If New York's Department of Taxation and Finance has a tax warrant filed against a debtor and is properly notified of a sheriff's sale of that debtor's real estate under CPLR § 5236(c), does the Department's tax lien survive the sale if it never delivers its own execution to the sheriff beforehand?

Plain-English summary

Although this opinion is filed in the Department's Income Tax advisory-opinion series, it does not address what income is taxable at all. It is really a procedural question about lien priority in a debt-collection context: whether a New York State tax warrant (which functions as a judgment lien once docketed) survives a sheriff's sale of the debtor's real estate held to satisfy a different creditor's judgment.

Sturdy Oil Corporation had obtained a judgment by confession against John E. Craig, Jr. and Catherine B. Craig (doing business as Rainbow Market) back in 1983, docketed in the Essex County Clerk's office. Years later, in 1989, the New York State Department of Taxation and Finance filed its own tax warrant against the same debtors in the same clerk's office - creating a competing lien. In 1993, Sturdy Oil had an execution issued on its own judgment and the Essex County Sheriff proceeded to sell real estate belonging to John E. Craig, Jr. (and a co-owner, George W. Rosenvold) to satisfy Sturdy Oil's judgment. Because the Department had a lien of record, CPLR § 5236(c) required the sheriff to formally notify the Department of the upcoming sale, which happened on August 31, 1993. Sturdy Oil then bought Craig's interest in the property for $100 at the sheriff's sale and received a sheriff's deed.

The critical fact is what the Department did - or rather, didn't do - after receiving that notice: it never delivered its own execution to the sheriff before the sale took place. CPLR § 5236(e) provides that a judgment creditor who is duly notified under § 5236(c) but fails to deliver an execution to the sheriff before the sale loses any further lien on the property and, except as against the debtor personally, loses any further interest in the sale proceeds. Applying that rule, the Department concluded that its own tax warrant/lien did not survive the sheriff's sale: it has no further lien on the real property Sturdy Oil purchased and no further interest in the sale proceeds, because it was properly notified but never took the one step - delivering an execution - that would have preserved its position.

What this means for you

Judgment creditors and purchasers at a sheriff's sale

If you are enforcing your own judgment against a debtor whose property carries a docketed New York tax warrant, that warrant does not automatically block your sale or follow the property forever. The sheriff must give the Department formal notice under CPLR § 5236(c), but once that notice is given, the ball is in the Department's court: if it does not deliver its own execution to the sheriff before the sale, its lien is cut off by the sale under CPLR § 5236(e), and a purchaser like Sturdy Oil can take the property free of that particular lien.

Businesses and accountants dealing with a debtor who also owes back NY taxes

When a customer or borrower owes you money and also owes the state back taxes, a docketed tax warrant does not necessarily have priority over your judgment lien in every collection scenario. This opinion shows that the state's lien can be extinguished as to a specific property if the state is notified of a sheriff's sale and fails to protect its lien by delivering its own execution beforehand - a reminder that lien "priority" in a sheriff's-sale context turns on procedural compliance under CPLR § 5236, not simply on which lien was filed first.

Common questions

Q: What did CPLR § 5236(c) require the sheriff to do here, and did it happen?
A: It required the sheriff to furnish a list of every judgment creditor and lienholder of record - including the Department, whose docketed tax warrant functions as a judgment lien - and to serve each of them with notice of the sale. The sheriff served the Department with notice of the sale on August 31, 1993, satisfying that requirement.

Q: Did receiving notice under § 5236(c) by itself protect the Department's tax lien?
A: No. Notice alone does not preserve a lien. Under CPLR § 5236(e), a judgment creditor that is duly notified must also deliver its own execution to the sheriff before the sale takes place in order to keep its lien and interest in the sale proceeds.

Q: What would have happened if the Department had delivered its own execution to the sheriff before the sale?
A: The opinion's reasoning implies that doing so would have preserved the Department's lien and its interest in the proceeds of the sale, consistent with the plain terms of CPLR § 5236(e) (which only cuts off the lien of a creditor who "fails to deliver an execution to the sheriff prior to the sale"). Because the Department did not deliver an execution here, that protective step was never taken.

Q: Does losing its lien on the property mean the Department can no longer collect the underlying tax debt from the Craigs?
A: CPLR § 5236(e) only affects the Department's lien on, and interest in the proceeds of, the specific property sold; it expressly does not cut off the Department's rights against the judgment debtor personally. The opinion addresses only the lien's fate as to this sale, not the Department's broader collection remedies against the debtors.

