In re Kallak
| Decision Date | 13 September 1906 |
| Citation | 147 F. 276 |
| Parties | In re KALLAK. |
| Court | U.S. District Court — District of North Dakota |
John E Greene, for trustee.
George A. McGee, for Ward County.
This matter comes before the court upon the certificate of John H Lewis, Referee in Bankruptcy. The question presented arises upon the following facts: The adjudication was entered April 16, 1906. Among the debts listed by the bankrupt are state county, and municipal taxes for the year 1905. These taxes became due December 1st of that year and became delinquent March 1, 1906, at which time a penalty of 5 per cent. was added. Thereafter, on the 1st of each month, a further sum of 1 per cent. of the original tax attached, which, by the revenue laws of the state of North Dakota, is usually spoken of as interest, but sometimes as penalty. After a certain length of time these taxes are placed in the hands of the sheriff for collection. In this case the trustee offered to pay the county treasurer the amount of the original tax with penalty and interest which had accrued previous to April 16 1906, the date of the adjudication. This sum the county, upon the advice of the state's attorney, refused to accept, claiming that it was entitled to further interest up to the date when the payment was actually made. The matter was thereupon brought before the referee who ordered the trustee to pay the taxes in full with penalty and interest to the date of payment. The trustee feeling aggrieved by this decision, it is certified to the court for review.
The decision of the referee was correct. The contention of the trustee rests entirely upon the ground that public taxes constitute a claim against the bankrupt estate to be paid with other claims in the ordinary course of administration. As other claims are not permitted to draw interest after the adjudication, it is therefore contended that the amount of the public demand for taxes is subject to the same restriction. The fact is, however, that under the bankruptcy law (Act July 1, 1898, c. 541, Sec. 64a, 30 Stat. 563 (U.S Comp. St. 1901, p. 3447) and other provisions dealing with the same subject, public taxes do not constitute a 'claim' in bankruptcy. It is not necessary for the public authorities to appear in a court of bankruptcy as ordinary claimants. They have no right in the administration ad creditors and no voice in the selection of trustee, and the liability for taxes is in no way affected by the discharge of the bankrupt. On the other hand, the duty of affirmative action rests upon the court of bankruptcy. It is the duty of the trustee to ascertain from the public records the amount due for taxes and bring the matter to the attention of the court, and thereupon it is the duty of the court to order their payment if there are sufficient funds in the estate for that purpose. There are two reasons why ordinary claims of creditors are not permitted to draw interest subsequent to the adjudication: First, it is important that the proportionate interest of the several creditors in the estate be ascertained and fixed. If interest were to accrue, however, after the adjudication, the amount of the several claims would vary from time to time, according to their respective rates of interest and the proportionate share of the several creditors would be subject to constant readjustment. The second reason is the convenience of...
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City of New York v. Saper State of New York v. Carter United States v. Carter 201
...the lower courts generally did allow interest on tax claims until paid. The parties and the lower courts trace that practice to In re Kallak, D.C., 147 F. 276, and cases following that decision. But we do not believe those cases support petitioners' contention that the pre-Chandler allowanc......
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Nicholas v. United States, 650
...priority, tax claims were permitted to accumulate interest even after the date the petition in bankruptcy was filed. See In re Kallak, 147 F. 276 (D.C.D.N.D.); United States v. Childs, 266 U.S. 304, 45 S.Ct. 110, 69 L.Ed. 299. In 1938, however, Congress amended the Bankruptcy Act by reducin......
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United States v. Harrington
...of the United States' claim for post-bankruptcy interest on its liened tax claims and for tax penalties is Affirmed. 1 In re Kallak, D.C.N.D.1906, 147 F. 276 held that because, under the Bankruptcy Act of 1898, taxes were not claims and did not have to be proven, but had absolute priority o......
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Saper v. City of New York
...3 Collier, loc. cit. supra.3 A single exception, that for tax claims, was developed judicially. It appears to have begun with In re Kallak, D.C.N.D., 147 F. 276, though the contemporaneous case of In re William F. Fisher & Co., D.C. N.J., 148 F. 907, held to the contrary. But the Kallak cas......