207 Conn. 743 | Conn. | 1988
The commissioner of income maintenance has authority, under General Statutes § 17-82C,
The underlying facts are not at issue. The liens of the United States arise out of liabilities of Colin M. Delaney and Valerie E. Delaney for arrearages in federal income taxes for the taxable years 1978 and 1982, together with interest, penalties and lien fees. Pursuant to I.R.C. §§ 6321 and 6322,
The trial court ruled that the federal liens should be given priority even though they postdated the filing of the state’s certificates of lien. The court noted that, under applicable precepts of federal law embodied in I.R.C. §§ 6321 and 6322, a federal lien ordinarily takes its place in the priority race at the time when the federal tax is assessed, while a state lien only receives such standing when it has become specific, perfected and choate.
I
The state maintains, in its first claim of error, that the trial court erred in importing into this litigation, brought under the federal tax lien statutes, the priority standards that govern cases brought under the federal insolvency statute, 31 U.S.C. § 3713. The state makes three arguments: (1) the insolvency statute was not pleaded at trial; (2) no evidence of insolvency was introduced at trial; and (3) the test for determining the choateness of a competing lien is more stringent under 31 U.S.C. § 3713 than it is under the federal tax lien statutes. We agree.
II
The state further maintains that the trial court could not have found that its liens were inchoate if the trial court had properly employed the test for choateness
In this case, the state’s recordation, on August 24, 1981, of certificates of lien under § 17-82c clearly fulfilled some of the requirements for a choate state statutory lien. The certificates identified each lienor by name and described with specificity the property subject to the state’s lien. The certificates were, however, entirely open-ended with regard to the amount of the secured indebtedness, which, without any dollar amount, was described only as “assistance payments heretofore or hereafter made to or in behalf of the said Valerie Delaney and said dependent child or children.” No supplemental recordations ever detailed the amounts of the secured indebtedness. Even in the priority proceedings herein, the state’s affidavit of debt did not allocate assistance payments to periods predating either its filings or the federal tax lien filings. To this date, therefore, the record does not reveal the precise amount of the state’s liens that antedate those of the United States. Furthermore, the record indicates that, prior to the mortgage foreclosure proceedings initiated by the named plaintiff, the state had taken no steps to foreclose its liens, a process that, under the express
The United States would have us answer this question “No.” It maintains that the amount of the state’s liens could not be determined unless and until the commissioner of income maintenance obtained a judgment in a specific amount and an order directing foreclosure. Until that time, it argues, the state’s liens were contingent as a matter of state law and therefore inchoate as a matter of federal law.
The state maintains, to the contrary, that its liens had become fully matured and certain as to amount before the effective date of the federal tax liens. This claim has two aspects: the state’s liens were fully perfected upon filing, because § 17-82c so provides, and they secured the state’s rights to reimbursement in an amount measured by grants of public assistance to or for the benefit of each of the Delaneys up to the date of each of the federal assessments. The state comes close to conceding that the liens may have been inchoate in amount when filed but contends that they matured into specificity thereafter by virtue of each unreimbursed public assistance payment. The state invokes analogous concepts in the law of consensual security arrangements, in which a real property mortgage or a commercial security interest may secure future advances as well as contemporaneous or past indebtedness.
We need not decide today whether federal law would permit state statutory liens to include state claims for reimbursement that were uncertain in amount at the
That difficult question need not be decided because § 17-82c itself incorporates conditions on the state’s right to pursue its statutory lien. The state’s lien does not encompass an automatic right to seize the debtor’s property once unreimbursed public assistance grants have accrued. The statute contemplates that recipients of public assistance may, despite their default, continue to occupy their homes. Although the statute does not spell out the circumstances under which such continued occupancy will no longer be countenanced, we have indicated, in interpreting related provisions in General Statutes § 17-83e, that the state has no power to enforce its rights to reimbursement through summary seizures “giving rise to possible due process deprivations.” Thibeault v. White, 168 Conn. 112, 118, 358 A.2d 358 (1975). Undoubtedly these concerns prompted the legislature to make explicit, in § 17-82c, that “[a]ny such lien may, at any time during which the amount by it secured remains unpaid, be foreclosed in an action brought in a court of competent jurisdiction by the commissioner [of income maintenance] on behalf of the state.” Such a foreclosure action, far from being a ministerial act, invokes the equitable exercise of judicial discretion. Hamm v. Taylor, 180 Conn. 491, 497, 429 A.2d 946 (1980).
