The opinion of the court was delivered by: COOPER
We have before us cross-motions for summary judgment by plaintiffs and by co-defendant United States pursuant to Fed.R.Civ.P. 56. The material facts are not in dispute; summary judgment is therefore appropriate. At issue here are conflicting claims to a substantial amount of money now in the possession of co-defendant Property Clerk of the City of New York (hereinafter "Property Clerk"). For the reasons given below, we (1) grant the motion by the United States for summary judgment dismissing plaintiffs' complaint against it, and (2) dismiss the complaint against the Property Clerk for lack of jurisdiction. The United States has filed a cross-claim against the Property Clerk which is predicated upon an independent basis of federal jurisdiction and therefore will not be affected by our disposition of these motions.
Plaintiffs herein are licensed bail bondsmen in the City of New York. One John T. Brown (hereinafter "taxpayer"), who resided at 180 West End Avenue, New York, New York, was arrested on September 24, 1972 by the New York Police and arraigned in state court criminal proceedings on three separate charges apparently relating to drugs. The police seized from the taxpayer cash sums totalling more than $80,000. Plaintiffs furnished bail in the amount of $45,000; the taxpayer failed to appear on May 5, 1973; the bail bond was forfeited.
On November 3, 1972, Internal Revenue Service made an income tax assessment against the taxpayer in the amount of $78,040.00 for the taxable period ended September 24, 1972. No portion of that tax assessment has been paid.
On November 9, 1972, IRS served upon the Property Clerk of the City of New York a Notice of Levy which recited the facts of the tax assessment and stated: ". . . all property . . . now in your possession and belonging to this taxpayer . . . are hereby levied upon and seized for satisfaction of the aforesaid tax . . . and demand is hereby made upon you for the amount necessary to satisfy the liability set forth herein . . ." At the time the Notice of Levy was served, the Property Clerk had in his possession, and still possesses, the cash seized by the police from the taxpayer ($80,000 minimum), in excess of the tax liability ($78,040). The Property Clerk has not remitted any of the taxpayer's property to IRS. On the same date that the Notice of Levy was served (November 9, 1972), IRS filed with the Register of the City of New York a Notice of Federal Tax Lien against the taxpayer for the unpaid $78,040.00 tax assessment.
After the $45,000 bail was forfeited on May 31, 1973, plaintiffs instituted in the Supreme Court, New York County, an action against the taxpayer; on June 25, 1973 plaintiffs obtained an order of attachment for $45,000 against him; on June 28, 1973, the Sheriff of the City of New York served the Property Clerk with the attachment order; on September 10, 1973, a default judgment for $45,000 was entered in favor of plaintiffs against the taxpayer; on September 11, 1973, an Execution with Notice to Garnishee was issued upon the Sheriff and the Property Clerk by plaintiffs as attaching judgment creditors.
At no time did plaintiffs file any claim or request with IRS for the return or release of the property levied upon by IRS. On September 14, 1973, plaintiffs began this action against IRS and the Property Clerk.
Plaintiffs' action against the United States is authorized by 26 U.S.C. § 7426(a); it provides in substance that any person (other than a taxpayer) may sue the United States to recover a money judgment in respect to property of a taxpayer levied upon by IRS when the claimant had a right to that property superior to the claim of IRS.
IRS argues that plaintiffs' complaint must be dismissed because (1) this Court lacks jurisdiction since the action is time barred by 26 U.S.C. § 6532(c), and (2) on the merits, the claim of the United States to the property held by the Property Clerk is superior to that of plaintiffs.
We hold that the complaint must be dismissed on the ground that plaintiffs' action is time-barred. Even if this is not so, the United States should prevail, for it is clear that its claim is superior to that of plaintiffs.
Section 7426 permits suit by third parties in cases where the United States has made a wrongful levy on a taxpayer's property. In such actions, as this one, the validity of the tax assessment is conclusively presumed. 26 U.S.C. § 7426(c).
This statutory provision follows the general rule of law that no person, other than a taxpayer in the appropriate judicial proceeding, may challenge the validity of a tax assessment. See Falik v. United States, 343 F.2d 38, 41-42 (2d Cir. 1965). Thus, plaintiffs have no standing to challenge the merits of the tax assessment; so for the purposes of this litigation it is conclusively presumed that the taxpayer owes $78,040.00 to the United States. What the statute does permit, and what plaintiffs are attempting to successfully accomplish, is the prosecution of an action to resolve the conflicting claims to the cash held by the Property Clerk.
III PROCEDURAL REQUIREMENTS
To resolve such conflicting claims, plaintiffs must comply with statutory procedural requirements; this they have not done. Section 6532(c) provides that an action pursuant to § 7426 must be commenced within nine months from the time the Notice of Levy is served, unless within that nine month period the third party claimant files with IRS a request for the return of the property levied upon. If such a request is timely filed, then the period within which an action may be commenced is extended for twelve months from the filing of the request, or, alternatively, ...