Deed of Trust Trumped IRS Lien

After Restivo Auto Body Inc. filed for bankruptcy, a disagreement between Susquehanna Bank and the IRS began over which had a priority interest over the other. The bank had an executed deed of trust as of January 4, 2005 and recorded security interest as of February 11, 2005. In the interim time between the two actions by the bank, the IRS filed a federal tax lien on January 10, 2005. The bank was granted priority in both bankruptcy and district court and the IRS appealed.

In In re: Restivo Auto Body, Inc., the 4th Circuit held that while under Maryland statute the bank did not have priority because they recorded second, under Maryland common law the bank qualified as a bona fide purchaser and thus the bank’s deed of trust had priority over the IRS’s lien.

See, In re: Restivo Auto Body, Inc.: 4th Circuit Rules Executed but Unrecorded Security Interest Has Priority Over IRS Tax Lien, McGuireWoods, Nov. 17, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.