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DIMMIT & OWENS FIN. v. UNIQUE INDUS.

July 7, 1983

DIMMITT & OWENS FINANCIAL, INC., PLAINTIFF,
v.
UNIQUE INDUSTRIES, INC., ALLEN SPECIALITY COMPANY, DUDLEY OLSEN, AND UNITED STATES OF AMERICA, DEFENDANTS.



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

DECISION

Both parties have filed motions for summary judgment in this case, plaintiff seeking to set aside and enjoin the enforcement of a tax levy against Unique Industries, Inc. and defendant United States of America as counterplaintiff seeking to enforce its tax levy by foreclosing its liens against defendant Unique Industries, Inc. We find and conclude that Unique's principal executive office was located in Illinois which requires that defendant's motion for summary judgment should be granted.

The controversy arose in the following manner. Internal Revenue Service filed tax liens in DuPage County, Illinois against Unique Industries beginning July 10, 1979. Unique Industries' total tax indebtedness reached $152,726.20 plus statutory penalties and interest, which is the amount of its counterclaim. Plaintiff began buying Unique Industries' accounts receivable on June 18, 1979, and obtained a total of $723,166.90 in collections. Plaintiff was served with a notice of levy by I.R.S. on November 9, 1979, and had acquired the accounts receivable prior to that time. However, it had constructive notice of the government's liens which had been filed with the Recorder of Deeds of DuPage County on July 10, 1979.

The applicable statute, 26 U.S.C. § 6323(f), protects a commercial financing transaction such as the plaintiff had with Unique Industries in this case up to the 46th day after the tax lien has been filed. The forty-sixth day after July 10, 1979, is August 25, 1979, and plaintiff collected approximately $400,000 of Unique Industries' accounts receivables after that date. Therefore, if the tax liens were properly filed, the counterclaim of the Internal Revenue Service becomes valid and enforceable up to $400,000.

Subparagraph (f) of § 6323 provides in pertinent part as follows:

(f) Place for filing notice; form. —

    (1) Place for filing. — The notice referred to in
  subsection (a) shall be filed —

(A) Under State laws. —

    (ii) Personal property. — In the case of personal
  property, whether tangible or intangible, in one
  office within the State (or the county, or other
  governmental subdivision), as designated by the laws
  of

  such State, in which the property subject to the lien
  is situated . . .
    (2) Situs of property subject to lien. — For
  purposes of paragraph (1), property shall be deemed
  to be situated —
    (B) Personal property. — In the case of personal
  property, whether tangible or intangible, at the
  residence of the taxpayer at the time the notice of
  lien is filed.
  For purposes of paragraph (2)(B), the residence of a
  corporation or partnership shall be deemed to be the
  place at which the principal executive office of the
  business is located. [Emphasis added.]

Plaintiff argues, first, that its contract with Unique Industries predated any tax lien filed by I.R.S. and that it had no actual knowledge of the one filed in DuPage County on July 10, 1979, or any other subsequent lien filed by the federal government. However, actual notice or knowledge of a tax lien is not required under § 6323. Plaintiff had forty-five days to discover the lien, which is a reasonable period of grace for a factoring corporation to protect itself. If a lien is properly filed in accordance with the laws of the State of Illinois, as was done in the case at bar, then all parties, at least in this state, have constructive notice of the lien. Although plaintiff claims that notices of liens subsequently filed in California were not in accordance with the laws of that State, this contention becomes irrelevant if the principal executive office of Unique Industries was in Illinois. Indeed, the government does not contend that liens were properly filed in California.

It should be noted that the phrase "principal executive office" was enacted into § 6323 on July 25, 1958, modifying the phrase "residence of the taxpayer." The case relied upon by plaintiff, United States v. Jane B. Corp., 167 F. Supp. 352 (D.Mass. 1958), was decided under the old language of § 6323 which is no longer applicable. It thus becomes a question of the meaning of the phrase "principal executive office," and this is generally understood to mean "the head office, the place where the principal officers generally transact ...


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