United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT

                                 ___________

                                 No. 01-2962
                                 ___________

In re: Nerland Oil, Inc.              *
                                      *
------------------------------        *
                                      *
Superpumper, Inc.,                    *
                                      *
        Claimant-Appellant,           *
                                      *
        v.                            * Appeal from the United States
                                      * District Court for the
Nerland Oil, Inc.,                    * District of North Dakota
                                      *
        Debtor-Appellee.              *
                                      *
United States of America through      *
The Internal Revenue Service,         *
                                      *
        Creditor-Appellee.            *
                                 ___________

                            Submitted: April 16, 2002

                                Filed: September 12, 2002
                                 ___________

Before McMILLIAN, BOWMAN and MURPHY, Circuit Judges.
                         ___________

McMILLIAN, Circuit Judge.
       In this Chapter 7 bankruptcy matter filed by the debtor Nerland Oil, Inc.
(“Nerland Oil”), Superpumper, Inc. (“Superpumper”) appeals from a final order
entered in United States District Court for the District of North Dakota1 affirming the
bankruptcy court’s2 grant of summary judgment in favor of the United States, through
the Internal Revenue Service (“IRS”), on the ground that federal tax liens previously
assessed by the IRS against Nerland Oil took priority over a North Dakota state court
judgment affirming an arbitration award enabling Superpumper to setoff its debt to
Nerland Oil. See In re Nerland Oil, Inc., No. A3-01-05 (D.N.D. June 13, 2001)
(memorandum and order). For reversal, Superpumper argues that the district court
erred in determining that (1) Superpumper did not complete a valid setoff under state
law in 1996, (2) unfiled federal tax liens prevented Superpumper’s setoff of debt, and
(3) Superpumper could not assert the same defenses against the IRS as it could
against Nerland Oil. For the reasons discussed below, we affirm the order of the
district court.

                                     Jurisdiction

       Jurisdiction in the bankruptcy court was proper based upon 28 U.S.C. § 157(b)
(transferring jurisdiction of cases arising in or related to Title 11 from district court
to bankruptcy court), pursuant to 28 U.S.C. § 1334 (providing original federal
jurisdiction for Title 11 bankruptcy cases). Jurisdiction in district court was proper
based upon 28 U.S.C. § 158(a)(3) (enabling district court to consider interlocutory
orders of bankruptcy courts). Jurisdiction in this court is proper based upon 28
U.S.C. § 158(d) (authorizing appeals from final district court judgments reviewing



      1
       The Honorable Rodney S. Webb, Chief Judge, United States District Court for
the District of North Dakota.
      2
       The Honorable William A. Hill, United States Bankruptcy Judge for the
District of North Dakota.

                                          -2-
bankruptcy court appeals). The notice of appeal was timely filed pursuant to Fed. R.
App. P. 4(a).

                                    Background

        The parties stipulated to the following facts in the bankruptcy court’s record.
In the mid-1970s, Brent Nerland founded Nerland Oil, a petroleum products
wholesale marketing business. Nerland Oil established a “jobber” relationship with
Conoco, in which it contracted with Conoco to distribute Conoco products to Conoco
retail stations and to forward credit card receivables to Conoco retail stations after
Conoco processed the credit card transactions. Over time, Nerland Oil acquired
several convenience stores, including a Conoco retail station and convenience store
called the Dakota Fuel Stop in Jamestown, North Dakota.

      In June 1995, Superpumper, an owner and operator of convenience stores,
bought the Dakota Fuel Stop from Nerland Oil. To partially finance the purchase,
Superpumper executed a promissory note payable to Nerland Oil in the amount of
$350,000 and secured by a second mortgage on the Dakota Fuel Stop. The note
required Superpumper to make quarterly payments of $7,545 to Nerland Oil at an
annual interest rate of nine percent. The balance of the note was to be paid on
September 30, 2000, or earlier if Superpumper sold the Dakota Fuel Stop.

