United States v. Brosnan

PETITIONER:United States
RESPONDENT:Brosnan
LOCATION:Fleetwood Paving Co.

DOCKET NO.: 137
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 363 US 237 (1960)
ARGUED: Mar 21, 1960 / Mar 22, 1960
DECIDED: Jun 13, 1960

Facts of the case

Question

  • Oral Argument – March 22, 1960
  • Audio Transcription for Oral Argument – March 22, 1960 in United States v. Brosnan

    Audio Transcription for Oral Argument – March 21, 1960 in United States v. Brosnan

    Earl Warren:

    Number 137, United States, Petitioner, versus William Brosnan.

    Mr. Friedman.

    Daniel M. Friedman:

    Mr. Chief Justice and may it please the Court.

    This case which is here on a writ of certiorari to the Third Circuit and the case which immediately follows it bring before this Court the questions whether a Government tax lien, which is admittedly junior to a previous mortgage on real property, may be divested from that real property, when the mortgagee follows state foreclosure proceedings to which the United States has not been made a party.

    In each of these cases, what happened briefly was that a mortgage was given subsequently federal tax lien is attached to the property.

    In this case, the mortgage was foreclosed under state procedures pursuant to a power of mortgagee to confess judgment and in the next case pursuant to power of State.

    It is conceded in each case that in carrying out the foreclosure, the mortgagee fully complied with the provisions and requirements of state law.

    And then under state law, the effect of this foreclosure would be to eliminate private junior liens that had attached to the property.

    The Government’s position simply stated in these cases is that whatever maybe the effect of this procedure on the elimination of private liens, it cannot operate to eliminate the federal tax lien that is attached to the property.

    I want to emphasize here that this case has presented no question with respect to priorities of liens.

    This is not a conflict basically between the Government and other groups as to which lien has priority.

    The Government concedes in these cases that it has no claim against this property unless and until the prior mortgage has been fully satisfied.

    Our claim basically is that when the prior mortgage is fully satisfied, we are entitled to satisfy our tax claim out of any excess that maybe produced over and above the amount of the first mortgage and as I will develop, the Congress has provided certain specified procedures designed to ensure that.

    William J. Brennan, Jr.:

    And this decision cuts you often times, doesn’t it?

    Daniel M. Friedman:

    This does Mr. Justice Brennan.

    William J. Brennan, Jr.:

    Under the State Law, was there any equity of redemption?

    Daniel M. Friedman:

    As I understand not under Pennsylvania law, under California law in the next case, there will be, there is.

    Now, I will refer briefly in my argument of three rather detail provisions relating to the elimination of tax liens, and I would like to just summarize it at the outset.

    The first provision in Section 7403 of the Internal Revenue Code 1954, under which the instant case was brought, and this basically authorizes the United States to file a preceding to foreclose the tax lien with respect to real personal property.

    In addition to that, another provision is Section 7424 of the Internal Revenue Code.

    Now that is a simple matter, it gives someone who holds a prior lien prior to that of the United States or someone who purchases at a sale to foreclose that lien the right to institute himself a suit to determine the interest in the real property after going through a request to the Commissioner of Internal Revenue and that has to request to institute the other type of suit, and it’s denied.

    The last provision is Section 2410 of Title 28 of the United States Code.

    That is a provision which authorizes the institution — I am sorry, authorizes the United States to be made a party to a proceeding to foreclose on mortgage or the client title.

    And I would like to emphasize at the outset something very significant.

    Now that is the only one of these provisions which specifically provides that if the provisions there and are followed the effect of foreclosure on junior and subsidiary liens is the same as under state law.

    In that one case, Congress has said that if you comply with these procedures, you look to state law to see what the effect of foreclosure is.

    But in that situation where state law wipes out the lien, it does, the United States is given a year within which to redeem.

    Now, the basic facts in this case are not disputed and are relative simple.

    In 1948, some people in apartment purchased some real property and gave that a bond and mortgage.

    The bond on defendants laying a practice is the equivalent of a promise to pay.

    Daniel M. Friedman:

    The bond and mortgage were properly recorded and the bond authorized the mortgagee to enter a confession of judgment.

    After that time, the various federal tax liens attached to this property and the tax liens were properly recorded.

    In 1955, there was a default under the bond, and on June 7th of 1955, a surviving mortgagee entered a confession of judgment in accordance with the authority under the bond and mortgage.

    At that point, they filed the Pennsylvania practice of issuing a writ to the Sheriff to sell the property.

    But, proceedings would delay while they procure it from the state court a rule to show cause why the United States should not be made a party to these proceedings.

    The United States did not answer this rule, and thereafter, the Pennsylvania State Court issued an order purporting to make the United States a party to the proceedings.

    I say purporting because the District Court subsequently held that that attempt to make the United States a party had failed because it have been begun too late.

    Felix Frankfurter:

    Mr. Friedman, to whom was this part of show cause against the United States, you said against to whom was that issue directed?

    Daniel M. Friedman:

    It was served upon the United States Attorney and the Attorney General in accordance with the provision of Section 2410.

    Felix Frankfurter:

    And the United States did not answer?

    Daniel M. Friedman:

    United States did not answer.

    Felix Frankfurter:

    On the theory that they couldn’t be summoned into a state court?

    Daniel M. Friedman:

    Now Mr. Justice, I think on the theory which the court held — below held that the proceeding permits the United States only to be made a party to a proceeding to foreclose a mortgage.

    And then in this case, the judgment had already been entered.

    The confession of judgment had been entered and as the District Court held, they merely intended to make us a party to a proceeding in execution of the foreclosure.

    Felix Frankfurter:

    Is it — I am just curious.

    If the Government or its law pursue to serve with any legal proceeding to which they need not, as a matter of law, make a response, is it the custom, is it the practice or — to disregard it entirely or make some suggestions to the Court why it is improper?

    Daniel M. Friedman:

    Well, I suppose a better practice would be to indicate why, but I think there are instances where it was taken that since it is improper, we do not have to respond, and responding might, in some way, be construed as a recognition I suppose to the litigation.

    Felix Frankfurter:

    Of course, you save yourself of that.

    Daniel M. Friedman:

    Now, during the course of this proceeding, the respondents before this Court purchased the confessed judgment and the bond in mortgage.

    And early in 1956, the property was sold at a sheriff’s sale and the respondents Brosnan and Jacobs who had previously purchased the mortgage, board in the property for slightly better than $6,000, the amount of the original bond and mortgage was $45,000.

    One year later, the Government attempted to redeem the property by making a tender to one of the respondents.

    This tender was rejected as inadequate in amount and the District Court upheld that ruling that the tender was improperly rejected and the issue is no longer in the case, because the Government abandoned that argument in the Court of Appeals and is not pressing it in this case.

    Charles E. Whittaker:

    What issue that was abandoned Mr. Friedman?

    Daniel M. Friedman:

    Pardon me, sir?

    Charles E. Whittaker:

    What — what issue that was abandoned?

    Daniel M. Friedman:

    The argument that we made a proper tender under the statute when we attempted to redeem the property.

    We’re no longer contending that.

    Charles E. Whittaker:

    You won’t claiming here right now to redeem this property in this — in this case?

    Daniel M. Friedman:

    That is correct.

    Daniel M. Friedman:

    We will rest here solely on the basic question whether the effect of the state court proceeding eliminated the federal lien on the real property.

    Now, the instant suit was filed approximately a year and a half after the mortgage had been foreclosed under this provision of Section 7403 of the code which I referred.

    It sought an adjudication from the District Court first that the United States had not properly been made a party to the state court proceeding.

    Secondly that the federal lien remains an encumbrance on the property.

    Third, it requested the Court to determine the relative priorities to the property.

    And finally, to have the marshal sell of property and to distributed the proceeds in accordance to these priorities.

    Earl Warren:

    May I ask if — if you argued this issue that you rely on here in the Court of Appeals?

    Daniel M. Friedman:

    The mortgage redemption or the other?

    Earl Warren:

    You — you have — you’ve abandoned one that you argued there.

    Daniel M. Friedman:

    Oh, yes.

    Earl Warren:

    Did you argue both there?

    The one —

    Daniel M. Friedman:

    No.

    No, we argued only —

    Earl Warren:

    The one you are arguing here now.

    Daniel M. Friedman:

    We argued in the Court of Appeals only the issue, which we are arguing before this Court now.

    Felix Frankfurter:

    The survival of the lien?

    Daniel M. Friedman:

    Yes.

