The opinion of the court was delivered by: TENNEY
This is an interpleader action brought by the plaintiff, Micheline Lerner, in order to determine the rights of the various parties to ownership of a fund she has collected. The matter concerns conflicting claims of priority between the plaintiff and the defendants other than Alan Jay Lerner. Two of the defendants, Viking Penguin, Inc. ("Viking") and the United States of America ("Government"), now move for summary judgment. For the reasons set forth below, summary judgment is granted in favor of Viking and the Government.
In 1965, Micheline Lerner obtained a divorce decree from Alan Jay Lerner in a Nevada court. The decree required Mr. Lerner to pay $4,166.66 in alimony to Ms. Lerner every month. In 1979, after Mr. Lerner had defaulted on his alimony payments, Ms. Lerner instituted an action against him in the Supreme Court of the State of New York. In addition to entering a money judgment against Mr. Lerner for prior alimony payments, the court appointed Ms. Lerner as the receiver and sequestrator of all of assets belonging to Mr. Lerner which are located in New York. The court authorized Ms. Lerner to distribute to herself "all sums of arrears already fixed under the parties' divorce decree as well as current and future support under such decree as it becomes due."
Mr. Lerner holds a number of copyrights, and two New York organizations collect royalties on his behalf. The fund at issue here consists primarily of royalties which were turned over to Ms. Lerner pursuant to the terms of the 1979 order. At the end of 1985, there was approximately $135,000 in the fund, and it was Mr. Lerner's principal New York asset. Three of the parties to this action--Ms. Lerner, the Government, and Viking--claim that they are entitled to payment from the fund, and that their claim has priority.
It is undisputed, at least for the purposes of this case, that Mr. Lerner owes money to each of these claimants. As of January 1, 1986, he owed Ms. Lerner approximately $72,000 for alimony which he failed to pay between September 1, 1984 and January 1, 1986. He also owes Viking approximately $75,000, pursuant to a judgment which Viking obtained in 1979. The Internal Revenue Service ("IRS") has determined that he owes the Government over $1,000,000 in federal income taxes for the years 1977, 1980, and 1981. Obviously, not all of these claims can be satisfied from the fund at issue here, and therefore it is necessary to determine whose interest has priority.
A federal tax lien generally takes priority over a competing lien. See 26 U.S.C. § 6321 et seq. A valid state-created lien, however, has priority if it became choate prior to the perfection of the federal tax lien. See United States v. City of New Britain, 347 U.S. 81, 98 L. Ed. 520, 74 S. Ct. 367 (1953); United States v. J.H.W. & Gitlitz Deli & Bar, Inc., 499 F. Supp. 1010, 1013 (S.D.N.Y. 1980); MDC Leasing Corp. v. New York Ins. Underwriting Ass'n, 450 F. Supp. 179, 181 (S.D.N.Y. 1978), aff'd mem., 603 F.2d 213 (2d Cir. 1979). In this instance, Ms. Lerner and Viking both claim that they have a state-created lien, arising from the judgments that they obtained against Mr. Lerner, and that their state-created liens take priority over the Government's tax lien. The Court concludes that Viking's claim overcomes the Government's priority, but that Ms. Lerner's does not.
The question of whether a federal tax lien has priority over a lien created under state law is governed by the common law rule--the first in time is the first in right. See United States v. City of New Britain, 347 U.S. at 85-87. In the case at bar, Viking obtained a judgment against Mr. Lerner in 1979. Viking perfected the judgment on June 5, 1981 by delivering a judgment execution to the sheriff. See N.Y. C.P.L.R. § 5202(a) (McKinney 1978). The federal tax lien was not recorded until after Viking had perfected its judgment. Therefore, Viking's lien has priority over the federal tax lien at issue.
2. Micheline Lerner's Claim
The "first in time, first in right" rule hinges upon whether the state-created lien was choate prior to the time that the federal tax lien arose. See United States v. City of New Britain, 347 U.S. at 84; Asher v. United States, 570 F.2d 682, 683 (7th Cir. 1978); J.H.W. & Gitlitz Deli, 499 F. Supp. at 1013. In this instance, Ms. Lerner's claim for alimony only concerns payments for 1984 and 1985, and Ms. Lerner did not have a choate lien for such payments at the time that the relevant tax assessments were made against Mr. Lerner between 1981 and 1984.
Ms. Lerner argues that the 1979 order,
which gave her the right to attach Mr. Lerner's New York property, created a lien that was choate as of 1979. In order for a lien to be choate, however, three factors must be satisfied: (1) the identity of the lienor must be known: (2) the property subject to the lien must be identified; and (3) the amount of the lien must be established. See United States v. Equitable Life Assurance Society, 384 U.S. 323, 327-28, 86 S. Ct. 1561, 16 L. Ed. 2d 593 (1966); United States v. Pioneer American Ins. Co., 374 U.S. 84, 89, 10 L. Ed. 2d 770, 83 S. Ct. 1651 (1963); W. Plumb, Federal Tax Liens 149-50 (3d Ed. 1972 and Supp. 1974). In the case at bar, the third factor--which requires that the amount of the lien be established--was not satisfied.
Under the 1979 order, Ms. Lerner had the right to attach Mr. Lerner's New York assets to satisfy any alimony payments that Mr. Lerner failed to make. Ms. Lerner's right to attach the specified property, however, was contingent upon a future event--that is, Mr. Lerner's failing to make the requisite alimony payments. If the ...