                            May 26, 1949

   Hpn. D. C. Greer ~ ~..~         Opinion No. V-830
   State-Hightiy engineer
   T&xas..Higj$va~..
                 Department        Re: ..Thenecessity for Fed-
   Austin, 'T&as~.,.   _            ._ .,
                                        era1 Income Tax Liens
                                       ,-tobe recorded on Cer-
                                        tificates of Title to
                                        motor-vehiclesand the
    .~                                ,+tatus in relation to
                                        other liens.
   Dear Mr. Greer:
            I&request .anopinion on.three questions based
  ]upon.thefol.lowingfacts:                              ..~
  7.        "The.Int.ernalRevenue.Departmentfiles liens
     ,.L-.
       against an.individual~.,.for..non-.~~~n~
                                             off'Income
     .~:..Taxea..~
               The.indWidua...owns.onenor sever&i motor ..
    ~:~
      :'vehlCies.on:amidh..Elear
                               ,Certifi.cate
                                           of Title has
       been issued, or perhaps such Certifioateof Tit&
       will record a lien.
             ."TheseFederal'Liensfor Income Taxes are
     ,: filed'in t,heOffice,of the County Clerk in'a.bo,ok
-. ..~ ..knownas the 'Federal Lien Record'."
               The.three questions referred to are:
                  Should.thisDe rtment recognizeas a
       _ prio~"~~en.this.FsderalEen.for I~ncomeTaxes
        .eventhough aCertificate af Title,has been is-
    ~..~..sued.on
                which there.is.recordeda lien &ted
     _ ,&     to-the recording df the'Federa1 Tax Lien?
               "2. Under Section3.,V.P.C., 1436-1, does
         ..the~.definit.ion
                         of the term!Lien' apply to Fed-
          ~eral.IncomeTax Liens?                         .
   .:           "If the answer to question 2 is in the af-
        ~_.
          .firmative~,~
                      must the .FederalTax 'Liensbe filed
        ~..with this Department?
               "3. What protection.~would a mortgagee have
          if henloans money on a-motor vehicle if a clear
    418
           Hon. D. C,.Greer.,Page 2                             (V-8301


                 Certificate~.of
                               Title~is presented to him and it
                 later .develops.that
                                    a Federal Income Tax Lien
                 $Eit$;n filed against the-owner of the ve-
                      .
                     For-convenienceof this.opinion we will answer
           your second questionfir~at.,
                                      and thenthe first and third
           .inthat order.

          ~\               ~~Article..l43&1;.
                                          Section.
                                                 3.,V.P.C.; provides:
                  _ ~,~~a.term'.'lien;'means.every
                                                 kind of~lease
               .~conditionalsales contract,-deed..of
                                                   trust, chattel
               -mortgage .trnst~receipt,.reservationof title, or
                otherwr-1,
                         tten instrumentof whatsoeverkind or
                character whereby an interest,other than absolute
               .title,.is soughtto be.held..orgivenin a motor
                vehicie,.alsoany l.ien:created~orgiven by C n-
                ,s.titution.
                          or'Statute.,"-
                                       ..    :             7
                     A i.ien..has
                               been .defined...by
                                               our Courts as a right
          .~to:
              &force.a.charge~upon.propertyofanother for the MY-
    _~    ..ment..,or...sat.isfaction.of.~claims...
                                           IX is..
                                                 also a charge upon
          .property.
                   for.the.pay+?ntof a debt...There can be no lien
          ..~without
                  a..deht; Vaugbad~v,~IJohnRancock'MutualL%f.fe'In-
.


               i.1       - :,f,..:~:.. ._ :~’        _,~
                  .:..
                    ...~.~~~.Fedei.dl...right.~.tcJ:
                                          a"&%&      'unpaidincome
      .      &&es, aris.es,.b~.c.;virtue..of
                                      Federal%&&te.    26 U.S.C.A.,
_    ..   ._Section _36i78~?,1aternal~Revenue
                                          Code&provides:                 .I
                           ,~   -1   .~                               .,_



                     .-F.Xf
                         .anypersonpliable'ta+ay any tax neg-
                lLe~tsnpr,:yefua~es.to
                                    pay..the>
                                           '&me after demand,
               ..the.amount(including~any interest, penalty, ad-
                .ditionalamount.,oraddition te“snch tax, to-
                gethheit_~th,~any~Eosts
                                      thatmay'~accruein,addi-
               _..t.ion:tihereto)
                              shall.be a.lieri+.favor of the
                Dnited~States uponall nroperty and rights to
                 propeey; whather,realor pers$nal, belonging to
                     s&h~Sp&&o,n;               W:         .:         .,_
                           ~,.~,,         :                                   ;. .,
.   -

