In Lombardo, supra, this Court affirmed per curiam a decree upon the opinion of President Judge HOBAN of the Court of Common Pleas of Lackawanna County.Summary of this case from Quaker State Oil Ref. Corp. v. Lansberry
April 14, 1947.
May 7, 1947.
Unemployment compensation — Delinquent contributions — Liens — Effectiveness — Personal property of employer — Bona fide purchaser for value without actual notice — Execution — Unemployment Compensation Law.
The lien of the Commonwealth for delinquent unemployment compensation contributions, entered pursuant to the provisions of section 308.1 of the Unemployment Compensation Law of December 5, 1936, P. L. (1937) 2897, as amended, is not effective against the personal property of the delinquent employer which is transferred to a purchaser for value without actual notice of the lien prior to the time that execution on the lien is placed in the hands of the sheriff.
Argued April 14, 1947.
Before MAXEY, C. J., DREW, LINN, STERN, PATTERSON, STEARNE and JONES, JJ.
Appeal, No. 31, Jan. T., 1947, from decree of C. P., Lackawanna Co., Sept. T., 1946, No. 1018, in case of Commonwealth, Department of Labor and Industry to use of Unemployment Compensation Fund v. Rose Lombardo. Decree affirmed.
Case stated. Interpleader proceeding.
The facts are stated in the opinion, by HOBAN, J., of the court below, as follows:
Rose Lombardo, interpleader plaintiff, claimed an automobile which had been seized by the Sheriff of Lackawanna County in an execution upon a judgment obtained upon a Commonwealth lien. The facts are undisputed. To eliminate any procedural questions, the parties have agreed upon a case stated, which is now before us.
The facts are as follows: Patsy Lombardo, an individual employer, became delinquent in his payment of contributions to the Unemployment Compensation Fund required by the Unemployment Compensation Law, Act of December 5, 1936, P. L. (1937) 2897, 43 PS 752, et seq., as amended. Under the provisions of section 308.1 of the Unemployment Compensation Law the Commonwealth entered its lien for the unpaid contributions and interest thereon in the office of the Prothonotary of Lackawanna County on October 31, 1942. The lien was prosecuted to judgment on December 15, 1943.
At the time the lien was entered Patsy Lombardo owned an automobile. On January 18, 1946, Patsy Lombardo transferred the ownership of the automobile to Rose Lombardo, interpleader plaintiff. The bona fides of the transfer is not questioned. A fi. fa. on the judgment against Patsy Lombardo issued May 8, 1946, and the Sheriff was directed to seize the automobile in the possession of Rose Lombardo.
The question for decision is presented in the case stated as follows:"Question
If the Court be of the opinion that
The Commonwealth cannot enforce its lien for delinquent unemployment compensation contributions, entered pursuant to the provisions of section 308.1 of the Pennsylvania Unemployment Compensation Law, against personal property thereafter transferred by the delinquent employer to a third person, the judgment shall be entered in favor of the interpleader plaintiff, but if the Court be of the opinion that
The Commonwealth can enforce its lien for delinquent unemployment compensation contributions, entered pursuant to the provisions of section 308.1 of the Pennsylvania Unemployment Compensation Law, against personal property thereafter transferred by the delinquent employer to a third person, then judgment shall be entered in the sum specified in the fi. fa. in the Sheriff's possession in favor of the interpleader defendant. Costs to follow the judgment."
The case seems to be one of first impression in Pennsylvania and only one similar case decided by any Appellate Court of the United States has been brought to our attention. However, we think the matter can be satisfactorily analyzed by a scrutiny of the provisions of the Unemployment Compensation Law, the principles of statutory construction and our general rules applicable to executions against personal property as they have remained in our law for over a century.
The provisions of the Unemployment Compensation Law under which the Commonwealth claims its right to execution upon the automobile is as follows:
"All contributions and the interest and penalties thereon due and payable by an employer under the provisions of this act shall be a lien upon the franchises and property, both real and personal, of the employer liable therefor, from the date a lien for such contributions, interest and penalties is entered of record in the manner hereinafter provided. Whenever the franchises or property of an employer is sold at a judicial sale, all contributions and the interest and penalties thereon thus entered of record shall first be allowed and paid out of the proceeds of such sale in the same manner and to the same extent that State taxes are paid: Provided, however, That the lien hereby created shall not be prior to pre-existing duly recorded real estate mortgages. The department may at any time transmit to the prothonotaries of the respective counties of the Commonwealth, to be by them entered of record, certified copies of all liens for unpaid contributions, interest and penalties which may now exist or hereafter arise, upon which record it shall be lawful for writs of scire facias to issue and be prosecuted to judgment and execution in the same manner as such writs are ordinarily employed. 1936, Second Ex. Sess., Dec. 5, P. L. (1937) 2897, Article III, section 308.1, added 1942, Ex. Sess., April 23, P. L. 60, section 4; as amended 1945, May 29, P. L. 1145, section 7." 43 PS section 788.1 (Underscoring [italics] ours).
