Court Opinion

ID: 9449884
Source: CourtListenerOpinion
Date Created: 2023-08-04 16:26:47.71695+00
Date Added: 2024-06-11T17:32:02.462462
License: Public Domain

LEONARD P. MOORE, Circuit Judge
(dissenting):
The majority accurately analyze the problem which is “to determine whether Penn has a property interest in the fund held by Linde.” To resolve the problem they concede that they “must look to state law [New York].” When they look they find “no New York cases on point” and, therefore, they are content to “think that a New York court would find that Penn had a sufficient property interest in the fund held by Linde for a tax lien to attach.” In other words, they apply nonexistent (on their hypothesis) New York law to a situation requiring such application. But just as my colleagues gaze into the crystal ball entitled, “New York law,” and find nothing, to me the answer, if not crystal clear, is definitely recognizable in sharp outline.
The fundamental question, of course, is: did Penn have a property interest in funds in Linde’s possession to which the tax lien attached? Or, stated in another way: could Penn have demanded successfully that Linde pay over to it the funds in Linde’s possession and enforced any such right by suit ? Since the funds were to be released to Penn upon conditions which concededly had not been met, Penn had no claim whatsoever to the funds at the time of the tax levy. i
The New York courts have faced and dealt with similar problems sufficiently related to the matter in issue here as to be indicative of the New York law. In United States Fid. & Guar. Co. v. Triborough Bridge Authority, 297 N.Y. 31, 74 N.E.2d 226 (1947) a surety which had satisfied the claims of unpaid subcontractors against the contractor-taxpayer challenged the federal tax lien on a fund representing the final payment under a construction contract. The contract between the Bridge Authority and the contractor, in addition to providing for the surety bond, provided that if the contractor failed to pay subcontractors, the Authority had the right to withhold from payments due the contractor sums required to satisfy the subcontractor’s claims. The New York Court of Appeals held for the surety, stating that because the subcontractors were unpaid and because the Authority had the right to with*424hold the sums for the subcontractors, “the contractor had no rights to the fund, and, consequently, had no property interest” upon which the Government could place its lien. 297 N.Y. at 37, 74 N.E.2d at 228. More recently, the New York Court held Triborough Bridge Authority, supra, dispositive in a case involving similar facts. Aetna Cas. & Sur. Co. v. United States, 4 N.Y.2d 639, 176 N.Y.S.2d 961, 152 N.E.2d 225 (1958). See Fidelity & Deposit Co. v. New York City Housing Authority, 241 F.2d 142 (2d Cir. 1957); United States v. Long Island Drug Co., 115 F.2d 983 (2d Cir. 1940); Aetna Cas. & Sur. Co. v. Port of N. Y. Authority, 182 F.Supp. 671 (S.D.N.Y.1960); see also In the Matter of Halprin, 280 F.2d 407 (3d Cir. 1960).
These cases, along with the Supreme Court decisions in Aquilino v. United States, 363 U.S. 509, 80 S.Ct. 1277, 4 L.Ed.2d 1365 (1960), and United States v. Durham Lumber Co., 363 U.S. 522, 80 S.Ct. 1282, 4 L.Ed.2d 1371 (1960), indicate that the fact that the taxpayer may have a property interest in the residue of a fund after competing claimants have been satisfied, as would Penn once Reeves was paid out of the contract proceeds, is not controlling. Cf. United States v. Toys of the World Club, Inc., 288 F.2d 89 (2d Cir. 1961).1 Rather, the central question is whether under state law the taxpayer’s right to the fund is contingent or is in some way subordinated to the claims of others.2 Thus, one author, commenting that labels of “ownership” or “lien” are unimportant, suggests that where a debtor could not maintain an action to recover the contested property or fund without first satisfying creditors who helped create the fund, the Government’s lien is defeated by the claims of the creditors. See Seligson, Creditor’s Rights, 1960 Annual Survey of American Law, 36 N.Y.U.L.Rev. 601, 611 (1961); Note, The Federal Tax Lien, 36 N.Y.U.L.Rev. 1316 (1961). I perceive no legal theory, even were there no tax lien, which would permit Penn, absent appellant’s authorization to Linde, to successfully bring an action to recover the contract proceeds unless they first had been applied to satisfy the obligations of the purchase from Reeves.
Because I rely primarily upon Penn’s lack of property interest in the fund, there is no need to discuss the effect of the Assignment of Claims Act.
I would reverse the order below and direct that summary judgment be granted in favor of appellant.

. In. Toys of the World, supra, this court held that an artisan’s lien on paper supplied by the taxpayer for a printing contract was superior to the tax lien. The court stated that the competing claimant failed to bring itself within the theory of the Aquilino case since it had a lien on the property, and under New York Law, N.Y. Lien Law § 203, McK.Consol.Laws, c. 33, the taxpayer had title. Under these facts, quite dissimilar from ours, the panel was constrained to look to form rather than substance, 288 E.2d at 91, a view not necessary or warranted here. It is significant that although Aquilino had been decided by the Supreme Court when Toys of the World was decided, the New York Court had yet to consider it on remand.

. In Acquilino v. United States, 10 N.Y.2d 271, 219 N.Y.S.2d 254, 176 N.E.2d 826 (1961), on remand from the Supreme Court, the New York Court held that the taxpayer did not have a sufficient beneficial interest in contract payments except insofar as the claimants, beneficiaries of a statutory trust fund under the predecessor of New York Lion Law § 70, were first satisfied. Thus, any residue would be subject to the tax lien. See United States v. Durham Lumber Co., supra, 363 U.S. at 525, 80 S.Ct. at 1283, 4 L.Ed.2d 1371.