In re Clark Realty Co.

• Decision Date: 13 August 1918
• Docket Number: 2553.
• Citation: 253 F. 938
• Parties: In re CLARK REALTY CO. v. GOETZ. RICHTER
• Court: U.S. Court of Appeals — Seventh Circuit

253 F. 938

In re CLARK REALTY CO.

RICHTER v. GOETZ.

No. 2553.

United States Court of Appeals, Seventh Circuit.

August 13, 1918

Rehearing Denied November 19, 1918.

Appellant named as trustee in a certain mortgage given by the bankrupt Clark Realty Company, for $150,000, petitioned the court to compel appellee, trustee in bankruptcy of the Clark Realty Company, to pay certain taxes assessed in 1913, and which became due and payable January 1, 1914. The premises were sold for nonpayment of taxes and tax certificates were duly issued to the purchasers pursuant to the statutes of the state of Wisconsin governing that subject. In the year 1917 appellant purchased these tax certificates and they were duly assigned to him.

The mortgagor, Clark Realty Company, was duly adjudged a bankrupt on February 3, 1914, and appellee was named its trustee in bankruptcy April 3, 1914. Appellee immediately took possession of the property covered by the mortgage and collected the rents until August 28, 1914, when he surrendered and abandoned the property pursuant to an order of the court.

Appellant petitioned the court to order appellee to pay him the amount represented by the tax certificates, with such interest as under the statutes of Wisconsin such a holder is entitled to recover. The District Court, affirming the order of the referee, denied the relief sought, and this appeal resulted.

Appellee relied upon a previous decision of the District Court affirmed by this court. 234 F. 576, 148 C.C.A. 342. In that application appellant sought to have the court direct appellee to pay these same taxes, out of the rents and profits by appellee collected, to the then holders of the tax certificates.

Leo Mann, of Powell, Wyo., and Lines, Spooner & Quarles, of Milwaukee, Wis., for appellant.

Lawrence A. Olwell, of Milwaukee, Wis., for appellee.

Before BAKER and EVANS, Circuit Judges.

EVAN A EVANS, Circuit Judge (after stating the facts as above).

As the holder of the tax certificates, appellant was, in the absence of any showing of special circumstances barring him from enforcing such a right, entitled to an order directing the payment of such taxes out of the estate of the bankrupt. His right to such payment was not limited to the fund realized out of the rents and profits collected by the trustee from the lands covered by the mortgage. The duty of the trustee to pay the taxes is clearly set forth in section 64a of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 563 (Comp. St. 1916, Sec. 9648)), which reads as follows:

'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.'

Commenting upon this statute the court says in Dayton, Trustee, v. Stanard, Treasurer of Pueblo County, 241 U.S. 588, 36 Sup.Ct. 695, 60 L.Ed. 1190:

'Considering the plain provision in section 64a of the Bankruptcy Act of 1898 that 'the court shall order the trustee to pay all taxes legally due and owing by the bankrupt * * * in advance of the payment of dividends to creditors,' * * * we entertain no doubt of the propriety of requiring that the certificate holders, who had paid the taxes and assessments at the sales, be reimbursed upon the cancellation of their certificates, or of requiring that the reimbursement be out of the general assets. The taxes and assessments were not merely charges upon the tracts that were sold, but

...