In construing this statute, the following principles are of importance:
"Every law shall be construed if possible, to give effect to all its provisions. . . .
"Where the words of a law are not explicit, the intention of the Legislature may be ascertained by considering, among other matters, . . . (6) the consequences of a particular interpretation."
Statutory Construction Act, section 51, Act of May 28, 1937, P. L. 1019, 46 PS section 551.
". . . In ascertaining the intention of the Legislature in the enactment of a law, the courts may be guided by the following presumptions among others:
(1) That the Legislature does not intend a result that is absurd, impossible of execution or unreasonable.
(2) That the Legislature intends the entire statute to be effective and certain. . . ."
Statutory Construction Act, section 52, supra.
The position of the Commonwealth may be stated as follows: The automobile in question at the time of the filing of the lien was a part of the personal property of the employer liable for the unpaid contributions; hence was subject to the lien. The filing of the lien was constructive notice to all transferees or vendees of the existence of the lien. Therefore, whether or not the transferee was otherwise a purchaser for value without notice of any encumbrance against the personal property, she is nevertheless bound by the constructive notice and in that sense cannot claim to be a purchaser for value without notice.
The position of the interpleader plaintiff is that executions against personal property are governed by the provisions of the Act of June 16, 1836, P. L. 755, section 39, 12 PS 2291, to the effect that no writ of fi. fa. or other execution shall bind the goods of the person against whom such execution is issued until the writ shall be delivered to the sheriff. Furthermore, that The Vehicle Code with its provisions for entering liens on the title of automobiles is the only recognized way that a lien against an automobile may be established, in addition to the procedure under the Act of 1836.
Now, considering the language of section 308.1 of the Unemployment Compensation Law, so far as it affects personal property, how can we give effect to its provisions? The words of the first sentence clearly indicate an intention to impress a lien on personalty in the hands of the employer at the time. But since liens are not self-executing, the section proceeds to provide for collection by providing that ". . . it shall be lawful for writs of scire facias to issue and be prosecuted to judgment and execution in the same manner as such are ordinarily employed".
But "such writs" are "ordinarily employed" in the manner prescribed in the Act of 1836.
"No writ of fieri facias or other writ of execution, shall bind the property or the goods of the person against whom such writ of execution is sued forth, but from the time such writ shall be delivered to the sheriff, under sheriff, or coroner, to be executed." Act of June 16, 1836, P. L. 755, section 39, 12 PS 2291.
To the extent that the last sentence of section 308.1 as to collection procedure is in conflict with the intent of the first sentence, there is an ambiguity as to the effectiveness of the lien so far as it binds personal property.
We now examine the consequences of the particular interpretation proposed by the Commonwealth, to wit, that the lien from the date of its entry binds all personal property of the employer, even against a bona fide purchaser without notice other than such constructive notice as may be provided by the entry of the lien in the Prothonotary's office.
At the argument the Court proposed this question: Suppose a department store sold a hat to a customer when at the time the store proprietor had a lien recorded against it as provided by the Unemployment Compensation Law, could the hat be taken from the customer on an execution following a judgment on the lien? Commonwealth's Counsel thought such was the exact meaning and intent of the law. If that is the meaning of the law, then no one could be assured of a good title to any item of personal property purchased from an employer of labor unless he first demanded proof of the employer's compliance with the contribution provisions of the Unemployment Compensation Law, or, so to speak, "searched the title to the hat". No such restriction on the alienation of personal property has existed in our law, and in view of the evident recognition of familiar processes of execution in the last sentence of section 308.1, we cannot conceive that the Legislature intended by this provision to "bind the goods" of the employer before the sheriff has the fi. fa. in his hands. If we are to read such an intent into the law, it would seem that the language of the act should state clearly and unequivocally its purpose to limit one of the incidents of ownership or personalty, that is, its freedom of alienation by transfer of possession.
That the Legislature has the power to place restrictions on the alienation of personal property is not questioned. It has done so effectively in many ways. For example, the Sales in Bulk Act and the Conditional Sales Act substantially restrict the right to contract for and dispose of personal property under specific situations. But, if the application of the law as proposed by the Commonwealth is followed to its logical conclusion, it would result in a complete upset in the law of sales of personal property. There is nothing so sacred about either the ownership of personal property or the method of its transfer that it could not be controlled by appropriate Acts of the Legislature to provide for the common welfare. Pure Food Laws, Milk Control statutes and other similar enactments do just that, but Acts of the Legislature to bring about such results must be clear and specific in their language so that there is no room to doubt the clear intent of the Legislature.
