In re Tilden

• Decision Date: 28 January 1899
• Docket Number: 510.
• Citation: 91 F. 500
• Parties: In re TILDEN.
• Court: U.S. District Court — Southern District of Iowa

91 F. 500

In re TILDEN.

No. 510.

United States District Court, S.D. Iowa, Central Division.

January 28, 1899

F. S Dunshee, for bankrupt.

N. E Coffin, for creditors.

WOOLSON District Judge.

Winfield Tilden was duly adjudged a bankrupt, and his voluntary petition, with accompanying schedules, etc., was referred to S. S. Ethridge, Esq., as referee in bankruptcy.

Among the property scheduled was the homestead of said Tilden actually occupied by him as such, and claimed to be exempt property at time his petition was filed herein. At that date there were outstanding, on the proper tax books, as taxes against said homestead, the taxes now under consideration. The bankrupt having called upon the trustee to pay such taxes, the trustee applied to the referee for decision and authority in the matter. The trustee meanwhile had set off said homestead to said bankrupt, as exempt property, under the statutes of Iowa. The referee refused to order such taxes paid by said trustee; whereupon the matter has been brought to this court for review, and fully presented by counsel. The question to be decided is whether it is the duty of the trustee to pay, out of the estate in his hands, the taxes against the exempt homestead of the bankrupt, which were outstanding at time of adjudication of bankruptcy, and were then a lien on said exempt property. In the present case there are no peculiar or distinguishing features. The proposition at issue is broadly presented for decision.

Section 64, par. (a), of the bankruptcy act, is 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 as to the amount or legality of any such tax, the same shall be heard and determined by the court.'

It is conceded that the term 'court,' as used in this paragraph, includes the referee. Section 1, cl. 7, Bankrupt Act.

Among the rules adopted by this court for regulation of proceedings in bankruptcy in this district is the following, which follows the general provisions of the paragraph just quoted:

'Rule 4: (1) In all cases wherein there are assets coming under charge of the trustee, it shall be the duty of the trustee forthwith to ascertain from the proper sources, what taxes, if any, are claimed to be due and owing by the bankrupt to the United States, the state of Iowa, the county, town or city in which the bankrupt resides, or in which any part of the estate is situated for taxing purposes, and to make a written report thereof to the referee, specifying the taxes upon each piece of property, so far as the same are shown on the tax lists; and the referee shall in writing, pursuant to section 64 of the bankrupt act, order the payment by the trustee of all taxes found by the referee to be legally due and owing by the bankrupt according to said report. (2) But if any question arises touching the taxes, or any part thereof, claimed or reported to be due, the referee, after due notice by mail, shall hear and determine the question at issue and order payment accordingly.'

Counsel have not been able to present to the court any decisions under former bankruptcy statutes which throw light on the question now under consideration. Apparently in this matter as in many other portions of the recent statute, the construction must be largely, if not entirely, in a new field of decision. The contention of the bankrupt is that taxes duly standing on the proper tax books against the exempt homestead are, within the meaning of this section, 'taxes legally due and owing by the bankrupt. ' The phraseology of the statute apparently favors this contention,-- 'all taxes legally due and owing,' etc. There is no express exclusion of taxes against exempt property. The trustee is to pay 'all taxes legally due and owing by the bankrupt. ' The creditors, however, plead what they term the 'injustice' of such a construction. The exempt property may have a large amount of taxes standing against it. The estate receives no benefit whatever from the exempt property. Where, as here, there is no question as to the property being exempt, the trustee, if he can in any wise be properly said to take such property, under the adjudication of bankruptcy, takes it only for the purpose of at once passing it out as exempt property. So that, if received by him...