State of Missouri v. Ross

• Decision Date: 31 December 1935
• Docket Number: 10281.,No. 10239,10239
• Citation: 80 F.2d 329
• Parties: STATE OF MISSOURI v. ROSS et al. (two cases).
• Court: U.S. Court of Appeals — Eighth Circuit

80 F.2d 329 (1935)

STATE OF MISSOURI v. ROSS et al. (two cases).

Nos. 10239, 10281.

Circuit Court of Appeals, Eighth Circuit.

December 3, 1935.

Rehearing Denied December 31, 1935.

Harry G. Waltner, Jr., Asst. Atty. Gen. (Roy McKittrick, Atty. Gen., on the brief), for appellant.

John G. Burkhardt, Associate City Counselor, of St. Louis, Mo. (Charles M. Hay, City Counselor, of St. Louis, Mo., on the brief), for appellees.

Before GARDNER, WOODROUGH, and FARIS, Circuit Judges.

GARDNER, Circuit Judge.

This matter comes to us on appeal from an order of the lower court denying appellant's motion to direct the trustee in bankruptcy of the Laessig's Oil Products, Inc., to pay the claim of the state of Missouri for gasoline taxes in full before making any payment to the city of St. Louis for gasoline taxes.

Laessig's Oil Products, Inc., was, prior to bankruptcy, engaged in the business of distributing and selling motor vehicle fuels and other petroleum products in St. Louis, Mo.,. and vicinity. Under the Missouri statute, motor vehicle fuel was subject to a sales tax calculated at the rate of 2 cents per gallon. During the months of August, September, October, November, and December, 1932, it failed to pay this tax, and during the same time it failed to pay a similar tax to the city of St. Louis, to which its products were subject under provisions of the city ordinance. On February 1, 1933, the company was adjudged a bankrupt. On February 28, 1933, three separate proofs were filed on behalf of the city of St. Louis, claiming gasoline taxes in the aggregate amount of $8,972.30 and interest; and on March 20, 1933, the state of Missouri filed its claim for gasoline taxes in the aggregate amount of $8,366.38, with interest.

The state asserted a right of priority to the payment of its tax in full before making any payment to the city of St. Louis. The question of the right of priority becomes important because the value of the assets of the estate is materially less than the aggregate amount of these two claims. There is no dispute as to the amount due on these claims. The referee held that the claim of the state and of the city were all upon an equality, and since they could not be paid in full, the available funds should be prorated between the two claims according to their respective amounts. On petition for review of this order, the court denied the same and approved and confirmed the order of the referee.

Section 64 of the Bankruptcy Act, as amended (11 U.S.C.A. § 104) in so far as here pertinent, provides as follows:

"Debts which have priority. (a) 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 the order of priority as set forth in paragraph (b) hereof. * * *

"(b) The debts to have priority, in advance of the payment of dividends to creditors, and to be paid in full out of bankrupt estates, and the order of payment shall be (1) the actual and necessary cost of preserving the estate; * * * (2) the filing fees paid by creditors in involuntary cases; * * * (3) the cost of administration; * * * (4) where the confirmation of composition terms has been refused or set aside upon the objection and through the efforts and at the expense of one or more creditors, in the discretion of the court, the reasonable expenses of such creditors; * * * (5) wages due to workmen; * * * (6) taxes payable under paragraph (a) hereof and (7) debts owing to any person who by the laws of the States or the United States is entitled to priority."

Appellant admits that the Federal Bankruptcy Act (11 U.S.C.A.) supersedes all state priority provisions which are in conflict with it, but contends that it is the policy of the Bankruptcy Act to recognize and adopt so far as possible relevant state laws, so long as the uniformity of the Bankruptcy Act would not be disturbed. Appellant invokes the provisions of section 3152, Revised Statutes of Missouri 1929 (Mo.St.Ann. § 3152, p. 4969), as being relevant and not in conflict with the provisions of the Bankruptcy Act. The section referred to provides as follows: "Whenever any person indebted to the state of Missouri is insolvent, * * * debts due to the state of Missouri shall be first satisfied, and the priority hereby established shall extend as well to cases in which a debtor not having sufficient property to pay all his debts makes a voluntary assignment thereof, * * * as to cases in which an act of bankruptcy is committed: Provided, that nothing in this article contained shall be construed to interfere with the priority of the United States as secured by law."

Because of the provisions of this act, appellant contends its claim should have been allowed as a preference over the city's claim. The asserted right of priority is not predicated upon any lien that attached to the property. As said by us in City of Lincoln v. Ricketts, 77 F.(2d) 425, 431: "The asserted right of priority of payment is not a lien that attached to the property any more than the right of the United States to priority given it by Revised Statutes, § 3466 (31 U.S.C.A. § 191), considered by the Supreme Court in Davis v. Pringle, supra, is such a lien, and the right of priority in payment of claims against a bankrupt estate, other than those based upon specific liens, must be found in the Bankruptcy Act."

The Bankruptcy Act deals specifically with the question of priority of claims, and by section 64b (6), 11 U.S.C.A. § 104 (b) (6), provision is made for the payment of all taxes legally due and owing by the bankrupt to the United States, state, county, district, or municipality. It seems clear that the specific provision for the payment of taxes does not contemplate any right of priority as between the various taxing districts.

In New Jersey v. Anderson, 203 U.S. 483, 27 S.Ct. 137, 139, 51 L.Ed. 284, the court, in reply to a contention that the Bankruptcy Act did not require the payment of taxes to a state wherein the bankrupt had no property and the state no means of collecting the tax upon the property within its jurisdiction, said: "The requirement of the present law is a wide departure from the act of 1867, and...