Transcript of Record — United States v. Scovil

SUPREME COURT OF THE UNITED STATES

OcTOBER TERM, 1953

No. —

UNITED STATES OF AMERICA, PETITIONER,

Vs.

R. P. SCOVIL, ET AL.

ON PETITION FOR A WRIT OF CERTIORARE TO THE SUPREME COURT

OF THE STATE OF SOUTH CAROLINA

INDEX

Original Print

Statement of Case 3 1

a)

Master’s Report 4 2

Order of Judge Baker 12 s

Exceptions 17 1]

Agreement 17 11

Clerk's certificate 18 11

Opinion 19 9

Clerk's certificate 22 14

Order extending time to file petition for writ of certiorari. ....-..--- 15

i 17

UNITED SVATES OF AMULRICA VS. RL PL SCOVIL 1

1-2 The State ot South Carolina in the Supreme Court

Appeal trom Greenville County

G. Badger Baker, Judge

UNitep Straies or AMERICA, APPELLANT-CLAIMANT.

is,

k. P. Scovin, RESPONDENT-CLAIMANT

In Re: Roy Bass Moron Co., puaintirr, vs. Dan Tassey, INc.,

DEFENDANT

TRANSCRIPT oF RECORD

JOHN C. WILLIAMS,

Attorney for Appellant,

Greenville, S.C.

LEATHERWOOD, WALKER, Topp, & MANN, ad

Attorneys for Respondent,

Greenville, S.C.

3 STA CEMENT OF CASE

As the result of an action filed in the Court of Common Pleas in

the County of Greenville, State of South Carolina, by the Roy Bass

Motor Company, €.cenville, South Carolina, a receiver was ap-

pointed by the Court on April 8, 1952, to take charge of the business

operated by che defendant and all of its assets. The receiver took

charge of said assets as of the day of his appointment and retained

possession of the premises in which said business was operated until

Mav 15, 1952.

In due time various ereditors filed claims with the receiver, one of

said creditors being Roger P. Seovil, owner of the premises occupied

by the insolvent corporation. The insolvent corporation was in pos-

session of the premises under a written lease with the Landlord,

Roger P. Seovil, said lease being dated October 12, 1949, and being

for the full term five vears thereafter and under the terms of said

lease, the Lessee was to pay rental on the basis of $250.00 per month,

payable in advance on the first day of exch suceessive month. The

rent tor the months of February, Mareh and April, 1952. being in

arrears and unpatd, the Landlord, on the 7th day of April, 1952,

distressed upon all assets of ssid corporation for the rent then in

arrears and, upon filing his elaum, the Landlord took the position

that said eum constituted a pro or Tien en the assets af the insolvent

corporation by reason of the distross devied against the assets of said

earporation for the nest rent dine

to

UNITED STATES OF AMIEIICA VS. RL PL SCOVIL

The United States of America, Appellant herein, likewise filed a

claim with the receiver, which claim consisted of the following tix

items:

(1) Income tax due by the insolvent corporation in the amoune

of $449.96, the assessment list therefor being reeeived by the Col-

lector of Internal Revenue, December 14, 1950, and filed in the B.

M. ©. Office for Greenville County on April 2, 1951.

4 (2) Payroll taxes in the amount of $2,895.33. assessimen!

list being received by the Colleetor on March 19, 1951. Mav

24, 1951, August 29, 1951, December 3, 1951. February 23, 1952 and

February 28, 1952, all of which were filed in the R' M. C. Offiee for

Greenville County on April 10,1952. Ineluded in the elaim for pay-

roll taxes is an item of $653.77 in connection with which the date of

receipt of assessment list by the collector was unavailable.

The Master before whom elaims were to be proven, filed a report

sustaining the claim of the Landlord as a prior lien, to which report

the United States of America filed exceptions. Said exceptions were

heard by the Honorable G. Badger Baker, Presiding Judge, Thir-

teenth Judicial Circuit, who on January 15, 1953, filed an order

holding that the claim of the Landlord had priority over the taxes

due the United States of America wit the exception of the item of

income taxes in the amount of $441.96 referred to as item (1) above.

The sole question raised by this appeal is as to priority between

the landlord's lien for rent and the lien of the United States of

America for taxes due by the insolvent Corporation.

Master's Reporr

The above entitled action was heretofore referred to me for the

purpose of determining the priority of various claims against the

defendant.

According to the testimony and stipulation entered into by the

interested parties, one R. P. Seovil is the owner of the building here-

tofore occupied by Dan Tassey, Ine. The corporation Was oceupy-

ing said property under a written lease providing for a rental of

Two Hundred and Fifty and No/106 ($250.00) Dollars per month.

The monthly instatlments of rent being pavable in advance on the

first of each month. The rent for te months of February, Mareh

and April, 1952 being in arrears and unpaid, the landlord pro-

5 ceeded on the 7th day of April, 1952 to distress upon the assets

of said corporation for said rent in arrears. On the following

day. to-wit: April 8, 1952 2 receiver for the defendant was appointed

by order of this Court. The receiver teak charge of the premises on

April 8, 1952 ond retained assession of the same until May 15, 1952

Consequently, the landlord filed with the reeeiver a claim for Seven

Hundred and Fifty snd no/100 ($750.00) Dollars as rent for the

~~

UNITED STATES OF AMERICA VS. R. FP. SCOVIL

months of Febrnarv, Mareh and April, 1952 taking the position

that saad elaim constitutes a prior lien on the assets of the corpora-

tion, juny to the cost of admoinistration. The landiord hkewise

filet a elam tor One Hundred, Twenty-Five and no 100 ($125.00)

Dollars as rent from May Ist to May 15, 1952 taking position that

this claim constituted a part of the cost of administration.

The landlord likewise made claim in the sum of Two Hundred

and no 100 ($200.00) Dollurs for expenses in cleaning and remov-

ing from said premises the debris, rubbish, ete. left upon the premises

when the same were vacated by the receiver, however, the landlord

has since reduced this claim to One hundred and no, 100 ($100.00)

Dolars, likewise the sum of Twenty-six and no 100 ($26.00) Dol-

lars for expenses in closing an opening in the roof oceasioned by the

receiver removing certain assets which had been attached to and

projected through the roof. Likewise, a claim in the amount of

Twenty-One and no 100 ($21.00) Dollars representing expenses

incurred in closing an opening in one of the walls in said building

occasioned by the reeciver removing from said wall certain fixtures

attached to and projecting into said wal!; likewise, the landlord

made further elaim in the amount of Forty and no/ 100 ($40.00)

Dollars for a laboratory whieh he had originally installed in said

building and which is now missing. However, the receiver pointed

out that the laboratory was absent from the premises when he took

charge, therefere, the landlord abandoned this elaim.

6 Likewise, according to the stipulation entered into, it

develops that the corporation in question owed certain taxes to the

United States Goverment; likewise said State and County taxes

and also taxes to the City of Greenville, and as stated above, a hear-

ing was had for the purpese of determining the priority of these

various elas.

