May 26, 1949

Hpn. D. C. Greer ~ ~. .~ State- Hightiy engineer Opinion No. V-830 T&xas..Higj$va~..

Department Re: ..The necessity for FedAustin, 'T&as~.,. _ ._ ., era1 Income Tax Liens ,-to be recorded on Certificates of Title to motor-vehicles

and the .~ ,+tatus in relationto other liens. Dear Mr. Greer:

I&request .anopinion on.three questionsbased ]upon.the

fol.lowing

facts: ..~ 7. "The.

Int.ernal

Revenue.Department files liens ,.L-. against an.individual~.,.for..non-.~~~n~ off 'Income .~:..Taxea..~

The. indWidua...owns

.one nor sever&imotor .

. ~:~ :'vehlCies.on:amidh..Elear ,Certifi.cate

of Title has been issued, or perhaps such Certifioateof Tit& will record a lien. ."These Federal'Liens

for Income Taxes are ,: filed'in t,he

Office, of the County Clerk in'a.bo,ok -. ..~ ..known

as the 'FederalLien Record'." The.three questionsreferred to are: Should.this

De rtment recognizeas a

_ prio~"~~en.this.Fsderal Een.for I~ncome

Taxes .even though aCertificate af Title,hasbeen is- ~.. ~..sued.on

which there.is.recorded a lien &ted

_ ,& to-the recording df the'Federa1Tax Lien?

"2. Under Section3., V.P.C., 1436-1,does ..the~.definit.ion

of the term!Lien' apply to Fed- ~eral.Income

Tax Liens?
. .: "If the answer to question 2 is in the af- ~_. firmative~,~

must the .Federal

Tax 'Liens

be filed ~.. with this Department? "3. What protection.~would a mortgagee have if hen loans money on a-motor vehicle if a clear

### 418 Hon. D. C,. Greer., Page 2 (V-8301 Certificate~.of

Title~ispresented to him and it later .develops.that a Federal Income Tax Lien $Eit$;n filed against the-ownerof the ve-

. For-convenience

of this.

opinion we will answer your second questionfir~at., and thenthe first and third .in that order. ~\ ~~Article..l43&1;. Section.

3., V.P.C.; provides:

_ ~,~~a.term'.'lien;'means.every kind of~lease .~conditional

sales contract,-deed..of trust, chattel -mortgage .trnst

~receipt,.reservation of title, or otherwr tten instrumentof whatsoeverkind or

-1, characterwhereby an interest,other than absolute .title,.

is soughtto be.held..orgiven in a motor vehicie,.also

any l.ien:created~or given by C n- ,s.titution.

or'Statute.,"-

. . : 7 A i.ien..has

been .defined...by

our Courts as a .~to: &force.a.charge~

upon. propertyofanother for the _~ ..ment..,or...sat.isfaction.of.~claims... IX is.. also a charge right

MYupon .property.

for.the.pay+?nt

of a debt...

There can be no lien ..~without

a..deht;Vaugbad~v,~ IJohnRancock'Mutual L%f.fe'In-

.

.

_ .. ._ i.1 - :,f,..:~:.. ._ :~’ _,~

.:.. . ..~.~~~.Fedei.dl...right.~.tcJ: a"&%& 'unpaid

income &&es, aris.es,.b~.c.;virtue..of Federal%&&te. 26 U.S.C.A., Section _36i78~?,1aternal~Revenue Code&provides:

.I ,~ -1 .~ .,_ .-F.Xf .any person pliable

'ta+ay any tax neglLe~tsnpr,:yefua~es.to pay..the>

'&me after demand, ..the.amount(including~any interest,penalty, ad- .ditionalamount.,

oraddition te“snch tax, togethheit_~th,~any~Eosts thatmay'~accrue

in,addi- _..t.ion:tihereto)

shall.bea.lieri+.favor of the Dnited~Statesuponall nroperty and rights to propeey; whather,realor pers$nal,belonging to s&h~Sp&&o,n; W: .: .,_ ~, .~,, : ;. .,. -