    Earl Warren:

    The — the survival — the survival of the lien, yes.

    Daniel M. Friedman:

    Now, the District Court denied the Government all relief.

    First, it held that the United States had not properly been made a party to the proceedings under 2410.

    It stated that to properly invoke Section 2410, the United States must be named initially as a the defendant in the state court action, and that all was done here was an attempt to make the United States a party to the execution of the judgment that had already been entered.

    At the time, this ordered to show cause was issued and the United States was purportedly made a party but the judgment already been entered several months before.

    Felix Frankfurter:

    May I ask you whether — whether — if suggestion had been made to the Court or representation made to the Court that you were — that the motions of show cause must fall, would there have been power on the part of the state court to amend so as to nunc pro tunc bring you into the earlier proceeding?

    Daniel M. Friedman:

    I don’t know Mr. Justice but I would rarely doubt it since the confession of judgement which — Mr. Justice, I understand on Pennsylvania practice entered as a matter of form once there is a power to confess judgment.

    Felix Frankfurter:

    That ever doesn’t go to court transaction.

    Daniel M. Friedman:

    I think so.

    Felix Frankfurter:

    To sell it from the — from the —

    Daniel M. Friedman:

    I think so.

    Earl Warren:

    — from the process?

    Charles E. Whittaker:

    But why — as I understand it Mr. Friedman, there was no contest by the Government over the validity of the first mortgage lien and nothing had been judged that affected any rights that a special execution had been issued but had been stayed for the purpose of bringing you in.

    And you have notice and the statute expressly gives you a right to redeem from a sale under the prior lien.

    How — why you couldn’t have then perfectly well gone ahead under 2410?

    Daniel M. Friedman:

    I think — I think Mr. Justice that Congress in setting up this statute 2410, which provides that If you follow the procedures, the United States lien maybe cut off under state procedures specified certain things to be done.

    One of which is that the United States must be made a party to a suit to foreclose.

    Now, if we had been made a party to begin with, we might have had some question as to the validity of the mortgage.

    And secondly, and I think more significant, if you we were made a party initially, we would have the full opportunity to contest all aspects of the case.

    But as in this situation, the State just goes ahead and follows its own procedures.

    If the decision below in this case is correct, it wouldn’t make any difference whether we had or hadn’t been given notice, because the theory of the Court of Appeals in this case, as I read the decision, is that as long as State practice does not require a junior lienor to be made a party before the lien is cut off, United States stands in the same position.

    And I believe it wouldn’t make any difference.

    Generally speaking, what would happen in the case of the United States as long as the provisions of Congress had provided, we are not complied with.

    Felix Frankfurter:

    Mr. Friedman, do I understand — I want to get this completely into my head as it goes on.

    Forgive me if I ask ignorant or stupid questions.

    Do I understand you to say that if you had been brought in before the foreclosure said, and I am not making remotely any suggestion about this case or the fact of this case.

    But then, you might come in and raise all sorts of question as to the relation between the foreclosure purchase and the mortgage — and the mortgagee or whatnot?

    Daniel M. Friedman:

    Yes.

    Felix Frankfurter:

    Do you have some — are you suggesting some such thing?

    Daniel M. Friedman:

    We are not suggesting —

    Felix Frankfurter:

    I don’t mean in this case.

    Daniel M. Friedman:

    That’s correct, yes.

    Felix Frankfurter:

    I am not talking about this case.

    Daniel M. Friedman:

    So, we might have a right to question the validity of the prior lien.

    That’s all I am —

    Felix Frankfurter:

    The validity or the — the purchase price that — which it was bought in, et cetera, et cetera.

    Daniel M. Friedman:

    Any of those factors whether the lien was fully perfected other than mortgage liens and so on.

    Charles E. Whittaker:

    Mr. Friedman I am still having some (Inaudible).

    Why could not — or is it, you tell us, could the Government have waived any defect in the timeliness of bringing — the notice upon it to bring it in to this case and have sought the right on the 2410 (c) to redeem within a year?

    Daniel M. Friedman:

    I suppose the Government probably could have waived.

    But the problem is Mr. Justice that we don’t think that this was the kind of thing anyhow which would have given us the right to redemption, because the statute, we think, speaks in terms of judicial sale.

    And we think what is contemplated under 2410 that we have the right — our right to — let me — under 2410, our lien maybe cut off in accordance with state procedures only if there is foreclosure at a judicial sale.

    Daniel M. Friedman:

    And then the protection that Government is giving in that case is, the lien is cut off but we have the right to redeem.

    Now, we think that the judicial sale contemplates something quite different than what was had in this case.

    This means, we think it means a sale pursuant to court order with an opportunity to object to the terms of the sales and so on.

    So that’s —

    Charles E. Whittaker:

    I mean — I am familiar with the practice that you are making in the statement (Inaudible) depends all mortgages foreclosures by a judicial sale.

    And the special execution is issued placed in the hands of the sheriff, publication was had and the property is sold.

    Now, that’s a judicial sale and there is a creative redemption thereafter.

    What happens in the case, and I am thinking about, which is an 18-month statute.

    What here I should turn to first, under the Government statute, the Government have the right to the first 12 months.

    Isn’t that a judicial sale?

    Daniel M. Friedman:

    Well, we — we think not Mr. Justice.

    There’s another proceeding under Pennsylvania practice which the District Court referred to under which foreclosure started by — without any entry of confession of judgment.

    In other words, we think that’s the kind of proceeding which started with a complaint, whereas here — what you have here is just a judgment is entered and the next step is — is a sale by the sheriff.

    We don’t believe that that is the kind of thing the Congress had referenced to when it spoke of judicial sale.

    But, if — I might just refer to the finding of the District Court in this case.

    In holding that the federal lien was cut off by the state proceedings, the Court recognized that in Pennsylvania a mortgage creates only a lien and not in the State.

    And it also found that the Government lien fastened upon a title to real property.

    So, there’s no question in this case that under local law, the mortgage interest here is that solely of creating a security interest in favor of the mortgagee.

    The mortgagor retained the title of the property at all times.

    Now, the District Court however held that the state proceedings had the effect or eliminating the federal lien on the real property, and the Third Circuit affirmed.

    The Third Circuit held, in effect, as follows.

    It said that since under Pennsylvania law, the purchase toward a sheriff’s sale takes the same title as the debtor had prior to this execution, and since further under Pennsylvania law, the — lien the — execution relates back to the time when the mortgage was given.

    This meant that once the execution had taken place, the Government had no interest in the property at all.

    It goes back, it cuts off the mortgagor’s interest and therefore, the United States had no remain — no interest to — there was no interest to the mortgagor to which the Government lien for the time.

    Felix Frankfurter:

    Mr. Friedman, may I ask as that your brief would tell us that I am reading.

    May I ask whether the answer to our problem as to the survival or the extermination or the decapitation of the — or the evaporation of the Government lien, would that turn on what the local law is as to the nature of the interest — of a mortgage whether it’s in a state or a lien would —

    Daniel M. Friedman:

    Well, I wouldn’t —

    Felix Frankfurter:

    The answer to the question we are now before would vary from state to state?

    Daniel M. Friedman:

    Well, I don’t think it would vary from state to state.

    I think —

    Felix Frankfurter:

    Assuming different states have different conceptions of —

    Daniel M. Friedman:

    I — I think this Mr. Justice that in the first instance, you have to look at the state law if you see if there was any interest in the mortgagor which remained after the mortgage had been given.

    That was — was there some interest to which the federal lien could attach.

    To start, I think there has to be something to which the federal lien attaches it after the mortgage —

    Felix Frankfurter:

    Do you mean whether the first mortgage would completely absorb everything that the mortgagor has so that there was nothing to which a junior, so called, junior lien could attach?

    Daniel M. Friedman:

    That is right, but once we overcome —

    Felix Frankfurter:

    Are we going to — I am very rusty on that almost 50 years of rust.

    You have to go into a lot of niceties of property law in different states for the answer to that question, wouldn’t you?

    Daniel M. Friedman:

    We might, but I don’t think there’s any problem in this case.

    Felix Frankfurter:

    All right.

    Daniel M. Friedman:

    And I think also that —

    Felix Frankfurter:

    I know but we’re construing of general statute and the Government is — this is a general position of the Government.

    Daniel M. Friedman:

    I think Mr. Justice —

    Felix Frankfurter:

    My interest in the case is very much less if I just have to decide into the obscurities or perhaps shall I say the mysteries of the Pennsylvania property law.

