436 Pa. 524 | Pa. | 1970
Opinion by
This is an appeal by Arch Lhormer from the order of the Court of Common Pleas of Westmoreland County determining the order of priority among competing claims asserted against a condemnation award in the hands of the condemnor.
On April 21, 1964, the Redevelopment Authority of the City of New Kensington acquired, by eminent domain, partnership property owned by William Sams and Samuel Mannarino. After extensive litigation, on February 6, 1969 a jury awarded the condemnees $200,-000.00 compensation, of which the sum of $186,665.00 remained due on April 8, 1969. On that date, on petition of the Redevelopment Authority, the court below ordered this sum paid into court and appointed a Master to determine the relative priorities of the competing claimants.
The dispute at bar is between the United States, relying upon certain tax liens, and Arch Lhormer, relying upon two assignments from Samuel and Rose Man
The real issue on this appeal is whether the tax lien against Mannarino or the assignment to Lhormer prevails. Samuel and Rose Mannarino made two assignments, under seal, to Lhormer, on July 1, 1966 and July 14, 1966. The July 1st assignment provided:
“I, Samuel Mannarino, of the City of New Kensington, Westmoreland County, Pennsylvania, one of the plaintiffs in the above entitled matter, in consideration of the sum of One ($1.00) Dollar, and other good and valuable consideration, receipt of which is hereby acknowledged, for myself, my heirs, executors, administrators and assigns, do hereby assign, transfer and set over unto Arch Lhormer, of the City of Pittsburgh, Allegheny County, Pennsylvania, his heirs, executors, administrators and assigns, all of my right, title, interest and claim of, in and to my share of the award made by the Board of Viewers, settlement made by the parties or final judgment entered by any Court of Record in the above entitled matter.
“The present amount of such assignment shall not exceed $56,000.00 and, at the time of the payment of the award settlement or final judgment above mentioned, shall be no less than the balance then due on a mortgage note to Western Pennsylvania National Banh of
“Arch Lhormer is authorized to notify the defendant in the above entitled matter of this assignment and his interest herein and to do all things necessary to protect his interest herein.
“It is understood and agreed that this assignment does not include the interest of any other plaintiff in the above entitled matter or Samuel Mannarino’s interest in the $53,000.00 paid to the plaintiffs by the defendant as a partial payment in the above entitled matter.” (Emphasis added).
The July 14th assignment stated that it was in addition to the July 1st assignment, and was virtually identical except that the present amount was $13,-320.00, as was a note to the bank.
The federal tax liens asserted were in the amount of $42,103.95, plus interest from the dates of levy, based on federal income tax assessments of September 2,1966, March 22, 1968, and May 24, 1968. These tax liens were duly filed in the prothonotary’s office of Westmoreland County, and notices of levy were sent on January 4, 1967, and February 12, 1969.
Appellant Lhormer contends, and the Government agrees, that the taxpayer must have some interest in the property or the federal tax lien cannot attach to it. Appellant claims that the assignments in the instant case divested Mannarino of any interest in the premises and that he, appellant, should thus prevail. The Government strongly disputes appellant’s argument. We agree with the Government.
Despite appellant’s contention to the contrary, the instruments labeled “assignments” in the instant case
The issue then is whether the tax lien or the security interest prevails. If the Federal Tax Lien Act of 1966 were here applicable, there would be no question. 26 U.S.C. §6323(a), as now constituted, provides as follows: “The lien imposed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic’s lienor, or judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Secretary or his delegate.” §6323(h)(1) defines “security interest”: “The term ‘security interest’ means any interest in property acquired by contract for the purpose of securing payment or performance of an obligation or indemnifying against loss or liability. A security interest exists at any time (A) if, at such time, the property is in existence and the mterest has become protected under Ipcal law against a subsequent judgment lien arising out of an unsecured obligation, and (B) to the extent that, at such time, the holder has parted with money or money’s worth.” (Emphasis added). In order to be protected against the subsequent lien creditor, i.e., in order that his security interest be perfected, the secured party must file a financing statement under §9-302(1) of the Uniform Commercial Code, Act of April 6, 1953, P. L, 3, 12A P.S. §9-302(1). Failure to
However, if appellant would have had priority under the pre-1966 law, it would appear that he must prevail here. §114(b) (2) (A) of the 1966 Act provides: “The amendments made by this title shall not apply in any case ... in which such amendments would impair a priority enjoyed by any person (other than the United States) holding a lien or interest prior to the date of enactment of this Act.” Since the 1966 amendments did not become effective until November 2, 1966, and the assignments on which appellant relies were made in July of 1966, appellant is entitled to any priority he might have had under prior law.
It is our conclusion that he was entitled to no more priority before 1966 than after that date. In the first place, the purpose of the 1966 Act was to help the private, secured creditors, not to injure them.
We recognize that there is a split of authority on the question of the relative priority of a duly filed federal tax lien and an unrecorded security interest. Compare the cases cited in footnote 4 of the Government’s brief with those cited in footnote 5. We further recognize that a reasonable argument exists that the unrecorded security interest should prevail because the Government, unlike a subsequent creditor or bona fide purchaser, did not rely upon the state of the record. So long as the security interest is valid as between the parties, the argument goes, it should be valid against the Government as well. See, particularly, United States v. Lebanon Woolen Mills Corp., 241 F. Supp. 393 (D.N.H. 1964).
We need not attempt to analyze those cases thoroughly here. In some thirty-five pages in his treatise, Security Interests in Personal Property
The order of the court below is affirmed, except insofar as it awards the Government more than the
See generally, Gerald K. Morrison, The Federal Taos Lien Act of 1966; A correlation With Pennsylvania Law, 72 Dickinson L. Rev. 144, 148 (1967).
The pre-1966 version of §6323(a) was as follows: “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 notice thereof has been filed by the Secretary or his delegate. ...”
Senate Report No. 1708, U. S. Code Congressional and Administrative News, 89th Congress, Second Session, 1966, Vol. 3, p. 3723.
Although 2 Federal Tax Regulations §301-6323(2) (ii) (1963) does indicate that the Government was not committed to a literal interpretation of the section, the Regulation did stop short of saying that any Article 9 secured party was within the section.
Gilmore, Security Interests in Personal Property (Little, Brown, 1965), Vol. II, Chap. 40, pp. 1047-1073.