp.

969 4S. TL: N. ea, And in U wited Stutes Vv.

J'crus uu. t U.S. 480, w hile the C our emphasized

Ee he es i eo.

of the Su preme Curt nor se ig ifie dl prior ities allowed

third? parties under Rev. St. $3186 as ame nded 42

&. yee el ici 4 section 3466 is subject

torany stich Timitation, hi tatth ott Ge.

the fact that the amount of the gasoline tax liabil-

ity secured by the lien w as “unliquidated and un.

certain,”’ it also pointed out (314 U. S. 450, 487,

488) that the. property subject tu the. lien Was”

“neither spec ifie nor constant” and that the lien

was not se If. ~exec uting » and ‘could net be enforced

without the assistance of the [state] courts.

We submit that the landlowd’s lien here asserted

is insufficiently spec ifie to prevail under the rule

of these cases. The Vi irginia Code authorizes. a

landlord te levy: distress for ‘six months’ rent

upon “any goods of the lessee * *) * found (a)

the preniises?” or removed from the ‘mm not more

than 30 days. prior to the le ‘vy (Va. Code of 19336,

‘Seetions 5519, 5523: - see Appendix, infra, pp.

29-31). In addition, it provides that the goods of

the: tenant on leased premises in a city or town

(as was the case here) may not be re moved by a

lienor or purchaser, nor taken under Je gal proe-

eSS, save “on the terms of paving -to the person

entitled to the revit so nine h as Is Wearrear, and

securing to him so much as. is te’ become due,’

not to exceed six months’ rent.(Va. Code: See tion

2 “4; Appendix thfra, p. 31).

Resign ooZ4 appears as Sections 5 and 6 of ¢ ‘hapter’ 15

‘of the Act of 1748 (Vj irginia Laws. 1752, p. 292). and has —

continued in the successive revisions of the Vi Inginia Code,.’

‘Va. Rey. Code (1819), p. fis: Va. Code (1887) see, 27 2 : 2"

Code (1919) sec, 5524: Va. Code (1942) see, 5524. It was

derived from the Act of & Annee. 14; see. 1. See 1 Va. Rey.

; oor (1819) p. 448: American Ere hang: Bank v. Goodlee R..

Corp., 185 V: a. 204, 212-215 (1923): In its original form, it

> £93 a4 .

- o

17 - ee 1

‘The Saprenie” Comrt—atAppeats—ot} ee

held that Section 5524 creates a hen, Htfective “ws

wit the date the Tenancy cectiine need, Without tlie

“HeCESSITY, for any further proceeding | by distress,

attachment, or otherwise, That. holding’ om a

“proposition wf state Taw is, of ectrsé., controlling .

here, But the question Whether the lien is suf

ficiently: * speenic and perfected” to override the

statutory prints of the United, States is a ques

thom of Tederal law as to which the characteriza

Slow given by the state court eaniiot control. The

states may net establish aspriority in conflict. with

that.. Jpreserit bed by Seetion 4b, Kicld yt nited

States, 9 Pet. 182, 201 Uudted State SV, Oklahoma,

“961. UL. 8. 253, ZOU; “Spokane ho ounty v, United

States; 279 U.S. 80, 90; United States v, Emory,

314 U.S. $930 425-427 - éf, Michigan v United —

Shates, si ie Oat ~. ON. BAO: ANcomrdinigt iV, we? look

not te the characterization eiven the dien by the

Virginia court in the present ease, but to the

actual rights and powers conferred by the lien

upon — as déclared: by the state courts.

applied only whie it oly prcinn | Were taken oni “execution o>

any prete beecet whiatsoeyet (+! it word “or” Whic i; «aloes hot.

appear in the Enwlish statute. has Peel suid to be a type

graphical error, American Fa se Bank vo Goodlee R.

