*1 through INTERNAL UNITED STATES and v. McDERMOTT REVENUE SERVICE et al. 7, 1992 24, 1993 Argued 91-1229. December March No. Decided Court, opinion delivered the in which Scalia, J., Rehnquist, J., JJ., joined. C. White, Kennedy, Blackmun, SouteR, O’ConnoR, *2 Stevens and
Thomas, J., dissenting opinion, which filed a JJ., p. joined, post, 455. argued the cause for United States. A. Feldman
James
Acting
Starr,
Assistant
the briefs were Solicitor General
On
Attorney
Deputy
Wal-
Bruton,
Solicitor General
General
Estabrook.
Jones,
L.
and
S.
lace, Kent
William
respondents
argued
and
the cause for
T. Richard Davis
respondent
Bank, N. A.
Zions First National
filed a brief for
opinion of the
alia delivered the
Court.
Sc
Justice
priorities
granted
certiorari to resolve
We
judgment
private
tax lien and a
creditor’s
of a federal
after-acquired
delinquent taxpayer’s
to a
as
I
assessed
1986,
December
States
Mr.
9,
On
United
unpaid federal taxes due for the tax
Mrs. McDermott for
years
through
Upon
assessment,
the law
1981.
on all
created a lien in favor of the United States
real and
personal property belonging
McDermotts,
26 U. S. C.
§§6321
including after-acquired property,
6322,
Glass
(1945).
City
States,
Bank v.
On cross-motions for
the Dis-
*3
priority
trict Court awarded
to the Bank’s
lien.
Appeals
The United States
Court
for the Tenth Circuit
affirmed.
Bank,
McDermott v. Zions First Nat.
A.,N.
945
(1991).
granted
2d 1475
F.
We
certiorari.
II automatically priority Federal tax liens do have over provision contrary, priority all other liens. Absent purposes governed by for of federal law is the common-law principle right.’” that “‘the first in time is the first in (1954); United States v. New 347 81,85 U. S. Ran cf. (1827) J.). (Marshall, Scott, kin 12 v. 177, 179 Wheat. C. For purposes applying present that doctrine in the case—in (that creditor) competing which state lien of a provision benefits from the that the federal lien shall “not be valid . . . until notice thereof . . . has been filed”—we must deem the United States’ lien to have com filing menced no sooner than the of notice. As for the Bank’s lien: Our cases deem a state lien to be in purposes existence for only “first in time” when it has been “perfected” in the identity sense that “the of the lienor, the property subject to lien, and the amount of the lien are established.” United States v. New Britain, 347 S.,U. at 84 added); v. Pioneer
(emphasis United States id., 86; see also Co., Ins. 374 S.U. American question answer, then, is whether the we must
The first perfected in before the this sense lien was Bank’s September 9, so, 1987. If lien on its tax filed United States prevails. the Bank’s lien matter; that is end of the Appeals was the view this was of Court of irrelevant) (or by our decision in United answered rendered (1964), which it took to Vermont, 377 U. S. v. States non-contingent... proposition “stan[d] lien on that a prior person’s to the federal all of a regardless lien, the federal take over lien, tax will after-acquired property 2d, is involved.”1 945 F. of whether reading. opinion expansive Our That is too gives property at had issue no indication Vermont application subject of an become state after-acquired-property that the debtor clause to contrary, To the federal lien arose. after the (presumably says opinion criti- lien met that the state arose) “the test down in federal lien laid cal time when the to the lien . . . . ‘the . Britain . (citation omitted).2 [be] at 358 established.’” U. show, contradictory say will we think As our later discussion filed, insofar “perfected” the state lien was before the federal *4 by acquired not the debtor after applies after-acquired property it to until evidently using Appeals filed. The Court of was the the federal was would) (as requiring in “perfected” term the Bank a sense not attachment question; the in our of Court of of the lien to discussion the Appeals’ opinion usage. that assumes grant assumption The both the “that the debtor in Ver dissent cannot acquired mont its interest in the bank account before the federal arose,” at n. and contend that “the in post, debtor’s interest the bank . . have uncertain or indefinite from account. could been the credi footnote, perspective,” tors’ ibid. the same the dissent misdescribes argument rejected” the “critical in Vermont. Ibid. It was we be superior that “the State’s claim could not unless the account had ibid., ‘specifically property subject lien,” been to State’s identified’ as the superior but rather the claim not be State’s could unless had The the United States that we Ver- argument rejected mont was the contention that a state lien is not within the of New Britain if it to all of meaning “attaches] rather than “to iden- taxpayer’s property,” specifically tified of that S.,U. at 355 portions property.” (empha- added).3 consider, sis did not and the We facts as recited did not different made implicate, quite argument in the United States case: that a lien in after- present is not as to acquired property “perfected” to property yet be acquired. Bank that, as of 6, 1987, the date it argues July lien,
