The Supreme Court/The Supreme Court.iso/pc/ascii/1991/91_1229/91_1229.zd

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SUPREME COURT OF THE UNITED STATES
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No. 91-1229
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UNITED STATES by and through INTERNAL
REVENUE SERVICE, PETITIONER v.
BRUCE J. McDERMOTT et al.
on writ of certiorari to the united states court
of appeals for the tenth circuit
[March 24, 1993]

  Justice Thomas, with whom Justice Stevens and
Justice O'Connor join, dissenting.
  I agree with the Court that under 26 U. S. C. 6323(a)
we generally look to the filing of notice of the federal tax
lien to determine the federal lien's priority as against a
competing state-law judgment lien.  I cannot agree, how-
ever, that a federal tax lien trumps a judgment creditor's
claim to after-acquired property whenever notice of the
federal lien is filed before the judgment lien has -at-
tached- to the property.  Ante, at 5.  In my view, the
Bank's antecedent judgment lien -ha[d] [already] acquired
sufficient substance and ha[d] become so perfected,- with
respect to the McDermotts' after-acquired real property,
-as to defeat [the] later-filed federal tax lien.-  United
States v. Pioneer American Ins. Co., 374 U. S. 84, 88
(1963).
  Applying the governing -first in time- rule, the Court
recognizes-as it must-that if the Bank's interest in the
property was -perfected in the sense that there [was]
nothing more to be done to have a choate lien- before
September 9, 1987 (the date the federal notice was filed),
United States v. New Britain, 347 U. S. 81, 84 (1954),
-that is the end of the matter; the Bank's lien prevails,-
ante, at 3.  Because the Bank's identity as lienor and the
amount of its judgment lien are undisputed, the choate-
ness question here reduces to whether -the property sub-
ject to the lien- was sufficiently -established- as of that
date.  New Britain, supra, at 84.  Accord, Pioneer Ameri-
can, supra, at 89.  See 26 CFR 301.6323(h)-1(g) (1992).
The majority is quick to conclude that -establish[ment]-
cannot precede attachment, and that a lien in after-
acquired property therefore cannot be sufficiently perfected
until the debtor has acquired rights in the property.  See
ante, at 5-6.  That holding does not follow from, and I
believe it is inconsistent with, our precedents.
  We have not (before today) prescribed any rigid criteria
for -establish[ing]- the property subject to a competing
lien; we have required only that the lien -become certain
as to . . . the property subject thereto.-  New Britain,
supra, at 86 (emphasis added).  Our cases indicate that
-certain- means nothing more than -[d]etermined and
[d]efinite,- Pioneer American, supra, at 90, and that the
proper focus is on whether the lien is free from -con-
tingencies- that stand in the way of its execution, United
States v. Security Trust & Savings Bank, 340 U. S. 47, 50
(1950).  In Security Trust, for example, we refused to
accord priority to a mere attachment lien that -had not
ripened into a judgment,- New Britain, supra, at 86, and
was therefore -contingent upon taking subsequent steps
for enforcing it,- 340 U. S., at 51.  And in United States
v. Vermont, 377 U. S. 351 (1964), we recognized the
complete superiority of a general tax lien held by the
State of Vermont upon all property rights belonging to the
debtor, even though the lien had not -attach[ed] to [the]
specifically identified portions of that property- in which
the Federal Government claimed a competing tax lien.
Id., at 355.  With or without specific attachment,
Vermont's general lien was -sufficiently choate to obtain
priority over the later federal lien,- because it was -sum-
marily enforceable- upon assessment and demand.  Id., at
359, and n. 12.
  Although the choateness of a state-law lien under
6323(a) is a federal question, that question is answered
in part by reference to state law, and we therefore give
due weight to the State's -`classification of [its] lien as
specific and perfected.'-  Pioneer American, supra, at 88,
n. 7 (quoting Security Trust, supra, at 49).  Here, state
law establishes that upon filing, the Bank's judgment lien
was perfected, even as to the real property later acquired
by the McDermotts, in the sense that it was definite as
to the property in question, noncontingent, and summarily
enforceable.  Pursuant to Utah statute, from the moment
the Bank had docketed and filed its judgment with the
clerk of the state court on July 6, 1987, it held an en-
forceable lien upon all nonexempt real property owned by
the McDermotts or thereafter acquired by them during the
existence of the lien.  See Utah Code Ann. 78-22-1
(1953).  The lien was immediately enforceable through
levy and execution against all the debtors' property,
whenever acquired.  See Belnap v. Blain, 575 P. 2d 696,
700 (Utah 1978).  See also Utah Rule Civ. Proc. 69.  And
it was -unconditional and not subject to alteration by a
court on equitable grounds.-  Taylor National, Inc. v. Jen-
sen Brothers Constr. Co., 641 P. 2d 150, 155 (Utah 1982).
Thus, the Bank's lien had become certain as to the prop-
erty subject thereto, whether then existing or thereafter
acquired, and all competing creditors were on notice that
there was -nothing more to be done- by the Bank -to have
a choate lien- on any real property the McDermotts might
acquire.  New Britain, 347 U. S., at 84.  See Vermont,
supra, at 355.
