California State Department of Employment v. United States

This appeal presents for determination the rather novel issue as to whether tax liens of the United States, hereafter the Government, perfected prior to and superior to state tax liens are subordinated by § 67, sub. c of the Bankruptcy Act to the state tax liens because the state acquired possession of the bankrupt’s personal property prior to bankruptcy. The specific question posed is, does § 67, sub. c of the Bankruptcy Act alter the priorities of statutory liens recognized by § 67, sub. b of said Act.

The facts are not disputed. Prior to June 12, 1950, the Commissioner of Internal Revenue perfected statutory liens upon the real and personal property of Claude E. Gee for the nonpayment of federal insurance contributions and withholding taxes. The California Department of Employment, hereafter the State, pursuant to the California Unemployment Insurance Act filed tax liens upon Gee’s property, and on June 12, 1950, took actual possession of Gee’s personal property. On July 19, 1950, Gee filed a voluntary petition in bankruptcy and was adjudicated a bankrupt. The receiver in bankruptcy entered into a stipulation with the State whereby the assets in the State’s possession were…