. Hon. D. C. Greer, Page 3 (V-830)

Its isapparent this type lien fits squarely.within the.LabQve

court ,definition.But the Section 3..definitiQn.obviollsly

containsa.restcictedapDlication.~. .It applieson1y.t.o.

those~.liens.

nsoughtto be'held or given in .amotors

vehicle!?.Consequently:,. the statutorydefinition does.

notapplyto a.

yederal.~.,income:,tax lienif .the. liqp, for.

example',

seeks enforc~ement.against.8 personrs.," real~property...,However.., inthe event such a lien is'sought
._ ,....:to ,be. enfQrc,ed.

against.

a motor.~vehicle.:regist.ered~~~in'~Texas, S.ection.3

of ~~icla,l1+36.-1.,applies.~.~T~ that etient, your .second. .questi.Qn

is answered in the affirmative. ~:~:Having

so answered,you ask #whether such Federal lienmust be.filed,,with yourDepartment.

Indeed, Congresshasby Federal Statute this corn&a&e. required

Section 3672, ~26.U.S.C.A. Internal Rev& enue, Code, provides:

-- "(a,) Such lien.shall.not
,. gainst any mortgagee.,. pledgee, ~..j.ndgment

creditor,

until.notice.

. . .~ filed..bythe dollector Abe valid as apurchaser,or thereof has been

. "(1) In the.office in. which~the filing of such notic~e

is. authQrized .by.the

law of the State -1 or.Territoryin which the property subject to the - lien issituated;.whenever the State or Territory has~by law.authorized.the filing of such notice in an office.within.the'State .or.Territory;

. '. ." -~The..filing

with. the County Clerk of,.Federal tax .liens~.to

be enforcedagainst.motor vehicles does not meet

.. -Texas

statutory requirements.. This is in keeping with. - the.established.meaning of Article.

lA36.-1,~

known generally.asthe Certificate.of .TitleAct,.

effective October 1, 1939. The effect of.this~ Act was.

to repeal and supersede

### 42cl Hon,. D. C... Greer., Page 4 (V-830) Articles~..5490~,

5497 and~5497a,,.~V.C.S., insofar as those Articles~affected..the..regiatration.of chattelmortgage : liens onmotor vehicles., Whereas ~formerly

the validity of a.motor..vehicle lien.as.against

third parties was de- \~.pendent .upon

the mortgage,being,~filed with the County, Clerk (Articles5490,,5497,5497a)the Certificateof Title Act.

made.auch..va.liditydepen~ upon a proper recording of the lienon the:certXficate~-of. title. Article 1436-1, Sactioos.42, 44 and 46.1 This office in a prior op~r&n,.G-l53~ ,datsd..&v..7 .1939, so held. And in 3 CommericalCre3 t ,COm . . ..v.. LericanManufacturi ~;m~,ny,.sn~,..the C%&eached the same conclu%on, c t ng withapproval.0.-1539..~.To the.same effect, see -agl;2Motor_In~..

Co,.:v,. Citp'..of'

HamUn; 142 -Tex.

&36;"179 278 (1944)

.. A Dnder-the-facts.presented here, it is our opinion that Federal liens~asagainstmotor vehiclesmust beg ~-filad;:and

recor&&with.yourDe artme& as authoriaed.by .-the .praaisionaaf.Article..Uc36-fl~in order to be valid as againat.

thirdparties.. ~~.. .

,_ ,Conc.erningyour..firstque.stion we are of the

. ..opinion

that you..

should. not.recognim .priorLty of a Federa1 taxlien properly.re.corded.undsr.$he Certificateof 1 "Set,.:

42;,~ No l%enr

one anr...motar...vehicle

shall be valid

. _

_ ._ ___ ,._. ~.

.._ _ . . . .

