The opinion of the court was delivered by: Robson, District Judge.
MEMORANDUM AND ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
The priority of right between the Federal Government, pursuant
to a lien and notice of levy for income taxes, and the taxpayer's
divorced wife-grantee under a divorce settlement, to a residence
held under an Illinois land trust, is raised by the cross motions
for summary judgment.
The interpretation to be given the Illinois Supreme Court
decision of Chicago Federal Savings and Loan Association v.
Cacciatore, 25 Ill.2d 535, 185 N.E.2d 670 (1962), is critical to
a determination of the rights of the parties.
There is no serious dispute as to the facts, which are as
follows: The title to the residence property located at 4313
Prairie Avenue, Chicago, Illinois, was conveyed October 18, 1951,
to the La Salle National Bank as trustee under Trust No. 7092,
with Howard Lewis (the husband) as beneficiary. On December 23,
1954, the United States assessed income taxes for 1950 against
Howard and Betty Lewis for $10,353.74 taxes, $2,401.53 penalties,
and $2,316.97 interest. The balance due, after credits, was
$10,256.08, and interest. In 1960, Betty and Howard Lewis
executed a waiver extending the statute of limitations for 1950
income tax deficiency in the amount of $12,072.24 until December
31, 1965. On November 7, 1955, notice of tax liens were filed by
the United States with the Cook County Recorder of Deeds.
On June 26, 1962, the Government filed a notice of levy for
$14,364.64 on the La Salle National Bank upon the beneficial
interest of Howard Lewis. On September 4, 1962, a divorce decree
in cause 62 C 14885 in Cook County awarded the residence to
Olivia Lewis, and directed Howard Lewis to convey the premises to
her. On October 15, 1962, there was recorded a quitclaim deed
from Howard Lewis to Olivia, and on October 23, 1963, he assigned
his beneficial interests in the trust to Olivia. Howard and Betty
Lewis have not answered the complaint and are in default.
While the nature of the property interests of the taxpayer is
determined by state law, the Federal law prescribes the mode of
procedure for the effectuation of the lien (United States v.
Clinton, 260 F. Supp. 84 (S.D.N.Y. 1966); United States v.
Goldberg, 3 Cir., 362 F.2d 575 (1966); Division of Labor Law
Enforcement, Department of Industrial Relations, State of
California v. United States, 9 Cir., 301 F.2d 82 (1962). See also
United States v. Equitable Life Assurance Society of the United
States, 384 U.S. 323, 86 S.Ct. 1561, 16 L.Ed.2d 593 (1966)).
The Federal Tax Regulations 1959, p. 1636, § 301.6331-1(a),
"If any person liable to pay any tax neglects or
refuses to pay such tax within 10 days after notice
and demand, the district director * * * may proceed
to collect the tax by levy upon any property, or
rights to property, whether real or personal,
tangible or intangible, belonging to such person or
on which there is a lien provided by [the
statute] * * * for the payment of such tax. * * *
Levy may be made by serving a notice of levy on any
person in possession of, or obligated with respect
to, property or rights to property subject to
levy. * * *" (Emphasis added.)
See also United States v. Manufacturers National Bank,
198 F. Supp. 157 (N.D.N.Y. 1961); Rosenblum v. United States,
300 F.2d 843 (1st Cir. 1962).
In the Cacciatore case, there was a notice of lien by the
Government but no levy. In that case, the court stated, at 540,
541 of 25 Ill.2d, at 672 of 185 N.E.2d:
"* * * [T]he Federal lien against the trust
beneficiary did not attach to the real estate to
which the beneficiary had no title under the law of
this State as is hereinafter more clearly set forth."
"* * * The threshold question in this case, as in
all cases where the Federal Government asserts its
tax lien, is whether and to what extent the taxpayer
had "property" or "rights to property" to which the
tax lien could attach. In answering that question,
both federal and state courts must look to state law,
for it has long been the rule that "in the
application of a federal revenue act, state law
controls in determining the nature of the legal
interest which the taxpayer had in the property * * *
sought to be reached by the statute." * * *'
"Only when the Federal tax lien has attached to the
taxpayer's State-created interests, does the Federal
law determine the priority of competing liens against