Corp. super 244). Die Code ¢ 4 ISS7 extends dhe landlord ie

right to cases where a lien is asserted ona tenant ‘Ss Property .

and in the revision of 119 a prohibition against removal off

— goods by “purchasers” awwas expressly incluileds the re}

lasers’ note stating that this Wa thought ie re ‘ly. ta e 5 sic “fh

, ee arly the effect of the Section as it stood, : we.

pe 2

When so measured, the lien lac ks specific ity in

se ae respec ts:

The le hi secured. ‘s not “specific—The lien

se ae hot for the rent dine during a particular

SIX nidnths’ 5 period,. but) for rent) which -may

happen to be due at or after the time when the

lien is asserted (see W ades \, Figgatt, 7 (9 Va. 575,

582 (1S81)). and where the disse tion of the lien

ist hot based i pon the Je ‘vy Zoe il distress, that time

is selected. by someone. other than the “landlord.

The amount of the debte secured is not specific

either; there may be dispute as to the rate of

rental prescribed (co. 4, Hayan v. Callas, 139 Va.

137 (19249), and in-any event the amount secured

will depend upon whether at the time the lien is

" usse rted the tenane vy has terminated or will termi-

cain Within six menths of the date to. which the

rent has been fully paid. Moreover, the amount of .

the debt see ure “d by the hes oF for whie h distraint

may be ‘made mia be subject, prior to distraint, to.

the right of ‘the tenant toa se t-off., Ch Hancock vy.

Whitehall, Kk fe, Lo. hoo Va. 443, 447 (1902),

“Thus, ; as | in U7 Ce States vo Te ras, o14 U.S. 480,

487, 488, the wnount of the de! at for which the lien

is a security “is: left: te “determination by the

courts 7; theslien ‘could not become specific until

* thes exact amount . of the. [4 lebt; due had bee ‘nh

determined.’ :

2.° Fhe yoods stibject to the lien are not Spe-

cifte.—The len extends to the tenait'’s mterest in

“whiatever goods he may bring onto the pretfises, in-

*cludfag goods brought there after the beginning of

i. ¢ pas a

EE Le ne ee ee ee

a oti

RMN Ta eRe y's as

Ray peel

« =

the tenancy (cf. Dinge ss-Rnm Coal Co. NV. Draper

Eagle Coal Co., 108 W. Va. 37 (1929) )—a matter

— distrain within 30 days asf th

es yo bist 275 (1933).

as to which the landlord usually has neither knowl-

edge nor control. it does net prevail over a pur-

_¢hasé-money mortgage or any other hen which

attached before the goods were brought on the”

premises. Va. Code, Sees, 5923-9924, - Appendix, i

‘ds

‘mfra, pp: 380-32. ‘The Vi inguin isfatute prohibits re-'

moval only by a iener or purchaser; nothing in

it would appear to prevent the tenant, or any

other person, from removing whatever goods he’

may choose. When goods gre removed from the

prenises, whether i in violation of the. statute or

hot, It dees not appear that the landiord ean fol-

“low the goods.» In any event, the landlord can

neither seize nor sell the tenant's voorls save by

the process of distrauit provided by the statutes

10 TE Mas been indic ated th: at property sod hy a merchant, .

in the ardjnary course of busine sStis not subject to this pro’

vision. American. Evchang: Bank v. Qoedlee Ro Corp. V8

Va. 204, 292. (19233. ° R 2

" The landlord may. under ee provisions of the statute,

woods had not been removed

(Va. Code, See. 3523)—a right which: exists regardless of

whether the removal of the-geods was in v iolation of See tien

5524. But onee the goods have been removed from the

premises, whether or not tlie right of cfistraint remains: the.

landlord cannot prevail over an attaching creditor. Gear r's

Admer v. Harman's Farr, 44 Va. 130 1846); Moshy v.

Leeds, 3’Call. 439 (7 Vu. 380) (1803) :. Dime, De posit Bank

“y. Wescott, 113 Va. 567 (1912). Aside from the sight of

distraint, his only remedy would appear to he a personal %

action for damages ayainst a purchaser or henor who removed -

> goods in violation of Sec, 5524 American Erchanae: Bank ~.

Goodler, Ry Corp., WB5 Va, 204 (1923): Ay Ny x. Worsham, -

_ ing

(Va. ( ‘ode. Sees. AI9-5523- witch: isa “proceed-

# >

judicial in * \* * Character.’

