Untitled Texas Attorney General Opinion

May 26, 1949
Hpn. D. C. Greer ~ ~..~ Opinion No. V-830
State-Hightiy engineer
T&xas..Higj$va~..
Department Re: ..Thenecessity for Fed-
Austin, 'T&as~.,. _ ._ .,
era1 Income Tax Liens
,-tobe recorded on Cer-
tificates of Title to
motor-vehiclesand the
.~ ,+tatus in relation to
other liens.
Dear Mr. Greer:
I&request .anopinion on.three questions based
]upon.thefol.lowingfacts: ..~
7. "The.Int.ernalRevenue.Departmentfiles liens
,.L-.
against an.individual~.,.for..non-.``~n~
off'Income
.~:..Taxea..~
The.indWidua...owns.onenor sever&i motor ..
~:~
:'vehlCies.on:amidh..Elear
,Certifi.cate
of Title has
been issued, or perhaps such Certifioateof Tit&
will record a lien.
."TheseFederal'Liensfor Income Taxes are
,: filed'in t,heOffice,of the County Clerk in'a.bo,ok
-. ..~ ..knownas the 'Federal Lien Record'."
The.three questions referred to are:
Should.thisDe rtment recognizeas a
_ prio~"``en.this.FsderalEen.for I~ncomeTaxes
.eventhough aCertificate af Title,has been is-
~..~..sued.on
which there.is.recordeda lien &ted
_ ,& to-the recording df the'Federa1 Tax Lien?
"2. Under Section3.,V.P.C., 1436-1, does
..the~.definit.ion
of the term!Lien' apply to Fed-
~eral.IncomeTax Liens? .
.: "If the answer to question 2 is in the af-
~_.
.firmative~,~
must the .FederalTax 'Liensbe filed
~..with this Department?
"3. What protection.~would a mortgagee have
if henloans money on a-motor vehicle if a clear
418
Hon. D. C,.Greer.,Page 2 (V-8301
Certificate~.of
Title~is presented to him and it
later .develops.that
a Federal Income Tax Lien
$Eit$;n filed against the-owner of the ve-
.
For-convenienceof this.opinion we will answer
your second questionfir~at.,
and thenthe first and third
.inthat order.
~\ ``Article..l43&1;.
Section.
3.,V.P.C.; provides:
_ ~,``a.term'.'lien;'means.every
kind of~lease
.~conditionalsales contract,-deed..of
trust, chattel
-mortgage .trnst~receipt,.reservationof title, or
otherwr-1,
tten instrumentof whatsoeverkind or
character whereby an interest,other than absolute
.title,.is soughtto be.held..orgivenin a motor
vehicie,.alsoany l.ien:created~orgiven by C n-
,s.titution.
or'Statute.,"-
.. : 7
A i.ien..has
been .defined...by
our Courts as a right
.~to:
&force.a.charge~upon.propertyofanother for the MY-
_~ ..ment..,or...sat.isfaction.of.~claims...
IX is..
also a charge upon
.property.
for.the.pay+?ntof a debt...There can be no lien
..~without
a..deht; Vaugbad~v,~IJohnRancock'MutualL%f.fe'In-
.
i.1 - :,f,..:~:.. ._ :~’ _,~
.:..
...~.``~.Fedei.dl...right.~.tcJ:
a"&%& 'unpaidincome
. &&es, aris.es,.b~.c.;virtue..of
Federal%&&te. 26 U.S.C.A.,
_ .. ._Section _36i78~?,1aternal~Revenue
Code&provides: .I
,~ -1 .~ .,_
.-F.Xf
.anypersonpliable'ta+ay any tax neg-
lLe~tsnpr,:yefua~es.to
pay..the>
'&me after demand,
..the.amount(including~any interest, penalty, ad-
.ditionalamount.,oraddition te“snch tax, to-
gethheit_~th,~any~Eosts
thatmay'~accruein,addi-
_..t.ion:tihereto)
shall.be a.lieri+.favor of the
Dnited~States uponall nroperty and rights to
propeey; whather,realor pers$nal, belonging to
s&h~Sp&&o,n; W: .: .,_
~,.~,, : ;. .,
. -
Hon. D. C. Greer, Page 3 (V-830)
Itsisapparent this type lien fits squarely.with-
in the.LabQve court ,definition.But the Section 3..defin-
itiQn.obviollsly containsa.restcictedapDlication.~. ..It
applieson1y.t.o. those~.liens.
nsoughtto be'held or given
in .a motorsvehicle!?. Consequently:,.
the statutory defin-
. ition does.notapplyto a.yederal.~.,income:,taxlienif .the.
liqp, for.example',seeks enforc~ement.against.8 personrs.,"
real~property...,However..,
inthe event such a lien is'sought
._,....:to
,be.enfQrc,ed.
against.a motor.~vehicle.:regist.ered``~in'~Texas,
S.ection.3of ``icla,l1+36.-1.,applies.~.~T~
that etient, your
.second..questi.Qn
is answered in the affirmative.
~:~:Having
so answered, you ask #whethersuch Federal
lienmust be.filed,,with
yourDepartment.
