The opinion of the court was delivered by: Mercer, Chief Judge.
This interpleader action by General Telephone Company of
Illinois was filed as the result of competing claims of the
United States and others to a balance unpaid by General upon
a construction contract between General and United Plumbing
and Heating, a partnership.
On August 4, 1960, General entered into a contract with
Herman Wolske, John Combs and Bobby Collom, partners d/b/a
United Plumbing and Heating, for the installation of certain
materials and equipment at General's installation at
Washington, Illinois. Materials and labor of the performance
of the United contract were furnished by a number of
subcontractors. United failed to complete the contracted work
and General elected, under the provisions of the contract, to
contract with V. I. Strubhar & Sons for completion of the
On November 11, 1960, and March 18, 1961, United assigned
all moneys to become due under the contract to First National
Bank and Trust Company of Pekin, Illinois, to secure loans
made to the United partnership in the aggregate amount of
On April 5 and May 26, 1961, the District Director of
Internal Revenue filed notices of tax liens against the United
partners for the aggregate sum of $5,871.94, plus interest,
for withholding taxes alleged to be due and unpaid by United.
Faced with the claims of subcontractors, the Pekin Bank and
the United States to moneys in its hands payable to United
under its contract, General filed this interpleader suit. Its
complaint named as defendants, United, First National Bank and
Trust Company of Pekin, the United States of America, American
Casualty Company of Reading, Pennsylvania, V. I. Strubhar &
Sons, and subcontractors of United, namely,
Minneapolis-Honeywell Regulator Company, Lee Wagener Company
(now DuMont Ventilating Company), A. Y. McDonald Mfg. Co.,
Leich Sales Company (now Automatic Electric Sales
Corporation), E-Z Plumbing, Heating and Supply Company,
Asbestos & Magnesia Materials Company, Connor Company and
Theodore J. Brill, d/b/a Brill Electric Motor Service.
American is the surety upon United's performance bond.
The complaint was dismissed as to the United States, after
which the United States intervened in the cause asserting its
On July 25, 1963, without objection, summary judgment was
entered in favor of the subcontractors who had perfected
mechanics' liens upon General's premises in accordance with
Illinois law, namely, Minneapolis-Honeywell, DuMont, McDonald
and Connor, and in favor of Strubhar for the amount of their
respective claims. Pursuant to that judgment, the aggregate
sum of $9,864.16 was paid out by the Clerk, leaving a balance
in the interpleaded fund of $5,627.84.
Thereafter, General filed its petition for the allowance of
its attorney's fees and costs out of the fund remaining.
The competing claims remaining for consideration are: (1)
the claim of the United States upon its tax liens; (2) the
claim of the Pekin bank as assignee of United; and (3) the
claims of E-Z, Brill and Automatic as materialmen.
The single issue for decision is the question of the
relative preference of those several competing claims.
The lien for federal taxes, under 26 U.S.C. § 6321 et seq.,
is entitled to priority over all other liens against the
subject property which had not attached to the property and
become choate prior to the time when the federal lien was
perfected. United States v. Hulley, 358 U.S. 66, 79 S.Ct. 117,
3 L.Ed.2d 106; United States v. R. F. Ball Construction Co.,
355 U.S. 587, 78 S.Ct. 442, 2 L.Ed. 2d 510; United States v.
Vorreiter, 355 U.S. 15, 78 S.Ct. 19, 2 L.Ed.2d 23; United
States v. New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520.
The general principle applied to the priority question is the
maxim of first in time, first in right.
Thus, the critical question is whether a perfected, choate
lien existed in favor of either of the materialmen or the
Pekin bank prior to the time when the lien claims were filed
by the District Director. We look to state law to determine
whether United had property or property rights to which the
federal lien could attach, and to determine whether a choate
lien had been perfected prior to that time against the
property in favor of those contesting the Government's claim
of priority. Aquilino v. United States, 363 U.S. 509, 512-513,
80 S.Ct. 1277, 4 L.Ed.2d 1365. As the Court there said,
Section 6321 does not create any property rights, but merely
attaches federally defined consequences to rights existing
under state law.
I conclude that neither Brill, Automatic Electric nor E-Z
Plumbing has a right to the funds in issue entitled to a
preference over the liens of the United States. The Illinois
Mechanics' Lien Act, Ill.Rev.Stat. 1959, c. 82, § 1 et seq.,
must be strictly construed with reference to requirements upon
which the right to claim a lien depends. Hoier v. Kaplan,
313 Ill. 448, 145 N.E. 243; NorthSide Sash & Door Co. v. Goldstein,
286 Ill. 209, 121 N.E. 563. As the Act applied to
subcontractors, the furnishing of labor and materials merely
creates a right to claim a lien by compliance with the
conditions expressed in the Act. Decatur Bridge Co. v.
Standart, 208 Ill. App. 592. A prerequisite to perfecting a
lien is the giving of notice of the lien claim to the landowner
as required by Section 24 of the Act. Western Plumbing Supply
Co. v. Horn, 269 Ill.App. 612. No such notice was ...