United States v. Equitable Life Assur. Soc’y, 384 U.S. 323 (1966)

United States v. Equitable Life Assur. Society

No. 645

Argued April 21, 1966
Decided June 6, 1966
384 U.S. 323

CERTIORARI TO THE SUPREME COURT OF NEW JERSEY

Syllabus

A husband and his wife executed to respondent a mortgage on real property in New Jersey which was thereafter recorded. Over a year later, the Government filed and recorded in accordance with 26 U.S.C. § 6323 a tax lien against the husband. Almost a year later, the mortgagors defaulted, and respondent brought this foreclosure action for the principal and interest under the mortgage and an attorney’s fee under a New Jersey court rule allowing for attorneys’ fees in foreclosure proceedings determined as a percentage of the amount adjudged to be paid the mortgagee and taxed as costs in the action. Petitioner conceded the mortgage priority, but contended that the attorney’s fee was inferior to the federal lien. The trial court, relying on United States v. Pioneer American Insurance Co., 374 U.S. 84, held the attorney’s fee claim subordinate to the federal tax lien. The State Supreme Court reversed.

Held: A federal tax lien recorded before the mortgagor’s default has priority over a mortgagee’s claim for an attorney’s fee in the subsequent foreclosure proceeding. Pp. 327-332.

(a) As against a recorded federal tax lien, the relative priority of a state lien, which is determined by federal law, depends upon whether the state lien was "specific and perfected" on the date the federal lien was recorded. Pp. 327-328.

(b) A mortgagee’s claim for attorneys’ fees which is inchoate at least until all federal liens have been filed is therefore subordinate to such liens. United States v. Pioneer American Insurance Co., supra, followed. P. 328.

(c) At the time the federal lien in this case was recorded, there had been no adjudication of the money due on the mortgage, which was not then in default, and therefore the percentage determination of the attorney’s fee under the New Jersey court rule could not be made. Security Mortgage Co. v. Powers, 278 U.S. 149, distinguished. Pp. 328-329.

(d) According priority to the federal tax lien cannot be defeated by labeling attorneys’ fees as "costs." P. 330.

(e) To allow the priority of federal tax lien to be determined by the different rules of the various States would contravene the policy of uniformity in the federal tax law. P. 331.

45 N.J. 206, 212 A.2d 25, reversed and remanded.