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December 19, 1960

UNITED STATES of America, Plaintiff,
MOJAC CONSTRUCTION CORP., Industrial Commissioner of the State of New York, M. F. Hickey Co., Inc., Cosmopolitan Mutual Casualty Company of New York (now known as Cosmopolitan Mutual Insurance Company), Ellis Schwartz, d/b/a Banner Roofing Company, Hardware Mutual Casualty Co. and School District No. 27, Town of Hempstead, State of New York, Defendants, New York State Tax Commission, People of the State of New York County of Nassau, State of New York, Town of Hempstead, State of New York, West Hempstead Gardens Water District, West Hempstead, State of New York, Harry Bialick, Milton Aronauer and Long Island Land Research Bureau, Inc., also known as L. I. Research Bureau, Additional Defendants

The opinion of the court was delivered by: ZAVATT

This is an action by the United States to foreclose five tax liens upon three parcels of real property described on the Land and Tax Map of the County of Nassau, State of New York, as lots 5, 61 and 62, block 536, section 33, School District 27. The liens sought to be foreclosed are for unpaid withholding and social security taxes due from the tax-payer-defendant Mojac Construction Corp. Notices of these federal tax liens were filed in the office of the Clerk of the County of Nassau as follows: January 29, 1952 for $ 15,821.87; August 15, 1952 for $ 10,733.97; March 2, 1953 for $ 5,905.40; June 8, 1953 for $ 8,721.44; and May 22, 1958 for $ 3,348.10. These federal tax assessments aggregate $ 44,530.78.

Mojac was the owner of these three lots when the County of Nassau sold its tax liens on December 3, 1956 for the following unpaid taxes: second half 1955-56 School District taxes; second half 1956 State, County, Town and Special District taxes. The tax liens on lot 5 were purchased by Long Island Land Bureau (coincidentally one of the defendants in this action) for the sum of $ 28.65. The tax liens on lots 61 and 62 were purchased by one Joseph Harris for $ 56.23. At the time of the sale of these tax liens the three lots were encumbered by the federal tax liens filed in January and August 1952, and March and June 1953, in the total principal sum of $ 41,182.68. Certificates of sale of tax liens (Nos. 3040 and 3041) were subsequently issued by Nassau County to the respective purchasers.

Thereafter, sometime between September 11, 1957 and July 1, 1958, the defendant Bialick acquired these tax lien certificates by assignment from the purchasers. On December 5, 1958, Bialick received from H. Bogart Seaman, Treasurer of the County of Nassau, what is known as a County Treasurer's Deed, executed and delivered pursuant to the provisions of Chapter 272 of the Laws of 1939 of the State of New York and all amendments thereto, hereafter referred to as the Administrative Code of the County of Nassau, or simply the Code. The deed, conveying the three lots, thereafter recorded in the Nassau County Clerk's office on December 15, 1958 in Liber 6473 of Conveyances page 419, contains no covenants. Bialick, the owner of record, and Nassau County, as a possible holder of tax liens, are defendants in the foreclosure action along with thirteen other named defendants. The following defendants have liens of record, in the amounts indicated below, against one or more of the three lots formerly owned by Majac and since conveyed to Bialick. (The date is the date when the lien was perfected by filing in the office of the Clerk of the County of Nassau.) DEFENDANT AMOUNT DATE (1) Industrial Commissioner of the State of New York: unem- ployment insurance taxes owed by Mojac $2,823.87 March 24, 1952 1,742.79 May 12, 1952 1,646.35 April 7, 1953 1,764.16 Jan. 20, 1953 1,461.61 July 13, 1953 (2) Cosmopolitan Mutual Casualty Co. of New York, a judg- ment creditor of Mojac 6,727.11 Aug. 14, 1953 (3) Ellis Schwartz, a judgment creditor of Mojac 5,912.17 June 10, 1953 (4) Hardware Mutual Casualty Co., a judgment creditor of Mojac 3,634.68 June 25, 1953 (5) M. F. Hickey Co., a judgment creditor of Mojac 2,010.90 Feb. 19, 1953 (6) New York State Tax Commission: other taxes owed by Mojac 135.40 July 29, 1958

 The People of the State of New York; School District No. 27, Town of Hempstead; West Hempstead Gardens Water District; and the Town of Hempstead were made additional parties defendant by reason of possible unpaid taxes

