* * * -- a case decided subsequent to our Sands decision -- we think a trustee in bankruptcy is not a 'judgment creditor' within the meaning' of § 3672.
To the same effect, see United States v. England, 9 Cir., 1955, 226 F.2d 205; United States v. Hawkins, 9 Cir., 1955, 228 F.2d 517; In the Matter of Green, D.C.N.D.Ala.S.D.1954, 124 F.Supp. 481, and In re Ann Arbor Brewing Co., D.C.E.D.Mich.1951, 110 F.Supp. 111. And see Seligson, Creditors' Rights, 1957 Annual Survey of American Law, pp. 334-336, N.Y.U., 9 Mertens, Law of Federal Income Taxation, § 54.46 (Zimit rev.) and Plumb, Federal Tax Collection and Lien Problems, 13 Tax L.Rev. 247, 488.
Treasury Regulation § 301.6323-1(2) provides that '* * * (b) the term 'judgment creditor' means a person who has obtained a valid judgment in a court of record and of competent jurisdiction for the recovery of specifically designated property or for a certain sum of money * * *' This construction is entitled to some consideration. Fawcus Machine Co. v. United States, 282 U.S. 375, 51 S. Ct. 144, 75 L. Ed. 397.
Pending legislation, H.R. 5195, 85th Congress, 1st Sess. (1957) which would in effect protect the trustee both as a judgment creditor and as a purchaser, Plumb, supra, note 572 at page 488, further supports the contention that a trustee in bankruptcy is not a judgment creditor within the purview of § 6323.
A judgment in its usual, conventional sense imports the use of judicial process, Restatement, Judgments §§ 1, 2, 4, 14 and 32 (1942); Restatement, Conflict of Laws § 429 (1934); G. Amsinck & Co. v. Springfield Grocer Co., 8 Cir., 1925, 7 F.2d 855, 858. It involves a claim pressed and resisted (or the opportunity for resistance) by adversaries in a court, a hearing and an adjudication. A successful claimant then becomes a judgment creditor. This is a far cry from one claiming to be a judgment creditor by legislative fiat under § 70, sub. c of the Bankruptcy Act, such 'judgment' not being the usual and conventional one.
Seemingly holding that the trustee is a judgment creditor under § 6323 are the Fisher
and Sport Coal
cases. The Fisher case relied on the Sands case, supra, and was decided prior to the later decision of the Second Circuit in the Brust case, supra, and prior to the Gilbert Associates case, supra. Furthermore, the case also held that whether or not the trustee in bankruptcy was a 'purchaser' under § 3672 depended on the meaning given that term by the courts of Massachusetts, contrary to the holding of the Gilbert Associates case, supra. And see Ersa, Inc., v. Dudley, 3 Cir., 1956, 234 F.2d 178.
The Sport Coal case, supra, held that the trustee was a judgment creditor and his status under § 3672 was to be determined under the law of West Virginia. This runs counter to the statement of Justice Jackson in his concurring opinion in the Security Trust case
340 U.S. at page 52, 71 S. Ct. at page 114: 'The history of this tax lien statute (26 U.S.C.A. § 3670-3672) indicates that only a judgment creditor in the conventional sense is protected.' The Justice also concluded that the statute excluded from the provisions of this secret lien 'those types of interests which it specifically included in the statute and no others.'
The Gargill, Straub and Sayre Village cases are urged by the Borough of East Newark as sufficient authority to classify the trustee as a judgment creditor.
In the Gargill case
the question was between a mortgage and a subsequently recorded tax lien, and the court held that the transaction in question was a conventional mortgage and would be so held uniformly throughout the States. There is nothing in the opinion which waters down the statement in the Gilbert Associates case, supra, that the type of judgment creditor envisioned in 26 U.S.C.A. § 3672 is one who is such in the usual, conventional sense.
The Straub case
was decided prior to Gilbert Associates, did not discuss the particular problem here involved, and, as pointed out above, the same court, in United States v. Hawkins, 9 Cir., 1955, 228 F.2d 517, and United States v. England, 9 Cir., 1955, 226 F.2d 205 held contrary to the contention of the Borough of East Newark.
The Sayre Village case
involved New Jersey statutes, N.J.S.A. 46:22-1 and 46:16-1 which provided, in part, that unrecorded agreements for the sale of real estate were void against subsequent judgment creditors without notice. The court held that the trustee in bankruptcy was a creditor with a lien under § 70, sub. c of the Bankruptcy Act, that a judgment creditor is a creditor with a lien, that the trustee did not have notice of the unrecorded purchase agreements and that therefore the trustee's lien prevailed against the unrecorded agreements. The relevancy of this case to the question at hand escapes me.
The suggestion, apparently made quite seriously, that this court follow the dissenting rather than the majority opinion in the Gilbert Associates case requires no comment.
The liens of the Government are valid as against the trustee in each case. Both cases are remanded to the referee for further proceedings not inconsistent with this opinion.