Manalis Finance Co., a Co-Partnership v. United States

This appeal involves conflicting claims to Medical funds owed Manchester Community Hospital. The dispute is between Manalis, a lender holding a perfected security interest in the hospital’s accounts receivable, and the United States, which claims the money under a federal tax lien resulting from the hospital’s failure to pay federal employment taxes.

The government appeals from a decision that, under I.R.C. § 6323, the security interest had priority over the federal tax lien. It contends that the district court erred in its interpretation of § 14115.5 of the California Welfare and Institutions Code, which concerns an assignee’s right to assert a claim to Medi-Cal funds. In addition, it asserts that the court’s application of I.R.C. § 6323 was erroneous. This court’s jurisdiction derives from 28 U.S.C. § 1291 .

We conclude that the district court correctly interpreted and applied both statutes and we affirm its decision.

FACTS

Manchester Community Hospital, owned by GAB Corporation, borrowed money from Manalis, assigning its accounts receivable as collateral and security for the loan. A U.C.C. financing statement reflecting this assignment was filed in California in 1971. The…