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Abstract

Plaintiff, a first mortgagee, instituted a foreclosure proceeding joining the mortgagors, a second mortgagee, several judgment creditors, and the United States Government. The Government's lien had been recorded subsequently to the first mortgage but had attached prior to the accrual of various local real estate taxes. Plaintiff's motion for summary judgment, that the premises be sold free of the United States lien but subject to all local real property taxes, was granted. After reversal on appeal, the court again granted summary judgment and effected the same distribution, this time by directing that all local real property taxes be paid as expenses of sale pursuant to section 1087 of the New York Civil Practice Act. The appellate division modified this judgment so as to give the United States priority over the local tax liens, and affirmed. On appeal to the court of appeals, held, reversed, two judges dissenting. State law determines the interest held by the taxpayer, the procedure in lien foreclosure and the method of payment. A federal tax lien is enforceable only against the surplus from a mortgage foreclosure sale in which the mortgagor has an interest. Such a lien does not, therefore, have priority over subsequently accruing local real property taxes which are deemed, under state law, to be expenses of a foreclosure sale. Buffalo Savings Bank v. Victory, 11 N.Y.2d 31, 181 N.E.2d 413, 226 N.Y.S.2d 382 (1962), rev'd per curiam sub nom. United States v. Buffalo Savings Bank, 371 U.S. 229 (1963).

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