Rice Investment Co. v. United States
United States Court of Appeals for the Fifth Circuit
625 F.2d 565 (1980)
- Written by Douglas Halasz, JD
Facts
In 1973, Rice Investment Company (Rice) (plaintiff) loaned money to Handy Stop, Inc. (Handy). In a security agreement, Rice took a security interest in all of Handy’s then-owned and after-acquired inventory. Rice filed a financing statement on October 29, 1973. Handy failed to pay federal taxes for the third and fourth quarters of 1973, which were assessed in March of 1974. Accordingly, the government filed a federal tax lien notice on April 26, 1974. The Internal Revenue Service (IRS) levied Hand’s inventory on August 18, 1974. The United States (defendant) sold the inventory, thereby generating proceeds. Meanwhile, Handy remained indebted to Rice. Rice sued the United States to recover the proceeds. Rice argued, pursuant to Section 6323 of the Internal Revenue Code (Section 6323), that its senior interest in the inventory gave it priority over the United States’ junior federal tax lien, which rendered the inventory sale unlawful. During proceedings, Rice admitted that it could not determine exactly when Handy acquired the inventory seized by the IRS. Rice also admitted that the inventory seized by the IRS was acquired entirely after Rice entered into the security agreement with Handy. Rice and the United States moved for summary judgment. The district court granted Rice’s motion.
Rule of Law
Issue
Holding and Reasoning (Randall, J.)
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