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UNITED STATES v. TOYS OF THE WORLD CLUB

February 14, 1959

UNITED STATES of America, Plaintiff,
v.
TOYS OF THE WORLD CLUB, INC., and Publishers Printing-Rogers Kellogg Corporation, Defendants



The opinion of the court was delivered by: DAWSON

This is a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. Plaintiff is seeking a judgment declaring the lien of the United States of America for taxes to be a lien upon the fund now held in escrow by defendant Publishers Printing-Rogers Kellogg Corporation (hereinafter called 'Publishers') superior to any interest or lien of said defendant. Defendant Publishers has cross-moved for summary judgment.

From the papers submitted, the following facts appear without substantial controversy:

That in September 1955 taxpayer, Toys of the World Club, Inc. (hereinafter called 'Toys'), sent a printing order to defendant Publishers; that this order called for Toys to supply Publishers with certain paper stock for the purpose of having Publishers print thereon; that at the time of the agreement Publishers was not in possession of any paper belonging to Toys but delivery under the printing order was made in the latter part of September;

 By letter dated October 25, 1955, final agreement was reached wherein Toys was required to pay Publishers $ 2,250 on November 4, 1955, $ 2,250 on November 11, 1955, one-half the balance on December 12, 1955 and the remaining half on December 31, 1955. Shipments of the printed material were, pursuant to the agreement, to be begun on the date the first payment was to be made;

 Publishers completed the work required under the order and shipments were made from day to day beginning November 4th and completed November 15, 1955. In all, Publishers received in September 1955 approximately 269,000 sheets of paper, of which 217,000 sheets were printed upon, leaving a balance of approximately 52,000 sheets;

 Pursuant to the payment arrangement Toys sent Publishers a check dated November 4, 1955, in the amount of $ 2,250. This check was not honored. The check required to have been transmitted to Publishers on November 11, 1955 was never sent, nor were the subsequent payments made. Since taxpayer Toys failed to make any payments, Publishers allege they have asserted an artisans' lien, pursuant to ┬ž 180 of the New York Lien Law, on the 52,000 sheets of paper which were retained in their possession;

 On various dates from February 21, 1956 to May 23, 1956, taxes were assessed against taxpayer Toys, and a notice of a federal tax lien was first filed with the office of the Register of the City of New York on March 7, 1956. Other notices of lien were filed subsequently, all totaling $ 3,814.95, plus interest due to the United States of America for withholding taxes for various periods of the year 1955. Subsequently, in the summer of 1956, plaintiff served on Publishers notice of tax lien and notice of levy relative to the tax assessments made against Toys. Thereafter, demand for the paper in the possession of Publishers was duly made, but not complied with;

 To conserve the value of the paper stock as much as possible, it was agreed by stipulation between Publishers, which claimed an artisans' lien on the stock in question, and the United States Attorney for the Southern District of New York, that Publishers would sell the paper in accordance with established procedures under the law of New York State, and that all claims with regard to the paper would attach to the proceeds of the sale. This was done, and after deducting all expenses and charges, the sum of $ 1,705.69 remains, said sum being held in escrow by the attorneys for Publishers.

 Discussion

 Plaintiff's argument for summary judgment is threefold, as follows:

 1. The defendant Publishers did not have a valid artisans' lien on the paper, because an artisans' lien does not attach to surplus or excess materials which are not altered, repaired or enhanced in value.

 2. The defendant Publishers did not have a valid artisans' lien because an artisans' lien is precluded by the existence of a credit relationship between the parties.

 3. Assuming that Publishers had an artisans' lien, such lien, if not reduced to a judgment, is subordinate to a federal tax lien.

 Consideration will be given to plaintiff's third argument since the conclusion makes superfluous any discussion ...


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