Simonson v. Granquist

PER CURIAM.

This appeal is taken by the trustee of a bankrupt estate from the judgment of the District Court affirming an order of the Referee in Bankruptcy which allowed the United States a lien claim against the bankrupt estate in the sum of $1,442.41 for penalties on unpaid federal taxes.

Two questions are presented by this appeal.

The first question concerns the significance of the fact that although the lien of the United States arose prior to the filing of a petition in bankruptcy, notice of such lien was not filed until after the filing of the petition in bankruptcy. The trustee contends that under § 6323 of the Internal Revenue Code of 1954, 26 U.S.C. § 6323, the lien of the United States under these circumstances is invalid.

*490Section 6323 provides that the tax lien of the United States “shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof' has been filed” in certain specified public offices.

Section 70 of the Bankruptcy Act, 11 U.S.C.A. § 110, provides in part:

“The trustee, as to all property, whether or not coming into possession or control of the court, upon which a creditor of the bankrupt could have obtained a lien by legal or equitable proceedings at the date of bankruptcy, shall be deemed vested as of such date with all the rights, remedies, and powers of a creditor then holding a lien thereon by such proceedings, whether or not such a creditor actually exists.”

The trustee contends that under § 70 he is by operation of law made a judgment creditor of the bankrupt; that under § 6323 of the Internal Revenue Code, as a judgment creditor, the lien of the United States is rendered invalid as to him.

The Supreme Court has interpreted § 6323 as limiting the class of persons who take priority over the unrecorded tax liens of the United States to judgment creditors (or purchasers, mortgagees or pledgees) in the conventional and ordinary sense of the words. United States v. Gilbert Associates, 1953, 345 U.S. 361, 73 S.Ct. 701, 97 L.Ed. 1071; United States v. Security Trust & Savings Bank, 1950, 340 U.S. 47, 52, 71 S.Ct. 111, 95 L.Ed. 53.

The precise question presented by the instant case was presented to this court in United States v. England, 9 Cir., 1955, 226 F.2d 205. We there held that a trustee in bankruptcy could not, in the light of the Supreme Court’s construction of the section, claim the status of judgment creditor under § 6323. Other courts have reached the same result. In re Fidelity Tube Corporation, 3 Cir., 1960, 278 F.2d 776; Brust v. Sturr, 2 Cir., 1956, 237 F.2d 135; see In re Tay-lorcraft Aviation Corporation, 6 Cir., 1948, 168 F.2d 808.

We adhere to our ruling in United States v. England and accordingly reject this contention of the trustee.

The second question presented by this appeal is whether a claim of the United States for penalties on unpaid taxes, upon which claim a lien arose prior to bankruptcy, is barred by § 57, sub. j of the Bankruptcy Act, 11 U.S.C.A. § 93:

“Debts owing to the United States or to any State or any subdivision thereof as a penalty or forfeiture shall not be allowed, except for the amount of the pecuniary loss sustained by the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby and such interest as may have accrued on the amount of such loss according to law.”

While the courts have divided upon this question, this court has held that § 57, sub. j does not apply to secured claims. In re Knox-Powell-Stockton Company, 9 Cir., 1939, 100 F.2d 979. To the same effect are United States v. Mighell, 10 Cir., 1959, 273 F.2d 682; Commonwealth of Kentucky ex rel. Unemployment Compensation Commission v. Farmers Bank, 6 Cir., 1943, 139 F.2d 266. Cases contrary to this court’s position are: United States v. Harrington, 4 Cir., 1959, 269 F.2d 719; United States v. Phillips, 5 Cir., 1959, 267 F.2d 374.

We adhere to our ruling in Knox-Powell-Stoekton and accordingly reject the contention of the trustee that § 57, sub. j invalidates the secured claim of the United States in this matter.

Affirmed.