       As a condition of the purchase, Superpumper agreed to arrange future fuel
supply and freight in a form acceptable to Nerland Oil, and therefore entered into two
contracts with West Fargo Truck Stop, Inc. (“WFTS”), another company owned by
Brent Nerland. Together the contracts credited Superpumper with $579,332 toward
the purchase price of the Dakota Fuel Stop. The first agreement designated WFTS
as the exclusive supplier of the Dakota Fuel Stop’s Conoco brand fuel requirements.
The second contract required WFTS to haul fuel products to various Superpumper



                                         -3-
locations in the Red River Valley.3 Both contracts contained clauses requiring
disputes to be submitted to binding arbitration. Although neither contract established
Nerland Oil as the Conoco jobber to service the Dakota Fuel Stop, Nerland Oil acted
in that capacity. Consequently, Nerland Oil was responsible for forwarding from
Conoco to Superpumper the credit card receivables generated by the Dakota Fuel
Stop. Superpumper and Nerland Oil did not have a contract governing this
relationship, but it is a well-known industry practice which is generally not
recognized in writing.

       By the spring of 1996, Nerland Oil began failing to remit the Dakota Fuel Stop
credit card receivables from Conoco to Superpumper, and the amount of the arrearage
grew over the course of the year. As of October 31, 1996, Nerland Oil owed
Superpumper $348,856.26 in credit card receivables, and Superpumper owed Nerland
Oil $359,790.18 under the promissory note and mortgage. On October 28, 1996,
Superpumper terminated its jobber relationship with Nerland Oil. At that time,
Superpumper desired to apply the outstanding balance of credit card receivables
against the amount due under the promissory note and mortgage held by Nerland Oil.
Nerland Oil refused the proposed debt setoff.

       On January 28, 1997, Superpumper commenced a lawsuit against Nerland Oil
in North Dakota state court seeking to setoff the debts. Because the contracts at issue
contained arbitration clauses, the state court ordered that the dispute be submitted to
arbitration. After Superpumper unsuccessfully appealed the arbitration order to the
state supreme court, the dispute went to arbitration before a three-member panel of
attorneys. On August 18, 1999, the arbitration panel granted Superpumper’s request
for setoff.


      3
       The existence of these contracts is puzzling, as WFTS was not a Conoco
jobber authorized to sell the Conoco fuel products required, nor did it have any trucks
that could haul fuel.

                                         -4-
       On November 5, 1999, before judgment confirming the arbitration award was
entered in state court, Nerland Oil filed a Chapter 7 bankruptcy petition. As a result,
Nerland Oil’s bankruptcy estate was subject to an automatic stay which barred
issuance or enforcement of any state court judgment affecting the estate. See
11 U.S.C. § 362(a)(1), (2). Therefore, on November 18, 1999, Nerland Oil and
WFTS resisted confirmation of the arbitration decision in state court and WFTS
moved to vacate the arbitration award. Although the state trial court originally
adopted the arbitration award, the state supreme court reversed the trial court’s
decision, holding that, due to the automatic stay triggered by the bankruptcy filing,
the arbitration award was not final or enforceable. Superpumper, Inc. v. Nerland Oil,
Inc., 

(N.D. 2000).

      Superpumper then initiated this adversary proceeding on April 19, 2000,
seeking summary judgment to adopt the arbitration award in the United States
Bankruptcy Court for the District of North Dakota. See 28 U.S.C. §§ 157, 1334;
11 U.S.C. § 553 (enabling creditor of bankruptcy estate to offset a mutual debt arising
before commencement of bankruptcy filing). Nerland Oil counterclaimed, seeking
reversal of the arbitration award and monetary damages resulting from
Superpumper’s breach of the long-term supply and freight agreements with WFTS.

