MICHIGAN v. UNITED STATES

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Docket Number

No. 214.

Attorney(S)

Mr. John H. Witherspoon, with whom Messrs. Herbert J. Rushton, Attorney General of Michigan, Daniel J. O'Hara, Assistant Attorney General, James H. Lee, William E. Dowling, and Samuel Brezner were on the brief, for petitioners. Mr. J. Louis Monarch, with whom Solicitor General Fahy, Assistant Attorney General Clark, and Messrs. Sewall Key, Alvin J. Rockwell, and Valentine Brookes were on the brief, for the United States. Messrs. Francis P. Burns and Charles S. Rhyne filed a brief on behalf of the National Institute of Municipal Law Officers, as amicus curiae, urging reversal.

Judges

Harlan Fiske Stone

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Smart Summary

Factual and Procedural Background

The United States brought an action in the federal District Court to foreclose a federal estate-tax lien that had attached to private real property. After the lien attached, the City of Detroit, the County of Wayne, and the State of Michigan assessed and sought to collect their respective real-property taxes, claiming statutory liens that purported to be “first,” “prior,” and “paramount.” The District Court upheld the priority of the federal lien, and the Court of Appeals for the Sixth Circuit affirmed. The Supreme Court granted certiorari and, in this opinion, reviews and affirms those lower-court rulings.

Legal Issues Presented

Whether a federal estate-tax lien that has already attached to private real property is entitled to priority over subsequently arising state, county, and municipal tax liens.
Whether Michigan statutes purporting to make local tax liens “first” and “paramount” can displace an earlier federal lien in light of the Supremacy Clause.

Arguments of the Parties

Petitioners (State of Michigan, County of Wayne, City of Detroit)

Re-asserted every argument made—and previously rejected—in the companion case of Detroit Bank v. United States, challenging the validity and scope of the federal estate-tax lien.
Contended that Michigan Compiled Laws §3429 (1929), as amended in 1934, expressly makes local tax assessments a “first lien, prior, superior, and paramount” to any other unrecorded lien, including the federal estate-tax lien.
Relied on §3746 and other state provisions that authorize filing notice of liens, arguing that Michigan law and judicial construction elevate state tax liens over the federal interest.

United States

The opinion does not provide a detailed account of the Government’s arguments, but the Court’s reasoning indicates reliance on the Supremacy Clause and existing federal precedents establishing the supremacy of federal tax liens.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Detroit Bank v. United States, ante p. 329	Companion decision establishing validity of the same federal estate-tax lien.	Referenced as controlling authority rejecting petitioners’ recurring arguments.
United States v. Snyder, 149 U.S. 210	Congress’s power to create tax liens and the supremacy of such liens over state law.	Cited for the proposition that federal tax liens cannot be displaced by state liens.
Burton v. Smith, 13 Pet. 464, 483	Essential nature of a lien: property passes cum onere (with the burden).	Used to explain why a federal lien remains attached regardless of later interests.
Rankin v. Scott, 12 Wheat. 177, 179	Same principle regarding liens following the property.	Reinforces that a later acquirer takes subject to the federal lien.
Howard v. Railway Co., 101 U.S. 837, 845	Continuity and indivisibility of liens.	Supports rejection of petitioners’ attempt to displace the federal lien.
United States v. Greenville, 118 F.2d 963	Inviolability of federal tax liens against state encroachments.	Cited as additional modern authority upholding federal priority.
United States v. Texas, 314 U.S. 480, 486	Priority of federal claims under R.S. §3466 cannot be altered by state law.	Analogized to demonstrate Congress’s exclusive control over federal lien priorities.
Spokane County v. United States, 279 U.S. 80	Federal priority over competing state claims.	Invoked to buttress the supremacy of the federal estate-tax lien.
New York v. Maclay, 288 U.S. 290	Scope and limits of federal priority vis-à-vis state liens.	Discussed in differentiating earlier perfected state liens from the later ones here.
Missouri v. Ross, 299 U.S. 72	Comparison case on lien priority.	Cited in passing to illustrate the analytical framework for lien conflicts.

Court's Reasoning and Analysis

Chief Justice Stone, writing for the Court, emphasized that the federal estate-tax lien arises directly from Congress’s constitutional power “to lay and collect Taxes.” Under Article VI, federal law is “the supreme Law of the Land,” binding state judges notwithstanding state statutes to the contrary.