Written arguinents have been submitted in behalf of the land-

lord and in behalf of the United States Government in support of

their respective positions that their claims constitute « prior elaim

as to the assets of said corporation. It appears that assets are insuf-

ficient to pay the elaim of the landlord and the elaira ef the United

States, and for that reason, it is necessary to determine which claim

has priority over the other. The total amount of taxes due the

United States is $3,991.06 Dollars and consists of the following

items; Four Hundred, Fortv-One and 96 100) (8441.96) Dellers

evideneed by a tox lien filed in the Ro M,C. Offiee for Greenville

County, South Carolina en April 2, 1951 representing withholding

Income taxes for the third quarter of 1950 in the amount of Three

Hundred, Sixtv-Five snd 90-100 (8365.90) Dollars. The assess-

ment lst for which was received by the Collector of Internal Reve-

nueion December BM. 1950) Seventy-Six and 06 100 ($76.06) Dol-

lars ef said amount representing Federal Insurance Contribution

4 UNITED STATES OF AMEKICA VS. R. P. SCOVIT.

for the fourth quarter of 1950, the assessment list for which was

received on December 14, 1950. Also the amount of Two Thousand,

Fight Hundred, Ninety-Five and 33° 100 ($2.895.2°) Dollars evi-

deneed by tax tien filed in the RL MC. Office for ¢ mreenville County

on April 10, 1952 of whieh amount Four Hundred, Sixtv-One and

01/100 ($461.01) Dollars is payroll taxes for the fourth quarter of

1950, the assessment list for whieh was reeeived by the collector on

Mareh 19, 1951; Five Hundred. Forty-Nine and 06.100 (8549.06)

Dollars is payroll taxes for the first quarter of 1951, the assessment

list for whieh was received by the collector on May 24, 1951: Five

Hundred, Ninety-One and 69.100 ($591.69) Dollars is pay-

7 roll taxes for the second quarter of 1951. the assessment list

for which was received hy the eellector on October 29. 1951;

Five Hundred, Ninety-Two and 03.100 ($592.03) Dollars is pay-

roll taxes for the third quarter of 1951. the assessment list for

which was received on December 3, 1951: Six Hundred, Twenty-

Fight and 61/100 ($628.61) Dollars is payroll taxes for the fourth

quarter of 1951, the easement list for whieh was reeeived on Feb-

ruary 28, 1952 and Seventy-Two and 93/100 ($72.93) Dollars rep-

resents Federal Unemployment Tex for the year 1951, the assess-

ment list for which was received by the collector on February 23,

1952. Also an amount of Six Hundred. Fifty-Three and 77100

($653.77) Dollars representing payroll taxes for the first quarter

of 1952. The record does not reveal the date the collector received

the easement list for this item.

The government contends that its claim for faxes Is 2 superior

claim to that of the landlord for rent because of 31 UL S.C. AL 191

which states, “the debts due to the United States shall |

hed” whenever that person beconies insolvent; and because of 26

U.S. C. A. 3670, 71 and 72 whieh creates a tien on the property

of the taxpayer for unpaid taxes.

a ,

? fcst SATIS-

It must be here pointed out that prior to the receivership the land-

Jord had caused to be issued a distress warrant for his past due rent

and that his landlord’s lien as provided by statute, was fully per-

fected.

With regard to the first contention (31 U.S.C. A. 191), the Su-

preme Court of the United States held in United States vs. Waddill,

Holland and Flinn, 323 Uo Ss 853, 65 8. Ct. 304, that where the

landlord's lien for rent had not been perfeered and made specific

by distress prier to the insolvency, the elaim of the United States

Was prior to that of the landlord. The Court was, however, careful

to point out that it was not deciding the question as to whieh: claim:

would be prior had the landlord perfected his claim prior to the

UNITED STATES OF AMERICA VS. R. P. SCOVIL ao

assignment for the benefit of the ereditors (here a recerver-

S ships. The impheation from that ease is clear that, had the

landlord’s lien been speeifie and perfected, the result would

have been different.

‘This section creates a priority ‘n favor of the United States but

the time such priority attaches is upon the appointment of the

receiver. People of Illinois ex rel Gordon vs. Campbell, 67 8. Ct.

340, 320 US. 362. And when the receiver was appomted in this

ease, the insolvents’ property upon which landlord had levied, was

subject to a perfected and specifie lien. The government could have

no greater rights m this property than did the insolvent, United

States vs. Yates, (Texas, 1947) 204 8.W. (2d) 399, end so far as the

insolvent was concerned, it was subject to a perfeeted and spe-

cific hen.

On the second point that 26 U.S.C.A. 3670-71-72 creates a lien

on the taxpayer's property, the government cites United States vs.

City of Greenriile, 118 F. (2d) 968 but overlooks what the Court

of Appeals said on page 966. There Chicf Judge Parker said:

“Whether the hen provided by statute is entitled te priority

over antecedent hens for taxes duly perfected by states or

municipalities, is a question which is not before us and which

we need not decide. It would seem, however, that the Hen was

intended to attach to the property subject to existing eneum-

brances; and this is borne out by the provision that it shall not

be valid as against mortgagees, purchasers or judgment eredi-

tors until notice thereof is duly filed as provided by the Act.”

The ease of Reaan Ms Vetropohtan Haulage Co... Inc. 127 N.J.

Eq. 487, 14 A (2d) 257, in which the government presented a claun

to the receiver similar to the one in this case, is an interesting and

pertinent authority. Under the New Jersey statute, a garageman is

given a len on the specifie property repaired. No further action on

his part is required,

9 There the Court said:

“«5) The government's contention that under Section 316

(a) of the Revised Statutes, 26 US.CLA. Int. Rev. Code, 3670,

3671, its claim is a lien on all property and mghts of a debtor,

as soon as the assessment list is received by the collector and

continues until the liability is satisfied. is correet; but such hen

is a general hen upon the estate of the inselvent bankrupt. It

does not attach to any specifie property covered by a valid

specific hen until after the specific len is first satisfied.

See Ferris vs. Chie-Mint Cau Co., 14 Del. Ch. 232, 124 A.

o77; in re Wyley, D.C. 292 F. 900; sherwood vs. United

6 UNIVED STATES OF AMI RICA VS. Ro P. SCOVIL

States, I). sor. 999- Tn re Caswell Constry tion Co

D.C. 13 F. 24 667.”

And so here the government's geners] lien given by 26 USO 4

3670 when the assessment lists sr recerved by the eolleetar threes

not attach te the property upon whieh the landlord levied bis

distress until that speeifie lien is first satisfied.

In Crawford ('o., Ine. vs. I. Leapold armed Co, TAN. YS. (ds

183, the question for determination was whether sg mechanie’s len

filed on November 21, 1944 took precedence over a tax lien created

by the receipt of the assessment list in the office of the collector on

November 2, 1944. The tax lien was not recorded in anv of the

places required by 26 U.S.C_A. 3672.

The Court held that the holder of the filed mechanie’s lien was a

“purchaser” within the meaning of Section 3672 and that as such

he was protected until the lien of the government was recorded.

This decision was affirmed by the Court of Appeals for New York

in 297 N. Y. 884, 79 N. FE. (2d) 279.

In National Refining Co. vs. United States, 160 F. (2d) 951.

(Sth Cir.) a “purchaser” under Section 3672 was defined as one

who, for a valuable present consideration. aequires property or an

interest in property. Surely, the landlord who gives consideration

in the form of the use of the premises, and who acquires an

10 interest in the specific property by perfecting his lien by

way of distress fits this definition.