Wickham vy. Richmond Spike Co., 107 Va. 44, 49°

(1907). gies distress warrant is returnable in

court (Va. Code, See, DAS), and the tenant has

the opportunity to make any defe ‘nse to the dis- -/

tramt (See, 6519). and thus to secure = il trial

of the amount of rental due (Mogan vo Callas,

. 139 Val 137 (1924) ; of. Curt. inv, te pha Va.

"197, 201 (1925)) and to elaim ‘ny right of set-off —

4 Hancock vo W hitehall, Ete. Co., 100 Va. 443, 447

i, W902) ). Only suffies went goods Inay be distrained.

to satisfy. the re nt justly believed due. and the ten-

"apt has an action for damages, comparable to an

action te W trespass, for EXCESSIVE distraint® (Va.

Code, See.5783 ; Mishbirne vy. Bn ldove, OL Va.-:

M48 (1895); ef. Va. Code, See. 5527), this indicat.

ing that: the Hien’is inchoate ‘and net speemic. and

perfeetedh ; ‘

It is apparent that the property subject to the =

leon here tnyelved is tio mere specific and con-

stant ¢ that Was the state lien one the “property

devoted to or tised in ithe debtor's | business asa.

distributor” whie - Was Involved.in United States

Teas, 314 U.S. 480, 487. The. amount of the

debt secured is net fixed. “And not until distraint

by “the a “does the lien. aitach to Specified

goods Ma -specific amount so as to enable ‘the

ess to satisfy his claim out,of them. “Prior

to distraint, the * ‘lien’ is merely a right to pre--

vent removal of the goods from the premises by

certain classes of persons, and a right under state ——

law to priority in distribution so long as the goods.

remain‘on the premises. In short, as'in United

States v. Texas, 314 U. S. 480, 488, the lien in

question ‘“‘did pot of its own force divest the

[debtor ] of either title or possession * * *

and it could not be enforced without the assist-

ance of the courts.” Until such enforcement, it

amounts to no more than a state statutory declara-

tion “as. to the order of payment of creditors,

which cannot override the inconsistent declara-

tion of R. S. 3466.”

Thus, the landlord’s lien conferred by Vinsinin

law does not appear to differ essentially from the”

» The fact that a landlord’s lien, where created by state

law, i is considered, to come within section “67f. of the Bank-

ruptey Act, thereby taking ahead of any of the priorities given

by section 64a thereof (e. g., Jn re Brannon, 62 F. (2d) 959

' (C.C. A. 5) ; Bradford v. Graham, 287 Fed. 686 (C.C. A. 4);

Grant Co. v. Snead, 37 F. (2d) 705 (C. C. A. 4)), has no sig-

~ nificance in a proceeding under R. S. 3466. Under the bank-

ruptcy statute, the claims of the United States for taxes and

. other debts are, subordinate under section 67f of thit statute

to those of the states or individuals secured by general liens.

U.S. Fo & G. Co.v. Sweeney, 80 0 F. (2d) 235 (C. (. A. 8);

Claude D. Reese, Ine,x, United States, 7 5 F. (2d) 9(CICLA

5) ; cf. City of New, Orleans v. Harrell, 184 F. (2d) 399, 402

(C. C. A. 5). General liens, of course, are subordinate to

_ the priority of the United States under R. S. 3466. Spokane

“Caunty v. United States, 279 U.S. 80; New York v. Maf§ay, —

288 U.S. 290; United St v. Texas, 314 U.S. 480; Umtid

States v. ya 131 F. (2d) 466, 4693-470 (C. C. A. 7). The

“twa Acts are not in pari materia. United States v. Emory,

. 3d Ss S. 423, 498-4

Te)

statutory’ lien for ‘corporation pate taxes con-.

sidered by this Court in New York v. Maclay, 288 .

U.'S. 290, -or from the lien for gasoline taxes

involved in U nited States v. Texas, 314 U.S. 480.

