The opinion of the court was delivered by: CLARY
This matter is before the Court on a cross motion for summary judgment filed by the United States and the Fidelity-Philadelphia Trust Company (hereinafter referred to as the 'bank'). The parties have stipulated to the essential facts. These facts raise a narrow question of law, the answer to which will in turn determine the relative priority of the moving parties to certain proceeds from an insurance policy deposited in this court under a decree of interpleader. The Government claims these proceeds by virtue of a Federal tax lien, Title 26 U.S.C. § 3670 of the Internal Revenue Code of 1939 (or what is now Section 6321 of the 1954 Code). The bank claims a large part of them as pledgee of the insurance policy, Title 26 U.S.C. § 3672(a).
Theodore Ullman was owner and his wife beneficiary under an insurance policy with United Benefit Life Insurance Company. Said Ullman was deficient in his income taxes in the total amount of $ 89,053.88 at the end of 1948, assessments with respect to which were made on August 31, 1951, by the Commissioner of Internal Revenue. On February 9, 1951, Ullman had pledged the insurance policy in question with the bank to secure a loan for $ 3,000, surrendering the actual physical policy to the bank in Philadelphia. The Collector of Internal Revenue for the First Collection District of Pennsylvania received the list concerning the tax assessments on September 4, 1951 and issued notice and demand for payment on that day, Title 26 U.S.C. § 3671. Ullman failed to pay. On September 12, 1951, the Collector filed a notice of Federal tax lien with the Prothonotary of Berks County, Pennsylvania, where the taxpayer resided and also with the Clerk of the Federal District Court for the Eastern District of Pennsylvania. No such notice was ever filed with the Prothonotary of Philadelphia County.
On September 27, 1951, Ullman borrowed an additional $ 20,000 from the bank on the pledged policy. The insurance certificate remained with the bank in Philadelphia. No part of the bank's loans had ever been repaid.
After the Government brought suit to recover the current surrender value of the policy ($ 34,362.50), the insurer moved to interplead the fund. A decree for interpleader was entered by this Court on June 18, 1953. The Government seeks the total amount now deposited in the Registry of the Court, less only the $ 3,000 secured by the original pledge made prior to the time the Federal tax lien was filed. The bank in opposition claims a further right to $ 20,000 secured by the later pledge, on the grounds that the Government failed to file its notice of Federal tax lien at the proper place, and thus is subordinate to the 'pledgee' bank under Title 26 U.S.C. § 3672(a).
Section 3670 of Title 26 U.S.C. gave to the Federal Government 'a lien * * * upon all property and rights to property whether real or personal, belonging to (a taxpayer who neglects to pay his taxes after demand)'. Such a lien would arise in point of time on the date the assessment list is received by the Collector and demand is made upon the taxpayer -- in this case, September 4, 1951. Title 26 U.S.C. 3671. The bank would therefore have no possible claim to the further $ 20,000 (the pledge for which was made on September 27, 1951), were it not for Section 3672(a) of Title 26 U.S.C. This section reads as follows:
'(a) Invalidity of Lien Without Notice.
'Such a (tax) lien shall not be valid as against any * * * pledgee * * * until notice thereof has been filed by the collector -- .
'(1) Under State or Territorial laws.
'In the office in which the filing of such notice is authorized by the law of the State * * * in which the property subject to the lien is situated, whenever the State * * * has by law authorized the filing of such notice in an office within the State. * * *'
This section immediately raises two questions. First, in what state is the 'property' (i.e., the insurance policy) allegedly subject to this tax lien situated? Second, has the required notice been filed by the United States 'in accordance with the law of (that) state?'
The first question must be answered with reference to Federal law. Both parties agree to this. The bank suggested that the answer to this first question might be Nebraska, the place where the insurance company was domiciled. This argument does not appear to have much weight and counsel for the bank did not seriously urge it at oral argument. See United States v. Penn Mutual Life Ins. Co., 3 Cir., 1942, 130 F.2d 495, 142 A.L.R. 888; United States v. Royce Shoe Co., D.C.N.H.1956, 137 F.Supp. 186.
Moreover Congressional policy favoring the success of federal tax enforcement over rigid property concepts would not be furthered by viewing the property interest in an insurance policy as located in the state of the insurance company's domicile. Nor would such a holding coincide with the realities of general commercial practice. The real issue appears to be a choice between the domicile of the insured (or the beneficiary, which in this case is the same) and the situs of the physical writing embodying the insurance contract. Either choice brings us to Pennsylvania, and in turn to the second and more difficult question in this case, i.e., was the notice of the tax lien filed properly in accordance with the law of Pennsylvania in Berks County?
This question is controlled by Pennsylvania law. Reiter v. Kille, D.C.E.D.Pa.1956, 143 F.Supp. 590. The applicable Pennsylvania statute is the Act of May 1, 1929, P.L. 1215, Section 1, 74 P.S. § 141, which provides as follows:
'Notices of liens for taxes payable to the United States of America, and certificates discharging such liens, shall be filed by the collector of internal revenue in the office of the prothonotary of the county or counties in this State ...