docketed its the lien was as to all “perfected real then and thereafter owned McDer- by” motts, since further was “[njothing to required [the Bank] attach the lien on non-contingent after-acquired property.” Brief for 21. That reflects an unusual Respondent notion of what it takes to a lien.4 Under the “perfect” Uniform specifically “attached] United portions property,” to identified of that Vermont, added). States v. (emphasis at 377 U. 3The dissent that “the ‘specificity’ rejected claims Government’s claim Vermont analytically indistinguishable argu from the ‘attachment’ accepts today,” specific ment the Court since “[i]f attachment is not re quired ‘sufficiently choate,’ for the state lien specific to be then neither is Post, (citation omitted). acquisition.” at 459 compa But the two are not rable. Until the debtor subject property, impossible has it is say to property subject established,” that “the [has the lien . . . been] Britain, United States v. New 81, 84 347 U. S. attachment, Judicial (and important the other it is judicial hand to note that attachment of property, rather than attachment of the lien to the was what in Vermont argument involved), merely Government’s brings into the custody of a court already prior judicial that is attachment— — known to be to the lien. accepts The dissent argument perfection the Bank’s central oc ‘nothing curred when “there more to be done’ the Bank ‘to have a Post, any choate lien’ on might acquire.” McDermotts United supra, States v. New (quoting 457-458 84); see also post, at 461. This unusual perfection definition of has been achieved making a substantively important small but addition language Britain. “‘[N]othing more to be done ... to have a choate lien’” *5 interest in after- a security Code, example,
Commercial not considered is generally acquired property when se- filed, but the is statement when the financing the upon to particular property interest has attached curity 203(1) (2), 3 §§ and that property. of debtor’s acquisition 9— (1992). And L. 3A U. A. §9-303(1), 363 (1992); U. A.L. was an element of also to particular property attachment in New Britain. See meant what we by “perfection” (“when the . to lien . . the property subject U. at 84 . . . (“[T]he of each statutory established”); id., at [is] the time it attached to here must depend contested inchoate]”).5 [no and became longer the property attach its did not to actually The Bank concedes that at here until the McDermotts acquired rights issue property Britain) (the “nothing more to be done of language New becomes recognizes that the con- one dissent’s Bank to have a choate lien.” Once thereto,” subject property cept “becoming] certain as to of a lien’s 5, infra, apparent n. it becomes post, 461, meaningless, see see Bank, dissent, simply have us substitute con- would that the like the perfection. cept concept “best efforts” for the acknowledge the unavoidable realities that the to The dissent refuses specific until one knows what property subject to lien is not “established” is, anything be other than “inchoate” property that that a lien cannot and yet the lien. respect property with to that is not to Hence that, perfected, says filing, lien at here “was upon dissent its issue McDermotts, in the property even to the real later question, noncontingent, it was sense that definite as Post, been, But summarily how could have enforceable.” identity time, prop this when the property, “definite” as to this (established erty acquisition) yet was the McDermotts’ later unknown? “noncontingent” Or when the would have property, as to this entirely judgment lien had the McDermotts remained free of the not later buy this “summarily against it? enforceable” decided Or owned, own, never it? when the McDermotts did not and had The dissent immediately through says levy also “[t]he lien enforceable acquired.” against all whenever execution the debtors’ Ibid. added). “immediately (emphases But of course it was not enforceable” time) (as date, filing of its which is the relevant acquired. had yet McDermotts *6 Respondent property. that Brief for 21. Since
in that filing tax the state lien was lien, of the federal occurred after not first in time.6 inquiry: Though complete the state our does not
