FELDMAN v. BARSHAY, 246 N.Y. 130 (1927)

158 N.E. 47

LOUIS FELDMAN, Respondent, v. JOSEPH BARSHAY, Appellant.

Court of Appeals of the State of New York.Argued June 14, 1927
Decided July 20, 1927

Appeal from the Supreme Court, Appellate Division, Second Department.

Samuel Silverman and Jacob Saul Barshay for appellant.

Page 131

Samuel Weiss for respondent.

Albert Ottinger, Attorney-General (C.T. Dawes of counsel), for State Tax Commission.

KELLOGG, J.

Every domestic corporation, for the privilege of exercising its corporate franchises, must pay an annual tax to the State based upon its capital employed within the State (Tax Law; Cons. Laws, ch. 60, sec. 182); it must, between the fifteenth day of November and the fifteenth day of December in each year, make a written report to the Tax Commission, stating its condition at the close of business on the preceding 31st day of October and particularly stating the capital employed by it during the year previous to such date (Id. sec. 192); the Tax Commission must, from such report or other data, “order and state an account for the tax due the State” (Id. sec. 195); notice in writing must be given by the Commission to the corporation of the auditing and stating of the account

Page 132

(Id. sec. 196); “a tax imposed by section 182 * * * shall be due and payable into the State treasury on or before the fifteenth day of January in each year” (Id. sec. 197); “such tax shall be a lien upon and bind all the real and personal property of the corporation * * * from the time when it is payable until the same is paid in full.” Whether, under these sections, in the absence of a report by the corporation, in default of an audit and statement by the Tax Commission, an unascertained franchise tax becomes, from the fifteenth day of January following the due date for the corporate report, a “lien upon” the real property of the corporation “until the same is paid in full,” is an interesting question. It is a question, however, which we do not find it necessary to decide, and, therefore, refrain from deciding. If the franchise taxes, payable by the Dumont Terrace Company for the years 1904 and 1905, originally became a lien upon the real property owned by it in the year 1905 and now the subject of this controversy, they ceased to be a lien thereupon by the force of the provisions of section 207 of the Tax Law, as amended by chapter 410 of the Laws of 1917. That section provides that “as to real estate in the hands of persons who are owners thereof who would be purchasers in good faith but for such tax or penalty * * * all taxes and penalties which have prior to April first, nineteen hundred and seventeen, become due and payable pursuant to this article, and which have not been referred to the attorney-general pursuant to section two hundred and three of this chapter, shall cease to be a lien on such real estate as against such purchasers or holders, after the expiration of ten years from the time when such tax became due and payable.” The taxes in question became payable, if at all, in the year 1905; they never were referred to the Attorney-General pursuant to the provisions of section 203; the defendant, “but for such tax or penalty,” was a purchaser in good faith of the property in question; therefore, the taxes ceased to constitute

Page 133

a lien upon the property “ten years from the time when such tax became due and payable,” or in the year 1915. It follows that the defendant, when he contracted to sell the property to the plaintiff, was the owner of an unincumbered marketable title, and was able to convey such a title to the plaintiff. The plaintiff, therefore, was not entitled to recover the sum paid to the defendant, in part payment of the purchase price, and the judgment rendered was erroneous.

The judgment of the Appellate Division and that of the Special Term should be reversed and the complaint dismissed, with costs in all courts.

CARDOZO, Ch. J., POUND, CRANE, ANDREWS, LEHMAN and O’BRIEN, JJ., concur.

Judgment accordingly.