. .~. .._ .as against.third.part,i~.ss.witbout~actllal knowledgethereof.ar enforceable.aga&stthe motor vehicle of any such third..parties

as.th.e issuanceof a certificate of title thereof, unless.anapplication.for a newtjtle is made as prssc.ribe.d.-in

-this-Act

and ~~all..first

and subseque'nt liens noted-by.

the Department

thereon.". %ec. 44.. No.lien onany motor vehicle to which a re-

_ ._ ceipt .ar..certificate.of-time. has.b.een.issued

shall be .~_ -Ipal~h.as.against.third ..parties..wd&hout

ac& knowl-
_,. adge.~h~reof,~..or.enforceable.against the motor vehicle
., of anysuch third+art$es, Mless.the notation of said
._ . .lIenshal&.have. beencaused to be.made on receiptsand ..c.ert~ficatea...of.title on said motor vehicle, as pro- ..~ &Led. in this Act." "Sqc. 46. On&y lie& noted on a receipt or certif$cate of title ahall~,b.e-valid as.againstcreditorsof the ~~- .mortgagorFn ao farasconcerns the motor vehicle.?Hon. D. C. Greer, Page 5 (V-.830) :,,'., ?a2

Title Act2 prior to the,Federallien,. ~When the Govern- ~with the State's.statutoryrequireloses priority over prior

~ In United States v,'Yatas, 204 S.W..Zd 399 (Tex. .CLv..

App.., 1947*. .error~.re.f.~,n.r.,e.) the Court held:;. '"Raving

~.conuluded.

that&he attachment lien of.Ear1.and.W.

0.. Yates was.sp&ifie andi'fixed uponthe date of..ita.lav.y.,..which date.,was

prior to .the.date

.the Governmenttied its ,lien:for un- ..~ .paid.

taxes..,...-..

the. Government% contentiontbat~ ..'th.etax,lienshould hane.priorityover the attach-

. .ment lien~fixed

aga.inst..the,parsonal propertyof L..,C.~Russellis

denisd and overru1ed.w :._ The Yates &ase,rcited..with.-approval Louisiana State.~JJniversity

v~. 'Hart,. 2lO..Ia;.:7S.,:

174 A.L.R. 1366 &Sg%d upon. .T&aSupremeJourt of Louisiana there

3.61. (1946)~whereina similar priority dispu<e stated: ....eIt.has.often~ been.saidthat the iien of the..Unit.ed.Si5ates,.~under.Sections 3670 and 3671,

_ ia~.subordinate.to a ~~priormortgage. .This.has been the..consi.stentruling.of the Federal courts. ~~.DetroitBank ~.Y. United..States,. 317 U.S. 329 ,63 ;.S.Ct. 297~,

87.L.Ed. 304;..Unitsd States v. heaver 'Run Coal Company, 3 :.CJs,,99 F.2d 16; Metropolitan Life Insurance

Company v:..United States, 6 Cir, .~~ 107~F.2~d

311; Exchange National Bank of Tulsa v. ~. Davy~(DC)..13

,F.Supp..226.

..This subordinate.positioa.to prior mortgageawas held to apply inthe ~- . ..case where the.taxlien arase~ before the mortgage
..~ 2 "Sec. 43. All liens.onmotor vehicles shall take priority accordingto~the.order...of time the same are recorded on ths receipt orcertificate of title~of .a11 ,such.racordingsto be_made,.by

the Department.? 3.. ..-!Ths Government*s.failure.to.comply with statutory raquirementa

relative to.filingor recordingnotice -, of lienwill deprive it of priority over such claimants.! 47 C.J.S. Sec. 764, Internal.Revenue, p. 997.

