United States v. V. F. Bond, Audrey A. Bond

BOREMAN, Circuit Judge.

The principal question for decision is whether a tax lien of the United States is prior in right to payments of real estate taxes made by the mortgagee under a prior recorded mortgage, the taxes having accrued and the payments having been made subsequent to the recordation of the notice of federal tax lien. In addition, there is a question of priority as between the federal tax lien and an attorney fee allowed by the District Court for payment to the mortgagee out of the proceeds of the sale of the mortgaged property.

The United States brought this action in the United States District Court for the Eastern District of Virginia on October 29, 1957, for the foreclosure of tax liens upon property and rights to property of appellees, the taxpayers.

There is no dispute as to pertinent facts. On December 20, 1955, deficiencies were assessed against the taxpayers for the years 1943 through 1947, totaling $318,832.84, and on the same day deficiencies were assessed against taxpayer, V. F. Bond, for the year 1942 in the amount of something over $18,000.00. On or about December 20, 1955, notices of such assessments were served upon the taxpayers and demand for payment was made but taxpayers refused to pay.

On December 21, 1955, notice of lien for each assessment was recorded in the proper county and municipal offices pursuant to 26 U.S.C.A. § 6323(a) (1). On July 2, 1957, the assessments had been reduced to judgment.

The complaint listed various properties owned by the taxpayers, among them being the Arlington Hotel, at Arlington, Virginia, the property and the proceeds of sale thereof involved in controversy before this court. The United States requested the appointment of a Receiver to take charge of, marshal and liquidate the properties, and prayed inter alia that the court determine the validity and priority of all liens and claims and order a foreclosure of the liens of the United States and a sale of the properties.

On November 27, 1957, the District Court found that the United States had valid liens in the principal sum of $357,-484.18, plus interest, for the years involved, and that the taxpayers were insolvent. The court then appointed a Custodial Receiver to take charge of the properties of the taxpayers and appointed a Special Master to ascertain and report to the court the claims against the taxpayers, the value of their properties and the validity and priority of liens on such properties. Pursuant to the recommendations of the Receiver, the Arlington Hotel property was sold for $172,-500.00.

The Arlington Hotel property was subject to a mortgage,1 executed by taxpayers as mortgagors, securing a loan in the original principal sum of $100,000.00 made by Perpetual Building Association, hereinafter called “Perpetual”. This mortgage was recorded on July 15, 1955, some six months prior to the recordation of the notice of federal tax lien. Monthly payments were made by the mortgagors until October 4, 1956, after which *840no further payments were received by Perpetual.

Under the mortgage each monthly payment was allocated not only to the payment of principal and interest, but a portion, $331.00, was also set aside in a fund for the payment of taxes accruing against the mortgaged property. The mortgage contained other provisions as follows: ■

“It Is Hereby Covenanted: * * (2) that any and all taxes and assessments,' general or special, now or hereafter assessed against said realty shall be paid when due,' * * * (7) that the title to said realty and the record of said title shall be kept free of litigation, infirmity and lien, * * * . (10) that any and all disbursements made by the Treasurer [of Perpetual] because of the failure of the grantor to make any payment or do any' act required to be made or done,- with interest thereon six percent (&%■) per annum, shall be demandable at any time by the Treasurer and, until repaid to the Treasurer, shall be deemed to be secured by this Deed of Trust, and (11) that if there shall be any default in the performance of any of the foregoing covenants the Treasurer shall have the right and power to do any one or more of the following: (a) do any act or make any disbursement, in his name or the name of the grantor, which he may deem necessary or proper to protect the lien of this Deed of Trust, * ■»

After default by the mortgagors, Perpetual paid the local real estate taxes assessed for the years 1957 and 1958 which had accrued and had been assessed subsequent to the recordation of the notice of federal tax liens. While a portion of the payment made for 1957 taxes came from the accumulated fund paid and held for this purpose, Perpetual paid from its own funds on August 16, 1957, $4,759.16 for the year 1957 and on August 11, 1958, $4,787.16 for the year 1958. Perpetual claims that it has a lien for those amounts, with interest, by virtue of the provisions of the mortgage, and that such lien is prior to the federal tax liens.

