Opinion ID: 238996
Heading Depth: 1
Heading Rank: 2

Heading: Priority as between the United States and the District of Columbia.

Text: 19 The United States bases its claim to priority on the unrestricted right to first payment of its debts accorded by Section 3466, already discussed, whereas the claim of the District for priority rests on Section 47-2609 of the District of Columbia Code, 1951. 7 Section 47-2609 is found in the title relating to sales taxes and is made applicable to compensating-use taxes by Section 47-2707 of the Code. It provides that where property is assigned for the benefit of creditors, these taxes for which the debtor is liable shall be a prior and preferred claim; and it is the duty of any United States marshal, receiver, assignee, or any other officer to first pay to the Collector the amount of said taxes    before making any payment of any moneys to any judgment creditor or other claimants of whatsoever kind or nature. Personal liability for the tax is imposed if the officer violates the terms of the section. 8 20 In District of Columbia v. Greenbaum, 1955, 96 U.S.App.D.C. 168, 171, 223 F.2d 633, 636, we stated in footnote 13 of the opinion that the scope of Section 47-2609 9 will be similar to that of Section 3466 of the Revised Statutes in local insolvency proceedings, as distinguished from bankruptcy proceedings under the Federal Bankruptcy Act. But that statement was not a holding that the District's priority will be equivalent to that of the United States under Section 3466 in contests between the two. Although the United States was an appellee in that case, it did not urge priority for its tax claim under Section 3466, the Supreme Court having already decided that in proceedings under the Bankruptcy Act the taxes due the United States take the priority accorded them by Section 64, sub. a of the Bankruptcy Act, rather than having a first priority under Section 3466. See Guarantee Title & Trust Co. v. Title Guaranty & Surety Co., 1912, 224 U.S. 152, 32 S.Ct. 457, 56 L.Ed. 706, and cf. State of Missouri v. Ross, 1936, 299 U.S. 72, 57 S.Ct. 60, 81 L.Ed. 46, and United States v. Emory, 1941, 314 U.S. 423, 427-429, 62 S.Ct. 317, 86 L.Ed. 315. Thus, our statement in the Greenbaum case, at footnote 13, related to the scope, in local insolvency proceedings, of the District's first priority for sales and use taxes in relation to creditors other than the Federal Government. A fortiori the District's claim would be prior to that of a landlord who has not perfected his lien, for the reasons already given in connection with our discussion of Section 3466 and the landlord's lien. But the question here, as to the rights of the United States and the District under statutes giving each a first priority, was not present or decided in the Greenbaum case. 21 That question must now be decided. We are faced with the dilemma of choosing between two statutes enacted by Congress, each giving a first priority in terms absolute, each applicable here, and each imposing a personal liability on the assignee if he pays any other debt of the insolvent assignor first. Obviously, neither statute can be applied as it is written without violating the other, and we must therefore find some solution from extraneous aids. 22 We have searched the legislative history in vain for some indication from the Congress as to whether, in enacting the District statute, it intended to create an exception from Section 3466 of the Revised Statutes with respect to the District sales and use taxes. As we noted in the Greenbaum case, 10 the section follows almost verbatim the Maryland sales tax statute, Md.Ann.Code, 1951, art. 81, § 339. In fact, sales-tax officials of Maryland were invited to sit with the subcommittee and advise it in writing the bill. 95 Cong.Rec. 6087 (1949). Obviously, the Maryland statute, even though in terms absolute, could not and did not make the state taxes prior to the claims of the United States in insolvency proceedings of the types covered by Section 3466. 11 But in legislating for the District of Columbia Congress is not subject to the same limitations as are state legislatures, Neild v. District of Columbia, 1940, 71 App.D.C. 306, 309-311, 110 F.2d 246, 249-251, and we can hardly impute to it without more an intent to have the District taxes occupy a priority status equivalent only to that of state taxes. 23 Other factors lead us to resolve the priority dispute in favor of the District. Section 47-2609 is a more recently enacted statute awarding priority to only one kind of tax claim whereas the Federal statute prescribes a general priority for all kinds of debts. The limited nature of the District's priority given by a later statute using language just as forceful as that of Section 3466 12 requires the inference that Congress intended to create an exception from the broad and general Federal priority in this one respect. Cf. Cook County National Bank v. United States, 1882, 107 U.S. 445, 2 S.Ct. 561, 27 L.Ed. 537; Mellon v. Michigan Trust Co., 1926, 271 U.S. 236, 46 S.Ct. 511, 70 L.Ed. 924; United States v. Guaranty Trust Co., 1930, 280 U.S. 478, 50 S.Ct. 212, 74 L. Ed. 556. In all of the cases just cited the Supreme Court held that later acts of Congress created an exception, as to specific debts due the United States, from the general priority accorded by Section 3466, even though the act did not in terms refer to Section 3466 and the legislative history was apparently silent on the matter. The repugnancy between the two priority statutes here is far clearer than the inconsistency in any of the cited cases. 24 We conclude that Section 47-2609 as the later, more specific, and more limited enactment creates an exception to Section 3466 to the extent of the District's claim for sales and use taxes, and that the District's claim for such taxes has first priority in local insolvency proceedings over the United States. We are reinforced in this conclusion by the consideration that since Congress has the obligation to provide revenues for both the District and the Federal Government, there could have been no real incentive for subordinating the District's taxes in an insolvency proceeding. 25 Our decision requires that the case be remanded. It remains to consider how the available fund of $1,548.81 is to be distributed on remand. The District did not appeal from the order of the District Court. Under it the District was awarded $648.81 although, had it appealed, it would have been entitled to the full amount of its claim. We will not direct the District Court to increase the amount allowed the District. On remand the District Court may either order that the $900 previously allowed to the landlord be paid to the United States, or if it can justify so doing despite the failure to appeal, allow the District its full claim and allot the balance to the United States. 26 Remanded for proceedings consistent with this opinion.