There is another theory of this ease which is applicable. 26

US.C.A. 3672 states that a tax lien is not valid as agaist a mort-

gage until recorded in the Office of the R. M. CC. Under the South

Carolina law, the lien of a landlord for past due rent is superior to

that of a mortgagee except in two instances, iLe.. where the mortgage

Was executed beiore the rental contract was entered inte. or (2)

when it was executed before the chattels were brought upon the

rented premises, Maynard vs. Bank of Kershaw, 188 S.C. 160, 19S

S. EF. 188.

The mortgage takes precedence over the federal tax lien until

recorded as required by Section 3672; the landlord's lien tukes

precedence over the mortgage. It necessarily follows that the land-

lord’s lien takes precedence over the federal tax lien.

The same situation was present in Ferris ps. Chic-Mint Gum Co.,

14 Del. Ch. 232, 124 A. 577, where the Court said at page 50:

“Here we have three claimants, each claiming certain prefer.

ences. The first (the state, county, and citv adinittediy out-

ranks the second (he mortgagee) and we have seen that the

second outranks the third (the United Statesi. Yer it Is Con-

tended that the third is to be preterred to the first and thus

displace the second fram: a nesition of neeforanea nenr thea ¢hia.d

UNITED STATES OF AMERICA VS) ROP. SCOVIT ry

[i this cantention be accented then meadeed wril the fast tw de-

elared to be first, When the government ag sal by section 3DS6

to take repk utter the ‘ryortgugec, i oumtist necessari rollon

that it os subordinate in rank to these who are superior toy

lmmediate senior.”

To the same effeet ws Lowsiana State University vs. Heart. 210 Va

78, 26 So. (2d) 361. 174 ALL.R. 1366 where the Court said:

“It is undisputed that Seetion 3670 of the Internal Revenue

Code creates a tax hen but does not give it priority. Tt

11 is also undis sputed that the general hen created by that

statute is inferior to prior reortgaces or eamitable or

legal liens and encumbranees. dt wou. seem to be snemealous,

therefore. to say that if a mortgage intervened between the date

the attachment was obtained by the Louisiana State University

and the date the tax lien of the United States arose, the privi-

lege or len of the University would be superior to the mortaace,

which, in turn, would be superior to the tax lien of the United

States, but that the tax lien of the United Sates would he

superior to the privilege of the University. That, however, is

the situation that would result if the argument on behalt of the

United States is followed to its logical conclusion. We do not

think the law sanctions such an anomalous situation.”

It would indeed be an unlikely situation to liold that the land-

lord’s lien was superior to a mortgace (and this we must hold under

the South Carolina law); to hold that a mortgage was superior

te the a tax lien not recorded (and this we must hold under

26 US 3672); and that the federal tax hen was superior to the

ste pied s lien. The Court will not countenance such a

result and as was said in the above cited cases when the government

by statute placed a mortgage above its unrecorded tax hen, it

necessarily placed above its tax lien any other len which would

take precedence over the mortgage.

For the reasons above stated, Tam of the opimion that the len

in the amount of Seven Hundred and Fifty and no 100) (8750.00)

Dollars represeating unpaid rent for the months Februarv, Mareh

and April, 1952 constitutes a hen on the assets of said corporation

superior to the government's tax lien: Tam also of the opinion that

the landlord’s claims in the ameunt of One Hundred and ne 100

($100.00), Twenty-six and no 100 (826.00) and Twenty-One snd

no 100 «S827 00. Dollars respectively constitutes items properly

chargeable to the cost of sdrouintstration along with the landlord's

ela oan the amount of One Tlundred. Twenty-Five and no 100

($125.00) Dollars representing rent for the permed May 1, P52 to

Mav 14, 1942

» UNITED STATES OF ANE A VS ROP SeOV—IT.

1? I therefore lest t thiy ] titers Hyed : this ta 3 Ve ais

frst paving the cost of the ediministration ineluding the lend-

lord's claims im the amounts of One Tundrod Dedlars es 10000;

Twenty-six Dotinr= (826.000. Twonty-Ome Pbotlirs (Sl) CM) sy

One Hundred, Twenty-Five Dollars (8125.008 respectively. paw thi

landlord's elainy m the nowt of Seven HH nieiredl, Fitts stdin Pon

(8750.00) representing rent fer the ryonths February, Mareh and

April, M52 and the balanee of thy preceeds mm lus hands malized

from the sale of the gesots of the deiendant e rporatiom., to th

United States for application to its tax lien,

Respectfuily submitted,

Kk. INMaAN,

Master.

September Sth, 1952.

Orper oF Jupce BAKER

This proceeding comes before me upon appeal from the Re port

of the Mester of Greens ‘itte County dated Se ptember 8, 1952. estab-

lishing the priority ef certain claims filed with the Reeeives for the

insolvent defendant Den Tasecy, Ine. The receiver was appointed

om April 8, 1952, and the tollowing claims were filed with him.

bue not in the order of their priority as IT enumerate them:

(a) Claim for rent in the amount of $750.00, for whieh distress

was levied on April 7, 1952, by Robert P. Scovil.

ib) Claim for $100.00 for cleaning premises vacated by Receiver;

$26.00, enclosing ope ning in roof during removal of assets sd Re-

ceiver; $21.00, enclosing opening in wall during removal of asset<

by Receiver; and $125.00 for rent during oceupaney of Receiver

(¢) Claim for property. taxes assessed January 1, 1951, for

County of Greenville in the sanount of $146.66.

13 (d) Claim for property taxes assessed January 1, 1951,

for City of Greenville in the amount of $136.26.

fe) Claim by South Caroling Employment Security Commission

for employment compensation contribution taxes in the sum of

$600.56.

(ft) The following claims of the United States: ineome tex of

$441.96, the assessment Hist being reecived by Collector of Internal

Revenue on December 14. 1950, filed in the offiee of the ROM. C.

for Greenville County April 2. 1951; claim for payroll taxes in the

sum of $2,895.33, assessment lists being received by the Collector

on Mareh 19) 1951, May 24. 1951, Aueust 29. 1951. Decenybos

141. Febrmiary 28, 1952. and Februsry 23, 1952: sil of which were

filed in the oifice of the Ro M,C. for Greenvill County on Anrl

10, 195%. The forecoing elain for pavroll tawes meludes $653.77. en

UNITED STATES OF AMERICA VS) RLF scoveT 9

which the date of reeeipt of assessment jist bw (*, efor W

itiaveatlable

The Master recommends there should be fips tha

colmanistratyen, wh ach di holds ure proc linede cl any ate Ty) 04 fe mext. the

Clann of the landlord for the remt os contaimed im item; tare and

third in order of prionty, the clann of the United Stetes Govern.

ment. He does net make any recommendstion for the payment of

City and County taxes, or other order of priorits

After study of the record. at as my conelision the order of Hrloryty

of claims should be as fellows:

(1) The costs of administration which are contained in item, (bs

of this order. This, of course, should alse inelude Reeciver’s fees

and expenses,

(2) Claim by the United States Government for ineome tones

mn the sin Oo s4 11.96, rece ived by the Colleetor of Internal] Revenue

on December 14. 1950, and filed in the office of the Ro M. C. en

April 2, 1951.

