# In Re the Accounting of Gruner > New York Court of Appeals · July 23, 1946 · 295 N.Y. 510 URL: https://www.frixlaw.com/law-library/cases/3613692 ## Case - **Full name:** In the Matter of the Accounting of Katharine D. Gruner, as Administratrix With the Will Annexed of Otto H. Gruner, Deceased, Respondent. New York Trust Company, Appellant; United States of America Et Al., Respondents - **Court:** New York Court of Appeals - **Decided:** July 23, 1946 - **Citations:** 295 N.Y. 510; 68 N.E.2d 514; 167 A.L.R. 628; 1946 N.Y. LEXIS 809 - **Precedential status:** Published - **Opinion:** Dissent by Desmond - **Judges:** Conway, Desmond - **Cited by:** 35 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/3613692 ## Opinion text Desmond, J. (dissenting in part.) I agree with Judge Conway’s opinion except that I think the State, for its unpaid income taxes, is entitled to priority over the New York Trust Company. It is undisputable that the State of New York, as a sovereign, has a common-law right of priority, with respect to the payment of taxes, over all other creditors of the taxpayer except the United States (Matter of Smith v. Meader Pen Corp., 255 App. Div. 397, 399 , aifd. 280 N. Y. 554 ; N. Y. Terminal Co. v. Gaus, 204 N. Y. 512 ; Central Trust Co. v. N. Y. C. & N. R. R. Co., 110 N. Y. 250, 259 ; Matter of Century Steel Co. of America, 17 F. 2d 78 ; Matter of Lincoln Chair & Novelty Co., 274 N. Y. 353, 356 ; Matter of Carnegie Trust Company, 206 N. Y. 390, 399 ). This prerogative right of the State does not depend on statutes and so we do not have to examine into the difference between, for instance, section 219-c of the Tax Law (as to franchise taxes) and section 377 of that Law (with respect to income taxes). Nor can the State be defeated by reference to section 380 of the Tax Law, which provides for the filing of a warrant, etc. Even if it be the law that this sovereign right of the State must give way to a perfected lien of another creditor, I do not see how the trust company’s lien can be considered to have been perfected as against the State of New York any more than against the United States of America. Both the' trust company and the State came into the Surrogate’s Court to assert their alleged priorities to payment out of a fund which was in the hands of the adminstrator of the debtor’s estate. Neither the State nor the trust company had reduced the property to possession, and no part of the property had been set off to either. The trust company had no “ specific prior lien ”, by attachment, execution or otherwise (see Wise v. Wise Company, 153 N. Y. 507, 511 ). Even if the trust company’s equitable lien could be considered to have been “ perfected ” when the proceeds of the sale of the seat became available, that time was subsequent to the accrual of the State’s tax claim. Thus we had an insol *527 vency proceeding with a claim filed by the trust company, as holder of an inchoate lien, and another claim filed by the State of New York for past due income taxes. 1 do not see anything in all that to defeat the State’s undoubted sovereign right to priority over all creditors (except the United States, which has its own special, and paramount, statutory right to first payment). Loughran, Ch. J., Lewis and Thacher, JJ., concur with Conway, J.; Desmond, J., dissents in part in memorandum; Dye and Fuld, JJ., taking no part. Ordered accordingly. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/3613692. Public record. Not legal advice.