Ernst v. Guarantee Millwork Inc.

• Citation: 200 Wash. 195,93 P.2d 404
• Decision Date: 15 August 1939
• Docket Number: 27541.
• Parties: ERNST, Director of State Department of Social Security, v. GUARANTEE MILLWORK Inc., et al.
• Court: United States State Supreme Court of Washington

93 P.2d 404

200 Wash. 195

ERNST, Director of State Department of Social Security, v. GUARANTEE MILLWORK Inc., et al.

No. 27541.

Supreme Court of Washington

August 15, 1939

Department 1.

Action by Charles F. Ernst, Director of the Washington State Department of Social Security, against Guarantee Millwork Incorporated, wherein a receiver was appointed for the Guarantee Millwork, Incorporated, and wherein the County of King, Mary Warrack, J. B. Warrack, and the United States of America filed claims and sought to establish priority as to money in the hands of the receiver. From a judgment giving the County of King, Mary Warrack, and J. B. Warrack claimants, priority over the United States of America claimant, the United States of America, claimant, appeals.

Judgment affirmed.

Appeal from Superior Court, King County; Roger J. Meakim, judge.

J. Charles Dennis, of Tacoma, and Gerald Shucklin and Thomas R. Winter, both of Seattle, for the United States.

G. W. Hamilton, Atty. Gen., and Lyle L. Iverson, of Olympia, for respondent Charles F. Ernst.

Mawer & Wigle, of Seattle, for respondents Guarantee Millwork, Inc., et al.

Kellogg, Walters & Pedersen, of Seattle, for respondent Warrack & Warrack.

B. Gray Warner, Lloyd W. Shorett, and Edward E. Henry, all of Seattle, for respondent King County.

JEFFERS Justice.

This is an appeal by the United States from an order of the superior court for King county, establishing priorities, ordering distribution, discharging receiver and exonerating his bond, made and entered November 4, 1938, wherein the receiver was directed to pay the subrogation claim of J. B. Warrack for 1937 personal property taxes paid by him, the claim of King county for 1938 personal property taxes due and unpaid, and the labor claim of Mary Warrack, prior to the claim of the United States for social security and income taxes.

The controversy is one between the United States, King county, J. B. Warrack and Mary Warrack, as to priority of payment out of the assets of an insolvent corporation.

No bill of exceptions or statement of facts having been certified to this court, we are limited, in our consideration of the questions raised, to the findings of fact, conclusions of law and order signed by the trial court.

The findings of the trial court may be summarized as follows: On October 14, 1938, the matter came on for hearing Before the court on the final report, petition for order determining priorities and for distribution, and petition for discharge, and, evidence having been introduced and considered, the court made the following findings of fact:

