Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Standard Engineering Corp.; Wright v. . . . (1972)

State Has Priority Claim to Assets in Hands of Receiver

The State Board of Equalization intervened in an action brought by a creditor on a promissory note against a delinquent taxpayer. A receiver had been appointed by the court and had come into possession of the proceeds of the principal receivership asset, a dealer's reserve account, following the rendering of judgment for the creditor. The Board sought to assert its priority under Section 6756 of the Revenue and Taxation Code, which grants to the State a priority for unpaid taxes against general creditors of a debtor when the debtor is insolvent, and under Section 6757 of the code, under which the Board may obtain, upon the filing of a certificate of delinquency, a lien for unpaid taxes having the force, effect, and priority of a judgment lien. The Board had filed a certificate of delinquency prior to the time that the creditor secured judgment. The creditor contended that the receiver was the owner of the debtor's assets and that, therefore, the Board acquired no priority.

The court of appeal, in holding that the Board was entitled to priority under both statutory provisions, stated that a receiver takes the property in the condition existing at the time of his appointment, impressed with the legal and equitable rights and claims of creditors. The creditor never had a lien on the funds paid to the receiver, no levy having been made on the specific property, and thus had no right greater than that of a general creditor. Likewise, when the Board recorded its certificate of delinquency it acquired a lien entitling it to priority, since the general creditor's judgment lien did not come into existence until a later date. Wright v. Standard Engineering Corp. (1972) 28 Cal.App.3d 244.