The District Court (United States v. Bond, 172 F.Supp. 759) held that Perpetual was entitled to be reimbursed for the real estate taxes paid by it, prior to the lien for federal taxes. In a separate unreported memorandum opinion, the court allowed an attorney fee of $1,000.-00, .payable to Perpetual from the proceeds of sale as a cost of liquidating the mortgage, the attorney fee to take priority also over the federal tax liens. From these decisions United States appeals.

The United States contends that in determining priorities, where a federal tax lien is involved, the “inchoate lien test” is applied so as to defeat the competing lien if it be shown that the competing lien was uncertain and inchoate at the time of the recordation of the federal tax liens. Therefore, it is urged that since both the necessity and amount of the local real estate taxes and attorney fee were uncertain at the time the federal tax liens were recorded, both must necessarily be inferior and junior in priority to the federal tax liens. Perpetual, on the other hand, contends that 26 U.S. C.A. § 6323(a) gives priority to a prior recorded mortgage over a federal tax lien not only as to the mortgage debt but also as to the covenants and provisions contained in the mortgage and payments made by mortgagee thereunder; and that the inchoate lien test is not applicable here.

The federal tax lien was created by statute many years ago and present enactments are identified as § 6321 2 and *841§ 6322 3 of the Internal Revenue Code of 1354. For the lien to become valid and effective under these sections, notice, filing or recording are not required. Section 6322, originally Act of July 13, 1866, ch. 184, 14 Stat. 107, was considered in United States v. Snyder, 1893, 149 U.S. 210, 13 S.Ct. 846, 37 L.Ed. 705, wherein the Supreme Court of the United States held that an unrecorded tax lien was valid against a purchaser without notice thereof. This decision prompted Congress to at least partially abrogate the effect of the secret, unrecorded lien, and by Act of March 4, 1913, ch. 166, 37 Stat. 1016, the tax lien statute was supplemented by requiring recordation of the federal tax lien to render it valid as against mortgagees, pledgees, purchasers and judgment creditors. Under the Internal Revenue Act of 1954, this is designated § 6323(a) 4. While § 6323(a) is not a priority statute as such, if it is to have any meaning its necessary effect is to give priority to the interests mentioned therein.

31 U.S.C.A. § 191, R.S. 3466 5, is a statute which purports to fix priority of debts due the United States where the debtor is insolvent. While the priority of such debts mentioned in this statute would appear to be absolute, it was held in Brent v. Bank of Washington, 1836, 10 Pet. 596, 9 L.Ed. 547, that this priority in insolvency cases is not to supersede prior encumbrances, including mortgages. The court there said that it had never been decided that the preference given the United States would affect any lien, general or specific, existing “when the event took place which gave the United States a claim of priority.” In the instant case, even though the court found insolvency of taxpayers, the United States did not present, before the District Court, any claim of priority under this insolvency priority statute and, for that reason, it is precluded from first raising the point here. 36 C.J.S. Federal Courts § 292(b) (1) (1943).

Several cases have been decided by the Supreme Court of the United States involving the application of the insolvency priority statute, 31 U.S.C.A. § 191, and while a discussion thereof may serve no real purpose here, we note them to indicate that, in insolvency cases, the Supreme Court considered and determined the question as to whether state created liens were so specific, perfected and choate as to be accorded priority over federal tax liens. In establishing the “choate lien test”, these cases have developed exacting requirements, the substance of which is to require that the state created liens be specific to the point that nothing further need be done to make the lien enforceable. See United *842States v. Gilbert Associates, 1953, 345 U.S. 361, 73 S.Ct. 701, 97 L.Ed. 1071; United States v. Waddill Co., 1945, 323 U.S. 353, 65 S.Ct. 304, 89 L.Ed. 294; United States v. State of Texas, 1941, 314 U.S. 480, 62 S.Ct. 350, 86 L.Ed. 356; People of State of New York v. Maclay, 1933, 288 U.S. 290, 53 S.Ct. 323, 77 L.Ed. 754.

United States v. Security Trust & Sav. Bank, 1950, 340 U.S. 47, 71 S.Ct. 111, 113, 95 L.Ed. 53, extended the application of the ehoate lien test to a statutory attachment lien on property in California obtained under California law. No insolvency question was presented. The court said that in cases involving federal priority under the insolvency statute, 31 U.S.C.A. § 191, R.S. § 3466,

« * * * has never been held sufficient to defeat the federal priority merely to show a lien effective to protect the lienor against others than the Government, but contingent upon taking subsequent steps for enforcing it. * * * If the purpose of the federal tax lien statute to insure prompt and certain collection of taxes due the United States from tax delinquents is to be fulfilled, a, similar rule must prevail here. * * * ” (Emphasis supplied.)

