SW Legal Educational Publishing

First in Time Is First in Right in Priority of Liens
Description Appeals court held that a tax lien was perfected against property before a judgment lien was perfected because the amount of the judgment lien was uncertain until after the tax lien had been filed.
Topic Real Property
Key Words Judgment Lien; Perfected; Priority
C A S E   S U M M A R Y
Facts The Hensleys won a $780,000 judgment against Harbin and attached his property to satisfy the award. On appeal, judgment was reversed and remanded on the damages issue. The parties then settled for $400,000. After the judgment had been reversed, but before the settlement had been reached, the U.S. filed a tax lien against Harbin's property. The Hensleys then sued Harbin and the U.S. to establish priority of the Hensleys' judgment lien and to force foreclosure of Harbin's property. The question before the court was which lien was perfected first.
Decision "Where a federal tax lien is involved, the relative priority of competing liens is governed by federal law." The federal rule is "the first in time is the first in right." Once the original judgment had been reversed, it was unclear how much, if anything, Harbin would owe the Hensleys. Hence, until that issue was resolved, which did not happen until after the tax lien was filed, there was not a certain judgment lien. The tax lien has priority before the judgment lien because it was perfected first.
Citation Hensley v. Harbin, 196 F.3d 613 (6th Cir., 1999)

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