Q: Why is this opinion filed under "Income Tax" if it isn't about income taxation?
A: New York's tax warrants (including those arising from income tax liabilities) are advisory-opinion matters handled within whichever tax-type series the underlying debt falls under administratively; here the warrant appears to have been categorized as an income tax matter. The substance of the ruling, however, is entirely about lien priority and sheriff's-sale procedure under the CPLR, not about the computation or taxability of any income.

Citations and references

• CPLR § 5236(c) - requires the sheriff to furnish notice of a real property sale to every judgment creditor and lienholder of record, including a taxing authority with a docketed warrant
• CPLR § 5236(e) - a judgment creditor duly notified under subdivision (c) or (d) who fails to deliver an execution to the sheriff before the sale loses any further lien on the property and, except as against the judgment debtor, any further interest in the sale proceeds

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1994.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a94_5i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-94 (5) I
Income Tax
March 21, 1994

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I940105B

On January 5, 1994, a Petition for Advisory Opinion was received from
Sturdy Oil Corporation, 9 Bloomingdale Avenue, Saranac Lake, New York 12983.
The issue raised by Petitioner, Sturdy Oil Corporation, is whether a tax
lien survives an execution and sheriff's sale of real property.
On July 27, 1983, Petitioner, by confession of judgment, received a
judgment against John E. Craig, Jr. and Catherine B. Craig, d/b/a Rainbow Market,
filed in the Essex County Clerk's office under index No. 324-83.
On July 27, 1989, the New York State Department of Taxation and Finance
filed warrant A-5#5 in the Essex County Clerk's office.
On August 6, 1993, an execution was issued to the Essex County Sheriff on
behalf of Petitioner and against John E. Craig, Jr. and Catherine Craig, d/b/a
Rainbow Market.
Pursuant to the execution, a sheriff's sale of certain real estate
belonging to John E. Craig, Jr. and George W. Rosenvold was sought to satisfy the
judgment of Petitioner.
Pursuant to section 5236(c) of the Civil Practice Law and Rules (CPLR), the
Essex County Sheriff served the New York State Department of Taxation and Finance
with a notice of sale on August 31, 1993.
The New York State Department of Taxation and Finance did not deliver an
execution to the sheriff before the sale pursuant to section 5236(e) of the CPLR.
Petitioner purchased the defendant, John E. Craig, Jr.'s, interest in the
real estate for $100 at the sheriff's sale and thereafter received a deed from
the sheriff.
Section 5236(c) of the CPLR states:
(c) Notice of sale. A printed notice of the time and place
of the sale containing a description of the property to be sold
shall be posted at least fifty-six days before the sale in three
public places in the town or city in which the property is located
...
A list containing the name and address of the judgment debtor
and of every judgment creditor whose judgment was a lien on the
real property to be sold and of every person who had of record any
interest in or lien on such property forty-five days prior to the
day fixed for the sale shall be furnished the sheriff by the
TP-9 (9/88)

-2­

TSB-A-94 (5) I
Income Tax
March 21, 1994

judgment creditor, and each person on the list shall be served by
the sheriff with a copy of the notice by personal delivery or by
registered or certified mail, return receipt requested, at least
thirty days prior to the day fixed for the sale....
Section 5236(e) of the CPLR states:
(e) Effect of notice as against judgment creditors. A judgment
creditor duly notified pursuant to subdivisions (c) or (d) who fails
to deliver an execution to the sheriff prior to the sale shall have
no further lien on the property and, except as against the judgment
debtor, no further interest in the proceeds of the sale.
Herein, the New York State Department of Taxation and Finance filed a
warrant in the Essex County Clerk's office on July 27, 1989. Pursuant to the
execution issued, on August 6, 1993, to the Essex Country Sheriff on behalf of
Petitioner, a sheriff's sale of certain real estate belonging to John E. Craig,
Jr. and George W. Rosenvold was sought to satisfy the judgment of Petitioner.
Pursuant to section 5236(c) of the CPLR, on August 31, 1993 the Essex Country
Sheriff served the New York State Department of Taxation and Finance with a
notice of sale of such real property on October 4, 1993.
Since the New York State Department of Taxation and Finance, as a judgment
creditor against John E. Craig, 3r. and/or Catherine B. Craig, was duly notified
pursuant to section 5236(c) of the CPLR of the sale of such real estate belonging
to John E. Craig, Jr. and the Department of Taxation and Finance failed to
deliver an execution to the sheriff prior to the sale, pursuant to section
5236(e) of the CPLR, the New York State Department of Taxation and Finance has
no further lien on such property sold and no further interest in the proceeds of
the sale.

DATED: March 21, 1994

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.