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December 17, 1962


The opinion of the court was delivered by: LA Buy, District Judge.

Seeking to enforce and foreclose various purported asserted federal tax liens*fn1 against the realty and personal property of United States Chain Company, one of the defendants,*fn2 the government filed a civil complaint in this court joining numerous parties as defendants.*fn3

That complaint states a cause of action and from the evidence it is established that Chain owes the government the following amounts:

Tax     Interest      Totals
  Withholding Tax            $4,818.88  $2,204.11  $7,023.99
  Federal Unemployment Tax     1,171.80     400.79    1,572.59
  Miscellaneous Excise Tax    12,949.56   5,029.04   17,978.60
Total Amount Owed By Chain                          $26,575.18

Lien priorities warrant some detailed discussion in an opinion, but such a presentation of my views is unnecessary for other parts of the case. Therefore, in addition to this opinion I am making some other and separate findings of fact and conclusions of law on points and issues unrelated to the lien problems. To avoid misunderstandings, I also point out that my additional findings of fact do, however, reflect some factual data concerning the assessments underlying the liens involved, and I have simply pursued such a course with the idea of keeping this opinion relatively uncluttered. Of course, the findings of fact, separately stated, referring to the government's assessments are an integral part of this opinion.


By its answer to the complaint, Interstate Bond Company, a defendant, asked that it be adjudged and decreed the owner in fee simple of the real estate described in paragraph VI of the complaint,*fn4 that any and all liens upon said real estate be declared null and void, removed and cancelled as a cloud on Bond's title. Bond also prayed as follows:

    "3. This defendant is willing that the court order
  said real estate sold, provided (a) the court enters
  judgment as prayed in paragraphs 1 and 2 of this
  defendant's prayer for relief, (b) said real estate
  can be sold for at least $3,200.00, and (c) the court
  orders the first $3,200.00 out of the proceeds of any
  such sale to be paid to Interstate Bond Company in
  full payment for its interest in said real

Subsequently, Bond moved for an order granting it leave to amend the answer by striking the aforesaid third paragraph. I allowed that motion, leaving Bond pressing its tax deed against all rights and liens claimed by the government and Chain, and Kahn.

It must be borne uppermost in mind that this is unlike those cases where opposing lien holders lay claim against funds in the hands of a stakeholder. A stipulation of facts entered into by and between the government, Chain and Bond brings into focus some salient facts as follows:

    "It is hereby stipulated by and between United
  States of America, plaintiff, and United States Chain
  Company and Interstate Bond Company, two of the
  defendants, by their respective counsel, that:
    "1. The general taxes for the year 1950 on the real
  estate described in paragraph VI of the complaint
  were not paid when due, and on the application of the
  County Treasurer and ex-officio County Collector of
  Cook County judgment was entered by the County Court
  of Cook County in November, 1951, ordering said real
  estate to be sold to satisfy the amount of taxes due
  thereon, interest, penalties, and costs.
    "2. Interstate Bond Company purchased said real
  estate on April 21, 1952, at the sale of said real
  estate duly held and conducted pursuant to said order
  of the County Court by paying therefor the sum of
  $1069.11, and a certificate of purchase was duly
  issued to Interstate Bond Company therefor.
    "3. In addition to the amount paid by Interstate
  Bond Company for said real estate at said tax sale as
  set forth in paragraph 2 of this stipulation,
  Interstate Bond Company also paid the general real
  estate taxes on said real estate for the years 1951,
  1952, and 1953, as set forth below:
"Taxes For Year   Date of Payment   Amount Paid
         "1951         July 20, 1954      $734.05
         "1952         July 20, 1954        728.80
         "1953         July 20, 1954        657.09
    "4. Said real estate was not redeemed from said tax
  sale, and upon petition of Interstate Bond Company
  the County Court of Cook County, on March 25, 1955,
  entered an order directing the County Clerk of Cook
  County to issue a tax deed conveying said real estate
  to Interstate Bond Company, a copy of which order is
  attached hereto as Exhibit A and made a part hereof.
    "6. The notices of federal tax liens set forth in
  paragraph III(a) of the complaint were filed with the
  Recorder of Deeds of Cook County, Illinois, upon the
  dates respectively set forth in said paragraph III(a)
  under the column heading `Dates on which Notices of
  liens filed'.
    "7. The notices of federal tax liens set forth in
  paragraph IV(a) of the complaint were filed with the
  Recorder of Deeds of Cook County, Illinois, upon the
  dates respectively set forth in said paragraph IV(a)
  under the column heading `Dates on Which Notices of
  Liens were Filed'.
    "8. The notices of federal tax liens set forth in
  paragraph V(a) of the complaint were filed with the
  Recorder of Deeds of Cook County, Illinois, upon the
  dates respectively set forth in said paragraph V(a)
  under the column heading `Dates on which Notice of
  Federal Liens were Filed'."

