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NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports. Readers are
requested to notify the Reporter of Decisions, Supreme Court of the
United States, Washington, D.C. 20543, of any typographical or other
formal errors, in order that corrections may be made before the
preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
--------
No. 91-1229
--------
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 SCALIA delivered the opinion of the Court.
We granted certiorari to resolve the competing priorities of a federal tax
lien and a private creditor's judgment lien as to a delinquent taxpayer's after-
acquired real property.
I
On December 9, 1986 the United States assessed Mr. and Mrs. McDermott for
unpaid federal taxes due for the tax years 1977 through 1981. Upon that
assessment, the law created a lien in favor of the United States on all real and
personal property belonging to the McDermotts, 26 U. S. C. SS6321 and 6322,
including after-acquired property, Glass City Bank v. United States, 326 U. S. _______________ _____________
265 (1945). Pursuant to 26 U. S. C. S6323(a), however, that lien could "not be
valid as against any purchaser, holder of a security interest, mechanic's
lienor, or judgment lien creditor until notice thereof . . . has been filed." ______________________
(Emphasis added.) The United States did not file this lien in the Salt Lake
County Recorder's Office until September 9, 1987. Before that occurred, however
- specifically, on July 6, 1987 - Zions First National Bank, N. A., docketed
with the Salt Lake County Clerk a state-court judgment it had won against the
McDermotts. Under Utah law, that 91-1229 - OPINION
2 UNITED STATES v. MCDERMOTT ____
created a judgment lien on all of the McDermotts' real property in Salt Lake
County, "owned . . . at the time or . . . thereafter acquired during the
existence of said lien." Utah Code Ann. S78-22-1 (1953).
On September 23, 1987 the McDermotts acquired title to certain real property
in Salt Lake County. To facilitate later sale of that property, the parties
entered into an escrow agreement whereby the United States and the Bank released
their claims to the real property itself but reserved their rights to the cash
proceeds of the sale, based on their priorities in the property as of September
23, 1987. Pursuant to the escrow agreement, the McDermotts brought this
interpleader action in state court to establish which lien was entitled to
priority; the United States removed to the United States District Court for the
District of Utah.
On cross-motions for partial summary judgment, the District Court awarded
priority to the Bank's judgment lien. The United States Court of Appeals for
the Tenth Circuit affirmed. McDermott v. Zions First Nat'l Bank, N. A., 945 F. _________ _____________________________
2d 1475 (1991). We granted certiorari. 504 U. S. ___ (1992).
II
Federal tax liens do not automatically have priority over all other liens.
Absent provision to the contrary, priority for purposes of federal law is
governed by the common-law principle that "`the first in time is the first in
right.'" United States v. New Britain, 347 U. S. 81, 85 (1954); cf. Rankin & _____________ ___________ ________
Schatzell v. Scott, 12 Wheat. 177, 179 (1827) (Marshall, C. J.). For purposes_________ _____
of applying that doctrine in the present case - in which the competing state
lien (that of a judgment creditor) benefits from the provision of S6323(a) that
the federal lien shall "not be valid . . . until notice thereof . . . has been
filed" - we must deem the United States' lien to have commenced no sooner than
the filing of notice. As for the Bank's lien: our cases 91-1229 - OPINION
UNITED STATES v. MCDERMOTT 3 ____
deem a competing state lien to be in existence for "first in time" purposes only
when it has been "perfected" in the sense that "the identity of the lienor, the ___
property subject to the lien, and the amount of the lien are established." ____________________________
United States v. New Britain, 347 U. S., at 84 (emphasis added); see also id.,_____________ ___________ ___
at 86; United States v. Pioneer American Ins. Co., 374 U. S. 84 (1963). _____________ _________________________
The first question we must answer, then, is whether the Bank's judgment lien
was perfected in this sense before the United States filed its tax lien on
September 9, 1987. If so, that is the end of the matter; the Bank's lien
prevails. The Court of Appeals was of the view that this question was answered
(or rendered irrelevant) by our decision in United States v. Vermont, 377 U. S. _____________ _______