 Of all the defendants only County of Nassau, Bialick and the Industrial Commissioner have filed answers. The Industrial Commissioner has also asserted a counterclaim and a cross-claim against Mojac. Bialick has asserted a cross-claim against the County of Nassau, the Town of Hempstead and School District No. 27 of the Town of Hempstead. The School District has answered this cross-claim. The substance of Bialick's cross-claim is that, if his interest in the property is cut off in this action to foreclose the federal tax liens, he is entitled to 'the amount of the taxes and assessments sold by the County of Nassau (to Bialick) together with any and all subsequent taxes and assessments paid by * * * Bialick with interest and penalties thereon besides costs and disbursements in this action.' These damages are based on the allegations that the County of Nassau sold its tax liens subject only to liens of the County of Nassau and that the Treasurer's Deed was a conveyance of title to the three lots subject only to any liens and encumbrances for County taxes. Bialick further alleges in his cross-complaint that any damages he may suffer will be the result of a misrepresentation on the part of the County of Nassau, which knew, or should have known, that the tax liens sold by the County were subject and subordinate to the federal tax liens. On the argument of the motions about to be referred to, Bialick abandoned this claim for misrepresentation and limits his claim to breach of contract.

 Now before the Court are several motions. The County of Nassau has moved for summary judgment on Bialick's cross-claim. The United States has moved to sever the determination of that cross-claim, and for partial summary judgment, limited to a determination of the priority of its earliest lien (that filed January 29, 1952), judgment of foreclosure and sale of the encumbered property, and for further relief related to the requested sale. Since the property when sold is expected to bring far less than the amount of the Government's first lien, the relative priorities of the liens held by the defendants may become academic.

 Clearly, the United States' lien for $ 15,821.87 plus interest filed January 29, 1952 is prior to any other lien or interest asserted here. That concession is specifically made by the Industrial Commissioner whose lien filed May 12, 1952 is next in the line of priorities. The government's lien being first in time is first in right. United States v. City of New Britain, 1954, 347 U.S. 81, 74 S. Ct. 367, 98 L. Ed. 520. Bialick seems to concede that the federal lien was the first perfected, but argues that either the subsequent sale by the County of its tax liens or the conveyance of title in the real property by the County, cut off the federal lien. Of course, this argument is inconsistent with Bialick's theory that the County breached its contract to convey unencumbered title. Granting Bialick the right to rely on inconsistent theories, the argument is nevertheless without merit. Even assuming that an appropriate state proceeding, although inconsistent with the federal procedures for removing clouds upon title as found in section 2410 of Title 28, and section 7424 of Title 26, might cut off a junior federal lien (see United States v. Brosnan, 1960, 363 U.S. 237, 80 S. Ct. 1108, 4 L. Ed. 2d 1192; but cf. United States v. John Hancock Mutual Life Ins. Co., 1960, 81 S. Ct. 1, there are two reasons why Bialick's argument falls. Firstly, the government asserts here a senior and not a junior lien, and senior liens are a much hardier variety. See United States v. Roessling, 5 Cir., 1960, 280 F.2d 933. In Roessling, a state quiet title action in the nature of an in rem proceeding (brought subsequent to a County tax sale) which purported to cut off and extinguish all pre-existing liens and interests, was held to be ineffective against a first mortgage held by the United States. Section 2410(c) of Title 28 provides the condition upon which a federal senior lien may be foreclosed:

 'A sale to satisfy a lien inferior to one of the United States, shall be made subject to and without disturbing the lien of the United States, unless the United States consents that the property may be sold free of its lien and the proceeds divided as the parties may be entitled.'

 Bialick does not contend that the United States gave any such consent here. Secondly, as a matter of state law, county tax sales do not cut off sovereign liens. See Riverhead Estates Civic Ass'n v. Gobron, Suffolk Cty.Ct.1954, 206 Misc. 405, 134 N.Y.S.2d 13.

 Bialick contends that his argument finds support in the recent case of Buffalo Savings Bank v. Victory, Erie Cty. Ct.1960, 206 N.Y.S.2d 518. But that case deals only with the effect of a judgment of foreclosure and sale upon a junior federal lien. Even on the narrow 'procedural' issue with which the court purports to deal, the case is of doubtful authority, however, because the effect of the decision is to prefer local tax claims over prior federal liens, contrary to the teaching of the New Britain case, supra.

