167 F. Supp. 402 | D.N.J. | 1958
Is a trustee in bankruptcy a “judgment creditor” within the purview of
In each case the Borough of East Newark, with a standing as a priority claimant under § 64, sub. a(4) of the Bankruptcy Act, 11 U.S.C.A. § 104, sub. a(4) and abjuring any claim of lien for the personal property taxes due it, argued that the lien claim of the United States for taxes was invalid and that the Government claim should merely have a priority status under § 64, sub. a(4). This contention was upheld by the referee on the ground that since the Government had not filed notice of its lien claim under 26 U.S.C.A. § 6323,
The referee was in error. A trustee in bankruptcy is not a judgment creditor within the purview of § 6323(a). The Government’s claim for taxes should not have been adjudicated to be a priority claim under § 64, sub. a(4) of the Bankruptcy Act and on a parity with the tax claim of the Borough of East Newark. Its lien is valid and is entitled to payment out of available proceeds prior to a distribution to priority claimants. 3 Collier, Bankruptcy, pp. 2054-2056; Miners Sav. Bank of Pittston, Pa. v. Joyce, 3 Cir., 1938, 97 F.2d 973, 978.
The doctrine that a trustee is not a judgment creditor was first enunciated in the Taylorcraft case.
In 1953, the Gilbert Associates case was decided by the Supreme Court.
In United States v. Scovil, 1955, 348 U.S. 218, 75 S.Ct. 244, 247, 99 L.Ed. 271, the Court ruled similarly as to the “purchaser” exception of § 3672. In holding that a landlord with distress lien under South Carolina law was not a purchaser under § 3672, the Court said: “A purchaser within the meaning of § 3672 usually means one who acquires title for a valuable consideration in the manner of vendor and vendee. Obviously, the landlord was not a purchaser.”
The question came before the Second Circuit again in Brust v. Sturr, 2 Cir., 1956, 237 F.2d 135, 136, and the court held that “ * * * under the doctrine of United States v. Gilbert Associates.
To the same effect, see United States v. England, 9 Cir., 1955, 226 F.2d 205; United States v. Hawkins, 9 Cir., 1955, 228 F.2d 517; In the Matter of Green, D.C.N.D.Ala.S.D.1954, 124 F.Supp. 481, and In re Ann Arbor Brewing Co., D.C.E.D.Mich.1951, 110 F.Supp. 111. And see Seligson, Creditors’ Rights, 1957 Annual Survey of American Law, pp. 334-336, N.Y.U., 9 Mertens, Law of Federal Income Taxation, § 54.46 (Zimit rev.) and Plumb, Federal Tax Collection and Lien Problems, 13 Tax L.Rev. 247, 488.
Treasury Regulation § 301.6323-1(2) provides that “* * * (b) the term ‘judgment creditor’ means a person who has obtained a valid judgment in a court of record and of competent jurisdiction for the recovery of specifically designated property or for a certain sum of money * * *” This construction is entitled to some consideration. Fawcus Machine Co. v. United States, 282 U.S. 375, 51 S.Ct. 144, 75 L.Ed. 397.
Pending legislation, H.R. 5195, 85th Congress, 1st Sess. (1957) which would in effect protect the trustee both as a judgment creditor and as a purchaser, Plumb, supra, note 572 at page 488, further supports the contention that a trustee in bankruptcy is not a judgment creditor within the purview of § 6323.
A judgment in its usual, conventional sense imports the use of judicial process, Restatement, Judgments §§ 1, 2, 4, 14 and 32 (1942); Restatement, Conflict of Laws § 429 (1934); G. Amsinck & Co. v. Springfield Grocer Co., 8 Cir., 1925, 7 F.2d 855, 858. It involves a claim pressed and resisted (or the opportunity for resistance) by adversaries in a court, a hearing and an adjudication. A successful claimant then becomes a judgment creditor. This is a far cry from one claiming to be a judgment creditor by legislative fiat under § 70, sub. c of the Bankruptcy Act, such “judgment” not being the usual and conventional one.
Seemingly holding that the trustee is a judgment creditor under § 6323 are the Fisher
The Sport Coal case, supra, held that the trustee was a judgment creditor and his status under § 3672 was to be determined under the law of West Virginia. This runs counter to the statement of Justice Jackson in his concurring opinion in the Security Trust case'
The Gargill, Straub and Sayre Village cases are urged by the Borough of East Newark as sufficient authority to classify the trustee as a judgment creditor.
In the Gargill case
The Straub case
The Sayre Village case
The suggestion, apparently made quite seriously, that this court follow the dissenting rather than the majority opinion in the Gilbert Associates case requires no comment.
The liens of the Government are valid as against the trustee in each case. Both cases are remanded to the referee for further proceedings not inconsistent with this opinion.
. 26 U.S.O.A. § 6323. While the 1939 Code, 26 U.S.C.A. § 3672 is applicable to these cases, the current code will be referred to because the differences between the 1954 and 1939 codes do not affect the question involved.
. § 6323 (a). “ * * * the lien imposed by section 6321 shall not be valid ns against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed * * * ”
. In re Tayloreraft Aviation Corporation, 6 Cir., 1948, 168 F.2d 808.
. United States v. Gilbert Associates, 345 U.S. 361, 73 S.Ct. 701, 703, 97 L.Ed. 1071.
. In re Fisher Plastics Corporation, D.C.Mass.1950, 89 F.Supp. 446.
. In re Sport Coal Company, D.C.S.D. West Va.1954, 125 F.Supp. 517.
. United States v. Security Trust & Sav. Bk., 1950, 340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53.
. United States v. Gargill, 1 Cir., 1955, 218 F.2d 556.
. Sampsell v. Straub, 9 Cir., 1951, 194 F.2d 228, certiorari denied 343 U.S. 927, 72 S.Ct. 761, 96 L.Ed. 1338.
. In re Sayre Village Manor, D.C.N.J. 1954, 120 F.Supp. 215.