In both those cases, the state taxes,-as a matter of

state law, were paramount and superior to. all

other lieris, including the lien created by pre-.

existing mortgages. They failed i in the contest of

priority with the United States because, as was

- pointed out in the latter case, they did not of their

‘own force divest the t taxpayer of either title or —

possession, or because they were not so “ specific

and pe rfected” against an identifiable chattel as

in éffect to divest the property from the debtor’s

estate. We believe: that similar considerations

here obtain to subordinate the Virginia statutory |

lien. - ene

eka eee! ° | |

THE LIEN OF THE CITY OF DANVILLE FOR TAXES IS NOT

ENTITLED, TO PRIORITY AS AGAINST THE 58 es OF

THE UNITED STATES ‘ =

‘The Corporation Court of the City of Danville

“held-that the taxes due the City of Danville wer

a specific lien on the furniture and equipment .

superior to ‘the claim of the United States (R.-

(33434). The Supreme Court of Virginia did not

‘ decide whether this tax hen was as sufficiently ‘‘syie-

-cifie and perfected’ to override the claini of the

United States, since it found that ‘the landlord’s S

claim would exhaist the availabie fund (R. 43).

~~ long as they-remained on the prentises

.. eines 23

If, as we contend, this ruling: as to, the bindlond* Ss.

priority was error, the relative priorities of the

United States and the city become pertinent.

In awarding priority to the city, the Corpora-

tion Court apparently recognized that the munici-

pal tax confers alien ona specific chattel, capable

of following it wherever 1t may be,.only if specifi-

‘ally assessed on that chattel (Drewry v.. Baugh

and Sons, 150: Va. 394, 401 (1928) ; Chambers vy.

Higgins, 169 Va. 345, 351-352 (1937) ), and that |

otherwise the right. of the tax collector is mere ly

a right to distrain.” But-it does not appear that

each item of furniture was ‘assessed’ separately,

The holding of. the Corporation Court was, : by -

‘analogy to the requirement of description in a.

chattel mortgage (see Ww liamson Vv. Payne, 103

Va. 591 (1905) ), that assessment of the furni-

ture cand equipment as a unit’ was sufficient. to.

establish a specific lien upon them as a unit ‘‘so

” * =

‘Had they been divided and removed therefrom tio

doubt ° different results would’ have’ followed”? ;

Pee : |

’ This right is made superior ob a mortgage lien by Sec-

tion }S1 of the Va. Tax Code, but is inferior to the hen-of an

- execution.. Drewry v. Baugh and Sons, 150 Va. 394. (1928).

It may be noted that both the landlord and the city thought

that judicial .proceedings were necessary to make their liens

specific: and perfected. Both distrained or attached (see

Statement, supra, p. 4). Indeed, the landlord claimed pri-

ority solely because of the levy of the attachment and dis stress

warrant (R. 22): .

We submit that such ‘a lien, accompanied by -

neither title nor possession, which attaches to the

I—+

furniture and equipment only for so long as it

remains om the premises as a unit, is not, as a

matter of federal law, s ciently’ specific and per-

fected to defeat the priotity of the United States.

The lien for the city’s taxes appears to be simi-

lar m veneral character to the lien for state taxes

He consider red in New York v. Maclay, 288 U. S. 290,

(1934). - ? A

and ‘United States v. Texas, 314.U. 8. 480, which

were held to be subordinate to the Federal Gov-

ernment’s claim (see pp. 13, 14, 15-16, 18, 20-22,

supra).*

Ill -

RECOGNIZING LIENS OF THE CHARACTER INVOLVED/IN

THE INSTANT ‘CASE AS SUPERIOR TO THE PRIORITY

_CONFERRED ON PHE UNITED STATES BY BR. 8. 3466 .

WOULD. ‘IMPROPERLY PERMIT STATES TO SUBSTITUTE

“THEIR OWN PRIORITY SCHEME FOR THAT DIREC PED

“RY GONGRESS

_-As this Court reaffirmed in United States v.

Emory, 314 U.S. 423, 426, the purpose of Section

3466 is ‘to secure,adequate public revenues to sus-

™ State courts have recognized that state statutory liens

for taxes, when unaccompanied by a. change of title or Bape

‘sion, must yield to the priority established by R. S. 3466.

West Coast Power Co. v.. So. Kansas Gas C 0., 20 at Ch.