The provision of the Statutory Construction Act that the Legislature does not intend a result that is absurd, impossible of execution or unreasonable, is an aid in the construction of section 308.1.
We have used the illustration of the hat sold in the normal course of trade by an employer, subject to a lien, as an instance of what might be expected if the Commonwealth's interpretation of the Act is correct. The absurdity of the application of the Act in such a situation is apparent and the impossibility of following such goods by execution process is apparent. We presume that the Legislature did not intend any such result. Legislatures can, and sometimes do, pass laws which by their clear language direct results which seem to be absurd to the mind of observers, citizens and judges, or which in operation prove to be impossible of execution, but unless it is clearly apparent that the language of the Act intends such results, we cannot presume them. The Prohibition Laws proved to be impossible of execution, in some places fell by their own weight and finally were repealed, but there is no question about the clear intent or meaning of such laws.
Section 64 of the Statutory Construction Act provides: "Except as provided in section sixty-three whenever, in the same law, several clauses are irreconciliable, the clause last in order of date or position shall prevail."
So far as the last sentence of section 308.1 is in conflict with the first sentence of the section, it must prevail. Since writs of execution against personal property are ordinarily employed as provided by the Act of 1836, they become effective only as provided in that Act, that is, from the time the fi. fa. is delivered into the hands of the sheriff the "goods are bound".
The Commonwealth has cited the case of Fleck v. Iowa Employment Security Commission, Supreme Court of Iowa, 8 N.W.2d 703, as the only case decided by a Court of last resort in this country directly on the point at issue. In that case the lien for unemployment security tax due under the Iowa Unemployment Compensation Act was filed against an automobile dealer. Subsequently he sold some automobiles and the Iowa Supreme Court held that the automobiles so sold were subject to the existing lien and could be followed to the purchasing company, even though he had paid value therefor. However, a study of the case reveals that the point argued in the case before us was neither argued nor involved in the decision of the Iowa Supreme Court. In the first place the Iowa statute contains this language: " 'In order to preserve the aforesaid lien against subsequent mortgagees, purchasers or judgment creditors, for value, and without notice of the lien, on any property situated in the county, the commission shall file with the recorder of the county in which said property is located, a notice of said lien, etc.' "
Here we find a clear intention on the part of the Legislature to bind purchasers for value and without notice, an intention expressed so forcibly that there can be no mistake or ambiguity involved. No such language appears in the Pennsylvania statute. The Iowa Court considered that the filing of the lien in the manner prescribed by the statute was constructive notice to the purchaser of the tax lien against the employer, and the particular question involved in the case was whether or not the formalities required by the Act had been accurately completed, so that the filing of the lien was in fact effective to furnish notice to such purchasers. In view of the express language of the Iowa statute, regardless of the absurd results that might ensue or the uneven enforcement bound to result as to different classes of personal property, it is difficult to see how the Iowa Court could have arrived at any other decision. But the Pennsylvania Act contains no such language, and under the principles of statutory construction we are unable to read such language into the statute.
In the case at Bar we may assume that the filing of the lien in the office of the Prothonotary is sufficient constructive notice to anyone who ought to be bound thereby. Certainly under our system of recording of conveyances of real estate, any prospective purchaser of realty from the employer would have notice of the lien.
But the real question here is whether an innocent purchaser of personal property ought to be bound by such notice as is afforded by the filing of the lien. As we have analyzed the law, under the principles of statutory construction, our answer is no.
The Commonwealth has cited a number of cases from other jurisdictions on the question of the efficiency of the various forms of statutory liens to bind personal property.
Beall v. White, 94 U.S. 382, is cited for the proposition that it was not necessary for the Commonwealth to have had actual possession of the personal property in question in order to assert its right to subject it to legal process. There is no quarrel with that proposition. As a matter of fact, our own procedure in executions binds personalty as soon as the fi. fa. is delivered to the hands of the sheriff, even before actual levy. Under the facts in Beall v. White, the case might also be taken as contrary to the Commonwealth's position, since the Court decided that whatever lien was impressed on the personal property in question was lost by a sale in the ordinary course of trade.
The case of Rodgers v. Gaines, 73 Ala. 218, turned upon a question of jurisdiction, and the "innocent purchaser" lost his case because he had obtained his judgment for the property in a minor Court without jurisdiction of the amount in controversy.
The case of Crawford v. Koch, 169 Mich. 322, 135 N.W. 339, turns upon the peculiar provisions of the Michigan tax laws and the Detroit city charter, and the plaintiff in the case, under the facts therein, could not be held in any sense to be a so-called innocent purchaser. The Michigan General Tax Law actually exempted from the pertinent provisions under which the lien was impressed upon the goods in question any property actually sold in the regular course of trade.