We therefore agree with the United States that the filing of the state’s liens pursuant to § 17-82c did not create liens that were, in advance of foreclosure proceedings, choate as a matter of federal law. Such liens amounted to no more than “ ‘a lis pendens notice that a right to perfect a lien exists.’ ” United States v. Vermont, supra, 355, quoting United States v. Security Trust & Savings Bank, supra. Because the state’s liens were still inchoate according to federal law at the time
There is no error.
In this opinion the other justices concurred.
“[General Statutes] Sec. 17-82c. eligibility of person having interest in real property, lien of state. No person shall be deemed ineligible
“[I.R.C.] § 6321. lien FOR taxes. 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.”
“[I.R.C.] § 6322. period OF lien. 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 become unenforceable by reason of lapse of time.”
I.R.C. § 6323 provides in relevant part: “validity and priority AGAINST CERTAIN PERSONS, (a) PURCHASERS, HOLDERS OR SECURITY INTERESTS, MECHANIC’S LIENORS, AND JUDGMENT LIEN CREDITORS. The lien imposed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic’s lienor, or judgment lienor credi
(b) PROTECTION FOR CERTAIN INTERESTS EVEN THOUGH NOTICE FILED. . . .
(c) PROTECTION FOR CERTAIN COMMERCIAL TRANSACTIONS FINANCING AGREEMENTS, ETC. . . .
(d) 45-DAY PERIOD FOR MAKING DISBURSEMENTS. . . .
(e) PRIORITY OF INTEREST AND EXPENSES. . . .
(f) PLACE FOR FILING NOTICE; FORM. . . .”
The state, in its reply brief, has acknowledged that its original appellate brief incorrectly assumed that federal liens take no priority over state statutory liens until notice of the federal tax liens is filed. Because the state does not qualify as a purchaser, a holder of a security interest, a mechanic’s lienor, or a judgment lien creditor under I.R.C. § 6323 (a), the priority of the state’s liens is measured, in accordance with I.R.C. § 6322, from the date of the assessment of the federal taxes.
This statute, which is often referred to as § 3466 of the Revised Statutes (1875), governs federal claims against insolvent debtors. Recently recodified as 31 U.S.C. § 3713 (a), it provides: “priority of government claims. (a) (1) A claim of the United States Government shall be paid first when— (A) a person indebted to the Government is insolvent and—(i) the debtor without enough property to pay all debts makes a voluntary assignment of property; (ii) property of the debtor, if absent, is attached; or (iii) an act of bankruptcy is committed; or (B) the estate of a deceased debtor, in the custody of the executor or administrator, is not enough to pay all debts of the debtor. (2) This subsection does not apply to a case under title 11.”
To invoke 31 U.S.C. § 3713 (a), the United States would have had to prove not only that the taxpayers were insolvent but also that while insolvent, they made a voluntary assignment of property, their property was attached or they committed an act of bankruptcy.
Despite the filing of notice of a federal tax lien, a priority over such a federal lien is given to specially defined real property and special assessment taxes by I.R.C. § 6323 (b) (6) and to certain commercial transactions financing agreements by I.R.C. § 6323 (c). The state’s liens do not qualify under either of these provisions.
I.R.C. § 6323 (d) provides: “45-day period for making disbursements. Even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid with respect to a security interest which came into existence after tax lien filing by reason of disbursements made before
United States v. Vermont is particularly instructive because the court pointedly distinguished between the test for a choate lien under the federal tax lien statute and the test for a lien that would be valid under the federal insolvency statute. The lien in United States v. Vermont was choate under the former test. United States v. Vermont, 377 U.S. 351, 357-59, 84 S. Ct. 1267, 12 L. Ed. 2d 370 (1964).