Indeed, Congress hasby Federal Statute required
this corn&a&e. Section 3672, ~26.U.S.C.A.Internal Rev&
enue,Code, provides:
-- "(a,) Such lien.shall.notbe valid as a-
,.gainst any mortgagee.,.
pledgee, purchaser,or
~..j.ndgment
creditor,until.notice.thereof has been
.. .~ filed..bythedollector A-
. "(1) In the.office in.which~the filing of
such notic~eis.authQrized.by.thelaw of the State
-1 or.Territoryin which the property subject to the
- lien issituated;.whenever the State or Territory
has~by law.authorized.thefiling of such notice
in an office.within.the'State.or.Territory;. '. ."
-~The..filing
with.the County Clerk of,.Federal
tax
.liens~.tobe enforced against.motorvehicles does not meet
.. -Texasstatutory requirements..This is in keeping with.
- the.established.meaningof Article.lA36.-1,~
known gener-
ally.as the Certificate.of
.Title Act,.effective October 1,
1939. The effect of.this~
Act was.to repeal and supersede
42cl Hon,.D. C...
Greer.,Page 4 (V-830)
Articles~..5490~,
5497 and~5497a,,.~V.C.S.,
insofar as those
Articles~affected..the..regiatration.of chattel mortgage :
liens onmotor vehicles.,Whereas ~formerly the validity
of a.motor..vehicle lien.as.againstthird parties was de-
\~.pendent .uponthe mortgage,being,~filed with the County,
Clerk (Articles5490,,5497,5497a) the Certificate of
Title Act.made.auch..va.liditydepen~ upon a proper record-
ing of the lienon the:certXficate~-of. title. Article
1436-1, Sactioos.42,44 and 46.1 This office in a prior
op~r&n,.G-l53~ ,datsd..&v..7.1939,so held. And in
CommericalCre33 t ,COm ....v..LericanManufacturi
~;m~,ny,.sn~,..the C%&eached the same conclu%on,
c t ng withapproval.0.-1539..~.To the.same effect, see
-agl;2Motor_In~.. .Co,.:v,.
Citp'..of'
HamUn; 142 -Tex.&36;"179
278 (1944)..
A
Dnder-the-facts.presented here, it is our opin-
ion that Federal liens ~asagainstmotor vehicles must beg
~-filad;:and recor&&with.yourDe artme& as authoriaed.by
.-the .praaisionaaf.Article..Uc36-fl~in order to be valid as
againat.thirdparties.. ``.. .
,_,Conc.erningyour..firstque.stion
we are of the
...opinionthat you..
should.
not.recognim .priorLtyof a Fed-
era1 taxlien properly.re.corded.undsr.$he
Certificateof
1 "Set,.:
42;,~No l%enroneanr...motar...vehicle
shall be valid
.as against.third.part,i~.ss.witbout~actllal
knowledge there-
. _ of.ar enforceable.aga&st the motor vehicle of any such
third..partiesas.th.eissuance of a certificateof title
_ ._ ___ ,. _. ~. thereof, unless.anapplication.fora newtjtle is made
.._ _ .. . . as prssc.ribe.d.-in
-this-Actand ``all..first
and subseque'nt
. .~. .._ liens noted-by.the Departmentthereon.".
%ec. 44.. No.lien onany motor vehicle to which a re-
_ ._ ceipt .ar..certificate.of-time. has.b.een.issuedshall be
.~_ -Ipal~h.as.against.third..parties..wd&hout
act& knowl-
_,. adge.~h~reof,~..or.enforceable.against
the motor vehicle
.,of anysuch third+art$es, Mless.the notation of said
._ . .lIenshal&.have. beencaused to be.made on receipts and
..c.ert~ficatea...of.title
on said motor vehicle, as pro-
..~&Led. in this Act."
"Sqc. 46. On&y lie& noted on a receipt or certif$cate
of title ahall~,b.e-valid
as.against creditors of the
``-
.mortgagorFn ao farasconcerns the motor vehicle.?
Hon. D. C. Greer, Page 5 (V-.830) :,,'., ?a2
Title Act2 prior to the,Federallien,. ~Whenthe Govern-
~withthe State's.statutoryrequire-
loses priority over prior
~ In United States v,'Yatas, 204 S.W..Zd399
(Tex..CLv..App..,1947*..error~.re.f.~,n.r.,e.)
the Court
held:;.
'"Raving~.conuluded.
that&he attachment lien
of.Ear1.and.W.0..Yates was.sp&ifie andi'fixed
uponthe date of..ita.lav.y.,..which
date.,wasprior
to .the.date.theGovernmenttied its ,lien:forun-
..~ .paid.taxes..,...-..
the.Government% contention tbat~
..'th.etax,lienshouldhane.priorityover the attach-
. .ment lien~fixedaga.inst..the,parsonal
property of
L..,C.~Russellisdenisd and overru1ed.w
:._
The Yates &ase,rcited..with.-approval
Louisiana
State.~JJniversity
v~.'Hart,. 174 A.L.R. 1366
2lO..Ia;.:7S.,:
3.61.