The court held that the federal tax lien was superior to the inchoate attachment lien. In a concurring opinion, Mr. Justice Jackson expressed the view that the statute (§ 6323(a) ) excludes from the operation of the secret lien those types of interests which are specifically set forth in the statute and no others.

United States v. City of New Britain, 1954, 347 U.S. 81, 74 S.Ct. 367, 368, 98 L.Ed. 520, brought before the Supreme Court the question of the “relative priority of statutory federal and municipal liens to the proceeds of a mortgage foreclosure sale of the property to which the liens attached”. There, two mortgages on the real estate of a corporation located in the City of New Britain, Connecticut, were foreclosed by judgment sale. Against the fund thus created were the claims of the two mortgages, a judgment of record and various statutory liens asserted by the City and by the United States. The Connecticut state court gave priority to the City’s liens, the mortgages, the judgment lien and the federal tax liens in that order. The United States appealed from the judgment insofar as the statutory liens of the City were given priority over those of the United States. The record did not disclose insolvency of taxpayer. Since the holding in that case represents an important step in the development of the law by which we find ourselves now controlled, careful analysis is warranted.

In New Britain, the federal tax liens, resulting from unpaid withholding and unemployment taxes and insurance contributions, arose on various dates between April 1948 and September 1950. The City’s liens, which attached to the specific real estate sold, were for delinquent real estate taxes and water rents which became due and which attached on various dates between 1947 and 1951. Certain of the City’s liens were specific and became ehoate prior to the attachment of some of the federal tax liens. At 347 U.S. at pages 84 and 85, 74 S.Ct. at pages 369-370 (we omit footnote references), the court said:

“ * * * However, we accept the holding as to the specificity of the City’s liens since they attached to specific pieces of real property for the taxes assessed and water rent due. The liens may also be perfected in the sense that there is nothing more to be done to have a ehoate lien — when the identity of the lien- or, the property subject to the lien, and the amount of the lien are established. The federal tax liens are general and, in the sense above indicated, perfected. But the fact that one group of liens is specific and the other general in and of itself is of no significance in these eases involving statutory liens on real estate only. * * *
“Thus, the general statutory liens of the United States are as binding *843as the specific statutory liens of the City. The City gains no priority by the fact that its liens are specific while the United States’ liens are general. Obviously, the State cannot on behalf of the City impair the standing of the federal liens, without the consent of Congress. [Cases cited.] On the other hand, the federal statutes do not attempt to give priority in all cases to liens created under the paramount authority of the United States. The statute creating the federal liens here involved, I.R.C., § 3670, [now 26 U.S.C.A. § 6321] does not in terms confer priority upon them.
“When the debtor is insolvent, Congress has expressly given priority to the payment of indebtedness owing the United States, whether secured by liens or otherwise, by § 3466 of the Revised Statutes, 31 U.S.C. (1946 ed.) § 191. * * * Where the debtor is not insolvent, Congress has failed to expressly provide for federal priority, with certain exceptions not relevant here, although the United States is free to pursue the whole of the debtor’s property wherever situated. * * *
“It does not follow, however, that the City’s liens must receive priority as a whole. We believe that priority of these statutory liens is determined by another principle of law, namely, ‘the first in time is the first in right’.”

Continuing on page 86 of 347 U.S., on page 371 of 74 S.Ct., the court referred to the inchoate attachment lien involved in United States v. Security Trust & Sav. Bank, supra, and said:

“ * * * Such inchoate liens may become certain as to amount, identity of the lienor, or the property subject thereto only at some time subsequent to the date the federal liens attach and cannot then be permitted to displace such federal liens. Otherwise, a State could affect the standing of federal liens, contrary to the established doctrine, simply by causing an inchoate lien to attach at some arbitrary time even before the amount of the tax, assessment, etc., is determined. Accordingly, we concluded in Security Trust ‘that the tax liens of the United States are superior to the inchoate attachment lien * * * ’. In the instant case, certain of the City’s tax and water-rent liens apparently attached to the specific property and became ehoate prior to the attachment of the federal tax liens.”