In a subsequent Michigan case, In re Ever Krisp Food Products Co., 307 Mich. 182, 11 N.W.2d, page 852, Crawford v. Koch, supra, was cited for the proposition that personal property found in the hands of a subsequent bona fide purchaser, which was subject to a tax lien in the hands of the tax debtor, may be distrained and that such a purchaser, although in good faith, takes the property subject to the tax lien. From a careful examination of Crawford v. Koch, we cannot read that meaning into the decision.
We cannot agree with the contention of the interpleader plaintiff that the only way to impress a lien on a motor vehicle owned by a Pennsylvania resident is by securing some record of the lien under the titling provisions of The Vehicle Code. Act of May 1, 1929, P. L. 905, section 201 et seq., as amended, 75 PS section 31, et seq.
The Vehicle Code provides for a notation upon certificates of title of such liens or encumbrances which the applicant for the title may show to be thereon, and for the delivery of such certificates of title to holders of liens in priority as established by such information as is submitted to the Department of Revenue in the application. But we see no provision in The Vehicle Code for the recording of a lien by any person not somehow connected with the routine of transfer of possession of a vehicle. Even the notation of such liens does not create any ownership or right of possession in the creditor named, and a lien so noted does not have any priority over a pledge of the vehicle to a garage proprietor who has furnished service and repairs to the vehicle and holds the vehicle as security for payment. Equitable Credit Co. v. Stephany, 155 Pa. Super. 261.
The amendment to The Vehicle Code of June 27, 1939, P. L. 1135, section 1, provided that certificates of title showing lien or encumbrance shall be adequate notice to the Commonwealth, creditor and purchasers that a lien against the motor vehicle, etc., and failure to transfer possession of the vehicle, etc., shall not invalidate said lien or encumbrance. 75 PS section 33. Prior to the amendment of 1939 it was held that the notation of a so-called encumbrance upon a certificate of title did not create a lien upon the automobile which would be good as against bona fide purchasers, creditors or subsequent pledgees. In a case considering the provisions of The Vehicle Code as it stood before the amendment of 1939, the Superior Court made this significant statement: "The act did not contemplate a new kind of statutory lien on automobiles valid in the absence of delivery of possession. In Pennsylvania, there has never been any way a lien could be created upon personal property without delivering possession and, if an exception was intended under the act with respect to automobiles, such intention should be clear and unambiguous." (Italics ours.) Ambler National Bank v. Maryland Credit Finance Co., 147 Pa. Super. 496.
The case just cited went on to say that The Vehicle Code, including the provisions for the notation of encumbrances in titles by the mere issuance of a Pennsylvania certificate of title, did not charge a creditor with notice. The amendment of 1939, providing that notice of such encumbrances should be notice to the Commonwealth, creditors and purchasers was no doubt brought about because of the judicial construction as to the failure of the law to provide adequate notice to creditors, purchasers and others, and does state in clear and unambiguous language what Ambler National Bank v. Maryland Credit Finance Co., supra, says the law should state if it intends to work an exception to the usual Pennsylvania law with reference to liens against personal property. But even so, the language of The Vehicle Code only provides that the notation of such liens as are brought to the attention of the Department of Revenue by the applicant for the title shall provide such notice. It does not provide in any way for the creation or validity of other liens, or provide or require a method of recording. Hence, if the Commonwealth, under the Unemployment Compensation Law, can establish a valid lien against an employer who possesses an automobile as his personal property, the lien is valid regardless of The Vehicle Code.
But as we have seen, the language of section 308.1 of the Unemployment Compensation Law is not in our opinion effective to establish a lien against the personal property of an employer so as to prevent its transfer to a bona fide purchaser for value prior to the time that the writ of fieri facias, the first step in the execution process, is placed in the hands of the sheriff.
This opinion is based solely on the admitted fact that the transfer of the automobile in question to the interpleader plaintiff was a bona fide transfer; hence the question in the case stated must be answered with that qualification.
We, therefore, answer the question proposed in the case stated as follows:
The Commonwealth cannot enforce its lien for delinquent Unemployment Compensation contributions, entered pursuant to the provisions of section 308.1 of the Pennsylvania Unemployment Compensation Law, against personal property thereafter transferred by the applicant employer to a third person who is a bona fide transferee for legal value without actual notice of the filing of a lien as provided by section 308.1.
Accordingly, the interpleader plaintiff is entitled to judgment.
Now, August 12, 1946, the Prothonotary is directed to enter judgment in favor of the interpleader plaintiff for the automobile levied on by the Sheriff.
Morley W. Baker, Special Deputy Attorney General, with him T. McKeen Chidsey, Attorney General, and David R. Perry, Special Deputy Attorney General, for appellant.
James G. Colleran, with him Joseph T. Kelly, for appellee.
The decree is affirmed on the opinion of Judge HOBAN of the court below; costs to be paid by the appellant.