Valley Bank of Nevada v. City of Henderson

528 F. Supp. 907 (1981)

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Valley Bank of Nevada v. City of Henderson

United States District Court for the District of Nevada
528 F. Supp. 907 (1981)

Facts

The municipal code of the City of Henderson, Nevada (city) (defendant) required the city to refund water-main-installation costs that property subdividers incurred. In 1969, the city entered into a water-refunding agreement with subdivider Bentonite, Inc., pursuant to which the relevant proceeds were pledged to the Nevada National Bank as loan collateral. In April 1974, the Nevada National Bank assigned the agreement to Valley Bank of Nevada (Valley) (plaintiff). In October 1974, the Internal Revenue Service (IRS) made aggregate tax assessments of approximately $125,000 against Bentonite. These assessments automatically created tax liens against all Bentonite’s property and property interests. In March 1975, the IRS filed a notice of federal tax lien against Bentonite with the Nevada secretary of state. In July 1979, the United States (defendant) served its answer to an interpleader action brought by Valley regarding the water-refunding-agreement funds (interpleader funds) in which the United States demanded payment of the interpleader funds. In July 1980, the IRS served a notice of levy on the city. In the interpleader action, the United States argued that its liens were entitled to priority over other claims to the interpleader fund by other claimants, including Valley, because (1) the other claimants did not perfect security interests pursuant to Internal Revenue Code (code) § 6323 and (2) the other claimants’ liens were inchoate. Valley responded that Bentonite had no property interest in the water-refunding agreement when the IRS issued the October 1974 tax liens because Bentonite had assigned its refund rights to Valley. Additionally, Valley and Bentonite argued that the IRS’s liens had lapsed because the IRS purportedly did not issue its levy against the city within six years of the IRS’s tax assessment, as required by code § 6602(a). The court conducted a trial.

Rule of Law

Issue

Holding and Reasoning (Claiborne, C.J.)

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