(3) Taxes due the city and County of Greenville in the ameunts

of $136.26 and $146.66, as contained in items (e¢) and (dd

14 (4) Rent in the amount of $750.00, as set forth in item

tad.

(5) The balance is to be applied to the payment of the reminder

of the clains filed by the United States Government.

Having given what should be the order of priority, T will now

undertake to give my reasons therefor.

The United “tates Government eontends its claim for taxes is

superior to the claim of the landlord for rent by reasons of See-

tions 3670 and 3671, Tithe 26, USCA. Seetion 3670 provides, “If

wny person liable to pay any tax neglects or refuses to pay the same

after demand, the amount (ineluding any cost, penalty, additicna!

amount, or addition to such tax, together with any costs that may

accrue in addition thereto) shall be a lien in favor of the United

States upon all property and rights to property, whether real or

personal, belonging to such person.” Section 3671 specifies the lien

shall attach as of the date the assessment list is received by the

Collector. There will be found, however, in Section 3672. Title

26, USCA, certain exceptions to the vesting of the lien in favor of

the United States, which is “sueh lien shall not be valid as agains

any mortgagee, pledgee, purchaser or judgment creditor until notiee

thereof has been file? by the Collector in accordance with the law

of the State or Territory in which the property subject to the lien

is situated * * *" For the purpese of authorizing the Sling of

notices of dion in accordance with the provisions of Section BIS6

of the Revised Statutes of the United States, acts or parts «

amendatory thereto, the General Assembly of this State passed what

is Known as the Uniform Federal Tax Lien Registration Act. aie

li UNITED STATES OF AMP LGOA VS BOP. SCOVEL

is contained im Voi. 6) Section 65-272. 2. aft our Mor

of Law- The teome ton les r Sitl ia Tus recerve bay

the Collector on Decondber TE POI0 enel filed mm the offers oft

R. M,C. for Greenville County on April 2.1951, has pa

the rent elim or tren The landlord’. lien tor rent was ner-

15 fected hy distress procee Ones on Asal 7. 92. The Pecowe

Was appointed on Apriios. 2952. but the eioim for the mean

caxes was filed on April 2, 1991, which. of course. was prior to thy

date of the distress and appomtinent of the Beeeiver, “Phas it

therefore, clearly takes priority over the rent lien The

items comprising the Government = cleimae we net filed in the ofhe

of the R. M. Co wetil April WO. 1952. although most of thers x

received by the Cellector in 191.0 The Master has foumd chat th

perfected lien of the landlord come. within the meaning of “mare

chaser” as provided in Section 3672, supra.

It is needless for me to reiterate the Master's ressons for arriving

at this conelision since Tami in seeord with him. and for the ren-

sons stated in his order T have mieule the remetuine items of the

Government's elaim seeondary mn priority te the lien ot the liadlord

The taxes for the County end Citv of Greenville have received

priority to the Government items, excepting the imceme tax len

of $441.56, and the claim for rent. These taxes were assessed den-

uary 1, 1951.) Section 65-2701 of the Cade of Lews of 1852. pre-

vides all taxes, assessrionts and penalties legally assessed shall be

a first lien in all eases whatsoever upon the property taxed, the len

to attach at the begianing of the fiseal vear during which the tax

is levied.

Section 65-2702 says the tax assessment shall im. ediately be-

come a first hen on the property as seon as it is listed with the

auditor of any county in this state for taxation. The city snd

county taxes became a first lien on January 1, 1951, subject to the

prior hen of the United States Government for the imcome tax

in division (2) of order of priority, <inee this claim was receive: |

by the Collector on Deeember 14. 1850.) The remaining Govern-

ment items for taxes were not received bv the Collector until after

January, mB conscequently, they are inferior to the priority. of

taxes due the City and County of Grecuville, The rent tiem is macs

secondary to the taxes due the City and County of Greenville by

reason of & tion 41-162, Vol. 4, Code of Laws of 1952. whieh

16 is entitled, Taxes Lien on Property Sold Under Distress. sind

the bedy of which Aet is as follows: “The purehascr ata

sale of chattels seized under distress warrant shall take the prop-

erty subject to any lien for taxes thereon.”

The Den af the south Caroline Pnnlovinent Seeurity. Conmiis-

sion hes tet heen overlooked, but it t= last in prigritw snd it is np

parent there Vv 1 ret Tye <utfietent timmeds teu even the rortisal stil ys-

UNIPED STATES oF 4ehies VS. BR. OP. -COMEL i

. , ° } ‘ ‘* . ;

Praetion of this elary As Mis! His eon oer Envoyer

, '

this partie tvie af tax requires periection 1 tule Neention

: ied l4 4 £ wry hy; Wiis tio clagtye

: i 1 ——

boxcepet ne epee?) Priceeigin ite itdjcud ?f five Licusfa? - [tej t }*

even verst

,

f, Ps nw Bakir,

' f f

! j if / f cuit

Vt Chanubers,

bierenes, Soe

January 15, 1953.

17 i Kerceptrons

Po Tt is respectfully subinitted that the Circuit Judge erred in find-

ing amd helding that the tunes due the United States of Ameries

(io not have prorty over the rent elamio. che tandiord, the error

beng that:

tad) The United States has poictity onder Sectious 3670 and 3671,

Title 26, UL S.C. A.

tht The United States-has priority under Tithe 41, Section 161, Vol-

ume 4, 1952 Code of Laws of South Carolma.

I]. Et is respectfully submitted that the Cirenit Judge erred in not

finding that the taxes due the United States of America have priority

in Reeeivers’ip of the debtor, the error being that under Sections

19t and 192, Tithe 31. Ul S.C. A. the United States has priority

over all other creditors of the debtor.

Agreement

We agree that the foregoing when printed and filed in the Supreme

Court shall constitute the record on which this appeai shall be based.

=

Joun C. Winiiams,

Attorney tor Appellant-Claimant

Leatherwood, Walker, Todd & Mann

Attorne us for Respondent-Claimant

Is 1. J. B. Westprook. Clerk of The Supreme Court of South

Carolina, do hereby eertify Chat the foregoing 17 pages is a

true and correet copy or The Transeript ot Reeord in the case of

United states of Amerien, applit-elaimant, vs. Ro P. Seovil, respt-

claimant.

J. Bo Westrrrook,

JSPAL.| ¥ Clerk.

biertary 19, 1954.

4 UNITED STATES OF AMISICA VS. RL P. SCOVIL

AD The State of South Carolina

IN GHEE StrreMe Court

UN TrED STATES OF AMERICA, APPELLANT,

7s

Ro Po Seowin, RESPONDENT.

Appeal trom Greenville County

{i Babvorr Barer. Judge

Cause No. 3679

Opimuon Ne. 16789

Filed Oetober Pb, 1953

AFFIRMED

John ©) Wilhams. of Greenville, for appellant.

Leatherwood, Walker, Todd & Mann, of Greenville, for respondent.

Taytor, Ao do: As the result of an aetion filed in the Court of

Coron Pleas in the County of Greenville, State of South Carolina

by the Roy Bass Motor Conoany, Greenville, South Carolina, a

receiver Was appomted by the Court on Aprils, 1952, to take charge

of the business operated by the Defendant and all of its assets.