, 130, 131 (1934); Matter of: Lineoln Chair & Vove Ity, Cé.,

- 974. N. Y. 353 (1937) ; Decker v. Decker Building Material Co.,

118 N. J. Eq. 177, 179 (1935) ; Spokane Merchants’ Ass'n v.

State, 15 Wash. (2d) 186, 188-189 (1942) ; ef. 7° ropical P rint-

ing Co, v, Union-Lithe’ Guaranfec Co., 180 La. 702, 730-732

tain the publie burden’? (United States v. State

~~ Bank of North Carolina, 6 Pet. 29, 35), and it is |

"> to be construed liberally i in order to effectuate that

purpose (Bramwell ¥. U. S. Fidelity & Guaranty

Co., 2609 U.S. 483, 487 ). This Court likewise has

repeatedly stated that ‘states are without power to_

establish a priority in conflict with that prescribed

by Section 3466 (Field v. United States, 9 Pet.

182, 201; United States v. Oklahoma, 261 U. S.

253,.260; Spokane County v. United States, 279

U. S..80, 90; ef. Michigan v. United States, 317 -

U.S. 338, 340). The dee ‘ision below, we submit,

by substituting the state order-of priority of pay-

‘ment for that éstablished by R. 8S. 3466, reaéhes a

result at Variance with the imperative language

of that Section and the controlling, deci ‘isions of |

this Court. oe

It is, of course, clear that should-a state statu-

tory lien, unaceompanied by either title or pos-

“session, be held superior to'a claim of the United

| States, it would be possible for a-state, by the

simple expedient of characterizing certain classes

of claims ag liens, to substitute its own conception

_ of priority: in cases of insolvency for that of Con-

, gress, ‘Attempts of states to. procure prior :pay-

9? ment of “their taxes, in this manner have been

' rejected’ by this’ ‘Court in the Spokane County, -

Maclay, and Tezas cases. (See also fi. 14, supra;

p. 24.) The results in those cases accord vith

the repeated statements of this Court that the

benefits of a federal statute may. not. be evaded or

_ denied by state statutes or common-law rules. E. 4.,

‘Sola Electric Co. v. Jeffe rson Co., 317 U. S, 173, |

176; Prudence Corp. v. Geist, 316 U. S. 89, 95.

plt is only when. the debtor bee -omes: insolvent’

that a statutory lien assumes stature. The lienee

then .becomes entitled to priority in payment out

of the assets charged with the lien. Piedmont

Corp. V. Gainesville & NW. R. Co., 30 F. (2d)

for priority of payme nt te certain classes of debts

acqomplishes the same ultimate result as a statu-

tory tien Not gtate | laws grating. priority in

payment must yield te the. priority conferred by

R. S,. 3466. We submit that a state cannot

achieve the same result by indirection. Whether

it uses the terminology of lien, or that of prior-

ity in distribution, a state cannot by mere statu-

tory declaration override the command of R. S.

3466 as to the priority of the. United States dver

other creditors.’

This sslceinhe apples to the landlord's ‘lien

here in question. In those states whieh follow

the common-law rule, no len. arises wutil dis-

| ar ttn

* Thus, the atte mipts of states to prefer wage clainis ‘by a

statutory de« ‘laration of priority (Emory v VSS. Sames Dis

tiller, WBS. W. (20) S18 (Mo. Ct. of Apps. T840). reversed,

Unite States v, Bmory, Se, S. 425) or by statutory lien

(Erasf vv. GQuarantes Millivork. dnc 2) Wash. 195 (1939),

overruled sud xen? io, “Spokane Merchants Ass'n y. Ny ate, 15

Wash. (2) 186) (142), were alike unsuccessful in view of |

+ & S"3H

“

°7

traint, acigntiog of course effects a change | in pos-

session.’ ‘In other: states, by statutory tpse dizit,

ite beialieks has a paramount lien by reason’ of -

the relationship of landlord and tenant alone.

oWe d6 not. perceive that -a ‘state statute which

merely provides that such a lien shall be para-

mount to all.other vlaims (with the, usual exe ep-

tion of state and municipal tax liens) changes the /-

inherent nature of the claim or raises its ch: arac-

ter to that of ; L specific and- perfected he 1, eH-

titled to prevail over the priority of the: United

States.” Moreover, it may frequently result, as in

the instant case, in enabling. state or municipal

taxes otherwise uncollectible, owing to -the imsol-

vent: condition of the debtor and the priority | pie

accorded by R. S.°3466, to be paid in- full. ie

siete Vv. Chie- Mint Gum Co., 14 Del. Ch.