                Hon. D. C. Greer, Page 3   (V-830)


                       Itsisapparent this type lien fits squarely.with-
            in the.LabQve court ,definition.But the Section 3..defin-
            itiQn.obviollsly containsa.restcictedapDlication.~. ..It
            applieson1y.t.o. those~.liens.
                                         nsoughtto be'held or given
            in .a motorsvehicle!?. Consequently:,.
                                                 the statutory defin-
    .       ition does.notapplyto a.yederal.~.,income:,taxlienif .the.
            liqp, for.example',seeks enforc~ement.against.8 personrs.,"
            real~property...,However..,
                                      inthe event such a lien is'sought
        ._,....:to
               ,be.enfQrc,ed.
                            against.a motor.~vehicle.:regist.ered~~~in'~Texas,
            S.ection.3of ~~icla,l1+36.-1.,applies.~.~T~
                                                      that etient, your
            .second..questi.Qn
                             is answered in the affirmative.
                       ~:~:Having
                               so answered, you ask #whethersuch Federal
                lienmust be.filed,,with
                                      yourDepartment.




                          Indeed, Congress hasby Federal Statute required
                this corn&a&e.    Section 3672, ~26.U.S.C.A.Internal Rev&
                enue,Code, provides:
         --               "(a,) Such lien.shall.notbe valid as a-
                   ,.gainst any mortgagee.,.
                                           pledgee, purchaser,or
                   ~..j.ndgment
                              creditor,until.notice.thereof has been
        .. .~        filed..bythedollector A-
            .            "(1) In the.office in.which~the filing of
                    such notic~eis.authQrized.by.thelaw of the State
                 -1 or.Territoryin which the property subject to the
                 - lien issituated;.whenever the State or Territory
                    has~by law.authorized.thefiling of such notice
                    in an office.within.the'State.or.Territory;. '. ."
                         -~The..filing
                                    with.the County Clerk of,.Federal
                                                                    tax
                .liens~.tobe enforced against.motorvehicles does not meet
          .. -Texasstatutory requirements..This is in keeping with.
           - the.established.meaningof Article.lA36.-1,~
                                                       known gener-
             ally.as the Certificate.of
                                      .Title Act,.effective October 1,
              1939. The effect of.this~
                                      Act was.to repeal and supersede
 42cl             Hon,.D. C...
                             Greer.,Page 4        (V-830)


              Articles~..5490~,
                              5497 and~5497a,,.~V.C.S.,
                                                      insofar as those
             Articles~affected..the..regiatration.of chattel mortgage :
              liens onmotor vehicles.,Whereas ~formerly   the validity
              of a.motor..vehicle lien.as.againstthird parties was de-
         \~.pendent .uponthe mortgage,being,~filed   with the County,
              Clerk (Articles5490,,5497,5497a) the Certificate of
              Title Act.made.auch..va.liditydepen~ upon a proper record-
              ing of the lienon the:certXficate~-of. title. Article
              1436-1, Sactioos.42,44 and 46.1 This office in a prior
              op~r&n,.G-l53~ ,datsd..&v..7.1939,so held. And in
              CommericalCre33 t ,COm ....v..LericanManufacturi
              ~;m~,ny,.sn~,..the C%&eached       the same conclu%on,
              c t ng withapproval.0.-1539..~.To the.same effect, see
             -agl;2Motor_In~.. .Co,.:v,.
                                      Citp'..of'
                                              HamUn; 142 -Tex.&36;"179
                     278 (1944)..
                    A
                        Dnder-the-facts.presented  here, it is our opin-
              ion that Federal liens ~asagainstmotor vehicles must beg
           ~-filad;:and  recor&&with.yourDe artme& as authoriaed.by
           .-the .praaisionaaf.Article..Uc36-fl~in order to be valid as
              againat.thirdparties.. ~~.. .
                           ,_,Conc.erningyour..firstque.stion
                                                           we are of the
                 ...opinionthat you..
                                    should.
                                          not.recognim .priorLtyof a Fed-
                   era1 taxlien properly.re.corded.undsr.$he
                                                           Certificateof