By statute in Illinois, real estate taxes became a prior and first lien on the real estate, involved here, from and including "the first day of April in the year in which the taxes were levied." The general real estate taxes, on the property in question, for the year 1950 were not paid when due (Stipulation, ¶ 1). The initial struggle for relative priority between competing liens commences with the lien stemming from the unpaid 1950 Illinois real estate taxes and the government lien authorized*fn5 by § 3671 of the Internal Revenue Code of 1939 and based upon receipt by the collector of the federal assessment list on December 17, 1951. Bond paid the Illinois real estate taxes for the years 1951, 1952 and 1953. Accordingly, the lien springing from the 1950 local Illinois taxes is significant for Bond's theory of its case.

Bond relies heavily on United States v. New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520 (1954). There, the City of New Britain was asserting its liens for delinquent real estate taxes, for 1947 through 1951, and water rents, against funds realized from a judgment sale following foreclosure of two mortgages on the real property against which both Federal and local tax liens had attached. Or, as Mr. Justice Minton put it, the question presented involved "* * * 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." (Id. at 82, 74 S.Ct. at 368). But New Britain did not involve the facts or contention here urged by Bond that the judgment sale in the Illinois County Court extinguished all federal liens, leaving Bond tax title holder in fee simple, free and clear of all federal liens. Extinguishment of liens is absent from New Britain and the court treated solely with the problem of lien priorities.*fn6

But when treating with the problem of priorities the New Britain court observed (id. at 86, 74 S.Ct. at 370): "Thus, the priority of each statutory lien contested here must depend on the time it attached to the property in question and became choate."

Quickly stated, the basic teaching of federal case law is that a lien becomes choate when there is certainty as to amount, identity of the lienor, and property subject to the lien. United States v. New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520 (1954). Save for some bare facts in the stipulation now before me, I find the record devoid of any proof as to when the County Clerk of Cook County computed the tax rates and extensions for the use of local tax collectors, or when the books showing the amount of taxes were delivered to the collectors. All that appears in Bond's brief are some Illinois statutory citations of the various procedural steps laid down by the Illinois General Assembly. Of course, it is presumed that public officials do their duty, but when this court is called upon to determine relative priorities between liens relevant evidence becomes indispensable. I refrain from assuming that the amount of the local real estate tax lien was established "by December 31, 1950." (Bond's brief at page 7).

However, during November, 1951 (Stip., par. 1) on application of the Cook County Treasurer and ex-officio County Collector judgment was entered by the County Court, ordering the real estate to be sold to satisfy the real estate taxes, interest, penalties and costs. This judgment was not offered in evidence and all that is now before me is found in the first paragraph of the stipulation. (Bond's Exhibit 1). However, see also S.H.A., chap. 120, § 747 and § 751, discussed elsewhere in this opinion. Since the government joined in the stipulation I will, however, assume that the County Court order was in due form and hold that at the County Court stage the lien for general real estate taxes levied and assessed for the year 1950 was choate. I think, by leaving this point uncontroverted, the government has conceded the validity and specificity of this local lien, at least, in November 1951. From this point on it is readily apparent that the initial government lien under I.R.C. of 1939 purportedly arose on December 17, 1951 [when the assessment lists were received by the United States Collector] — after the County Court judgment was entered.