      Additionally, the United States, through the IRS, cross-moved for summary
judgment against Nerland Oil, arguing that it possessed a superior interest in the
promissory note payments on the basis of several prior federal tax liens against
Nerland Oil. The federal tax liens originated in the early 1990s, when the IRS
assessed unpaid federal excise and employment taxes against Nerland Oil for the
following dates: August 9, 1993, August 30, 1993, September 20, 1993,
December 27, 1993, January 3, 1994, December 9, 1996, December 31, 1996,
November 3, 1997, December 22, 1997, and September 20, 1999. Nerland Oil did
not pay these tax assessments, and the IRS filed proper notice of its federal tax liens
against Nerland Oil on September 21 and 22, 1998. At the time Nerland Oil filed its

                                         -5-
bankruptcy petition, it owed the IRS $1,693,979.57 for federal tax liens covering the
1993 and 1994 time period, which occurred prior to the sale of the Dakota Fuel Stop
to Superpumper. The IRS argued that it should not be bound by the arbitration award
since it was not a party to the arbitration.

       On September 19, 2000, the bankruptcy court conducted a hearing to consider
the cross-motions for summary judgment. At the hearing, the parties agreed to rely
on the record established during the arbitration proceeding, supplemented by
evidence regarding the federal tax liens. The bankruptcy court addressed for the first
time the impact of the federal tax liens on Superpumper’s right of setoff. On
October 20, 2000, the bankruptcy court denied Superpumper’s motion for summary
judgment and granted summary judgment in favor of the IRS, concluding that (1) the
federal tax liens became choate when the federal taxes were assessed against Nerland
Oil in 1993 and 1994, thus giving the IRS priority over Superpumper in collecting its
debt from Nerland Oil, and (2) because Superpumper did not qualify as a holder of
an implied security interest, the IRS’s lien collection right was not invalid under
26 U.S.C. § 6323(a). See Superpumper, Inc. v. Nerland Oil, Inc., No. 99-31826
(Bankr. D.N.D. Oct. 20, 2000).

       Superpumper appealed the bankruptcy court decision to the district court. The
district court affirmed, agreeing with the bankruptcy court that the federal tax liens
took priority over Superpumper’s setoff. The district court also clarified that, because
a setoff does not introduce any new money into the estate, it is treated as a lien, not
a payment, for purposes of determining priority, and therefore must be treated as a
lien inferior to the federal tax liens.    Further, the district court concluded that
because Superpumper was unable to identify or trace the credit card receivables, as
a result of Nerland Oil’s commingling the receivables with its general funds,
Superpumper must be classified as a general creditor of the Nerland Oil bankruptcy
estate and therefore assume an inferior position for debt repayment. Last, the district
court refused to categorize Superpumper as a “purchaser” under 26 U.S.C. § 6323

                                          -6-
because the asset in question was not the convenience store itself, but Nerland Oil’s
right to receive payments under the promissory note. See In re Nerland Oil, Inc.,
No. A3-01-05 (D.N.D. June 13, 2001). This appeal followed.

       On August 31, 2001, pursuant to Fed. R. Civ. P. 27(a) and 8th Cir. R. App.
P. 27A, Nerland Oil’s bankruptcy trustee moved to dismiss this appeal on the ground
that the bankruptcy judgment was not a final appealable order. On September 19,
2001, pursuant to Fed. R. Civ. P. 54(b), the bankruptcy court certified that its
October 20, 2000 judgment was final. See Superpumper, Inc. v. Nerland Oil, Inc.,
No. 99-31826 (Bankr. D.N.D. Sept. 19, 2001). The district court affirmed. On
November 9, 2001, this court denied Nerland Oil’s bankruptcy trustee’s motion to
dismiss the appeal for lack of a final appealable order. See Superpumper, Inc. v.
Nerland Oil, Inc., No. 01-2962 (8th Cir. Nov. 9, 2001) (denial of motion to dismiss).

       On October 17, 2001, the bankruptcy court lifted the bankruptcy stay. As a
result, Nerland Oil moved to vacate and modify the arbitration award in state court,
and Superpumper renewed its motion to confirm the arbitration award in state court.
The state trial court denied the motion to vacate the arbitration award on June 6,
2002, and affirmed the arbitration award on June 18, 2002. Superpumper accordingly
supplemented the record in this appeal to reflect the state court’s favorable order. See
Superpumper, Inc. v. Nerland Oil, Inc., No. 01-2962 (8th Cir. July 10, 2002) (order).

