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International Harvester Credit Corp. v. Goodrich

Supreme Court of New York, Appellate Division

July 8, 1954

INTERNATIONAL HARVESTER CREDIT CORPORATION et al., Plaintiffs,
v.
ALLEN J. GOODRICH et al., Constituting the State Tax Commission, Defendants.

Page 605

SUBMISSION of a controversy pursuant to sections 546-548 of the Civil Practice Act.

COUNSEL

John T. DeGraff, Ralph D. Semerad and John J. Kelly, Jr., for plaintiffs.

Nathaniel L. Goldstein, Attorney-General (Wendel P. Brown, John C. Crary, Jr., and Robert W. Bush of counsel), for defendants.

IMRIE, J.

The parties have submitted this controversy upon a stipulated statement of facts pursuant to section 546 of the Civil Practice Act. Plaintiffs ask for judgment that the tax lien priority asserted by defendants under article 21 of the Tax Law (Highway Use Tax Law) be declared unconstitutional and invalid, and that certain bonds filed by them, under protest, to secure payment of such liens be cancelled and returned.

In 1953 International Harvester Company and Brockway Motor Company, Inc., sold three tractors to Eastern Cartage and Leasing Company, Inc. (herein referred to as Eastern), a carrier subject to the tax imposed by article 21. The carrier owned at least fifteen motor vehicles as defined in the article. In each sale the vendor took a valid conditional sales agreement as a portion of the purchase price. Each vehicle became subject to article 21. The conditional sales agreements pertaining to the two sales by International Harvester Company were duly assigned to plaintiff International. Plaintiff Brockway held the sales agreement taken by it. Eastern defaulted in making payments on all of the contracts and the several tractors were repossessed.

About April 21, 1954, defendants asserted that a lien in the amount of $3,698.04 attached to each of the three motor vehicles above mentioned. Such lien included all unpaid taxes, penalties and interest due from Eastern, including, in addition to taxes incurred as the result of the operation of those three vehicles, (a) taxes incurred by Eastern as the result of the operation of other vehicles purchased from plaintiffs and other vendors, (b) taxes for periods both prior and subsequent to the purchase

Page 606

of the three specified vehicles from these plaintiffs, (c) taxes for periods prior to plaintiffs' repossession of the three vehicles assessed prior to the repossession, (d) taxes for periods prior to repossession assessed after such repossession, and (e) taxes subsequent to the repossession of the vehicles by International. The Brockway truck remained in the possession of that company. International sold its tractors to third parties. Plaintiffs have been permitted to file bonds to obtain the release of the trucks from the liens.

This court affirmed the validity of article 21 in Mid-States Frgt. Lines v. Bates (279 A.D. 451, affd. without opinion, 304 N.Y. 700, certiorari denied 345 U.S. 908). This controversy involves the application of the lien priority imposed by section 506 thereof.

Section 505, prior to its amendment effective March 15, 1954 (L. 1954, ch. 127), provided that every subject carrier should file with the tax commission 'on or before the twentieth day of each month a return for the preceding calendar month during which any vehicular unit was operated in this state'. (L. 1953, ch. 147.) Section 506 directs that each carrier shall pay the required tax at the time of filing the return and provides that 'The fees, taxes, penalties and interest accruing under this article shall constitute a lien upon all motor vehicles and vehicular units of such carrier. The lien shall attach at the time of operation of any motor vehicle or vehicular unit of such carrier within this state and shall remain effective until the fees, taxes, penalties and interest are paid, or the motor vehicle or vehicular unit is sold for the payment thereof. Such liens shall be paramount to all prior liens or encumbrances of any character and to the rights of any holder of the legal title in or to any such motor vehicle or vehicular unit.'

The sum of plaintiffs' contentions is that such lien priority denies them the equal protection of the law, subordinates their liens, and takes their property without due process unreasonably and arbitrarily. They assert that this is done to satisfy Eastern's tax obligation to pay for highway use by its other vehicles, which includes the tax obligation which had accrued before Eastern purchased and used plaintiffs' vehicles and a similar obligation accruing after the repossession of the vehicles by plaintiffs. We believe that the basic issue here is, as defendants argue, whether the State may secure its prerogative right to the ...


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