Source: https://supreme.justia.com/cases/federal/us/249/174/
Timestamp: 2019-04-24 12:03:32+00:00

Document:
Under the law of Virginia and the charter of the City of Richmond, the city's claim for delinquent taxes on personal property, unsupported by distraint, is no better than the claim of a general creditor, and is inferior to a landlord's lien secured by levy of a distress warrant. P. 249 U. S. 177.
Section 64a of the Bankruptcy Act, in directing payment of taxes before dividends to creditors, means general creditor; when by the local law a lien for a private debt is superior to a claim for taxes, its status is preserved by § 67d (as it was before 1910) if the lien was given or accepted in good faith and not in fraud of the act, for a present consideration. Id.
City of Richmond for which it had not distrained, although having authority so to do. Respondents, landlords of the bankrupt, under express statutory authority, levied a distress warrant November 1, 1909, upon its goods and chattels on account of rent due for the period since April 1, 1908. The question is whether their claim is entitled to priority of payment over the taxes. The circuit court of appeals answered in the affirmative. 240 F. 545.
"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 arises as to the amount or legality of any such tax, the same shall be heard and determined by the court."
"Liens give or accepted in good faith and not in contemplation of or in fraud upon this act, and for a present consideration, which have been recorded according to law, if record thereof was necessary in order to impart notice, shall not be affected by this act;"
and (2) that, under Virginia law, such a lien is superior to the inchoate one which the city had for unpaid taxes but neglected to perfect by exercising the summary power granted by its charter to distrain therefor after September first in year for which levied.
creditors of the company, and they were not entitled to share in the proceeds of sale of the company's property, except as to the amount of taxes due them [the state and the city], respectively, for the year 1910, assessed against and due from the receivers."
Respondents therefore must prevail unless priority over their lien is given by § 64a to claim for taxes which, under state law, occupied no better position than one held by a general creditor. Section 67d, Bankruptcy Act, quoted supra, declares that liens given or accepted in good faith and not in contemplation of or in fraud upon this act shall not be affected by it. Other provisions must, of course, be construed in view of this positive one. Section 64a directs that taxes be paid in advance of dividends to creditors, and "dividend" as commonly used throughout the act means partial payment to general creditors. In § 65b, for example, the word occurs in contrast to payment of debts which have priority. And as the local laws gave no superior right to the city's unsecured claim for taxes, we are unable to conclude that Congress intended by § 64a to place it ahead of valid lienholders.
New Jersey v. Anderson, 203 U. S. 483, is not decisive of any point here contested; it only adjudged that New Jersey's claim was for a tax within the meaning of § 64a, and entitled to be treated accordingly. See New Jersey v. Lovell, 179 F. 321.
MR. JUSTICE DAY and MR. JUSTICE CLARKE dissent.

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