Bradbury v. Kaiser

California Court of Appeal Feb 25, 1992 No. No. B056734Published

Before: Gilbert

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Holding. A withholding order served under Revenue and Taxation Code section 18817 is not subject to the priority requirements of Government Code section 7170, subdivision (c)(2). Consequently, a withholding order served prior to the perfection of a judgment lien takes priority over that lien.

Issues

Whether a withholding order under Revenue and Taxation Code section 18817 is subject to the priority provisions of Government Code section 7170, subdivision (c)(2).
Whether a tax assessment is a prerequisite to a valid withholding order under Revenue and Taxation Code section 18817.

Disposition. reversed

Quotations verified verbatim against the opinion

“Unlike the section governing tax liens (§ 18881), the section governing withholding orders (§ 18817) is not made subject to the Government Code.”

“Here the FTB’s withholding order, having been served prior to the perfection of Kaiser’s judgment lien, has priority over the judgment lien.”

Opinion

GILBERT, J. We hold that a withholding order served pursuant to Revenue and Taxation Code1 section 18817 is not subject to Government Code section 7170, subdivision (c)(2) which establishes priorities between state tax liens and other perfected liens on personal property. We reverse.

Facts

The subject matter of the dispute is a cashier’s check in the amount of $15,000 made payable to Charles S. Hodson. The check was seized during a [1259]search of a house by investigators from the Ventura County District Attorney’s Office on September 29, 1989.

Hodson owed the State of California $113,882.75 for personal income taxes. He also had two money judgments against him. One judgment in favor of Jack D. Kaiser and others was for $120,617. Another judgment in favor of Cederic B. Emery and others was for $318,346.

On October 3, 1989, the Franchise Tax Board (FTB) served on the district attorney a notice of levy and an order to withhold property belonging to Hodson.

On October 5, Kaiser filed a notice of judgment lien on personal property with the Secretary of State.

On October 10, the FTB filed a notice of state tax lien with the Secretary of State.

The district attorney brought an action in interpleader naming the FTB, Kaiser and Emery as defendants. The trial court found in favor of Kaiser stating that under Government Code section 7170 a state tax lien is not valid against a judgment lien that is perfected prior to the time a notice of state tax lien is filed with the Secretary of State.

Discussion

Division 2, part 10, chapter 19 of the Revenue and Taxation Code provides a variety of methods for the collection of taxes. Article 1 of chapter 19 concerns tax withholding. The article includes section 188172 which requires a party served with a withholding notice to withhold amounts due for taxes from the property of the designated taxpayer. Article 4 of chapter [126019]

Bradbury v. Kaiser

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