In re David Brown Printing Co.
| Citation | 285 N.Y. 47,32 N.E.2d 787 |
| Parties | In re DAVID BROWN PRINTING CO., Inc. |
| Decision Date | 06 March 1941 |
| Court | New York Court of Appeals Court of Appeals |
OPINION TEXT STARTS HERE
Appeal from Supreme Court, Appellate Division, Third Department.
Proceeding in the matter of the general assignment for benefit of creditors of the David Brown Printing Company, Inc., to Bessie Lastfogel, wherein the City of New York and others filed claims. From an order of the Appellate Division, 259 App.Div. 802, 19 N.Y.S.2d 775, unanimously affirming an order of the Supreme Court settling the assignee's account and directing distribution, the City of New York appeals by leave of the Court of Appeals, motion for leave to appeal having been denied in 259 App.Div. 863, 20 N.Y.S.2d 398. The appeal was opposed by the New York State Department of Labor, Division of Placement and Unemployment Insurance, and the State of New York.
Order modified and, as modified, affirmed. William C. Chanler, Corp. Counsel, of New York City (Sol Charles Levine, Arthur A. Segall, and Morris L. Heath, all of New York City, of counsel), for appellant.
John J. Bennett, Jr., Atty. Gen. (Jacob G. Welch, Asst. Atty. Gen., and Henry Epstein, of Albany, of counsel), for claimants-respondents.
Upon an accounting by the assignee, in a proceeding involving a general assignment for the benefit of creditors, a single point of law is in controversy between the State and the city of New York as to the relative priority of a State corporation franchise tax and certain city emergency relief taxes.
In the account filed by the assignee it appeared that the estate of the assignor consisted of accounts receivable in the amount of $503.01, against which were listed various claims including emergency relief taxes in the total amount of $119.71 filed by the city for which priority was demanded. A claim was also filed by the State Department of Labor for unemployment insurance contributions in the amount of $49.60, but as that Department made no objection to the account and did not appeal, no issue as to its claim is now before us.
The assignee's account did not list a claim by the State for the corporation franchise tax for the period beginning November 1, 1937, and we are told that no claim had been filed therefor. However, it appears that in the process of administering the estate of the assignor, the assignee had paid to the State the full amount of the franchise tax in the amount of $27.50. The present controversy arose when, upon the settlement of the account of the assignee, the order at Special Term directed that the assignee should be given credit for the payment of the corporation franchise tax in full. The account also listed taxes due the United States, wage claims and expenses of administration which the city concedes had priority over either the franchise tax or emergency relief taxes and the payment of which exhausted the entire estate.
The challenge by the city goes to that part of the order by Special Term which in result gives priority to the corporation franchise tax over city emergency relief taxes. This result obtains because of the fact that, by approving payment to the State of the franchise tax in full, the estate of the assignor was so depleted that, after payment of certain preferred claims, there were no funds available for the payment of the city emergency relief taxes.
The city appealed to the Appellate Division from the order of Special Term, in so far as it failed to grant to the city emergency relief taxes parity with the State franchise tax. The proceeding is here, by our permission, on appeal by the city from an order of the Appellate Division unanimously affirming the order of Special Term.
Whatever may be the law in other States (see note 36 A.L.R. 640), the courts of New York recognize in municipal corporations a common-law right to assert a preference in support of their claims at least where governmental functions are concerned. Matter of Northern Bank of New York, 85 Misc. 594, 148 N.Y.S. 70, affirmed 163 App.Div. 974, 148 N.Y.S. 70; affirmed 212 N.Y. 608, 106 N.E. 749;Matter of Atlas Television Co., 273 N.Y. 51, 54, 55, 57, 58, 6 N.E.2d 94;Matter of Lexington Surety & Indemnity Co., 282 N.Y. 720, 26 N.E.2d 826. In the present case the State argues that any preference to which the city is entitled is inferior to that of the State. We have recently held that there is no priority between county and village taxes. County of Nassau v. Lincer, 280 N.Y. 662, 20 N.E.2d 1018;Village of Garden City v. Roeder, 280 N.Y. 663, 20 N.E.2d 1019. The basis of those decisions casts doubt upon the assertion that at common law there is a difference in priority between claims of the State and of the city. Both preference depend upon the same sovereign right. However, in the case at bar we do not reach the question whether in all cases tax claims by the State and by the city are to be dealt with on a basis of parity. Here we find in the enabling act which is involved, and in the nature of the taxes imposed thereunder, evidence of an intent by the Legislature that claims by the city for emergency relief taxes should share equally with other tax claims by the State.
The emergency relief taxes, for which the city claims parity with the franchise tax due the State, were imposed by the city pursuant to Local Laws 20 and 22 of 1937 (), which were authorized by chapter 873 of the Laws of 1934, Ex.Sess., as last amended by chapter 327 of the Laws of 1937. The purpose of these enabling acts is the same as chapter 815 of the Laws of 1933, Ex.Sess., the constitutionality of which was upheld in New York Steam Corporation v. City of New York, 268 N.Y. 137, 197 N.E. 172, 99 A.L.R. 1157. Withoutreference to other details of those statutes it is sufficient for our present purposes to note that those enabling acts expressly provide that revenues resulting from taxes to be levied thereunder shall not be deposited in the city's general fund but shall be deposited in a separate bank account and used solely for purposes of relief from suffering caused by unemployment.
We have held as to kindred statutes that they ‘were passed by the Legislature for a state purpose,...
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