Litton Industrial Automation Systems, Inc. v. Nationwide Power Corp.

United States Court of Appeals,

Eleventh Circuit.

No. 95-2725.

LITTON INDUSTRIAL AUTOMATION SYSTEMS, INC., Plaintiff,

v.

NATIONWIDE POWER CORPORATION; Fitzgerald, Peters, Dakmak &
Miller, P.C., Defendants-Cross-Defendants,

United States of America, Defendant-Cross-Defendant-Appellee,

Magna Card, Inc., d.b.a. Highlander International Corp.; John F.
Roscoe, III, Defendants-Cross-Defendants-Appellants,

Brooks Satellite, f.k.a. Nationwide Power Corporation, Defendant-
Cross-Defendant.

Feb. 24, 1997.

Appeal from the United States District Court for the Middle
District of Florida. (No. 91-377-CIV-21C), Ralph W. Nimmons, Jr.,
Judge.

Before BIRCH, Circuit Judge, KRAVITCH*, Senior Circuit Judge, and
SCHWARZER**, Senior District Judge.

BIRCH, Circuit Judge:

The issue in this appeal is whether an unperfected security

interest in interpleaded funds is entitled to priority over a

competing federal tax lien. The district court held that the

federal tax lien is entitled to priority. We affirm.

I. BACKGROUND

The facts in this appeal are essentially undisputed.

Plaintiff Litton Industrial Automation Systems, Inc. ("Litton")

*
Judge Kravitch was in regular active service when this
matter was originally submitted but has taken senior status
effective January 1, 1997.
**
Honorable William W. Schwarzer, Senior U.S. District Judge
for the Northern District of California, sitting by designation.
filed this interpleader action in the United States District Court

for the Eastern District of Michigan, from which it was transferred

to the United States District Court for the Middle District of

Florida. Litton deposited in the registry of the court

$572,627.46, which it owed to Nationwide Power Corporation

("Nationwide") pursuant to a judgment obtained by Nationwide on

August 15, 1989. The real parties in interest are Highlander

International Corporation ("Highlander") and the United States.1

Highlander's interest in the interpleaded funds stems from an

agreement between Nationwide and Highlander, pursuant to which

Nationwide sought to secure a debt it owed to Highlander.2 In this

agreement, Nationwide granted to Highlander a security interest in

certain "cash collateral," including Nationwide's cause of action

against Litton, which eventually resulted in the money judgment

here in dispute. This interest arose on the date of the agreement,

April 15, 1986. Highlander did not file a UCC-1 statement until

August 1989, however. The Government's interest in the

interpleaded funds arose from a tax assessment on June 9, 1986 of

1
The district court dismissed Litton from the case as a
disinterested stakeholder. The court also dismissed with
prejudice all the defendants, except Highlander and the IRS. On
February 23, 1995, John F. Roscoe, attorney for Nationwide, Magna
Card, Inc., and Highlander moved to be substituted as a party for
Magna Card and Highlander. The district court denied Roscoe's
motion, and Roscoe appeals. We summarily affirm the district
court's denial of this motion.
2
A series of commercial transactions preceded this
agreement. These transactions are described in the district
court's opinion. See Litton Indus. Automation Sys. v. Nationwide
Power Corp., 75 A.F.T.R.2d (RIA) 2276 No. 91-377-CIV-T-21C
(M.D.Fla. Mar.30, 1995). A detailed description of these
transactions is not necessary here because it has no bearing on
the resolution of the narrow issue on appeal.
tax penalties exceeding $700,000 against Nationwide. On July 3,

1986, the Internal Revenue Service ("IRS") filed a notice of

federal tax lien in Broward County, Florida, in which Nationwide

had its principal executive office.

On July 27, 1989, the IRS served a notice of levy on Litton's

attorney, directing him to deliver to the IRS any monies owed to

Nationwide. After judgment was entered in favor of Nationwide in

its suit against Litton, Litton initiated the instant interpleader

action to determine which party is entitled to the funds. The

district court granted summary judgment to the Government, holding

that the federal tax lien was entitled to priority over

Highlander's security interest. This appeal followed.

