RESPONDENT: Union Central Life Insurance Company
LOCATION: Herricks School District
DOCKET NO.: 52
DECIDED BY: Warren Court (1958-1962)
CITATION: 368 US 291 (1961)
ARGUED: Nov 07, 1961
DECIDED: Dec 18, 1961
Facts of the case
Media for United States v. Union Central Life Insurance Company
Audio Transcription for Oral Argument - November 07, 1961 in United States v. Union Central Life Insurance Company
Number 52, United States, Petitioner, versus Union Central Life Insurance Company.
I. Henry Kutz:
Mr. Chief Justice, may it please the Court.
This is a contest between a mortgage in a federal tax lien for priority.
Under statute, under provisions of the Internal Revenue Code which I hope to discuss in more detail later on my argument, a federal tax lien in order to be valid as against the mortgage and several other classifications against the mortgagee and several other classifications must be filed in either one of two ways.
In a state office where -- which has been established in accordance with the laws of the state or authorized by the laws of the state or if the state has not authorized such an office in the office of the clerk of the District Court, the issue in brief here is whether a state has authorized such an office when it requires that the notice of lien describe particular parcels of real property in order that it may accept notice.
The State of Michigan did prescribe under its law that any notice of lien filed in the office authorized by it must state -- must describe the real property.
And since this was not considered as permitting a notice of tax lien to be filed in the form and with the efficacy of a full notice of tax lien that was filed in the office of the clerk of the District Court.
The facts are -- which are not in dispute are as follows.
In January 1954, federal income taxes were assessed against Robert and Helen Peters in the amount of some $1300 and notice and demand for payment was sent to them.
In July 1954, a notice of tax lien was filed by the Government in the clerk's office of the United States District Court, Eastern District of Washington, the notice did not contained a description of any real property owned by the tax payers.
At that time, the statute of the State of Michigan, statute which had been in this form from the 1920's on required that to set up of certain offices for the filing of federal liens but required that the property be described before the -- in such a notice.
In 5th -- 1953, the year before these events took place, the Attorney General of Michigan had ruled that the registers -- County Registers in Michigan could not accept notices of tax lien unless they did contained such a description.
In view of the fact that the county register would not accept the notice, the -- and since it was felt that this was an unwarranted condition limiting the federal tax lien, the District Director filed a notice in the clerk -- office of the clerk of the United States District Court.
Subsequent to this July when the note 54 when the notice was filed, the insurance company respondent here gave a mortgage, loan money and gave a more -- and received the mortgage from the Peters on property which say they then owned in Oakland County.
Subsequently, this was done in November 1954, subsequently the Peters defaulted on the payments on the mortgage, the present action, the action before the Court here which was one of foreclosure the mortgage was brought in the Michigan State Court and the United States was joined as a party both the trial court and the Michigan Supreme Court held that the Government had not filed an adequate notice because it had been filed in the office of the clerk of the District Court and asserting that the state had provided an office.
The Michigan Supreme Court further considered two decisions, one, by the Sixth Circuit in the Youngblood case which held that it was proper for Michigan to require that the real property be described, and the other a decision of the Ninth -- of the Eighth Circuit Court of Appeals in Rasmuson case which held to the contrary supporting on the Government's view point.
The Supreme Court of Michigan noted that this Court had not spoken on the subject and decided to follow the Youngblood case.
The nature of the federal tax lien is that it attaches upon notice and demand and assessment of the tax.
And that, it applies to all property then owned by a tax payer or after acquired.
If in order to file notices of tax lien in the state or any other office, the district directors would have to describe the property to which a notice attached, it would be necessary to have some officer of the Government either continuously search the various registers offices to determine whether a tax payer has acquired owned property at the time the notice was filed and in particular whether he acquired property later.
This would effect we believe, very seriously the efficacy of the federal tax lien as created by Congress.
We think this is an unreasonable and improper condition to the designation of an office and under these circumstances, a state has an effect not designated any office at all and therefore the Government is entitled to file its lien in the office of the United States District Court.
Now, the legislative history of the federal tax lien, we believe strongly supports this argument in this view point.
The federal tax lien in almost its present form was first established in around 1867, but at that time there was no provision at all for the filing of notices of lien.
In -- it became Section 3186 of the revised statutes in 1875 and then 1893, a case came to this Court construing that provision of the revised statute.
The -- under the facts of that case which is United States against Snyder, a taxpayer had sold real property to a bona fide purchaser but this Court held that nevertheless, the purchaser took -- subject to the tax lien.
In 1913, the first provision for notice -- filing of notices of tax lien was incorporated into the statute.
That provision required that the notice be filed in the office of the clerk of the District Court and further provided that if a state authorized a place in a county for the filing of notices of tax lien, the notice should also be filed in the state office.
In 1928, the revised statute section was further amended and it then provided that the notice would not be valid as against the mortgagee, purchaser, and judgment creditor unless a notice was filed in one of two places.