Davis & Warshow, Inc. v. S. Iser, Inc.

• Decision Date: 17 October 1961
• Citation: 220 N.Y.S.2d 818,30 Misc.2d 528
• Parties: , 9 A.F.T.R.2d 689, 62-1 USTC P 9291 DAVIS AND WARSHOW, INC., Plaintiff, v. S. ISER, INC., The City of New York, The Franklin Company Contractors, Inc., Jet Spray Auto Washer Corp., New Amsterdam Casualty Co., Frank Castelento, d/b/a Castel Contracting Co., Mazella Contractors, Inc., Lucien Nemser, Fred A. Smythe, d/b/a Independent Credit Company and United States of America, Defendants.
• Court: New York Supreme Court

Page 818

220 N.Y.S.2d 818

30 Misc.2d 528, 9 A.F.T.R.2d 689,

62-1 USTC P 9291

DAVIS AND WARSHOW, INC., Plaintiff, v. S. ISER, INC., The City of New York, The Franklin Company Contractors, Inc., Jet Spray Auto Washer Corp., New Amsterdam Casualty Co., Frank Castelento, d/b/a Castel Contracting Co., Mazella Contractors, Inc., Lucien Nemser Fred A. Smythe, d/b/a Independent Credit Company and United States of America, Defendants.

Supreme Court, Special Term, New York County, Part I.

Oct. 17, 1961.

Corwin & Beck (Erwin L. Corwin, New York City, of counsel), for plaintiff.

Charles H. Tenney and Leo Larkin, Corp. Counsel, New York City (Morris Lacher, Asst. Corp. Counsel, New York City, of counsel), for defendant City of New York.

Pakula & Pakula, Forest Hills (Gerson Pakula, Forest Hills, of counsel), for defendant Franklin Co. Contractors, Inc.

Neumann & Fleissig, New York City (Aaron Fleissig, New York City, of counsel), for defendant Jet Spray Auto Washer Corp.

Leon Kirschenbaum, New York City (Joseph S. Tedesco, New York City, of counsel), for defendant New Amsterdam Cas. Co.

Crisona Brothers, New York City (John L. Crisona, New York City, of counsel), for defendant Frank Castelento d/b/a Castel Contracting Co.

Ely Estroff, New York City, for defendant Mazella Contractors, Inc.

Lucien Nemser, New York City, defendant in person.

Arthur A. Atha, New York City, for defendant Fred A. Smythe d/b/a Independent Credit Co.

Arthur H. Christy, S. Hazard Gillespie, Jr., Morton S. Robson, and Robert M. Morgenthau, U. S. Attys. for Southern Dist. of New York, New York City (Burton M. Fine, Asst. U. S. Atty., New York City, of counsel), for defendant United States.

MATTHEW M. LEVY, Justice.

The City of New York holds $8,849.86 and accumulated interest to the credit of S. Iser, Inc., (hereinafter referred to as Iser) for certain work done for the City by Iser in pursuance of public improvement contracts known as Numbers 170235, 172819, 170447, 171728, 175652 and 172094. Aside from accumulated interest, these moneys are allocated as follows: Contract No. 170235, $3,060.83; Contract No. 170447, $15.21; Contract No. 171728, $2,089.32; Contract No. 172819, $1,902.53; Contract No. 175652, $1,574.47; Contract No. 172094, $207.50. Iser is presently insolvent. Several parties have presented claims to all or portions of this fund, but the City has refused to make payment or distribution thereof, and is now retaining the moneys due Iser under these contracts pending the determination by this court of the various claims and priorities.

This is an action instituted by Davis and Warshow, Inc., for a judicial declaration as to the validity of its claims as Iser's assignee to a part ($4,000 plus interest) of the fund, for the determination of the superiority of its claims as against all other claimants, and for a direction that the City make appropriate payment to the plaintiff. The defendants are Iser (the debtor), the City (the stakeholder), The Franklin Company Contractors, Inc. (a mechanic-lienor of the properties involved), Jet Spray Auto Washer Corp. (an alleged judgment creditor of Iser), New Amsterdam Casualty Co. (an assignee of Iser), Frank Castelento, doing business as Castel Contracting Co. (a judgment creditor of Iser), Mazella Contractors, Inc. (a judgment creditor of Iser), Lucien Nemser (a judgment creditor of Iser), Fred A. Smythe, doing business as Independent Credit Company (a judgment creditor of Iser) and United States of America (as creditor for tax indebtednesses due it by Iser).

