United States v. Mojac Construction Corp.
| Decision Date | 19 December 1960 |
| Docket Number | Civ. No. 18999. |
| Citation | 190 F. Supp. 622 |
| Parties | UNITED STATES of America, Plaintiff, v. MOJAC CONSTRUCTION CORP., Industrial Commissioner of the State of New York, M. F. Hickey Co., Inc., Cosmopolitan Mutual Casualty Company of New York (now known as Cosmopolitan Mutual Insurance Company), Ellis Schwartz, d/b/a Banner Roofing Company, Hardware Mutual Casualty Co. and School District No. 27, Town of Hempstead, State of New York, Defendants, New York State Tax Commission, People of the State of New York, County of Nassau, State of New York, Town of Hempstead, State of New York, West Hempstead Gardens Water District, West Hempstead, State of New York, Harry Bialick, Milton Aronauer and Long Island Land Research Bureau, Inc., also known as L. I. Research Bureau, Additional Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Cornelius W. Wickersham, Jr., U. S. Atty., Eastern Dist. of New York, Brooklyn, N. Y., for plaintiff; Irving L. Innerfield, Asst. U. S. Atty., Brooklyn, N. Y., of counsel.
Bailey & Bailey, Long Beach, N. Y., for defendant Harry Bialick; Harold I. Bailey, Long Beach, N. Y., of counsel.
J. Oakey McKnight, Acting County Atty. of Nassau County, Mineola, N. Y., for defendant Nassau County; James F. Niehoff, Deputy County Atty., Mineola, N. Y., of counsel.
This is an action by the United States to foreclose five tax liens upon three parcels of real property described on the Land and Tax Map of the County of Nassau, State of New York, as lots 5, 61 and 62, block 536, section 33, School District 27. The liens sought to be foreclosed are for unpaid withholding and social security taxes due from the taxpayer-defendant Mojac Construction Corp. Notices of these federal tax liens were filed in the office of the Clerk of the County of Nassau as follows: January 29, 1952 for $15,821.87; August 15, 1952 for $10,733.97; March 2, 1953 for $5,905.40; June 8, 1953 for $8,721.44; and May 22, 1958 for $3,348.10. These federal tax assessments aggregate $44,530.78.
Mojac was the owner of these three lots when the County of Nassau sold its tax liens on December 3, 1956 for the following unpaid taxes: second half 1955-56 School District taxes; second half 1956 State, County, Town and Special District taxes. The tax liens on lot 5 were purchased by Long Island Land Bureau (coincidentally one of the defendants in this action) for the sum of $28.65. The tax liens on lots 61 and 62 were purchased by one Joseph Harris for $56.23. At the time of the sale of these tax liens the three lots were encumbered by the federal tax liens filed in January and August 1952, and March and June 1953, in the total principal sum of $41,182.68. Certificates of sale of tax liens (Nos. 3040 and 3041) were subsequently issued by Nassau County to the respective purchasers.
Thereafter, sometime between September 11, 1957 and July 1, 1958, the defendant Bialick acquired these tax lien certificates by assignment from the purchasers. On December 5, 1958, Bialick received from H. Bogart Seaman, Treasurer of the County of Nassau, what is known as a County Treasurer's Deed, executed and delivered pursuant to the provisions of Chapter 272 of the Laws of 1939 of the State of New York and all amendments thereto, hereafter referred to as the Administrative Code of the County of Nassau, or simply the Code. The deed, conveying the three lots, thereafter recorded in the Nassau County Clerk's office on December 15, 1958 in Liber 6473 of Conveyances page 419, contains no covenants.
Bialick, the owner of record, and Nassau County, as a possible holder of tax liens, are defendants in the foreclosure action along with thirteen other named defendants. The following defendants have liens of record, in the amounts indicated below, against one or more of the three lots formerly owned by Mojac and since conveyed to Bialick. (The date is the date when the lien was perfected by filing in the office of the Clerk of the County of Nassau.)