    Daniel M. Friedman:

    No, Mr. Justice.

    If that were all that were involved, the Government would have not brought this case here.

    I think that in most states at least, today and mortgages generally is only a security interest, and our basic position in this case is that as long as the mortgagor retains the property interest, as long as it’s secured — the mortgage is given only a security for a debt.

    When that happens, the federal tax lien attaches to that interest.

    In other words, here, you have a property subject to a security lien.

    And in effect, what has happened is really the mortgagor has said to the mortgagee, “I am going to give you the right to sell this property if I don’t pay my debts, and you may then apply the proceeds to the payment of my indebtedness to you.”

    Now, the State of course may and properly does determine what the effect of that kind of proceeding that sale the property to satisfy the interceding debt.

    What effect this has on the junior lien that it creates?

    But we believe that the State cannot purport to say that because state interest has cut off to this proceeding, the federal interest similarly can be cut off in situation where the United State has not been made a party.

    Now, we have set forth in our brief the various provisions which Congress has enacted dealing with this difficult subject of federal liens.

    To begin with, Congress itself has provided the duration of the liens.

    The statute says that unless another day the specifically fix by law of the tax lien arises when the assessment is made and it continues either until the liability for the tax is satisfied or becomes unenforceable by reason of lapse in time.

    Then, the United States has given the power under Section 7403 itself to bring a suit to foreclose its lien and to have all the interest in the property determined.

    There’s another provision, Section 6325 of the code which provides for the administrative release of liens in a situation where as a practical matter, the Government’s lien has no value and application maybe made for administrative discharge, and even the whole lien can be discharged or the lien maybe released from specific property.

    And finally, there’s this general statute, Section 2410, which permits the United States to be made a party to any civil action either in the District Court or in a state court having jurisdiction of the subject matter to prior title or to foreclose a mortgage or other lien on real or personal property.

    And in discussing this Section, one other point should be mentioned is that under this Section, not only are there various provisions provided for the protection of the United States, such as the lien of the Government must be described by particularity, appropriate notice and so on, the Government is also giving the right to remove the case to the Federal District Court.

    Daniel M. Friedman:

    And I want to reiterate again —

    William J. Brennan, Jr.:

    (Inaudible) statement as the practical matter or the Government prevails exist to say then that whenever there’s a federal tax lien, junior to a mortgage in any State, the only thing the mortgagee can do safely is to bring a proceeding under this 25, whatever it is.

    2410.

    Daniel M. Friedman:

    2410, well, he has a choice, he could do that.

    Well, the first instance he may speak administrative discharge of the federal lien.

    William J. Brennan, Jr.:

    Well, to work that out.

    Daniel M. Friedman:

    Then, he has a choice of either bringing a proceeding under 2410 or a fall in this, somewhat more cumbersome proceeding under Section 7424 in which he in effect asked the Government to bring a foreclosure.

    William J. Brennan, Jr.:

    Well, that’s what it means.

    This is then to say that he can’t resort any state procedure other than a 2410 procedure maybe brought to a state court.

    Daniel M. Friedman:

    That is correct.

    And we think that is what — that is precisely what Congress intended that federal liens are not to be discharged to leave many different and varying state court procedure.

    William J. Brennan, Jr.:

    Now, to what federal taxes and what federal tax liens that this construed?

    Not only income would construe of the state taxes, federal state taxes.

    Daniel M. Friedman:

    Well, I think so.

    William J. Brennan, Jr.:

    How would that satisfy it?

    Daniel M. Friedman:

    I would think so because the tax lien statute speaks in very broad term.

    In this — in this very case, there are all sorts of taxes involved, they’re unemployed — federal unemployment insurance taxes, old age assistance tax as well as income tax.

    Potter Stewart:

    Well, a look to 2410 might take over most of the mortgage foreclosure businesses of the country, doesn’t it?

    Daniel M. Friedman:

    Well, I — I think Mr. Justice that the Congress recognized the far reaching effect of this because it specifically provided that this is the one instance, 2410, when you may look to the state law to determine what the effect is of the state foreclosure proceedings on the federal law.

    And I — as I say, I think that it’s Congress which has created this liens and it’s Congress and not the State which are to be determined how they are to be removed, we think —

    Earl Warren:

    When — when was 2410 enacted Mr. —

    Daniel M. Friedman:

    2410 was originally enacted in 1931 and it was amended in 1942 to add the provision permitting the bringing of a quiet title suit.

    Earl Warren:

    Well, is it no — I just — may I apologize for one more — what has been the practice since that time with relation to matters of this kind?

    Daniel M. Friedman:

    Well, I am not clear as to your question Mr. —

    Earl Warren:

    Well, there must — there must have been enumerable cases of this kind occurs since 1931.

    And I am wondering what the practice of your department was in — in insisting upon the right to the Government to be joined as you claim; it should have been joined here?

    Daniel M. Friedman:

    Well, we have, as my understanding is we have insisted on that, we have taken the position that you must comply strictly with these provisions in order to have the effect of discharge in the lien.

    There’s been some litigation — in many cases involving peripheral points and there two previous Court of Appeals decision in addition to these two case which have gone —

    Earl Warren:

    What — what I am trying to get at, has your practice been so uniform that — that people have had knowledge of this thing and have generally conceded that that is the practice of the Government to — to require joining, to joining the Government in actions of this kind?

    Daniel M. Friedman:

    I — I don’t know that I could fairly make that statement Mr. Chief Justice but I think the statement is that generally speaking, it’s recognized that it is necessary to join the Government, because I think the legislative history of these provisions itself shows that these provisions, the provision originally in Section 7424 and then this provision Section 2410 were enacted because of the various real-estate interest that complaint, there was no way they could get rid of this Government lien.

    Daniel M. Friedman:

    In other words, if you have a Government lien, you had a prior mortgage and there was no way to get rid of it and that was the purpose of these things.

    Earl Warren:

    Well, if the title insurance companies throughout the country recognized that this is essential —

    Daniel M. Friedman:

    I — I wouldn’t think this so —

    Earl Warren:

    I do, I am not questioning you, I just don’t know, I have no knowledge at all.

    Daniel M. Friedman:

    All I can say Mr. Chief Justice is I would think so, I can’t —

    Earl Warren:

    I see.

    Daniel M. Friedman:

    — state that affirmatively but I’d say they were the leaders in urging this legislation.

    Felix Frankfurter:

    Mr. Friedman, the question that I wanted to ask to carry it on Chief Justice’s question, an answer to — and you said it originated in 1931 but I want to know if that on the original origination or was there no statutory healing with the subject prior to 1931?

    Daniel M. Friedman:

    Prior to 1931, originally in 1924, they had passed these two provisions giving the United States the right to foreclose its lien and also giving a person — who had — an interest in real property the right to — himself go under the District Court but 1931 was the first time that this provision permitting the United States to be made a party to a mortgage foreclosure suit.

    Felix Frankfurter:

    Well, what — what happened before 1924, the United States had an interest like this, how would it assert it as against a — a lien prior with mortgage?

    Would it go into the state court?

    What would it do?

    What would — what was the — this problem didn’t begin with 1931 or 1924, did it?

    Daniel M. Friedman:

    No, it didn’t.

    Felix Frankfurter:

    It couldn’t have.

    Uncle Sam must have had some lien prior thereto —

    Daniel M. Friedman:

    Well, as —

    Felix Frankfurter:

    — precise liens or whatnot?

    Daniel M. Friedman:

    Well, the — the United States did have this precise liens and the — as I understand that prior to that time, there was no way that the Government’s lien could be wiped out except — in other words, a mortgage would be foreclosed and there was —

    Felix Frankfurter:

    And there was still an Uncle Sam to just (Inaudible)

    Daniel M. Friedman:

    That’s right, because the legislative history states that there was no way in which these liens could be wiped or should pay them off, and that — that was the complaint of the — the lien was worth perhaps.

    The value of the property —

    William O. Douglas:

    Well, that — that might be true in many states where they would have to bring the United States in as a party, but you have to the consent of the Government to bring them in.

    Felix Frankfurter:

    That is (Inaudible) bring them in except by consent as Mr. Justice Douglas suggests.

    William O. Douglas:

    No.

    So this takes care of as I read the committee reports on 2410 that it would take care of that situation and they weren’t aiming to particularly the situation for the Government lien could be disposed of without bringing the Government in.