                                      Discussion

       We review a grant of summary judgment de novo, viewing the evidence in the
light most favorable to the nonmoving party, to determine whether there is no genuine
issue of material fact so that the moving party is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(c); Minnesota Dep’t of Revenue v. United States, 

, 727 (8th Cir. 1999) (Minnesota Dep’t of Revenue) (reviewing de novo a grant of
summary judgment regarding priority of federal tax lien).

                                          -7-
I. Priority of Federal Tax Liens

       “Priority for purposes of federal law is governed by the common-law principle
that ‘the first in time is the first in right.’” Minnesota Dep’t of 

(quoting United States v. McDermott, 

, 449 (1993)). According to
federal law, “‘the priority of a lien depends on the time the lien attached to the
property in question and became choate.’” 

(quoting Cannon Valley
Woodwork, Inc. v. Malton Construction Co., 

, 1250 (D. Minn.
1994)). A federal tax lien attaches and becomes choate at assessment. See 26 U.S.C.
§§ 6321 (consequence of unpaid taxes after assessment is “a lien in favor of the
United States upon all property and rights to property, whether real or personal,
belonging to such person”), 6322 (lien arises at the time assessment of unpaid taxes
is made against delinquent taxpayer). Therefore, a federal tax lien’s priority order is
based upon the time when the lien is assessed, not when it is filed. See United States
v. Jepsen, 

, 584 (8th Cir. 2001) (tax assessment creates a lien in favor of
the United States on all property and rights to property pursuant to 26 U.S.C.
§§ 6321, 6322); Minnesota Dep’t of 

(“The lien arises
automatically when the assessment is made and continues until the taxpayer’s liability
is either satisfied or becomes unenforceable due to the lapse of time.”); Horton Dairy
Inc. v. United States, 

, 291 (8th Cir. 1993) (Horton Dairy) (“Federal law
determines choateness, and the federal rule is that liens are perfected in the sense that
there is nothing more to be done to have a choate lien – when the identity of the
lienor, the property subject to the lien, and the amount of the lien are established.”)
(quoting United States v. New Britain, 

, 84 (1954) (internal quotations
omitted)).

        In this case, federal tax liens totaling $1,693,979.57 against Nerland Oil were
assessed and became choate over the course of 1993 and 1994. A competing state
interest cannot take priority over those assessments unless (1) the state interest
became choate before the federal tax assessment, see Minnesota Dep’t of Revenue,

                                          

, or (2) the state interest falls within the statutorily-defined exceptions
to the IRS’s lien priority order. See 26 U.S.C. § 6323.

II. Inferiority of the Attempted Setoff Transaction

      We apply federal law to determine the priority order of liens competing with
federal tax liens. See Minnesota Dep’t of 

(citing Aquilano
v. United States, 

, 513-14 (1960)). However, we apply state law to
determine the nature of the competing legal interest at stake. See Bremen Bank &
Trust Co. v. United States, 

, 1263 (8th Cir. 1997).

       Superpumper asserted its claim under 11 U.S.C. § 553(a), which preserves
rights of creditors to offset mutual debts arising before a bankruptcy petition is filed.
See United States v. Gerth, 

, 1431 (8th Cir. 1993). However, § 553(a)
only preserves setoff rights that are otherwise valid under applicable nonbankruptcy
law. See In re Sauer, 

, 724 (Bankr. D.N.D. 1998). When Superpumper
demanded a setoff of the mutual debts from Nerland Oil in October 1996, its state-law
interest in the attempted setoff transaction became choate. See Horton 

(state-created right of setoff becomes choate when it is exercised).

        However, by October 1996, $1,693,979.57 in unpaid federal taxes already had
been assessed against Nerland Oil (some as early as 1993). As a result, any
subsequent transaction, including Superpumper’s attempted setoff transaction, must
take an inferior position to the federal tax liens. See 

holder of an
inchoate state-created setoff right as a lienholder inferior to a choate federal tax lien).
As an inferior lienholder, Superpumper may not effect a setoff transaction to
compensate it for the loss of the credit card receivables until after the superior federal
tax liens are satisfied. See 26 U.S.C. § 6322 (federal tax lien remains in effect until
liability “is satisfied or becomes unenforceable”). As a practical matter in the present



                                           -9-
case, satisfaction of the federal tax liens will deplete entirely the Nerland Oil
bankruptcy estate. See In re: Nerland Oil, Inc., No. 99-31826 (Bankr. D.N.D. 2000).

