Court Opinion

ID: 9464899
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:45:58.996255+00
Date Added: 2024-06-11T17:38:52.527072
License: Public Domain

MANSFIELD, Circuit Judge
(dissenting):
I respectfully dissent for the reason that in my view appellee’s lien as a judgment creditor was not fully perfected under Connecticut law before the federal tax lien became valid and was perfected under 28 U.S.C. § 6323 by the Government’s filing notice of its tax lien with the Secretary of State of Connecticut on March 6,1975. The federal tax lien, therefore, must prevail.
It appears to be common ground and well settled that a state judgment creditor’s lien, in order to prevail over a federal tax lien, must not only meet federal requirements for choateness (specificity of lienor’s identity, amount of lien and property subject to lien) as established in United States v. Security Trust & Savings Bank, 340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53 (1950); United States v. New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520 (1954); and United States v. Vermont, 377 U.S. 351, 84 S.Ct. 1267, 12 L.Ed.2d 370 (1964), but also meet all state requirements for perfection as against third persons before the federal tax lien has been perfected. United States v. Security Trust & Savings Bank, supra, 340 U.S. at 49-50, 71 S.Ct. 111. Section 6323 does not “purport to affect the time at which local liens [are] deemed to arise or to become choate or to subordinate the tax lien to tentative, conditional or imperfect state liens,” United States v. Pioneer American Insurance Co., 374 U.S. 84, 89, 83 S.Ct. 1651, 1655, 10 L.Ed.2d 770 (1963). See Miller v. Bank of North America, 166 F.2d 415 (9th Cir. 1948). In short, for the state judgment lien to prevail there must be nothing left for the creditor to do under state law — no more hurdles to jump or steps to be taken — before the federal tax lien is perfected. United States v. Vermont, supra.
The requirement that the state judgment creditor’s lien be fully perfected under state law to gain priority is recognized in a portion of the definition of a “judgment lien creditor” in Treas. Regs, on Proc. and Admin. (1954 Code), which the majority has either overlooked or disregarded. I refer to the following sentences in 26 C.F.R. § 301.-6323(h)-1(g), which immediately follow those quoted by the majority:
“If recording or docketing is necessary under local law before a judgment becomes effective against third parties acquiring liens on real property, a judgment lien under local law is not perfected with respect to real property until the time of such recordation or docketing. If under local law levy or seizure is necessary before a judgment lien becomes effective against third parties acquiring liens on personal property, then a judgment lien under such local law is not perfected until levy or seizure of the personal property involved.” (Emphasis added).
Applying these principles here, appellee gained a contingent lien against the debt owed by the Community Renewal Team of Greater Hartford (CRT) to Hall pursuant to Conn.Gen.Stat.Ann. § 52-329 by service of its writ of attachment on CRT on December 17, 1974, and by obtaining a judgment against Hall on January 31, 1975. However, in order fully to perfect its lien as against third parties and thus gain priority over them, it was in addition required under Connecticut law to make a demand by successful service of a writ of execution upon CRT within 60 days. Without such demand and service appellee’s judgment lien was not fully perfected and the garnishee was not obligated to make payment, Conn.Gen. StatAnn. §§ 52-328, 52-381. Since no such demand and service was made prior to March 6, 1975, when the Government concededly perfected its lien under 28 U.S.C. § 6323, the federal tax lien is entitled to priority. Bradbury v. Wodjenski, 159 Conn. 366, 269 A.2d 271 (1970).
In my view Bradbury controls the present case. There the Connecticut Supreme Court, in a contest between competing judgment creditors, held that successful service of a writ of execution was an essential element of perfection, stating:
*12“A judgment creditor, in order to perfect an attachment or garnishment made pri- or to judgment on his claim, must take out an execution and have it levied on the real or personal estate attached or have demand made on the garnishee within sixty days after final judgment. General Statutes § 52-328; * * *. In thus having an execution issued and demand made well within sixty days of final judgment, Batter [the third creditor] effectively perfected its attachment and secured its claim to the fund, thereby creating an interest in the fund superior to those of the other two defendants, the interests of which, as have been stated, remained unsecured.” 159 Conn, at 370, 269 A.2d at 273.
Both sides agree that appellee’s lien was certain as to the amount of the lien, the identity of the lienor, and the property subject to the lien as soon as judgment was entered against Hall. However, that lien was not perfected as a matter of Connecticut law by the time of the filing of notice of the federal tax lien. Congress could not have intended that federal tax liens would be subordinated to unperfected state liens that are themselves vulnerable to later-created state liens of the same character that are fully perfected.