Source: https://law.justia.com/cases/federal/appellate-courts/F2/625/565/57108/
Timestamp: 2020-07-13 21:44:32
Document Index: 489294652

Matched Legal Cases: ['§ 6323', '§ 6323', '§ 6323', '§ 236', '§ 6323', '§ 6323']

Rice Investment Company, Plaintiff-appellee, v. United States of America, Defendant-appellant, 625 F.2d 565 (5th Cir. 1980) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fifth Circuit › 1980 › Rice Investment Company, Plaintiff-appellee, v. United States of America, Defendant-appellant
Rice Investment Company, Plaintiff-appellee, v. United States of America, Defendant-appellant, 625 F.2d 565 (5th Cir. 1980)
US Court of Appeals for the Fifth Circuit - 625 F.2d 565 (5th Cir. 1980) Sept. 4, 1980
The opinion of this court in Texas Oil & Gas Corp. v. United States, 466 F.2d 1040 (5th Cir. 1972), cert. denied, 410 U.S. 929, 93 S. Ct. 1367, 35 L. Ed. 2d 591 (1973), contains a description of the history of the competition between federal tax liens and private liens.3 We will repeat here only so much of that history as is necessary for an understanding of the problem before the court.
The term "qualified property," when used with respect to a commercial transactions financing agreement, is defined to include "only commercial financing security acquired by the taxpayer before the 46th day after the date of tax lien filing."18 The term "commercial financing security" is defined to mean "(i) paper of a kind ordinarily arising in commercial transactions, (ii) accounts receivable, (iii) mortgages on real property, and (iv) inventory." Finally, subsection (h) (1) of § 6323 defines the term "security interest" as follows:
26 U.S.C.A. § 6323(c) (2) (B) (emphasis added). The Senate Finance Committee in reporting the 1966 amendments concluded that " . . . protection is afforded only where the loan or purchase is made not later than 45 days after the tax lien filing . . . and only where the . . . accounts receivable . . . are acquired before the 45 days have elapsed." S.Rep. No. 1708 supra, U.S.Code Cong. & Admin.News, p. 3729 (1966) (emphasis added). Although it is not clear from the record whether the bank in the instant case had actually advanced funds to the taxpayer-debtor within the 45 day "grace" period, it is undisputed that none of the accounts receivable came into existence prior to April 13, 1970, 45 days after the filing of the tax lien.
See generally Coogan, The Effect of the Federal Tax Lien Act of 1966 Upon Security Interests Created Under the Uniform Commercial Code, 81 Harv. L. Rev. 1369 (1968); Plumb, Federal Liens and Priorities Agenda for the Next Decade (pts. 1-3), 77 Yale L.J. 228, 605, 1104 (1967-1968); Kennedy, From Spokane County to Vermont: The Campaign of the Federal Government against the Inchoate Lien, 50 Iowa L.Rev. 724 (1965); Kennedy, The Relative Priority of the Federal Government: The Pernicious Career of the Inchoate and General Lien, 63 Yale L.J. 905 (1954)
Glass City Bank v. United States, 326 U.S. 265, 66 S. Ct. 108, 90 L. Ed. 56 (1945); Dean Constr. Co. v. Simonetta Concrete Constr. Corp., 65-1 U.S. Tax Cas. P 9253, 37 F.R.D. 242 (S.D.N.Y. 1965); In re: Hudon & Son, Inc., 65-2 U.S. Tax Cas. P 9517 (D. Mass. 1964); Randall v. Colby, 190 F. Supp. 319, 341 (N.D. Iowa 1961); Stockholders Pub. Co. v. Smith, 56-1 U.S. Tax Cas. P 9420 (S.D. Cal. 1956)
United States v. Security Trust & Savings Bank, 340 U.S. 47, 53, 71 S. Ct. 111, 114, 95 L. Ed. 53 (1950) (Jackson, J., concurring)
United States v. Snyder, 149 U.S. 210, 13 S. Ct. 846, 37 L. Ed. 705 (1893)
I.R.C. § 6323(b) (2), which originated in Revenue Act of 1964, § 236, 78 Stat. 127
See Rankin & Schatzell v. Scott, 25 U.S. (12 Wheat) 177, 179, 6 L. Ed. 592 (1827). There is a special priority statute, commonly referred to as Section 3466 of the Revised Statutes, which provides as follows:
United States v. City of New Britain, 347 U.S. 81, 74 S. Ct. 367, 98 L. Ed. 520 (1954)
United States v. Pioneer American Ins. Co., 374 U.S. 84, 88, 83 S. Ct. 1651, 1654, 10 L. Ed. 2d 770 (1963). See also United States v. Security Trust & Savings Bank, 340 U.S. 47, 49-50, 71 S. Ct. 111, 113, 95 L. Ed. 53 (1950) ("The effect of a lien in relation to a provision of federal law for the collection of debts owing the United States is always a federal question. Hence, although a state court's classification of a lien as specific and perfected is entitled to weight, it is subject to reexamination by this Court. On the other hand, if the state court itself describes the lien as inchoate, this classification is 'practically conclusive.' Illinois v. Campbell, 329 U.S. 362, 371, 67 S. Ct. 340, 345, 91 L. Ed. 348.")
(d) Qualified property. For purposes of paragraph (a) of this section, qualified property consists solely of commercial financing security acquired by the taxpayer-debtor before the 46th day after the date of tax lien filing: Commercial financing security acquired before such day may be qualified property even though it is acquired by the taxpayer after the lender received actual notice or knowledge of the filing of the tax lien. For example, although the receipt of actual notice or knowledge of the filing of the notice of the tax lien has the effect of ending the period within which protected disbursements may be made to the taxpayer, property which is acquired by the taxpayer after the lender receives actual notice or knowledge of such filing and before such 46th day, which otherwise qualifies as commercial financing security, becomes commercial financing security to which the priority of the lender extends for loans made before he received the actual notice or knowledge. An account receivable (as defined in paragraph (c) (2) (ii) of this section) is acquired by a taxpayer at the time, and to the extent, a right to payment is earned by performance. Chattel paper, documents of title, negotiable instruments, securities, and mortgages on real estate are acquired by a taxpayer when he obtains rights in the paper or mortgage. Inventory is acquired by the taxpayer when title passes to him. A contract right (as defined in paragraph (c) (2) (i) of this section) is acquired by a taxpayer when the contract is made. Identifiable proceeds, which arise from the collection or disposition of qualified property by the taxpayer, are considered to be acquired at the time such qualified property is acquired if the secured party has a continuously perfected security interest in the proceeds under local law. The term "proceeds" includes whatever is received when collateral is sold, exchanged, or collected. For purposes of this paragraph, the term "identifiable proceeds" does not include money, checks and the like which have been commingled with other cash proceeds. Property acquired by the taxpayer after the 45th day following tax lien filing, by the expenditure of proceeds, is not qualified property.
See Aetna Ins. Co. v. Texas Thermal Indus., Inc., 591 F.2d 1035, 1038 (5th Cir. 1979); cf. Texas Oil & Gas Corp. v. United States, 466 F.2d 1040 (5th Cir. 1972), cert. denied, 410 U.S. 929, 93 S. Ct. 1367, 35 L. Ed. 2d 291 (1973) (federal standards of choateness employed as a tool for statutory interpretation of § 6323 where the collateral was an account receivable). See also 86 Harv. L. Rev. 1570 (1973) and 27 Sw.L.J. 723 (1973) (both criticizing the approach taken in Texas Oil & Gas)
See 26 U.S.C. § 6323(c) (2) (A), (d)