Court Opinion

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Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

6-2-1995

Monica Fuel v IRS
Precedential or Non-Precedential:

Docket 94-5406

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                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT

                          ___________

                          No. 94-5406
                          ___________

          MONICA FUEL, INC.

                                Appellee,

                         vs.

          INTERNAL REVENUE SERVICE, DEPARTMENT OF
          TREASURY, UNITED STATES OF AMERICA; STATE OF
          NEW JERSEY, DEPARTMENT OF TREASURY, DIVISION
          OF TAXATION

               Division of Taxation, Department of the
               Treasury, State of New Jersey,

                                Appellant.

                          ___________

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF NEW JERSEY

                  (D.C. Civil No. 91-cv-00748)

                          ___________

                    ARGUED JANUARY 24, 1995

BEFORE:   SLOVITER, Chief Judge, LEWIS and WEIS, Circuit Judges.

                     (Filed    June 2, 1995)

                          ___________
Martin L. Wheelwright
Kevin M. Schatz (ARGUED)
Office of Attorney General of New Jersey
Richard J. Hughes Justice Complex
CN 112
Trenton, NJ 08625

          Attorneys for Appellant

David A. Kasen
Kasen, Kasen & Braverman
1874 East Marlton Pike
Post Office Box 4130, Suite 3
Cherry Hill, NJ 08034

          Attorney for Appellee, Monica Fuel, Inc.

Gary R. Allen
William S. Estabrook
David A. Shuster (ARGUED)
Pamela C. Berry
United States Department of Justice
Tax Division
Post Office Box 502
Washington, DC 20044

          Attorneys for Appellee, Internal Revenue
          Service, Department of the Treasury,
          United States of America

                            ___________

                        OPINION OF THE COURT
                            ___________

LEWIS, Circuit Judge.

          This case presents a single issue of law:   the relative

priority of Internal Revenue Service ("IRS") liens, which arise

upon assessment under 26 U.S.C. §§ 6321 and 6322,1 versus New

1
.     26 U.S.C. § 6321 provides:
Jersey motor fuels tax liens, which arise under New Jersey's

State Tax Uniform Procedure Law.     At summary judgment, the United

States District Court for the District of New Jersey found the

federal liens to be superior.   Because we believe the state liens

were choate before the liens of the IRS arose and were,

therefore, entitled to priority, we will reverse the district

court's judgment.

                                I.

          The material facts of this case are generally

undisputed.   The necessary factual background concerns New

Jersey's uniform procedures for assessing and collecting taxes

and the State of New Jersey, Division of Taxation's ("Division")

activities with respect to Monica Fuel, Inc. ("Monica Fuel").

(..continued)
          If any person liable to pay any tax neglects
          or refuses to pay the same after demand, the
          amount (including any interest, additional
          amount, addition to tax, or assessable
          penalty, together with any costs that may
          accrue in addition thereto) shall be a lien
          in favor of the United States upon all
          property and rights to property, whether real
          or personal, belonging to such person.

     26 U.S.C. § 6322 provides:

          Unless another date is specifically fixed by
          law, the lien imposed by section 6321 shall
          arise at the time the assessment is made and
          shall continue until the liability for the
          amount so assessed (or a judgment against the
          taxpayer arising out of such liability) is
          satisfied or becomes enforceable by reason of
          lapse of time.
                                 A.

            The state liens involved in this case arose under N.J.

Stat. Ann. § 54:49-1, which provides in pertinent part:
          The taxes fees, interest and penalties
          imposed by any such State tax law . . . from
          the time the same shall be due, shall be a
          personal debt of the taxpayer to the State,
          recoverable in any court of competent
          jurisdiction in an action in debt in the name
          of the State. Such debt, whether sued upon
          or not, shall be a lien on all the property
          of the debtor except as against an innocent
          purchaser for value in the usual course of
          business and without notice thereof, and
          except as may be provided to the contrary in
          any other law . . . .

            The Division is authorized to make an assessment after

a report is filed and it is determined that there is a deficiency

in payment.    Notice of such a deficiency assessment is then given

to the taxpayer and demand for payment is made.    N.J. Stat. Ann.

§ 54:49-6.    The taxpayer must remit to the Division the assessed

amount within fifteen days after the notice and demand are

mailed.    N.J. Stat. Ann. § 54:49-8.   Non-payment within the

15-day period results in the imposition of an additional penalty

of five percent.    N.J. Stat. Ann. § 54:49-9.

