Opinion
No. 03 Civ. 9316 (DAB).
September 28, 2004
Heather K. McShain, Assistant United States Attorney, DAVID N. KELLEY, UNITED STATES ATTORNEY, Attorneys for Plaintiff.
Lee P. Whidden, Linda C. Jamieson, SALANS, Attorneys for Defendants Arthur and Joan Goldstein.
MEMORANDUM OPINION
Defendants Arthur and Joan Goldstein move, pursuant to Fed.R.Civ.P. 62(b), for a stay of the operation of the default judgment entered herein pending the determination of their motion to vacate the judgment. The matter is before me as the Part I judge.
Facts
This is an action by the United States to foreclose fourteen tax liens assessed by the Internal Revenue Service ("IRS") against Mr. Goldstein, to set aside as fraudulent Mr. Goldstein's 1992 conveyance to Mrs. Goldstein of his interest in a house previously owned by them as tenants by the entirety, and for other relief. The Goldsteins defaulted and judgment was taken against them by default. They have moved pursuant to Rule 60(b) to vacate that judgment.The Goldsteins have been defendants also in an action brought by Bruce and Hillary Klein in the Supreme Court of the State of New York, Westchester County, for specific performance of a contract to convey the house. On September 8, 2004, the state court entered judgment for the plaintiffs, granting specific performance, requiring the Goldsteins to close on September 30, 2004, and directing them to pay part of the net proceeds to the IRS in satisfaction of the tax liens. The Goldsteins' application in Supreme Court for a stay of the judgment was denied, as was their motion in the Appellate Division for a stay pending appeal.
Mrs. Goldstein, who claims sole ownership of the house and disputes her liability for the tax liens, asserts that she would be harmed irreparably if part of the sales proceeds were paid to the IRS because she would be required to commence an action for a refund against the government in order to assert her claim that the liens may not properly be enforced against the proceeds of the sale.
Discussion
There is some confusion that must be eliminated at the outset. The present motion is to stay the operation of the default judgment in this action. But the allegedly imminent injury is not the enforcement of the default judgment in this action, but that of the state court judgment requiring the Goldsteins to close the sale of the house and to pay over part of the proceeds to the IRS in satisfaction of the tax liens. Thus, even if the Court granted the stay in the terms contained in the Goldsteins' motion, the stay would have no effect on their obligation to close the sale and pay part of the proceeds to the IRS. Confronted with this fact, counsel for the Goldsteins acknowledged that the principal purpose of seeking a stay of enforcement of the default judgment is the hope that the state courts might look more favorably upon a renewed motion there to stay the state court judgment if this Court lends some credence to the motion to vacate the default judgment by granting a stay than they did previously.
It is unclear why the state court so directed. If, as the government claimed at oral argument, there were nominee liens against Mrs. Goldstein pending on the property, it may have acted to ensure that those liens were removed at the closing. Those liens, assuming they existed, would have had force even prior to their enforcement by foreclosure or administrative levy. See 26 U.S.C. §§ 6321-22 (upon assessment, tax liability is "a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to" the taxpayer); Welsh v. United States, 220 F.2d 200, 203 (D.C. Cir. 1955) ("When a tax lien attaches to property, the United States has an interest in the property and becomes in a sense a co-owner of it to the extent of the lien."). On the other hand, the state court may have been aware of the default judgment in this case and thus proceeded on the premise that this Court already had determined that Mr. Goldstein had a property interest in the property and that the tax liens therefore reached that interest. The record, however, is silent on this.
To whatever extent the Goldsteins really seek to have this Court stay the state court judgment, at least to the extent of the requirement that sale proceeds be paid to the government, their application is without merit.
"The Rooker-Feldman doctrine embodies the principle that `among federal courts, only the Supreme Court has subject matter jurisdiction to review state court judgments.' Thus, a federal district court lacks jurisdiction over any claim that `directly challenges, or is `inextricably intertwined' with, a prior state court decision.'"
Gucci v. Gucci, 309 B.R. 679, 682 (S.D.N.Y. 2004) (footnotes omitted).
Accordingly, this Court lacks subject matter jurisdiction to stay the operation of the state court judgment. Moreover, even if the Court had the power to stay the state court judgment, it would decline to exercise it, as Mrs. Goldstein has failed to demonstrate the inadequacy of the remedy at law she concededly will have — an action against the government for a tax refund.
See Foulke by Foulke v. Foulke, 896 F. Supp. 158, 160 (S.D.N.Y. 1995).
This conclusion is fatal also to the request to order the government to hold the money paid over at the closing in escrow, as such an order would alter the disposition directed by the state court judgment. In any case, this Court perceives no practical difference between payment of the money into the United States Treasury and payment to the United States or some other escrowee. Regardless of how the money might be held, Mrs. Goldstein would not have it. In order to have any right to any of it, she would have to succeed in her motion to vacate the default judgment and then prevail in this action. If she accomplishes all that, she will get the money irrespective of how it is held in the interim.
The Court imparts no view as to the effect of the default judgment on any such action.
To the extent that the Goldsteins seek a stay of enforcement of the default judgment itself, the motion also is denied. The likelihood of success in obtaining vacatur of the judgment is modest. Nor have they demonstrated a threat of irreparable injury.
Conclusion
For the foregoing reasons, the motion is denied in all respects. Insofar as the motion is properly construed as seeking to stay the operation of so much of the state court judgment as requires Mrs. Goldstein to pay part of the sale proceeds to the government, the denial is for want of subject matter jurisdiction.
SO ORDERED.