In re Brinker

• Decision Date: 19 February 1904
• Docket Number: 719.
• Citation: 128 F. 634
• Parties: In re BRINKER.
• Court: U.S. District Court — Western District of New York

128 F. 634

In re BRINKER.

No. 719.

United States District Court, W.D. New York.

February 19, 1904

George C. Riley, for trustee.

Frank Rumsey, for county of Erie and Benjamin W. Carskaddon.

Percy W. Lansdowne, for city of Buffalo.

HAZEL District Judge.

The question for decision arises from facts which, so far as material, are as follows: Certain real estate of the bankrupt, situated in the city of Buffalo, incumbered by two mortgage liens, was sold at foreclosure sale to Benjamin W Carskaddon on the 5th day of February, 1902. Adjudication in bankruptcy was made September 24, 1901. There were tax liens for taxes assessed upon the mortgaged premises. The foreclosure sale was free and clear of all taxes. The trustee of the bankrupt was a party defendant to the foreclosure proceedings, and at the sale demanded that the property be sold subject to the tax liens. This the referee refused to do. Thereupon application was made by the trustee to the New York Supreme Court, in which the foreclosure action was pending, to require such payment out of the proceeds of the sale. The state court denied the application on the ground that the personal estate of the bankrupt was primarily subject to the payment of tax liens. On appeal to the Appellate Division of the Fourth Department, New York, this decision was sustained. It was the duty of the trustee to collect and reduce to money the assets of the bankrupt. At the time of the mortgage foreclosure, the trustee stood in the position of the bankrupt and the general creditors, demanding a sale of the property subject to incumbrances for taxes, or payment from the proceeds of the sale if such payment could legally be demanded. It undoubtedly was his duty to effect a sale of the bankrupt's realty at the best possible advantage to the bankrupt estate, and, if possible, to enhance the value of the assets. Whatever equities exist in favor of the purchaser at the foreclosure sale arose at that time, and it is difficult to perceive how any disposition can be inequitable towards the purchaser, Carskaddon, who was apprised of the tax liens in controversy, of the prior sales of said property because of nonpayment of taxes, and the claim of the trustee. The question, therefore, of whether the taxes were legally due and owing, in the sense that they should be allowed priority here, was an open one, for subsequent determination by the bankruptcy court. The city in connection with the purchaser, now demands payment of these from the estate. Reliance by the purchaser for the payment of the tax liens by the trustee under the provisions of section 64a of the bankrupt act (Act July 1, 1898, c. 541, 30 Stat. 563 (U.S.Comp.St. 1901, p. 3447)), is not sufficient to compel a decision that in equity, as well as under this section, the taxes should have priority from the bankrupt estate. The inferences deducible from the evidence are that Carskaddon bought the mortgaged property at the sale, knowing the exact situation as to these taxes. The undisputed evidence shows that there are outstanding at this time upon the tax records of the county of Erie and of the city of Buffalo, as taxes and assessments, the following sums: County tax for 1899, $194.64; county tax for 1900, $144.72; county tax for 1901, $172.64; city tax for 1901, $616.87; and local assessment, $378.05. On February 20, 1902, more than two weeks after the foreclosure sale, claims were presented to the referee in bankruptcy by the county and municipal authorities, and an application was made for an order directing the trustee to pay the tax liens above enumerated. It further appears by the record that after the foreclosure sale, and after claims for tax liens were filed under section 64a, as above stated, the real estate was sold by the county to one Wadhams for nonpayment of taxes for the year 1900, and thereafter was also sold by the municipality to one Wiltsie for nonpayment of the city taxes and assessment heretofore set out. Such sales were made in conformity with statutory requirements providing for the collection of taxes. The city and county therefore have no real interest...