The Court observed that the essence of any lien is that property passes cum onere; therefore, once a federal lien attaches, later-arising interests necessarily remain subordinate unless Congress consents otherwise. Precedent—including United States v. Snyder and cases applying R.S. §3466—makes clear that states cannot, by legislation or judicial declaration, displace or reorder federal tax priorities.

Even accepting the petitioners’ reading of Michigan’s statutes as creating “first” and “paramount” liens, the Supremacy Clause renders those provisions ineffective against an earlier federal estate-tax lien. Because the federal lien here attached before the state, county, and city taxes accrued, no question arises about conflicts with pre-existing state liens. The Court therefore affirmed the lower courts without revisiting the arguments already disposed of in the companion Detroit Bank decision.

Holding and Implications

Affirmed.

The Supreme Court’s decision upholds the priority of the federal estate-tax lien over later state and local real-property tax liens. Practically, the City of Detroit, County of Wayne, and State of Michigan cannot collect their taxes ahead of the federal government from the encumbered property. The ruling reinforces existing precedent on federal supremacy in tax-lien priority and sets no new doctrinal departure, but it underscores that state statutory declarations of lien priority are ineffective against previously attached federal tax liens.

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MICHIGAN ET AL. v. UNITED STATES.

A federal tax lien on private real estate, securing a federal estate tax, takes precedence over later liens securing state taxes. P. 340. 127 F.2d 64, affirmed.

MR. CHIEF JUSTICE STONE delivered the opinion of the Court.

This is a companion case to Detroit Bank v. United States, ante, p. 329. It involves the lien for estate taxes asserted by the Government and considered in our opinion in that case.

Petitioners, the City of Detroit, the County of Wayne, and the State of Michigan, assert liens for city, county and state taxes on the real estate in question, accruing subsequent to the federal estate tax lien. As defendants in the suit brought by the Government to foreclose the lien, they attack it on all the grounds considered and rejected in our opinion in the Detroit Bank case. They also contend that the state liens are given superiority over the federal lien by virtue of state statutes. Section 3429 of the Compiled Laws of Michigan, 1929, as amended by Act No. 38 of the Extra Session of 1934, declares that taxes "shall become a lien upon such real property" on specified dates following their assessment and, as construed by petitioners, states that they shall be a "first lien, prior, superior, and paramount." Section 3746 authorizes the filing of notice of liens as provided in R.S. § 3186, in the offices of registers of deeds in the counties of Michigan. Petitioners contend that these and other statutory provisions as construed by Michigan courts give superiority to state tax liens over other unrecorded liens, including the present estate tax lien of the federal Government.

We do not stop to inquire whether this construction of the state statutes is the correct one, for we think the argument ignores the effect of a lien for federal taxes under the supremacy clause of the Constitution. The establishment of a tax lien by Congress is an exercise of its constitutional power "to lay and collect taxes." Article I, § 8 of the Constitution. United States v. Snyder, 149 U.S. 210. And laws of Congress enacted pursuant to the constitution are by Article VI of the Constitution declared to be "the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding."

"It is of the very nature and essence of a lien, that no matter into whose hands the property goes, it passes cum onere." Burton v. Smith, 13 Pet. 464, 483; Rankin v. Scott, 12 Wheat. 177, 179; Howard v. Railway Co., 101 U.S. 837, 845. Hence it is not debatable that a tax lien imposed by a law of Congress, as we have held the present lien is imposed, cannot, without the consent of Congress, be displaced by later liens imposed by authority of any state law or judicial decision. United States v. Snyder, supra; United States v. Greenville, 118 F.2d 963. Similarly we held that the priority of payment commanded by R.S. § 3466 could not be set aside by state legislation. United States v. Texas, 314 U.S. 480, 486; Spokane County v. United States, 279 U.S. 80; New York v. Maclay, 288 U.S. 290; cf. Missouri v. Ross, 299 U.S. 72.

As the federal lien with which we are here concerned attached to private property prior to the acquisition of any interest in that property by the state, we need not consider the extent to which Congress may give, or intended by § 315(a) to give, priority to a federal lien over a previously perfected state lien. Compare New York v. Maclay, supra, 292; Spokane County v. United States, supra, 95; United States v. Texas, supra, 484-6.

Affirmed.

MR. JUSTICE MURPHY took no part in the consideration or decision of this case.