Opinion ID: 272229
Heading Depth: 1
Heading Rank: 2

Heading: the tax liens of april 2, 1964.

Text: 17 The second reason that the order of the district court must be affirmed springs from appellee Mozley's recordation of the certificates of delinquency on April 2, 1964. By recording, the certificates of tax delinquency became tax liens, and tax liens are not subject to the limitation on their payment during the pendency of bankruptcy or arrangement proceedings that mere tax priorities are subject to under section 64a(4) of the Bankruptcy Act. This position is recognized, and supporting authority cited, in 3 Collier, Bankruptcy 64.403: 18 'The principle expounded by the Supreme Court in City of Richmond v. Bird, and the cases which concur therewith-- that 64 does not apply to tax claims which are secured by valid liens-- is apparently broad enough to limit all the provisions of 64a(4) to unsecured tax claims alone. Nevertheless, there has been some authority for the proposition that the provision of 64a(4) which gives the bankruptcy court the power to determine the legality and amount of tax claims is meant to include taxes secured by valid liens as well, and that the bankruptcy court can re-examine the assessment of taxes even after they have become perfected liens. This particular doctrine itself must be re-examined, however, in view of the recent Supreme Court decision in Arkansas Corporation Commission v. Thompson, which limited the bankruptcy court's general power to determine and revise the assessment of taxes. It is settled, however, that the proviso of 64a(4) limiting the payment of a tax assessed against property of the bankrupt to the value of the interest of the estate therein does not affect the recognition of valid liens. 19 'Although, in general, the priority status of a claim is fixed as of the date of filing the petition, tax claims which are entitled only to priority under 64a(4) may subsequently become perfected liens, even after an adjudication. It has also been decided that a tax claim which would have been entitled to be secured as a lien, but which was not perfected in accordance with the statutory procedure, may still be paid as a tax claim under 64a(4).' Cf. also 3 Collier, Bankruptcy 64.401(2). 20 Moreover, it has been recognized that a lien does not lose its preferred standing by reason of the fact that it is not perfected until after the commencement of bankruptcy or Chapter XI proceedings. Section 67b of the Bankruptcy Act, 11 U.S.C. 107b, specifically authorizes such perfection, and Collier supports the practice with text and authority. 4 Collier, Bankruptcy 67.20(8): 21 'The first sentence of subdivision b states clearly that statutory liens 'may be valid against the trustee, even though arising or perfected while the debtor is insolvent and within four months prior to the filing of the petition initiating a proceeding under this Act or by against him.' Certainly this provision is applicable where proceedings are begun under Chapter X, XI, XII, XIII and are subsequently followed by adjudication of the debtor as a bankrupt. But a reasonable interpretation would also give effect to the quoted provisions in Chapter X, XI, XII, or XIII proceedings that are successfully terminated thereunder and hence do not end in bankruptcy, whether (1) the proceeding is begun in bankruptcy and is followed by a successful Chapter X, XI, XII or XIII proceeding, or (2) is originally begun and successfully ends as a Chapter X, XI, XII or XII proceeding. Moreover the subdivision now clearly applies in railroad reorganization proceedings under 77. 22 'The second sentence of subdivision b authorizes the perfection of statutory liens that arise but are not perfected before bankruptcy and makes no reference to the perfection of liens after the filing of a petition under the debtor relief chapters. Since, however, 'bankruptcy' when used with reference to time means 'the date when the petition was filed,' and 'petition' means a 'document initiating a proceeding under this Act,' the second sentence appears to have as broad an application as the first sentence of subdivision b. There would seem to be no fundamental policy or principle peculiar to reorganization or arrangement proceedings which would be nullified by permitting perfection of inchoate liens after their commencement.' 23 While raising various suggestions as to the impropriety of appellee Mozley's having recorded the tax delinquency certificates and thus converted the tax priorities into tax liens, appellant has been unable to cite any authority for the position that this conduct was not permissible. In light of the favored status of statutory liens and of the protection which taxes are accorded in any event by sections 17 and 371, and in the absence of any showing that appellee acted beyond methods specifically provided under the Bankruptcy Act, we cannot conclude that the district court or the referee erred in granting and affirming the order of July 22, 1964. 24 The order of the district court affirming the decision of the referee is affirmed.