US SUPREME COURT DECISIONS

Federal taxes were assessed against a company, but, despite demand, were not paid. No notice was filed of the lien which ensued under § 6321 of the Internal Revenue Code of 1954. Thereafter, the company filed a petition in bankruptcy. The trustee treated the Government as an unsecured claimant whose lien was invalid as to him, basing his position on § 70c of the Bankruptcy Act and § 6323 of the Internal Revenue Code. Section 70c vests a trustee as of the bankruptcy date with all the rights of "a creditor then holding a lien" on a bankrupt's assets by "legal . . . proceedings"; §6323 permits a "judgment creditor" to prevail over an unrecorded federal tax lien. The trustee's position was upheld by the referee, District Court, and Court of Appeals.

Held: A bankruptcy trustee has the status of a statutory "judgment creditor," and, as such, prevails over an unrecorded federal tax lien. Pp. 382 U. S. 269-278.

(a) The language in United States v. Gilbert Associates, 345 U. S. 361, that the term "judgment creditor" in the predecessor of § 6323 referred to a holder of a judgment of a court of record, must be read in context, and does not govern the rights conferred by Congress upon a trustee in bankruptcy. Pp. 382 U. S. 269-271.

(b) The language and legislative history of § 70c and § 6323 reflect a congressional purpose to confer all the rights of a judgment creditor upon the trustee in bankruptcy, including the right to avoid an unrecorded federal tax lien. Pp. 382 U. S. 271-275.

(c) That failure to accord the Government priority for its unrecorded lien may benefit other claimants in a bankruptcy proceeding by improving their relative positions as creditors (a result which the Government can avoid by promptly filing notice of the lien) is a matter of congressional policy. Pp. 382 U. S. 275-277.

(d) The provision in § 67b of the Bankruptcy Act that a statutory lien, including a federal tax lien, not perfected until after bankruptcy may nevertheless be valid as against the trustee does not preclude construing § 6323 to include the trustee, since the chanrobles.com-red

Page 382 U. S. 267

purpose of § 67b insofar as tax claims are concerned is to protect them from § 60, which allows the trustee to set aside preferential transfers made within four months of bankruptcy. Pp. 382 U. S. 277-278.

335 F.2d 311, affirmed.