            The Division is not limited to demand and imposition of

penalties as the only tools for effectuating collection of unpaid

taxes.    The Division may, as an alternative remedy, issue a

certificate of debt to the Clerk of the New Jersey Superior

Court.    The clerk immediately enters upon the record of docketed

judgments the name and business address of the debtor, the

certified amount of the debt and the name of the tax.     N.J. Stat.
Ann. § 54:49-12.   The entries are given the same force and effect

as any entry of a docketed judgment, and provide the Division

with all of the remedies available for recovery of a judgment in

action.   We note that this alternative remedy creates no

additional rights nor additional liabilities; rather "[i]t is a

device for collecting taxes[.]"    C.J. Kowasaki, Inc. v. New

Jersey, 13 N.J. Tax 160, 168-169 (N.J. Tax Ct. 1993).

          The New Jersey statute provides an additional remedy to

enforce collection of taxes.    The Division may issue a warrant of

execution to the sheriff of any county who, in turn, files the

warrant with the county clerk.2    The clerk then enters in the

judgment docket the name of the taxpayer and the amount the

taxpayer owes to the State.    As with the certificate of debt, the

warrant does not create the lien; instead the warrant provides a

procedural tool for enforcing a judgment.     In re Blease v. New

Jersey, 605 F.2d 97, 98 (3d Cir. 1979).

                                  B.

          On March 23, 1989, the Division made an assessment of

$76,554.19 against Monica Fuel, a Williamstown, New Jersey

corporation, engaged in the business of retail fuel oil

distribution, for unpaid motor fuels taxes.    On August 30, 1989,

the Division assessed against Monica Fuel an additional

$2,125.61, bringing the total state assessments to $78,679.70.

2
 .    The Division may also issue a warrant to any Division
employee who may execute the warrant with all the powers of a
sheriff. N.J. Stat. Ann. § 54:49-13(a). In this case the
Division exercised this option.
Thereafter, between September 18, 1989, and June 4, 1990, the IRS

made seven separate assessments against Monica Fuel for unpaid

federal excise and employment taxes, totalling $68,288.37.3     On

February 5, 1990, the Division filed a certificate of debt with

the clerk of the New Jersey Superior Court, who entered judgment

on the record of docketed judgments on February 14, 1990.      Nine

days later, on February 23, 1990, the Division issued a warrant

of execution on the personalty of Monica Fuel which was available

for payment of the taxes due.      This amounted to $60,000 which

Monica Fuel expected to receive from the bulk sale of its

business assets to Star Oil Company, Inc. ("Star Oil").4

3
 .         The amounts and dates of the IRS assessments are as
follows:

                Assessment Date              Amount

                    09/18/89               $ 9,253.99
                    09/25/89                40,365.94
                    12/04/89                 8,472.31
                    12/18/89                     0.00
                    03/19/90                   264.20
                    03/19/90                 7,570.84
                    06/04/90                 2,361.09

                                  Total                   $68,288.37

4
 .    On February 7, 1990, Star Oil, pursuant to N.J. Stat. Ann.
§ 54:32-22(c) (West 1986), filed a Notification of Sale, Transfer
or Assignment in Bulk with the Division indicating that Star Oil
would be purchasing some of Monica Fuel's business assets. The
sale was completed in mid-June. At or about that time, Monica
Fuel, Star Oil, the IRS and the Division executed an escrow
agreement whereby the proceeds from the sale were to be placed in
escrow for the purpose of satisfying the claim of either the IRS
or the Division or both. The agreement further provided that (1)
the funds were to be interpleaded within 90 days absent a
resolution regarding the distribution of the funds between the
IRS and the Division; and (2) the funds were to be disbursed in
                                  C.

             On October 26, 1990, Monica Fuel instituted this

interpleader action in the Superior Court of New Jersey.      The IRS

then removed the action to the district court.      On cross-motions

for summary judgment, the district court concluded that the IRS's

statutory liens were superior to those of New Jersey, and granted

judgment in favor of the IRS.     Specifically, the court held that

the Division's tax liens, arising under N.J. Stat. Ann.