II. DISCUSSION

We have jurisdiction to review the district court's order

under 28 U.S.C. § 1291. Because at least two of the defendants

named in this interpleader action are of diverse citizenship, the

district court's jurisdiction was founded on 28 U.S.C. § 1335. The

Government has waived its sovereign immunity for interpleader

actions involving tax liens in 28 U.S.C. § 2410.

We review the district court's grant of summary judgment de

novo and apply the same legal standards as the district court.

Sultenfuss v. Snow, 35 F.3d 1494, 1499 (11th Cir.1994) (en banc),

cert. denied, --- U.S. ----, 115 S.Ct. 1254, 131 L.Ed.2d 134

(1995). This case involves a pure question of law: Is Highlander

the "holder of a security interest" which is entitled to priority

over the Government's federal tax lien under the Federal Tax Lien

Act of 1966 ("FTLA"), 26 U.S.C. § 6323?
A. Applicable Law

Before we address the contentions of the parties, we briefly

outline the applicable law. Under the Internal Revenue Code, a tax

lien arises at the time of assessment, 26 U.S.C. § 6322, on "all

property and rights of property, whether real or personal,

belonging to" a delinquent taxpayer, id. § 6321. The FTLA

provides, however, that the tax lien "shall not be valid as against

any ... holder of a security interest ... until notice thereof

which meets the requirements of subsection (f) has been filed."

Id. § 6323(a). Therefore, any "security interest" which arises

prior to the proper filing of a federal tax lien takes priority

over the tax lien. See United States v. McDermott, 507 U.S. 447,

449, 113 S.Ct. 1526, 1528, 123 L.Ed.2d 128 (1993). The FTLA

defines a "security interest" as

any interest in property acquired by contract for the purpose
of securing payment or performance of an obligation or
indemnifying against loss or liability. A security interest
exists at any time (A) if, at such time, the property is in
existence and the interest has become protected under local
law against a subsequent judgment lien arising out of an
unsecured obligation, and (B) to the extent that, at such
time, the holder has parted with money or money's worth.

26 U.S.C. § 6323(h)(1). The dispute in this case is whether

Highlander's interest qualifies as a security interest as defined

by the FTLA.

B. District Court Opinion and Contentions of the Parties

It is undisputed in this appeal that a tax lien arose upon

all Nationwide's property on June 9, 1986, the first date of the

tax penalty assessments against Nationwide. It is also undisputed

that the IRS properly filed a notice of this tax lien in

Nationwide's county of residence, as required by 26 U.S.C. §
6323(f)(2)(B), on July 3, 1986. Therefore, for Highlander's

interest to take priority over the tax lien, Highlander must have

been the holder of a "security interest," as that term is defined

in the FTLA, on July 3, 1986. To do so, Highlander must establish

that its interest satisfies four conditions:

(1) that the security interest was acquired by contract for
the purpose of securing payment or performance of an
obligation or indemnifying against loss; (2) that the
property to which the security interest was to attach was in
existence at the time the tax lien was filed; (3) that the
security interest was, at the time of the tax lien filing,
protected under state law against a judgment lien arising out
of an unsecured obligation; and (4) that the holder of the
security interest parted with money or money's worth.

Haas v. Internal Revenue Serv. (In re Haas), 31 F.3d 1081, 1085

(11th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 2578, 132

L.Ed.2d 828 (1995). As in Haas, the only issue on appeal in this

case is whether the third condition is satisfied. In other words,

this case turns on whether Highlander's interest was protected

under Florida law—the applicable local law—against a judgment lien

arising out of an unsecured obligation on July 3, 1986.

Relying on the "hypothetical judgment lien creditor test"

adopted by this court in Haas, the district court held that

Highlander's interest was not protected under Florida law against

a judgment lien.

[T]he hypothetical judgment lien creditor test operates to put
the IRS in the shoes of any subsequent judgment creditor,
including the most favorable shoes. Thus, if any subsequent
judgment creditor could prevail over [Highlander], then the
IRS prevails.

Haas, 31 F.3d at 1089 (footnote omitted). The district court

reasoned that a class of judgment creditors, those who qualify as

"lien creditors" as defined in U.C.C. § 9-301(3) and who have no
notice of Highlander's previous unperfected interest, could have

prevailed over Highlander's interest under Florida law. The court

concluded that the Government prevails here.

