People v. Hopkins
| Decision Date | 04 April 1927 |
| Docket Number | No. 311.,311. |
| Parties | PEOPLE OF STATE OF NEW YORK v. HOPKINS et al. |
| Court | U.S. Court of Appeals — Second Circuit |
Albert Ottinger, Atty. Gen. of State of New York , for the People of State of New York.
Leo Oppenheimer, of New York City (Milton P. Kupfer, of New York City, of counsel), for receivers.
Before MANTON, HAND, and SWAN, Circuit Judges.
SWAN, Circuit Judge (after stating the facts as above).
Assuming for the moment that the franchise taxes are valid claims against assets in the hands of the receiver, was the state of New York precluded from asserting these claims because of the prior orders entered in the proceedings? It is clear that the general order of November 6, 1918, limiting the time within which creditors should file claims, would not preclude the state from subsequently presenting its claim for taxes. Employers' Liability Assur. Corporation v. Astoria Mahogany Co., 6 F.(2d) 945 (C. C. A. 2). As there explained, the effect of such so-called bar order is merely to protect the receiver in making distribution without regard to possible claims of creditors who have failed to file them. If, before distribution is actually made, a creditor appears and satisfies the court that he is justly entitled to share in the assets on hand, his delay in presenting the claim should not bar him unless some one has been injuriously misled thereby. See People v. Security Ins. Co., 79 N. Y. 267. The mere disappointment of the receiver or of other creditors or of the promoters of a reorganization plan in finding that an unexpected claim exists is not sufficient reason to exclude the tardy claimant. Particularly should this be true with respect to taxes. The assets are still in custodia legis and should bear their share of the public dues despite the state's delay in asserting its claim.
The next inquiry is whether the state is barred by the order of August 12, 1926, which expressly adjudged that the state had no claim. In the case of In re Anderson, 279 F. 525, this court held that in bankruptcy proceedings the sovereign might be summoned to prove its claim for taxes within a time or otherwise be barred, to the end that settlement of the estate be not unreasonably delayed. Whether a similar order in receivership proceedings would be equally effective need not be now considered. The order of August 12, 1926, assuming that notice to the state comptroller was sufficient notice to the state, was at best a default order. It could be vacated on adequate showing. So the problem really comes down to the issue whether the state must move to vacate the order of August 12th, or may apply directly for an order on the receiver to show cause why its claim for taxes should not be received. The application was made within eight days of the entry of the order of August 12th. It appears from the record that until August 10th the state tax commission did not receive notice from the state comptroller of the order nisi upon which the state's default was entered. The assets still remained in the hands of the receiver. Had a motion to vacate been made, we think it should have been granted, and it seems to us immaterial that the state presented its claim by an independent application instead of by a motion to vacate.
The order appealed from must, therefore, be reversed, unless it appears that the state has no valid claim for taxes.
The franchise tax obligations which are asserted are imposed by section 209, and computed according to section 214 of article 9-A of the Tax Law (Consol. Laws, c. 60). It has been authoritatively determined that franchise taxes, if due when bankruptcy or receivership proceedings are started, are claims entitled to priority in payment out of the estate. New York v. Jersawit, 263 U. S. 493, 44 S. Ct. 167, 68 L. Ed. 405; Marshall v. New York, 254 U....
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