The receiver teok chorge of said assets as of the dav of his appoint-

ment and retained possession of the preauses in which said business

Wis operated until May 15. W592

In due time, various ereditors filed elaims with the receiver,

one of said ereditors being Roger P. Seovil, owner of the premises

eeeupied by the insolvent carporation. Phe imsolvent corporation

Was Ti possession of the premises ander a written lease with the

Landlord, Roger Po Seoviil, said lease being dated October 12, 1949,

and being tor the full term, five wears thereafter, and under the

terms of said lease. the Lessee woes to pay rental on the

ma bests of S2OU00 per menth, payable in advance on the

first dav of each successive month. The rent for the meonths

of February, Mareh and April, 1952, beiig in arrears and unpaid,

the Landlord, on the 7th day of April, 1952. distressed upon all

assets oO. suid eerperation for the rent then in arrears and, upon

filing his elaim, the Landlord took the posation that said elaim: con-

stituted a prior lien on the assets of the insolvent corporation byw

penser oO! the distress levied agoimst the assets of said corporation

lor the past due rent,

UNITED STATES OF AMERICA VS. R. P. SCOVIL 13

The United States of America, Appellant herein, likewise filed a

clan with the reeeiver which consisted of the following tax items:

(1) Income tax due by the meselvent corporation ino the

amount of £440.96. the assessment list thereror being received

by the Collector of Titernal Revenue, Dee. 14. 1950, and filed

in the Ro M. CC. OMfice for Greenville Ce unty on April 2, 1951.

(2) Payroll taxes im the samount of 82,895.93. assessment

list being received by the Collector on Mareh 19, 1951, May

24,1951, August 20, 1951, December 3, 1951, Feb. 23. 1952 and

February 2s, 1952, all of which were tiled in the R. M,C. Office

for Greenville County on April 10, 19920 Included in tne

claim for payroll] taxes is an iter of 8653.77 in connection with

whieh the date of receipt of assessment list by the collector

was unavailable.

The Master before whom these ciaims were to be proven, filed his

report sustaining the claim of the Landlord as a prior lien, to which

report the United States of America filed exceptions. Said excep-

tions were heard by the Honorable G. Badger Baker, Presid-

21 ing Judge, Thirteenth Judicial Cireuit, who on January 15,

1953, filed an Order holding that the claim of the Landlord

had priority over the taxes due the United State. of America with

the exeeption of the item of income taxes in the amount of $441.96

referred to as [tem (1) above.

The sole question raised by this appeal is as to priority between

the Landlord’s len for rent and the hen of the United States of

America for taxes due by the insolvent corporation.

There is no question in this ease of distress having been perfected

prior to the appointment of the receiver; therefore, the lien was per-

fected as of that time and the amount specified in such distress was

not available to the reeetver to pay other debts of the insolvent

debtor, 31 USCA P91 gives the U.S. Government claim no priority

over this her as the distress, honee the len, was perfected April

7, 1952, before the appointment of the receiver on April 8, 1952.

The Government could have no greater right in the property in the

hands of the receiver than the insolvent. United States vs. Yates,

ZOE ™ Wo lity 899, (Texas 19471, Nerno-Snath Co. vs. Maloney,

Collector of Internal Revenue, 112 Fed. (2) 690 (8rd Cir.), Thelus-

on Vs. Snooth, 2 Wheat. 396.4 1. Bd. 271, People of New York vs.

Ponded States, 106 Fed, (2d) 210 (rd Ciro, In re. Holmes M fg.

fo. 1 Fed. 12d) 2890 Dist. Ct. Conn. +.

Section YO USCA provutes that such len shall not be valid as

nudist anv mortgagee, pledgec. purenaser, or judement creditor

until notice thereot has been filed by the eollector, whieh im this

14 UNITED STATES OF AMELICA VS. K.P. SCOVIL

ease means the Register of Mesne Convevances S ection 65-2799

of the South Carolina Code for 1952.

22 The Government's tax lien under this section is of foree

against a Landlord's lien which has been perfected only from

the date of recording of suel Gax lien and, therefore, not effectivs

In the ease at bar.

We are of the opinion that all exceptions should be dismissed,

the judgment appealed from affirmed and it is so ordered

Baker, C. J., SruKes and OXNER, J. concur. Frsusurne, J.,

hot participating.

A true copy:

| SEAL] J. B. Wesrsrook, Clerk (s).

wy S GOVERNMENT PRINTING OF Fice ete 29048) $97

R. P

0]

Uy

Ir

tiora

tend

De

Inthe Supreme Court of the Wnited States

No. , Ocroser Term, 1953

UNITED STATES OF AMERICA, PETITIONER

v.

R. P. Scovuz (in re Roy Bass Motor Co. v. Dan ‘Tassey, ine.)

ORDER EXTENDING TIME TO FILE PETITION FOR WRIT OF

CERTIORARI

Upon CONSIDERATION Of the application of counsel for petitioner,

Ir is onDERED that the time for filing petition for writ of cer-

tiorari in the above-entitled cause be, and the same is hereby, ex

tended to and including March 25, 1254.

Bart. WaARKEN

Chief Justice of the Supreme Court

of the United States.

Dated this 22d day of January, 1954.

17

Supreme Court of the United States

No. 645, October Term, 1953

Unirep Starrs or AMERICA, PETITIONER

v.

R. P. Scovit, Dan Tassry, INc., ev AL.

Order allowing certiorari

Filed May 24, 1954

The petition herein for a writ of certiorari to the Supreme

Court of the State of South Carolina is granted. The case is

transferred to the summary docket.

And it is further ordered that the duly certified copy of the

transcript of the proceedings below which accompanied the peti-

tion shali be treated as though filed in response to such writ.

Mr. Justice Jackson took no part in the consideration or deci-

sion of this application.

INDEX

Page

Opinions below ]

‘urisdietion ]

Questions presented 3

Statutes involved 3

Statement 3

Specification of errors to be urged 5

Keasons for granting the writ 6

Conelusion 12

Appendix 13

‘ CITATIONS

Cases:

Conard vy. Atlantic Insurance Co.,1 Pet. 386 7

Field v. United States, 9 Pet. 182 7

illinois v. Campbell, 329 US, 362 6,7,9,10

Illinois y. United States, B28 U.S. 8 7,5

Massachusetts v. United States, 333 U.S. 61] 7

Michigan vy. United States, 317 U.S. 338 7

New York v. Maclay, 288 U.S. 290 7

Spokane County v. United States, 279 U.S. 80 7

Thelusson v. Smith, 2 Wheat. 396 7

United States v. City of New Britain, 347 U.S. 81,

6,8, 10, 11,12

United States v. Gilbert Associates, 345 U.S. 361,

United States vy. Oklahoma, 261 U.S. 253

United States v. Security Tr. & Sav. Bk., 340 U.S. 47,

6,7, 8, 9, 10, 11, 12

‘

6,7, 8,10, 11

United States v. Snyder, 149 U.S. 210 11

United States y. Texas, 314 U.S, 480 55 ae

United States vy. Waddill Co,, 323 U.S. 353. s«G,, 7, 8, 9,16

Statutes:

Internal Revenue Code:

See. 3670 (26 U.S.C. 1946 ed., See. 3670) 6, 10,13

See, 3671 (26 U.S.C. 1946 ed., See. 3671) 6, 10,13

See, 3672 (26 U.S.C. 1946 ed., See. 3672) 6,13

Revised Statutes of the United States, See. 3466, 31 U.S.C.