Highlander contends, however, that under Florida law a

"judgment lien" does not attach to intangible assets, such as the

funds at issue in this case, until the judgment creditor has taken

further judicial action—by way of garnishment or an independent

suit to enforce the debt. See Peninsula State Bank v. United

States, 211 So.2d 3, 5 (Fla.1968). Highlander concludes that the

holder of a simple "judgment lien" on intangibles does not qualify

as a UCC "lien creditor" under Florida law. Thus, Highlander's

security interest, though unperfected, prevails over the judgment

lien because Highlander's interest was the first to attach. See

Fla. Stat. ch. 679.312(5)(b) (1995).

Highlander argues that Haas is distinguishable. The priority

contest in Haas was between a mortgagee who had mistakenly released

its mortgage on the contested real property and a federal tax lien.

The applicable local law was Alabama law, which provided that the

mortgagee's interest is subordinate to that of a "judgment creditor

without notice." Haas, 31 F.3d at 1086. The issue decided in that

case was whether knowledge on the part of the IRS of the mistakenly

released mortgage affected the hypothetical priority contest—we

decided that it did not—, not whether the IRS should be treated as

a UCC lien creditor. In other words, the IRS would have won the

priority contest in Haas, whether it was a UCC lien creditor or

not, because it was the hypothetical holder of a "judgment lien"

and thus a judgment creditor entitled to priority under Alabama
law. Highlander acknowledges that, in Haas, we noted: "In

interpreting the phrase "protected under local law against a

subsequent judgment lien,' courts and commentators have determined

the phrase is equivalent to being protected against a "lien

creditor' as defined in U.C.C. § 9-301(3)." Haas, 31 F.3d at 1087.

Highlander contends, however, that this statement is dictum, in

light of the discussion of the specific type of interest and

applicable local law at issue in Haas.

Highlander also distinguishes Dragstrem v. Obermeyer, 549 F.2d

20 (7th Cir.1977), which is the first decision of a United States

Court of Appeals to adopt the hypothetical judgment creditor test

and upon which we relied heavily in Haas. Dragstrem involved facts

analogous to those we face here. The priority contest inDragstrem

was between an unperfected security interest and a subsequent tax

lien over an interpleaded fund. Id. at 22. The difference between

Dragstrem and this case lies, however, in the applicable local law.

The relevant local law in Dragstrem was U.C.C. § 9-301(1)(b),

which, as adopted in Indiana at the time, provided that "an

unperfected security interest is subordinate to the rights of ...

(b) a person who becomes a lien creditor without knowledge of the

security interest and before it is perfected." Id. at 23 (omission

in original) (emphasis added). The equivalent provision of Florida

law is a newer version of section 9-301(1)(b) that omits the

knowledge requirement. See Fla. Stat. ch. 679.301(1)(b).

Therefore, the central issue decided in Haas and Dragstrem, whether

knowledge on the part of the IRS affects the priority of the tax

lien, is not relevant in this case.
 More importantly, a judgment lien attaches to intangible

property in Indiana upon docketing of a judgment and the delivery

of a writ of execution to the sheriff, Dragstrem, 549 F.2d at 27,

without any additional judicial proceeding as required in Florida.

Highlander argues that the holder of a "simple judgment lien" is

therefore a UCC lien creditor under Indiana law but not under

Florida law. Compare id. ("Upon delivery [of the writ to the

sheriff], the lien would attach to the debtor's property and the

creditor would become a "lien creditor' under the UCC.") with

Peninsula State Bank, 211 So.2d at 5 ("The only way a simple

judgment creditor can reach [intangible property] owed to his

debtor is by way of a separate and independent judicial

proceeding...."). According to Highlander, that such holder of a

simple judgment lien prevailed under Indiana law does not mean that

it should prevail under Florida law.

The Government contends, however, that the additional

procedural steps that a Florida judgment creditor must take for its

judgment lien to attach to intangible property are no different

from the lack of knowledge requirement that was at issue in Haas.

