METROPOLITAN LIFE INS. CO. v. UNITED STATES.
No. 8264.
Circuit Court of Appeals, Sixth Circuit.
Nov. 14, 1939.
107 F.2d 311
In the renewal application, the utilization of an elevated portion in the center of the base is emphasized. But to assert that the center portion of the base is elevated or thickened is merely to say that its extremities are lowered or thinned. It follows that the renewal application discloses no greater novelty in the means by which the desired result is alleged to be accomplished than was indicated in the original application or known in the prior art.
Furthermore, we entertain grave doubt as to whether the result claimed can be accomplished by a mere elevation in the center of the base. When it is considered that the ultimate external contour of the flange is necessarily determined in large measure before it comes into contact with the base, the pretentious nature of the claim urged is apparent.
Whether bending is limited, as claimed, to the portion of the flange adjacent to its free edge obviously depends almost entirely upon the way in which the flange itself is constructed and the manner in which force is applied thereto in bending. The elevated portion in the base is without effect until the flange comes into contact with it. Since the folding operation is then virtually completed, it follows that the influence of this elevated portion in achieving a predetermined contour is minor and incidental.
Assuming, however, that an invention was disclosed in appellant‘s renewal application, we are nevertheless of the opinion that appellee‘s structure constitutes no infringement thereof.
The District Court found that, while appellee‘s moldings have a thickened center portion, it is not utilized to limit bending to the free edge portion of the flange, the function claimed for it in appellant‘s renewal application. We are of the opinion that this finding was amply justified, as was also the finding that the bending in appellee‘s structure is confined almost entirely to the fold line.
In addition, appellee‘s structure is unlike that of appellant in that the folding operation is completed as soon as the flange comes into contact with the base. There is thereafter no swedging operation, an essential step in the method by which appellant claims to attain the predetermined contour.
Appellee‘s structure merely utilizes a relief groove to facilitate folding, which has been held not to constitute invention. It follows that appellee‘s structure cannot infringe.
The decree of the District Court is affirmed.
Wm. B. Waldo, Sp. Asst. to Atty. Gen. (James W. Morris, Asst. Atty. Gen., Sewall Key, J. Louis Monarch, and Wm. B. Waldo, Sp. Assts. to Atty. Gen., and John C. Lehr and J. Thomas Smith, both of Detroit, Mich., on the brief), for appellee.
Before ALLEN, HAMILTON, and ARANT, Circuit Judges.
HAMILTON, Circuit Judge.
During the years 1929 and 1930, appellant, an insurance corporation organized under the laws of the State of New York, by assignment acquired three mortgages, upon separate parcels of real estate, located in Detroit, Michigan. Each mortgage contained an acceleration clause and a provision which gave the mortgagee the right to sell the premises in event of default, with the King-Kelly Corporation as debtor. The mortgage assignments and conveyances were duly recorded.
On August 17, 1932, prior to foreclosure, an assessment for corporation income taxes for the year 1930 was made against the King-Kelly Corporation and the United States acquired a valid and subsisting lien on its property pursuant to the
On default, appellant declared the entire indebtedness due, and pursuant to power of sale, prescribed by
On March 17, 1936, appellant instituted this action under the provisions of
The District Court held the tax lien of appellee was not thus extinguished but was inferior to the appellant‘s mortgages and ordered the property sold and the proceeds first applied to appellant‘s claims and the balance, if any, paid to appellee. From this decree appellant appeals.
The government has plenary power over the property of taxpayers to collect taxes and is in no wise subject to state laws. Fink v. O‘Neil, 106 U.S. 272, 285, 1 S.Ct. 325, 27 L.Ed. 196. The statutes governing the collection of taxes are broad and comprehensive. By
The lien of the government attaches to all of the property in possession of the taxpayer to the extent of his interest in and rights thereto, depending upon contracts and unexecuted instruments and relates back to the date of the refusal to pay the tax after demand and, “unless another date is specifically fixed by law, the lien shall arise at the time the assessment list was received by the collector and shall continue until the liability for such amount is satisfied or becomes unenforceable by reason of lapse of time.”