Based upon the rule adopted in United States v. New Britain, 347 U.S. 81, 85, 74 S.Ct. 367, 370, 98 L.Ed. 520 (1954), that: "`the first in time is the first in right,'" plainly the Illinois lien for unpaid general real estate taxes, which attached to the real estate on April 1, 1950 and which became payable during the spring and summer of 1951, is superior to the federal lien which arose on December 17, 1951.

Under Illinois statutory provisions, governing orders of the County Court on the county collector's annual application for judgment and sale for delinquent taxes, the proceedings are in rem. It is analogous to a civil suit for the collection of debt. Keokuk & Hamilton Bridge Co. v. Salm, 258 U.S. 122, 42 S.Ct. 207, 66 L.Ed. 496 (1922). Without any conflict in the evidence before me regarding critical dates, which I have already mentioned, it is plain that the government's junior lien hardly improved its status once the Illinois taxing machinery commenced operating, predicated upon the senior lien for non-payment of general real estate taxes levied and assessed for year 1950. Certainly, when Bond purchased the real estate on April 21, 1952 at the sale held and conducted under the earlier order of the County Court, the initial junior federal lien was extinguished.

There is still another matter requiring some attention when considering extinguishment of the federal junior lien. It must be constantly borne in mind that the proceeding in this court was commenced by the government and, indeed, it sought, inter alia, "That the interests, claims and liens of the United States be foreclosed." (Complaint, par. 3). The sovereign itself asked for the adjudication and Bond resisted.

Under the decision of the basic issue, spelled out by Mr. Justice Harlan when delivering the opinion of a sharply divided court in United States v. Brosnan, 363 U.S. 237, 238, 80 S.Ct. 1108, 1110, 4 L.Ed.2d 1192, (1960): "* * * [w]hether the federal lien was effectively extinguished by state proceedings to which the United States was not, nor was required under state law to be, a party." I believe the County Court proceedings could legally, and in fact did, extinguish the federal junior lien. If private foreclosure could extinguish federal liens in Brosnan there is little doubt that Illinois local government can achieve the same end when its real estate tax lien primes a federal lien.

At least up to and at the County Collector's application for judgment of sale of the real estate for 1950 delinquent real estate taxes we are treating with competing statutory tax liens of two sovereigns, the United States and the People of the State of Illinois (for the local taxing bodies). This is significant because from and after November 1951 (when the County Court entered judgment) assessment lists were being received by the United States Collector or District Director (e.g., January 2, 1952 and March 3, 1952). The Illinois real estate tax delinquency was satisfied by the County Court sale when Bond paid the local collector $1,069.11 and a certificate of purchase was issued to it on April 21, 1952. (Stipulation, par. 2). Other than the 1950 Illinois real estate tax lien there are no other liens competing with the government liens in this case.


Within the novel factual framework of this case the next question is what rights, if any, the government has under the numerous liens it claims, other than the one already disposed of and referred to as arising on December 17, 1951. For example, on January 2, 1952, January 23, 1952 and on March 3, 1952, assessment lists were received by the United States Collector or District Director. But, the County Court had already entered its judgment, in November 1951, ordering the real estate sold for taxes, and that local court retained jurisdiction. What is said below, in this opinion, concerning redemption, is applicable to this group of liens.


According to the second paragraph of the stipulation, Bond "purchased" the real estate on April 21, 1952 at the sale held pursuant to the County Court's order. If, on that date, Bond occupied the technical status of a "purchaser" within the meaning and purview of I.R.C. § 3672(a), then any federal lien to have validity against Bond's position must be based upon a prior notice of such lien. The government first filed its notice of lien on June 2, 1953. But Bond apparently falls short of the yardstick provided by United States v. Scovil, 348 U.S. 218, 221, 75 S.Ct. 244, 247, 99 L.Ed. 271 (1955): "A purchaser within the meaning of § 3672 usually means one who acquires title for a valuable consideration in the manner of vendor and vendee." (Emphasis supplied). After all, on April 21, 1952 Bond simply held a certificate of purchase which, under Illinois statutes, could be eradicated by a redemption any time within a two year period. S.H.A., chap. 120, § 734.

