Johnson v. Smith

• Decision Date: 16 January 1948
• Citation: 77 N.E.2d 386,297 N.Y. 165
• Parties: JOHNSON et al. v. SMITH et al.
• Court: New York Court of Appeals Court of Appeals

297 N.Y. 165

77 N.E.2d 386

JOHNSON et al.

v.SMITH et al.

Court of Appeals of New York.

Jan. 16, 1948.

Appeal from Supreme Court, Appellate Division, Third Department.

Action by J. Howard Johnson, as receiver of all the rents and profits issuing out of premises situate on the northeasterly corner of Green and Beaver Streets in the City of Albany, N. Y., and another against John M. Smith, as treasurer of the County of Albany and others to set aside tax sales and for other relief. From an order of the Appellate Division, 272 App.Div. 6, 69 N.Y.S.2d 68, entered March 14, 1947, which reversed on the law and the facts and order of the Supreme Court at Special Term entered in Albany County, granting a motion by defendants for dismissal of the complaint on the ground that it failed to state facts sufficient to constitute a cause of action, defendants appeal by permission of the Appellate Division, wherein, on such appeal, the following question was certified: ‘Does the complaint state a cause of action?’

Order of Appellate Division reversed and that of special term affirmed, and certified question answered in negative. Walter L. Collins, County Atty., of Albany (Frank Pedlow, of Albany, of counsel), for John M. Smith, County Treasurer of Albany County, appellant.

Maurice Freedman, of Albany, for Yetta V. Sandler, John Carroll and L. Berman, appellants.

Ellis J. Staley, Jr., of Albany, for J. Howard Johnson, respondent.

Roland Ford and C. Raymond Burton, both of Albany, for Wallace J. Allendorf, respondent.

John Francis Lucey, Jr., of Albany, for J. F. Lucey, special guardian.

FULD, Judge.

This is an action to set aside as invalid tax sales and subsequent conveyances of certain property located in Albany. In 1925, several of the tenants in common who then owned the property commenced a partition action in the Supreme Court, Albany County, which resulted in the entry of a judgment of partition and sale in 1927. In 1935, a receiver was designated and, in 1940, he was succeeded by the plaintiff Johnson who was ‘appointed with the usual powers Receiver herein for the benefit of the Plaintiffs and Defendants in this action, of all the rents and profits now due and unpaid or to become due pending this action and issuing out of the premises' in question. Though more than 20 years have passed, the partition action is still pending.

In 1938, the porperty was assessed at $51,000, and the taxes not having been paid as required the county treasurer in 1940 sold the property to the county of Albany for 1,000 years for $2,200. There was a default also in the 1939 taxes, and in 1941 again the county treasurer sold the property to the county for a like sum of $2,200. The county assigned its rights and conveyed the property to defendant Federal Investors, Inc.; the latter subsequently conveyed to defendant New York State Realty Liquidating Corporation, which in turn, sold to defendant Sandler, and she is now collecting the rents.

In 1946, five years after the last tax sale, the receiver Johnson and one of the parties to the partition proceeding commenced this present action against (1) the county treasurer of Albany County, (2) the purchaser at each of the tax sales, and (3) the subsequent grantees of the property. By the action, plaintiffs seek to set aside as ‘null, void and of no effect’ the tax sales and the conveyances subsequently made. It is acknowledged that the county treasurer complied faithfully and completely with all applicable provisions of law of city charter and tax statutes but it is contended that the property was in the custody of the court through its receiver and that its sale without court permission was void.

The defendants moved to dismiss the complaint, under rule 106 of the Rules of Civil Practice, upon the ground that it failed to state a cause of action, The justice at Special Term granted the motion; the Appellate Division, however, reversed and, in granting leave to appeal, certified the question, ‘Does the complaint state a cause of action?’ It is our opinion that it does not.