But that federal tax lien was not time, the lien not first ap- necessarily lien, Like the state it in time either. first (judicially plied issue here virtue of a to the inferred) provision, after-acquired-property which means lien until the same instant the state not attach that it did property; the viz., when the McDermotts attached, “perfected” until it did not become lien, like the state and, language under the think, however, that that We time. (“shall 6323(a) against any judgment § . be valid as . . filed”), filing of . has been until notice . . lien creditor time” tax lien extant for “first in the federal notice renders yet regardless priority purposes it has attached of whether indicated That result is also to identifiable priority, provision, which accords later, two subsections security against interests liens, federal tax even filed agreements, including arising “commercial of certain out agreement^],” financing entered into before transactions 6323(c)(1). § provi- filing That 26 U. S. C. of the tax lien. security protects that, interests like the after- certain sion acquired-property here, lien will have been re- filing lien, of the tax and will attach to before the corded filing lien, after of the tax encumbered (1 simultaneously e., the attachment of the tax lien with subject property). upon acquisition of the the debtor’s security According special priority interests to certain state Treasury suggests, post, Department n. The dissent creditor,” 301.6323(h)-1(g) regulation defining “judgment 26 CFR would, (1992), analysis. It if it contained the three contradicts our fact, however, says requirements describes. that dissent perfected, prevail lien must be and that “[a] lienor, identity property subject is not until the Ibid, added). lien, (emphasis lien are established.” and the amount of the that otherwise obviously presumes in these circumstances prevail e., the federal tax lien would the federal —i. in time” of “first dated, for purposes is ordinarily tax lien interests, from the time to the subject it attaches of when filing, regardless of its property.7 the first lien of law, common argues “[b]y
The Bank *7 over those a has priority debtor’s against record statute lien-creating clearly filed unless a subsequently lien to cause the statutory intention shows or declares an Bank, Zions First National Brief override.” for Respondent a “first-to-record” A., may II.8 Such strong presumption N. under liens ordi- simultaneously perfected be appropriate liens, arise ordinarily which statutes creating private nary adopt persuasive no reason for not “there is The dissent contends that well-recognized rule of common-law of ing a matter federal law the as Post, property.” at giving equal the an interest in the parity and Bank the existence 461, persuasive have the reason is explained, n. 4. As we security 6323(c), that in displays assumption perfected § all of which the why by lieh. is no reason defeated federal tax There this terests are “security A judgment not liens as well. in assumption should extend to terest,” insignificant preference. § not an creditor’s as defined is judgment protected subsequent includes interests The term 6323(c)(1)(B). 6323(h)(1) Moreover, §§ S. See 26 U. C. text liens. 6323(a) (“The against any purchaser, lien be valid . . . shall not as lienor, creditor”) security interest, judgment mechanic’s or holder of a be, security judgment Parity may liens as interests and alike. treats rule,” says, “well-recognized post, common-law at n. dissent but years adopted have not hitherto it as the federal law of tax liens we of tax lien enforcement. suggests “[n]othing *8 judgment Appeals The of the Court of is reversed, and proceedings the case is remanded for further consistent with opinion. this
So ordered. Justice Thomas, with whom Justice Stevens Justice O’Connor join, dissenting. agree
I with the Court that under 26 U. S. C. we generally filing look to the of notice of the federal tax lien to determine competing the federal lien’s a judgment agree, state-law lien. I cannot however, that a trumps tax federal lien a creditor’s claim to after- acquired property whenever notice of the federal lien is filed before the property. lien has “attached” to the my Ante, at 451-452. judg- view, the Bank’s antecedent [already] “ha[d] ment lien sufficient substance and perfected,” ha[d] respect become so with to the McDermotts’ [the] later-filed after-acquired “as to defeat Ins. Pioneer American v. States federal tax lien.” United 84, 88 Co.,374 U. S. rec governing rule, in time” the Court