The Connecticut court, from which the appeal was taken in New Britain, suggested that the mortgagee could have paid the delinquent real estate taxes and water rents; that the amount so paid would become part of the mortgage debt covered by the mortgage lien; and that the federal tax lien would, therefore, be invalid as to such amount by virtue of then § 3672, now 26 U.S.C.A. § 6323(a). While the Supreme Court declined to pass upon the merits of these suggestions since there had been no payment of City taxes and water rents by the mortgagee, it had this to say at page 88 of 347 U.S., at page 371 of 74 S.Ct.:

“The United States is not interested in whether the State receives its taxes and water rents prior to mortgagees and judgment creditors. That is a matter of state law. But as to any funds in excess of the amount necessary to pay the mortgage and judgment creditors, Congress intended to assert the federal lien. There is nothing in the language of § 3672 [now § 6323] to show that Congress intended antecedent federal tax liens to rank behind any but the specific categories of interests set out therein, and the legislative history lends support to this impression.”

The case was remanded to the Connecticut court for a redetermination of the order of priority of the various liens asserted.

In the instant case, Perpetual contends that the court, in United States v. City *844of ■ New Britain, supra, abandons the choate lien test in noninsolvency cases but we reject this contention because it is clear that it did not do so; it merely held that not only must the competing lien be first in point of time, but it must also be choate.

Consistent with its prior position, the Supreme Court of the United States, in three opinions by Mr. Justice Minton, held that federal tax liens were entitled to priority over the following:

(1) An attachment lien under the laws of Ohio upon which judgment was not rendered until after recordation of the federal tax lien, United States v. Acri, 1955, 348 U.S. 211, 75 S.Ct. 239, 99 L.Ed. 264;
(2) A garnishment lien under the laws of Texas upon which judgment was not rendered until after recordation of the federal tax lien, United States v. Liverpool & London & Globe Ins. Co., 1955, 348 U.S. 215, 75 S.Ct. 247, 99 L.Ed. 268; and
(3) A landlord’s distress lien obtained after the attachment of the federal tax lien but before it was recorded, United States v. Scovil, 1955, 348 U.S. 218, 75 S.Ct. 244, 99 L.Ed. 271.

In all of these cases, the competing liens were recorded prior in time to the federal tax lien, but they did not meet the other requisite established by the Supreme Court in New Britain, namely, that the lien must also be choate. As a basis for its conclusion in Acri and Liverpool & London & Globe Ins. Co., the Court simply refused to accept the state court’s characterization of the lien as perfected and choate, and in Seovil it was held that a landlord is not a “purchaser” within the meaning of § 6323(a) (then § 3672) so as to be accorded priority.

Following the decision in United States v. Scovil, supra, the majority-of the Supreme Court has spoken on this subject only five times and in each case by per curiam opinion. Three of these five opinions are neither enlightening nor helpful here.. In United States v. Colotta, 1955, 350 U.S. 808, 76 S.Ct. 82, 100 L.Ed. 725, and United States v. Vorreiter, 1957, 355 U.S. 15, 78 S.Ct. 19, 2 L.Ed.2d 23, the court subordinated mechanics’ liens to federal tax liens, and in United States v. Hulley, 1958, 358 U.S. 66, 79 S.Ct. 117, 3 L.Ed.2d 106, subordinated a prior recorded materialman’s lien to federal tax liens. Since the Supreme Court did not clearly indicate its reason for such subordination, we are left to surmise and conjecture. However, it would seem that the cases could have turned on one or both of two theories: (1) The subordinated liens did not meet both the prior in time and choate tests; or (2) such liens are not protected interests under § 6323 (a).