    Daniel M. Friedman:

    Well, except Mr. Justice that the need to bring the Government in, we think rest not only on the fact that under State practice in many instances, the junior lienor must be brought in but also on the broader ground that the federal lien on the property gives the United States a property interest.

    The United States has an interest in the property and under settled principles, the United States must be made a party to any suit involving property in which it has an interest.

    I’d like to read, refer to —

    William J. Brennan, Jr.:

    Mr. Friedman may I just get this clear?

    William J. Brennan, Jr.:

    In my own home State, there is provision made under our foreclosure procedures for bringing the United States in for junior lien.

    Although I understand you say that that procedure is not operable that the only procedure that maybe operative, effectively the deal with the United States and the junior lienor is the 2410 procedure.

    Daniel M. Friedman:

    Mr. Justice, I think that unless the state procedures specify — comply with the requirements if 2410 or these other provisions, they’re not operative to this —

    William J. Brennan, Jr.:

    What do you mean by comply?

    As 2410 sets up its own procedures as you prescribed to the Court.

    Daniel M. Friedman:

    That’s right.

    William J. Brennan, Jr.:

    Now, what can the New Jersey legislature do to make it comply, to make its own state procedures comply?

    Daniel M. Friedman:

    Well, there’s nothing that it — it can do except that — if the New Jersey legislature provides a provision, suppose for the sake of argument, the New Jersey legislature provided a provision for foreclosure and said that the lien of the United States maybe eliminated upon giving 10 days notice to the Attorney General.

    And the congressional statute says 60 days notice, I don’t think the New Jersey —

    William J. Brennan, Jr.:

    Suppose the procedure of the New Jersey legislature adopted a procedure identical in form and terms with the 2410 procedure.

    Daniel M. Friedman:

    Well, then it would be — then it would be — then 2410 would be net, and then they would be complying with 2410.

    There’s nothing to prevent the State from adopting a procedure which fully complies with the requirements of the federal procedure.

    Potter Stewart:

    And then the United States would agree that in the state court and under the state procedure its lien could be cut off.

    Daniel M. Friedman:

    Yes.

    2410 explicitly so provides subject to the right of redemption of course which is very important and subject to the further fact that the United States has given the right to remove —

    Felix Frankfurter:

    Where is that provision?

    I have been looking for that and can’t find it.

    Daniel M. Friedman:

    It’s the right to remove —

    Felix Frankfurter:

    Is that in 2410?

    Daniel M. Friedman:

    Yes, Mr. Justice.

    That’s at the very beginning of 2410 on page 33 of our brief under Subsection (a) under the conditions prescribed and Section 1444 of this title which is the provision for removal.

    Felix Frankfurter:

    (Inaudible)

    Earl Warren:

    Are there States that have made their law to conform?

    Do you know Mr. Friedman?

    Daniel M. Friedman:

    I — I don’t believe explicitly in those terms.

    I don’t believe that States attempted to make their law to meet the standards of the federal, but our point is that you can’t — you can’t comply with these federal things, and there’s nothing to prevent the State prescribing a form of procedure.

    Indeed, in this very case we think that if the other procedure which Pennsylvania will allows, the initiation of a complaint prior to the entry of a — the flow of judgment and the giving of notice in the foreclosure pursuant to the order of the Court that that would meet the standards of 2410.

    William J. Brennan, Jr.:

    Mr. Friedman, where — there’s nothing I gather explicit in 2410 which says what you said to me earlier namely that the New Jersey legislature can adopt in terms a procedure which satisfies 2410, which would permit an action in a New Jersey Court which could have the effect of cutting off the United States liens.

    Daniel M. Friedman:

    No, Mr. Justice, I think I didn’t make myself clear.

    The question as to the effect we think of cutting off federal liens must depend on the congressional provisions relating to such liens.

    Daniel M. Friedman:

    Now, New Jersey can of course adopt whatever procedures it wishes.

    New Jersey can adopt whatever procedures it wishes to discharge private liens.

    And all that I was suggesting is that there is nothing to prevent New Jersey from adopting a procedure which will satisfy the standards of 2410, and thus by complying with it, have the effect which Congress has permitted under 2410.

    William J. Brennan, Jr.:

    Well concretely, will that have the effect of clearing the title of the federal lien?

    Daniel M. Friedman:

    Yes, Mr. Justice.

    William J. Brennan, Jr.:

    All right. Now, what about the removal?

    May such a case then be removed by the United States?

    Daniel M. Friedman:

    Yes, specifically under the 1440.

    That’s one of the rights that Congress gave for the protection of the United States.

    William J. Brennan, Jr.:

    Now, that actually then the termination will not be made under New Jersey courts but will be removed in the United States District Court if the United States wants to do that.

    Daniel M. Friedman:

    That is correct, because that is what Congress has provided in the case of federal lien.

    William J. Brennan, Jr.:

    I just want to get clear of what — what —

    Daniel M. Friedman:

    Yes, yes.

    The United States would have the right to remove.

    That’s given explicitly.

    Now, I think this discussion has also pointed up the fact that there’s a real and serious danger here of conflict between the federal procedures and program for the discharge of liens on the one hand and the state proceedings on the other.

    One instance that’s already been developed here in many States including the State of Pennsylvania, a junior lien maybe discharged without making the junior lienor a party.

    But under the various federal statutes, the United States must be made a party to any proceedings seeking to discharge its lien.

    And similarly, there are various conflicts dealing with the right of redemption.

    Here, the United States has given a year within which to redeem.

    Some States attempt to give the mortgagor the exclusive right to redeem.

    Other states provide a greater or a lesser period.

    Indeed, we have in this case what I think is the anomalous situation.

    And then under the Pennsylvania Law, state liens fair better than federal liens in the foreclosure proceedings followed here, because under Pennsylvania law, the state lien for taxes will be discharged at a foreclosure sale only if they amount realize at the foreclosure sale is sufficient to pay off the state liens.

    And in fact, in this very case, the amount that was bid at the foreclosure sale by the purchasers who were the, in effect, the successes to the mortgagees was an amount sufficient to pay the cost of the sale and pay off the local taxes.

    That was what — that was what happened.

    If the local taxes were paid off and yet at the same time the state procedure has the effect of cutting off the federal lien in this situation where the Government gets not a single penny, the State is paid in full, the United States gets not a penny.

    Charles E. Whittaker:

    Well, the State (Inaudible), but a second mortgage lien would be extinguished even though (Inaudible).

    Daniel M. Friedman:

    Yes.

    If it were a mortgage lien, it would but this — the statute says the lien of all taxes now or hereafter to be levied.

    Daniel M. Friedman:

    This is page 36 of our brief.

    Against any real estate within the commonwealth shall be divested by any judicial sales such land provided the amount of the purchased shall equal the amount of the state taxes.

    But I was just pointing out that the conflicting situation here if federal tax liens maybe eliminated through this bearing in different state procedures.

    Now, Congress has adopted as one of its cardinal canons of taxation the idea of equality that it should not vary from State to State.

    And we think that what Congress has done in this situation is to say that there is to be one procedure, the various forms of it administrative discharge, suit by the Government, suit requested after request to the commissioner or proceeding under 2410, that those are the ways in which the federal liens are to be discharged.

    And we do not think that Congress ever intended in this area, important area of federal taxation, to permit the States by their own procedures fully proper with respect to their own local liens to wipe out the federal tax lien in a proceeding where the United States —

    Can you point anything in the (Inaudible) history of the statute that says that?

    Daniel M. Friedman:

    Well, we’ve said forth in our brief at pages 15 to 19.

    I see, I can’t point to anything specifically that speaks that this being exclusive in that.

    But what we do think is that this comprehensive system has been set up by Congress involves an occupancy of the field.

    That’s what I was pointing to the question.

    You really derive that from the scheme rather than anything that you can put —

    Daniel M. Friedman:

    From the scheme, and as I say the fact that under 2410, there is the specific reference in one situation that the validity of the federal lien continued existence will be determined by state law.

    In one situation they say that if you follow these procedures, the effect on the junior lien is to be the same as that under state law, and we think that is the only exception and unless that is followed, the federal lien continues even though under state law the junior lien is released from the property.

    Charles E. Whittaker:

    I am coming by this, could you answer that?

    I know you’re not raising the question here about a right to redeem under 2410, but from my mind that’s still in this — tell me, how much you tendered the amount of the bid, that’s $6,203.

    Daniel M. Friedman:

    That’s correct.