1946 ed., See. 191) 6, 14

South Carolina Code Annotated (1952 ed.) :

See. 41-151 9,14

See. 41-153 9,15

See. 41-158 15

See, 41-159 15

See. 41-160 9,16

Sec. 41-161 9,16

See. 41-162 9,16

(1)

Iuthe Supreme Court of the United States

OcToreR TERM, 1953

No. 643

UNITED STATES OF AMERICA, PETITIONER

V.

R. P. Scovin, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE SU-

PREME COURT OF THE STATE OF SOUTH CAROLINA

The Solicitor General, on behalf of the United

States, prays that a writ of certiorari issue to re-

view the judgment of the Supreme Court of the

State of South Carolina in this case.

OPINIONS BELOW

The opinion of the Supreme Court of South

Carolina (R. 12-14) is reported at 78 S.E. 2d 277.

‘ine order of the Court of Common Pleas (R. 8-11)

is not reported.

JURISDICTION

The judgment of the Supreme Court of South

Carolina (R. 12. 14) was entered October 26, 1953.

On January 22, 1954, Mr. Chief Justice Warren

(1)

»

extended the time for filing a petition for a writ of

certiorari to and including Mareh 25, 1954. The

jurisdiction of this Court is invoked under 28 U.

S.C. Section 1257(3).

This suit (originating as a receivership proceed-

ing (R.1) ) arises out of conflicting claims for pri-

ority of the tax claims of the United States and _

those of a landlord under a distress for unpaid

rents, against the assets of an insolvent debtor in

the hands of a receiver appointed by a state court.

In the trial court (Court of Common Pleas, Green-

ville County, State of South Carolina) the United

States asserted its right to priority in the payment

of its debts under R.S. 3466, and also claimed that

Section 3670-3672 of the Internal Revenue Code

gave it a lien on property of the taxpayer which

was paramount to the landlord's distress ¢laims for

rent. (R. 1-11.) The court (on exceptions filed by

the United States to the Master’s Report (R. 2) )

held that the landlord’s distress claim for rents was

superior to the claim of the United States for its

taxes and that the landlord was entitled to have his

claim paid out of the assets in the hands of the

receiver before the United States might participate

(R.8-11). On appeal to the Supreme Court of the

State of South Carolina, the United States again

asserted its claim to priority under R.S. 3466 and

the superiority of its tax liens under Sections 3670-

O72 of the Internal Revenue Code (R.11).) That

court held that the distress claims of the landlord

for rent were paramount to the Government's pri-

ority eloims under RS. 3466, 31 ULS.C. 191, and

lien of the United States under Sections 3670-2672

(WR. 12-14).

The question is one of substance, as is more fully

developed under the reasons for rranting the writ.

QUESTIONS PRESENTED

1. Whether the priority accorded claims of the

United States against the assets of an insolvent

debtor by R.S. 3466 is defeated by a landlord’s lien

for rent arrears created by state law, where the

landlord has not divested the debtor of possession

of any property subject to the lien.

2. Whether the lien accorded the United States

for unpaid taxes by Section 3670 of the Internal

Revenue Code is rendered subordinate to a sub-

sequently arising landlord’s lien created by state

law, merely because notice of the federal tax lien

was filed after the landlord’s lien arose.

STATUTES INVOLVED

The pertinent provisions of the federal and state

statutes involved are printed in the Appendix,

Infra, pp. 13-16.

STATEMENT

This case involves the relative priority of tax

claims of the United States and rent claims of a

landlord against the estate of an insolvent corpora-

tion in receivership, Dan Tassey, Inc. (hereafter

sometimes referred to as the taxpaver). The mate-

rial facts, as disclosed by the statement of the case

(RR. 1-2), the master’s report (R. 2-8), and the

opinion below CR. 12-14), are not in dispute.

The claims of the United States are for taxes

4

assessed against the taxpayer for 1950 and 195]

in the aggregate amount of 3,549.10, the asses=-

ment lists for which were received by the Collector

on various dates between March 19, 1951, and Feb-

ruary 28,1992." Notice of federal tax lien covering

these assessments was recorded in the Register of

Mesne Conveyances for Greenville County, South

Carolina, on April 10,1952. (32. 3-4, 12-13.)

The business of the taxpayer corporation was

conducted on premises oecupied under a five-vear

lease from R. P. Scovil (herein sometimes referred

to as the landlord) dated October 12, 1949, under

the terms of which the lessee (taxpayer) was to pay

rental at the rate of #250 per month, payable in

advance on the first day of each month. The rents

for the months of February, March, and April,

1952, heing in arrears and unpaid, the landlord on

April 7, 1952, caused a warrant of distress to be

issued upon all the assets of the taxpayer corpora-

tion for the $750 rent then in arrears. On the next

day, April 8, 1952, the South Carolina Court of

Common Pleas appointed a receiver for the tax-

payer and all of its assets. The receiver took pros:

session of the assets the same day and operated the

taxpayer's business until May 15,1952. The United

States and the landlord both filed claims against

the receiver for the respective amounts owing to

' The tax claims filed with the receiver also included assess-

ments for earlier periods aggregating $441.96. but these were

given priority by the courts below (Ro 10. 13). and are ne

longer involved. With respect to $653.77 of th» amount still in

Issue, covering payroll taxes for the first quarter of 1952, the

date of the receipt of the assessments list by the Collector doe

not appear. (R. 4.)

them. The assets of the taxpayer corporation were

sold at publie auction hy the receiver, pursuant to

court order, for an amount insufficient to satisfy all

claims against it. (R. 2-3, 12-15.)

The master filed a report (R. 2-8) holding that

the claim of the landlord for unpaid rent was

prier and superior to the tax claims of the United

States, and the United States filed exceptions (R.

2). The Court of Common Pleas affirmed the mas-

ter’s report (R. 8-12.) °

The United States appealed, the only questions

presented on the appeal being whether the tax

claims were entitled to priority over the landlord’s

claim, under either Section 3466 of the Revised

Statutes of the United States er Sections 3670-8672

of the Internal Revenue Code. (R. 2, 13.) The

Supreme Court of South Carolina affirmed the de-

cision of the Court of Common Pleas. (R. 12-14.)

SPECIFICATION OF ERROR$ TO BE URGED

The court below erred:

1. In holding. contrary te Section 3466 of the

Revised Statutes and the decisions of this Court,

that the landlord's rent claim against the insolvent

taxpaver was entitled to priority of payment over

the tax claims of the United States.

2 In holding, contrary to Sections $670, 3674,

and 3672 of the Internal Reverie Code, and the

decisions of this Court, that the landlord’s lien for

? Exeept for the amount of $441.96 referred to in the preced-

ing footnote, and no longer im issue.

