Appeal, No. 159, Jan. T., 1963, from order of Court of Common Pleas No. 2 of Philadelphia County, June T., 1960, No. 944, in case of American National Insurance Company v. Vine-Wood Realty Co., Joseph A. Richman, Rosaline D. Richman, his wife, et al. Order affirmed.
Louis F. Floge, with him James M. Richardson, and Schnader, Harrison, Segal & Lewis, for appellants.
Joseph R. Ritchie, Jr., Assistant United States Attorney, with him Drew J. T. O'Keefe, United States Attorney, Edward N. Barol, and Creskoff, Riely & Barol, for appellees.
Before Bell, C.j., Musmanno, Jones, Cohen, O'brien and Roberts, JJ.
OPINION BY MR. JUSTICE COHEN
This appeal challenges the order of the court below directing payment to the United States of its lien for unpaid income taxes out of the proceeds of a foreclosure sale.*fn1
On January 27, 1954, appellees Richmans, acquired an undivided one-half interest in the Broadwood Hotel. On April 4, 1955, the property became subject to a first mortgage. On September 24, 1955, appellee United States, pursuant to a favorable tax court decision, filed a tax lien against the Richmans for a deficiency in their 1948 income taxes in the amount of $35,778.59. On June 2, 1958, a second mortgage was created on the hotel which was subsequently assigned to appellant Goldberg. On July 20, 1959, the Richmans conveyed the premises to appellant, Vine-Wood Realty Co. On August 25, 1960, a judgment lien was acquired against the property by appellant, Pennsylvania Laundry Co. (Laundry). On October 6, 1960, the United States filed another tax lien against the Richmans based on an assessment of their unpaid income taxes for 1959 in the amount of $8,826.63.
Meanwhile, Richmans had acquired certain securities which they deposited with the Liberty Real Estate Bank and Trust Co. (Bank) as collateral for a loan. Two notices of levy and final demand were served by the United States on Bank on February 9, 1960, and August 25, 1961. The first was based on the Richmans' 1948 unpaid taxes and the second on their 1959 unpaid taxes. On September 12, 1961, solely as a result of an oral request from Richmans, the United States wrote a letter to Bank agreeing to the liquidation of the collateral security. Pursuant to the terms of the letter, (1) Bank sold the securities between October 26 and December 1, 1961 and (2) liquidated
its loan of $36,133.67; (3) a certificate of deposit of $36,133.57 was created on November 24, 1961, retained by Bank and made subject solely to the tax claims of the United States; (4) the balance was then paid to Richmans.
The first mortgagee on the hotel instituted foreclosure proceedings on the property on June 24, 1960 and judgment was entered for him on July 19, 1960. The property was sold on May 1, 1961 for $1,106,000. Appellants filed exceptions to the sheriff's proposed order of distribution of these proceeds on September 1, 1961 based on the "amount, validity, and priority of lien of United States of America v. Joseph A. Richman and Rosaline D. Richman."*fn2
On October 3, 1961, the United States petitioned the court below to have the sheriff distribute the proceeds of the foreclosure sale in payment of the lien for the Richmans' unpaid 1948 income taxes. Appellants opposed the petition on the grounds that (1) the creation of the certificate of deposit constituted payment to the United States of its 1948 tax lien and (2) if it did not, appellants were entitled to have this tax lien first satisfied out of the certificate of deposit in accordance with ...