Dissenting opinions were filed in the other two cases decided by the Supreme Court since the decision in United States v. Scovil and thus some discussion is merited. In the first of these cases, United States v. White Bear Brewing Co., 1956, 350 U.S. 1010, 76 S.Ct. 646, 100 L.Ed. 871, the court summarily, and without citation of authority, reversed a decision of the United States Court of Appeals for the Seventh Circuit, 227 F.2d 359, and held that a federal tax lien had priority over a recorded mechanics’ lien, specific in amount, and on which a suit for enforcement had been instituted before the federal tax lien arose. There the only thing remaining to be done was the granting of a final judgment enforcing the lien. Mr. Justice Douglas dissented on the theory that the mechanics’ lien was specific and perfected insofar as it could be under state law and said that, under the majority opinion, it would be impossible for a competing lien to ever prevail against a subsequent federal tax lien, short of reducing the competing lien to final judgment. He felt that the holding of the majority was not warranted by prior decisions and was supportable only if United States v. City of New Britain were overruled. We venture to suggest our impression that the conflict between the majority and dissenters in United States v. White Bear may have arisen from a difference in interpretation of *845“choate lien” and not, as Perpetual suggests, that the real test is “prior in point of time” as opposed to “choate lien”. At no place in either the majority or dissenting opinions is it suggested that a mechanics’ lien was not a protected interest under § 6323(a).

The second of the cases (in which there was a dissenting opinion) decided since United States v. Scovil, namely, United States v. R. F. Ball Constr. Co., 1958, 355 U.S. 587, 78 S.Ct. 442, 446, 2 L.Ed.2d 510, for the first time presented to the Supreme Court, for decision, the question of priority between a non-statutory contractual lien and a federal tax lien. There a subcontractor was required to furnish a surety bond. To induce the surety company to issue the bond, the subcontractor assigned all sums due or to become due under the subcontract as collateral security for any liability the surety company might incur through non-performance of the subcontract, and for the payment of other indebtedness for liability of the subcontractor to the surety company whether theretofore or thereafter incurred, not exceeding the penalty of the bond. Subsequently, the subcontractor incurred indebtedness to the surety company, independent of the subcontract. Certain funds became due the subcontractor but payment was withheld because of outstanding claims of materialmen against the subcontractor. Thereafter the United States filed federal tax liens against the subcontractor and the question was whether the assignment to the surety company made it a “mortgagee” within the meaning of § 3672(a) (now § 6323(a)). The majority of the court relied upon United States v. Security Trust & Sav. Bank, supra, and United States v. City of New Britain, supra, and held that since the assignment, the instrument involved, was inchoate and unperfected, the provisions of § 3672(a) did not apply. Mr. Justice Whittaker vigorously dissented and was joined by Justices Douglas, Burton and Harlan. It was .their view that neither Security Trust nor New Britain was applicable because neither was primarily concerned with § 3672(a). Therefore,, they were■ of the opinion that the assignment was, in legal effect, a mortgage and that inasmuch as it antedated the filing of the federal tax liens, it was superior to them under the express terms of § 3672(a). .In summarizing the position of the dissenters, Mr. Justice Whittaker said:

“ * * I think it is clear that the assignment was in legal effect a mortgage, completely perfected on its date, in all respects choate,- and valid between the parties; and inasmuch as it antedated the filing of the federal tax liens it was expressly made superior to those liens by the terms of § 3672(a).”

Perpetual urges that the opinion.of the majority in the Ball Construction Co. case could be supported only by a finding that the assignment was not a mortgage ; and if the majority had determined that the protected interests mentioned in § 3672(a) should be subject to the choate lien test, there would certainly have been a full opinion announcing a decision of such moment. Perpetual’s argument is unacceptable to us. The per curiam opinion in Ball Construction Co. clearly states the reason upon which the decision is based, namely, that the instrument is inchoate and unperfected. Both of the cases cited by the majority, Security Trust and New Britain, set forth the choate lien test, a further indication of the basis of the court’s opinion. Here ' again, as in United States v. White Bear Brewing Co., we venture to suggest a conflict between the majority and the - minority as to the interpretation of “choate lien”. However, we do not perceive any real conflict of opinion as to the applicable rule of law.