  The Court brushes aside the relevance of our Vermont
opinion with the simple observation that that case did not
involve a lien in after-acquired property.  Ante, at 3-4.
This is a wooden distinction.  In truth, the Government's
-specificity- claim rejected in Vermont is analytically
indistinguishable from the -attachment- argument the
Court accepts today.  Vermont's general lien applied to all
of the debtor's rights in property, with no limitation on
when those rights were acquired, and remained valid until
the debt was satisfied or became unenforceable.  See 377
U. S., at 352.  The United States claimed that its later-
filed tax lien took priority over Vermont's as to the
debtor's interest in a particular bank account, because the
State had not taken -steps to perfect its lien by attaching
the bank account in question- until after the federal lien
had been recorded.  Brief for United States in United
States v. Vermont, O. T. 1963, No. 509, p. 12.  -Thus,- the
Government asserted, -when the federal lien arose, the
State lien did not meet one of the three essential elements
of a choate lien: that it attach to specific property.-  Ibid.
In rejecting the federal claim of priority, we found no need
even to mention whether the debtor had acquired its prop-
erty interest in the deposited funds before or after notice
of the federal lien.  If specific attachment is not required
for the state lien to be -sufficiently choate,- 377 U. S., at
359, then neither is specific acquisition.
  Like the majority's reasoning today, see ante, at 5, the
Government's argument in Vermont rested in part on dicta
from New Britain suggesting that -attachment to specific
property [is] a condition for choateness of a State-created
lien.-  Brief for United States in United States v. Vermont,
supra, at 19.  See New Britain, 347 U. S., at 86 (-[T]he
priority of each statutory lien contested here must depend
on the time it attached to the property in question and
became choate-) (emphasis added).  New Britain, however,
involved competing statutory liens that had concededly
-attached to the same real estate.-  Id., at 87.  The only
issue was whether the liens were otherwise sufficiently
choate.  Thus, like Security Trust (and, in fact, like all of
our cases before Vermont), New Britain provided no occa-
sion to consider the necessity of attachment to property
that was not specifically identified at the time the state
lien arose.
  Nothing in the law of judgment liens suggests that the
possibility, which existed at the time the Bank docketed
its judgment, that the McDermotts would not acquire the
specific property here at issue was a -contingency- that
rendered the Bank's otherwise perfected general judgment
lien subordinate to intervening liens.  Under the relevant
background rules of state law, the Bank's interest in after-
acquired real property generally could not be defeated by
an intervening statutory lien.  In some States, the priority
of judgment liens in after-acquired property is determined
by the order of their docketing.  3 R. Powell, Law of Real
Property -481[1], p. 38-36 (P. Rohan rev. 1991) (hereinaf-
ter Powell).  See, e. g., Lowe v. Reierson, 201 Minn. 280,
287, 276 N. W. 224, 227 (1937).  In others, the rule is
that -[w]hen two (or more) judgments are successively
perfected against a debtor and thereafter the debtor
acquires a land interest[,] these liens, attaching simulta-
neously at the time of the land's acquisition by the debtor,
are regarded as on a parity and no priority exists.-  3
Powell -481[1], pp. 38-35 to 38-36.  See, e. g., Bank of
Boston v. Haufler, 20 Mass. App. 668, 674, 482 N. E. 2d
542, 547 (1985); McAllen State Bank v. Saenz, 561
F. Supp. 636, 639 (SD Tex. 1982).  Thus, under state com-
mon law, the Bank would either retain its full priority in
the property by virtue of its earlier filing or, at a mini-
mum, share an equal interest with the competing lienor.
The fact that the prior judgment lien remains effective
against third parties without further efforts by the judg-
ment creditor is enough for purposes of 6323(a), since the
point of our choateness doctrine is to respect the validity
of a competing lien where the lien has become certain as
to the property subject thereto and the lienor need take
no further action to secure his claim.  Under this federal-
law principle, the Bank's lien was sufficiently choate to
be first in time.
  I acknowledge that our precedents do not provide the
clearest answer to the question of after-acquired property.
See ante, at 8.  But the Court's parsimonious reading of
Vermont undercuts the congressional purpose-expressed
through repeated amendments to the tax lien provisions
in the century since United States v. Snyder, 149 U. S.
210 (1893)-of -protect[ing] third persons against harsh
application of the federal tax lien,- Kennedy, The Relative
Priority of the Federal Government: The Pernicious Career
of the Inchoate and General Lien, 63 Yale L. J. 905, 922
(1954).  The attachment requirement erodes the -preferred
status- granted to judgment creditors by 6323(a), and
renders a choate judgment lien in after-acquired property
subordinate to a -secret lien for assessed taxes.-  Pioneer
American, 374 U. S., at 89.  I would adhere to a more
flexible choateness principle, which would protect the
priority of validly docketed judgment liens.
  Accordingly, I respectfully dissent.