§ 54:49-1, were not sufficiently choate to defeat the priority of

the federal tax liens arising under sections 6321 and 6322.        The

court further found that the Division's tax assessments did not

"elevate the state to the level of `judgment creditor' within the

meaning of 26 U.S.C. § 6323(a)."5      Monica Fuel, Inc. v. IRS,

No. 91-748 at 10 (D. N.J. Nov. 20, 1991) (order granting summary

judgment).    The Division moved for reargument, claiming that the

tax deficiency assessments it issued in 1989 rendered its tax

liens fully choate and, therefore, superior to the federal liens

in question.    The court again rejected the Division's argument,

noting that "the state liens were not choate at the time assessed

because N.J.S.A. 54:49-1 contemplates judicial enforcement of
(..continued)
accordance with the court's final order once it was no longer
subject to appeal.
5
.     26 U.S.C. § 6323(a) provides:

          Except as otherwise provided in subsection
          (c), the lien imposed by section 6321 shall
          not be valid as against any mortgagee,
          pledgee, purchaser, or judgment creditor
          until the notice thereof has been
          filed . . . .
state liens."6   Monica Fuel, Inc. v. IRS, No. 91-748 at 3 (D.

N.J. May 10, 1994) (order granting summary judgment).   The

Division now appeals.   We have jurisdiction under 28 U.S.C.

§ 1291.

           The district court's determination that New Jersey's

tax liens were inchoate and therefore not entitled to priority is

a legal conclusion subject to plenary review.   Keystone Chapter,

Associate Builders and Contractors, Inc. v. Foley, 1994 WL 513971

at *5 (3d Cir. 1994), citing Gregoire v. Centennial School Dist.,

907 F.2d 1366, 1370 (3d Cir. 1990).

                                II.

           Federal tax liens do not automatically prime all other

liens.    Rather, priority is governed by the federal common-law

principle that "`the first in time is the first in right.'"7

6
 .    In its motion for reargument the Division also claimed that
the court had failed to consider adequately the certificate of
debt which, under state law, entitled the Division to treatment
as a judgment lien creditor. The district court granted
reargument on the narrow issue of whether the entry of a
certificate of debt raises the state to the status of judgment
lien creditor. The court concluded that upon such entry the
Division did not acquire judgment lien creditor status because a
certificate of debt "does not qualify as a `valid judgment, in a
court of record and of competent jurisdiction' as specifically
required by 26 C.F.R. 301 6323(h)-1(g)." Monica Fuel, Inc. v.
IRS, No. 91-748 at 7 (D. N.J. May 10, 1994) (order granting
summary judgment). The Division does not contest this aspect of
the district court's judgment on appeal.
7
 .    Over the years, the Supreme Court and this court have
consistently held that federal law is determinative where the
question involved is the priority to be accorded a lien of the
federal government, whatever its source. United States v.
Security Trust & Savings Bank of San Diego, 340 U.S. 47, 49
(1950); In re Lehigh Valley Mills, Inc., 341 F.2d 398, 400 (3d
Cir. 1965) (collecting cases).
United States v. McDermott, 113 S. Ct. 1526, 1528 (1993), quoting

United States v. New Britain, 347 U.S. 81, 85 (1954).    As stated

by Chief Justice Marshall in Rankin & Schatzell v. Scott, 12

Wheat. (25 U.S.) 177, 179 (1827):    "The principle is believed to

be universal that a prior lien gives a prior claim, which is

entitled to prior satisfaction, out of the subject it

binds . . . ." 12 Wheat. at 179.   It is critical, therefore, for

the purpose of determining priority, to ascertain when competing

liens, whether federal- or state-created, arise.

          Under 26 U.S.C. §§ 6321 and 6322, federal tax liens

arise when the underlying taxes are assessed.    The priority of a

state lien depends on when it "attached to the property in

question and became choate."   New Britain, 347 U.S. at 86.   As

the Supreme Court has stated, "a competing state lien [is

considered] to be in existence for `first in time' purposes only

when it has been `perfected . . . .'"    McDermott, 113 S.Ct at

1528, quoting New Britain, 347 U.S. at 84.    That is, the state

lien must be "perfected in the sense that there is nothing more

to be done to have a choate lien -- when the identity of the

lienor, the property subject to the lien, and the amount of the

lien are established."   United States v. Vermont, 377 U.S. 351,
355 (1964).

          The Division argues that New Britain controls this case

and that the state liens have priority because the identity of

the lienor (the State of New Jersey), the property subject to the

lien (all of Monica Fuel's property, according to N.J. Stat. Ann.

