273 N.Y. 51, In re Atlas Television Co., Inc.

Citation:273 N.Y. 51, 6 N.E.2d 94
Opinion Judge:LEHMAN, Judge.
Party Name:In re ATLAS TELEVISION CO., Inc.
Attorney:Paul Windels, Corp. Counsel, of New York City (Paxton Blair, Oscar S. Cox, and Sol Charles Levine, all of New York City, of counsel), for appellant. Frederic E. Hammer, Nathaniel H. Mandelker, and Benjamin N. Brody, all of New York City, for respondent.
Judge Panel:CRANE, C. J., and O'BRIEN, HUBBS, CROUCH, LOUGHRAN, and FINCH, JJ., concur.
Case Date:December 31, 1936
Court:New York Court of Appeals
 
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Page 51

273 N.Y. 51

6 N.E.2d 94

In re ATLAS TELEVISION CO., Inc.

Court of Appeals of New York.

December 31, 1936

          Proceeding in the matter of the general assignment for the benefit of creditors of the Atlas Television Company, Inc., assignor, to Nathaniel H. Mandelker, assignee, wherein the City of New York filed a claim for taxes. The court at Special Term held that the city's claim was entitled to priority in payment, and the Appellate Division ( 248 A.D. 835,291 N.Y.S. 138), reversed, but granted leave to the city to appeal, and certified a question.

          Order of Appellate Division reversed, order of the Special Term affirmed, and the question answered.

Page 52

          Appeal from Supreme Court, Appellate Division, First department.

          Paul Windels, Corp. Counsel, of New York City (Paxton Blair, Oscar S. Cox, and Sol Charles Levine, all of New York City, of counsel), for appellant.

Page 53

          Frederic E. Hammer, Nathaniel H. Mandelker, and Benjamin N. Brody, all of New York City, for respondent.

          LEHMAN, Judge.

          In April, 1936, Atlas Television Company, Inc., made an assignment for the benefit of creditors. The city of New York filed a claim for ‘ taxes imposed pursuant to the provisions of Local Law No. 24 of the City of New York for the year 1934 [page 164].’ The assignee allowed the claim but refused to accord it priority over claims

Page 54

filed by other creditors. The court at Special Term held that the city was entitled to priority in the payment of its claims. The Appellate Division by a divided court held otherwise, but granted leave to appeal and certified the question: ‘ In a general assignment for the benefit of creditors made pursuant to the statutes of this State, is the claim of the City of New York for sales taxes which the assignor was obligated under Local Law No. 24 of 1934 to pay to the Comptroller, entitled to a preference?’

          No statute in express terms provides a general priority in favor of the state or of a governmental agency of the state in the payment of debts due from an insolvent debtor. Even without such statutory provision the state as the holder of the sovereign power has a preference over other creditors in insolvency proceedings. Matter of Carnegie Trust Co., 206 N.Y. 390, 99 N.E. 1096, 46 L.R.A.(N.S.) 260. That is [6 N.E.2d 95] not true generally of debts due to cities of the state, though such cities at times exercise governmental powers delegated to them. Matter of Northern Bank of New York, 85 Misc. 594, 148 N.Y.S. 70, affirmed on the opinion of Mr. Justice Lehman, 163 A.D. 974, 184 N.Y.S. 70, affirmed, 212 N.Y. 608, 106 N.E. 749.

          In the opinion at Special Term I wrote: ‘ The power to tax is a sovereign power and the city in laying a tax is acting as part of the state under authority given it by the people of the state, and in the exercise of this power it is entitled, I think, to all the prerogatives enjoyed by the sovereign under our common law, and its right to a preference in the distribution of the assets of an insolvent corporation has been declared in Matter of the Receivership of Columbian Insurance Co., 3 Abb.Ct.App.Dec. [239], 242, and in Matter of Atlas Iron Construction Co., 19 A.D. 415 [46 N.Y.S. 467], and recognized in Matter of Carnegie Trust...

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