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United States Court of Appeals,
Fifth Circuit.
No. 95-10604
Summary Calendar.
In The Matter of Walter G. SILLS; Joyce K. Sills, Debtors.
Walter G. SILLS; Joyce K. Sills, Appellants,
v.
UNITED STATES of America, DEPARTMENT OF TREASURY; Internal
Revenue Service, Appellees.
May 3, 1996.
Appeal from the United States District Court for the Northern
District of Texas.
Before JOLLY, JONES and STEWART, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
Walter G. Sills and his wife, Joyce K. Sills, debtors in a
Chapter 13 bankruptcy case, appeal the district court's affirmance
of the bankruptcy court's judgment in favor of the Internal Revenue
Service (the "IRS") in an adversary proceeding challenging the
validity of a tax lien attached to the Sills' house. The Sills
purchased the house with workers' compensation proceeds from an
injury sustained by Walter Sills. We affirm.
I
In 1990, Walter Sills received $180,000 in workers'
compensation proceeds as a result of injuries suffered from a fall
while working on an oil platform. The Sills used the proceeds to
make several purchases, including a house in Dallas County, Texas.
On September 9, 1991, the IRS filed a notice of federal tax lien
1

("NFTL") on the Sills' house in the office of land records of
Dallas County, listing the following federal tax and penalty
liabilities against Walter Sills:
Kind of Tax
Tax Period Ended
Date of Assessment
U n p a i d
Balance
6672
12/31/83
09/02/85
$ 2,001.06
1040
12/31/80
10/13/86

15,204.31
1040
12/31/81
02/23/87

14,863.23
1040
12/31/86
10/13/86

10,312.59
----------
On September 12, 1991, the Sills filed a petition in
bankruptcy for relief under Chapter 7 of the Bankruptcy Code. In
January 1992, the case was converted to a proceeding under Chapter
13. The IRS filed an amended proof of claim in the bankruptcy
proceeding asserting a secured claim for the unpaid taxes and the
penalty specified in the NFTL, and additional penalties and
interest.1 The Sills objected to the IRS' proof of claim and
commenced an adversary proceeding challenging the IRS's lien. The
parties filed a stipulation of facts in which the Sills agreed
"with the Income taxes, interest and penalties for 1980, 1981,
1983." The Sills contended, inter alia, that (1) the portion of
the lien for Walter Sills' 1983 tax year liability was invalid
because it erroneously indicated that the liability was for the
1986 tax year and (2) the tax lien was invalid or unenforceable
1The IRS sought to assert its claim only against Walter
Sills' one-half interest in the house, which he owned as
community property with his wife.
2

because property purchased with workers' compensation benefits is
exempt from levy under I.R.C. � 6334(a)(7). They also claimed that
the IRS was required to release the lien pursuant to I.R.C. �
6325(a)(1), or discharge the property from the lien pursuant to
I.R.C. � 6325(b)(2)(B), because the lien was invalid or
unenforceable.
The bankruptcy court ultimately ruled that the Sills were
barred from challenging the validity of the portion of the lien for
1983 taxes because of their stipulation concerning income tax
liability for 1983. It also ruled that Walter Sills' interest in
the house the Sills purchased with his workers' compensation
proceeds was not exempt from levy under I.R.C. � 6334(a)(7).2
On appeal, the district court affirmed the bankruptcy court's
holding that the house was not exempt from levy. In a separate
opinion issued in response to the
Sills'
motion for
reconsideration, the district court noted that it had omitted
discussion of the Sills' claim regarding the validity of the tax
lien for the 1983 tax liability. The district court ruled that the
bankruptcy court committed error when it viewed the Sills'
stipulation on Walter Sills' 1983 tax liability as a stipulation on
the validity of that portion of the tax lien. The district court
held, however, that the error in the NFTL was a "minor defect in
the notice" and thus did not render the tax lien for that year
2The court analogized from two Supreme Court decisions
concerning tax levies involving proceeds from the World War
Veterans' Act. See Trotter v. State of Tennessee, 290 U.S. 354,
54 S.Ct. 138, 78 L.Ed. 358 (1933); Lawrence v. Shaw, 300 U.S.
245, 57 S.Ct. 443, 81 L.Ed. 623 (1937).
3