In order to function, a government must collect taxes. To assure a part of them, Constitution and statute render taxable ‘all real property within the State * * * unless exempt from taxation by law’ (Tax Law, Consol.Laws, c. 60, art. 1, s 3; N.Y.Const., art. XVI, ss 1, 2). Equality and uniformity of taxation are the aim, for, if one taxpayer escapes payment, the burden is placed disproportionately and unfairly on another. See Matter of Atlas Television Co., 273 N.Y. 51, 6 N.E.2d 94;Mabie v. Fuller, 255 N.Y. 194, 201, 174 N.E. 450, 453;People ex rel. Metropolitan Street Ry. Co. v. Tax Com'rs, 199 U.S. 1, 25 S.Ct. 705, 50 L.Ed. 65, 4 Ann.Cas. 381, affirming 174 N.Y. 417, 67 N.E. 69, 63 L.R.A. 884, 105 Am.St.Rep. 674; People ex rel. Gould v. Barker, 150 N.Y. 52, 44 N.E. 785;Security Building & Loan Assn. v. Carey, 259 App.Div. Div. 42, 47, 18 N.Y.S.2d 511, 516;County of Herkimer v. Village of Herkimer, 251 App.Div. 126, 295 N.Y.S. 629.

It is section 150 of the Tax Law which imposed upon the county treasurer the duty to sell the property here involved; inmandatory terms, it directed the sale whenever ‘any tax charged on real estate * * * is returned’ to him and remains unpaid for a specified period. Plaintiffs point to no statutory provision which exempts from taxation or from the operation of section 150, the property held by a receiver in partition, and there is none. Once a default occurs and the other statutory conditions are met the county treasurer must obey the law's mandate and sell the property no matter by whom owned whether by incompetent, infant or trustee or receiver. See, e. g., Levy v. Newman, 130 N.Y. 11, 28 N.E. 660;County of Nassau v. Day, 266 App.Div. 738, 41 N.Y.S.2d 155, affirmed 291 N.Y. 732, 52 N.E.2d 956;Bonded Municipal Corp. v. Carodix Corp., 266 App.Div. 737, 41 N.Y.S.2d 154, affirmed 291 N.Y. 733, 52 N.E.2d 956.

In the two cases last cited, we rejected a contention that the failure of a county treasurer to obtain court leave and approval for a tax sale invalidated such a sale where the property was held by trustees appointed by the Supreme Court in reorganization proceedings brought pursuant to the Schackno and Mortgage Commission Acts, McK.Unconsol.Laws, s 4871 et seq. Those decisions apply with equal force here; insofar as the problem before us is concerned, there is little to differentiate the receiver in a partition suit from a trustee in a Schackno or Mortgage Commission Act proceeding. See Matter of Bond & Mortgage Guar. Co., 288 N.Y. 270, 277, 43 N.E.2d 38, 41. In the absence of specific statutory provision restraining tax collection agencies during the pendency of the action, or during the receivership, there is no basis for a claim that the county or its treasurer should have sought permission from the court before selling the property for unpaid taxes or delivering the tax deeds. And, in any event, it is highly questionable whether the Supreme Court would have had jurisdiction in the first instance to enjoin the county from selling or delivering the deeds.

Paramount and vital is the circumstance that, in selling the property, the county treasurer acted solely in accordance with the mandate of the statute. It may well be that court approval is required if in possession is a statutory receiver or trustee or a receiver or trustee appointed by a court pursuant to a statute such as the Federal Bankruptcy Act, 11 U.S.C.A. s 1 et seq. granting extremely broad powers. Quite apart from any other consideration under the Bankruptcy Act, title to the property vests in the trustee (Bankruptcy Act, s 70; U.S.C.A. tit. 11, s 110). A receiver in partition, on the other hand, obtains no title to the property (Rinehart v. Hasco Building Co., 153 App.Div. 153, 138 N.Y.S. 258, affirmed 214 N.Y. 635, 108 N.E. 1106); title remains vested in the owners who are the parties to the partition action. As is evident from the order of appointment, the receiver is given merely the right to manage the premises on behalf of those owners until the action has been concluded. The court, by appointing a receiver in a partition, undertakes, not to preserve the rights of the parties in the property against the world, but simply to preserve their rights as against each other.

Even in cases involving private litigants and not officials upon whom is imposed a duty of collecting taxes it has been held that, while propriety may suggest an application to the court before selling property possessed by a receiver, the failure to obtain leave neither defeats the action brought (Pruyn v. McCreary, 105 App.Div. 302, 304, 93 N.Y.S. 995, 996;Le Fevre v. Matthews, 39 App.Div. 232, 57 N.Y.S. 128) nor invalidates the sale...