### 422 Hon..D. C. Greer, Page 6 (V-830)
but was not properlyrecorded,until after the mortgage, even when the,mortgagee~had knowledge .ofthe..existentie~.of the uurecorded

tax lien; .Unitsd.States.v..BeaverRun Coal Company,supra.n M&h of.

what~.&e

have said is also applicable to your.thirdquestian, .The protection to be afforded a -mortgagee wha loans money .on~.s.motor vehicle where the .cer$.ificate.of.title presented.&0

him is clear depends mainly onthe da e'.of filing and.rewrding his lien with pour Department.1 ..Ths same.prote.ction

is extended the Government,

provided~

its-.lisn..is

filed and recordedas

. required .byArtFcle, l.43~6-?1...

Filing its lien with the -~Coungy

C1erk.i.s

of.no,effeCt.as

against such a,mortgagee. In.47.C.J.S.~

997.,.,Internal.Revenue, Sction 764, it is said? 4~~. ,.... _ ,. "As bstween.the

mortgag e or other claim- .~.ant.apecifis&

inthe..statute

3 ..~ as entitledto protection and the..government.,~.the_date of rebording _~ ..-l:the..tax lien..will.cQntrQl ,the tax lien being - .prefarradtQ subsequent..&ns and deferredto

- .thosa~rec~rded

prior.tQthe~.tax

lien. . . .* -CPQotnote

insertion.0urs.1~

._~ Ix%far as.motor.vehicles are concerned.the - . tru&i& Is:.. The..~first.r.ecorded.lien as required by ...Article.lA36E1.is entitledtom

priority.

. . ~,. .:

..,. _~.~I .- 1.~ &deralinwme.taxliens sought to bs .%.enforced.against_a.motQr~vehi~le in Texas are ,. . ..withinthe.meaning of the .&erm"lien"as defined in Section 3.of~Article.lA3&1,V.P.C. Such liens, ~ in. order. to-be. valid~aa~

againstthird partiesmust --:.a~ 1.3 ..be.filed~withthe Texas HighwayDepartmentand

....duly.recorded

npon the certificate of title. 'Arti&le lA36-l,.,Se&ions 42,..l+l+ and 46, V.P.C.;

. .~
5 ,' -,Presumably

26 U..S.C.A.,

3672,Internal Revenue Code, supra.Ron; D:~C. Greer., Page 7 (V-830)
26 U.S.C.A.-

ItiternalBRe&& Code,~Section3672; . ~~ Coohmercial. Credit Companyv..~&nericati Manufactur- :
_. _^.. (Tex. Cl v** PP., A

,. ,. ‘
_

2. Insofaras motar.vehicles are concerned,
_... then Texas Highway.Departmant should snot

give prior-

_ ity.to.a .Federal ~inc~eetaxlisn filed in the of- ~,~ fi.k.e.of..the~~County Clerk over a lien duly filed ~. and recorded upon,..the...krtifikate of title to the _~.mot~..vehicle~.~prior. to-the .Federal

lien. Article
_, ._. .~.

l@6~l;Section.43,..V,P.C.,;..Uni.t.ed~~States v. Yates, 294 S,K2d.399. (Tex. CttV. .App~.., 1947 error.ref. n,Le.).: _.. .~ ._.. louiaianaStat.e UniversityG. Hart, 210
_. Ls.78;&!4 AJ+R~.l3+6; 26 So&d 361 (194a .

3. A mortgagee..who lends motiey 6n a motor vehi&e~where a clear.,certificate of title is pre- _~..sented.to

himis fullj.protectad ,against

a Federal ~:lncame.taxlianf.iladwith.the.County Clerk, provided .his.

lianis ratiorded-bond the.~ certificate'

of .~ .tltle.aa

provided..byArticle 1436-l; As between ths Governiaent.and~,such a.martgagee,the first re- +orded:lien on the.certificate of-title is enti- .;l;d.$o-priority.. Article 1436-1, Se;tion 43,

. . . Yotis very truly,'

ATTORNEY GENERALOF TEXAS .c
Assistant
APPROVED @-~~ FIRST ASSISTANT .ATTORNEP

GENERAL CEC)lg