Since the Federal Statutes do not define the term “property” or the rights attaching thereto, we must turn to the state law for their meaning. Poe v. Seaborn, 282 U.S. 101, 118, 51 S.Ct. 58, 75 L.Ed. 239.
Appellant insists that its right to sell the premises in default of its mortgages was a right in property which it had purchased and which could not be impaired by the tax lien of the government. The fallacy of this contention is readily apparent when appellant concedes, as it does, that the taxpayer-mortgagor had an interest in the property at the time the lien of the United States attached.
Appellant, mortgage creditor of the taxpayer-mortgagor, did not acquire title to the lands in lien to it until their sale in 1934. Dawson v. Peter, 119 Mich. 274, 77 N.W. 997; White v. Fulton, 260 Mich. 346, 244 N.W. 498, and at the time the lien of the United States was perfected on the interest of the mortgagor in the land, the latter had title to and an interest in the property. Kollen v. Sooy, 172 Mich. 214, 137 N.W. 808.
The statute imposing a lien for federal taxes is derived from the Act of July 13, 1866 (R.S. § 3186) and since that time has been in substantially the same form. From a study of it and derivatives, it is certain that no policy of the states may interfere with the power of Congress to levy and collect taxes. Burnet v. Harmel, 287 U.S. 103, 110, 53 S.Ct. 74, 77 L.Ed. 199; United States v. Snyder, 149 U.S. 210, 214, 13 S.Ct. 846, 37 L.Ed. 705. The Federal statutes create specific liens for taxes and as a corollary give a specific remedy for their removal and when such liens once attach, they may be lifted only as provided thereunder.
Under the provisions of R.S. § 3207 (
In all such cases where a claim or interest of the United States in the property is established, the court “shall decree a sale of such real estate, by the proper officer of the court, and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States.”
The jurisdiction of Federal District Courts is limited not only by the Constitution (
The United States as a sovereign may be sued only with its consent. It follows that the Congress has the power to prescribe not only the methods by which and the conditions under which tax liens on real estate may be released but also to limit the right to sue therefor and no suit may be maintained against the United States for such purpose unless strictly within the terms of the Statute (Jud. Code § 24(20),
The right of the plaintiff to a release of the lien here in question is purely statutory and the jurisdiction of the Court may not be enlarged by implication. The question to be determined is not what binding effect the power of sale conferred by the mortgage had on subsequent lienors, and it matters not what may seem to the Court equitable in the premises. Appellant‘s action was predicated on the theory that the United States had some sort of lien on the premises which it was seeking to lift in accordance with the terms of the Statute. Since the statute does not expressly or impliedly give the Court power to discharge the lien by decree, the only statutory method by which it may be done is sale. The decree of the District Court is affirmed.
ARANT, Circuit Judge (dissenting).
The lien of the United States involved herein was based upon an income tax, not a property tax, and attached only to “property and rights to property, whether real or personal, belonging to” the tax debtor. R. S. Sec. 3186,
I am in general accord with the view of the majority as to the plenary nature of the federal power of taxation. However, I cannot concede that this power enables the United States to acquire a lien upon any greater property interest than its tax debtor owns. In the case at bar, the interest of the tax debtor was subject to destruction by exercise of the power of sale. While Michigan statutes recognize the validity of such a power, it was not conferred by statute but was created by contract. Had a statute conferred the power, however, I do not understand the majority to suggest that it would have been unconstitutional as an interference with the federal power of taxation. On the contrary, it expressly concedes that the extent of the property interest of a tax debtor is dependent upon state law. The conclusion is inescapable, therefore, that the tax lien attaches only to the destructible interest that remains in a mortgagor after execution of a mortgage with a power of sale.
