In re M.I. Hibbler Mach. Supply Co.

• Decision Date: 05 January 1912
• Docket Number: 3,938.
• Citation: 192 F. 741
• Parties: In re M. I. HIBBLER MACH. SUPPLY CO.
• Court: U.S. District Court — Western District of New York

192 F. 741

In re M. I. HIBBLER MACH. SUPPLY CO.

No. 3,938.

United States District Court, W.D. New York.

January 5, 1912

S. D Bentley, for petitioner.

George A. Carnahan, for trustee.

HAZEL District Judge.

The petition of the trustee to reject and expunge the claim of Margaret V. Lighthouse, the petitioner for review, for $3,101.68, with interest, was granted by the referee in bankruptcy, and her claim for an order requiring the trustee to pay taxes and certain other claims was denied. The case comes before me on review of the determination by Referee Draper, and exceptions filed to his report.

1. As to the rejection of the claim arising out of the mortgage transaction, I agree with the referee in his reasoning and conclusions that Mrs. Lighthouse, by her acts, elected to abandon her mortgage lien against the property of the bankrupt, described in the mortgage; and that in subsequently acquiring title to the premises from Mr. Hibbler there was created a merger in the quitclaim deed of her mortgage lien. The covenant in the deed expressly negativing a merger, in view of the facts and circumstances disclosed in the record is without effect as to the bankrupt for the reason that it is shown by evidence to have been the intention of the claimant to take the conveyance in lieu of her secured claim against the bankrupt estate. She cannot now be permitted to file her claim on the bond or have the value of her security determined pursuant to section 57 of the bankrupt act.

2. It is difficult to conceive of any sound reason why the claimant, who practically took title from Darling, to whom the property was conveyed by the trustee in bankruptcy subject to taxes, liens, and incumbrances, should now be entitled to have the trustee pay them under the priority provision of section 64 of the bankruptcy act. While ordinarily the taxes legally due and owing by the bankrupt must be paid by his trustee before the assets of the bankrupt are apportioned among the creditors, still, when the property is sold under an order of the court, and the purchaser subsequently pays the taxes, he is not subrogated to the rights of the municipality to priority payment. Collier on Bankruptcy (6th Ed.) 529 and cases cited.

By analogy it may safely be held, I think, that when the trustee in bankruptcy transfers property subject to the payment of taxes, there is a legal obligation on the part of the grantee to make such payment; and, if the property is by him sold the purchaser, having...