On appeal from Superior Court, Law Division, Bergen County.
Botter, Antell and Furman. The opinion of the court was delivered by Botter, P.J.A.D.
[185 NJSuper Page 444] The issue on this appeal is whether the federal estate tax lien of the United States has priority over the inheritance tax lien of the State of New Jersey where the assets of decedent's estate available for distribution in this country are inadequate to satisfy both liens. The State contends that the liens attached simultaneously at the time of death pursuant to 26 U.S.C.A. § 6324 and N.J.S.A. 54:35-5, that the federal lien does not have priority and, therefore, the claims should be satisfied pro rata.
From a ruling in favor of the United States the State appealed, and we now affirm.
31 U.S.C.A. § 191*fn1 gives priority to the United States for "debts due to the United States" from insolvent debtors and from a "deceased debtor" whose estate in the hands of an executor or administrator is insufficient to pay "all the debts due from the deceased." The State argues that this section does not apply because the federal estate tax is not a debt of the deceased and this section was intended to apply to debts in existence prior to the debtor's death. The United States contends that the statute should not be read in a narrow, technical fashion, citing United States v. Moore, 423 U.S. 77, 96 S. Ct. 310, 46 L. Ed. 2d 219 (1975). It also contends that the federal estate tax may be viewed as a debt of the deceased because it is an excise on the transfer of property from decedent which attaches at the moment of transfer, namely, at death. Frick v. Pennsylvania, 268 U.S. 473, 498-499, 45 S. Ct. 603, 607-08, 69 L. Ed. 1058, 1066 (1925); see 26 U.S.C.A. 2001(a).
The State urges that the literal language of § 191 supports its position. However, § 191, read in conjunction with § 192, suggests a legislative intent that leads to an opposite conclusion. The history of §§ 191 and 192 is traced in King v. United States, 379 U.S. 329, 334-336, 85 S. Ct. 427, 430-31, 13 L. Ed. 2d 315, 319-320 (1964). Both sections were said to be "part of a single statutory structure" originating before 1800. Id. The precursor
of § 191 was enacted in 1789, and the provisions now embodied in § 192 first came into existence in 1799, "establishing personal liability for those who frustrated the Government's priority" established by § 191. Id. Thus it was held in King v. United States, supra, that §§ 191 and 192 must be read in pari materia, since the division of these provisions into separate sections in the Revised Statutes "did not work any change in the purpose or meaning." Id.
§ 192 of 31 U.S.C.A. provides:
Every executor, administrator, or assignee, or other person, who pays, in whole or in part, any debt due by the person or estate for whom or for which he acts before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate to the extent of such payments for the debts so due to the United States, or for so much thereof as may remain due and unpaid.
Obviously, this section applies only where payment of a debt to another disparages the priority given to a federal claim. However, § 192 speaks of payment of debts due not only from debtors but from estates as well. It seems to assume a priority for obligations due to the United States from estates over other debts of an insolvent estate.*fn2 Considering the long history of both § 191 and § 192, and reading them together, we are inclined to the conclusion that the words in § 191, "debts due from the deceased," should be read to include federal estate taxes, so as to give the United States priority in cases where the estate is insufficient to pay all debts. In re Williams' Estate, 189 Misc. 210, 68 N.Y.S. 2d 840 (Surr.Ct.1947); cf. Bowes v. United States of America, 127 N.J. Eq. 132, 140 (Ch.1940), where the court held that the word "debts" as used in R.S. § 3466 (31 U.S.C.A. § 191) includes taxes, citing Price v. United States, 269 U.S. 492, 499, 46 S. Ct. 180, 70 L. Ed. 373, 377 (1926).