§ 54:49-1) and the amount of the lien (the amount of the
assessments) were all established prior to when the federal liens

arose.

          The IRS does not dispute that the first two choateness

requirements were satisfied.   It concedes that the identity of

the lienor and the property subject to the lien were known well

before the federal liens arose.    The IRS does, however, claim

that the amount of the state liens were not sufficiently

established and, consequently, not entitled to priority.

Moreover, in the event that we find the state lien amounts were

sufficiently fixed to satisfy the final New Britain factor, the

IRS makes an additional argument, namely that the state tax liens

were inchoate because they were not summarily enforceable.8   We

will address these two distinct issues in turn.

                                  A.

          As noted above, one requirement of choateness under the

standard articulated by the Supreme Court in New Britain is that

8
 .    The IRS posits an additional argument which presents a much
broader challenge to the Division's right to the interpleaded
funds:

          "[I]t is submitted that the assets at issue
          here were not subject to the section 54:49-1
          lien because they were purchasable (indeed,
          they were purchased) in the usual course of
          business . . . . Thus, not until the
          Division filed its warrant [of execution] or
          levied on the property could it be said that
          the Division had a lien, choate or otherwise,
          on the property at issue here."

Appellee's Br. at 30.

      We have considered this argument and find it to be without
merit.
the amount of the state lien be "established."     In an attempt to

convince us that the liens met the requirements of New Britain,

the Division makes two separate arguments.     First, it contends

that the amounts were sufficiently established upon assessment.

Alternatively, the Division claims that the amounts became fixed

when the period for filing a protest expired.9     The IRS suggests

that when assessed, the amounts were neither final nor

established; rather, they represented nothing more than debts

which were open to contest and revision.10     Appellee's Br. at 17.

Indeed, the taxpayer may, within thirty days of the notice of

assessment, file a protest and request a hearing, N.J. Stat. Ann.

§ 54:49-18, or, in the alternative, file an appeal with the New

Jersey Tax Court within 90 days of being notified of an

assessment.11   N.J. Stat. Ann. § 54:51A-13.   Although either

9
 .    Based on language in the New Jersey statute providing that
a lien on unpaid taxes arises "from the time the [taxes] shall be
due[,]" the Division initially argued that the amounts were
sufficiently established when Monica Fuel filed its tax returns
indicating the amount due. The district court rejected this
contention relying primarily upon In re Priest, 712 F.2d 1326
(9th Cir. 1983), modified, 725 F.2d 477 (1984), wherein the Court
of Appeals for the Ninth Circuit concluded that the "mere receipt
of a delinquent State tax return is too vague and indefinite a
standard by which to establish a lien that is capable of taking
priority over a federal lien." In re Priest, 712 F.2d at 1329.
The Division has abandoned this argument on appeal.
10
 .    Although in the portion of its brief challenging the
specificity of the state lien amounts upon assessment, the IRS
consistently refers only to the Division's March 23, 1989,
assessment ("[t]he Division's earliest claim to the fund,"
Appellee's Br. at 11), we understand the IRS's argument to apply
to both of the Division's assessments.
11
 .    Effective July 1, 1993, the 30-day protest period was
expanded to 90 days. In addition, the commencement date for the
90-day period for appeal to the Tax Court was changed from the
process might result in an order modifying or vacating the

assessment, these remedies do not interfere in the first instance

with the right of the Division to collect the unpaid tax.

Significantly, the New Jersey statute specifically authorizes

collection by the Division of the amounts assessed prior to the

expiration of the protest period.    N.J. Stat. Ann. § 54:49-18.

See also N.J. Stat. Ann. §§ 54:49-12 and 54:49-13a.    In fact,

payment must be made within fifteen days of notification to avoid

the imposition of an additional penalty of five percent.     N.J.

Stat. Ann. §§ 54:49-8 and 54:49-9.