      Moreover, the scope of the federal tax liens includes all the delinquent
taxpayer’s property interests, including interests acquired after the liens were
assessed. See 26 U.S.C. §§ 6321; Shawnee State Bank v. United States, 

, 310 (8th Cir. 1984) (“[t]he lien attaches to all the property of the defaulting
taxpayer, including property acquired by the taxpayer after the lien arises”) (citing
Glass City Bank v. United States, 

, 267-69 (1945)). Consequently, the
federal tax liens attached to all of Nerland Oil’s property interests, including the
promissory note acquired in exchange for the sale of the Dakota Fuel Stop, which was
signed after the federal tax liens were assessed.

       Superpumper attempts to distinguish this case from a typical lien priority case,
arguing that (1) as Nerland Oil’s debtor, not its creditor, Superpumper’s debt was not
part of the property subject to the federal tax liens; (2) because the funds used to
complete the setoff transaction – the credit card receivables – were actually
Superpumper’s own funds held in trust by Nerland Oil, not the property of Nerland
Oil, those funds were not part of the property subject to the federal tax liens; and
(3) because the bankruptcy filing occurred after Superpumper’s completion of the
setoff transaction,4 only the remaining amount on the promissory note and mortgage
should be considered part of the bankruptcy estate.5




      4
        Superpumper defines the date of completion of the setoff transaction as
August 18, 1999, the date on which the arbitration panel applied state law to conclude
that the setoff should be mandated. The bankruptcy petition was filed on November
5, 1999.
      5
      If the setoff transaction was valid, $10,994 remained on the promissory note
and mortgage.

                                         -10-
       We find these arguments unpersuasive. Nothing distinguishes this case from
typical lien priority cases. First, Superpumper’s debt in the form of the promissory
note constitutes the type of property typically subject to a federal tax lien. See St.
Louis Union Trust Co. v. United States, 

, 1301 n.11 (8th Cir. 1980)
(considering escrow agreement providing income payable to debtor-taxpayer to be
property available to satisfy federal tax lien). We apply federal law to determine
whether or not the interest at stake constitutes property for purposes of federal tax
lien satisfaction. See Drye v. United States, 

, 50 (1999) (“whether a state-
law right constitutes ‘property’ or ‘rights to property’ under § 6321 is a matter of
federal law”) (quoting United States v. National Bank of Commerce, 

,
727 (1985) (internal quotations omitted)). “Property” broadly includes “every species
of right or interest protected by law and having an exchangeable value.” 

note clearly has value – the right to collect payments on it – as well as
transferability.     See Black’s Law Dictionary 1085 (7th ed. 1999) (defining
“promissory note” as a “negotiable instrument”); see also UCC § 3-104 (categorizing
a promissory note as a negotiable instrument).

       Second, Superpumper incorrectly classifies the property at stake as the funds
used to complete the setoff transaction. Superpumper confuses the issue by
conflating two separate debts: (1) Superpumper’s debt to Nerland Oil under the
promissory note, and (2) Nerland Oil’s debt to Superpumper resulting from its failure
to remit the credit card receivables. Superpumper seeks to treat the two debts
interchangeably, as the attempted setoff transaction would have done. However, we
recognize that the two debts are separate and distinct from one another, and thus
involve different rights and consequences.

      We agree with the district court that the relevant property interest is
Superpumper’s debt to Nerland Oil involving the right to collect payments under the
promissory note. See In re Nerland Oil, Inc., No. A3-01-05 (D.N.D. June 13, 2001).
The federal tax liens transferred to the IRS the right to all of Nerland Oil’s property,

                                         -11-
including Nerland Oil’s later-acquired right to collect Superpumper’s debt under the
promissory note. Therefore, Superpumper’s debt under the promissory note was
owed to the IRS, not Nerland Oil. It does not matter what type of funds the credit
card receivables are, because by the time Superpumper attempted the setoff
transaction, there was no debt owed to Nerland Oil to setoff the debt Nerland Oil
owed to Superpumper.6

       Third, the date of the attempted setoff transaction in relation to the bankruptcy
filing is irrelevant because, as already discussed, the assessment of the federal tax
liens occurred as early as 1993 and 1994 and thus predated the attempted setoff
transaction in October 1996 and thus nullified it.




