The opinion of the court was delivered by: William J. Hibbler, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff, General Star Indemnity Company, brought this interpleader action to determine the rights of competing claimants to $160,000 in insurance proceeds arising from the settlement of a prior lawsuit with Hubbard Bowling Lanes. The United States subsequently entered the lawsuit [ Page 2]
asserting its interest in the interpleaded funds. The United States now files for summary judgment. Defendant James C. Ten Broeck also files for summary judgment. Both motions are unopposed. For the reasons below, the motions are granted.
Hubbard Bowling operated a bowling alley until it was destroyed by fire in 1997. After the fire, Hubbard Bowling made claim for property loss under an insurance policy issued by General Star Indemnity Company (the Policy). The Policy's loss payable provisions identified Deutsche Credit Corporation and Brunswick Bowling & Billiard as loss payees with respect to Hubbard Bowling's personal property. Deutsche Credit had held a 1987 promissory note from Hubbard Bowling that was later assigned to Brunswick Bowling & Billiards and then to its successor, defendant Brunswick Corporation.
Hubbard Bowling's claim under the policy led to litigation in this Court. Defendant James Ten Broeck represented Hubbard Bowling, The parties reached a settlement whereby General Star agreed to split $160,000 in insurance proceeds among the following parties: $70,000 to Brunswick Corporation (as loss payee); $70,000 to Broeck and Hubbard Bowling jointly; and $20,000 to the Internal Revenue Service and Robert Hubbard jointly (the Settlement Agreement). Broeck later agreed to accept $50,000 of the $70,000 awarded to him and Hubbard Bowling.
Defendant B & W Financial Group, Hubbard Bowling's former landlord, was not a party to the Settlement Agreement, but is named in the present interpleader action because it seeks a share of the interpleaded funds to satisfy a 1998 Illinois state court judgment against Robert Hubbard for unpaid rent.
The United States' interest in the insurance proceeds derives from federal tax liens against Hubbard Bowling for unpaid federal employment taxes for the period 1989 to 1992. Through this [ Page 3]
action, the United States seeks to reduce Hubbard Bowling's tax liabilities to judgment and foreclose its tax liens on the interpleaded funds in the amount of $40,000, claiming priority over the competing interests of Hubbard Bowling, B & W Financial, and Robert Hubbard. Hubbard Bowling, Brunswick Corporation and Broeck do not object to the United States' request. B & W Financial Group has not responded, Regarding the remaining $120,000 in interpleaded funds addressed in the Settlement Agreement, defendant Broeck seeks $50,000 for himself and $70,000 for Brunswick. No party opposes Broeck's proposed distribution.
To restate, the Settlement Agreement allocated the insurance proceeds as follows: $70,000 to Broeck and Hubbard Bowling; $70,000 to Brunswick; and $20,000 to the Internal Revenue Service (IRS) and Robert Hubbard. Broeck later agreed to accept $50,000 of the $70,000 jointly allotted to him and Hubbard Bowling. The United States argues that Hubbard Bowling is not entitled to any of the remaining insurance proceeds, as the United States' tax liens trump any interest that Hubbard Bowling may have in the proceeds. The United States also argues that the liens are superior to any interest that Robert Hubbard, as owner of Hubbard Bowling, may have in the $20,000 jointly allocated to the IRS and Robert Hubbard. The United States therefore requests the Court to modify the Settlement Agreement so that it may collect $40,000 of the interpleaded funds.
To determine the rights of the competing claimants it is first necessary to define each party's purported interest. Broeck holds an attorney's lien on the proceeds arising from his efforts negotiating the Settlement Agreement. Brunswick, as a secured lender, holds a perfected security interest in Hubbard Bowling's property and proceeds therefrom. The United States holds tax liens also encumbering Hubbard Bowling's property and proceeds therefrom. B & W Financial holds an [ Page 4]
unperfected state court judgment against Ronald Hubbard. Lastly, Hubbard Bowling holds an insurance policy from General Star providing coverage ...