Applying “first prop in the interest ognizes if the Bank’s must—that it—as nothing [was] that there erty “perfected sense in the September 9, lien” before a choate done to have more to be (the filed), States v. notice was United the federal date (1954), is the end of the “that 81, 84 Britain, New 347 U. S. prevails,” Because the ante, at 450. lien matter; the Bank’s identity amount of its and the as lienor Bank’s undisputed, here reduces the choateness are sufficiently subject the lien” was “the whether supra, Britain, New that date. “established” as of supra, at 26 CFR American, (1992). 89. See Accord, Pioneer majority quick 301.6323(h)-1(g) to conclude precede “establish[ment]” attachment, and cannot after-acquired be suffi therefore cannot acquired rights ciently perfected has until the debtor holding That does not ante, at 451-453. See with, our and I believe it is inconsistent from, follow precedents. (before today) prescribed any rigid criteria
We have not
“establishing]”
subject
to a
lien;
required only
as to
we have
that the lien “become certain
...
supra,
at 86
thereto.”
added).
(emphasis
cases indicate that “certain” means
Our
nothing
“[determined
more than
[d]efinite,”
Pioneer
supra,
proper
American,
and that
focus is on
“contingencies”
whether the lien is free from
that stand in
way
Security
execution,
its
United States v.
Trust &
*9
(1950).
Savings
Security
Bank, 340
47,
Trust,
U. S.
example,
priority
for
we refused to accord
to a mere attach-
ripened
judgment,”
ment lien that “had not
into a
supra,
“contingent upon
86,
at
and was therefore
taking subsequent steps
enforcing
it,”
340 U.
(1964),
And in United
Vermont,
States v.
Although the choateness of a state-law lien under question, part by federal is answered in give reference to state and weight law, we therefore due specific [its] per- the State’s “‘classification of lien as supra, (quoting fected.’” Pioneer American, at 88, n. 7 49). Security supra, Trust, Here, state law establishes upon filing, perfected, the Bank’s lien was acquired by even as to the real later the McDer- motts, in the sense that it was definite as to the question, noncontingent, summarily enforceable. Pursu- ant to Utah statute, from the moment the Bank had docketed and filed its with of the Clerk state court on July upon nonexempt 1987, it held an enforceable lien all owned the McDermotts or thereafter ac- quired by during them the existence of the lien. See Utah Code Ann. 78-22-1 immediately The lien was en- through levy forceable and execution all the debtors’ acquired. Belnap whenever See v. Blain, 575 (Utah 1978). P. 2d See also Utah Rule Civ. Proc. subject And it 69. was “unconditional and not to alteration equitable grounds.” Taylor a court on National, Inc. v. (Utah 1982). Jensen Brothers Co., Constr. P. 2d Thus, the Bank’s lien had become certain as to the existing thereto, whether then or thereafter ac- quired, and all creditors were on notice that there *10 “to have the Bank a be done” more to “nothing ac- might the McDermotts real
choate lien” any Vermont, supra, at 84. See supra, quire. 355.1 Vermont our relevance of aside the
The brushes Court that case did not observation with the simple opinion Ante, at 450-451. involve a lien in after-acquired the Government’s truth, In This is a wooden distinction. indis- in Vermont is analytically claim “specificity” rejected ac- Court argument “attachment” from the tinguishable all of lien to applied today. general Vermont’s cepts no on when those with limitation debtor’s in rights until the debt was and remained valid were rights acquired, 377 U. See 352. satisfied or became unenforceable. its later-filed tax lien took claimed that The States United in as to the debtor’s interest a over Vermont’s had taken account, because State bank particular the bank account in its lien by attaching to “steps perfect had lien been after the federal recorded. until question” Vermont, in United States v. O. T. Brief for United States “Thus,” asserted, Government No. 12. p. arose, lien did not meet one the State “when the federal defining Treasury “judgment credi Department regulations The 6323(a) only specific requirements tor” for set forth three for purposes of criteria of New (corresponding “establishfment]” a choate lien three (thus Britain). judgment” a “obtaifn] The creditor must valid lienor) recovery “specifically designated prop establishing the for the (thus money” erty establishing or the amount of the for certain sum of lien), docketing “necessary recording if or under local law” for the parties, per lien to be effective third lien “is not respect fected to real until the time of such recordation or with §301.6323(h)-1(g) requirement— The docketing.” CFR last recording docketing requirement recognized specific or —is regulations establishing for the real lien. way imposes any regulations suggest in no “attachment” after-acquired property. be, condition Such a condition would ef fect, requirement imposed an additional recordation that is not otherwise by local law.
