Petitioner Northeast Heating Cooling Refrigeration Company, Inc. ("Northeast") brings this special proceeding pursuant to CPLR 5225 (b) and CPLR 5227, seeking an order requiring respondent Julianna Potter to turn over monies in her possession and control that allegedly are owed to respondent Jeff Almstead Builders, Inc. ("Almstead"), a judgment debtor of Northeast.

BACKGROUND

In 2011, Almstead contracted with Potter, who serves as a trustee for a disabled relative, to construct a home in Chatham, New York. Northeast and respondents Century Electric and Old World Tile served as sub-contractors to Almstead. The work is substantially complete, and Potter is alleged to owe Almstead a remaining contract balance of $26,726. While certain "punch list" items remain outstanding, Potter and Almstead apparently agreed to reduce the contract balance by $3,000 in lieu of completion.

On or about June 12, 2013, Northeast entered a default judgment against Almstead in the sum of $26,607.66. According to the petition, Century Electric also is owed $7,575.00 for its work, and Old World Tile is owed $11,600. However, neither subcontractor has filed a mechanic's lien or obtained a judgment against Almstead.

The only opposition to the turnover petition comes from Almstead, who argues principally that the IRS must be joined in this proceeding due to the pendency of certain federal tax liens. The record reflects that prior to the June 12, 2013 docketing of Northeast's judgment, the Department of the Treasury, Internal Revenue Service ("IRS") filed three separate Notices of Federal Tax Lien against Almstead, totaling $59,596.24.

ANALYSIS

CPLR 5225 (b) authorizes a judgment creditor to commence a special proceeding "against a person in possession or custody of money or other personal property in which the judgment debtor has an interest . . . ." Notice of the proceeding shall be served upon the judgment debtor, who may be permitted to intervene in the proceeding (id.). "The court may permit any adverse claimant to intervene in the proceeding and may determine his rights in accordance with section 5239" (id.). CPLR 5227 similarly authorizes a judgment creditor to commence a turnover proceeding "against any person who it is shown is or will become indebted to the judgment debtor."

As the above-quoted language makes clear, a judgment creditor is obliged to give notice of a turnover proceeding to the judgment debtor, but there is no requirement that notice be given to adverse claimants, including other judgment creditors or lienholders. And while "[r]ival claimants to the assets or funds may be joined in [the turnover] proceeding so that the court may prioritize the competing interests" (Matter of National Union Fire Ins. Co. of Pittsburgh, Pa. v Eland Motor Car Co., 85 NY2d 725, 729 [1995]), adverse claimants generally are not necessary parties to the proceeding (see BDP Intl. Fin. Corp. v First Affiliated Sec., 2010 NY Slip Op 30053 [U] [Sup Ct, NY County 2010]; Matter of Ruvolo v Long Is. R.R. Co., 45 Misc 2d 136, 146 [Sup Ct, Queens County 1965]; Bergdorf Goodman, Inc. v Marine Midland Bank, 97 Misc 2d 311 [NY Civ Ct 1978]). For these reasons, CPLR article 52 has been described as "contemplat[ing] a race of diligence'" among creditors (Ruvolo, 45 Misc 2d at 148).

In arguing that the IRS is a necessary party, Almstead emphasizes that the federal tax liens potentially hold a higher priority than Northeast's later-filed judgment. The priority of [*2]federal tax liens is determined solely by federal law (North Am. Corp. v Datacap Intl., Inc., 54 AD2d 708, 708-709 [2d Dept 1976]; Matter of Mintz v Fischer, 19 AD2d 36 [1st Dept 1963]; cf. CPLR 5234). Subject to certain prescribed exceptions that do not appear to be implicated here, a federal tax lien is valid "as against any . . . judgment lien creditor" (26 USC § 6323 [a]), and the lien broadly encompasses "all property and rights to property, whether real or personal, belonging to [the taxpayer]" (id. § 6321 [emphasis added]).

The Court is not persuaded by Almstead's focus on the priority of the IRS liens. As the IRS is not a party to this proceeding and has taken no steps to enforce its liens through levy or otherwise, the Court has no occasion to consider or determine the scope or priority of any such liens. The issue before the Court at this juncture is whether any provision of state or federal law requires the IRS to be given notice of this proceeding or joined as a party. For the reasons stated above, CPLR article 52 does not require notice to, or the joinder of, rival claimants — even those with potentially superior claims to the subject property. And this is not a case where the IRS or any other non-party has been shown to have an "actual, current interest in the property in question" (Bergdorf Goodman, 97 Misc 2d at 314; cf. Swezey v. Merrill Lynch, 87 AD3d 119, 125-126 [1st Dept 2011]). Moreover, Almstead cites no provision of federal law that requires the IRS to be joined as a party.^[FN1] Under the circumstances, Almstead has failed to demonstrate that the IRS is a necessary party to this turnover proceeding.

Finally, the Court rejects Almstead's alternative contention that Northeast has "no interest or right to possess any of the said monies which are the rightful property of unpaid subcontractors." At the outset, the other subcontractors owed monies by Almstead were named as respondents in this proceeding, but have not appeared or otherwise asserted any claim to the subject funds. In any event, the funds at issue are owed by Potter pursuant to a contract with Almstead, there is no proof of any direct contractual relationship between Potter and the subcontractors, and there has been no showing that the other subcontractors have any actual, current interest in the subject funds. Under the circumstances, the record conclusively establishes that Potter is a person indebted to Almstead (see CPLR 5527).

Accordingly, it is

ORDERED that petitioner's motion for a turnover order is granted, and petitioner shall settle an order/judgment on notice to respondents.

This constitutes the Decision & Order of the Court. The original of this Decision & Order is being returned to petitioner's counsel; all other papers are being held by the Court pending further proceedings in this matter. The signing of this Decision & Order shall not constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.

Dated: Albany, New York

September 16, 2013

[*3]

RICHARD M. PLATKIN

A.J.S.C.

Papers Considered:

Notice of Petition, dated June 28, 2013;

Petition, dated June 28, 2013, with attached exhibit 1;

Verified Answer, sworn to July 23, 2013;

Affidavit of Daniel L. Doherty, Esq,. sworn to July 23, 2013;

Affidavit of Jeffrey Almstead, sworn to July 23, 2013, with attached exhibits A-C;

Reply affidavit of Conor E. Brownell, Esq., sworn to July 29, 2013.