' [5] We have derived an indelible impression from the cases (involving deter- . mination of priority of federal, tax liens over competing liens) decided by the Su- ' preme Court,, which reveal the persistent application of the choate lien test, first in insolvency cases, fherri i/rt statutory lien cases, and 'finally in nonstatutory contractual lien cases. '

*846The United States places great reliance upon the recent case, United States v. Christensen, 9 Cir., 1959, 269 F.2d 624. In that case, a mortgage had been executed on November 22, 1948, covering certain real property owned by the taxpayer. On January 19, 1950, federal tax liens were filed against mortgagor, taxpayer. On December 12, 1955, the United States instituted an action for the collection of the taxes and sought to foreclose its lien against the mortgaged property. On January 3, 1956, mortgagee redeemed a tax sale certificate for local real estate taxes on the mortgaged property and, on the same day, paid delinquent taxes on the same property. The District Court entered judgment which, though generally favoring the United States, gave the mortgagee priority over the federal tax lien for the amount remaining due under the mortgage and for the real estate taxes which mortgagee had paid. The United States appealed from that portion of the order which allowed priority of the real estate taxes paid after the federal tax liens were recorded, and the Court of Appeals reversed, relying primarily upon the case of United States v. City of New Britain, supra.

Although in its brief Perpetual contends that the Christensen ease is distinguishable on its facts from the case at bar, during oral argument counsel conceded that an examination of the record discloses factual similarity. In undertaking to discourage our acceptance of the Christensen decision, Perpetual presents the following arguments: (1) “although the case recites that the mortgagee contended for a contractual right to priority, the decision appears to have gone off on the questions of whether the priority of a federal tax lien is a federal question and whether the mortgagee, becoming subrogated to the right of the local taxing authority, might prevail over the federal tax lien”; and (2) “further, the mortgagee in Christensen does not appear to have argued the effect of § 6323(a) on the priority of lien question presented”.

We believe these arguments to be without merit. First, while the court in Christensen did discuss the well settled principle that the priority of a federal tax lien is a federal question, it dismissed the mortgagee’s contention of priority by subrogation to the rights of the local taxing authority and based its decision on the test set forth in United States v. City of New Britain. Although the opinion does not disclose that the mortgagee argued the effect of § 6323(a), the court did note that section and then applied the New Britain rule that the priority of the competing lien must depend upon the time it attached and became choate. As before stated, this rule was extended by the Supreme Court to nonstatutory contractual liens in United States v. R. F. Ball Constr. Co., 1958, 355 U.S. 587, 78 S.Ct. 442, 2 L.Ed.2d 510. Therefore, in view of the persistent application of the “choate lien test” by the Supreme Court, which doctrine was recognized and followed by the Ninth Circuit in United States v. Christensen, supra, we reach the conclusion in the instant case that the claimed priority for payment of the real estate taxes accruing after recordation of the federal tax liens, even though made pursuant to an authorized provision of a prior recorded mortgage, must be subordinated to the federal tax lien because such lien so acquired by the mortgagee was unperfected and inchoate at the time the federal tax liens were recorded.

For the same reasons, we must subordinate to priority of the federal tax liens the claim for an attorney fee paid by Perpetual in protection of the lien of its mortgage. The fee was incurred long after the attachment of the federal tax lien; and at the time of the execution of the mortgage and the creation of the debt secured thereby, the future existence or amount of such attorney fee was, at best, speculative and uncertain.

As to Perpetual’s claim to reimbursement for its payment of an attorney fee, we are cited to United States v. Seaboard Citizens Nat’l Bank, 4 Cir., 1953, 206 F.2d 62, 64. Therein, an automobile that *847was subject to a mortgage was seized and forfeited by the United States for violation of the Internal Revenue laws (liquor). The mortgagee filed its petition asking for remission of the forfeiture to the extent of its mortgage interest pursuant to the provisions of 18 U.S.C.A. § 3617.6 The District Court granted such petition and allowed, as a part of the secured mortgage debt, a fifteen per cent attorney’s fee, provision for which was specifically made in the default provision of the mortgage. This court affirmed the District Court stating that: “The contingent liability for attorney’s fees having become absolute, there was no reason why the remission should not extend to this as well as to the other parts of the obligation secured.” Earlier in the opinion, the court considered and accepted as authority Security Mortgage Co. v. Powers, 1928, 278 U.S. 149, 49 S.Ct. 84, 86, 73 L.Ed. 236. In neither Seaboard nor Security Mortgage v. Powers was a lien for delinquent federal taxes involved. The opinion in Seaboard does not disclose whether default in the payment of the mortgage occurred prior or subsequent to seizure and forfeiture of the mortgaged property.