In order to be in "the most favorable shoes," Haas, 31 F.3d at

1089, the hypothetical judgment creditor must be assumed to have

completed whatever additional steps are required under local law

for the judgment lien to attach. Highlander responds that there is

an important distinction between the knowledge requirement in Haas

and the additional steps necessary under Florida law for a judgment

lien to attach to intangible property. The underpinning of the

hypothetical judgment creditor test is that the FTLA
 "does not put the government in the position of a competing
holder of a security interest or judgment lien, but rather
describes the legal status which security interests must
obtain under state law in order to have priority over later
filed or unfiled federal tax liens."

Haas, 31 F.3d at 1087 (quoting Dragstrem, 549 F.2d at 26).

Therefore, whether the IRS had knowledge of the security interest

is irrelevant to the inquiry of whether that security interest

achieved a given legal status. Under Haas, we do not engage in "a

case-bycase inquiry into whether the IRS had "notice.' " Haas, 31

F.3d at 1088. Instead, we compare the security interest at issue

to a given legal construct, namely a hypothetical "judgment lien."

Just what the phrase "judgment lien" means was not an issue in

Haas, although it was addressed in dicta. See id. at 1087 (noting

that "courts and commentators have determined the phrase is

equivalent to ... a "lien creditor' as defined in the U.C.C. § 9-

301(3)"). Highlander argues that the plain meaning of the phrase

"judgment lien" is a "simple" judgment lien that arises, but not

necessarily attaches to intangible property, upon the entry of a

judgment. Highlander argues further that whether such "judgment

lien" should be considered to have attached to the property in

dispute is a matter of state law. If state law requires separate

judicial action for the lien to attach to the property, then a

"judgment lien" in that state, even a hypothetical judgment lien,

has not attached and its holder is not a UCC lien creditor. Cf.

Peninsula State Bank, 211 So.2d at 5. Highlander adds that defining

a "judgment lien" in this fashion does not defeat the congressional

purpose, implemented in the hypothetical judgment creditor test, of

avoiding a case-by-case inquiry into whether the IRS actually
complied with certain state law requirements—i.e., had no notice

(as in Haas ) or performed the actions necessary under state law

for the judgment lien to attach to the property in question.

C. Analysis

We agree with Highlander that Haas does not necessarily

dictate the result in this case. To determine whether the language

of Haas should be extended to encompass the additional steps needed

under Florida law for a "simple judgment lien" to attach, we must

construe the statute and ascertain what the phrase "judgment lien,"

as used by Congress in section 6323(h)(1), means.

In a case involving statutory construction, our starting

point always is the language of the statute, and we assume that

Congress expressed its intent by the ordinary meaning of the words

it used. American Tobacco Co. v. Patterson, 456 U.S. 63, 68, 102

S.Ct. 1534, 1537, 71 L.Ed.2d 748 (1982); Gulf Life Ins. Co. v.

Arnold, 809 F.2d 1520, 1522 (11th Cir.1987). The FTLA does not

define the phrase "judgment lien." Highlander relies primarily on

the Florida Supreme Court's decision in Peninsula State Bank to

argue that the plain meaning of the phrase "judgment lien" is a

"simple unperfected judgment lien." Peninsula State Bank, 211

So.2d at 7. The gist of this argument is that, under Florida law,

a simple money judgment against a defendant creates a "lien" on all

of its property. Such a lien, "a simple judgment lien" in the

terminology used by the Florida Supreme Court, does not attach to

the defendant's intangible personal property until further judicial

action is taken. Id. at 5. Highlander's argument is unconvincing.

Federal law, not state law, governs a priority contest
between a security interest and a federal tax lien. Haas, 31 F.3d

at 1084-85 (citing Aquilino v. United States, 363 U.S. 509, 513-15,

80 S.Ct. 1277, 1280-81, 4 L.Ed.2d 1365 (1960)). Thus, although the

FTLA resolves such a contest by comparing the security interest to

a judgment lien under state priority rules, what constitutes a

"judgment lien" within the meaning of section 6323(h)(1) is a

matter of federal law. We are concerned with what Congress

intended that phrase to mean, not with what state law labels as a

judgment lien. Cf. id. at 1088 n. 10 (definition of "judgment

creditor" in a predecessor to the FTLA is a matter of federal law).