If a mortgage contains no power of sale, it is generally recognized that the interest of the mortgagor can be extinguished only by a judicial foreclosure, and this, except in a few states, saves to the mortgagor a right of redemption. If a junior encumbrancer is not made a party to the foreclosure in such a case, he may thereafter redeem or foreclose. Walker v. Fisher, 117 Mich. 72, 75 N.W. 144; Sherman v. Fisher, 138 Mich. 391, 101 N.W. 572; Wiley v. Ewing, 47 Ala. 418; Jones v. Williams, 155 N.C. 179, 71 S.E. 222, and note in 36 L.R.A.,N.S., 426.
The question here presented is whether, the period of redemption allowed the mortgagor having expired, it is essential to the extinguishment of a subordinate tax lien that there be a judicial foreclosure to which the United States consents to be made a party, when the mortgagor, by granting a power of sale, has consented that his interest be extinguished without such a proceeding.
The extent of the interest that remains in a property owner, who executes a mortgage with a power of sale, does not depend upon the nature of the junior encumbrance. If, when a power of sale has been exercised, a junior encumbrancer has a greater
I cannot believe that the benefit conferred by a power of sale is so unsubstantial. I am of the opinion that an owner of unencumbered property can empower a mortgagee to extinguish, without resort to a judicial proceeding, his interest as well as those of subordinate encumbrancers; and the inclusion of a power of sale in a mortgage effectively manifests an intent to bestow such a power. From the execution of such a mortgage, it follows, in the absence of a statute providing for a right of redemption, that the mortgagor is incapable of subsequently creating any subordinate encumbrance that will not be extinguished by an exercise of the power of sale. Courts have generally so held where the junior encumbrance is a mortgage. Vines v. Wilcutt, 212 Ala. 150, 102 So. 29, 35 A.L.R. 1301; Lowe v. Grinnan, 19 Iowa 193; Bancroft v. Ashurst, 2 Grant Cas., Pa., 513; Mutual Loan and Banking Co. v. Haas, 100 Ga. 111, 27 S.E. 980, 62 Am.St.Rep. 317; Felgner‘s Adm‘rs v. Slingluff, 109 Md. 474, 71 A. 978; Tolleson v. Nobles, Tex.Civ.App., 152 S.W. 850; II Wiltsie on Mortgage Foreclosure, 4th Ed., Sec. 776, p. 1012.
If the mortgagor who grants his mortgagee a power of sale is without power to create a subordinate lien that will not be extinguished by exercise of the power of sale, such a lien cannot be acquired by operation of law. See Jackson v. Lawrence, 117 U.S. 679, 6 S.Ct. 915, 29 L.Ed. 1024. No attribute of sovereignty of the United States can increase the interest of a property owner. See Trust Co. of Texas v. United States, D.C., 3 F.Supp. 683.
If any interest of the tax debtor survived the exercise of the power of sale, the conclusion of the majority could be accepted. But the interest of the tax debtor, to which the lien had attached, was extinguished when the property was sold for less than the claim of the mortgagee. Let us suppose a tax debtor owned an estate in fee, subject to a condition subsequent, and, after a tax lien attached, the condition occurred which terminated his estate. All his interest having thus been extinguished, is the tax lien thereafter existent and enforceable? Unless the Congress has power to take the property of one person to pay the tax debt of another, this question must be answered in the negative. But even if Congress has such a power, I am nevertheless of the opinion that it had no intent to exercise it when it provided that a tax lien should attach merely to “property and rights to property, whether real or personal, belonging to” a tax debtor.
The position of the majority is that Congress, by
The majority opinion attaches great weight to the procedural difficulties entailed by the attribute of sovereignty. No one would assert that this suit can be maintained without the consent of the government, but its waiver of its immunity from suit seems clear from Section 3207 (b),
The majority asserts that the question whether the tax lien was extinguished is not open for determination in this proceeding. But, since Section 3207 (a),
If my view that the tax lien was extinguished by the mortgagee‘s sale of this land is correct, the District Court had no authority under Section 3207 (a) to order its resale.
In conclusion, it should be observed that the effect of the majority‘s view is to render it impossible for any prior lienor to institute a proceeding under Sec. 3207 (b),