      6
        Although Superpumper does not claim explicitly an action for constructive
trust based on wrongful conversion of the credit card receivables, it appears that
Superpumper intends to pursue that theory by claiming that the credit card receivables
were Superpumper’s own funds held in trust by Nerland Oil and therefore should be
exempted from the bankruptcy estate property accessible to satisfy the IRS tax liens.
However, North Dakota law imposes a substantial evidentiary burden on the party
seeking to establish a constructive trust, see Napolean Livestock Auction, Inc. v.
Rohrich, 

, 356 (N.D. 1987), and it is impossible for us to review
whether that burden has been satisfied because (1) the issue was not raised before the
original factfinder of the bankruptcy court, see First Bank Investors’ Trust v. Tarkio
Coll., 

, 476-77 (8th Cir. 1997) (requiring factual issues to be considered
on appeal to be presented to bankruptcy court first), and (2) Superpumper agreed to
stipulate to the facts already in the record following the arbitration panel proceeding,
which are insufficient to substantiate a constructive trust claim. See Napolean
Livestock Auction, Inc. v. 

(imposition of constructive
trust not allowed in absence of both parties’ recognition of issue and acquiescence in
the introduction of evidence on that issue).

                                         -12-
III. Applicability of 26 U.S.C. § 6323

       Superpumper’s only recourse lies in 26 U.S.C. § 6323, which protects specific
types of creditors in a bankruptcy proceeding from the priority rule favoring the IRS.
See 26 U.S.C. § 6323(a)7; Millers Mutual Ins. Assoc. of Illinois v. Wassall, 

, 304 n.5 (8th Cir. 1984) (“‘[26 U.S.C.] [s]ection 6323 of the Federal Tax Lien Act
of 1966 is the exclusive source of exceptions to the priority of federal tax liens’”)
(quoting Campagna-Turano Bakery, Inc. v. United States, 

, 41 (7th Cir.
1980)). Section 6323(a) invalidates properly filed federal tax liens against
purchasers, holders of security interests, mechanic’s lienors, and judgment lien
creditors. See Hoggarth v. Somsen, 

, 39 (N.D. 1993) (federal priority
statutes give IRS priority unless competing state interests are accorded “purchaser”
status prior to IRS filing). A “purchaser” is defined as “a person who, for adequate
and full consideration in money or money's worth, acquires an interest (other than a
lien or security interest) in property which is valid under local law against subsequent
purchasers without actual notice.” 26 U.S.C. § 6323(h)(6).

       Superpumper contends that it should be considered a purchaser within the
meaning of § 6323(a) because (1) it made continuing installment payments of the
purchase price of the Dakota Fuel Stop through the promissory note, and (2) the
setoff transaction acted as a payment on the purchase-money mortgage.


      7
        In 1966, Congress enacted the Federal Tax Lien Act, codified at 26 U.S.C.
§ 6323, which carved out specific exemptions from the otherwise broad scope of
federal tax liens imposed by the IRS. “Before 1966, the requirement of choateness
. . . generally operated to prevent a nonfederal lien from gaining priority over a
federal tax lien with respect to property acquired by the debtor after the tax lien had
arisen.” Shawnee State Bank v. United 

. The purpose of the
Act was “to specifically enumerate certain ‘superpriorities’ . . . and commercial
financing transactions . . . that defeat a federal tax lien.” Dugan v. United States, 

, 950 n.9 (8th Cir. 1973).

                                          -13-
       Even if the installment payments made pursuant to the promissory note could
transform Superpumper into a purchaser, at most Superpumper was a purchaser of the
Dakota Fuel Stop, not a purchaser of the right to receive payments under the
promissory note. Therefore, Superpumper would only be protected by § 6323(a)
against any taxes levied against the Dakota Fuel Stop, which is not an issue in this
case.

