The Youngstown Sheet and Tube Company v. Lucey Products Company

403 F.2d 135, 12 Fed. R. Serv. 2d 45, 1968 U.S. App. LEXIS 5176
CourtCourt of Appeals for the Fifth Circuit
DecidedOctober 22, 1968
Docket25140
StatusPublished
Cited by25 cases

This text of 403 F.2d 135 (The Youngstown Sheet and Tube Company v. Lucey Products Company) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
The Youngstown Sheet and Tube Company v. Lucey Products Company, 403 F.2d 135, 12 Fed. R. Serv. 2d 45, 1968 U.S. App. LEXIS 5176 (5th Cir. 1968).

Opinion

GOLDBERG, Circuit Judge:

The present controversy between rival creditors and lien claimants was brought into the federal courts by way of inter-pleader, and there battle was joined over the proper distribution and allocation of a sum of money deposited with the court. All of the original claimants, however, are not now involved in this appeal. Some departed their battle stations prior to the district court’s rendition of judgment, and we therefore deal only with those stalwarts who still remain. These include: 1) wage claimants; 2) mechanics and materialmen lienholders; 3) the United States; and 4) Youngstown Sheet and Tube Company, garnisher-creditor.

We begin with the chronology and logistics of this lien warfare. On July 3, 1965, Youngstown Sheet and Tube Company (Youngstown), appellant in the case at bar, instituted two actions in the state court in Dallas County, Texas, one for debt against Gould Drilling Company (Gould) and one for writ of garnishment against Texaco, Inc. (Texaco). Texaco was then indebted to Gould in the sum of $20,291.44 for drilling services performed by Gould on Texaco’s P. L. Fuller lease in Scurry County, Texas, and Youngstown, as Gould’s creditor, wished to garnish the Texaco debt. The writ of garnishment on Texaco was duly served on July 7, 1965, and sometime later, on November 4, 1966, judgment was entered in the state court establishing Youngstown’s debt against Gould. This debt was determined to be in the sum of $15,444.98 plus attorneys’ fees and court costs. On this basis Youngstown claimed to be a holder of a first and prior lien on the sum owed by Texaco to Gould.

While these events were moving toward fruition in the state courts, Texaco filed on July 23, 1965 a complaint and bill of interpleader in the United States District Court for the Western District of Texas. The complaint and bill of interpleader were filed pursuant to 28 U.S.C.A. § 1335 and § 2361 and named as defendants numerous parties not including the United States who were asserting the right to payment from the funds owing *137 by Texaco to Gould. Texaco was then dismissed from the action on the motion of all parties, but left on deposit with the district court the sum of $18,328.57 after allowable disbursements.

At this point in the proceedings claimants already present were joined by the United States. The government had filed its complaint in intervention asserting a claim of $6,389.31 against the taxpayer-debtor for unpaid federal employment taxes. However, since the fund left on deposit with the district court was now no longer sufficient to satisfy all these claimants, the district court’s determination of lien priorities gave some of the combatants real and others only pyrrhic victories. That determination thereby precipitated this appeal.

Turning to the district court’s judgment, we note that it awarded first priority to the wage claimants for a total of $2,260.75; 1 second priority to those holding mechanics’ and materialmen’s liens in the sum of $12,579.90; 2 and the remainder of the fund totaling $3,077.92 to the United States. 3 The Court then went on to allow the claim of Youngstown in the sum of $13,925.11, but noted that there were no funds available in satisfaction of such claim. Two other claims totaling $12,432.12 were likewise allowed with no funds available.

Against this background, Youngstown, as garnisher-creditor, appeals. It attacks the priority awards to the United States, to the laborers and to the mechanics and materialmen lienholders. There are no cross appeals. For purposes of analytic convenience, we take up the claims in the order in which Youngstown attacks them, but for reasons set forth below, we reach and decide only the priority rights between the materialman lien claimant, Lucey Products, Inc. (Lucey), and Youngstown. On all other claims, we reverse and remand to the district court for re-allocation of priorities among the remaining combatants.

The Wage Claimants and the Claims of the United States

These claimants are grouped together because their right to the priorities assigned by the district court is attacked on the common ground that both failed at trial to submit adequate proof of their asserted liens.

At the outset it is best to declare what is not in dispute on the present appeal. Youngstown does not, for example, seriously challenge the superiority of a federal tax lien arising under Sections 6321 4 *138 and 6322, 5 Internal Revenue Code of 1954, over a state garnishment lien 6 where the federal tax lien is filed before the garnishment lien is reduced to judgment. 7 United States v. Liverpool and London and Globe Insurance Co., 1955, 348 U.S. 215, 75 S.Ct. 247, 99 L.Ed. 268. Nor is the priority award to the wage claimants challenged apart from an alleged absence of substantiating proof. What Youngstown does argue is that despite the fact that the government pleaded the timely fulfillment of the recording requirements of 26 U.S.C.A. § 6323, it offered no proof to that effect at trial. Neither did the wage claimants offer proof that their liens were perfected. Since the burden of proving such facts rested with both the government and the wage claimants, Worley v. United States, 9 Cir. 1965, 340 F.2d 500; United States v. Hartsell, 6 Cir. 1958, 261 F.2d 593, and since no evidence was forthcoming, Youngstown argues that the district court’s priority award to the United States and to the wage claimants was in error.

In reply the United States directs our attention to the Federal Rules of Civil Procedure, particularly Rule 8(d), and to the fact that the government’s complaint properly alleged assessment, notice and demand on August 18, 1965, served that day on Gould. The complaint also stated that the filing was consummated or effectuated in the office of the Clerk of the County Court of Midland County on August 23, 1965. Since these allegations contained in the government’s complaint were not denied by Youngstown in a responsive pleading, the government argues that they are deemed admitted by Rule 8(d), and that the necessity for proof was thereby obviated.

Rule 8(d) of the Federal Rules of Civil Procedure prescribes that:

“Averments in a pleading to which a responsive pleading is required, other than those as to the amount of damage, are admitted when not denied in the responsive pleading. Averments in a pleading to which no responsive pleading is required or permitted shall be taken as denied or avoided.”

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Bluebook (online)
403 F.2d 135, 12 Fed. R. Serv. 2d 45, 1968 U.S. App. LEXIS 5176, Counsel Stack Legal Research, https://law.counselstack.com/opinion/the-youngstown-sheet-and-tube-company-v-lucey-products-company-ca5-1968.