    Charles E. Whittaker:

    And that involves only court costing in the judicial proceeding and ad valorem taxes against the property, and didn’t involve anything for application on the mortgage itself, did it?

    Daniel M. Friedman:

    That’s correct.

    Charles E. Whittaker:

    Now then, you sought to redeem simply by the payment of the $6,000 —

    Daniel M. Friedman:

    Correct.

    Charles E. Whittaker:

    — which would destroy and defeats entirely the mortgagee’s interest in the first mortgage, wouldn’t it?

    Daniel M. Friedman:

    Yes.

    And I — as I say, we’re not attempting at this — we’re not arguing at that tender was adequate at this point.

    But as I say — I say, since we’re not arguing — we’re not claiming here that any right to redeem any mortgage.

    William J. Brennan, Jr.:

    Now I gather, if you had — if you had to prevail, this means although a junior lienor, you get paid in the mortgage you get nothing.

    Daniel M. Friedman:

    Well, I think we had — first that we probably would not have prevailed and second that’s the reason we didn’t press it.

    Charles E. Whittaker:

    And so, as a matter of fact, wouldn’t you in equity action — isn’t it true what action in mind — what resembles that the amount that gets equaled, the amount of judgment plus the $6,000.

    Daniel M. Friedman:

    My —

    Charles E. Whittaker:

    And that the redemption price that you have to pay would be the judgment plus the $6,000.

    Daniel M. Friedman:

    I would suspect though, Mr. Justice.

    Charles E. Whittaker:

    Now that would be (Inaudible), wouldn’t it?

    Daniel M. Friedman:

    I think so.

    I am — I am not attempting to suggest here that — there is some indications, some — under some of the statutes that where a junior lienor redeems, he satisfies the standard by paying merely what was bid at the foreclosure sale.

    But as I understand Mr. Jacob states and I am questioning the practice in Pennsylvania as the first bid that is made at a foreclosure is for cost and local taxes.

    If there’s another bid, it’s then jump up to $50,000 or whatever it is.

    We’re not attempting to argue here, so to say that our tender was valid.

    Earl Warren:

    Mr. Jacob.

    William L. Jacob:

    Mr. Chief Justice and members of the Court.

    In order to fully appreciate the situation in which we find ourselves, I think that we’re going to have to refer a little bit to the testimony and to the facts of this case, which are peculiar to this case, and as such, we tried it on that basis.

    Apartments owned a piece of a property which say is purchased from Berts and in the purchase of that property they gave back a mortgage of $45,000 in 1949.

    Now, it went to default and seven years later a foreclosure was had on that mortgage.

    Accompanying that mortgage was a judgment bond.

    The bond was the real debt, the mortgage is collateral for the debt for the obligation.

    The plaintiff in that writ had the choice of remedy.

    The plaintiff could file, enter a judgment on that bond or could institute fieri facias proceeding on the mortgage.

    He went on the bond; he had to pursue on them judgment against that defendant, meaning that he had a judgment against anything and everything that that defendant owned.

    If he went on the fieri facias proceedings, he was limited and restricted to the piece of property that was described in that mortgage.

    That choice of remedy is a very valuable asset that belongs to the mortgagee.

    This plaintiff —

    Potter Stewart:

    And is that in Pennsylvania, is that a choice, you have to choose, you can’t pursue both?

    William L. Jacob:

    No, no.

    It would be quite improper and confusing on the record to have to do both, you just couldn’t.

    But you wind up the same result because you wind up with the share of sale.

    On the fieri facias, you relieved the obligor of that bond from any personal liability and you limit — restrict your self to recovering on that mortgage against the mortgage premises on them.

    Potter Stewart:

    So you end up with the same result only that he doesn’t have any (Inaudible) property.

    William L. Jacob:

    The terminal result.

    The share of sale is identical.

    The same officer will make the sale and for the same amount of money.

    Potter Stewart:

    Right.

    Hugo L. Black:

    You are —

    William L. Jacob:

    (Inaudible)

    Hugo L. Black:

    You’re saying that the bond — that the mortgagee don’t rise to go into Court, confess a judgment in favor of himself and against the mortgagor without knowing?

    William L. Jacob:

    Oh, yes.

    That’s the — that’s common practice in Pennsylvania on a judgment bond.

    I think that’s quite common in many, many states of the union.

    Hugo L. Black:

    Yes.

    I know it, but —

    William L. Jacob:

    And it’s — and our courts have said that that is just the same as if a suit had been brought in (Inaudible) on debt and a judgment recovery.

    It’s just a shortcut is what it — what it really amounts to because one there recognizes abd submits himself to the jurisdiction of the court, and in fact, that’s what it is.

    Now, in this case, that procedure was adopted.

    Judgment was confessed.

    And then before the sale was had, the proceedings were stated and a petition was filed in the common pleas court and a rule was granted on the United States Government in compliance with 2410 to upraise them with a situation.

    There was a sheriff sale of this property and that they had tax liens on there and giving — and asking them to commend an answer or to state their position.

    And that was done in accordance with the requirements of 2410.

    We waited not for 60 days that the statute requires.

    We waited for 89 days and the Government completely ignored that.

    And then the Court said, “Well, you go ahead and sell.”

    So then, we went ahead and sold.

    And then, in — that sell was made on January 3rd, 1956.

    On January 3rd, 1957, the Government recognizing that sale, (Inaudible) out to these purchasers at that sale and tendered them $6,203 which represented only the amount of the approximate taxes at the sheriff sale.

    These men had in that property over $55,000 and the Government wanted to get that property back from them for $6,200 and some and the testimony here will bear out every word I am saying.

    Felix Frankfurter:

    I should have asked these questions earlier.

    Forgive me.

    The confession of judgment, is that an — is that an automatic thing or is that a proceeding or contested and adversary proceeding?

    William L. Jacob:

    It is not a contested and an adversary proceeding.

    It is an admitted proceeding.

    Felix Frankfurter:

    An admitted?

    William L. Jacob:

    Yes.

    Felix Frankfurter:

    Well now, maybe I am ahead of the game, but would you say that that proceeding set comes within 2410 (a) and equivalent of tax liens?

    William L. Jacob:

    Yes, that’s — that —

    Felix Frankfurter:

    That it requires to deprive title for — for the foreclosure of a mortgage.

    William L. Jacob:

    For the foreclosure of the mortgage.

    Felix Frankfurter:

    That is not deprive title, is it for the foreclosure of a mortgage.

    William L. Jacob:

    That’s the foreclosing on a mortgage.

    That’s how accepted procedure in Pennsylvania for foreclosing on a mortgage.

    Felix Frankfurter:

    But your earlier answer, would you make some clear, if I may say so, that you just file a piece of paper and automatically, there is a judgement.

    William L. Jacob:

    No, it isn’t that simple.

    Felix Frankfurter:

    Now, what is it?

    William L. Jacob:

    You file what is generally characterized as a narr or a declaration.

    Felix Frankfurter:

    What?

    William L. Jacob:

    A narr, N-A-R-R or a declaration.

    And on that, you set forth that that who the plaintiff is and who the defendant is and then have set forth your allegation of default and make reference to you mortgage.

    You tie in that judgment with your mortgage, so that there’s a record in the (Inaudible) office of that judgment and a cross reference made to the mortgagor as recorded over in the reporter’s office.

    Felix Frankfurter:

    Is that served on anybody?

    William L. Jacob:

    That is not necessarily be served on any person.

    And then from there, you issue your execution, your writ of fieri facias.

    Felix Frankfurter:

    So that, in effect — would it be unfair or inaccurate to go to the next part in proceedings?

    William L. Jacob:

    It — it could very properly be turned down, it could be ex parte, until the purchaser — until the mortgagor then has notice of it through posting of the premises and the advertisement which is necessary under our sheriff selling.

    Felix Frankfurter:

    Now, if you’ll help me to follow you argument if you are to answer this question.

    Do you conceive that proceeding as you described it to be a proceeding — a proceeding “for the foreclosure of the mortgage”?

    William L. Jacob:

    Yes, sir.

    Yes, sir, and the Government —

    Felix Frankfurter:

    And that’s the foundation of your argument?

    William L. Jacob:

    Yes.

    And the Government so recognized that.

    The Government so recognized that because the Government filed a petition saying we want to redeem under the 2410, because you have the tittle.

    Why would they try to buy the property back from us if we didn’t have the tittle?

    Felix Frankfurter:

    But you already have it.

    You have it and why didn’t piece of paper —

    William L. Jacob:

    Oh, no, no.