       Superpumper next advances the theory that it purchased the right to receive
payments under the promissory note by virtue of the attempted setoff transaction.
Superpumper attempted the setoff transaction in October 1996, prior to the filing of
the federal tax liens in September 1998. If Superpumper was a purchaser under
§ 6323 at that time, then it would be protected against the unfiled federal tax liens.
However, “[p]arties claiming the protected status of [§] 6323(a) have the burden of
proving that they qualify for that protection.” Hoggarth v. 

. To satisfy that burden, Superpumper must prove that (1) it gave “adequate and
full consideration in money or money’s worth,” (2) it acquired an interest in property
“other than a lien or security interest,” and (3) the interest is “valid under local law
against subsequent purchasers.” 26 U.S.C. § 6323(a).

       We do not agree that the attempted setoff transaction converted Superpumper
into a purchaser within the meaning of § 6323. Because the two interests involved
in the attempted setoff transaction were mutual debts, there was no exchange of
“adequate and full consideration in money or money’s worth.” 

sought to obtain the right not to pay the balance on the promissory note.
We agree with the district court’s reasoning that because the attempted setoff
transaction did not propose to pay any new money into the bankruptcy estate, it
cannot be considered a payment in exchange for the right to receive payments under
the promissory note.




                                         -14-
       To be considered a payment, either money or something of value must be
“given and accepted in partial or full discharge of an obligation.” Black’s Law
Dictionary 1150. The record does not contain any evidence to indicate that, at the
time Nerland Oil began failing to remit the credit card receivables, Superpumper gave
Nerland Oil permission to cease remitting the credit card receivables in exchange for
release of its obligation to pay the amounts owed under the promissory note. Nor is
there any evidence demonstrating that Nerland Oil accepted this arrangement. On the
contrary, the record reflects that Superpumper sought the setoff as an after-the-fact
remedy and that Nerland Oil rejected the proposed setoff.8 See Black’s Law
Dictionary 1376 (defining “setoff” as the “right to reduce the amount of debt by any
sum the debtor owes the creditor”).

        “The exceptions permitted under § 6323 are carefully crafted and narrowly
limited,” Janssen v. United States, 

, 564 (B.A.P. 8th Cir. 1997) (quoting
Battley v. United States (In re Berg), 

, 537 (9th Cir. 1997)), and we
cannot justify expanding the definition of purchaser as Superpumper urges. Rather,
we think Superpumper is characterized more accurately as a judgment lien creditor,
whose interest in the attempted setoff transaction was perfected and became choate
on June 18, 2002, the date the state court entered final judgment enforcing the
attempted setoff transaction. Because that date occurred after the IRS properly filed
its tax liens in September 1998, Superpumper is not entitled to superpriority under the
protection of § 6323(a). See Horton 

(treating a setoff as a

      8
        We note that Superpumper’s “setoff as payment” theory was not presented to
the bankruptcy court and the record contains no evidence to substantiate that theory.
We address the issue only insofar as we may draw legal conclusions from the
established record. We consider any argument requiring additional factual findings
to have been waived. See First Bank Investors’ Trust v. Tarkio Coll., 

,
476-77 (8th Cir. 1997) (enabling appellate court to consider arguments not raised in
bankruptcy court only “‘when the argument involves a purely legal issue in which no
additional evidence or argument would affect the outcome of the case’”) (quoting
Universal Title Ins. Co. v. United States, 

, 1314-15 (8th Cir. 1991)).

                                         -15-
competing lien when determining priority); United States v. Scovil, 

, 221
(1955) (considering transaction involving cancellation of debt not to be a purchase
for purposes of taking priority over a federal tax lien).

      As a result, we hold that the district court did not err in affirming the
bankruptcy court’s decision to give priority to the federal tax liens when distributing
the property in Nerland Oil’s bankruptcy estate.

                                     Conclusion

      Accordingly, the order of the district court is affirmed.

      A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




                                         -16-