The phrase "judgment lien" does not have a generally

understood meaning. See Texas Oil & Gas Corp. v. United States,

466 F.2d 1040, 1047 (5th Cir.1972) ("The phrase "protected against

a judgment lien' is not a term of art ...."), cert. denied, 410

U.S. 929, 93 S.Ct. 1367, 35 L.Ed.2d 591 (1973); Peter F. Coogan,

The Effect of the Federal Tax Lien Act of 1966 Upon Security

Interests Created Under the Uniform Commercial Code, 81 Harv.

L.Rev. 1369, 1389 (1968) ("The term "judgment lien' is not

generally used in chattel security statutes...."). For example, in

contrast to Florida, there appears to be no such thing as a

"judgment lien," whether labeled "simple" or not, on personal

property in some states. See, e.g., Keep Fresh Filters, Inc. v.

Reguli, 888 S.W.2d 437, 443 (Tenn.Ct.App.1994) (Under Tennessee

law, "judgment creditors ... may obtain two significantly different

liens against the judgment debtor's property. The first is [a]

judgment lien ... that attaches to ... real property. The second

is [an] execution lien ... that attaches to ... personal
property.").; Franchise Tax Bd. v. Danning (In re Perry), 487 F.2d

84, 89 (9th Cir.1973) (Zirpoli, J., dissenting) (explaining that

"no provision of California law ever permits that a judgment lien

attach to personal property" and that only an "execution lien" can

reach such property), cert. denied, 415 U.S. 978, 94 S.Ct. 1565, 39

L.Ed.2d 874 (1974). In other states, a simple judgment creates no

lien at all on personal property, and a judgment lien does not

arise until certain additional action is taken by the judgment

creditor. See, e.g., Fore v. United States, 339 F.2d 70, 72 (5th
Cir.1964) (Under Texas law, "[t]he filing and indexing of [a]

judgment in ... Harrison County entitled [the judgment creditor] to

a lien upon all of the real estate of the defendant ... situated in

the county. It gave him no lien on the personal property of the

defendant."); First Security Bank v. Friese Mfg., Inc., 489 N.W.2d

342, 345 (N.D.1992) ("Under North Dakota law, a judgment lien on

personal property only arises upon the "actual levy' of the

property in question.").3

3
The inconsistency between what these courts from other
states refer to as a judgment lien or execution lien and what the
Florida Supreme Court refers to as a "simple judgment lien" in
Peninsula State Bank appears to stem from a different
understanding of the word "lien." For the Reguli, Fore, and
First Security Bank courts, and the dissenting judge in Perry, a
lien is an interest that has actually attached to the defendant's
property. The Florida court uses the word "lien" to mean a claim
arising from a judgment but that has not necessarily attached to
the subject property. This inconsistency may be a good example
of what Massachusetts Justice H.T. Lummus said: "The word "lien'
hardly admits of definition. It is used to describe various
kinds of interests in property or rights over it, and is
frequently used in a very loose way." H.T. Lummus, The Law of
Liens with Especial Reference to Massachusetts & Maine I (1904),
quoted in Coogan, supra, at 1371 n. 11. Unfortunately, Congress
did not define the word "lien" or the phrase "judgment lien" in
the FTLA.
 Even the Florida Supreme Court's opinion upon which Highlander

relies is confusing in defining a judgment lien. Although the

court eventually concluded in that opinion that the term "judgment

lien" used in 26 U.S.C. § 6323(c)(1)(B) means a "simple judgment

lien" under Florida law, it also stated: "[I]nsofar as what we

call a "simple judgment creditor' is concerned, there simply is no

such thing as a judgment lien against [intangible property] in this

state." Peninsula State Bank, 211 So.2d at 5 (emphasis added).

What the court was referring to in its opinion as a "simple

judgment lien" is therefore nothing more than a simple money

judgment. This interpretation of the phrase judgment lien, which

Highlander invites us to adopt, in fact reads the word "lien" out

of the statute. As the Eighth Circuit did in a similar case, we

decline this invitation. See International Fidelity Ins. Co. v.

United States, 949 F.2d 1042, 1045 (8th Cir.1991).

We conclude that the phrase "judgment lien" has no ordinary

meaning so as to compel Highlander's interpretation of the phrase

within the context of the FTLA. The Government argues that

"judgment lien," as used in the FTLA, is equivalent to the interest

of a UCC lien creditor. This interpretation is one that has been

adopted almost unanimously by the commentators, see, e.g, Timothy

R. Zinnecker, When Worlds Collide: Resolving Priority Disputes

Between the IRS and the Article Nine Secured Creditor, 63 Tenn.

