The opinion of the court was delivered by: BONSAL
Plaintiffs Alvin A. Adams and Gloria C. Adams, as owners of the premises at 40 John Alden Road, New Rochelle, County of Westchester, New York (the "premises"), instituted this action in New York Supreme Court, Westchester County, pursuant to Article 15 of the New York Real Property Actions and Proceedings Law (McKinney Supp. 1975) and 28 U.S.C. § 2410, seeking judgment enjoining the defendant United States from seizing the premises; declaring that plaintiffs are the lawful owners "vested with an absolute and unincumbered [sic] title in fee"; and awarding allowances, costs and disbursements to plaintiffs. On or about March 10, 1976, plaintiffs served the United States with an order requiring it to show cause why a preliminary injunction should not issue and temporarily staying it from seizing the premises. On March 19, 1976, the United States removed the action to this Court. 28 U.S.C. § 1444. On March 29, 1976, the United States noticed a motion for summary judgment dismissing the complaint. On April 12, 1976 after oral argument on both motions, the Court denied plaintiffs' motion for preliminary injunction on the parties' stipulation that the United States would not seize the premises pending disposition of this motion for summary judgment.
On February 28, 1975, plaintiffs purchased the premises, the home in which they now reside, from Olivette Severino by deed recorded in the Westchester County Clerk's Office on March 4, 1975. On June 14, 1974, prior to plaintiffs' purchase, U.S. LIFE Title Insurance Company of New York conducted a title search of the premises on behalf of plaintiffs and examined the Federal tax lien index ("Index") in the Westchester County Clerk's Office (the place designated by statute for filing notices of federal tax liens on real property located in Westchester County (N. Y. Lien Law § 240(1) (McKinney Supp. 1975)). The title search revealed that one John A. Severino owned the premises until May 17, 1963 when he conveyed title to his wife, Virginia Severino, who conveyed title to Olivette Severino sometime after August 20, 1973. The title search also revealed that seven notices of federal tax liens ("Notices") had been recorded on the Index between July 19, 1965 and August 20, 1973 against John Severino for non-payment of federal taxes. No Notices were recorded under the name of Virginia Severino. As Virginia, not John, was the record owner of the premises at the time the Notices against John were recorded by the County Clerk, the United States did not acquire a lien on the premises as a result of these seven Notices. Accordingly, on February 28, 1975, a title insurance policy was issued to plaintiffs by U.S. LIFE Title Insurance Company of New York.
It seems, however, that the County Clerk erroneously failed to record on the Index four other Notices of federal tax liens which the Internal Revenue Service of the United States ("IRS") filed against Virginia Severino between December 2, 1968 and September 23, 1970 and refiled on September 26, 1974, for non-payment of taxes. There is no dispute that these four Notices were properly presented to the County Clerk's office since copies were returned to the IRS bearing the County Clerk's stamp indicating the date and time each was received.
On or about June 9, 1975, U.S. LIFE Title Insurance Company of New York, as agent for plaintiffs, was served with a notice of levy on the premises in favor of the United States, as authorized by 26 U.S.C. § 6331. After unsuccessful conferences with the IRS, plaintiffs instituted this action.
Defendant moves for summary judgment dismissing the complaint on the ground that the Notices against Virginia Severino which it presented to the County Clerk in 1968, 1969 and 1970 create a property interest in the premises superior to plaintiffs' interest obtained by their purchase of the premises on February 28, 1975.
There is no dispute that, prior to plaintiffs' purchase, the United States filed the Notices; that the County Clerk failed to record them in the Index; that the United States was unaware of this, having received receipted copies of its Notices; and that plaintiffs had no knowledge of the Notices at the time of their purchase of the premises.
The sole issue presented is the priority between the interests of the parties where the County Clerk failed to record the Notices in the Index. There appear to be no genuine questions of material fact.
The Internal Revenue Code ("Code") sets forth the circumstances under which a federal tax lien may arise:
"If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount . . . shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." 26 U.S.C. § 6321
As against purchasers of the property subject to a federal tax lien, the Code provides in section 6323 that:
"(a) . . . The lien imposed by section 6321 shall not be valid as against any purchaser . . . until notice thereof which meets the requirements of subsection (f) has ...