                  1        "Set,.:
                                 42;,~No l%enroneanr...motar...vehicle
                                                                   shall be valid
                           .as against.third.part,i~.ss.witbout~actllal
                                                                    knowledge there-
             .    _        of.ar enforceable.aga&st the motor vehicle of any such
                            third..partiesas.th.eissuance of a certificateof title
    _ ._ ___ ,. _. ~.       thereof, unless.anapplication.fora newtjtle is made
.._        _ .. . .         as prssc.ribe.d.-in
                                             -this-Actand ~~all..first
                                                                    and subseque'nt
  .              .~. .._    liens noted-by.the Departmentthereon.".
                 %ec. 44.. No.lien onany motor vehicle to which a re-
           _ ._ ceipt .ar..certificate.of-time. has.b.een.issuedshall be
           .~_   -Ipal~h.as.against.third..parties..wd&hout
                                                         act& knowl-
              _,. adge.~h~reof,~..or.enforceable.against
                                                       the motor vehicle
                 .,of anysuch third+art$es, Mless.the notation of said
            ._ . .lIenshal&.have.  beencaused to be.made on receipts and
                  ..c.ert~ficatea...of.title
                                        on said motor vehicle, as pro-
                ..~&Led. in this Act."
                        "Sqc. 46. On&y lie& noted on a receipt or certif$cate
                        of title ahall~,b.e-valid
                                               as.against creditors of the
                      ~~-
                        .mortgagorFn ao farasconcerns the motor vehicle.?
Hon. D. C. Greer, Page 5   (V-.830)             :,,'.,     ?a2


Title Act2 prior to the,Federallien,. ~Whenthe Govern-
                    ~withthe State's.statutoryrequire-
                            loses priority over prior

        ~ In United States v,'Yatas, 204 S.W..Zd399
(Tex..CLv..App..,1947*..error~.re.f.~,n.r.,e.)
                                          the Court
held:;.
          '"Raving~.conuluded.
                            that&he attachment lien
     of.Ear1.and.W.0..Yates was.sp&ifie andi'fixed
     uponthe date of..ita.lav.y.,..which
                                     date.,wasprior
     to .the.date.theGovernmenttied its ,lien:forun-
..~ .paid.taxes..,...-..
                      the.Government% contention tbat~
    ..'th.etax,lienshouldhane.priorityover the attach-
  . .ment lien~fixedaga.inst..the,parsonal
                                         property of
     L..,C.~Russellisdenisd and overru1ed.w
        :._
          The Yates &ase,rcited..with.-approval
                                            Louisiana
State.~JJniversity
                 v~.'Hart,.          174 A.L.R. 1366
                          2lO..Ia;.:7S.,:
         3.61.
             (1946)~whereina similar priority dispu<e
&Sg%d      upon. .T&aSupremeJourt of Louisiana there
stated:
         ....eIt.has.often~
                          been.saidthat the iien of
      the..Unit.ed.Si5ates,.~under.Sections
                                         3670 and 3671,
 _    ia~.subordinate.to a ~~priormortgage..This.has
      been the..consi.stentruling.of the Federal courts.
    ~~.DetroitBank~.Y. United..States,.
                                      317 U.S. 329 ,63
    ;.S. Ct. 297~,87.L.Ed. 304;..Unitsd States v. heaver
     'Run Coal Company, 3 :.CJs,,99F.2d 16; Metropolitan
      Life InsuranceCompany v:..United  States, 6 Cir,
   .~~107~F.2~d311; Exchange National Bank of Tulsa v.
    ~.Davy~(DC)..13,F.Supp..226. ..Thissubordinate.posi-
      tioa.to prior mortgagea was held to apply inthe
 ~- ...casewhere the.taxlien arase~before the mortgage
       ..~
2   "Sec. 43. All liens.on motor vehicles shall take
     priority accordingto~the.order...of
                                       time the same are
     recorded on ths receipt orcertificate of title~of
    .a11 ,such.racordingstobe_made,.bythe Department.?
3..
 ..-!ThsGovernment*s.failure.to.comply
                                     with statutory
    raquirementarelative to.filingor recording notice
 -, of lienwill deprive it of priority over such claim-
    ants.! 47 C.J.S. Sec. 764, Internal.Revenue,p. 997.
        422           Hon..D. C. Greer, Page 6   (V-830)


