58.1-3942 - Security interests no bar to distress.
§ 58.1-3942. Security interests no bar to distress.
A. No security interest in goods or chattels shall prevent the same frombeing distrained and sold for taxes or levies assessed thereon, no matter inwhose possession they may be found.
B. Prior to such sale for distress, the treasurer, sheriff, constable orcollector, or other party conducting the sale shall give notice to anysecured party of record as his name and address shall appear on the recordsof the Department of Motor Vehicles, the Department of Game and InlandFisheries, the State Corporation Commission, or in the office of the clerk ofany circuit court where the debtor has resided to the knowledge of the partyto whom the tax is owing during a one-year period prior to the sale. Noticeshall also be given to any secured party of whom the party to whom the tax isowing shall have knowledge.
C. A security interest perfected prior to any distraint for taxes shall havepriority over all taxes, except those specifically assessed either per itemor in bulk against the goods and chattels so assessed. Taxes specificallyassessed either per item or in bulk against goods and chattels shallconstitute a lien against the property so assessed and shall have priorityover all security interests. For purposes of this section, a merchant'scapital tax shall be deemed to be specifically assessed against all inventoryin the merchant's possession at the time of distraint, or at the time suchinventory is repossessed by the holder of a security interest therein. Forpurposes of this section, taxes specifically assessed in bulk means anassessment against the specific class of property distrained.
D. The title conveyed to the purchaser of goods and chattels at a sale fortaxes specifically assessed either per item or in bulk against such goods andchattels distrained shall be free of all claims of any creditor, includingthe claims of any secured party of record, provided that notice was given tosuch creditor as required by subsection B. The person conducting the saleshall apply the proceeds of the sale first to unpaid taxes and then theclaims of secured parties of record, in the order of their priority, beforedelivering any sum remaining to the person or estate assessed with taxes.
E. Notwithstanding any provision of this section to the contrary, no highwayvehicle as defined in § 58.1-3941 purchased by a bona fide purchaser forvalue from the person or estate assessed with taxes shall be liable to levyor distress for such taxes unless the purchaser knew at the time of purchasethat the taxes had been specifically assessed against such vehicle.
(Code 1950, § 58-1009; 1966, c. 559; 1981, c. 153; 1983, c. 498; 1984, c.675; 1990, c. 553; 1996, c. 732; 1997, c. 731; 1999, c. 299; 2001, c. 801;2005, c. 59.)