Opinion
No. CA 06-03702.
November 9, 2007.
Appeal from an order of the Supreme Court, Erie County (John A. Michalek, J.), entered November 13, 2006. The order adjudged that any outstanding sums owed to plaintiff by defendant be given priority and paid after the satisfaction of any fees and expenses associated with the sale of defendant's business and thereafter any capital gains tax may be satisfied.
COHEN LOMBARDO, P.C., BUFFALO (MELISSA A. CAVAGNARO OF COUNSEL), FOR DEFENDANT-APPELLANT.
LIPSITZ GREEN SCIME CAMBRIA, LLP, BUFFALO (PATRICK C. O'REILLY OF COUNSEL), FOR PLAINTIFF-RESPONDENT.
Present: Hurlbutt, J.P., Centra, Lunn, Fahey and Pine, JJ.
It is hereby ordered that the order so appealed from be and the same hereby is unanimously affirmed without costs.
Memorandum: Defendant contends in this post-matrimonial matter that, pursuant to CPLR 5234 (a) and 5236 (g), capital gains tax liability from the sale of his business must be satisfied before the proceeds of his business are distributed to plaintiff as a judgment creditor. We conclude that CPLR 5234 (a) and 5236 (g) are inapplicable, and we therefore reject defendant's contention. Those sections require that any taxes levied upon the sale, delivery, or transfer of personal and real property be paid prior to distribution of the proceeds to judgment creditors ( see CPLR 5234 [a]; 5236 [g]), and a capital gains tax is not a transfer tax levied upon the sale of defendant's business. Rather, a capital gain is taxed as a portion of an individual's gross income ( see 26 USC § 61 [a] [3]). In any event, the business was sold pursuant to the parties' agreement to satisfy the money judgments entered in favor of plaintiff and, as a judgment creditor, plaintiff is entitled to the benefit of the common-law rule of "'first in time, first in right'" ( Boris v Flaherty, 242 AD2d 9, 13). Because plaintiffs rights with respect to those money judgments were established before the sale of the business and the amount of capital gains tax, if any, was unknown at the time of the sale, plaintiff's money judgments take priority over any future capital gains taxes levied against defendant ( see generally Lerner v United States, 637 F Supp 679, 680).