212 F. 787 | W.D. Wash. | 1914
This matter is before the court upon petition to review two orders of the referee. The same proceeding has been considered, in other phases, upon former hearings. 204 Fed. 674, and decision of December 3, 1913, 209 Fed. 84. The bankrupt, upon its organization, acquired some 1,200 acres of land near Wenatchee, Wash., together with shares of stock in an'irrigation company. The land was largely platted into 5 and 10 acre tracts, devoted to
To the present petition the creditor Wells objects. The nature of his interest in and past relations with the bankrupt are disclosed in the court’s former opinion. 209 Fed. 84.
The court is asked to distinguish the present matter from that formerly considered, as a justification for which the present petition asks for the purchase of water rights, to be used in effecting the settlement of unliquidated claims for damage on account of the failure of the bankrupt to furnish the amount of water promised under the contracts ‘of sale. To this end, the petition recites:
“Xour petitioner further represents that a large number of claims have been filed by the purchasers of property from the said bankrupt, demanding damages for the failure of the bankrupt company to supply sufficient water as provided for by the contracts hereinbefore mentioned, that said claims now filed are unliquidated, and that the amount claimed thereunder is in excess of $100,000.
“Xour petitioner further represents that in his opinion the hearing upon the liquidation and allowance of the unliquidated claims for damages hereinbe-fore referred to jvill consume a large amount of time, and will entail a large expense upon this estate; that in the opinion of the trustee it. would be to the best interests of a large majority of the persons interested in said estate if the additional water stock and water rights hereinabove referred to could be purchased upon the condition that the unliquidated claims for damages should be released; that your petitioner believes that it is essential for a proper administration of said estate that the question as to whether or not your petitioner shall purchase any additional water stock or rights should be speedily, determined.”
These allegations, even when supplemented by the full record of the proceeding, are clearly insufficient to warrant the making of the order asked. The referee’s order denying this petition is approved and sustained.
The further order of which a review is asked, refused, upon the trustee’s -petition for instructions, to direct him to pay the taxes upon
“Tbe court shall order the trustee to pay all taxes legally due and owing by the bankrupt to the United States, state, county, district, or municipality in advance of the payment of dividends to creditors, and upon filing the receipts of the proper public officers for such payment he shall be credited with the amount thereof, and in case any question arises as to the amount or legality of any such tax the same shall be heard and determined" by the court.” Section 64a.
The effect of the sale of the contracts and the subsequent assignments is that the bankrupt, having contracted to deed to the several purchasers the platted tracts when the full contract price was paid, thereafter, upon the assignment of its interest under these contracts, agreed, in case of forfeiture under any contract by reason of failure to pay the purchase price of the land, that it would deed such tract, or tracts, to whom the assignee of its interest thereunder might elect, and to that end executed deeds in blank for that purpose, placed in escrow, with power of attorney to complete by filling the blanks. This arrangement clearly leaves the title to the property in the bankrupt.
The taxes are owing by the bankrupt. It is argued that they were not owing, that the lands owed the taxes, and that they were no more owing by the bankrupt than they were by the contract holders, and
The exemptions allowed by law to churches, hospitals, and other similar institutions, as well as to heads of families, to a certain amount, shows that the ownership of property has some effect upon the amount owing, even though a personal judgment may not be recovered against the owner for the' taxes.
“Owner,” as used in this connection, signifies the owner of an estate in possession at the time of the assessment, and not a prior owner, or the owner of an estate in expectancy, or any executory or contingent interest. Hopper v. Malleson’s Ex’rs, 16 N. J. Eq. (1 C. E. Green) 382, 387. The legal title and right of possession in the lands taxed here at the time of filing the petition were in the bankrupt.
Form should not be allowed to obscure the substance. Property is assessed to the owner. If it is so, and the assessment creates a lien against his property, out of which payment can be compelled, of what use is it to argue that the owner does not owe the tax? As language is ordinarily understood, the owner of property, to whom it is assessed, owes the tax, whether the remedy given for its collection is solely confined to his taxed property or not. If he does not owe the'tax, no one does. Hecox v. Teller County, 198 Fed. 634, 117 C. C. A. 338. Even where the remedy for the collection of a debt is entirely taken away, as by the exemption from suit of the 'sovereign, the statute of limitations, or a discharge in bankruptcy, one may still be said to owe the debt, payment of which cannot be enforced.
This is but the effect of a general rule of public policy, favoring the state in the collection of its revenues. Summary remedies are provided for its collection, where an individual would have to proceed in limine. The strength of this policy overrides ordinary equities.
The national government, by the foregoing provision of the bankruptcy law, while taking the administration of insolvent estates from the control of the state, recognized its obligation not to impede, by such administration, a state in the collection of its revenues, and to
The mandatory language of the section (64a) recognizes a comity that would not require the assertion by the state of its claim for taxes in all cases to warrant the order for their payment; but a suggestion that taxes are owing by one interested in the estate should be sufficient.
“It is the duty of the court, not only to respect this paramount right (to taxes) and to make no order for distribution of assets in custodia legis, except in subordination thereto, but also to make such orders as will compel the receiver to discharge this obligation.” 34 Cyc. 347.
“It is not necessary for the public authorities to appear in a, court of bankruptcy as ordinary claimants. They have no right in the administration as creditors, and no voice in the selection of trustee, and the liability for taxes is in no way affected by the discharge of the bankrupt. On the other hand, the duty of affirmative action rests upon the court of bankruptcy. It is the duty of the trustee to ascertain from the public records the amount due for taxes and bring the matter to the attention of the court, and thereupon it is the duty of the court to order 'their payment if there are sufficient funds in the estate for that purpose.” In re Kallak (D. C.) 147 Fed. 276, at 277.
“And section 1, 30 Stat. 544 (U. S. Comp. St. 1901, p. 3419), declares that the word ‘debt’ shall include any debt, demand, or claim provable in bankruptcy. Of course, a tax is provable in bankruptcy. It thus appears that taxes legally due and owing by the bankrupt must be paid before distribution to creditors, and the injunction of section 64 is that the court ‘shall order’ the trustee to pay them. It seems to be the duty of the court to require such payment, even though no claim for the same shall have been presented in the manner or within the time 'prescribed by the bankruptcy act for the filing of claims. It is true that section 64 does not, in express words, refer to taxes assessed or becoming due after the institution of bankruptcy proceedings. But it is settled law that the bankrupt’s estate is taxable while it is in the hands of the bankrupt’s trustees.” In re William F. Fisher & Co. (D. C.) 148 Fed. 907, at 912.
The conclusion reached finds further support in the following cases: In re Tilden (D. C.) 91 Fed. 500; City of Waco v. Bryan, 127 Fed. 79, 62 C. C. A. 79; City of Chattanooga v. Hill, 139 Fed. 600, 71 C. C. A. 584, 3 Ann. Cas. 237; In re Baker, 1 Am. Bankr. Rep. 526.
The referee’s order is modified to conform to the foregoing.