Source: https://supreme.justia.com/cases/federal/us/347/81/case.html
Timestamp: 2017-03-28 06:24:12
Document Index: 284782587

Matched Legal Cases: ['§ 3670', '§ 3670', '§ 33', '§ 10', '§ 3670', '§ 3672', '§ 3672', '§ 3672']

United States v. City of New Britain (full text) :: 347 U.S. 81 (1954) :: Justia U.S. Supreme Court Center Log In
› United States v. City of New Britain
United States v. City of New Britain 347 U.S. 81 (1954)
U.S. Supreme CourtUnited States v. City of New Britain, 347 U.S. 81 (1954)United States v. City of New BritainNo. 92Argued December 1, 1953Decided February 1, 1954347 U.S. 81CERTIORARI TO THE SUPREME COURT OF ERRORS OF CONNECTICUT
A Connecticut state court directed that, in the distribution of the proceeds of certain mortgage foreclosure sales of real estate, certain municipal tax and water rent liens should take priority over certain federal tax liens. Page 347 U. S. 82 The Supreme Court of Errors affirmed. 139 Conn. 363, 94 A. 2d 10. This Court granted certiorari. 346 U.S. 809. Judgment vacated and cause remanded, p. 347 U. S. 88.
Two mortgages on the real property of a corporation located in the City of New Britain, Connecticut, were foreclosed by judgment sale in the Superior Court of Hartford County, and a gross sum of $28,071.24 was realized. Against this fund, there were claims of some $31,000, including expenses of the sale, the two mortgages, a judgment of record, and various statutory liens asserted by the City and by the United States. The federal liens, securing unpaid withholding and unemployment taxes and insurance contributions totaling $8,475.13, were created by § 3670 of the Internal Revenue Code. [Footnote 1] Page 347 U. S. 83 They arose at the times the assessment lists were received in the office of the Collector of Internal Revenue for Connecticut [Footnote 2] on various dates between April 26, 1948, and September 21, 1950. The City's liens, which attached to the specific real estate sold in the total sum of $3,587.71, are for delinquent real estate taxes and water rent. The real estate taxes became due on various dates in 1947 through 1951, the liens attaching in each case as of October 1 or other assessment date of the prior year; [Footnote 3] the water rent liens arose upon failure to pay [Footnote 4] and date from December 1, 1947, to June 1, 1951.
A Connecticut statute provides that real estate tax liens "shall take precedence of all transfers and incumbrances" in any manner affecting the property subject to the line. [Footnote 5] Another state law gives the water rent liens "precedence over all other liens or incumbrances except taxes" on the property subject to the liens. [Footnote 6] The funds available for distribution being insufficient to pay all claimants in full, the Superior Court directed that the expenses, the City's liens, the mortgages, the judgment lien, and the United States' liens be paid in that order. The United States appealed from the judgment insofar as the statutory liens of the City were given priority over those of the United States. The Supreme Court of Errors of Connecticut affirmed, Brown v. General Laundry Service, 139 Conn. 363, 94 A.2d 10, and we granted certiorari, 346 U.S. 809. Page 347 U. S. 84
Thus, the general statutory liens of the United States are as binding as the specific statutory liens of the City. The City gains no priority by the fact that its liens are specific, while the United States' liens are general. Obviously, the State cannot, on behalf of the City, impair the standing of the federal liens without the consent of Congress. Michigan v. United States, 317 U. S. 338, 317 U. S. 340; United States v. Oklahoma, 261 U. S. 253, 261 U. S. 260; United States v. Snyder, 149 U. S. 210, 149 U. S. 214. On the other hand, the federal statutes do not attempt to give priority in all cases to liens created under the paramount authority of the United States. The statute creating the federal liens Page 347 U. S. 85 here involved, I.R.C. § 3670, does not in terms confer priority upon them.
This principle is widely accepted and applied, in the absence of legislation to the contrary. 33 Am.Jur., Liens, Page 347 U. S. 86 § 33; 53 C.J.S., Liens, § 10b. We think that Congress had this cardinal rule in mind when it enacted § 3670, a schedule of priority not being set forth therein. Thus, the priority of each statutory lien contested here must depend on the time it attached to the property in question and became choate.
340 U.S. at 340 U. S. 50. Thus, the attachment lien was "merely a lis pendens notice that a right to perfect a lien exists." Ibid. Such inchoate liens may become certain as to amount, identity of the lienor, or the property subject thereto only at some time subsequent to the date the federal liens attach, and cannot then be permitted to displace such federal liens. Otherwise, a State could affect the standing of federal liens, contrary to the established doctrine, simply by causing an inchoate lien to attach at some arbitrary time even before the amount of the tax, assessment, etc., is determined. [Footnote 9] Accordingly, we concluded in Security Trust "that the tax liens of the United States are superior to the inchoate attachment lien. . . ." Id. at 340 U. S. 51. In the instant case, certain of the City's tax and water rent liens apparently attached to the specific property and Page 347 U. S. 87 became choate prior to the attachment of the federal tax liens.
The State finds the rule of "first in time, first in right" not applicable, because of § 3672 of the Internal Revenue Code, [Footnote 10] which makes the lien of the United States invalid as to the prior recorded mortgages and the judgment in this case. It points out that the mortgagee could have paid the delinquent real estate taxes and water rent, with the amount so paid becoming part of the mortgage debt covered by the mortgage lien, [Footnote 11] and suggests that the federal tax lien would therefore be invalid as to such amount by virtue of § 3672. [Footnote 12] From this and a belief that Congress did not intend, by giving mortgages and Page 347 U. S. 88 judgments priority over federal tax liens, to supersede state laws making certain interests superior to mortgages and judgments, the Supreme Court of Errors concluded that, by enacting § 3672 Congress