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April 19, 1991


James F. Holderman, United States District Judge.

The opinion of the court was delivered by: HOLDERMAN


 Interpleader defendants, the United States of America ("the Federal Government") and the State of Illinois ("the State"), have made cross-motions for summary judgment on the amended interpleader complaint of plaintiff Dennis W. Hoornstra. For the reasons stated below, the Federal Government's motion must be granted and the State's motion denied.

 The parties have stipulated to the following facts. In a sales contract dated June 5, 1987, Southwest Mini Mart Corporation ("Mini Mart") agreed to sell all of its business assets related to its Mini Mart at 674 North Broadway, Aurora. Mini Mart sold its assets to Malcolm Quick.

 Pursuant to a sales contract, Mr. Quick paid $ 50,000.00 for the Mini Mart assets. Of this $ 50,000.00, Mr. Quick paid a total of $ 25,000.00 to the business broker as a commission and to the landlord of the premises to cure arrearages under the lease. In order to protect himself from transferee liability under the Bulk Sales Provisions of the Illinois revenue acts, however, the sales contract provided for plaintiff Dennis Hoornstra, Mr. Quick's attorney, to hold the remaining $ 25,000.00 in escrow.

 By this court's order, Mr. Hoornstra deposited $ 19,437.05 of the $ 25,000.00 with the Clerk of the District Court. An additional $ 6,000.00 remains to be remitted by VR Business Brokers to Dennis Hoornstra, who will then deposit it with the Clerk. Thus, the total subject matter of this interpleader action will be $ 25,437.05, plus any additional earned interest.

 Both the Federal Government and the State claim the $ 25,437.05 interpled fund. The Federal Government bases its claim on unpaid federal employment taxes. Specifically, the United States Internal Revenue Service ("IRS") assessed employment taxes due from Mini Mart in the following amounts on the following dates: (1) $ 10,247.25 on June 16, 1986; (2) $ 18,451.16 on September 8, 1986; (3) $ 18,784.77 on March 30, 1987; (4) $ 17,150.01 on June 22, 1987; and (5) $ 10,328.16 on March 9, 1987.

 The State bases its claim to the interpled fund on unpaid state sales taxes. On September 25, 1987, a Notice to Creditors of Bulk Transfers was served on the Illinois Department of Revenue ("Department") pursuant to the sale of Mini Mart to Mr. Quick. On October 2, 1987 the Department issued a Bulk Sales Stop Order in the amount of $ 104,000.00 to Mr. Quick pursuant to the provisions of Section 5j of the Retailers' Occupation Tax Act, Ill. Ann. Stat. ch. 120, § 444j (Smith-Hurd Supp. 1990), and Section 902(d) of the Illinois Income Tax Act. The basis for the issuance of the Bulk Sales Stop Order was open sales taxes for the certain months between August of 1986 and September of 1987. The open sales taxes totaled $ 104,000.00.

 On November 27, 1987 Mini Mart filed for bankruptcy. The bankruptcy trustee abandoned any interest that the estate may have in the escrow funds. Obviously, payment in full of either the Federal Government's claim or the State's claim to the interpled fund would exhaust it. Thus, this dispute.


 Under Rule 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). Normally, in ruling on a motion for summary judgment the evidence of the non-movant must be believed, and all justifiable inferences must be drawn in the non-movant's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202 (1986). In this case, however, the parties have stipulated to all of the facts necessary to resolve this dispute.

 The Federal Government first contends that under Sections 6321 and 6322 of the Internal Revenue Code, its federal tax lien has priority over the State's interest in the interpled fund. 26 U.S.C. §§ 6321-22. As the State notes, however, although the priority of liens is determined by reference to federal law, state law determines the nature of the property interest of the taxpayer which is subject to a federal tax lien. As the Supreme Court has stated:

The threshold question . . . 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 ...

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