351 (1964), which it took to "stan[d] for the proposition that a non-contingent
. . . lien on all of a person's real property, perfected prior to the federal
tax lien, will take priority over the federal lien, regardless of whether after-
acquired property is involved." (Ftnote. 1) 945 F. 2d, at 1480. That is too (Ftnote. 1)
expansive a reading. Our opinion in Vermont gives no indication that the _______
property at issue had become subject to the state lien only by application of an
after-acquired-property clause to property that the debtor acquired after the
federal lien arose. To the contrary, the opinion says that the state lien met
(presumably at the critical time when the federal lien arose) "the test laid
down in New Britain that . . . `the property subject to the lien . . . [be] ___________
established.'" 377 U. S., at 358 (citation omitted). (Ftnote. 2) The (Ftnote. 2)
____________________
1) As our later discussion will show, we think it contradictory to say that 1)
the state lien was "perfected" before the federal lien was filed, insofar as it
applies to after-acquired property not acquired by the debtor until after the
federal lien was filed. The Court of Appeals was evidently using the term
"perfected" (as the Bank would) in a sense not requiring attachment of the lien
to the property in question; our discussion of the Court of Appeals' opinion
assumes that usage.
2) The dissent cannot both grant the assumption "that the debtor in Vermont 2) _______
acquired its interest in the bank account before the federal lien arose," post, ____
at 4-5, n. 2, and contend that "the debtor's interest in the bank account . . .
could have been uncertain or indefinite from the creditors' perspective," id., ___
at 5, n. 2. In the same footnote, the dissent misdescribes the "critical argu-
ment that we rejected" in Vermont. Ibid. It was not that "the State's claim _______ _____
could not be superior unless the account had been `specifically identified' as
property subject to the State's lien," ibid., but rather that the State's claim _____
could not be superior unless it had "attach[ed] to specifically identified __________
portions of that property," United States v. Vermont, 377 U. S. 351, 355 (1964) _____________ _______
(emphasis added). 91-1229 - OPINION
4 UNITED STATES v. MCDERMOTT ____
argument of the United States that we rejected in Vermont was the contention _______
that a state lien is not perfected within the meaning of New Britain if it ___________
"attach[es] to all of the taxpayer's property," rather than "to specifically ___
identified portions of that property." 377 U. S., at 355 (emphasis
added). (Ftnote. 3) We did not consider, and the facts as recited did not (Ftnote. 3)
implicate, the quite different argument made by the United States in the present
case: that a lien in after-acquired property is not "perfected" as to property
yet to be acquired.
The Bank argues that, as of July 6, 1987, the date it docketed its judgment
lien, the lien was "perfected as to all real property then and thereafter owned
by" the McDermotts, since "[n]othing further was required of [the Bank] to
attach the non-contingent lien on after-acquired property." Brief for
Respondents 21. That reflects an
____________________
3) The dissent claims that "the Government's `specificity' claim rejected in 3)
Vermont is analytically indistinguishable from the `attachment' argument the_______
Court accepts today," since "[i]f specific attachment is not required for the
state lien to be `sufficiently choate,' then neither is specific acquisition."
Post, at 4 (citation omitted). But the two are not comparable. Until the____
debtor has acquired the subject property, it is impossible to say that "the
property subject to the lien [has been] . . . established," United States v. New _____________ ___
Britain, 347 U. S. 81, 84 (1954). Judicial attachment, on the other hand (and_______
it is important to note that judicial attachment of the property, rather than
attachment of the lien to the property, was what the Government's argument in
Vermont involved), merely brings into the custody of a court property that is_______
already - prior to judicial attachment - known to be subject to the lien._______ 91-1229 - OPINION
UNITED STATES v. MCDERMOTT 5 ____
unusual notion of what it takes to "perfect" a lien. (Ftnote. 4) Under the (Ftnote. 4)
Uniform Commercial Code, for example, a security interest in after-acquired
property is generally not considered perfected when the financing statement is
filed, but only when the security interest has attached to particular property
upon the debtor's acquisition of that property. SS9-203(1) and (2), 3 U. L. A.