(1924 State v. WwW YRne, 134 Tex. 455, 471 Gag).

‘enn we maintain that -the state statu--~

tory liens here in question, Which are not specific,

and de hot divest the debtor of either ‘tithe or.

posses sion, are incapable of de ‘Teating the priority

“of the U nited States under R.. S. 3466, no matter

haw suc +h lie ‘us may be char acte rized as a matter

of state “Taw. -

As the court halow remarked (R. 40); “At Common biw .

the landlord had no lien upon any property of his tenant .as

security for rent prior to. the levy of a dist ras - Warrant. /

31 Am. Jur.. ‘Landlord and Tenant. See. abd a $61, and | .

authorities there igre Cf. In re Ww ext Sidi Pooper Co... /

(162 Fed. 110 (C.C. A bat

eee

| CONCLUSION :

—For-the ages saa “it-is respectfully EE

mitted that the decision below should ‘be reversed. .

| and the case remanded. with direction that the

debt due: the | United States be the first paid.

; - CHARL ES: Fany,

: Solicitor Gonz ral.

+ Secrcn ie Sura, |

Assistant Attorney General.

. D. L. Kreraer, -

‘siased Assistant tor the Attorney General.

4 PauL A. SWEENEY, fe

/ WALTER J. Cumminas, Jr.,. |

ce ; Si Attorneys.

_ SEPTEMBER 1944. Seb ee tee,

APPENDIX

‘—

Whenever -any person: indebted to the

United States is insolvent, or. whenever

‘ the estate of any deceased debtor, in. the

hands of the executors or administrators,

is insufficient to pay all the debts due from

the deceased, the debts due to the United

States shall be first satisfied; and the pri-

ority hereby established shal! extend as well

cieut property to pay all his debts, makes

a voluntary assignment thereof, or in

which the estate and effects of an abscond-

ing, concealed, ‘or absent debtor are. at-

tached by. precess of law, as ‘to cases in

Which an act of bankruptcy is committed.

"The Virginia Code of 1936 provides: .

§ 5519. REMEDY FOR RENT AND FOR USE AND

OCCUPATION.—Rent of every kind maybe

recovered by distress or action. A land-

‘the agreement is not by deed) a reasonable

satisfaction for the use and occupation of

lands; on the trial of which action, if any

arol demise, or any agreement (not’ being

= deed) whereon a cértain rent was. re-

tiff shall .not therefor. be non-suited, but

amount of his debt or damages. In any

(29) .

Section "3466 of ‘the. Revised Statutes of the |

to cases in which a debtor, not having suffi-

lord may also, by action, recover (where

served, shall appear in evidence, the plain-.

‘may use the, same.as evidence of the -

action for rent, or for ‘such use and occu-

pation, interest shall be allowed as on other

contracts. (Code 1887, § 2787.)

« * * * *

’

§ 5922. WHEN AND BY ‘WHOM DISTRESS

~MApE.—Rent may be distrained for within

five years from the time it) becomes due,

and not afterwards, whether the lease he

ended or not. Lhe distress shall be made.

-by-a constable, xheriff. or sergeant of the

county or city wherein the premises vield-

Ing the rent; or some Sart thereof, may’ be,

er the -g6ods liable to distress may ‘be.

Found, umder warrant) from a justice,

founded upon an affidavit of the ‘person

claiming the. rent; or his agent. that the

amount of money or other thing to be dis-.

-tramed: for (ta he. specified in the: affi-

dayit}, as he verily believes, is justly due

to the claimant for rent reserved upon

_contraet from the person of whom. it is _

claimed, (Code 1887... § 2790; 1902-34,

p. 664.) —. 3 ae 4 |

859237 ON WHAT Goon LEVIED—The

(distress may be levied on any goods of

the bessee, or his assignee, or undertenant:

found on the premises, or which may have |

been removed . therefrom Het more than

thirty days. A ‘levy within such thirty

days shall have like effect as if. the goods

levied on, had net boon removed from the -

leased premises. If -the goods of such —

lessee, assignee, or underfenant, . when

carried on the premises, are subject to a>

lien, which is valid agaist This creditors,

his interest only in’ such: geods Shall be

liable te such distress.” If any lien he

created thereon while they are upou the

leased — premises, cor within thiriy days

thereafter, they shall be liable to. distress,

_ but for not more than six months’ rent if

the | “premises are if a city er town, or in

any subdivision of suburban and other lands -

divided inte building lots for residential

purposes, or of premises anywhere’ used.

