United States v. Scovil

Background

A landlord sought to seize a corporation’s property for unpaid rent by filing an affidavit and obtaining a distress warrant on April 7, 1952. The next day a receiver was appointed for the insolvent tenant, all corporate assets passed to the receiver, and those assets were later sold. The Internal Revenue Collector had received assessment lists for unpaid taxes on several dates in 1951 and early 1952, and notice of the Government’s tax liens was filed in the county on April 10, 1952.

Reasoning

The core question was which claim came first: the landlord’s distress for rent or the Government’s tax liens. The Court said the Government’s liens attached when the assessment lists were received, long before the landlord’s distress became federally perfected. Under South Carolina law the tenant had five days to post bond and free the property from the landlord’s lien, so the landlord’s seizure remained defeasible. The Court also explained that the landlord was not a “purchaser” entitled to special protection under the Internal Revenue Code. For those reasons, the United States must prevail.

Real world impact

The ruling means federal tax liens can defeat a landlord’s attempt to hold or collect from a tenant’s assets when the tax assessments were made earlier and the landlord’s seizure was not yet final under federal rules. The Supreme Court reversed the state court’s contrary result, allowing the Government to reach the debtor’s assets rather than the landlord taking priority.