United States v. Buffalo Sa v. Bank

PETITIONER: United States v. Buffalo Sa
LOCATION: South Carolina State House

DECIDED BY: Warren Court (1962-1965)

CITATION: 371 US 228 (1963)
ARGUED: Dec 03, 1962
DECIDED: Jan 07, 1963

Facts of the case


Media for United States v. Buffalo Sa v. Bank

Audio Transcription for Oral Argument - December 03, 1962 in United States v. Buffalo Sa v. Bank

Earl Warren:

Number 96, United States, Petitioner, versus Buffalo Savings Bank.

Mr. Jones.

John B. Jones, Jr.:

Mr. Chief Justice, may it please the Court.

This case involves the federal tax lien which is created by Section 3670 of 1939 Internal Revenue Code.

The question is whether a subsequent local property tax lien shall be preferred over an earlier federal tax lien whether because of the existence of a mortgage to which the Federal Government grants priority or for some reason peculiar in the nature of the local property tax.

The facts are quite simple and they're undisputed.

In 1946, the respondent bank, lent $2600 to one Joseph Victory.

He took back a mortgage covering this indebtedness and that mortgage was created in 1946.

Seven years later, in 1953, United States filed notice of a federal tax lien in the amount of some $857, and this was against Victory.

In 1957, four years later starting from July 1, 1957, local liens or various real estate taxes owed to the City of Buffalo, real estate taxes owed to Erie County and certain sewer rents began accruing.

In 1958, the respondent bank brought an action in the Erie County court to foreclose his mortgage which by that time had been paid down to some $1400 and for an interest of 5%.

When the United States answered in this action, its originally $157 lien had been paid down to $690, and the record that gives no indication that Mr. Victory was insolvent as the Court will recall from earlier cases when it goes off on the revised statute Section 3466 that there is an indication into solvency.

That's not present here and this case involves the federal tax lien standing alone as such.

William J. Brennan, Jr.:

I'm sorry Mr. Jones, perhaps you've already said it.

What's the -- what are the dates?

When was the federal tax lien filed?

John B. Jones, Jr.:

January 15, 1953.

There's a great deal of time difference here.

Let me just go through those again.

William J. Brennan, Jr.:


John B. Jones, Jr.:

The mortgage was given to -- in 1946, seven years later, the federal tax liens came along in 1953 and four years later, the local tax did so that not the common case where we're worrying about a minute of time.

There's no question about that recording in here, everything that needed to be was recorded and there's no close interplay there.

It's a remarkable case in that regard.

When the mortgagee was in the Erie County court, it moved for summary judgment and the Erie County court granted this motion and said that property should be sold subject to local taxes but free and clear of the federal tax liens.

And the proceeds would then go to satisfy the mortgage debt first.

Now, a moment's reflection will make it clear that if the property is sold subject to the local taxes that price which a bidder is willing to pay will be reduced by the amount equal to the local taxes since there's practically no way of escaping that obligation.

And at the same time, since the Federal Government must look only to the sales proceeds, its chances of recovering the federal tax lien under that form of sale are diminished.

And on appeal by the Government, the Appellate Division reversed on essentially the same ground.

And it's -- on its remand, its -- it suggested that the local authorities, they made parties to the action, and the property sold free and clear of all liens with the priorities to be determined in allocating the sales proceeds that came in.

When the case went back to the county court, they did issue an order saying that it should be so free and clear of all liens but it came up with another special provision that provided that local taxes should be paid as expenses of sale citing the Section 1087 of the New York Civil Practice Act which does appear to say that for purposes of that article, that is the article governing sales pursuant to mortgage foreclosures that for purposes of that article, local taxes shall be considered expenses of sale to be paid by the person handling the sale.