the Bank. Franklin Savings & Trust Co. of Pittsburgh v. Clark, supra, 283 Pa. at 218, 129 A. 56. This relationship alone creates in a depositor a sufficient property interest to which a federal tax lien may attach. MacKenzie v. United States, 109 F.2d 540 (9th Cir. 1940).
Here, the reserve accounts in question were "special" rather than general accounts. Under the terms of the Loan Agreement, the taxpayer cannot be said to have had less of a proprietary interest in these accounts than he would have had in a general account. In fact, he appears to have had more. By virtue of the provision in the Loan Agreement that the Bank would pay into a reserve account a portion of the purchase price of a discounted note to serve as security for ultimate collection of the note, we believe the taxpayer acquired a vested property right in such funds as were paid into the account at the times when they were so applied, subject to defeasance only upon the contingency and to the extent that the Bank ultimately would find certain notes to be uncollectible. Consequently, the funds deposited into the reserve accounts constituted "such property or rights to property" in the taxpayer as would be subject to the attachment of federal tax liens.
A federal tax lien attaches not only to property and property rights owned by the taxpayer on the date of assessment but also to such property and property rights which the taxpayer acquires thereafter during the continued existence of the lien. Thus, by virtue of the assessments against the taxpayer during the period from February 2, 1962 to March 20, 1964, the continuing federal tax liens attached not only to funds in the account on the dates of the assessments in question but also to such funds as were thereafter paid into the reserve accounts during the continuing existence of the liens. There is no dispute that the liens have continued to the date of filing suit.
The question remains, however, as to whether the Bank was entitled to the setoffs of September 4, 1964 and September 17, 1964 against the reserve accounts, free and clear of the federal tax liens arising from assessments made prior to the setoffs. No general right of setoff was afforded to the Bank under the terms of the Loan Agreement itself. Thus, if such a right existed, it had to be one afforded by law.
Under the law of Pennsylvania, funds deposited in a bank for a special purpose, known to the bank, or under a special agreement, cannot be set off by the bank against an unrelated debt due to it from a depositor. R. M. Bourne & Co. v. Peoples Union Bank & Trust Co., 404 Pa. 519, 172 A.2d 814 (1961). See also M'Intire v. Blakeley, supra. The reserve accounts were "special" accounts. The Bank's attempted setoffs therefore were invalid.
It may be noted that we are not presented with a question of the respective priorities of the Bank's security interest in the reserve accounts and the federal tax liens. The Bank ultimately recovered in full upon all of the notes purchased by it and, accordingly, even if the Bank's security interest previously had been entitled to priority over the federal tax liens, the Bank's security interest now has terminated under the conditions of the Loan Agreement.
The assessments gave rise to perfected tax liens upon the amounts in the reserve accounts on the dates of assessment and paid into the account thereafter. The Bank's attempted setoffs against these special purpose accounts subsequent to the assessments were invalid under State law. Accordingly, the Bank is liable to the United States in the amount of $4,923.02, that amount being the sum of the net setoff of $4,197.43 and the amount of $725.59 currently on deposit in reserve account 800-313.
An appropriate order is entered.
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