Opinion ID: 249441
Heading Depth: 1
Heading Rank: 5

Heading: The Superiority of the Liens of the Commonwealth

Text: 32 Applicable Pennsylvania statutes clearly indicate the superiority of the Commonwealth's liens for sums due under the Unemployment Compensation Law over any other liens on the same property. 21 In order to overcome the clear statutory directives, the Bank relies first on the case of Commonwealth, etc., v. Lombardo. 22 The Bank points out the following language in that opinion:    The language of section 308.1 of the Unemployment Compensation Law [Tit. 43 Sec. 788.1 of Purdon's, see footnote 21, supra] is not in our opinion effective to establish a lien against the personal property of an employer so as to prevent its transfer to a bona fide purchaser for value prior to the time that the writ of fieri facias, the first step in the execution process, is placed in the hands of the sheriff. At pages 608, 609 of 356 Pa., at page 662 of 52 A.2d. 33 From this statement the Bank concludes that the Commonwealth, in the case at bar, never had a valid lien against the merchandise inventories of the Bankrupt, since the Commonwealth never issued a writ of fieri facias. 34 The simple answer to this contention is found in the same statement from the Lombardo case upon which the Bank relies: The Court says that the language of Sec. 308.1 is not effective to establish a lien against personal property of an employer  so as to prevent its transfer to a bona fide purchaser for value.  The Bank contends, however, that its lien is entitled to the same protection against the Commonwealth's lien as is accorded a bona fide purchaser for value. But this contention assumes the result for which the Bank argues. The whole point of the Lombardo case is that Sec. 308.1 does not specifically state the effect to be given the Commonwealth's lien as against a bona fide purchaser for value. The Pennsylvania Supreme Court itself stated in the opinion: 35 The real question here is whether an innocent purchaser of personal property ought to be bound by such notice as is afforded by the filing of the lien. As we have analyzed the law, under the principles of statutory construction, our answer is no. At page 605 of 356 Pa., at page 661 of 52 A.2d. 36 But as to the effect of the Commonwealth's lien as against competing liens, Sec. 308.1 specifically states: 37 All contributions    thus entered of record shall first be allowed and paid out of the proceeds of such sale    (Emphasis supplied.) 38 The Fiscal Code (72 Purdon Stat. § 1401, 1958 Supp., quoted in footnote 21, supra) specifically provides that at a judicial sale the Commonwealth's lien shall be allowed before any other claim or lien. The Lombardo case has no effect on the clear meaning of these statutes as applied to the facts of the case at bar, i. e., as applied to the question of the superiority of the Commonwealth's lien as against the lien of the Bank at a judicial sale, or sale in bankruptcy. 39 But the Bank contends that the Lombardo case has already been applied by this Court in resolving a question of competing liens. In the case of Ersa Inc. v. Dudley, 3 Cir., 1956, 234 F.2d 178, this Court held that the filing of a lien for unpaid contributions due under the Unemployment Compensation Law does not create a perfected lien upon the employer's personal property, and that the lien is perfected only when a writ of fieri facias is delivered to the sheriff. Following the statement in the Lombardo case (to the effect that the lien is not established until the sheriff has the writ of fieri facias), the Court held that as between a prior recorded lien of the Commonwealth and a lien of the United States, the lien of the United States prevailed, although arising (in point of time) after the Commonwealth's liens were recorded. 23 40 The Court below distinguished the Ersa case on the ground that it determined the extent to which liens of the Commonwealth (arising under the Unemployment Compensation Law) must be perfected in order to prevail over a subsequent lien of the Federal Government. In addition, we observe another distinguishing feature of the Ersa case, which is that the lien competing with that of the Commonwealth arose subsequent to the recording of the Commonwealth's lien, whereas here the lien competing with that of the Commonwealth arose prior to the recording of the Commonwealth's lien. In the case at bar whether or not the Commonwealth issued a writ of fieri facias could have made no difference to the Bank. This is true since it obtained the lien prior to the time of recording by the Commonwealth. 41 The Referee and the Court below, therefore, correctly determined that the lien of the Bank was inferior to that of the Commonwealth and as a result, it was entitled to priority of payment over the Bank. 42 The decision of the Court below is affirmed. 24