 While not contesting the validity of the federal lien, the parties who have answered have questioned the timeliness of the action to foreclose. An action to foreclose a federal tax lien must be brought within six years from the assessment of the tax or 'prior to the expiration of any period for collection agreed upon in writing by the Secretary or his delegate and the taxpayer before the expiration of such 6-year period.' 26 U.S.C. § 6502(a) (1954), formerly 26 U.S.C. § 276(c) (1939). In this case, the withholding tax for the third quarter of 1951 (the subject of the Government's lien filed January 29, 1952) was assessed on January 14, 1952, and the action was commenced September 5, 1958, more than six years from the date of assessment. However, between these two dates (on January 16, 1955) the taxpayer, Mojac, submitted an offer of compromise covering, inter alia, the withholding tax for the third quarter of 1951. In making the offer 'and as part consideration, thereof' the taxpayer waived 'the benefit of any statute of limitation applicable to the assessment and/or collection of the liability sought to be compromised, and agrees to the suspension of the running of the statutory period of limitation * * * for the period during which this offer is pending * * * and for one year thereafter.' An amended offer with the same provisions relating to suspension of the statute of limitations was made February 10, 1956. The offer was rejected September 10, 1956. It is clear therefore that, as to the taxpayer at least, the action is timely brought. The other defendants, however, argue that as to them the action is untimely, on the premise that the agreement contained in the offer to compromise binds only the parties to it. They cite no cases supporting this position, whereas the government relies on the 'plain meaning' of section 6502(a), and supporting case law. In this it is clearly correct. An agreement by the taxpayer to suspend the running of the statute of limitations binds not only the taxpayer but also any party to an action to foreclose the tax lien. See United States v. Maddas, D.C.W.D.Pa.1953, 109 F.Supp. 607, 612; cf. United States v. Canadian American Co., D.C.E.D.N.Y.1952, 108 F.Supp. 206, 208, affirmed per curiam, 2 Cir., 1953, 202 F.2d 751. By virtue of the foregoing the government is entitled to partial summary judgment of foreclosure and sale of its lien filed January 29, 1952.

 There remains for consideration the motion of the County of Nassau for summary judgment in its favor and against the defendant Bialick on Bialick's cross-claim against the County of Nassau, School District 27 and the Town of Hempstead. The disposition of this motion requires consideration of Nassau County taxes. The local School and Special District, Town and County taxes, when due and payable, become liens upon the real property against which they are assessed. Nassau County Administrative Code §§ 5-15.0, 5-16.0. 'The term 'tax lien' includes: (a) the right of the county to collect taxes, penalties, interests and other charges on the real property affected by such taxes for failure to pay such taxes, and (b) the lien against such real property for all of the aforementioned items.' § 5-24.0, subd. 3. Assessment rolls showing unpaid taxes are returned by the Town Receiver, the primary collecting agent, to the County Treasurer for collection. § 5-23.0. The County Treasurer has a choice of methods for collecting delinquent taxes. He may bring an action 'as upon contract', ( § 5-32.0), or he may sell the tax lien. § 5-33.0. 'The term 'sale of taxes' or 'sale of a tax lien' includes the sale of the real property affected by such tax lien.' § 5-24.0, subd. 4. The former method is rarely, if ever, used and needs no further discussion. Sale of the tax lien is the usual procedure and the sale is conducted yearly in December. §§ 5-35.0, 5-37.0, Laws 1944, c. 718. The sale is preceded by advertisement for a period of three weeks in local newspapers. § 5-37.0. This advertisement contains the name of the owner of the liened real estate, a description of that property, and the amount of unpaid taxes due. This amount includes 'all taxes for the year or years advertised, the interest and penalty on such taxes to the date of the sale and other expenses and charges against the property.' § 5-37.0, subd. b. The advertisement of the sale of the lien on the Mojac property follows:

 'Notice is hereby given that I shall, on the 3rd day of December, 1956, * * * sell at public auction the tax liens on real estate hereinafter described, unless the owner, mortgagee, occupant of or any other party in interest in such real estate shall pay to the County Treasurer the total amount of such unpaid taxes * * *. Such tax liens will be sold at the lowest rate of interest * * * for which any person * * * shall offer to take the total amount of such unpaid taxes as defined in Section 5-37.0 of the Nassau County Administrative Code. The tax liens ...

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