for residential’ purposes, and not for farm-— ,

ing, or agriculture, and for not more than

twelve months’ rent if the lands or prem-

Ises are used for farming or agriculture

_ Whether it) shall have acerued before or

after the creation -of the lien. -No other

goods shall be liahJe ‘to distress than such '

as are declared to be so liable in this see-

tion, nor shall the goods of the undertenant

he liable to als greater amount) tham sueh

undertenant owed the tenant at: rhe time the

distress was‘ lévied. * (Code 1887, 8 2791;

1922, 1) SB: 1932, p. 696.) of ;

85524. WHEN Goops’ NOT TO BE REMOVED

Pe dainiyenso5 4 PAYING SIX MONTHS’. RENTS LiRN

FOR TANES, TEVIES, AND MILITIA FINES NOT

arrrerep.—Tf, after the conusencement ‘of

any tenancy, a lien be obtained or created

by deed of, trust, mortgage, or otherwise,

upon the interest or projerty in goods on

premises: leased or rented, of any -person

liable for the ae, or the said goods be

scdd, the party. having such tien, or the

prirchaser of such goods, may repove them

. from the premises on the following terms,

and not otherwise, that is. te sav: On the

terms of paving to the person entitled to.

the renf so muchas ts in arrear, and: secur-

ing to him-so much as ‘is to become due,

What is so paid or secured. not being more

aitiaiethor than-six months’. rent if) the

premises ave in a eity or-toWn, or in any

subdivision of -suburban and’ other lands

‘divided. inte building lots for residential»

purposes, , or a pier anywhere used

. / !

7 . / . - |

. . .

for residential purposes, and not for farm-

ing or agriculture, and not being more alto

gether than twelve months’ rent, if the

lands or. premises are used for.farming or

agriculture. If the goods be taken under

legal process, the officer executing it shall,

out of the proceeds of the goods, make

such payment of what-is‘in arrear; and as

to what is to beeome due, he shi if sell a

sufficient portion of the goods on a credit

till then, taking from. the purchasers bonds,

-with good security, payable to the ‘person

sp entitled, and delivering ‘such bonds to .

him. If the goods be not taken under legal

process, such payment and security shall

‘be made and given before their removal.

Neither this nor the preceding section shall

affect any lien for taxes, levies, or militia

fines. SHON ie Ate tan, Ree )

For the purpose of this act a monthly

or weekly tenancy shall not be construed as

-a new lease for every month or week of

occupation of the premises by the tenant,

but his tenaney shall be considered as a

.continuance of his original lease so long as

he shall continue .to oceupy the property

without making any new written. lease:

(Code 1887, § 2792; 1922, p. 863; 1932,

bp. G36.) ~~ FUN ay

~ $5927, WHEN DISTRESS NOT UNLAWFUL

BECAUSE OF IRREGULARITY, ETC.—Where dis-

tress shall be made for rent justly due, and:

any irregularity or unlawful ‘act shall be

‘afterwards done by the party. distraining,

or his agent, the distress itself shall not be

deemed to be unlawful,arr the party mak-

ing it be therefore deemed a trespasser ab

initio; but the party aggrieved by such ir-

¥eularity or unlawful act may, by action;

recover full satisfaction’ for the speeial .

33 ; e . * , Z 3

damage he shall have sistained thereby. om

(Code 1887, °§ 2794.) _ ?

