9 Misc. 2d 591 | N.Y. Sup. Ct. | 1957
In this foreclosure action plaintiffs move for an order confirming the Referee’s report of sale and directing the Referee to pay to plaintiffs the sum of $3,285.95 now held by the Referee as part of the proceeds of the sale and also for the payment to plaintiffs of the sum of $629.62 from the receiver’s funds, this latter sum being the amount of plaintiffs’ deficiency over and above the said $3,285.95. Defendant United States of America cross-moves for an order directing the Referee to correct his report in conformity with its objections and to pay to it the said sum of $3,285.95. A request is also made by the Referee for an additional allowance in the sum of $500 for additional services performed in this matter.
From the filed papers it appears that pursuant to a judgment of foreclosure and sale entered on October 19, 1956, the Referee sold the foreclosed premises to one Slavit for the sum of $13,-500. The judgment of foreclosure and sale did not provide that the purchaser be allowed a credit for the payment of any real estate taxes, assessments and water rates but rather that the Referee was to make such payment. The terms of sale, however, provided for such credit. The purchaser paid the real estate taxes, etc., in the sum of $3,285.95 and received a credit toward the purchase price for such payment. On January 21, 1957 title was closed and a deed delivered to the purchaser. By order dated February 20, 1957 the judgment of foreclosure and sale was amended nunc pro tunc to conform to the terms of sale relating to the payment of taxes. This order further provided that the issue of the Federal tax liens was to be passed upon on the motion to confirm the Referee’s report of sale. Upon appeal the order was affirmed by the Appellate Division (Rikoon v. Two Boro Dress, 3 A D 2d 864).
The defendant United States of America served and filed objections to the Referee’s report of sale in allowing priority to the City of New York for its real 'estate taxes, assessments and water rates as against liens relating to unpaid social security assessments levied by the United States against the owner of the foreclosed premises.
The basic issue involved is whether the $3,285.95 is to be deemed an expense of sale as provided by sections 1082 and 1087 of the Civil Practice Act or surplus upon which the Federal liens attached because of their priority in time as against the liens of the City of New York. The liens in question being statutory, the pertinent sections of the statutes involved reveal the following: section 6321 of title 26 of the United States Code provides that unpaid Federal taxes are a lien in favor of the United States Government from the date of the assessment and remain so until they are paid or become unenforcible by reason of the lapse of time (U. S. Code, tit. 26, § 6322), except as against mortgagees, pledgees, purchasers and judgment creditors, in which cases the Federal lien must first be filed (U. S. Code, tit. 26, § 6323). Section 172 of the New York City Charter provides that real estate taxes shall become liens when they become due and payable and shall remain so until paid. The semiannual installments of city taxes become due and payable on October 1 and April 1 of each year.
It is undisputed that the defendant United States of America having appeared in this action and the court having obtained jurisdiction of such defendant, the judgment of foreclosure and sale foreclosed any liens or claims against the property and such liens attached to the surplus money, if any, realized on the sale of the premises.
Defendant United States of America contends that the money paid to the City of New York for its taxes, etc., was out of surplus and that therefore the City of New York was given an unlawful priority over its liens. As its authority defendant cites United States v. City of New Britain (347 U. S. 81). In that case the court held that where tax liens are concerned the rule of ‘‘ first in time, first in right ’ ’ must be applied and that a prior lien gives a prior claim which is entitled to. prior satisfaction out of the property it binds, unless the lien be intrin
The contention that the term “ expenses of sale ” relates to taxes, etc., has been sustained by our courts. (Termansen v. Matthews, 49 App. Div. 163; Wesselman v. Engel Co., 309 N. Y. 27.)
It is undisputed that under section 6323 of title 26 of the United States Code, and also under the authority of the City of New Britain case (supra), the mortgagees herein were definitely entitled to priority over the United States Government and were entitled to be made whole.
The taxes, etc., being expenses of sale as provided by the sections of the Civil Practice Act, no surplus came into existence upon which the Federal liens could attach.
To sustain the contention of the United States Government would jeopardize the entire mortgage market, both present and future. Mortgagees would hesitate to advance funds needed in such business transactions in the fear that on a foreclosure they would not be made whole.
Furthermore, it would appear that the United States Government is barred from raising the present issue. It is well-settled law that the principle of res judicata operates to conclude by the judgment all the parties thereto and their privies with respect to any and all matters in issue or necessarily involved in the plaintiffs’ cause of action, as well as all matters of defense which were or might have been litigated therein, where the court had jurisdiction of the subject matter and the parties. The defendant United States of America
Accordingly, the motion of the plaintiffs is granted not only to confirm the Referee’s report of sale and to direct the Referee to pay the plaintiffs the sum of $3,285.95, but also directing the payment to the plaintiffs of the sum of $629.62 from the receiver’s funds now subject to the order of the court, in payment of the deficiency. The balance of the receiver’s funds amounting to $633.55, being surplus, is directed to be paid to the defendant United States of America. The cross motion by such defendant is otherwise denied.
The request for an additional allowance for the Referee is also denied because this court, in a similar application previously made by the Referee, denied such request (Rikoon v. Two Boro Dress, N. Y. L. J., June 24, 1957, p. 8, col. 1). No additional facts have been submitted warranting any change in such determination.
Settle order on notice.