          The state lien amounts unquestionably were, in our

view, established once the 90-day period for filing an appeal

with the tax court lapsed, as they became impervious to challenge

and were therefore fixed and specific.    We also agree with the

Division, however, that the amounts were established sufficiently

when the Division notified Monica Fuel of the assessments.     The

fact that the Division had the authority to enforce the liens --

whether sued upon or not -- prior to the expiration of the

protest period persuades us that the specificity of the amount of

a lien arising under N.J. Stat. Ann. § 54:49-1 is unaffected by

the taxpayer's right to appeal.     See In re Lehigh Valley Mills,

Inc., 341 F.2d 398, 401 (3d Cir. 1965) (where a lien is

enforceable against the property by a summary proceeding, the

certainty of the lien amount is established).    Accordingly, we
(..continued)
issuance of the tax assessment to the issuance by the Division of
a final determination on any protest. N.J. Stat. Ann. § 54:49-18
(West 1994).
conclude that on August 30, 1989 -- the date Monica Fuel was

notified of the Division's second and final assessment -- both of

the state tax liens satisfied the New Britain test for

choateness, as the identity of the lienor, the property subject

to the lien and the amount of the lien were all established.12

                                B.

           The IRS insists that the Division nevertheless failed

to achieve choate liens because the assessments were not

summarily enforceable.   The IRS cites several cases -- McDermott,

Vermont and T.H. Rogers Lumber Co. v. Apel, 468 F.2d 14 (10th

Cir. 1972) -- which, it contends, stand for the proposition that

in addition to satisfying the New Britain test, state liens must

also be summarily enforceable to prime a competing federal lien.

Appellee's Br. at 17.

          We agree that a right to enforce a lien summarily (that

is, without a judicial proceeding) is a requirement of choateness

in addition to the tripartite rule of fixed identity, property

and amount, articulated in New Britain.13   Indeed, a number of

12
 .    Consequently, we need not reach the federal government's
claim that the Division's failure, once the appeal period
expired, to "formally record in its books [Monica Fuel's] debt to
the State," itself renders the lien inchoate. Appellee's Br. at
25-26.
13
 .    The Supreme Court has made passing references to summary
enforceability, implicitly recognizing that the right to
summarily enforce a state lien is a requirement of choateness.
See, e.g., United States v. McDermott, 113 S. Ct. 1526, 1529-30
n.5 (1993); United States v. Vermont, 377 U.S. 351, 359 n.12
(1964). See also In re Thriftway Auto Rental Corp. v. Herzog,
457 F.2d 409, 414 n.8 (2d Cir. 1972), citing Vermont, 377 U.S. at
359 & n.12.
courts have expressly indicated that such a requirement exists.

See In re Terwilliger's Catering Plus, Inc., 911 F.2d 1168, 1176

(6th Cir. 1990) (state lien holder must show that he or she had

the right to enforce the lien prior to the attachment of the

federal lien); Apel, 468 F.2d at 18 (choateness requirement can

only be met if the lien is enforceable by summary proceedings);

Burrus v. Oklahoma Tax Comm'n, 850 F. Supp. 963, 964 (W.D. Okl.

1993) (nonfederal tax lien must be enforceable as well as

otherwise choate); Homestead Land Title Company v. United States,

1993 WL 360389, at *3 (D. Kan. August 17, 1993) (lien which is

not summarily enforceable is inchoate); United States v. Utah

State Tax Comm'n, 642 F. Supp 8, 10 (D. Utah 1981) (nonfederal

lien must be summarily enforceable and not have conditions that

affect its viability); In re Bright Designed Floors, Inc., 66-2

U.S. Tax Cas. (CCH) ¶ 9752 (S.D. N.Y. 1966) (test of perfection

is whether a lien is "presently enforceable").

          Although we agree with the IRS that state liens must be

summarily enforceable to attain priority over later arising

federal tax liens, we do not agree that New Jersey's liens fail

to satisfy this requirement.   The IRS argues that the Division's

February 1990 filing of its certificate of debt did not perfect

the state liens because the Division did not levy on Monica

Fuel's property.   The IRS argues further that because the

Division's warrant of execution (also issued in February 1990)

had expired before the Division could actually collect the funds

owed, the lien, itself, also expired, leaving the Division

without a means for summary enforcement.
           As an initial matter, we note again that a warrant of

execution does not create the state lien.     In re Blease, 605 F.2d

at 98.    Thus, the expiration of the warrants in this case did not

terminate the Division's lien.    Moreover, the requirement that

state liens be summarily enforceable does not, in our view,

compel the state to take possession of the debtor's property in

order to obtain a choate lien and achieve priority.    Choateness

only requires that the state have a right to enforce its lien in

a summary fashion.

