Law Offices of Jonathan A. Stein v. Cadle Co.

The district court determined that the Federal Priority Statute, 31 U.S.C. *718 § 3713 , 1 gave the United States the right to be paid first from a fund of its judgment debtor, Quicksilver Enterprises, Inc. That determination resulted in precluding Randall Welty, who was also a judgment creditor of Quicksilver, from receiving any amount whatsoever from the fund. He appeals and asserts that the Federal Tax Lien Act, 26 U.S.C. § 6323 , 2 should have been applied instead. We affirm.

BACKGROUND

Lyle Byrum was the President and Chief Executive Officer of Quicksilver, which had been engaged in the manufacture of ultralight and experimental aircraft before it became insolvent. He had previously incurred a significant tax liability to the United States, and the Internal Revenue Service attempted to levy upon his compensation. Quicksilver refused to hon- or the levy and continued to pay the compensation to Byrum. The United States then sued Quicksilver to enforce the levy and on January 31, 1996, obtained a judgment of $371,130.01 against it pursuant to 26 U.S.C. § 6332 (d).

As it happened, Quicksilver was then involved in litigation against the Riverside County Flood Control…