In Seaboard it was stated:

“The argument that the government will be burdened by allowing such fees to be included in the lien as to which remission is granted is without foundation. The government does not pay the fees. They are paid out of the proceeds of the property condemned. * * * ”

In the instant case, the amount derived from the sale of the property was far from sufficient to pay the mortgagee’s principal debt, interest, unpaid and delinquent real estate taxes, an attorney fee and the Government’s claim for unpaid taxes as represented by its recorded liens. The amount to be received by the Government from the proceeds of sale is correspondingly reduced by all prior payments from the available fund, and thus the direction of payment of an attorney fee prior to payment of federal taxes is the equivalent of a direction to pay such fee out of the federal treasury. In the Seaboard case, any amount received by the United States from sale of seized property was unanticipated revenue, a windfall, not to be credited as a payment on a fixed indebtedness.

It is important to note the legislative purpose in enacting the statutes involved in the case at bar and in the Seaboard case. As was indicated in United States v. Security Trust & Sav. Bank, supra, the purpose of the federal tax lien statute is to insure prompt and certain collection of taxes due the United States from tax delinquents. The courts have consistently held that the property of a delinquent taxpayer must be first applied to the satisfaction of the claims for federal taxes except in the specific instances listed in § 6323(a). On the other hand, the plain intention of the Congress in enacting laws providing for seizure, forfeiture and disposition of property used in violation of the Internal Revenue laws, particularly 18 U.S.C.A. §§ 3615 and 3616, was not to secure to the United States any claim for indebtedness already determined, but was to exact a penalty for violating the law. Therefore, the zealous protection of the revenues of the United States would not appear to be of paramount importance in the enactment of the seizure and forfeiture statutes as in the enactment of the federal tax lien laws. Section 3617 of 18 U.S. C.A. prevents the forfeiture claim of the United States from being absolute and provides that the court may decree remission of the forfeited vehicle if, upon proof of good faith, it is satisfied that an innocent creditor would otherwise be de*848prived of his right to security. Since no strict test has been evolved under this statute to determine the extent of the security of the mortgage as against the forfeiture claimant, this court, in the Seaboard case, gave effect to the Virginia law which allowed an attorney fee as a part of the secured interest. But, from the cases hereinbefore cited, we find the federal courts refusing, in cases involving a determination of priority of federal tax liens, to accept the characterization and classification, by state courts, of liens created and asserted under state law. Here, we are governed by the well established principles laid down by the Supreme Court in cases determining priorities of federal tax liens under §§ 6321, 6322 and 6323 of 26 U.S.C.A. wherein the court has assiduously protected the tax claims of the government. Although our decision under the facts and circumstances of the instant case cannot be construed as overruling United States v. Seaboard Citizens Nat’l Bank, supra, we cannot here accept the case as supporting Perpetual’s claim to allowance of a reasonable attorney fee prior to the tax liens of the United States.

Accordingly, judgment of the District Court will be reversed and the case remanded for further proceedings consistent with the views herein expressed.

Reversed and remanded.

. The instrument was actually a deed of trust, but there is no dispute that it qualified as a “mortgage” within the meaning of 26 U.S.C.A. § 6323(a). See Fn. 4.

. 26 U.S.C.A. § 6321. Lien for taxes

“If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.”

. 26 U.S.C.A. § 6322. Period of lien

“Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed is satisfied or becomes unenforceable by reason of lapse of time.”

. 26 U.S.C.A. § 6323. Validity against mortgagees, pledgees, purchasers, and judgment creditors

“(a) Invalidity of lien without notice.— Except as otherwise provided in subsection (c), the lien imposed by section 6321 shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed by the Secretary or his delegate—
“(1) Under state or territorial laws.— In the office designated by the law of the State or Territory in which the property subject to the lien is situated, whenever the State or Territory lias by law designated an office within the State or Territory for the filing of such notice; *

. 31 U.S.C.A. § 191. Priority established “Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed. R.S. § 3466.”

. “§ 3617. Remission or mitigation of forfeitures under liquor laws; possession pending trial — -(a) jurisdiction of court “Whenever, in any proceeding in court for the forfeiture, under the internal-revenue laws, of any vehicle or aircraft seized for a violation of the internal-rev-

enue laws relating to liquors, such forfeiture is decreed, the court shall have exclusive jurisdiction, to remit or mitigate the forfeiture.

“(b) * * *

it $ $ H-

“(d) * * * ”