    I don’t get title a by that piece of paper.

    I only get a judgment and on that judgment, I have to issue an execution, and have the property advertised for sale.

    Felix Frankfurter:

    So you’ve got a judgment for the title, is that right?

    William L. Jacob:

    No, I only get a judgment.

    Felix Frankfurter:

    Do you mean you got a judgment for the — for the principal amount, which is defrauded?

    William L. Jacob:

    Right.

    I get a judgment for the amount that’s stated in the bond and the amount to that is usually double the amount of the debt, like I got a judgment for $90,000.

    But the sheriff would be directed to collect the exact amount that is due on that.

    Potter Stewart:

    And it’s like out of the mortgage property or any property —

    William L. Jacob:

    Right.

    Potter Stewart:

    — a judgment (Inaudible) is that it?

    William L. Jacob:

    That’s right.

    Charles E. Whittaker:

    Is this not — to see if I understand.

    What you really do is file a plenary suit by a plaintiff against the defendant.

    William L. Jacob:

    Right.

    Charles E. Whittaker:

    And then you put a notice, a formal entry of appearance, consent to judgment executed by the defendant and he waives process and agrees to the — and to your judgment?

    William L. Jacob:

    That’s exactly by (Voice Overlap)

    Charles E. Whittaker:

    Judgment is thereupon entered.

    Just as no process had been issued in a normal case and an adversary trial that was all in the judgment.

    William L. Jacob:

    Yes.

    And I have so referred to that in my brief to give you authority for that.

    Charles E. Whittaker:

    Now then, from that judgment special execution issues for the sale of this mortgaged land.

    William L. Jacob:

    Right.

    Charles E. Whittaker:

    It was at that point that the Government was given notice and asked to come in.

    William L. Jacob:

    Yes.

    The Government is given notice before any violence was done to its so-called lien at all.

    Felix Frankfurter:

    May I ask you this question, I must trouble you some more.

    William L. Jacob:

    Go ahead.

    Felix Frankfurter:

    Suppose notice had been given, suppose that it served this — what do you call this piece of paper Mr. Jacob, which you —

    William L. Jacob:

    This declaration?

    Felix Frankfurter:

    This declaration.

    Suppose you’d serve this declaration on the Government, could the Government then come in and contested the entry of a judgment on to follow that declaration?

    William L. Jacob:

    The Government had a right to commend and do anything that it wanted.

    The Government could have contested —

    Felix Frankfurter:

    But it didn’t know that you filed — But it didn’t knows you filed that document which is — that was ex parte.

    William L. Jacob:

    Well, in a way, but that was ex parte, but nothing was done on that.

    Felix Frankfurter:

    Except the judgment was entered on the —

    William L. Jacob:

    That’s all, just the judgment entered, which does no harm because of mortgage was entered and that was noticed to them.

    Felix Frankfurter:

    No, but the — where could it contest the validity of that judgment?

    William L. Jacob:

    By coming in the rule that we granted and served upon them.

    They could have come right into our common pleas court and —

    Felix Frankfurter:

    Open any judgment.

    William L. Jacob:

    Open it up, transfer it down to the federal court, they can do anything that they wanted with it.

    Hugo L. Black:

    (Inaudible)

    William L. Jacob:

    Yes.

    But our judgment didn’t mean anything because we already had a mortgage and what was a difference is whether we had a mortgage or whether we had a judgment.

    Felix Frankfurter:

    Except the mortgage wasn’t executed and the judgment was there and they have to open it up.

    I am not saying that it’s a legal differences to 2410.

    William L. Jacob:

    It would make a particle of difference.

    But the Government recognized the fact that we did go through with the sheriff’s sale and that they had a right to redeem.

    And we conceded that because in the testimony here, these purchasers were asked.

    Did you know anything, that the Government had a right to redeem this.

    Yes.

    And did you — what — what happened?

    Well, we conceded that if they want to buy the property back, they would come around and pay us what we had in it.

    But mark you this, they say, it was January 3rd, 1956.

    On January 3rd, 1957 is when the Government agent came around and offered $6,200 and some dollars and not to both of the purchasers but only to one.

    Now, in Pennsylvania, when two purchasers that acquire a title of the property, each owns and then divide a one half interest or tenants in common, and one isn’t the agent for the other.

    But the Government assumed that they were.

    Earl Warren:

    May I ask you — may I ask you a question.

    And this without any reflection of course, but suppose an action such as you had here was collusive and suppose that a fictitious amount was put in this declaration, and the ex parte judgment was given and then you notified the United States Government of that occurrence.

    Would the United States Government then, under your Pennsylvania practice, have a right to come in and contest the amount of that judgment?

    William L. Jacob:

    Yes.

    Anytime —

    Earl Warren:

    How would — how would it do that?

    William L. Jacob:

    Simply by coming in and — because our judgments are all controlled by the court and they are on what we call the equitable side of the court, not on the legal side.

    And anything that’s addressed to the conscience of the court can be set forth in that petition to open that judgement, and that there was any — any fraud or any element of fraud or any element of collusiveness, that could be set forth in that petition there by the Government and testimony would have to be taken on that and the matter would be decided by the court.

    Hugo L. Black:

    Is that bond in the record of the judgment, state court judgment?

    William L. Jacob:

    I doubt it.

    Hugo L. Black:

    Did it contain a attorney’s fee?

    William L. Jacob:

    Yes.

    Hugo L. Black:

    As I understand it, what to do under that, I think I used to know about it in Alabama, a small loan company.

    What you do, you take a note authorizes the — it’s not — the person is (Inaudible) if it’s not paid to go into Court, file a suit against the first (Inaudible) confess judgment for that person —

    William L. Jacob:

    That’s right.

    Hugo L. Black:

    — without any notice.

    If it provides an attorney’s fee, it included attorney’s fee without the (Inaudible) and what you did here was the mortgagee on the bottom of the one end, test the judgment without notifying anybody, it got a judgment for how much?

    $60,000?

    William L. Jacob:

    $90,000.

    Hugo L. Black:

    $90,000.

    William L. Jacob:

    Condition upon the payment of just the exact amount that was due on that —

    Hugo L. Black:

    What was — what was the amount of the bond?

    William L. Jacob:

    The bond was $90,000.

    The mortgage is $45,000.

    Seven years later, they still load 43,000 some hundred dollars.

    And all of those taxes.

    So, they’re about $49,000 when we get —

    Hugo L. Black:

    Well if — if that’s a valid judgment, how could anyone attack it if it’s confessed by the party?

    William L. Jacob:

    Any person can attack any judgment in the — in the State of Pennsylvania who has any interest in it or who was a party to the proceeding.

    And when this case — the United States Government was made a party to the proceeding by the order of our Court because we —

    Hugo L. Black:

    Where — where is that order?

    William L. Jacob:

    Page —

    Hugo L. Black:

    That was after the judgment was obtained?

    William L. Jacob:

    Oh, yes.

    But before any execution was issued, that would be a vain thing to give notice to the United States Government and say —

    Hugo L. Black:

    It’s sort of way (Inaudible).

    William L. Jacob:

    I’ve waited a year.”

    Well, then, it wouldn’t do any —

    Hugo L. Black:

    Of the judgment, I am talking about the judgment for the mortgage for the moment.

    William L. Jacob:

    Yes.

    Hugo L. Black:

    Could the Government come in and tax judgment?

    William L. Jacob:

    Anytime at all after it’s given notice.

    You see it was served in this case with a petition to show cause why it should not be joined to the party defendant.

    And it ignored that petition.

    And at 60 days under the law in which to file an answer to it.

    But it didn’t seem fit to put in on appearance, it didn’t seem fit to answer and didn’t seem fit to attend the sheriff’s sale.

    William J. Brennan, Jr.:

    But Mr. Jacob, there is nothing in the Pennsylvania law that required you to give this notice to the United States but —

    William L. Jacob:

    No — no, but —

    Potter Stewart:

    And, you might have proceeded — have proceeded to the sheriff’s sale and bought this in and years might have elapsed before the United States have to learned anything about it.

    William L. Jacob:

    That’s true.

    That could have happened.

    Felix Frankfurter:

    So the real — do I always simplify the controversy when I say that by having giving notice for the execution of judgment entered ex parte, you brought yourself within 2410 (a).

    William L. Jacob:

    Yes.

    Felix Frankfurter:

    And the Government says that 2410 was satisfied because they weren’t in on the — on the proceeding which resulted in the entering of that judgment.