6

Unpaid cent was superior to the antecedent liens

of the United States for Unpaid taxes,

REASONS FOR GRANTING THE WRIT

The tax claim of the United States is entitled to

priority of payinent, over the rent claim of. the

landlord, out of the proceeds of the receiver's sale

of the insolvent taxpaver’s property, under both

the federal priority statute (RLS. 3466 ( Appendix,

mfrasp. Th) ) and the federal lien statute (Iuternal

Revenue Code, Seetions 3670-3672 Appendix, ‘ufra,

pp. -T4). In holding that neither statute made the

Government's claim paramount and that the land.

lord's claim was priot in right, the court below dis-

regarded the controls: decisions of this Court

applying the federal priority statute (United

States vv. Gilhert Associates, 34S US. B61: VM nited

States ve Waddill Co., 323 U.S. 553: Minois v.

Cam phell, 829 US. 362). as well as those applying

the federal lier statute (I uited States rm Coty of

New Briton BAT UL SOSL: United Staves ve. NSecur-

ty Troe Sav, Bk, 340: US. 47). On the basis of

the undisputed facts, and on the authority of this

Court's recent decisions in the Gilbert Associates

and City of New Britain cases. it is respectfully

submitted that the writ of certiorari should be

granted and the decision of the Court below

reversed,

I. Secion 3466 of the Revised Statutes pre-

scribes that * Whenever any person indebted to the

United States is insolvent. © * * the debts die 6

the United States shall he first satisfied.” The pri

7

ority accorded the United States in the collection of

claims against an insolvent is by the terms of the

statute absolute. Ttoa long line of cases this Court

has repeatedly held that an adverse lien whieh has

net become both specitic and perfected before the

debtor becomes insolvent can not serve to deprive

the United States of its priority right... United

States ve Gilbert — ssociates, supra; Illinois v.

Campbell, supra; United States v. Waddill Co.,

supra; United States v. Texas, 314 U.S. 480; New

York v. Maclay, 288 U.S. 290; Spokane County v.

United States, 279 U.S. 80; lnited States vy. Okla-

homa, 261 US. 253: Thelusson v. Smith, 2 Wheat

96° Field vy. United States, 9 Pet. 182; Conard v.

Aflantie lusurance Co., 1 Pet. 386; ef. United

States v. Security Tr. & Sav. Bk., supra; Massa-

chusetts Vv. United States, 333 U.S. 611; lllimois v.

lvited States, 328 Us. 8. To be *‘specifice,’’? the

adverse lien must, among other requirements, at-

tach to particulier items of the debtor’s property.

Hlinois ve. Campbell, supra, pp. 373, 375-3576;

Conited States v. Waddill Co., supra, p. 399;

United States v. Teras, supra, p. 485. To be ** per-

‘In several of the eases the Court has expressly posed but

left unanswered the question of whether even a specifie and

perfected adverse len can serve as an exception to the absolute

priority accorded elatins of the United States by the terms of

Ro oS 34660 United States v. Teras, supra, yp. 485-486;

New York v. Maclay, supra, p. 294; Spokane County v. United

States, supre. p. G4: Michigan v. United States, 317 U.S. 338,

341. “This Court has never actually held that there is such

an exeeption.” United States v. Gilbert Associates, supra,

p. 865. In each instance, th» Court has found it unnecessary

to reach and decide the question, having coneluded that the

adverse lien was not sufficiently specifie and perfected,

8

fected,’ the lien must be enforced at least to the

point of divesting the debtor of either title or pos-

session. United States vy. Gilbert Associates, supra,

Pp. 369-360; United States v. Security Tr. & Sav.

Bk., supra, p. 51: IMinois vy. Campbell, supra, pp.

3879-376; United States v. Waddill ('0., supra, pp.

397-360. Whether an adverse lien has become suffi-

ciently specific and perfected to overcome the fed-

eral priority presents, of course, a federal question.

The priority established hy Congress in favor of

the United States may not be impaired by state leg-

islation or state court decisions creating interests

in the debtor’s property in favor of third parties,

United States v. Gilbert Associates. supra; Illinois

v. Campbell, supra, js. 371; United States v. Wad-

dill Co., supra, p. 857. See also United States v.

Seeurity Tr. & Sav. Bk., supra, p. d1; United

States v. City of New Britain, su pra.

In thi. case, the Supreme Court of South Caro-

lina has held (R. 13-14) that a lien created by South

Carolina law in favor of a landlord became specific

and perfected a day before a receiver for the tax-

paver-lessee’s property was appointed merely by

virtue of the issuance of a warrant of distress pur-

suant to the South Carolina law. Appendix, infra,

pp. 14-16. But there is nothing in the record to

indicate that the landlord had actually divested the

taxpayer of the title or possession of any of its prop-

erty prior to the appointment of the receiver.

Recently, in the Gilbert Associates case. this Court

held that a Town's tax lien was not sufficiently spe-

cific and perfected to defeat the federal priority

notwithstanding that the Town (p.962) had ‘sold’

9

the taxpayer's property at a tax sale before (and

again after) the appointment of the receiver where

no change in possession was accomplished. The

Court said (p. 566) that **There is no ground for

the contention here that the Town had perfected its

lien by reducing the property to possession. The

record reveals no such action.’? Similarly, the ree-

ord here discloses nothing to show that the landlord

had reduced the property to possession. See also

United States vy. Waddill Co., supra, pp. 357-3860 ;

Hlinois v. Campbell, supra, pp. 370-376. Further-

more, even as a matter of state law the issuance of

the distress warrant the day before the receiver was

appointed did not operate to divest the taxpayer of

possession of any of its property, since no posses-

sion could have been obtained until five davs after

distress.’ Indeed, any suggestion that the land-

lord acquired possession would be incompatible

with the conceded facts that the receiver took over

all the taxpayver’s assets and that the landlord’s

claim is being asserted against the proceeds of the

receiver's sale,

Nor is there any basis for the assumption by the

4

*The distress warrant was issued pursuant to Sections 41-

151 and 41-153 of the South Carolina Code Annotated (1952

ed.) (Appendix, infra, pp. 14-15). Under Section 41-160 of the

State Code (Appendix, infra, p. 16), the taxpayer had five days

after distress was issued within which to free its property from

the distress. during which time it could not be deprived of

title or possession. Only after expiration of the five days and

upon failure of the tenant to furnish the bond therein provided

could the property be sold for the payment of rent due. See

Section 41-161 of the South Carolina Code (Appendix, infra,

p. 16). Furthermore, “The purehaser at a sale of chattels

seized under a distress warrant shall take the property subject

to anv lien for taxes thereon.” Section 41-162 ef the South

Carolina Code (Appendix, infra, p. 16).

10

court below that the landlord's lien was specific

rather than general, in view of the fact (R. 1, 12)

that the landlord had ‘distressed upon all the

assets’’ of the insolvent taxpayer. ‘‘In claims of

this type, ‘specificity’ requires that the lien be at-

tached to certain property by reducing it to posses-

sion * * *, Until such possession, it remains a gen-

eral lien.’’ United States v. Gilbert Associates,

supra, p. 366. And ‘Where the lien of the Town

[here the landlord] and that of the Federal]

Government are both general, and the taxpaver is

insolvent, § 3466 clearly awards priority to the

United States.”’ /d., p. 366. See also Iinois y,

Campbell, supra, p. 370, 375-376; United States vy.