The defendants Iser, the City, New Amsterdam, Castelento, Mazella, and Nemser have defaulted in answering (or, at least, no answers have been submitted to me on behalf of such defendants). The defendant Franklin has interposed an answer containing certain denials of the allegations of the complaint, and (without expressly designating its prayer as a counterclaim) asks affirmative judgment in its favor as against the fund in the principal sum of $1,258.68, plus interest, as a mechanic lienor, and as against Iser for any deficiency. The defendant Jet has also interposed an answer containing denials and has set up three defenses--(1) that this court has no jurisdiction; (2) that Jet has obtained a judgment against Iser in the sum of $3,821.54, that a third-party subpoena was issued thereon against the City, that the City has been directed by the City Court of the City of New York in such supplementary proceedings to make payment thereof to Jet, and that therefore there has been an adjudication on the merits as to Jet's rights; and (3) that there is an action still pending and undisposed of between the plaintiff and Jet and other parties upon the same cause of action set forth in the complaint. The defendant Smythe, in his answer, in addition to denials, has alleged, by way of 'further answering the complaint herein and for counter claim and cross action', (1) that the defendant Franklin has failed to obtain a due extension of its mechanic's lien enabling it to institute an action threon or to file a lis pendens, and therefore the lien of said defendant is void, and (2) that Jet has been fully paid on its claim and therefore has no present claim upon the fund. Smythe asks for judgment in favor out of the fund in the principal amount of $1,458, plus interest, as a judgment creditor of Iser in that amount . In its amended answer, the defendant United States, setting forth certain denials and admissions, has also pleaded as a defense and cross claim that it has duly assessed certain taxes against the defendant Iser, totalling $6,659.16, plus interest, and that the claims of all of the other parties are subordinate to such Federal tax liens, and asks a declaration of rights accordingly.

The plaintiff has moved for summary judgment in its favor (Rules of Civil Practice, rule 113). The defendant United States has cross-moved for a denial of the plaintiff's motion and for partial summary judgment in favor of the United States (R.C.P. rule 114). On these motions, ¹ it appears that all of the parties, except the defendant Iser, have served or been served with the respective notices of motion, whether such parties have appeared in the action or answered the complaint or have not. Affidavits have not been submitted on behalf of the defendants Jet, Castelento and Mazella, and, as to the defendants Iser and the City, the affidavits on their behalf assert no claim to the fund on hand or any portion thereof, and merely present factual data in respect of certain facets of the situation submitted to me for resolution.

Because it appears--at first blush at least--that the United States may be entitled to a primary priority as against all of the parties to this proceeding, I think it will facilitate an understanding of the issues if the cross motion of the United States were first studied and the claim of priority of the United States were resolved separately vis-a-vis the claim of each of the other parties.

Under section 6322 of the Internal Revenue Code, 26 U.S.C. § 6322, the tax lien will be deemed to have arisen at the time of the assessment thereof, but section 6323 provides that a tax lien is not valid as against 'any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed * * *'. The United States assessed unpaid withholding taxes against the defendant Iser on September 9, 1954 in the sum of $1,943.26, on May 31, 1955 in the sum of $1,902.61, and on August 31, 1955 in the sum of $2,003.17. Delinquent interest to April 5, 1957, amounted to $810.12. The total tax lien amounts to $6,659.16. On April 4, 1957, notices of these liens were filed with the Register of the City of New York, pursuant to the requirements of New York law (Lien Law, § 240). Recovery thereof, with interest to the date of payment, is demanded out of the fund of $8,849.86 held by the City of New York to the credit of the debtor. What are the rights of each of the competing claimants in the light of this federal tax lien?

The alleged claim of defendant Jet does not appear on the lien docket maintained by the Register of the City of New York for that purpose (Lien Law, § 10). This is not necessarily decisive as to the position of Jet for it might be able to establish itself as a creditor, lien or otherwise, in some other fashion. Jet, however, makes no claim to any of the moneys held by the City under contracts with Iser and now says that it has been paid. There is no showing of the amount and date of such payment and for the purposes of these motions it will be assumed that payment was made to Jet by the City prior to submission herein of the affidavit, sworn to May 20, 1959, submitted by the Corporation Counsel of the City of New York. Nothing said in this opinion shall be construed as approval of any payment made to Jet before that date and the rights of all parties with respect to any such payment shall be unaffected.

The defendant Smythe filed his judgment against the debtor Iser for $1,458 on February 24, 1958, by way of third-party subpoena, and the defendant Nemser filed his judgment for $8,520 against the debtor Iser (by the same method) on February 11, 1958--in both instances long after the government assessed and docketed its lien for taxes. Tax liens are entitled to priority as against judgment creditors who file judgments subsequent to the filing of the tax liens (United States v. Security Trust & Savings Bank, 340 U .S. 47, 71 S.Ct. 111, 95 L.Ed. 53). Since the judgment of both of these claimants were entered after the filing of the Federal lien, they must yield to the tax priority of the government.

The defendant Castelento obtained a judgment against the debtor Iser for $4,069.25 in the City Court of the City of New York Queens County, on February 8, 1957, and served a third-party subpoena upon the City of New York (pursuant to section 781 of the New York Civil Practice Act) on April 11, 1957. It will be...