Opinion
John J. Bennett, Jr., Atty. Gen., and Vincent A. Tauriello, of Buffalo, N.Y., for petitioner.
Harry Cooper, of Medina, N.Y., for trustee.
In the above matter, Referee George D. Judson rendered the following decision:
'This Bankrupt was adjudicated such on February 16, 1931, and the First Meeting of Creditors was held on March 27, 1931, and due notice thereof was given all creditors including the State of New York, by mail and by publication, and the time to present claims expired on August 16, 1931. On June 1, 1931, another notice was given creditors of a proposed sale of real estate on June 12, 1931.
'Many claims were presented within the statutory time.
'On January 13, 1933, upon due notice to creditors a dividend of 6% to all general creditors was declared and all priority claims that had been duly presented were ordered paid, and very shortly thereafter the Trustee paid the same.
'Much of the Estate funds are still tied up in a defunct bankruptcy bank depository in process of liquidation.
'The New York State Attorney General by Henry E. Warner, Esq., one of his deputies, appeared at said January 13, 1933, dividend meeting and announced that the State had a claim for motor fuel taxes under article 12A of the State Tax Law (section 282 et seq.), but presented no proof thereof, and was advised by the Referee and Trustee that that was the first they had ever heard of such a claim and that no such claim had been presented and that neither the Referee nor Trustee could consider it unless duly presented.
'On December 23, 1933, over two years and ten months after the adjudication, the State for the first time presented its proof of claim in which it asserts that the Bankrupt owes it for motor fuel taxes as follows:
| December 1930, | $793.52 |
| January 1931, | 734.50 |
| February 1st-16th, 1931, | 266.82 |
|
| --------- |
| Total | $1794.84. |
'The Trustee objects to the allowance of the claim.
'The claim did not disclose the rate of tax per gallon nor the number of gallons taxed, nor the period of time covered by each of the charges, and the Trustee objected to the form and claimed he could not therefrom determine the validity of the claim as to amounts without such additional information, and further objected on the ground that the claim was presented too late. The defect as to form has since been remedied by the State and the additional information desired by the Trustee has been supplied.
'The Bankruptcy estate is still open and the State now claims priority of payment.
'There is now no dispute as to the correctness of the amounts claimed by the State and the Trustee concedes that had the claim been presented in time, it would have been entitled to priority of payment as a debt owing to the State under the authority of Matter of Alamac, etc., 42 F. (2d) 120, 16 A.B.R. (N.S.) 434 (2d C.C.A.) and the cases cited on page 440. 'This case holds and counsel here all agree that this so-called gasoline tax is not a 'tax' under section 64a of the Bankruptcy Act (11 USCA§ 104(a), but is a 'debt' under section 64b(7), 11 USCA § 104(b)(7).
'There seems to be a dearth of direct authority on this question and none has been called to my attention by either party.
'Section 57n of the Bankruptcy Act (11 USCA § 93(n) (in force in the instant case) in express language prohibits the allowance of claims presented subsequent to six months after adjudication with certain exceptions not existing in this case. See In re Muskoka Lumber Co., 127 F. 886, 11 A.B.R. 761 (Opinion by Judge Hazel, D.C.W.D.N.Y.), and In re Ingalls Bros., 137 F. 517, 13 A.B.R. 512 (2d C.C.A.).
' The State's claim was never presented in any form until one year and eleven months after adjudication and over one year and ten months after the first hearing of the first meeting of creditors, and was never presented in proven form until over two years and ten months after adjudication.
'It has been held by the Circuit Court of Appeals in this jurisdiction that the United States Government as the Sovereign promulgating the law is not bound by that limitation. Matter of Menist Co., Inc., 294 F. 532, 2 A.B.R. (N.S.) 190, and authorities therein cited.
'The principle upon which that decision is predicated is that the Sovereign making the law is excepted from the limitation unless it expressly subjects itself thereto.
'The argument before me is that because all United States, State, County, etc. debts are priority claims and because the United States did not subject itself to the limitation, therefore, it excepts states, counties and all other taxing entities from that limitation.
'I do not think the law can be so construed because the State of New York did not make the law and, therefore, the theory that it did not subject itself to the limitation fails, and I do not see how we can read it into the law in view of the fact that the limitation of section 57n in plain language bars the proving of claims (other than taxes) after six months and under the authorities the United States itself seems to be the only exception.
'The reports are numerous that the limitation is mandatory (except as to the United States), although none of them involved a debt owing to a state or other municipal body.
'I do not think the passage of a law by one Sovereign, which by judicial construction exempts itself from the operation of the law as to its own claims, can by implication be held to exempt other sovereigns therefrom as to their claims.
'Accordingly the motor fuel tax claim was not presented by the State of New York in time for allowance.