    William L. Jacob:

    That’s true.

    Felix Frankfurter:

    That’s the case.

    William L. Jacob:

    That’s our contention there.

    Felix Frankfurter:

    That’s the controversy.

    William L. Jacob:

    But now wait a minute.

    They — they have abandoned all of that now.

    William L. Jacob:

    They’re saying they are staying here, and they’re saying we’re not going under 2410.

    We’re going under 7403, and under 7403, we say that we have a right to have that property sold again now by the United States marshall.

    That’s their contention, but there is no evidence to that at the trial of this case.

    You redirected this case, we didn’t tried on that theory.

    We tried our case on the theory that they had redeemed this property that we were bound to take that $6200 and some, so I showed in the case of Collins versus Riggs of this honorable Court in which you stated by clearly that if one wants to redeem, he has to make the other party whole.

    And they didn’t do that.

    They didn’t seem fit to do that.

    And our testimony showed here that if the Government wanted to redeem these members worthy and willing to give them back the property, if they wanted to pay the $55,000 which they have invested in.

    But this is in the evidence.

    And now I am arguing my case from the — from the evidence as produced at the trial.

    Hugo L. Black:

    What did the property sell for?

    William L. Jacob:

    The property.

    Hugo L. Black:

    I am not talking about that sale, that — under execution sale.

    William L. Jacob:

    On the execution sale, nobody did honor.

    Hugo L. Black:

    Didn’t settle at all?

    William L. Jacob:

    We — we bought it in.

    The plaintiffs in the writ —

    Hugo L. Black:

    For how much?

    William L. Jacob:

    Bought it in for the cost and the taxes.

    Hugo L. Black:

    What was that?

    William L. Jacob:

    $6200 and some and then we had to pay $400 and some stamps on the deed before we could get a deed by the United States Government some taxes on that, stamps on the deed and the local taxes and the State of Pennsylvania taxes.

    Hugo L. Black:

    Do you say that if the Government have to pay you $55,000?

    William L. Jacob:

    Yes, because that was the amount of our debt interest in —

    Hugo L. Black:

    And that’s the amount of your debt, and they say they want to get a hearing under 7403.

    That’s what it gets to —

    William L. Jacob:

    No.

    Hugo L. Black:

    — so that you can resettle it and see if it’s a bona fide sale?

    William L. Jacob:

    No.

    What they want to do is have this Court — this is so noble and so new and that it’s shocking.

    They want this Court to tell the United States marshall to sell this property again.

    William L. Jacob:

    Now, I like to devote a little of my time here to the reason why that is such a lie.

    Hugo L. Black:

    Is the — is the theory of that that it sold for too little and therefore the Government is losing its lien?

    William L. Jacob:

    No.

    Hugo L. Black:

    What is —

    William L. Jacob:

    The Government — the Government has — under the Pennsylvania law, equality is equity.

    That means that any — every person has the right to come in and bid on that property and you had equal opportunity to come in and bid on it.

    If these people paid too much money for it, that’s their problem.

    If they buy it for less, the mortgagor can’t object to it.

    Hugo L. Black:

    What about the lien holder who wants to come in here?

    William L. Jacob:

    The lien holder had his day, had his right to come in here.

    He was given his 60 — given 89 days in which to come in, put an answer or attend the sheriff’s sale.

    He didn’t do anything at all, he just ignored it completely, and therefore he’s out.

    But the Court said he was out for this reason that they only tendered an insufficient amount of money to get back this property and they did it on the last day of the year.

    So the year has gone by now, several years have gone by, and they have no right of redemption.

    Hugo L. Black:

    There has never been an adjudication has there, contested adjudication of how much it was owing?

    You say they are owing $55,000?

    William L. Jacob:

    Well, that’s in the record and there’s no — there’s no doubt about that.

    Hugo L. Black:

    That was in the bond, wasn’t it?

    William L. Jacob:

    Yes, that was the —

    Hugo L. Black:

    That was in the bond?

    And sometimes bond is paid or one thing or another, there might be a defense to it?

    William L. Jacob:

    Well, the — there was no — there was no defense.

    Hugo L. Black:

    I know there wasn’t because there had been no lawsuit.

    Felix Frankfurter:

    Except that you say that — that when they were given notice of the execution to follow, they then could’ve come up — come in, I am just trying to —

    William L. Jacob:

    At any time —

    Felix Frankfurter:

    — they then come — could have come in and your Court of common plea would have given —

    William L. Jacob:

    Anytime —

    Felix Frankfurter:

    And said that we challenge the amount of the judgement as I understand it?

    William L. Jacob:

    That’s right.

    At any time up until the Sheriff knocks that down and when they do — when the Sheriff knocks that down at that auction sale, then their rights are cut off.

    Felix Frankfurter:

    Are you saying that’s the Pennsylvania law might, it might not be Idaho law?

    William L. Jacob:

    That’s true.

    I am not quoting Idaho law.

    Earl Warren:

    What has been the practice in the State of Pennsylvania in real estate in transactions of this — of this kind where — where the Government has a junior lien as — they power the practice that — that you’re trying to sustain here or — or is there a practice?

    William L. Jacob:

    In many, many instances — in many — in talking with other lawyers, they have followed this and other ones have just ignored it entirely.

    Felix Frankfurter:

    Meaning by that?

    Earl Warren:

    (Inaudible) Mr. Jacob.

    William L. Jacob:

    Meaning by that that here — and this gets to the gist of my argument.

    A deed and a mortgage is a property right and that property right is governed by Pennsylvania law and Pennsylvania law in that sphere is supreme.

    And this Court has said that in the case Erie Railroad versus Tompkins.

    Property rights are creatures of state law and the remedies are creatures of state law.

    And in this case, the apartments had a property right.

    It was a defeasible one, because they had a mortgage on there or a purchase money mortgage.

    And their title was subject to being defeated when they defrauded in that mortgage.

    They defrauded in that mortgage and that sheriff’s sale, which was regular in every respect, that sheriff’s sale took away from them their property right in this property.

    7403 can only be invoked to the Government if the Government — it has to say that that property right is still in apartments and from the time of 1701 to this day, it’s a law of Pennsylvania that by that sheriff’s sale all rights of that mortgagor in that real estate are cut off.

    Now, when they’re cut off, then the lien which the Government had which attached to that property right to give it any sustenance or any vitality or any (Inaudible), it was cut off and when it was cut off, there is that lien hanging in there in a vacuum you might say.

    But we don’t destroy the lien.

    We don’t extinguish the lien.

    They still have that lien, and they can collect it from those people that they have to look through another asset.

    Felix Frankfurter:

    Mr. Jacob, may I insert into that, sheriff’s sale cut off the lien so far as you are concerned.

    That’s your position, isn’t it?

    William L. Jacob:

    No, that isn’t —

    Felix Frankfurter:

    You’re saying cut off all property interest in the mortgagor and thereby his interest, the total interest of the mortgagor went into the purchaser at the day of sale.

    William L. Jacob:

    That’s right.

    Now, we have to be technical about this because we are dealing with a technical subject.

    Felix Frankfurter:

    I am not hostile to the perspective here.

    William L. Jacob:

    All right.

    Now, they had a lien, and the lien rested here on this property right.

    We take away that property right.

    William L. Jacob:

    There hangs their lien but their property right is gone.

    Felix Frankfurter:

    Yes, but they flow in between your right hand and your lower low hand, your lower left hand Mr. Jacob.

    They say that wasn’t operating your illustration because in between where debt — neglect of their right to have come in on your judgment as — ascertainment.

    William L. Jacob:

    Now —

    Felix Frankfurter:

    That’s where the difficulty is.

    William L. Jacob:

    Didn’t Mr. Friedman stand here and tell you that he abandoned his argument about redemption?

    Felix Frankfurter:

    He — yes, he said that, but I didn’t know that he abandoned that.

    You can’t get a judgement ex parte without any given notice to the United States.

    I didn’t hear him abandon that.

    William L. Jacob:

    Well, he has no — he can’t raise that issue here now.

    Felix Frankfurter:

    Why?

    William L. Jacob:

    Aren’t you suppose to raise here what’s raised in the court below?

    Felix Frankfurter:

    But I’ve got to see what is — what is the question that he wants to raise.

    William L. Jacob:

    Here’s another thing, let me point out this to the Court —

    Earl Warren:

    Mr. Jacob, he already has.