PROCESS OF SALE THEREUNDER.—It shall be

the duty of each officer who, under the

present law may execute warrants of dis-

tress, éxcept where it is otherwise provided

by law, to make return of his~action. and

proceedings upon such warrants as maybe

placed in his hands for.collection, and file

the same with the clerk of the circuit or

corporation court of his. county or city, a:

the case may be, except in the city of Rich-

mond the same shall be filed with the clerk

of the circuit court, or the ‘clerk of the law

_ and equity court, or the elerk of the’ law .

and equity court, part two, within, sixty

days after the same may. have come to

- his hands, upon the return of such warrant

it shall be the duty of such clerk to enter

the same upon the execution’ book ‘of his

office after the manner as now provided by

law as to executions issued by justices and

returned unsatisfied, and the said clerk shall

- preserve such warrant in his office as is now

provided as. to such unsatis.ied 2 teys has

If suck return shall show that a leyy has.’ |

been made and that. property levied on

remains ‘unsold, it shall be lawful for the

- . said clerk of the court in whose office such

return js filed to. issue a/writ of venditioni

exponas thereon just as if the said return

were upon a writ of fieri facias. (1897-8,

p..755; 1930, p. 456). ” ee

* * : * + par

‘§ 5783. FoR WRONGFUL DISTRESS, ETC.—If

property be distrained for any rent not.

due, or attached for any rent not accruing,

or taken under any attachment sued out

without good cause, the owner of such

{

property May, in an-action against the

party suing out the warrant of.distress or

attachment, recover damages for the wrong-—

ful seizure,sand also, if the property be

’ ( : D

sold, for the sale thereof: (Code 1887, .

* GOO es ae pease

a * Baw, ae : 4 *

> § 6518. WHEN AND. HOW FORTHCOMING

BOND MAY BE TAKEN; PROPERTY THEN RE-

MAINS IN .PEBTOR’S POSSESSION.—-The sheriff

or other officer levying-a writ of fieri facias,

or distress ‘warrant, may take from the —

. debtor a bond, with sufficient: surety, pay-

able to the creditor, reciting the service of

such writ or warrant, and the amount due

thereon (including his fee for taking the

bond, commissions,” and ‘other lawful

charges, if any), Wtth condition that the

property. shall be forthcoming atcthe day

and place of sale; whereupon, such prop-

erty may bé permitted to remain in the

possession and at the risk of the debtor.

(Code 1887, § 3617.) i ane

§ 6519. How TENANT JDNABLE 10. GIVE

FORTHCOMING BOND MAY HAVE DISTRESS WAR-

RANT. RETURNED TO COURT AND MAKE: De-

FENSE THERETO; WHEN OFFICER, IN* SUCH

_ CASE, TO TAKE POSSESSION OF PROPERTY LEVIED

ON ; ITS SALE, WHEN PERISHABLE OR EXPENSIVE

TO KEEP.—On affidavit by a ténatyt, whose

property has been levied on/ ynider a war-

/—~vant of distress, that he-is-unable to give

the bond required in the precedii seetion,

and thatdievhas a valid defense under see-

tion sixty-five hundred and twenty-two, the’

officer levying the Warrant shall permit the

property to remain in the possession and

at the risk of the tenant, and glial return

the warrant, together with’ the affidavit, ‘to.

Vand ype eee oat aaa : z /

”

| ae . +. we

‘the first day of the next term of the circuit

. courto€ his county or corporation court of

- * his-¢orporation, and thereupon the land-

lord after ten days”. notice in writing: to

the tenant, may make a motion before such

court for a judgmené for the amount of the

rent and for a sale of the property levied

on, as afoxesaid, to which motion the ‘ten-

ant may make such defense.as he is au- |”

thorized to make, under -section, sixty-five

hundred. and twenty-two, to ‘an’ action of

motion on the bond where one js given. Sie

the claimant of the rent, or some one fer:

_ him, shall. give bond with sufficient surety,

‘in a penalty double the value of the proy-

erty levied’ on, with condition to pay all”. -

_costs and damages whi¢gh may accrue to

any. one by reason Of his suing: out said

warrant, the officer shall take possession .

of the property and hold thé same subject

to the order of the court. If the property.

be perishable, or expensive to Keep, the

court, or the judge therepf in vacation, may

“order it to be sold, and on the final trial

of the cause, the-court shall dispose of the

property, or proceeds of sale, according to

the rights of the parties.” (Code 1887,

§ 3618; 1902-34, p. 839.) saz ih

U S GOVERNMENT PRINTING OFFice j94a6

£e

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