Defendant Amount Date
(1) Industrial Commissioner $2,823.87 March 24, 1952
of the State of New York: 1,742.79 May 12, 1952
1,646.35 April 7, 1953
unemployment insurance taxes 1,764.16 Jan. 20, 1953
owed by Mojac 1,461.61 July 13, 1953
(2) Cosmopolitan Mutual Casualty 6,727.11 Aug. 14, 1953
Co. of New York, a judgment
creditor of Mojac
(3) Ellis Schwartz, a judgment 5,912.17 June 10, 1953
creditor of Mojac
(4) Hardware Mutual Casualty 3,634.68 June 25, 1953
Co., a judgment creditor of
Mojac
(5) M. F. Hickey Co., a judgment 2,010.90 Feb. 19, 1953
creditor of Mojac
(6) New York State Tax Commission: 135.40 July 29, 1958
other taxes owed by Mojac
(7) Milton Adenauer, holder of Tax Sale certificate No. 2631 sold by
the County of Nassau December 7, 1959 for 1959 full year Town
Tax, and 1958/59 full year School Tax, on lot 5
(8) Long Island Land Research Bureau, Inc., holder of Tax Sale certificate
No. 2632 sold by Nassau County on the same date and for the
same taxes on lots 61 and 62
The People of the State of New York; School District No. 27, Town of Hempstead; West Hempstead Gardens Water District; and the Town of Hempstead were made additional parties defendant by reason of possible unpaid taxes
Of all the defendants only County of Nassau, Bialick and the Industrial Commissioner have filed answers. The Industrial Commissioner has also asserted a counterclaim and a cross-claim against Mojac. Bialick has asserted a crossclaim against the County of Nassau, the Town of Hempstead and School District No. 27 of the Town of Hempstead. The School District has answered this cross-claim. The substance of Bialick's cross-claim is that, if his interest in the property is cut off in this action to foreclose the federal tax liens, he is entitled to "the amount of the taxes and assessments sold by the County of Nassau to Bialick together with any and all subsequent taxes and assessments paid by * * * Bialick with interest and penalties thereon besides costs and disbursements in this action." These damages are based on the allegations that the County of Nassau sold its tax liens subject only to liens of the County of Nassau and that the Treasurer's Deed was a conveyance of title to the three lots subject only to any liens and encumbrances for County taxes. Bialick further alleges in his cross-complaint that any damages he may suffer will be the result of a misrepresentation on the part of the County of Nassau, which knew, or should have known, that the tax liens sold by the County were subject and subordinate to the federal tax liens. On the argument of the motions about to be referred to, Bialick abandoned this claim for misrepresentation and limits his claim to breach of contract.
Now before the Court are several motions. The County of Nassau has moved for summary judgment on Bialick's cross-claim. The United States has moved to sever the determination of that cross-claim, and for partial summary judgment, limited to a determination of the priority of its earliest lien (that filed January 29, 1952), judgment of foreclosure and sale of the encumbered property, and for further relief related to the requested sale. Since the property when sold is expected to bring far less than the amount of the Government's first lien, the relative priorities of the liens held by the defendants may become academic.
Clearly, the United States' lien for $15,821.87 plus interest filed January 29, 1952 is prior to any other lien or interest asserted here. That concession is specifically made by the Industrial Commissioner whose lien filed May 12, 1952 is next in the line of priorities. The government's lien being first in time is first in right. United States v. City of New Britain, 1954, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520. Bialick seems to concede that the federal lien was the first perfected, but argues that either the subsequent sale by the County of its tax liens or the conveyance of title in the real property by the County, cut off the federal lien. Of course, this argument is inconsistent with Bialick's theory that the County breached its contract to convey unencumbered title. Granting Bialick the right to rely on inconsistent theories, the argument is nevertheless without merit. Even assuming that an appropriate state proceeding, although inconsistent with the federal procedures for removing clouds upon title as found in section 2410 of Title 28, and section 7424 of Title 26, might cut off a junior federal lien (see United States v. Brosnan, 1960, 363 U.S. 237, 80 S.Ct. 1108, 4 L.Ed.2d 1192; but cf. United States v. John Hancock Mutual Life Ins. Co., 1960, 81 S.Ct. 1, there are two reasons why Bialick's argument falls. Firstly, the government asserts here a senior and not a junior lien, and senior liens are a much hardier variety. See United States v. Roessling, 5 Cir., 1960, 280 F.2d 933. In Roessling, a state quiet title action in the nature of an in rem proceeding (brought subsequent to a County tax sale) which purported to cut off and extinguish all pre-existing liens and interests, was held to be ineffective against a first mortgage held by the United States. Section 2410(c) of Title 28 provides the condition upon which a federal senior lien may be foreclosed:
"A sale to satisfy a lien inferior to one of the United States, shall be made subject to and without disturbing the lien of the United States, unless the United States consents that the property may be sold free of its lien and the proceeds divided as the parties may be entitled."
Bialick does not contend that the United States gave any such consent here. Secondly, as a matter of state law, county tax sales do not cut off sovereign liens. See Riverhead Estates Civic Ass'n v. Gobron, Suffolk Cty.Ct.1954, 206 Misc. 405, ...
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