Dickinson v. Riley

• Decision Date: 19 November 1936
• Docket Number: No. 10653.,10653.
• Parties: DICKINSON v. RILEY, County Treasurer.
• Court: U.S. Court of Appeals — Eighth Circuit

86 F.2d 385 (1936)

DICKINSON v. RILEY, County Treasurer.

No. 10653.

Circuit Court of Appeals, Eighth Circuit.

November 19, 1936.

J. A. Tellier, of Little Rock, Ark., for appellant.

G. O. Patterson, Jr., of Clarksville, Ark. (E. J. Broaddus, of Wagoner, Okl., on the brief) for appellee.

Before GARDNER, SANBORN, and FARIS, Circuit Judges.

FARIS, Circuit Judge.

On January 8, 1932, the Cherokee Public Service Company, was duly adjudicated a bankrupt, and one W. D. Dickinson appellant herein, was in due course elected trustee thereof. Thereafter, one E. L. Riley, appellee herein, as treasurer of Wagoner county, Okl., filed for allowance by the referee in bankruptcy five certain claims for taxes, for the years 1929 to 1933, inclusive. These claims in the aggregate amounted to the sum of $15,857.99. But this aggregate, included the sum of $3,365.42, which had accrued as penalties for delinquencies in the prompt payment of the actual taxes assessed and levied. Both the referee in bankruptcy and the trial court held that no penalties were recoverable; no appeal was taken by appellee, and appellant avows himself as content with the holding, so this appeal is concerned only with the actual taxes claimed namely the sum of $12,492.57.

The referee after a summary, but full hearing, reduced the aggregate of the tax claims to the sum of $8,328.38 and allowed the latter sum to appellee, and fixed the priority of payment in accord with section 64b of the Bankruptcy Act, as amended (11 U.S.C.A. § 104 (b). Upon a petition for review, the District Court modified the order of the referee, as to the amount due and as to priority of payment, and rendered judgment for appellee for the sum of $12,492.57, the total aggregate of the taxes claimed by appellee to be due, and ordered that the claims be paid "in accordance with the priorities fixed by section 64a of the Bankruptcy Act as amended, 11 U.S.C.A. § 104 (a)." From the above orders of the court, the trustee in bankruptcy appealed in conventional form.

The property on which the taxes in controversy were assessed and levied, consisted of a gas distributing plant in the city of Wagoner, Okl., and eighteen miles of eight-inch pipe line, which is laid from certain gas fields to the city of Wagoner. During the five-year period of the accrual of the taxes claimed, the above property had been owned by, and assessed in the names of different owners. But it was owned by the bankrupt when bankruptcy supervened, and no point is urged as to this diverse ownership.

When these tax claims were filed with the referee for allowance the trustee, appellant, appeared and filed so-called objections to the allowance thereof for that: "Said taxes are excessive, unjust and disproportionate; (b) that the physical valuations of the property on which said taxes are based are excessive and erroneous; (c) that either no depreciation, or inadequate depreciation has been allowed on the property assessed during the period for which the taxes are claimed, and the valuations are therefore excessive and erroneous; (d) that the valuation, as a basis for taxation as determined by the return on said property is excessive, unequal and erroneous; (e) that said taxes are otherwise unjust and unlawful."

And for relief prayed thus: "Wherefore, your trustee prays that said matter be set down for hearing at an early date and that upon full hearing thereof said taxes be reduced in such amount as shall be shown to be lawful, just and proper."

Thereupon, the referee issued an order to show cause why these objections should not be sustained. While this order was directed to others than appellee, he nevertheless came in, no point being made as to this notice, and the objections were heard summarily. At this hearing numerous witnesses testified on both sides, without objections, as to the fair cash value and assessable value of the property on which the taxes were levied. No other question of fact was mooted. It is conceded throughout the case that the levy of $12,492.57, as claimed, was the correct sum of taxes due upon the basis of the assessed value as fixed by the Oklahoma Tax Commission, and that no part of said sum had ever been paid. But it was and is denied by the appellant, that the property had been "assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale," as provided by the taxing statute of the state of Oklahoma. Section 13641, Oklahoma Statutes 1931. Appellee contended contra, and toward this dispute of fact the whole of the evidence was directed. As a question of law in the petition for review, appellee then contended that the court of bankruptcy had no power or jurisdiction to go into the question of excessive valuation of the property taxed, but that an irrebuttable presumption of the correctness of such assessment exists. Appellant then and yet contends, contra, and appellee, though never objecting, nor raising the point till he filed his petition for review, is now content.