There remains in the hands of the receiver, for distribution, the sum of approximately $750.55, but there are not sufficient funds with which to pay a dividend in any amount to general creditors. With reference to claims heretofore filed as and/or approved by the superior court as preferred, the following facts appear: That on or about May 4, 1937, the county assessor of King county made a regular and valid assessment against the personal property of defendant corporation then on its operating premises, for the 1937 personal property taxes, in the sum of $245.58, including interest and penalties; that such assessment was not segregated with reference to property encumbered or free of encumbrances, and on July 25, 1938, in order to protect his interest in that part of the tangible personal property which he held under chattel mortgage, and which he had duly foreclosed and bought in at sale, J. B. Warrack paid to King county the sum of $245.58; that on April 12, 1938, the county assessor of King county made a regular and valid assessment against the personal property of defendant corporation for 1938 personal property taxes, in the sum of $205.64, which remains due and unpaid; that no distraint was made by King county for either the 1937 or 1938 taxes; that on October 11, 1938, J. B. Warrack filed herein a petition for order of priority of King county personal property taxes, and for subrogation of that portion of the 1937 personal property taxes paid by him; that the portion of defendant's personal property covered by chattel mortgage held by J. B. Warrack was sold and bid in by Warrack for $10,000; that the unencumbered tangible personal property was sold for $1,508.01; that the sale price at the foreclosure sale and the price received by the receiver for the unencumbered property is a fair measurement of the value of all the property; that the claim of King county for 1938 taxes covers that portion of the unpaid personal property taxes represented by the ratio which the fund received from the sale by the receiver of the unencumbered property covered by the assessment ($1,518.01) bears to the total value of the tangible personal property received by him covered by the assessment ($11,518.01); that based on this ratio, King county is entitled to 13.17% of $205.64, or $27.08; that J. B. Warrack is entitled to be subrogated to the rights of King county, based upon his payment of the total of 1937 personal property tax, to the extent of 13.17% of $245.58, or $32.45, which sum would have been payable to King county under its assessment lien from funds in the receiver's possession, if the same had not been satisfied by J. B. Warrack; that Mary Warrack duly filed with the receiver her claim for wages due her from defendant corporation, in the sum of $300; that no lien was filed therefor; that the receiver was appointed within ninety days after claimant ceased to perform such labor; that the claimant duly qualified for preference under Rem.Rev.Stat. §§ 1149 and 1153, and asserted priority under those statutes; that on or about July 12, 1938, Thor W. Henricksen, acting collector of internal revenue for the district of Washington, on behalf of the United States, filed proofs of claim covering social security taxes assessed against defendant corporation for the years 1936 and 1937, and the first quarter of 1938, and additional income tax for the year ending December 31, 1937, the social security tax being $2,223.53, plus penalty of $422.35, and interest $71.54, and the income tax of $13.38; that no notice of tax liens were ever filed with the auditor of King county or the clerk of the United States district court prior to the appointment of the receiver herein, or at all; that the state did not appear at the hearing, and asserted no claim to priority.

Based upon the foregoing facts, the court concluded that the claim of King county to the extent of $32.34 for personal property taxes for the year 1937 is a valid and specific lien under Rem.Rev.Stat. § 11265, against the funds in the hands of the receiver for distribution, and J. B. Warrack, having paid the 1937 taxes, is entitled to subrogation and should be by the receiver reimbursed in the amount of $32.34, prior to the payment of any other claim; that the claim of King county, to the extent of $27.08, for personal property taxes for the year 1938, is a valid and specific lien against the funds in the hands of the receiver for distribution, and should be second in priority; that the claim of Mary Warrack for wages, in the sum of $300, is a valid and specific lien under Rem.Rev.Stat. §§ 1149 and 1153, against the funds in the hands of the receiver for distribution, and should be third in priority of payment; that the claim of the United States for income and social security taxes is junior in priority to the claim of King county, J. B. Warrack and Mary Warrack, and that after payment by the receiver of the three claims last abovementioned, the receiver shall disburse and pay over to the United States the remainder of the funds in his hands for distribution.

An order was made and entered on November 4, 1938, in accordance with the conclusions, and this appeal followed.

Respondents have moved to affirm the final order upon the record, because of the failure of appellant to include in its brief any statement of the question involved and any assignment of error. While we do not approve the style used by appellant in the preparation of its brief, we think it is apparent from appellant's analysis of the issue that its claim is based upon the provisions of U.S.Rev.Stat. §§ 3466 and 3467, 31 U.S.C.A. §§ 191, 192, and that the only error claimed, or which could be claimed, is that the order is not supported by the findings. The motion will be denied.

Appellant contends that under U.S.Rev.Stat. §§ 3466 and 3467 (§§ 191 and 192, Title 31, U.S.C.A.), it is entitled to have its claim for social security and income taxes paid by the receiver, from funds in his hands, prior to the claims of respondents. Section 3466, supra, provides in part: 'Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied.'

Section 3467 provides: 'Every executor, administrator, or assignee, or other person, who pays any debt due by the person or estate from whom or for which he acts, Before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate for the debts so due to the United States, or for so much thereof as may remain due and...