           As the Court recognized in Vermont, where ministerial

acts which do not affect the viability of the lien remain, the

lien is nevertheless summarily enforceable.    See Utah State Tax

Comm'n, 642 F. Supp at 10, citing Vermont, 377 U.S. at 359

n.11.14   Section 54:49-1 of the New Jersey tax code gives New

Jersey the right to enforce its liens upon assessment.     The New

Jersey statute also provides two tools for enforcement -- the

certificate of debt and the warrant of execution -- neither of

which require the Division to engage in a judicial contest to

attain a judgment in its favor.   Therefore, the state liens at

issue in this case were not susceptible to "[n]umerous

contingencies which might prevent the lien from becoming

perfected by a judgment awarded and recorded."     See United States
v. Security Trust & Savings Bank of San Diego, 340 U.S. 47, 50

14
 .    In footnote 11 the Court cites to a footnote in United
States v. Vermont, 317 F.2d 446, 448 n.2 (2d Cir. 1963), wherein
the Court of Appeals for the Second Circuit describes the steps
required before Vermont could foreclose on the real property at
issue in that case.
(1950).    In other words, the Division's liens were "given the

force of a judgment" upon assessment.    Vermont, 377 U.S. at 359.

                                III.

            For the reasons set forth above, we conclude that the

state tax liens were choate and, therefore, entitled to priority

over the liens of the IRS.    Accordingly, we will reverse the

district court's grant of summary judgment in favor of the IRS

and remand the case for further proceedings consistent with this

opinion.
Monica Fuel, Inc. v. IRS, No. 94-5406

SLOVITER, Chief Judge, concurring in the judgment.

          The majority has written a creditable opinion which

reaches a plausible result in light of the positions taken (and

not taken) by the Internal Revenue Service in this case.    I

believe, however, that there are additional considerations that

require some discussion.

          Of concern to me is that despite the fact that New

Jersey's tax scheme does provide methods for enforcement of a tax

lien after public notice of the lien, as a result of this opinion

the mere assessment of taxes due is enough to render that lien

choate and hence entitled to priority over a federal tax lien.     I

do not question that New Jersey's tax lien would become summarily

enforceable, and therefore choate, under United States v.

Vermont, 377 U.S. 351 (1964), when a certificate of debt issued

by the Director of the Division of Taxation is docketed by the

Clerk of the Superior Court under N.J. Stat. Ann. § 54:49-12, or

when a warrant issued by the Director is filed with the county

clerk and docketed under N.J. Stat. Ann. § 54:49-13a.   However,

in this case, neither of these procedures was effectively

utilized until the first three federal tax assessments, totalling

almost $60,000, had been made.15   Nonetheless, the majority

15
 . Three federal tax assessments totalling almost $60,000 were
made against Monica Fuel on September 18 and 25, 1989 and
December 4, 1989. Thereafter, (1) the Division issued a
Certificate of Debt to the clerk of the New Jersey Superior Court
on February 5, 1990, and the clerk entered judgment on the record
of docketed judgments on February 14, 1990, and (2) the Division
issued a warrant of execution to one of its employees on February
relies merely on New Jersey's assessments on March 23, 1989 and

August 30, 1989 as fulfilling the requirements for choateness.      I

am far less certain than the majority that some additional act

that would provide public notice of the state tax lien is not

required to render the lien summarily enforceable.16

           It is true, as the Division argues, that the Supreme

Court stated in Vermont that the assessment under Vermont's

statutory scheme "was given the force of a judgment."   Vermont,
377 U.S. at 359 (quoting Bull v. United States, 295 U.S. 247, 260

(1935)).   But the State of Vermont in that case had not only

assessed taxes; it also had filed a notice of lien with the city

clerk before the federal taxes were assessed.   See United States

v. Vermont, 317 F.2d 446, 447 (2d Cir. 1963), aff'd, 377 U.S. 351

(1964).    The Court's holding that Vermont's tax lien was entitled

to priority over the subsequent federal tax lien may therefore

have reflected an unspoken premise that the public recording of

(..continued)
23, 1990, which was filed with the Camden County Clerk on the
same day.
16
 . The Division suggests that any requirement of public
recording of state tax liens would impose a "double standard" in
determining the choateness of federal and state tax liens. I
recognize that a federal tax lien need not be publicly recorded
in order to become choate. See 26 U.S.C. §§ 6321-22; United
States v. McDermott, 113 S. Ct. 1526, 1531 (1993). Whether
public recording is required to render a state lien choate is a
matter of federal law to be resolved with reference, in the first
instance, to the particular state scheme. See United States v.
Security Trust & Sav. Bank, 340 U.S. 47, 49-50 (1950). The
Division cites us to no New Jersey appellate case holding that
mere assessment, absent more, renders the state tax lien
summarily enforceable.
the lien was an element of choateness, either as a matter of

federal law or under Vermont's particular statutory scheme.