This question of the power of the court in bankruptcy in such behalf depends on the meaning of section 64a of the Bankruptcy Act, which, so far as pertinent reads thus: "(a) The 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 the order of priority as set forth in paragraph (b) hereof * * * upon filing the receipts of the proper public officers for such payments the trustee shall be credited with the amounts 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 104 (a), title 11, U.S.C., as amended (11 U.S.C.A. § 104 (a). Some diversity of opinion is found among the ruled cases as to the nature and extent of the power conferred on the court in bankruptcy, perforce the quoted language of the subsection, which for emphasis, we italicize. The great weight of authority, as shown by the ruled cases, is in favor of the view that the bankruptcy court is not irrevocably bound by an irrebuttable presumption of the validity and correctness of the assessment made by the taxing authorities; but that the bankrupt court has the power under the plain language of the above statute to hear and determine whether the value at which the property of the bankrupt was assessed was the proper and correct value, as provided by the taxing statutes of the sovereignties, or public entities, which assessed and levied the taxes sought to be allowed in a court in bankruptcy. Cases which hold that such an assessment is prima facie evidence of correctness, but that such evidence may be rebutted in a hearing in the bankruptcy court and modified or overturned, are: In re Clayton Magazines, 77 F.(2d) 852, 854 (C.C.A.2); Whitney v. Dresser, 200 U.S. 532, 26 S.Ct. 316, 50 L.Ed. 584; New Jersey v. Anderson, 203 U.S. 483, 27 S.Ct. 137, 51 L.Ed. 284; Henderson County v. Wilkins, 43 F.(2d) 676, (C.C.A.4); Truman v. Thalheimer, 19 F.(2d) 468; (C.C.A.9); In re United Five and Ten Cent Store, 242 F. 1005 (D.C.); In re Simcox, Inc., 243 F. 479 (D.C.); In re Sheinman, 14 F.(2d) 823, 824 (D.C.); In re Williams Oil Corp., 265 F. 401 (D.C.); In re Heffron Co., 216 F. 642 (D.C.); In re Geo. F. Redmond & Co., Inc., 17 F.(2d) 128 (D.C.).

On the other view, that is, that section 64a of the Bankruptcy Act (as amended) confers no power on the bankruptcy court to go behind the findings of value of the state, county, or municipal taxing authorities, we find but one case (In re Gould Mfg. Co. D.C. 11 F.Supp. 644). In the latter case, the case of New Jersey v. Anderson, supra, is discussed at much length and distinguished as to what is said therein, construing section 64a, supra, as obiter dictum. There were two questions before the Supreme Court in the Anderson Case; the chief one being, whether the alleged tax was or was not a tax. On this the court divided; the dissenting justices holding that the subject-matter did not constitute a tax. The other was, as to the power of the bankruptcy court to reduce such tax from one based on an assessment of $40,000,000 as fixed by the taxing authorities of the state of New Jersey, to a tax based on a valuation of $10,000,000 as found by the bankruptcy court. In discussing the latter question, the court cites section 64a, supra, and construes it as affording authority for the view that the finding of value by the State Board was not conclusive. The Anderson Case, supra, has been cited by practically every court which has had occasion to construe section 64a, as an authority in favor of the power of the bankruptcy court to revise the findings of the taxing authorities as to the amount of taxes legally due. Among these we find, In re Clayton Magazines, supra (C.C.A.2); Henderson County v. Wilkins, supra (C.C. A.4) and Truman v. Thalheimer, supra (C. C.A.9); each as indicated, a decision by a federal Court of Appeals.

But we content ourselves in merely stating the views of other courts upon the question, without presently ruling it. This for the reason, that appellant agrees with what seems, from the cases above cited, to be the weight of opinion upon the question, and appellee having won below, is content now and no longer urges his former contention. And so the sole question now presented on the record is, whether upon the evidence heard before the...