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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 93-8074

WESTERN NATIONAL BANK,
Plaintiff,
versus
UNITED STATES, ET AL.,
Defendants,
UNITED STATES,
Defendant-Appellee,
versus
COMPTROLLER OF PUBLIC ACCOUNTS
FOR THE STATE OF TEXAS,
Defendant-Appellant.

Appeal from the United States District Court
for the Western District of Texas

( November 19, 1993 )
Before WISDOM, HIGGINBOTHAM, and SMITH, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
The United States and the State of Texas both claim the same
bank account to satisfy tax liabilities. We affirm the district
court's grant of summary judgment for the federal government,
persuaded that the federal lien attached to the account before the
state's claim arose.

I.
This case stems from a secured transaction among oil
companies. In August 1991, 3-B Rattlesnake Refining Limited and 3-
B Rattlesnake Refining Corporation executed a UCC-1 financing
statement in favor of Enron Oil Trading and Transportation Company,
which was filed with the state on August 12, 1991.1 The parties
then renegotiated the agreement on November 21, 1991, to create a
"lockbox" deposit account arrangement with Western National Bank.
Under the lockbox arrangement, 3B opened a demand deposit
account in its name at Western, for which the only signatories were
two Enron employees. 3B's invoices told its customers to make their
checks payable to 3B and to mail payment, addressed to 3B, to a
post office box maintained by Western. Western forwarded
undepositable checks, such as checks without signatures or checks
with incorrect endorsements, to 3B for disposition. Additionally,
3B forwarded checks mistakenly sent to 3B's offices to Western for
deposit in the account. Neither 3B nor Enron could unilaterally
terminate the agreement. If a customer was late in making a
payment to the lockbox, 3B could take it to court.
In late 1991, creditors began vying for 3B's assets. The IRS
assessed federal excise taxes against 3B on September 16 and
December 23, 1991, and March 23 and May 21, 1992. The IRS recorded
1It covered: "All furniture, supplies, machinery, inventory
and nonfixture equipment and personal property now or hereafter
located on any of the land described in Exhibit A, attached
hereto and made a part thereof for all purposes, and/or used in
connection with any present or future building(s) or other
improvement(s) upon any of the said lands, excluding the platinum
catalyst in the reformer."
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a notice of federal tax lien on 3B's property in the appropriate
county property records on April 22 and 23, 1992, and then filed
with the Texas Secretary of State on May 8, 1992. The IRS filed
notice of later assessments with the county on June 22 and with the
Secretary of State on June 25. Meanwhile, the Texas Comptroller of
Public Accounts filed notices of motor fuels taxes on May 11, 1992.
It served "freeze" notices on Western on May 22 for a total of
$205,011.59, the balance of fuels taxes then due the state. On
that day the account had about $1.7 million on deposit.
Later that month, 3B and Enron settled litigation arising out
of their business dealings. As part of the settlement, Enron
waived any lien it had on the lockbox account, and 3B became
immediately entitled to collect all the money in the account.
Enron then released the account leaving only the $205,011.59
claimed by the state on deposit on May 26, 1992.
On June 4, the IRS served a notice of levy on Western stating
it had assessed a total of $1,932,221.13 against 3B. Faced with
conflicting claims to the same account, the bank filed an
interpleader action in July 1992 in state court and the IRS removed
to federal court. Both sides moved for summary judgment and in
January of 1993 the district court ruled for the IRS.
II.
The accounts receivable generated by 3B's sales to customers
created rights under state law that constituted "property" under
the Internal Revenue Code. See, e.g., United States v. Bank of
Celina, 721 F.2d 163, 167 (6th Cir. 1983). A federal tax lien
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attached to this property on September 16, 1991, when the IRS made
its first assessment against 3B.2 See 26 U.S.C. � 6322. That
property remained subject to the IRS lien after the negotiation of
the lockbox arrangement with Enron. See United States v. Bess, 357
U.S. 51, 57 (1958) ("[I]t is of the very nature and essence of a
lien, that no matter into whose hands the property goes, it passes
cum onere.").
Once a tax lien attaches, the question of its priority against
other liens is determined by the rule that "the first in time is
the first in right." To defeat the federal lien under these
circumstances, the competing state lien must have been "perfected"
before the federal lien was assessed on September 16, which means
that the identity of the lienor, the property subject to the lien,
and the amount of the lien must have been established before
September 16. United States v. McDermott, 113 S.Ct. 1526, 1528
(1993); United States v. New Britain, 347 U.S. 81, 86 (1954).
