In re Anderson, 95.
| Decision Date | 18 January 1922 |
| Docket Number | 95. |
| Citation | 279 F. 525 |
| Parties | In re ANDERSON. Petition of UNITED STATES. |
| Court | U.S. Court of Appeals — Second Circuit |
William Hayward, U.S. Atty., appearing .S. Atty., appearing specially (Edward F. Unger, Asst. U.S. atty., of New York City, Russell N. Shaw, Sp. Atty., Bureau of Internal Revenue, of Washington, D.C., of counsel), for petitioner and appellant.
M. S. & I. S. Isaacs, of New York City (Eugene M. Gregory, of New York City, of counsel), for trustee.
Before HOUGH, MANTON, and MAYER, Circuit Judges.
On October 17, 1918, Alma Newton Anderson filed a voluntary petition and was duly adjudicated a bankrupt. On April 1 1918, she filed an income tax return for the year 1917, on which there became payable to the Commissioner of Internal Revenue a tax of $650. This remained unpaid at the time of her bankruptcy. No proof of claim was filed by the United States for this tax in these proceedings. On or about December 30, 1920, the trustee in bankruptcy served a notice of motion and petition on the collector of internal revenue for the Second district of New York, returnable before the referee in bankruptcy on January 7, 1921, wherein he prayed for 'an order barring and foreclosing the United States from participating in the estate herein, or in the alternative that the United States be directed to file its claim or claims with the referee herein on or before a day certain, in order that the trustee may object thereto and hearings had on said claim in accordance with law. ' The United States appeared specially in the bankruptcy proceedings and moved to dismiss the trustee's petition on the ground that the court was without jurisdiction, and, further, that the service upon the collector of internal revenue was not service upon the United States. These objections were overruled by the referee. Testimony was taken on behalf of the trustee, and an order entered barring the United States from participating in the estate for any income tax for the year 1917. Upon review by the District Court, the referee's order was affirmed.
This petition to revise presents, first, a question of the jurisdiction of this court. The District Court has sustained its jurisdiction. Has the Circuit Court of Appeals jurisdiction, or should the appeal here be direct to the Supreme Court? We think this court has jurisdiction to review the question of jurisdiction here presented. The question involved in the present appeal arises in the bankruptcy proceedings. Sections 24 and 25 of the Bankruptcy Act (Comp. St. Secs. 9608, 9609) set forth the supervisory jurisdiction of the Supreme Court and the Circuit Court of Appeals in bankruptcy proceedings, and this was reaffirmed by section 130 of the Judicial Code (Comp. St. Sec. 1122). By these provisions, judgments and decrees of the Circuit Court of Appeals in all proceedings and causes arising under the Bankruptcy Act have now been made final, save only where that application for certiorari may be made to the Supreme Court. The objection to the jurisdiction raised here is one common to all judicial tribunals, namely, that no court has jurisdiction of a sovereign, in the absence of unequivocal legislation conferring the same. Therefore this court may properly pass on the questions involved. Davis v. Anderson, etc., Co., 252 F. 681, 164 C.C.A. 521.
The petitioner contends that the United States is not bound by the terms of the Bankruptcy Act, that the bankruptcy court has no jurisdiction over the United States, and that the Bankruptcy Act provides no means for requiring the government to appear and take a position with reference to its claim; also that the court cannot in effect enact a statute of limitations against the United States. Section 64a of the Bankruptcy Act (Comp. St. Sec. 9648a) provides:
'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 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.'
Debts due to the United States are entitled to priority of payment. U.S. Revised Statutes, Sec. 3466 (Comp. St. Sec. 6372); Lewis v. United States, 92 U.S. 618, 23 L.Ed. 513. And section 3467 of the Revised Statutes (Comp. St. Sec. 6373) makes the trustee personally liable if, with notice, he fails to pay a debt due to the United States. U.S. v. Barnes (C.C.) 31 F. 705. The order of payment to the United States is next after the wages due workmen, clerks, or servants which have been earned within three months before the date of the commencement of the proceedings. Guarantee Title & Trust Co. v. Title Guaranty & Surety Co., 224 U.S. 152, 32 Sup.Ct. 457, 56 L.Ed. 706. Section 64a of the Bankruptcy Act was a departure from the principles of public policy theretofore prevailing as to the rights of the sovereign which were recognized in the previous acts of 1800, 1841, and 1867 (2 Stat. 19; 5 Stat. 440; 14 Stat. 517). Guarantee Title & Trust Co. v. Title Guaranty & Surety Co., supra; Matter of General Film Corp. (C.C.A., Second Circuit, decided June 8, 1921) 274 F. 903. In that latter case this court said:
By this amendment to the previous Bankruptcy Act it commands the trustee to pay all taxes legally due and owing to the United States. To carry out this command, Congress must have intended that the bankruptcy court had jurisdiction to determine the legality and amount of the taxes. Section 28, subd. 5, of the previous act (14 Stat. 531) provided:
'That nothing contained in this act shall interfere with the assessment and collection of taxes by the authority of the United States or any state.'
The 1898 act may interfere with the collection of taxes to the extent of commanding the court to order taxes, legally due and owing, paid, and giving it the authority to determine any question arising thereon. In Guarantee Title & Trust Co. v Title Guaranty & Surety Co., supra, it was contended...
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