At this juncture, United States v. Meyer, 199 F. Supp. 508 (D.C.Ill. 1961), cited to me by Bond, deserves some attention. The underlying Madison County Court judgment was made part of the record in the Meyer case, and "This is the judgment under which the lands * * * described in the Complaint were sold to defendant Paul Meyer on January 18, 1955, and under which certificate or certificates of purchase were issued on said date, and which certificates ripened into tax deeds on October 24, 1957 * * *." (Id. at 510). The United States made its assessments on April 19, 1955 and "on June 28, 1955, filed notices of liens for the assessed federal tax liabilities with the Recorder of Deeds of Madison County, Illinois * * *." (Id. at 511). On August 21, 1956 Meyer petitioned for the issuance of tax deeds and notice of this application was served on the United States Attorney and District Director of Internal Revenue. That notice appears in the Meyer opinion. In short, Meyer had already acquired his certificates of purchase when the federal tax lien attached. While at bar, Bond purchased the real estate on April 21, 1952 at the sale held by the County Court after the first federal lien purportedly attached to the real estate on December 17, 1951, and before notices of several other government liens were filed, during the year 1953, for example.

United States v. Meyer, 199 F. Supp. 508, 520-521 (D.C.Ill. 1961) also presents some views on Wells v. Glos, 277 Ill. 516, 115 N.E. 658 (1917), culminating in the following statement:

    "This case [Wells v. Glos] does not hold that an
  intervening lien-holder, junior in point of time, can
  defeat the issuance of a deed by merely filing a lien
  prior to the expiration of the period of redemption.
  It [Wells v. Glos] does hold that unless a junior
  lienor redeems before the expiration [sic] period
  expires, his rights will be cut off by the expiration
  of the statutory period of redemption and issuance of
  the deed in accordance with the terms of the
  Statute." (Emphasis supplied).

But, with all due deference, close examination of the opinion in Wells v. Glos, 277 Ill. 516, 115 N.E. 658 (1917), reveals that the Illinois Supreme Court stated at the outset: "The question to be determined in this case is whether a quitclaim deed executed during the period of redemption by the holder of a certificate of purchase for lands sold for taxes conveys any existing legal or equitable right or title to the grantee." This is all that was decided by the Illinois Court, and that Court has repeatedly quoted the following admonition: "We have frequently held that a decision of this court must be read in connection with what was actually decided, and to what the language used applied to." People ex rel. Schlaeger v. W.J. Dennis & Co., 397 Ill. 381, 385, 74 N.E.2d 542, 544 (1947). The Wells case omits any mention of a "junior lienor." Actually, under the holding in Wells v. Glos, 277 Ill. 516, 115 N.E. 658, Bond had nothing but a certificate of purchase from April 21, 1952 to March 25, 1955. (Stipulation, pars. 2 and 4).

United States v. Atlantic Municipal Corp., 212 F.2d 709 (5th Cir. 1954), relied upon by Bond, allowed priority to the holder of a local tax lien certificate acquired before a lien of the United States had attached, in point of time. By its reasoning in Atlantic the Fifth Circuit permitted the tax certificate purchaser to hold the same priority status enjoyed by the real estate tax lien underlying the certificate. Atlantic was decided squarely on the theory of lien priority, and leaves unmentioned the federal statutory (I.R.C. of 1939, § 3672) requirements for first filing lien notices in order to achieve validity as against any "purchaser." At bar, this means Bond is entitled to continuous priority, commencing from the time when the general real estate taxes for the year 1950 became a choate lien, since its certificate of purchase stems from that particular prior local lien. Thus, it could be said Bond and Atlantic, respectively, purchased liens which were superior to government claims. Nothing is said in Atlantic about redemption periods, if any there be, under Florida law when real estate tax liens are sold by local county governments.

Under Illinois law only redemption within the statutory period could defeat Bond's ultimate tax deed, and the parties have agreed there was no redemption. (Stipulation, par. 2). I think it is not what might have happened, but what in fact did happen that governs this case since redemption*fn7 was left undone.

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