Court Opinion

ID: 6901375
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:55:16.289785+00
Date Added: 2024-06-11T16:06:11.053375
License: Public Domain

WALLER, Circuit Judge
(dissenting).
The Lone Star Air Cargo Lines, Inc., was not adjudicated a bankrupt until March 19, 1947. Its petition for reorganization in bankruptcy was not filed until February 26, 1947. No assessment was made on its personal property by the City of Dallas, according to the findings °of the Referee (Tr. p. 17) and the lower Court (Tr. p. 73), until September 23, 1947. Until that assessment was made, any liability or lien at best could only have been indefinite, uncertain, inchoate, and unenforcible until the assessment was made in September and the amount due thereby determined.
Sec. 104, of Title 11 U.S.C.A., gives the bankruptcy court the authority to order the trustee to pay all “taxes legally due and owing by the bankrupt”. (Emphasis added.) Clause (5) of § 104, sub. b gives priority to taxes payable under paragraph a of that section. The personal property taxes here could not have been “payable” until after assessment, fixing of the millage, approval of the rolls, etc. The test is when the taxes become “legally due and owing” or “payable” — not when a lien accrued — that determines the right of pri*530ority under Sec. 104. It was correctly stated in Lufkin v. City of Galveston, 73 Tex. 340, 11 S.W. 340, 341: “But the tax could not he paid, and hence was not payable, until the officer designated by law was authorized to receive them; * *
The tax here could not have been “payable” on January 1 because there had been no assessment, no valuation, no roll made up, no warrant in the hands of the Tax Collector upon which to collect taxes. Moreover, some of the taxes due the United States became due and payable long before the personal property taxes became “due and owing” or “payable” to the City.
It is observed that $9,515.53 of the claim of the United States was for withholding taxes which the bankrupt collected from its employees for the United States; that $6,996.53 of that sum was collected by the bankrupt during 1946. $2,519 was collected during the first quarter of 1947. These withholding taxes so collected and withheld were due and payable long before there was any asses°sment by the City, and $6,996.53 was collected and largely payable to the United States in the prior year.
Since § 104, sub. a and § 104, sub. b, Title 11 U.S.C.A., do not order payment made on the basis of prior liens but upon the basis of taxes legally due and owing, or taxes payable that are legally due and owing, and since the taxes to the City of Dallas could not have become legally due and owing, or legally due and owing and payable, until there was an assessment, fixing of the millage, approval of the rolls, etc., on September 23, 1947, and since the City taxes were not due and payable until October 1, 1947, it should not be held that the City of Dallas had any prior right over the United States to the payment of its taxes.
Moreover, I am convinced that the taxes collected by the bankrupt from its employees and withheld were funds which belonged to the United States, and constituted trust funds in its hands and in the hands of its trustee, of which funds the United States was the beneficial and.equitable owner. See 42 Tex.Jur. p. 649, §§ 45-47, inclusive; 54 Am.Jur. p. 190, § 248, and also § 256, p. 198 Such sums so collected and so withheld never oecame ine property of the bankrupt. Being the property of the United States and not the property of the bankrupt, such funds could not have been appropriated for paying the taxes of the City oj Dallas regardless of whether taxes on personal property constituted a lien as of the 1st of January.
Whether these funds can be traced or identified, or whether there has been such a commingling of these funds with others of the bankrupt as to render tracing of these funds impossible or unnecessary, is not revealed by the record.
For the reasons herein set forth I would hold that the City of Dallas is without priority over the United States in right of payment under § 104, sub. a and § 104, sub. b, Title 11 U.S.C.A. I concur, however, in the reversal of the case in order to determine the amount of trust funds remaining in the hands of the trustee and, therefore, payable to the United States.