363 (1992); S9-303(1), 3A U. L. A. 117 (1992). And attachment to particular
property was also an element of what we meant by "perfection" in New Britain. ___________
See 347 U. S., at 84 ("when . . . the property subject to the lien . . . [is]
established"); id., at 86 ("the priority of each statutory lien contested here ___
must depend on the time it attached to the property in question and became [no
longer inchoate]"). (Ftnote. 5) (Ftnote. 5)
____________________
4) The dissent accepts the Bank's central argument that perfection occurred 4)
when "there was `nothing more to be done' by the Bank `to have a choate lien' on
any real property the McDermotts might acquire." Post, at 3 (quoting United ____ ______
States v. New Britain, supra, at 84); see also post, at 6. This unusual______ ___________ _____ ____
definition of perfection has been achieved by making a small but substantively
important addition to the language of New Britain. "[N]othing more to be done ___________
to have a choate lien" (the language of New Britain) becomes "nothing more to be ___________
done by the Bank to have a choate lien." Once one recognizes that the dissent's ___________
concept of a lien's "becom[ing] certain as to the property subject thereto," see
post, at 3, 6, is meaningless, see n. 5, infra, it becomes apparent that the____ _____
dissent, like the Bank, would simply have us substitute the concept of "best
efforts" for the concept of perfection.
5) The dissent refuses to acknowledge the unavoidable realities that the 5)
property subject to a lien is not "established" until one knows what specific
property that is, and that a lien cannot be anything other than "inchoate" with
respect to property that is not yet subject to the lien. Hence the dissent says
that, upon its filing, the lien at issue here "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." Post, at 3. But how could it have been, at that time, "definite" ____
as to this property, when the identity of this property (established by the
McDermotts' later acquisition) was yet unknown? Or "noncontingent" as to this
property, when the property would have remained entirely free of the judgment
lien had the McDermotts not later decided to buy it? Or "summarily enforceable"
against this property when the McDermotts did not own, and had never owned, it?
The dissent also says that "[t]he lien was immediately enforceable through levy _______________________
and execution against all the debtors' property, whenever acquired." Post, at 3 _________________ ____
(emphases added). But of course it was not "immediately enforceable" (as of its ___
filing date, which is the relevant time) against property that the McDermotts
had not yet acquired. 91-1229 - OPINION
6 UNITED STATES v. MCDERMOTT ____
The Bank concedes that its lien did not actually attach to the property at issue
here until the McDermotts acquired rights in that property. Brief for
Respondents 16, 21. Since that occurred after filing of the federal tax lien, _____
the state lien was not first in time. (Ftnote. 6) (Ftnote. 6)
But that does not complete our inquiry: Though the state lien was not first
in time, the federal tax lien was not necessarily first in time either. Like
the state lien, it applied to the property at issue here by virtue of a
(judicially inferred) after-acquired-property provision, which means that it did
not attach until the same instant the state lien attached, viz., when the ___
McDermotts acquired the property; and, like the state lien, it did not become
"perfected" until that time. We think, however, that under the language of
S6323(a) ("shall not be valid as against any . . . judgment lien creditor until
notice . . . has been filed"), the filing of notice renders the federal tax lien
extant for "first in time" priority purposes regardless of whether it has yet
attached to identifiable property. That result is also indicated by the
provision, two subsections later, which accords priority, even against filed _____
federal tax liens, to security interests arising out of
____________________
6) The dissent suggests, post, at 3-4, n. 1, that the Treasury Department 6) ____
regulation defining "judgment lien creditor," 26 CFR S301.6323(h)-1(g) (1992),
contradicts our analysis. It would, if it contained only the three requirements
that the dissent describes. In fact, however, it says that to prevail the
judgment lien must be perfected, and that "[a] judgment lien is not perfected
