United States v. R. F. Ball Construction Company, Inc.

PETITIONER: United States
RESPONDENT: R. F. Ball Construction Company, Inc.
LOCATION: Alabama State Capitol

DOCKET NO.: 97
DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 355 US 587 (1958)
ARGUED: Jan 27, 1958
DECIDED: Mar 03, 1958

Facts of the case

Question

Media for United States v. R. F. Ball Construction Company, Inc.

Audio Transcription for Oral Argument - January 27, 1958 in United States v. R. F. Ball Construction Company, Inc.

Earl Warren:

Number 97, United States of America, versus R.F. Ball Construction Company and United Pacific Insurance Company.

Mr. Prescott.

Alexander F. Prescott:

Mr. Chief Justice, may it please the Court.

It is stipulated that the sum impleaded in this case is a balance to -- from the R.F. Ball Construction Company for -- to the taxpayer for having completed a contract in San Antonio, Texas.

The first question presented is the relative priority of federal tax liens in this fund and those of claims made by the surety under the Texas contract for payments that was required to make in an entirely separate contract under which the taxpayer defaulted in Kentucky.

The court below has held that the application of the -- which was executed by the partnership with predecessor of the taxpayer corporation where the mortgage within the meaning of Section 3672 of the 1939 Internal Revenue Code.

That statute, insofar as pertinent here, provides that no federal tax liens shall be valid against the purchaser, mortgagee, pledgee, or judgment creditor.

The statute was enacted to protect the public from secret federal tax liens.

The application which the court below held made the surety, a mortgagee provided that the partnership had transferred and conveyed as of this date, that's the date of the Texas contract to the surety all right, title and interest of the undersigned to all percentages and all of the sums which would come to, to the undersigned as collateral, security of the full performance of the Texas contract which was performed, and the payment of any other indebtedness or liability to the undersigned into the company whether heretofore or hereafter incurred.

Charles E. Whittaker:

May I ask you?

Is that -- is not the conference form of application used by all the indebtedness?

Alexander F. Prescott:

We have made a search, if the Court please, of the textbooks and of the decisions of the states that its default and yet the -- any other indebtedness or liability, when it appears in each instrument, the courts some hold that there's no mortgage at all.

Charles E. Whittaker:

I think you misunderstand me.

What I say as it is, is not this form of bond application which you've just read the conference form used by all the bonding companies in the country?

Alexander F. Prescott:

I trust it is, Your Honor.

Charles E. Whittaker:

Yes.

Alexander F. Prescott:

And a like one was executed late -- late application was executed by the taxpayer when the bonding company became surety on the Kentucky bonds.

This contract or this assignment was executed in July of 1951.

A few months afterwards, the partnership was incorporated and the taxpayer assumed the liabilities and took all of its assets.

About nine months after the execution of this instrument, the taxpayer corporation entered into the Kentucky contract.

In March of 1952 -- 1953, the first Government lien arose.

How much was that lien bore?

Alexander F. Prescott:

Six thousand and some dollars, if Your Honor please, plus interest.

Plus the amounts of the --

Alexander F. Prescott:

(Inaudible)

13,000

Alexander F. Prescott:

Yes, sir, there were two other liens.

On April the 30th, 1953, the work of the R.F. Ball Construction Company was accepted by the housing authority that is the work under the Texas contract.

Between that period and the date upon which it was agreed as to the amount that the two -- the taxpayers under the Texas contract, the other two liens arose and all of the notices were filed.

It was not until December, 1953 between December, 1953 and March of 1954 that any liability arose under the Kentucky contract that is the date that the payments were made by the surety under the Kentucky contract or from December, 1953 to March of 1954.