                           but was not properly recorded,untilafter the
                           mortgage, even when the,mortgagee~hadknowledge
                           .ofthe..existentie~.of
                                               the uurecordedtax lien;
                           .Unitsd.States.v..BeaverRun Coal Company,supra.n
                                M&h of.what~.&ehave said is also applicableto
                      your.third questian, .The protectionto be afforded a
                     -mortgagee wha loans money .on~.s.motor
                                                           vehicle where the
                      .cer$.ificate.of.titlepresented.&0him is clear depends
                      mainly onthe da e'.offiling and.rewrding his lien with
                      pour Department.1..Thssame.prote.ction is extended the
                      Government,provided~its-.lisn..isfiled and recorded as
                 .    required .byArtFcle, l.43~6-?1...
                                                   Filing its lien with the
                     -~CoungyC1erk.i.sof.no,effeCt.asagainst such a,mortgagee.
                      In.47.C.J.S.~997.,.,Internal.Revenue,
                                                          Section 764, it is
                      said? 4~~.       ,....
                                          _ ,.
                                "As bstween.themortgag e or other claim-
                       ..~.~.ant.apecifis&            3 as entitledto pro-
                                         inthe..statute
                           tection and the..government.,~.the_date
                                                               of rebording
        _~             ..-l:the..tax
                                   lien..will.cQntrQl,thetax lien being
    -                     .prefarradtQ subsequent..&ns and deferred to
                        - .thosa~rec~rded prior.tQthe~.taxlien. . . .*
                           -CPQotnoteinsertion.0urs.1~
._~                             Ix%far as.motor.vehiclesare concerned.the
-            .        tru&i&    Is:..The..~first.r.ecorded.lien
                                                            as required by
                     ...Article.lA36E1.is
                                        entitled tompriority.
                          .. ~,.    .:..,.


                     _~.~I
                       .- 1.~ &deralinwme.taxliens     sought to bs
                  .%.enforced.against_a.motQr~vehi~le in Texas are
               ,. ...withinthe.meaningof the .&erm"lien"as defined
                     in Section 3.of~Article.lA3&1,V.P.C. Such liens,
                   ~ in.order.to-be.valid~aa~against third parties must
                    ..be.filed~withtheTexas Highway Department and
                  ....duly.recordednpon the certificateof title. 'Ar-
         --:.a~
             1.3     ti&le lA36-l,.,Se&ions42,..l+l+
                                                  and 46, V.P.C.;
          . .~



                      5 -,Presumably
                         ,'        26 U..S.C.A.,3672,Internal Revenue Code,
                         supra.
      Ron; D:~C. Greer.,Page 7    (V-830)


           26 U.S.C.A.-ItiternalBRe&&    Code,~Section3672; .
                     Credit Company v..~&nericati
            ~~Coohmercial.                           Manufactur-:
      _._^..                            (Tex.   Clv** APP.,
 ,.    ,.                                                    ‘_
               2. Insofaras motar.vehiclesare concerned,
      _...thenTexas Highway.Departmantshould snotgive prior-
     _    ity.to.a .Federal~inc~eetaxlisn filed in the of-
       ~,~fi.k.e.of..the~~County
                              Clerk over a lien duly filed
        ~.and recorded upon,..the...krtifikate
                                             of title to the
       _~.mot~..vehicle~.~prior.
                               to-the .Federallien. Article
_, ._. .~.l@6~l;Section.43,..V,P.C.,;..Uni.t.ed~~States
                                                     v. Yates,
          294 S,K2d.399. (Tex. CttV. .App~..,
                                           1947 error.ref.
          n,Le.).: louiaianaStat.eUniversityG. Hart, 210
   _...~._..
  _.     Ls.78;&!4 AJ+R~.l3+6; 26 So&d 361 (194a .
                3. A mortgagee..who   lends motiey 6n a motor
           vehi&e~where a clear.,certificate    of title is pre-
        _~..sented.tohimis fullj.protectad,againsta Federal
         ~:lncame.taxlianf.ilad with.the.CountyClerk, pro-
           vided .his.lianis ratiorded-bond
                                          the.~ certificate' of
         .~.tltle.aaprovided..byArticle1436-l; As between
           ths Governiaent.and~,such a.martgagee, the first re-
           +orded:lien on the.certificateof-title is enti-
          .;l;d.$o-priority..Article    1436-1, Se;tion 43,
              . ..
                                     Yotis very truly,'
                                 ATTORNEY GENERAL OF TEXAS
                                                   .c



                                              Assistant


                                 APPROVED

                              @-~~
                               FIRST ASSISTANT
                               .ATTORNEPGENERAL
      CEC)lg