Since no evidence in the record shows the existence of a state
claim prior to the notices filed on May 11, 1992, the federal lien
has priority.
The state contends that Enron had a prior-perfected security
interest in those accounts receivable. As a result, the state
argues, the IRS lien was "not . . . valid" since the IRS did not
file public notice about its lien until almost a year after Enron
entered the arrangement. See 26 U.S.C. � 6323(a). This contention
2As the first lien involved an assessment of $235,145.91,
more money than the account held when the levy was served, we do
not analyze the strength of the other liens.
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fails for two reasons. First, section 6323(a) governs lien
priority in a dispute with a secured creditor; it does not address
the creation or elements of a lien. The lien existed even if Enron
had priority over the IRS for a period of time. Second, Enron had
no such priority when the IRS levied, as Enron released all of its
interest in the account in favor of 3B on June 1, three days before
the levy.
The state next contends that its claim enjoys the
"superpriority" status of 26 U.S.C. � 6323. Section 6323 provides
that a lien is not valid against the purchaser of a security who
lacked actual knowledge of the lien at the time of purchase. 26
U.S.C. � 6323(b)(1)(A). The state contends that since "money" is
a security, it qualified as a purchaser of a security by serving a
freeze notice on the bank. See 26 U.S.C. � 6323(h)(4).
This argument, inventive as it is, has two flaws. First,
Texas is not a purchaser. A "purchaser" is one who for adequate
and full consideration acquires an interest in property. 26 U.S.C.
� 6323(h)(6). We see no exchange of consideration in the
collection of tax revenue. Further, Congress has established a
superpriority for real property tax and special assessment liens.
26 U.S.C. � 6323(b)(6). The decision to go further and establish
another superpriority for state fuel taxes is a decision for
Congress rather than this court. See William T. Plumb, Jr.,
Federal Liens and Priorities--Agenda for the Next Decade III, 77
Yale L.J. 1104, 1108 (1968) (noting that "[f]urther study might
lead to the conclusion that additional superpriorities may deserve
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federal recognition" in the area of "sales, gasoline, and other
taxes collected from the consumer").
Lacking a foundation for a superpriority in federal law, the
state next seeks one in Texas law. It cites a Texas statute
requiring the collectors of fuels taxes to hold them in trust for
the state. Tex. Tax Code Ann. � 111.016 (Vernon 1992). See also
Dixon v. State, 808 S.W.2d 721, 723 (Tex. App.-Austin 1991, writ
dism'd w.o.j.). It argues that the IRS lien could not attach to
funds in the lockbox account collected to pay fuel taxes, as those
funds were being held in trust for the state. See Aquilino v.
United States, 363 U.S. 509, 515 (1960).
Congress has not given state sales taxes the superpriority
under the Internal Revenue Code enjoyed by state property taxes,
and we are not persuaded that the Texas legislature has either.
However the state characterizes its claim for sales taxes, the
first-in-time rule determines the priority of conflicting state and
federal claims for taxes when a section 6323 provision does not
apply. See United States v. Vermont, 377 U.S. 351, 358-59 (1964);
In re Thriftway Auto Rental Corp. v. Herzog, 457 F.2d 409, 413 (2d
Cir. 1972) (both looking to the New Britain test to determine
priority of conflicting liens rather than state or local lien
characterization). See also Michael I. Saltzman, IRS Practice and
Procedure � 16.04[2][f], at 16-35 (2d ed. 1991) ("Obviously,
significant state and local taxes, such as state and local . . .
sales taxes, are not covered by the [� 6323(b)(6)] superpriority.
Liens for these taxes, even if the lien has arisen before the
6

federal tax lien, must qualify as `choate' liens . . . .").
Assuming that Enron acted as a collector of fuels taxes, triggering
the Texas statute, the federal claim has priority because Texas's
equitable interest did not arise until after the IRS asserted its
interest by assessing 3B on September 16, 1991. See State v. Bar
Coat Blacktop, Inc., 640 F.Supp. 407, 411-12, 415-16 (W.D. Wisc.
1986) (federal tax lien had priority over later-arising state's
equitable lien for tax liability).
The state directs us to bankruptcy law to support its trust
fund argument. The cases it cites address various threshold
questions under bankruptcy law, such as the dischargeability of a
state claim for fuel taxes or whether money collected for payment
of fuel taxes falls within the debtor's estate. See, e.g., Matter
of Al Copeland Enterprises, 991 F.2d 233, 235 (5th Cir. 1993); In
re Avant, 110 B.R. 264, 265 (Bankr. W.D. Tex. 1989). The inquiry
in this case takes place a step later, after the court has
identified the nature of the state's claim, and asks about the
priority of that claim relative to a federal one. The state cites
no bankruptcy cases speaking to that separate issue.
AFFIRMED.
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