Waddill Co., supra, p. 399; United States vy. Texas,

314 U.S. 480, 488.

2. The tax claim of the United States is likewise

paramount to the claim of the landlord under the

federal lien statute. Sections 3670 and 56071 of the

Internal Revenne Code accord the United States

a lien for unpaid taxes upon all property belong-

ing to the Celinquent taxpayer, the lien arising

when the assessment list is received by the Collec

tor. Under this Court’s recent decision in the City

of New Britain ease, in which it enunciated the

principle of ‘‘the first in time is the first in right”

for purposes of applying the federal lien statute,

the United States must prevail unless the landlord

acquired a choate lien hefore the federal liens at.

tached. See also United States y. Security Tr. &

Sav. Bh., supra. Were the federal tax liens ante-

dated the landlord’s lien. They arose and attached

11

to all of the taxpayer's property on various dates

between March 19, 1951, and February 28, 1952,

When the several assessment lists were received hy

the Collector, whereas the landlord’s lien did not

arise until the distress warrant was issued on April

7, 1952. (R. 2-4, 12-13.)

The court below nevertheless ruled (R. 13-14)

the landlord’s claim to be superior under Code Sec-

tion 3672, which provides that the federal lien

“shall not be valid as against any mortgagee,

pledgee, purchaser, or judgment creditor until

notice thereof has been filed by the collector’ in a

designated recording office. It held (R. 14) that

“under this section’? the Government’s tax lien was

effective ‘only from the date of recording” of the

hen (April 10, 1952), which was after the distress

Warrant Was Issued. This holding is patently er-

roneous, for the landlord does not come within any

of the excepted categories enumerated in Section

val: it was not a ‘mortgagee, pledgee, purchaser,

or judgment creditor’? within the purview of that

section. Cf. United States v. Gilbert: Associates.

supra; United States v. Security Tr. & Sav. Bk.,

supra, And sinee the landlord's claim does not fall

Within any of the classes of interests which Section

8072 protects against an unrecorded federal tax

lien, whether or when the federal lien was recorded

is of no significance here. United States v. Snyder,

149 U.S. 210.) This case is governed rather by the

principle of “first in time is first in right’* applied

in City of New Britain, and under the decision in

12

that case the federal liens are clearly superior to

a subsequently arising landlord’s lien.

CONCLUSION

The decision below is manifestly erroneous. It

is respectfully submitted that the petition for a

writ of certiorari should be granted, and the deci-

sion below be reversed, without argument or further

briefs, on the authority of United States v. Gilbert

Associates, supra, and United States v. Cit y of New

Britain, supra. |

Simon E. Soperorr,

Solicitor General.

Marcu, 1954.

13

APPENDIX

Internal Revenue Code:

SEC. 3670. Prorernty SuBrecr to LIEN.

If any person liable to pay any tax neglects

or refuses to pay the same after demand, the

amount (including any interest, penalty, addi-

tional amount, or addition to such tax, together

with any costs that may accrue in addition

thereto) shall be a lien in favor of the United

States upon all property and rights to prop-

erty, whether real or personal, belonging to

such person.

(26 U.S.C. 1946 ed., See. 3670. )

Sec. 5671. PEertop or LIEN.

Unless another date is specifically fixed by

law, the lien shall arise at the time the assess-

ment list was received by the collector and shall

continue until the liability for such amount is

satisfied or becomes unenforceable by reason

of lapse of time.

(26 U.S.C. 1946 ed., See. 3671.)

Sec, 3672 [as amended by See. 401, Revenue

Act of 1939, ¢. 247, 53 Stat. 862, and See. 505,

Revenue Act of 1942, ¢. 619, 56 Stat. 798].

Vanipiry AGAINST MoRTGAGEES, PLEDGEES,

PURCHASERS, AND JUDGMENT CREDITORS,

(a) Invalidity of Lien Without Notice.—

Such lien shall not be valid as against any

mortgagee, pledgee, purchaser, or judgment

creditor until notice thereof has been filed by

the collector—

(1) Under State or Territorial Laws.—In

the office in which the filing of such notice is

14

authorized by the law of the State or Terri-

tory in which the property subject to the lien

is situated, whenever the State or Territor Vv

has by law authorized the filing of such

notice in an office within the State or Terri-

tory; or

* % * * aa

(26 U.S.C. 1946 ed., See. 3672. )

Revised Statutes of the United States:

Sec. 3466. 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 insuffi-

cient to pay all the debts due from the de-

ceased, the debts due to the United States shall

be first satisfied ; and the priority hereby estab-

lished shall extend as well to eases in which a

debtor, not having sufficient property to pay

all his debts, makes a voluntary assignment

thereof, or in which the estate and effects of

an absconding, concealed, or absent debtor are

attached by process of law, as to vases in which

an act of bankruptey is committed.

(31 U.S.C. 1946 ed., See. 191.)

South Carolina Code Annotated (1952 ed.):

Title 41. Landlord and Tenant. Chapter 4.

Collection of Rent by Distraint.

Sec. 41-151. Collection of rent by distress.

A landlord may enforce collection of rent

due by distress in the following manner, to wit:

i)

Any magistrate in the county in which the

premises occupied are situated may issne, upon

receipt of an affidavit of the landlord or his

agent setting forth the amount of rent due, his

distress warrant in whieh shall be named the

amount of rent due with costs and such war-

rant shall be detivered to (a) any regular con-

stable, (b) such special constable as the magis-

trate may appoint or (¢) the sheriff of the

county for enforcement.

Src. 41-153. Distraint on tenani’s property if

rent and cost not paid.

Such officer shall forthwith demand of the

tenant pavinent of the rent with costs as named

in the distress warrant. If such amount be

paid the officer shall return the warrant with

the amount collected to the magistrate who

shall settle with the landlord. But if the tenant

fail or refuse to pay such rent with costs the

officer shall distrain sufficient of the property

upon the rented premises to pay such amount,

viving the tenant a list in writing of the prop-

erty distrained together with a copy of the

distress warrant.

See. 41-158. Only reasonable amount of prop-

erty to be distrained,

Any distress must be reasonable in respect

to the amount of property distrained.

Sere. 41-159. Damage for unreasonable dis-

fre SS,

Any lessor or landlord who makes unreason-

able and excessive distress shall be liable for all

16

damages sustained by the tenant whose goods

are distrained by reason of such excessive dis-

tress. Such damage may be recovered by an

action in any court of competent Jurisdiction.

Sec. 41-160. Tenant may free property fron

distraint by giving bond.

Within five days after such distraint the

tenant may free the property from the lien of

the distraint by giving a bond payable to the

landlord in double the amount claimed, with

sufficient surety or sureties approved by the

court, and the issues thus joined shall be tried

by the court. The landlord shall have the right

to except to the surety or sureties and the

surety or sureties shall justify before the mag-

istrate as provided for justification for sureties

in claim and delivery actions.

Sec, 41-161. Sale of property distrained,

If the tenant fails to give hond as above pre-

scribed then the officer may sell such property

at public auction to the highest bidder for cash

at a designated place of sale after posting a

notice of such sale for five days upon the prem-

ises and two other publie places in the counts

stating the time and place of such sale.

Sec. 41-162. Tares lien on property sold under

distress.

The purchaser at a sale of chattels seized

under a distress warrant shall take the prop-

erty subject to any lien for taxes thereon.

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