In re Northwest Wood Products Co.

• Decision Date: 28 June 1948
• Docket Number: No. 9490.,9490.
• Citation: In re Northwest Wood Products Co., 168 F.2d 639 (7th Cir. 1948)
• Parties: In re NORTHWEST WOOD PRODUCTS CO. UNITED STATES v. INDUSTRIAL COMMISSION OF STATE OF WISCONSIN.
• Court: U.S. Court of Appeals — Seventh Circuit

168 F.2d 639 (1948)

In re NORTHWEST WOOD PRODUCTS CO UNITED STATES v.INDUSTRIAL COMMISSION OF STATE OF WISCONSIN.

No. 9490.

Circuit Court of Appeals, Seventh Circuit.

June 28, 1948.

Charles H. Cashin, U. S. Atty., and James E. Doyle, Asst. U. S. Atty., both of Madison, Wis., Theron L. Caudle, Asst. Atty. Gen., Robert N. Anderson, Asst. to Atty. Gen., and Sewall Key, A. F. Prescott and Louise Foster, Sp. Assts. to Atty. Gen., for appellant.

Stanley Rector and W. H. Putnam, Enforcements Division, Unemployment Compensation Department, both of Madison, Wis., for appellee.

Before SPARKS, MAJOR, and KERNER, Circuit Judges.

SPARKS, Circuit Judge.

The Government appeals from a judgment of the District Court awarding priority to a claim of the Wisconsin Industrial Commission over its claim for income taxes due from a bankrupt taxpayer.The case is presented to us on an agreed statement of facts.

The Northwest Wood Products Company was adjudicated a bankrupt after failure of an attempt at voluntary arrangement and composition under Chapter XI of the Bankruptcy Act.Order of distribution was entered on May 10, 1947.The present controversy arises over the disposition of a balance of $1,280 remaining after distribution to mortgagees and other prior claimants of the proceeds of sale of real estate belonging to the bankrupt located in Dane County, Wisconsin.Three rival claims were presented for this $1,280: One, for $308, for two mechanics' lien claims, filed with the clerk of the Dane County Court at 3:29 p. m. on June 8, 1944; a second, for $2,552, for delinquent unemployment compensation contributions or taxes filed by appellee here, the Wisconsin Industrial Commission, in the Dane County Court at 2:32 p. m. on June 8, 1944; the third, for $7,733, for unpaid federal taxes, notice of which was duly filed February 7, 1945, for taxes for which the assessment list was received by the Collector, and demand made in 1943.

The referee, in his order of distribution of May 10, determined that as between appellant and appellee, the latter was entitled to priority as a judgment creditor within the meaning of section 3672 of the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, § 3672, but that as between appellee and the mechanics' lien claimant, the latter was entitled to priority.Hence he awarded $308 of the fund to appellant, and the balance of $972 to appellee.The appeal involves only this latter award.

On oral argument of this case, counsel for appellee contended that a jurisdictional question was presented in that the record failed to show service of a copy of the petition for review of the referee's order as required by section 39 sub. c, of the Bankruptcy Act, 11 U.S.C.A. section 67, sub. c. He admits that, in fact, he received a copy of the petition which he says was brought to him by a clerk in his office, but insists that there was no acknowledgement of receipt of service which, he contends, should be affirmatively shown of record.He filed special appearance before the District Court which did not pass upon his objection to the review but instead, affirmed the order of the referee in his favor, after argument in which he participated.We think any possible deficiency of written acknowledgement or proof of service is cured or waived by counsel's admission that he received a copy, filed special appearance in court for hearing on it, and was present and participated in that hearing.Defects even in initial process and service may be waived by voluntary appearance of a party.¹We cannot agree with appellee that, under the circumstances here involved, there is any doubt as to the jurisdiction of the District Court or of this court over the petition to review the referee's order.

Sections 3670and3671 of the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, §§ 3670, 3671, provide that upon failure to pay (federal) taxes, the amount due shall be a lien upon any property of the delinquent taxpayer in favor of the United States, which lien shall arise at the time the assessment list is received by the Collector and continue until the liability has been satisfied or becomes unenforceable by lapse of time.Section 3672 provides that such lien shall not be valid as against any mortgagee, pledgee, purchaser or judgment creditor until notice thereof has been filed by the Collector under the applicable local laws.Appellee's right to judgment creditor status is based upon section 108.22 of the Wisconsin Statutes which we set forth in the margin.²

Appellant contends that this does not make appellee a judgment creditor, but merely gives it some of the rights and privileges of a judgment creditor.It cites various Wisconsin cases as holding that the Industrial Commission is not a court and its awards do not have the status of judgments.Among these is a recent case, Hagenah v. Lumbermen's Mut. Casualty Co., 1942, 241 Wis. 226, 5 N.W.2d 760, 763, 142 A.L.R. 1417, from the opinion of which it quotes:

"In this state an award not appealed from has all the legal consequences of a judgment ...