          Whether there is such a requirement has not been

addressed by the Supreme Court,17 and the few federal district

and appellate courts that have broached the question have reached

different results.   Compare In re Thriftway Auto Rental Corp.,

457 F.2d 409, 412 & 414, n.8 (2d Cir. 1972) (applying state court

decisions holding city tax lien to arise, not upon assessment,

but upon docketing of warrant, and holding city tax lien that

arose upon docketing to be "summarily enforceable" under Vermont)

with Noriega & Alexander v. United States, 859 F. Supp. 406 (E.D.

Cal. 1994) (holding that state tax lien under California

statutory scheme becomes choate upon assessment and rejecting

argument that it does not become choate until notice of tax lien

filed).   Nonetheless, I do not understand the IRS to so argue in

this case and thus leave that issue for another day.18

          I also cannot agree with another aspect of the

majority's analysis.   I agree that under the facts of this case

the tax lien based on the Division's March 23, 1989 assessment
17
 . The Supreme Court's decision in United States v. New
Britain, 347 U.S. 81 (1954), does not reveal whether the state
tax liens at issue in that case had been publicly recorded. Even
if there was no recording in that case, the state scheme at issue
may have differed significantly from the scheme at issue in this
case, where some form of public recording is apparently required
before the state may enforce its lien.
18
 . At oral argument, the IRS counsel, in response to a direct
question, stated that he was not arguing that its lien was
entitled to priority on the basis of the lack of any public
recording in this case. See Transcript of Oral Argument, Jan.
24, 1995, at 24.
met the third requirement of Vermont that "the amount of the lien

[be] established" before the federal assessment.   Vermont, 377
U.S. at 355 (quoting United States v. New Britain, 347 U.S. 81,

84 (1954)).   By then, the time for protest and appeal of that

assessment under New Jersey law had passed.   I would not decide,

as does the majority, that the requirement that "the amount of

the lien [be] established" was met under the New Jersey statutory

scheme while the amounts assessed were still subject to protest

and appeal under N.J. Stat. Ann. §§ 54:49-18 and 54:51A-13 et

seq.   We need not include that dictum here, and I believe it is

questionable whether the requirement of choateness that the

amount of the lien have been established is met as long as the

period for appeal and protest has not passed.

          Nonetheless, given the IRS's waiver of the public

recording issue I agree with the majority's result.19   Because

the Division's lien for $76,554.19 in taxes assessed on March 23,

1989 became definite in amount as of the expiration of the ninety

day appeal period, which preceded the first federal tax

assessment on September 18, 1989 and exceeded the amount of the

approximately $60,000 in escrowed bulk sale proceeds, I would

hold in this case that the Division's lien was entitled to

priority as of that time.20

19
 . I agree with the majority's holding that neither federal nor
New Jersey law requires a state taxing authority actually to levy
on a taxpayer's property in order to have a choate lien.
20
 . Contrary to the IRS's argument, Brief for Appellee at 25-26,
such a holding would be consistent with In re Priest, 712 F.2d
1327, 1329 (9th Cir. 1983), modified, 725 F.2d 477 (9th Cir.
1984), which held that a tax lien was not choate upon the taxing
(..continued)
authority's mere receipt of a delinquent tax return, in part
because the state had taken no action to determine the amount
owed by the taxpayer and "the total amount of the lien could not
be known until the Director computed the interest, penalties and
fees." Here, the Division's computation of tax, interest and
penalties was communicated to the taxpayer in the Division's
March 23, 1989 assessment, and the amounts became fixed at the
expiration of the appeal period. For the same reason, such a
holding would also be consistent with Brown v. State of Maryland,
699 F. Supp. 1149, 1154 (D. Md. 1987), aff'd, 862 F.2d 869, 870
(4th Cir. 1988), also relied upon by the IRS.