until the identity of the lienor, the property subject to the lien, and the ________________________________
amount of the lien are established." Ibid. (emphasis added). _____ 91-1229 - OPINION
UNITED STATES v. MCDERMOTT 7 ____
certain agreements, including "commercial transactions financing agreement[s],"
entered into before filing of the tax lien. 26 U. S. C. S6323(c)(1). That
provision protects certain security interests that, like the after-acquired-
property judgment lien here, will have been recorded before the filing of the
tax lien, and will attach to the encumbered property after the filing of the tax
lien, and simultaneously with the attachment of the tax lien (i.e., upon the ____
debtor's acquisition of the subject property). According special priority to _______
certain state security interests in these circumstances obviously presumes that
otherwise the federal tax lien would prevail - i.e., that the federal tax lien ____
is ordinarily dated, for purposes of "first in time" priority against S6323(a)
competing interests, from the time of its filing, regardless of when it attaches
to the subject property. (Ftnote. 7) (Ftnote. 7)
The Bank argues that "[b]y common law, the first lien of record against a
debtor's property has priority over those subsequently filed unless a lien-
creating statute clearly shows or declares an intention to cause the statutory
lien to override." Brief for Respondents 11. (Ftnote. 8) Such (Ftnote. 8)
____________________
7) The dissent contends that "there is no persuasive reason for not 7)
adopting as a matter of federal law the well-recognized common-law rule of
parity and giving the Bank an equal interest in the property." Post, at 7, ____
n. 4. As we have explained, the persuasive reason is the existence of
S6323(c), which displays the assumption that all perfected security interests
are defeated by the federal tax lien. There is no reason why this assumption
should not extend to judgment liens as well. A "security interest," as defined
in S6323, is not an insignificant creditor's preference. The term includes
only interests protected against subsequent judgment liens. See 26 U. S. C.
SS6323(h)(1) and 6323(c)(1)(B). Moreover, the text of S 6323(a) ("The lien
. . . shall not be valid as against any purchaser, holder of a security
interest, mechanic's lienor, or judgment lien creditor") treats security
interests and judgment liens alike. Parity may be, as the dissent says, a
"well-recognized common-law rule," post, at 7, n. 4, but we have not hitherto ____
adopted it as the federal law of tax liens in 127 years of tax lien enforcement.
8) The dissent notes that "[n]othing in the law of judgment liens suggests 8)
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." Post, at 5. Perhaps. But priorities here ____
are determined, not by "the law of judgment liens" but by S6323(a), as our
case-law has interpreted it. The requirement that competing state liens be
perfected is part of that jurisprudence. 91-1229 - OPINION
8 UNITED STATES v. MCDERMOTT ____
a strong "first-to-record" presumption may be appropriate for simultaneously-
perfected liens under ordinary statutes creating private liens, which ordinarily
arise out of voluntary transactions. When two private lenders both exact from
the same debtor security agreements with after-acquired-property clauses, the
second lender knows, by reason of the earlier recording, that that category of
property will be subject to another claim, and if the remaining security is
inadequate he may avoid the difficulty by declining to extend credit. The
Government, by contrast, cannot indulge the luxury of declining to hold the
taxpayer liable for his taxes; notice of a previously filed security agreement
covering after-acquired property does not enable the Government to protect ___
itself. A strong "first-to-record" presumption is particularly out of place
under the present tax-lien statute, whose general rule is that the tax collector _______ ____
prevails even if he has not recorded at all. 26 U. S. C. SS6321 and 6322; ______
United States v. Snyder, 149 U. S. 210 (1893). Thus, while we would hardly_____________ ______
proclaim the statutory meaning we have discerned in this opinion to be "clear,"
it is evident enough for the purpose at hand. The federal tax lien must be
given priority.
The judgment of the Court of Appeals is reversed, and the case is remanded for
further proceedings consistent with this opinion.
So ordered. ___________
