tax debtor * * * (the contractor) was entitled to.'
Our own Judge Maris, of the Third Circuit Court of Appeals, has disposed of similar questions in a similar manner. Karno-Smith Co. v. Maloney, 3 Cir., 1940, 112 F.2d 690; United States v. Burgo, 3 Cir., 1949, 175 F.2d 196. More recently, in United States v. Bess, 78 S. Ct. 1054, in determining whether a deceased had property rights in a life insurance policy to which a lien could attach, Mr. Justice Brennan said, for the United States Supreme Court, 78 S. Ct. 1057:
'We must now decide whether Mr. Bess possessed in his lifetime, within the meaning of § 3670
any 'property' or 'rights to property' in the insurance policies to which the perfected lien * * * might attach. Since § 3670 creates no property rights but merely attaches consequences, federally defined, to rights created under state law, Fidelity & Deposit Co. v. New York City Housing Authority, 2 Cir., 241 F.2d 142, 144, we must look first to Mr. Bess' right in the policies as defined by state law. * * *'
See, Old Colony Insurance Company v. Lampert, D.C.N.J.1955, 129 F.Supp. 545, affirmed per curiam, 3 Cir., 227 F.2d 520. All of these cases recognize that (1) the rights of the Collector of Internal Revenue can rise no higher than those of the taxpayer in property sought to be subjected to a Federal tax lien; and (2) whether the taxpayer had any property or rights in property to which a lien could attach is a matter of State law. See also, Great American Indemnity Co. v. United States, D.C.W.D.La.1954, 120 F.Supp. 445; New York Casualty Co. v. Zwerner, D.C.N.D.Ill.1944, 58 F.Supp. 473; and F. H. McGraw & Co. v. Sherman Plastering Co., D.C.Conn.1943, 60 F.Supp. 504, affirmed 2 Cir., 149 F.2d 301, certiorari denied, 326 U.S. 753, 66 S. Ct. 92, 90 L. Ed. 452. In each of these cases the finding of no property rights in the defaulting taxpayer contractor was predicated upon his failure to pay laborers and materialmen. Such failure was treated as a total breach of the taxpayer's contract with the owner, disentitling the contractor to receive any further payments under the contract. The decision law of New Jersey recognizes that the foregoing principles are applicable here. National Surety Corp. v. Barth, supra; Damato v. Leone Construction Co., App.Div.1956, 41 N.J.Super. 366, 125 A.2d 302. In National Surety, Judge Stanton, 20 N.J.Super. at page 109, 89 A.2d at page 109, relied upon United States Fidelity & Guaranty Co. v. Triborough Bridge Authority, supra, as disposing '* * * of the principal part of the claim of the United States.' In the Damato case a building owner deposited moneys due under a construction contract in court and interpleaded the general contractor and the United States. The latter claimed a lien for unpaid taxes due from the contractor. The contractor had abandoned the contract before completion and had left unpaid certain claims of subcontractors. In determining that there was no property right in the contractor to the moneys deposited in court by the owner to which the Federal tax lien could attach, the Court concluded that there had been no substantial performance of the contract without which no interest in the balance of the contract price could subsist in the contractor. See, Fidelity & Deposit Co. v. New York City Housing Authority, supra, 241 F.2d at page 146.
Such must necessarily be the disposition of the case at bar. I conclude that on February 15, 1956, when the Deputy Director first certified his assessment against Infante, for payment of which demand was thereafter made, Infante had no property rights in moneys in the hands of the Board which had been appropriated to the contract between them. Therefore, no lien could then or thereafter attach to any such moneys, and the subsequent levies were ineffective to create or establish in the United States any right to the funds presently on deposit in the registry of this Court.
The cases from which the Government seeks support for its assertion that property rights existed in Infante when the alleged tax liens arose do not hold as construed by the Government United States v. Security Trust and Savings Bank, 1950, 340 U.S. 47, 71 S. Ct. 111, 95 L. Ed. 53; United States v. White Bear Brewing Co., 1956, 350 U.S. 1010, 76 S. Ct. 646, 100 L. Ed. 871 (reversing per curiam, 7 Cir., 227 F.2d 359); United States v. Kings County Iron Works, Inc., 2 Cir., 1955, 224 F.2d 232, all turned upon the issue of priority between a federal tax lien and a state-recognized (choate or inchoate) lien. Sic etiam, United States v. Colotta, 1955, 350 U.S. 808, 76 S. Ct. 82, 100 L. Ed. 725 (reversing per curiam, 224 Miss. 33, 79 So.2d 474); United States v. Vorreiter, 1957, 355 U.S. 15, 78 S. Ct. 19, 2 L. Ed. 2d 23 (reversing per curiam, 134 Colo. 543, 307 P.2d 475); and United States v. R. F. Ball Construction Co., 1957, 355 U.S. 587, 78 S. Ct. 442, 2 L. Ed. 2d 510 (reversing per curiam, 5 Cir., 239 F.2d 384). Nor is United States v. Munsey Trust Co., 1947, 332 U.S. 234, 67 S. Ct. 1599, 91 L. Ed. 2022 at variance with our conclusion here. Munsey Trust held merely that percentages retained pursuant to contract by the United States may be subjected to its set-off claims despite the claims of a surety who has paid laborers and materialmen. The question here confronting us (whether the taxpayer had a property interest to which a Government tax lien could attach) was not involved in those cases. The Government's brief suggests a conflict between United Sates v. Kings County Iron Works, Inc., supra, and Fidelity & Deposit Co. v. New York City Housing Authority, supra. There is no conflict because in Housing Authority, as in the case at bar, the non-existence of a property right to support a tax lien precluded a recognition of any Government lien.
By virtue of the undertaking of Infante in its application to Surety for the contract bond, together with the assignments to Surety by the various subcontractors and materialmen of their lien claims and the advancements made by the Surety for the benefit of Infante, the Surety, as such, and as subrogee of the Board, has become entitled to the entire balance on deposit in the registry of this Court, without prejudice to any rights which the Surety may have against Infante by reason of Infante's default and the consequent unreimbursed losses which the Surety was thereby compelled to sustain. It is, therefore, unnecessary to discuss Surety's contentions with respect to the effect of the two Infante assignments or its status as a mortgagee or pledgee within the meaning of 26 U.S.C. § 6323(a).
This opinion shall be deemed to constitute the Court's findings of fact and conclusions of law, and an order for judgment may be presented in accordance therewith.