    William L. Jacob:

    — that in — at the trial of this case, if the Government was really sincere about wanting to have — wanting to resell this property and thinking that they had — they argue in their brief talking about windfall.

    Well, there wasn’t one since — until the evidence produced at the trial of this case to determine the value or to establish the value of this real estate.

    Now, if the Government was sincere in the beginning that they wanted to resell this in order to recapture their money out of it and pay us off, wouldn’t they have established the value of the real estate?

    Felix Frankfurter:

    Mr. Jacob let me read you the question which brought this case here and with your entirety and insisting that the Government should argue what it brought here and the basis on which we granted the certiorari.

    Whether a sheriff’s sale of real property and execution of a judgement confessed by mortgagee in a state court extinguishes a union federal tax lien on the property where the United States have not been joined as a party to the proceeding assured the federal statute.

    Until I am corrected, I will see this case as turning on what is meant by the proceeding.

    William L. Jacob:

    Well, that’s a classical question but it isn’t based on the facts of the case and it isn’t based on the issues that were developed by the facts in this case that — that developed at the trial.

    Earl Warren:

    Mr. Jacobs I don’t want to — I don’t want to labor the practice of your statement.

    But I wonder if you tell me this.

    You said that the — that the rights become final when the — when the sheriff says so, isn’t that right?

    William L. Jacob:

    That’s where the property right of that mortgagor is taken away from him.

    Earl Warren:

    Yes.

    William L. Jacob:

    And transferred into the purchasers of that real estate.

    Earl Warren:

    Yes.

    Now, may I ask you this, would a title insurance company guarantee the purchaser’s title on this record as you have it here?

    William L. Jacob:

    Well, on the record that I have it here, I would say that they would.

    Earl Warren:

    That they would not?

    William L. Jacob:

    That they would.

    Earl Warren:

    I —

    William L. Jacob:

    That they would insure.

    Earl Warren:

    They would insure?

    William L. Jacob:

    They would insure.

    Earl Warren:

    Yes.

    William L. Jacob:

    They would insure, because the Government did nothing here.

    Earl Warren:

    Yes.

    William L. Jacob:

    And in looking into this and looking in to the record, I think our title companies would say that we have complied.

    We have done everything.

    The prime purpose of that 2410 was to give the Government notice and can they say that they didn’t get notice when we gave them or everything that was in the case?

    Under your view, could you have proceeded to destroy the Government’s lien without proceeding under 2410 at all?

    William L. Jacob:

    We did not destroy the Government’s lien.

    I want that distinctly understood.

    We didn’t interfere with it.

    We didn’t touch it.

    Well, so far as this property is concerned?

    William L. Jacob:

    So far as this property is concerned, our property stood out under that lien.

    Could you have obtained the property ex the Government’s lien without resorting 2410 under your view?

    William L. Jacob:

    I think we could.

    That’s what I understood your provision was.

    William L. Jacob:

    But in order to — and my argument is premised on that.

    In other words, your — I thought your position was that basically, state procedures governed here?

    William L. Jacob:

    That’s right.

    That in proceedings as you did under 2410, you were doing something more than the Government — than you were required.

    William L. Jacob:

    Now, we were required to do.

    We — we went to that —

    Do I understand that correctly?

    William L. Jacob:

    That’s right, that’s exactly right.

    Felix Frankfurter:

    Now, I think Mr. Jacob if I may say so, my brother Brennan and my brother Stewart calls my attention to your statement of the collection, and I accept that, but I may say that Mr. Friedman has a more accurate statement as I understand it.

    Whether sheriff’s sale et cetera, there that’s the junior federal tax lien, where the United States was not originally made as a defendant in the confession of judgemental proceeding but was subsequently joined by the state court of the party defendant before the execution.

    William L. Jacob:

    That’s right.

    Felix Frankfurter:

    So that your — if I may think your upper and (Inaudible) within which you make property decline with the Government.

    If they object to this second part because they say we should have been in on the original judgment proceeding and you yourself, as you presented the question, acknowledged that to be the issue before this Court.

    William L. Jacob:

    But isn’t that rather moot? Now when they abandoned their proceedings under 2410.

    Felix Frankfurter:

    If Mr. Friedman has any time, he will tell me what he did or didn’t abandon.

    William L. Jacob:

    I thank you very much.

    Earl Warren:

    Mr. Friedman.

    Daniel M. Friedman:

    Just very, very briefly Mr. Chief Justice, we didn’t abandon this position.

    What happened was we said that — what have been done here did not operate to divest our lien because we hadn’t made a party initially.

    Felix Frankfurter:

    To what, a party to what?

    Daniel M. Friedman:

    We had not been made a party to a proceeding to foreclose a mortgage under 2410.

    Felix Frankfurter:

    Now, be more specific since there are several proceedings here.

    There was a proceeding in which Mr. Jacob is trying, put in the confession of judgment, which they were authorized to do out of the bond.

    Now, do you mean you were not a party to that proceeding?

    Daniel M. Friedman:

    That is precisely correct Mr. Justice, because the statutes speaks in terms of a proceeding of jurisdiction of any civil action to — for the foreclosure of a mortgage.

    And we think as the District Court held in this case that that means we must be made a party to that proceeding at the very —

    Felix Frankfurter:

    Ab initio.

    Daniel M. Friedman:

    Ab initio precisely.

    Earl Warren:

    But their state procedure doesn’t provide for — for any notice to anyone on the first point.

    Daniel M. Friedman:

    That is correct.

    Earl Warren:

    But does require on the second part and you do that what was required under the second part and had an opportunity to — to establish your — your right?

    Daniel M. Friedman:

    Well —

    Earl Warren:

    Where’s the Government been injured?

    Daniel M. Friedman:

    For one thing —

    Earl Warren:

    And — and where is your – where is it violated there?

    Daniel M. Friedman:

    One thing Mr. Chief Justice is under 2410, we are given the right of removal into the federal court and it seems to me when we remove is the suit for the foreclosure of the mortgage.

    We can’t remove to the federal court a proceeding — a sheriff’s sale.

    Daniel M. Friedman:

    What is contemplated we think here is a basic proceeding.

    Earl Warren:

    Well, if you removed it, wouldn’t you remove it with whatever — to the federal court with whatever rights the Government might have?

    And he says that you have the right to — to question the — the amount that is due, the amount that was in that ex parte order, and that you could not, in any way, be prejudiced because you have a right to bring in all those things, even in the state court.

    And if you took the federal court, why couldn’t you — why couldn’t you have the same rights there?

    Daniel M. Friedman:

    Well, I think — removal — what — the only thing we could remove at that stage of the proceedings would be execution proceeding and we think what Congress is contemplated here that the — for the protection of the United States, it has the right to remove the whole thing to have in the first instance before any judgment has entered, which has the effect and interest of the United States to have itself be given an opportunity to participate in those things.

    Hugo L. Black:

    Could you have (Inaudible) that, we have a judgment?

    Daniel M. Friedman:

    I wouldn’t think so Mr. Justice.

    Hugo L. Black:

    I suppose he did have a judgement?

    Daniel M. Friedman:

    He had a judgement.

    Hugo L. Black:

    But if you reopen the judgment, would you then remove?

    You made it there, there in state court.

    Daniel M. Friedman:

    I don’t know whether if we reopen the judgment we could remove.

    Hugo L. Black:

    Reopen, if you havent’ joined in the state court.

    Daniel M. Friedman:

    Into the state court.

    Hugo L. Black:

    (Inaudible)

    Daniel M. Friedman:

    I would — I would think that the removal would require initially before there’s been any final determination.

    I would if I — just like to say one other point which I think is important.

    The fact that we attempted to redeem a year later, it doesn’t seem to me to indicate that we conceded that we had been properly made a party to the state court proceeding.

    And it seems to be perfectly consistent common practice for litigants to try alternative remedies.

    We thought that we would not — had not been properly joined, but nevertheless, we did attempt to redeem later to protect ourselves.

    Charles E. Whittaker:

    May I ask Mr. Chief Justice before we close this one question?

    Is this clear under the law of Pennsylvania that a redemption where it’s proper to be been made, maybe made at a sum equal to the bid at the sale or not?

    Daniel M. Friedman:

    Mr. Justice, Pennsylvania does not permit redemptions under Pennsylvania law.

    Once the Sheriff has set sold, there is no right of redemption.

    There is no right of redemption under Pennsylvania law to my understanding nevertheless.

    Earl Warren:

    We’ll recess now.