of the three essential elements of a choate lien: that it attach specific property.” rejecting Ibid. the federal claim *11 priority, we found no need even to mention whether the acquired property deposited debtor had its in interest specific funds or before after notice of the federal lien. If required not attachment for the state lien to be “suffi- ciently specific at choate,” S., 359, U. then neither is acquisition.2 majority’s reasoning today,
Like the ante, see at 452, the argument part Government’s in Vermont rested in on dicta suggesting from specific New Britain that “attachment to property [is] a condition for choateness of a State-created lien.” Brief for United States in United Vermont, States v. (“[T]he supra, pri- at Britain, 19. See New 347 S.,U. at 86 ority statutory depend of each lien contested here must property the time it attached to the in and became choate”) added). (emphasis however, involved competing statutory concededly liens that had “attached to the same real Id., estate.” at 87. The issue was sufficiently whether the liens were otherwise choate. Thus, (and, Security like Trust in fact, like all of our cases before Vermont), provided New Britain no occasion to consider the necessity property specifically attachment to that was not identified at the time the state lien arose. assuming, Even majority does, as the the debtor in Vermont ac quired its interest the bank account arose, before the federal
critical argument rejected we in that case was the contention that claim superior State’s could not be unless the “spe account had been cifically identified” property subject to the State’s lien. 377 U. at 355. At the time of the filing, federal the debtor’s interest in the bank account, like the McDermotts’ interest in the property here, at issue could have been uncertain or indefinite from the perspective. creditors’ Never theless, cases, in both particular was “known to be ante, lien,” [state] n. simply lien, by because that its terms, applied without limitation to all acquired any time the debtor. suggests
Nothing liens in the law of its Bank docketed time the possibility, at the which existed acquire the judgment, would McDermotts “contingency” that was a specific property at issue here general otherwise rendered the Bank’s intervening Under relevant liens. lien subordinate Bank’s interest after- background law, rules of state generally be defeated an could not statutory States, the intervening In some lien. after-acquired is determined liens in docketing. Real Powell, Law of 3 R. of their the order 1991)(hereinafter (P. p. Property rev. ¶ 481[1], Rohan 38-36 Powell). g., Reierson, 201 Minn. e. Lowe v. See, the rule is that others, 224, 227 287, 276 N. W. *12 (or more) successively perfected judgments “[w]hen are two acquires a against the debtor thereafter a debtor and simultaneously attaching at the liens, interest^] land these regarded by acquisition debtor, are the time of the land’s priority parity ¶48.1[1], 3 Powell exists.” on a and no g., Boston v. pp. Haufler, Bank See, to 38-36. e. 38-35 of (1985); App. E. 2d 547 668, 674, 482 N. 20 Mass. (SD Supp. Tex. Saenz, F. 639 v. 561 McAllen State Bank 1982). law, the Bank would under state common Thus, by priority virtue of its in the its full either retain equal filing an interest with or, minimum, at a share earlier judgment prior competing lien lienor.3 The fact the parties further ef- third without remains effective enough purposes judgment of the creditor is forts 3 inapposite, the Commercial Code is and Article 9 of the Uniform ante, misplaced. it See at 451-462. technical Court’s reliance on security perfection priority special the inter governing the and of rules application Article 9 have no to tradi personal ests in created 9-102, (1992), § L. in real see 3 U. A. 73 judgment tional liens bearing no the