Nesbitt v. United States

445 F. Supp. 824, 41 A.F.T.R.2d (RIA) 709, 1978 U.S. Dist. LEXIS 19786
CourtDistrict Court, N.D. California
DecidedFebruary 1, 1978
DocketC-77-1126-CBR
StatusPublished
Cited by8 cases

This text of 445 F. Supp. 824 (Nesbitt v. United States) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nesbitt v. United States, 445 F. Supp. 824, 41 A.F.T.R.2d (RIA) 709, 1978 U.S. Dist. LEXIS 19786 (N.D. Cal. 1978).

Opinion

MEMORANDUM OF OPINION

RENFREW, District Judge.

This is an action instituted by plaintiff seeking a determination that her claim to certain proceeds from the sale of real property has priority over any claims of the United States to such proceeds. The United States has filed a cross-claim seeking a determination that it is entitled to first priority payment from the same sales proceeds. Both parties have moved for summary judgment on their respective claims. Arguments on the motions were heard on November 10, 1977. Having carefully considered the arguments of counsel and the legal memoranda, affidavits, and exhibits filed in support of and in opposition to the motions, the Court concludes that there is no genuine issue as to any material fact and that the United States is entitled to summary judgment in its favor as a matter of law.

I. FACTUAL BACKGROUND

The complaint, originally filed on May 26, 1977, and amended by stipulation on August 8,1977, named as defendants the United States, the City and County of San Francisco (the “City”), L. T. Goldmeyer d.b.a. Union Credit Company (“Union Credit”), the Franchise Tax Board of the State of California (“Franchise Tax Board”), and Safeco Title Insurance Company (“Safeco”). Plaintiff and each defendant except Safeco are claimants to the proceeds from the sale of certain real property (the “Capp Street property”) in which one Franklyn K. Brann *826 (“Brann”), together with his wife, owned an undivided 13 per cent interest.

Plaintiff and the claimant-defendants are creditors of Brann. Plaintiff holds a judgment against Brann for $225,061, 1 an abstract of which was recorded on April 28, 1976. The United States has assessed certain internal revenue tax liabilities totalling $89,160.06 against Brann. 2 Notices of tax liens were recorded on September 7, 1976, for $436.77; on January 17, 1976, for $50,-674.29; and on January 25, 1977, for $4,761.66. Union Credit holds a judgment against Brann for $267.57, an abstract of which was recorded on April 16, 1975. The City has assessed certain personal property tax liabilities totalling $772.56 against Brann and recorded a certificate of delinquency of such taxes on July 28,1975. The City also holds a judgment against Brann in the amount of $280.10, an abstract of which was recorded on August 1,1975. The Franchise Tax Board holds two tax liens against Brann, one of which was recorded on May 27, 1976, in the amount of $5,489.36, the other recorded on June 7, 1976, in the amount of $704.77. 3

On May 26, 1976, Brann died and the Capp Street property passed to his estate. Since the estate did not have assets of sufficient value to pay and satisfy all valid claims of indebtedness against it, a dispute arose as to who should be first paid from the proceeds from the sale of the Capp Street property. So that the property could be sold, plaintiff, the United States, Union Credit, and the City entered into an agreement whereby the property was to be sold pursuant to 26 U.S.C. § 6325(b)(3), 4 with all claims to attach to the sales proceeds. Safe-co now holds the sum of $39,839.51, which are the net proceeds of sale allocable to Brann’s interest in the Capp Street property-

The question presented, simply stated, is who has priority to payment from these sales proceeds. The parties agree that, but for the insolvency of Brann’s estate, the judgment lien claim of plaintiff against Brann, being perfected under state law pri- or in time to the United States tax liens, would, under the provisions of 26 U.S.C. § 6321 et seq., be entitled to satisfaction from these proceeds prior to any tax lien claim of the federal government. The United States contends, however, that because Brann’s estate is insolvent, its claims are entitled to priority under the provisions of Revised Statutes § 3466, 31 U.S.C. § 191.

II. APPLICABILITY OF § 3466

Section 3466 of Revised Statutes provides:

“Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority established shall extend as well to cases in which a debtor, not having sufficient property to pay all his *827 debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.” 5

It is not disputed that § 3466 applies here. There is an estate which is insufficient to pay all the debts due from the deceased, 6 and there are debts due to the United States from the estate. Taxes due the United States have long been recognized as debts for purposes of § 3466. See Price v. United States, 269 U.S. 492, 499, 46 S.Ct. 180, 70 L.Ed. 373 (1926). There is, therefore, no question that the claim asserted here by the United States is within the purview of § 3466.

III. CLAIMED EXCEPTIONS TO § 3466

Having decided as a preliminary matter the applicability of § 3466, the Court now addresses plaintiff’s arguments that the United States does not have priority under that section over her judgment lien since (1) the Federal Tax Lien Act of 1966 (the “FTLA”), and in particular 26 U.S.C. § 6323(a), created an exception to § 3466 which excepts her lien from the operation of § 3466, and (2) her lien is perfected and

specific and therefore excepted from the operation of § 3466. 7

A. Internal Revenue Code § 6323(a)

Section 6321 creates a lien in favor of the United States for the amount of tax, together with incidentals, that anyone has neglected to pay, upon “all property and rights to property, whether real or personal, belonging to such person.” 26 U.S.C. § 6321. 8 Section 6323(a), however, provides in relevant part:

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Cite This Page — Counsel Stack

Bluebook (online)
445 F. Supp. 824, 41 A.F.T.R.2d (RIA) 709, 1978 U.S. Dist. LEXIS 19786, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nesbitt-v-united-states-cand-1978.