United States v. Buffalo Sa v. Bank Page 2

United States v. Buffalo Sa v. Bank general information

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

William J. Brennan, Jr.:

Was that law in effect from the mortgage was (Voice Overlap) --

John B. Jones, Jr.:


That's a very long standing law and might make it right clear at this point that there's no suggestion that this is a law which New York has enacted to, to put something over into federal lien.

That 1880 as the date that's fixed in my mind that that law come from my -- I would submit that it has somewhat a different purpose read in context of the New York Act.

It doesn't say that they are expenses of sales which says, that they shall be deemed to expenses of sale and while being this quite an ambiguous word, I have a feeling that it means something less than saying that they are expenses of sale.

Byron R. White:

Well, did the Court of Appeals give it some interpretation or is that the one implicit anyway?

John B. Jones, Jr.:

I think it would have to be implicit on the point and I'm not sure that this Court would want to make a new examination.

The only point it seems (Voice Overlap) --

Byron R. White:

Well, could we --

John B. Jones, Jr.:

It seems to be carrying off a lot of freight to say that a casual phrase that it's deemed to expense of sale would produce this (Voice Overlap) --

William J. Brennan, Jr.:

Well, if that's interpretation of the Court of Appeals (Inaudible) that statute would stop with that.

John B. Jones, Jr.:

I think that's the position.

But on -- when this county court judgment again was appealed to the Appellate Division, the Appellate Division modified the judgment and on the grounds that it was necessary to apply what it understood to be the rule of the New Britain case which is cited by this Court.

And that rule was that having determined that the sale should be made and the -- this question of priority should be resolve in the allocation of the fund would be to set aside an amount equal to the amount of the mortgage which the Federal Government had conceded was prior, and setting aside for the amount of mortgage would include any interest do on the mortgage.

Then from all other proceeds, they should go first to pay the federal lien since the federal lien conceded no other priority.

Then if the excess proceeds -- if there are still some excess proceeds available, they would be used to pay state taxes.

And then as the last resort, the state lien could go back against the share of the mortgagee because the state, as a matter of its own internal law had said that it should have priority over the mortgagee.

This case then went on appeal to the New York Court of Appeals and it was reversed by the New York Court of Appeals in an opinion by Judge Burke and four other judges, with Judge Fuld and Judge Foster dissenting.

They agreed with the Erie County court that the payment of later local taxes as expenses of foreclosure was the proper result under the New York statute.

The dissenters took the position which we espouse here that such provision runs directly contrary the decision of this Court in New Britain.

In looking at this case, it seems to the Government that it's advantageous to recognize that the two liens we're talking about here primarily are the federal tax liens which have been very strongly characterized by this Court over the years as intending to reach every piece of property which the taxpayer owned.

It is a lien in support of certainly a basic function of Government and the one that's crucial to the existence, the gathering of revenue.

At the same time, states typically, place great reliance of -- if not major reliance on the property tax as a source of their revenue and typically the state gives a -- what amounts to a super priority to the property tax in the sense that they -- the state does not care at what point a person acquires an interest in the land.

Anybody who wishes to deal with the land must see that the taxes are paid whether they rose prior to his interests, add for his interest or in any other circumstances.

And so, this is really a contest of wills if you will between the Federal Government fighting hard to maintain the supremacy of its federal lien and the state government relying on the fair effort of its legislature to give to the local property tax everything which it can give.

Now, though this is a struggle between the two jurisdictions, the fact is in the case before us and in all cases which should be decided under the New Britain doctrine, the state is going to be paid because the Federal Government concedes that the state -- it can't -- its grant of priority to the mortgagee is not a sufficient reason for it to step in and forbid the mortgagee from paying the state, and thus the state have a jurisdiction over the mortgagee typically can get its interest from there.

Potter Stewart:

What if the mortgagee had paid the delinquent state taxes?

John B. Jones, Jr.:

After the -- after they arise in the federal tax lien?

Potter Stewart:

Yes, yes.

John B. Jones, Jr.:

We would certainly take the position that that was not and have taken the litigation that if it's paid afterwards that's not given the original priority of the mortgage.