federal doctrine of “choateness.” and should have competing statutory determining of of a the context relative lien, is Article 9’s notion perfection of that is the more “un Ante, usual.” at 451. since the of our doctrine is to re- 6323(a), choateness point of spect lien where the lien has be- validity come to the certain as thereto no lienor need take further action secure his claim. Under Bank’s lien this federal-law was suffi- principle, choate to be first in time.4 ciently I that our do not acknowledge precedents provide clearest answer after-acquired property. ante, But See 455. the Court’s parsimonious reading Vermont undercuts the congressional purpose expressed — amendments to the tax lien through repeated provisions States v. United since Snyder, century U. S. 210 (1893) third harsh “protecting] persons against applica- —of tion of the tax lien,” federal The Relative Kennedy, Priority of the Federal Government: The Pernicious of the Career Lien, Inchoate and General Yale L. J.
The attachment erodes the status” requirement “preferred 6323(a), creditors and renders a granted choate subordinate after-acquired property Even if were correct Court that attachment is the determinative choateness, tie, criterion of we would have a since “did the federal lien after-acquired attach property] [to until the state same instant the Ante, being so, attached.” persuasive That there is no reason adopting for hot as a matter of federal well-recognized law the common- parity law rule giving equal the Bank an interest in the 6323(a)’srequirement ¶ See 3 Powell 481[1]. Section that the federal lien *13 may be “filed” to be effective general determine when the lien arises for priority purposes, provides but word “filed” no textual basis for con cluding goes Government, a tie that simply declaring that it ante, does, see special exception does not make it so. The 6323(c), protects which later-arising security interests are based on ibid., preferred certain financing agreements, imply see does not 6323(c) Indeed, § creditors lose out. demonstrates that Con gress has considered the of later-arising property, and the ab analogous provision sence an suggests Congress let content to apply courts one of existing background rules to (or determine the relative priority parity) of the federal lien as competing judgment after-acquired liens in American, Pioneer taxes.” to a lien for assessed “secret flexible choate- to a more I would adhere U. validly protect the principle, which would ness docketed liens.
Accordingly, respectfully
I
dissent.
notes
in the law of
liens
The dissent
possibility,
at the
Bank
which existed
time the
docketed its
judgment,
acquire
specific property
would not
McDermotts
‘contingency’
per
here at
was a
that rendered
Bank’s otherwise
issue
Post,
general
intervening
liens.”
fected
subordinate
Perhaps.
priorities
determined,
460.
But
here are
“the law of
liens,”
by 6323(a),
interpreted
but
our case
law has
it. The
requirement
part
state liens be
is
of that
jurisprudence.
voluntary
private
out of
transactions. When two
lenders
security agreements
both exact from the same debtor
with
after-acquired-property
clauses, the second lender knows,
recording,
category
prop-
reason of the earlier
that that
erty
remaining
will
to another claim,
be
and if the
security
inadequate may
difficulty by
is
he
avoid the
declin-
ing
to extend
Government,
credit. The
contrast, cannot
indulge
luxury
declining
taxpayer
to hold the
liable
previously
security agreement
taxes;
for his
notice of a
filed
covering after-acquired property does not enable the Gov-
protect
strong
pre-
ernment to
itself. A
“first-to-record”
sumption
particularly
place
present
out of
under the
tax-
general
lien statute, whose
rule is that the tax collector
prevails even if he has not recorded at all. 26 U. S. C.
§§
Snyder,
6322;
United States v.