L.Rev. 585, 605-06 & nn.89-90 (1996) (collecting cases); Coogan,

supra, at 1382-83, and by the courts—though arguably in dicta, see,

e.g., Haas, 31 F.3d at 1087; Dragstrem, 549 F.2d at 25. The

rationale for adopting this interpretation is that one of
Congress's main goals in enacting the FTLA was "to conform the lien

provisions of the internal revenue laws to the concepts developed

in [the] Uniform Commercial Code." H.R.Rep. No. 89-1884, at 1-2

(1966), reprinted in Committee on Ways and Means, 89th Cong.,

Legislative History of H.R. 11256: Federal Tax Lien Act of 1966,

at 443-44 (1966) [hereinafter Legislative History ]. The only way

in which the U.C.C. gives effect to the interest of a judgment

creditor is the "lien creditor" concept embodied in section 9-

301(3) of the U.C.C. See Coogan, supra, at 1382-83. The logical
conclusion, though by no means an inevitable one, is that Congress

intended the phrase "judgment lien" to mean the interest, arising

from a judgment (as opposed to assignment, for example), that a

lien creditor has in a given property.4 This conclusion is further

4
Highlander's strongest attack on this conclusion is that a
previous version of the bill that eventually became the FTLA
defined "security interest" in terms equivalent to those used in
the U.C.C., but that this language was deleted from the bill.
Compare 26 U.S.C. § 6323(h)(1) (enacted definition of security
interest) with H.R. 11256, 89th Cong. § 101 (1966) (version
initially introduced by Rep. Mills) (providing in 26 U.S.C. §
6323(h)(4) that "[a] security interest shall be deemed to arise
at the time when it becomes protected under local law as against
a subsequent lien upon such property obtainable by legal or
equitable proceedings on a simple contract"), reprinted in
Legislative History, supra, at 50. Highlander infers that
Congress must have intended to develop the law in a way that is
inconsistent with the UCC lien creditor analysis. Congress,
however, could have modified the language for other reasons.
According to Coogan, "[a]pparently, in an effort to conform the
language of other parts of section 6323 to that of subsection
(a), where "judgment lien creditor' is not inappropriate, the
language was changed by Treasury draftsmen who understandably
knew more tax law than lien law." Coogan, supra, at 1389.
Moreover, that the drafters of the statute substituted ambiguous
language to more accurate language in a previous version of the
bill does not inevitably lead to the conclusion that Congress
rejected the analysis consistent with the more accurate language.
Congress might have failed to realize that the new language is
ambiguous and might have intended no change in the substantive
provision. In short, while the change in statutory language
supported by the fact that it gives effect to Congress's "specific

legislative intent ... to enable creditors to protect certain types

of security interests against subsequent federal tax liens, and to

do so by taking the same steps already necessary under state law to

protect their interests against various other types of competing

claims."5 Dragstrem, 549 F.2d at 26.

In short, we are faced with two possible interpretations of an

ambiguous phrase that Congress used in the FTLA. Cf. Texas Oil &

Gas Corp., 466 F.2d at 1047 (5th Cir.1972) ("The phrase "protected

against a judgment lien' is not a term of art easily adaptable to

the sometimes equally unartful language of the Uniform Commercial

Code."); David G. Epstein & Steve H. Nickles, Debt: Bankruptcy,

Article 9 and Related Laws, 521 n.56 (1994) (stating that "[t]he

use of the term "judgment lien' was unfortunate") quoted in

Zinnecker, supra, at 606 n. 90; Coogan, supra, at 1388

(characterizing the phrase "judgment lien" as "baffling language").