(1946)~whereina similar priority dispu317 U.S. 329 ,63
;.S. Ct. 297~,87.L.Ed. 304;..Unitsd States v. heaver
'Run Coal Company, 3 :.CJs,,99F.2d 16; Metropolitan
Life InsuranceCompany v:..United States, 6 Cir,
.``107~F.2~d311; Exchange National Bank of Tulsa v.
~.Davy~(DC)..13,F.Supp..226. ..Thissubordinate.posi-
tioa.to prior mortgagea was held to apply inthe
~- ...casewhere the.taxlien arase~before the mortgage
..~
2 "Sec. 43. All liens.on motor vehicles shall take
priority accordingto~the.order...of
time the same are
recorded on ths receipt orcertificate of title~of
.a11 ,such.racordingstobe_made,.bythe Department.?
3..
..-!ThsGovernment*s.failure.to.comply
with statutory
raquirementarelative to.filingor recording notice
-, of lienwill deprive it of priority over such claim-
ants.! 47 C.J.S. Sec. 764, Internal.Revenue,p. 997.
422 Hon..D. C. Greer, Page 6 (V-830)
but was not properly recorded,untilafter the
mortgage, even when the,mortgagee~hadknowledge
.ofthe..existentie~.of
the uurecordedtax lien;
.Unitsd.States.v..BeaverRun Coal Company,supra.n
M&h of.what~.&ehave said is also applicableto
your.third questian, .The protectionto be afforded a
-mortgagee wha loans money .on~.s.motor
vehicle where the
.cer$.ificate.of.titlepresented.&0him is clear depends
mainly onthe da e'.offiling and.rewrding his lien with
pour Department.1..Thssame.prote.ction is extended the
Government,provided~its-.lisn..isfiled and recorded as
. required .byArtFcle, l.43~6-?1...
Filing its lien with the
-~CoungyC1erk.i.sof.no,effeCt.asagainst such a,mortgagee.
In.47.C.J.S.~997.,.,Internal.Revenue,
Section 764, it is
said? 4``. ,....
_ ,.
"As bstween.themortgag e or other claim-
..~.~.ant.apecifis& 3 as entitledto pro-
inthe..statute
tection and the..government.,~.the_date
of rebording
_~ ..-l:the..tax
lien..will.cQntrQl,thetax lien being
- .prefarradtQ subsequent..&ns and deferred to
- .thosa~rec~rded prior.tQthe~.taxlien. . . .*
-CPQotnoteinsertion.0urs.1~
._~ Ix%far as.motor.vehiclesare concerned.the
- . tru&i& Is:..The..~first.r.ecorded.lien
as required by
...Article.lA36E1.is
entitled tompriority.
.. ~,. .:..,.
_~.~I
.- 1.~ &deralinwme.taxliens sought to bs
.%.enforced.against_a.motQr~vehi~le in Texas are
,. ...withinthe.meaningof the .&erm"lien"as defined
in Section 3.of~Article.lA3&1,V.P.C. Such liens,
~ in.order.to-be.valid~aa~against third parties must
..be.filed~withtheTexas Highway Department and
....duly.recordednpon the certificateof title. 'Ar-
--:.a~
1.3 ti&le lA36-l,.,Se&ions42,..l+l+
and 46, V.P.C.;
. .~
5 -,Presumably
,' 26 U..S.C.A.,3672,Internal Revenue Code,
supra.
Ron; D:~C. Greer.,Page 7 (V-830)
26 U.S.C.A.-ItiternalBRe&& Code,~Section3672; .
Credit Company v..~&nericati
``Coohmercial. Manufactur-:
_._^.. (Tex. Clv** APP.,
,. ,. ‘_
2. Insofaras motar.vehiclesare concerned,
_...thenTexas Highway.Departmantshould snotgive prior-
_ ity.to.a .Federal~inc~eetaxlisn filed in the of-
~,~fi.k.e.of..the``County
Clerk over a lien duly filed
~.and recorded upon,..the...krtifikate
of title to the
_~.mot~..vehicle~.~prior.
to-the .Federallien. Article
_, ._. .~.l@6~l;Section.43,..V,P.C.,;..Uni.t.ed``States
v. Yates,
294 S,K2d.399. (Tex. CttV. .App~..,
1947 error.ref.
n,Le.).: louiaianaStat.eUniversityG. Hart, 210
_...~._..
_. Ls.78;&!4 AJ+R~.l3+6; 26 So&d 361 (194a .
3. A mortgagee..who lends motiey 6n a motor
vehi&e~where a clear.,certificate of title is pre-
_~..sented.tohimis fullj.protectad,againsta Federal
~:lncame.taxlianf.ilad with.the.CountyClerk, pro-
vided .his.lianis ratiorded-bond
the.~ certificate' of
.~.tltle.aaprovided..byArticle1436-l; As between
ths Governiaent.and~,such a.martgagee, the first re-
+orded:lien on the.certificateof-title is enti-
.;l;d.$o-priority..Article 1436-1, Se;tion 43,
. ..
Yotis very truly,'
ATTORNEY GENERAL OF TEXAS
.c
Assistant
APPROVED
@-``
FIRST ASSISTANT
.ATTORNEPGENERAL
CEC)lg