' That claim is not a lien on any property in Bankruptcy Court, in fact is not a lien on any property, but merely a sales tax against the Bankrupt and, therefore, neither the Trustee nor the Court can pay it to relieve from liens property being administered in this Court.
'Section 289 of the State Tax Law provides that if the distributor does not pay the gasoline tax, the State Tax Commission may issue a warrant which shall be filed with the County Clerk of the County of the distributor and thereupon a judgment shall be docketed which shall become a lien on the real property of the distributor.
'It nowhere appears that any such warrant was issued or judgment docketed, and when the real properties of this bankrupt were sold in this Court, the title searches showed that no such judgment existed.
'I have not overlooked the following authorities cited by the State.
'In the Coleman & Titus Case (D.C.) 286 F. 303, 2 A.B.R. (N.S.) 473, the claim was supposed by the claimant and trustee to have been filed within the year and was being considered by them when it was discovered that no formal claim had been filed and the year had elapsed. The claimant was permitted to file the formal proof after the year on the theory that the claim had been brought to the knowledge of the trustee within the year, had been informally presented, was being considered with others, and all parties supposed it had been properly filed, and, therefore, the claimant was permitted to file the formal proof as an amendment to the informal claim.
'In the case at bar neither the Court nor the Trustee had any knowledge that such a claim existed other than that the Bankrupt's schedules stated that the Bankrupt owed the State $1671.70, and when the State formally presented its claim in December 1933, more than two years after the limitation had expired, it is for a larger amount, and within the limitation of the State had been sent at least two notices of the pendency of the proceeding, one of the first meeting and another of a proposed sale of assets. The distinction between this authority and the case at bar is obvious. Here the Trustee and the Court were justified in assuming that the State made no claim.
'In the Patterson-MacDonald Case (C.C.A.) 293 F. 190, 4 A.B.R. (N.S.) 195, an informal claim had been filed within the statutory period and the claimant was permitted to amend by presenting a formal proof after the limit had expired.
'Again the distinction is obvious.
'The Fisher & Co. Case (D.C.) 148 F. 907, 17 A.B.R. 404, did not involve the element of time of presentation of a claim for taxes. There the taxes were a lien upon real property sold by the Trustee free and clear from all liens, and the Court merely held that the Trustee must pay all liens.
'The Kallak Case (D.C.) 147 F. 276, 17 A.B.R. 414, involved only the question of to what time the Trustee should pay interest on tax claim liens, and in no way involved the time of presentation of a tax claim, and the observations of the Court as to the duty of Trustees is wholly obiter dictum and should carry no weight as an authority on the question involved here of whether the State of New York should file its claim within the six months limitation.
'The Harvey Case (D.C.) 122 F. 745, 10 A.B.R. 567, was also a case of taxes which were a lien on real estate and merely holds that they must be paid by the Trustee out of the proceeds of a sale by him, as liens without formal claim the same as prior valid mortgage liens.
'The Prince & Walter Case (D.C.) 131 F. 546, 12 A.B.R. 675, is to the same effect as the Harvey Case.
'In the Cleanfest Hosiery Co., 4 American Bankruptcy Report 702, Referee Pendleton of the Southern District of New York, in 1930, held that the City of New York was not obliged to file within the year its claim for 'taxes levied,' against the Bankrupt prior to adjudication and particularly stresses that section 64a of the Bankruptcy Act directs the payment of all taxes legally due &c to the United States, a state &c. While the reported case does not expressly state what the tax was, the inference is that it was a real property tax and a lien on Bankrupt's real estate, and if so this case comes within the category of the last two above authorities. Moreover, since then and in 1926, that section was amended to prohibit the payment by the Trustee of such a tax unless the Trustee realized from the sale if the Bankrupt's interest an amount in excess of the tax. That is, he cannot pay it out of any assets in his hands except those he received from the property on which the tax is a lien.
Referee's opinion.
'With all respect to the learned Referee, I cannot bring myself to regard his decision as an authority in the case at bar, while the authorities hold and the counsel all agree that the claim of the State here is not a tax, but a debt, and section 64a directs the payment of 'taxes' (apparently those which are a lien on assets), and section 64b(7) treats of debts other than taxes.
'Therefore I can see no good reason for exempting anyone except the United States itself from the six months limitation prescribed by section 57n.
'On principle it would not seem that the State of New York, after it has had due and timely notice to present its claim within the limit fixed by the Act and has wholly through its own neglect omitted to present its claim until long after the limit has expired and after a dividend has been paid, should then be permitted to prove its claim.
'Accordingly allowance of the claim at this late day is denied on the ground that it was not presented in time, and the Trustee's attorney may prepare and submit to me a formal order to that effect, and after I have signed and filed the same, said attorney shall serve a copy thereof with notice of filing upon the attorney for the State.'
RIPPEY, District Judge.
The petition for review is dismissed, and the order is affirmed on the opinion of George D. Judson, referee.
An order may be entered accordingly.