The opinion of the court was delivered by: BRIEANT
By this action filed March 3, 1975, the United States of America sought to assert priority of and foreclose various federal tax liens upon a fund then held by defendant James J. Hage, an attorney. The fund arose out of the settlement of a state court action for personal injuries brought by Mr. Hage for his client, Dorothy Ratcliffe, the taxpayer-debtor, against the Rockford Auto Service Company, based on claims of negligence.
This Court has subject matter jurisdiction pursuant to 26 U.S.C. § 7402 and 28 U.S.C. §§ 1340 and 1345. The case was tried without a jury on March 25, 1976.
The contest has been narrowed down to two parties, plaintiff and defendant The Faxton Hospital. Priority of lien is the sole issue.
On December 12, 1975, the Clerk of the Court noted the default of defendants Dorothy Ratcliffe and The Children's Hospital and Rehabilitation Center of Utica, for failing to answer or otherwise plead to the complaint. By a stipulation dated January 12, 1976, the original fund of $7,000.00 had been reduced to $4,616.67 and accrued interest, if any. The remaining parties consented to the payment of $2,383.33 to Mr. Hage to satisfy his prior lien for legal services and disbursements in connection with the personal injury action. Pursuant to this stipulation, Mr. Hage deposited the balance of $4,616.67 with the Clerk of the Court and was dismissed from the action. Plaintiff claims taxes, interest and penalties totalling $6,455.77, which exceed the balance in the fund.
The Faxton Hospital claims a lien on the fund pursuant to New York Lien Law, § 189, which, it contends, is entitled to priority over the tax lien of the United States.
New York Lien Law § 189 provides in relevant part that a hospital shall
". . . have a lien upon any and all rights of action, suits, claims, counterclaims or demands, of any nature whatsoever, of any person receiving emergency treatment or admitted to any such hospital and receiving treatment, care and maintenance therein, on account of any personal injuries received within a period of one week prior to receiving emergency treatment or admission to the hospital and as the result of the negligence . . . of any other person or persons or corporation, which any such injured person, . . . may or shall have, assert or maintain against any such other person or corporation for damages on account of such injuries, for the amount of the reasonable charges of such hospital, for the treatment, care and maintenance of such injured person at cost rates in such hospital."
Dorothy Ratcliffe was injured in an auto accident on December 6, 1971, and admitted to The Faxton Hospital on the same day to be treated for those injuries. She was discharged from the hospital on January 7, 1972, owing $1,750.65 for the treatment she had received. On February 24, 1972 she was readmitted and then finally discharged on March 1, 1972, owing an additional $471.65.
On July 26, 1972 The Faxton Hospital filed a Notice of Lien against Dorothy Ratcliffe with the County Clerk of Oneida County, New York in the amount of $1,750.65. On October 25, 1972 it filed an additional Notice of Lien for $471.65. Thus the total amount of the liens which the hospital claims against the fund is $2,222.30. Plaintiff conceded on the trial before me that this amount represents a reasonable charge for the treatment provided to Dorothy Ratcliffe.
On April 11, 12 and 13, 1973 the United States filed tax liens in the proper state offices against Dorothy Ratcliffe d/b/a Ratcliffe Rest Home, for unpaid withholding, social security and unemployment taxes. Pursuant to 26 U.S.C. § 6321, plaintiff acquired a lien ". . . upon all property and rights to property, whether real or personal" belonging to the taxpayer-debtor, except for special situations not relevant here. Liens imposed by § 6321 arise at the time the assessment is made, 26 U.S.C. §§ 6322, 6323. Government Exhibits 5 through 8 reveal that the two assessments involved here were made on March 29, 1973 and April 10, 1973, after the hospital liens had been filed.
Under the principles established in United States v. City of New Britain, 347 U.S. 81, 84, 98 L. Ed. 520, 74 S. Ct. 367 (1954), and reaffirmed in United States v. Pioneer American Ins. Co., 374 U.S. 84, 10 L. Ed. 2d 770, 83 S. Ct. 1651 (1963) and in United States v. Equitable Life Assur. Soc. of the U.S., 384 U.S. 323, 16 L. Ed. 2d 593, 86 S. Ct. 1561 (1966), as against a filed federal tax lien, the relative priority of a perfected state lien is determined by the traditional rule "first in time is first in right." The federal statutes cited do not purport to give priority in all cases to liens created under the paramount authority of the United States. Where the lien created by state law is both specific, i.e., where it attaches to specific property, and 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" prior to the date that the federal tax lien arises, the state lien has priority. United States v. City of New Britain, supra 347 U.S. at p. 84.
In this case it is clear that the hospital's lien is specific, since it attached to a specific fund, i.e., the proceeds of the settlement of the negligence action for personal injuries brought against Rockford Auto Service Co. by Dorothy Ratcliffe. N. Y. Lien Law § 189(2)(a)(ii). Furthermore, the hospital's lien was also perfected prior to the time the federal liens attached. Nothing more needed to be done to perfect it. Neither the ...