void. The Sills filed a timely notice of appeal.
II
A
We initially address whether that portion of the NFTL
covering Walter Sills' liability for the 1983 tax year constitutes
a "properly filed" notice of a tax lien under section 522(c)(2)(B)
of the Bankruptcy Code.3 The district court's holding that the
NFTL constituted a proper filing under � 522(c) is reviewable de
novo. Matter of Walden, 12 F.3d 445, 448 (5th Cir.1994). The
Sills argue that the NFTL did not constitute a "properly filed"
notice of the Walter Sills' tax liability stemming from the 1983
tax year because the NFTL incorrectly identified 1986 as the tax
year giving rise to the liability.
Section 6323 of the Internal Revenue Code states that a lien
shall not be valid "as against any purchaser, holder of a security
interest, mechanic's lienor, or judgment lien creditor until notice
thereof which meets the requirements of subsection (f) has been
filed by the Secretary." I.R.C. � 6323(a) (1994). Subsection (f)
provides, inter alia, that "[t]he form and content of the notice
... shall be prescribed by the Secretary." I.R.C. � 6323(f)
(1994). The applicable IRS regulation requires that the lien
3Property that the debtor elects to exempt from the
bankruptcy estate pursuant to 11 U.S.C. � 522 is not liable
during or after the case for any debt that arose before the
commencement of the case. An exception to this rule is for "a
tax lien, notice of which is properly filed." 11 U.S.C. �
522(c)(2)(B) (1994). The Sills apparently have elected to exempt
the house from the bankruptcy estate under 11 U.S.C. �
522(d)(10)(C).
4

specify: (1) the taxpayer, (2) the tax liability giving rise to
the lien, and (3) the date that the assessment arose. 26 C.F.R. �
301.6323(f)-1(d)(2) (1995). Although the NFTL at issue in this
case incorrectly identified 1986, instead of 1983, as the tax year
of the liability giving rise to the lien, the NFTL was filed in the
proper place and correctly identified the taxpayer, the property
and its location, the amount owed, and the date of the assessment.
We agree with the district court that such a minor defect in the
notice is insufficient to render it void. See Richter's Loan Co.
v. United States, 235 F.2d 753, 755 (5th Cir.1956); In re Cennamo,
147 B.R. 540, 543 (Bankr.C.D.Cal.1992) ("The purpose of the NFTL is
to give constructive notice, and where there is such notice, a
minor defect in filing will be overlooked").
B
We now consider the validity of the tax lien on the house in
the light of the fact that the Internal Revenue Code exempts from
levy "any amount payable to an individual as workmen's
compensation." I.R.C. � 6334(a)(7) (1994). The Sills' underlying
theory of the case is that, because of the � 6334(a)(7) exemption
from levy, the house has no value to the IRS and, thus, the house
meets the criteria for discharge from the lien under I.R.C. �
6325(b)(2)(B),4 or, alternatively, that the underlying tax
liability is unenforceable and, thus, the lien meets the criteria
4"[T]he Secretary may issue a certificate of discharge of
any part of the property subject to the lien if the Secretary
determines at any time that the interest of the United States in
the part to be so discharged has no value." I.R.C. �
6325(b)(2)(B) (1994).
5

for release under I.R.C. � 6325(a)(1).5 The Sills argue that the
district court erred in affirming the bankruptcy court's judgment
that the exemption from levy under � 6334(a)(7) does not extend to
property purchased for maintenance and support with workers'
compensation proceeds.
We need not determine the reach of the exemption provided by
� 6334(a)(7). See Sojourner T. v. Edwards, 974 F.2d 27, 30 (5th
Cir.1992) (court may affirm judgment on any basis supported by the
record), cert. denied, 507 U.S. 972, 113 S.Ct. 1414, 122 L.Ed.2d
785 (1993). As the courts have held in United States v. Barbier,
896 F.2d 377 (9th Cir.1990), and Matter of Voelker, 42 F.3d 1050
(7th Cir.1994), whether property is exempt from levy is not
determinative of the validity or enforceability of a tax lien on
property. The court in Barbier explained that a lien "is merely a
security interest and does not involve immediate seizure" whereas
a levy "operates as a seizure by the IRS." 896 F.2d at 379. The
court further explained, "A lien enables the taxpayer to maintain
possession of protected property while allowing the government to
preserve its claim should the status of the property later change."
Id. The court concluded, "Reading sections 6334 and 6321 together
leads to the conclusion that the former section is a limitation on
the government's ability forcibly to seize the taxpayer's property,
but not a bar to the government's ability to assert a security
5"[T]he Secretary shall issue a certificate of release of
any lien ... not later than 30 days after the day on which [t]he
Secretary finds that the liability ... has become legally
unenforceable." I.R.C. � 6325(a)(1) (1994).
6

interest in such property." Id.
Even if the Sills' house were exempt from levy, the tax lien
still may be valid and enforceable. For example, the IRS may
enforce the lien by foreclosure action under I.R.C. � 7403; it may
seek to have its lien satisfied in proceedings, instituted by third
parties, in which the IRS is brought pursuant to 28 U.S.C. � 2410;
or it may exercise redemption rights provided by I.R.C. � 7425(d)
if another party forecloses on the property. The Sills' arguments
that the lien has no value, necessitating discharge of the property
under � 6325(b)(2)(B), or that the underlying tax liability is
unenforceable, necessitating release of the lien under �
6325(a)(1), are thus meritless.6
III
For the foregoing reasons, we AFFIRM the judgment of the
district court.
AFFIRMED.

6The Sills' alternative claim under section 502(b)(1) of the
Bankruptcy Code that the tax liabilities are not an allowable
claim because the tax lien is "unenforceable" is also meritless.
7