IN THE MATTER OF IRVING GAINES, INC., ALLEGED BANKRUPT
AI-generated. These summaries, headnotes, and key points are machine-generated and may contain errors or omissions. Always verify against the full opinion text below. Not legal advice.
The court held that the government's seizure and sale of property to satisfy a tax lien constituted 'distraint' within the meaning of the Bankruptcy Act.
Creditors filed an involuntary bankruptcy petition against Gaines after the United States sold Gaines' property to satisfy a tax lien. The petition al…
The full statement of facts, procedural history, and disposition for this case are member content.
Join FLexlaw to unlock all legal intelligence© FLexlaw, Inc. — AI-generated enrichments are proprietary. All rights reserved.
Explore caselaw by topic → Browse Distraint cases and more on FLexlaw
PER CURIAM:
After making various assessments for back taxes, the United States obtained on August 20, 1965 a lien on property of Irving Gaines, Inc. (Gaines). A number of Gaines’ creditors then filed an involuntary petition in bankruptcy on August 27, 1965. The record submitted to us is sketchy, but we glean from it that the property was sold by the United States on September 8, 1965 to satisfy the lien. Shortly thereafter, an amended petition in bankruptcy was filed, alleging that Gaines, while insolvent, had permitted the government to obtain this lien through “distraint” and had not vacated or discharged it within 30 days from the date it was obtained or at least 5 days before the date set for the sale. The Referee adjudged Gaines a bankrupt, and the district court, Metzner, J., affirmed.
Gaines maintains that it did not commit an act of bankruptcy because it did not suffer or permit “while insolvent, any creditor to obtain a lien upon * * * [its] property through legal proceedings or distraint * * 11 U.S.C. § 21(a) (3) (emphasis added). Gaines argues that the government’s tax liens arose by statute on the various dates when taxes were assesed, and not by “distraint” under 26 U.S.C. § 6331 on August 20, 1965. But the fallacy in this argument is that the government did not merely obtain a tax assessment lien or a so-called “floating” lien. Here, the government actually seized specific property —and sold it too — in order to enforce the lien. This surely is a distraint within the meaning of the Act. In re Timberline Lodge, 139 F.Supp. 13 (D.Or.1955); 1 Collier on Bankruptcy [¶] 3.308 (14th ed. 1967).
Affirmed.1
. Our disposition makes it unnecessary for us to consider whether a $10.00 O.O.D. payment by Gaines constituted a preference.