Although we believe that the interpretation offered by the

Government is the better one,6 we need not resolve this case solely

casts some doubt on the Government's interpretation, it is not
dispositive of the issue in this case, at least in light of the
total absence of any explanation of the change in the voluminous
legislative history of the FTLA.
5
When the security interest covers personal property, as it
does here, the steps already necessary under state law to protect
the interest from other types of competing claims include
perfecting the security interest by filing a UCC-1 statement or
other means.
6
We reach this conclusion because the Government's
interpretation is logical and comports with the stated purpose of
the statute, while Highlander's interpretation is unconvincing.
As presented by Highlander, the meaning of the phrase "judgment
lien" in section 6323(h)(1) is derived from what the Supreme
Court of Florida labels as a judgment lien. Accepting
on the basis of the statutory analysis described above. Congress

has entrusted the administration of the Internal Revenue Code,

which includes the FTLA, to the United States Department of

Treasury and the IRS. In construing an administrative (or

regulatory) statute, we are guided by the framework of analysis set

out by the Supreme Court in Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81

L.Ed.2d 694 (1984). "First, always, is the question whether

Congress has directly spoken to the precise question at issue. If

the intent of Congress is clear, that is the end of the matter;

for the court, as well as the agency, must give effect to the

unambiguously expressed intent of Congress." Id. at 842-43, 104

S.Ct. at 2781. If Congress did not express its intent

unambiguously, we defer to the agency's interpretation if it "is

based on a permissible construction of the statute." Id. at 843,

104 S.Ct. at 2782.

As we have already stated, we believe that Congress did not

express its intent unambiguously when it used the phrase "judgment

lien" in section 6323(h)(1). Department of Treasury regulations,

Highlander's interpretation leads to two equally unlikely
results: First, Congress could have chosen Florida's
interpretation as the federal standard, a result that has no
support whatsoever in the statute or elsewhere. Moreover, as we
already discussed, this result essentially reduces the phrase
"judgment lien" to "simple judgment," thus reading the word
"lien" out of the statute. Second, Congress could have intended
for the meaning of the phrase to be governed by each state's
understanding of what a judgment lien is, a result that defeats
the FTLA's purpose of uniformity. Cf. United States v. Gilbert
Assocs., 345 U.S. 361, 364, 73 S.Ct. 701, 703, 97 L.Ed. 1071
(1953) (stating, in the context of a predecessor to the FTLA, "A
cardinal principle of Congress in its tax scheme is uniformity,
as far as may be. Therefore, a "judgment creditor' should have
the same application in all the states").
however, define "judgment lien" as "a lien held by a judgment lien

creditor." Treas. Reg. § 301.6323(h)-1(a)(2).

The term "judgment lien creditor" means a person who has
obtained a valid judgment, in a court of record and of
competent jurisdiction, for the recovery of specifically
designated property or for a certain sum of money. In the
case of a judgment for the recovery of a certain sum of money,
a judgment lien creditor is a person who has perfected a lien
under the judgment on the property involved.... If recording
or docketing is necessary under local law before a judgment
becomes effective against third parties acquiring liens on
real property, a judgment lien under such local law is not
perfected ... until the time of such recordation or docketing.
If under local law levy or seizure is necessary before a
judgment lien becomes effective against third parties
acquiring liens on personal property, then a judgment lien
under such local law is not perfected until levy or seizure of
the personal property involved.

Treas. Reg. § 301.6323(h)-1(g). In short, the regulation codifies

the interpretation of "judgment lien" that the Government advocates

in this case and that we have already determined is not only

permissible, but also is the better interpretation. This

interpretation holds that a judgment lien is equivalent to the

interest of a UCC lien creditor. Under the second step ofChevron,

we must defer to the Department's interpretation.

Because Highlander's interest in the interpleaded funds was

unperfected under Florida law on July 3, 1986, it was subordinate

to that of a UCC lien creditor. See Fl. Stat. ch. 679.301(1)(b).

Highlander's interest, therefore, was not protected under local law

against a judgment lien arising on that date; it was not a

"security interest" within the meaning of 26 U.S.C. § 6323(h)(1).

The Government's tax lien is entitled to priority.

III. CONCLUSION

This appeal involves a priority contest between an unperfected

security interest and a federal tax lien. The district court held
that the tax lien takes priority. The case turns on whether the

security interest is protected under local law against a "judgment

lien"; if the answer is no, the tax lien takes priority. Because

we hold that a judgment lien is equivalent to the interest of a UCC

lien creditor, we conclude that the unperfected security interest

at issue here is subordinate to a judgment lien under local law.

Therefore, the federal tax lien is entitled to priority.

Accordingly, we AFFIRM.