Opinion of the Court.

highest court of the State as to the existence of the right and its incidents, will be accepted by this court as conclusive. Compare Lewis v. Monson, 151 U. S. 545, 549; St. Anthony Falls Water Power Co. v. St. Paul Water Commissioners, 168 U. S. 349, 358; Archer v. Greenville Gravel Co., 233 U. S. 60, 68–69; Guffey v. Smith, 237 U. S. 101, 113. The priority of the State extends to all property of the debtor within its borders, whether the debtor be a resident or a non-resident and whether the property be in his possession or in custodia legis. The priority is, therefore, enforceable against the property in the hands of a receiver appointed by a federal court within the State. Duryea v. American Woodworking Machine Co., 133 Fed. Rep. 329; Conklin v. United States Shipbuilding Co., 148 Fed. Rep. 129, 130; compare Franklin Trust Co. v. New Jersey, 181 Fed. Rep. 769; Washington-Alaska Bank v. Dexter Horton National Bank, 263 Fed. Rep. 304. For a receiver appointed by a federal court takes property subject to all liens, priorities or privileges existing or accruing under the laws of the State. In the case at bar a warrant for the amount of the license tax might have issued but for the appointment of the receiver, and if the levy had been made it would have become, under § 201 of the Tax Law, a lien on all the property of the company from "the time an actual levy shall be made by virtue thereof." Since the prerogative right of the State could not be enforced by levy and seizure, an application to the court for payment of the debt due was the appropriate remedy. In re Tyler, 149 U. S. 164, 184.

The State's right to be paid out of the assets prior to other creditors does not, as pointed out in In re Tyler, supra (quoting Greeley v. Provident Savings Bank, 98 Missouri, 458), arise from an express lien on the assets existing at the time they passed into the receiver's hands. State v. Rowse, 49 Missouri, 586, 592; George v. St. Louis Cable & Western Ry. Co., 44 Fed. Rep. 117, 118; Hamilton


Opinion of the Court.

254 U.S.

v. David C. Beggs Co., 171 Fed. Rep. 157; Coy v. Title Guarantee & Trust Co., 212 Fed. Rep. 520, 523; 220 Fed. Rep. 90. The right of priority has been likened to an equitable lien. State v. Rowse, supra. The analogous preference in payment given to claims for labor by state statutes, and to which the Bankruptcy Act gives priority, have been described as being "tantamount" to a lien. In re Laird, 109 Fed. Rep. 550, 555; In re Bennett, 153 Fed. Rep. 673, 677. The priority is a lien in the broad sense of that term which includes "those preferred or privileged claims given by statute or by admiralty law." 2 Bouvier Law Dict. (15th ed., 1883) 88. The prerogative right of the State resembles the privilege accorded by the civil law of Louisiana to certain classes of debts which it was assumed in Burdon Central Sugar Refining Co. v. Payne, 167 U. S. 127, would be enforced against property in the custody of a receiver appointed by a federal court. The fact that the right rests on the common law independently of any statute, does not, of course, affect the right of enforcement in the federal courts.

City of Richmond v. Bird, 249 U. S. 174, relied upon by the petitioner is not in point. The city sought there in vain to have taxes declared payable out of the bankrupt's assets in preference to the claim of the landlord thereon which was secured by a specific lien arising upon distraint. This court held that the city did not have such superior right since neither the laws of the United States nor those of Virginia accorded such priority. Here it is not sought to gain priority over a lien existing at the time when the receiver was appointed; and the priority over unsecured creditors is granted by the common law of New York.


Counsel for Appellants.



No. 116. Argued December 15, 16, 1920.-Decided January 3, 1921.

Section 29 of the War Revenue Act of June 13, 1898, which taxed legacies and distributive shares at so much per hundred dollars of clear value, was repealed by the Act of April 12, 1902, with a proviso saving all taxes imposed by § 29 prior to July 1, 1902, when the repeal became effective. In an action against the United States to recover taxes computed, returned and voluntarily paid by executors after July 1, 1902, on legacies paid over before that date, held:

1. That a formal assessment prior to July 1, 1902, was not necessary to bring the taxes within the saving clause as taxes "imposed" prior to that date. P. 390.

2. That such assessment was not necessary to ascertain the value of life interests in trust funds, their value being ascertainable by computation upon mortality tables and rules lawfully adopted by the Commissioner of Internal Revenue. Id. See Simpson v. United States, 252 U. S. 547.

3. That the fact that the estate was not completely settled and that the legatees and trustee might be liable to refund if retained assets proved insufficient to pay all claims, was no ground for recovery of the taxes, in view of the facts that the personal estate greatly exceeded in value the amount of the legacies, and the total of claims and expenses during many years after the commencement of administration was comparatively insignificant. P. 392.

4. One who seeks to recover money voluntarily paid as a tax upon the ground that the tax was illegal, must prove its illegality and may not rely on mere assertion and speculation. P. 393.

54 Ct. Clms. 219,


THE case is stated in the opinion.

Mr. H. T. Newcomb, with whom Mr. Frederick L. Fishback was on the brief, for appellants.

Opinion of the Court.

The Solicitor General for the United States.

254 U.S.

MR. JUSTICE MCKENNA delivered the opinion of the court.

Appeal from a judgment of the Court of Claims denying recovery of taxes paid under the War Revenue Act of June 13, 1898, and amendments, upon certain legacies made under the will of William F. Cochran.

The facts so far as we deem them material are as follows: Cochran died in New York, December 27, 1901, leaving a will and a personal estate of the value of $7,918,027.18, of which appellants and Eva S. Cochran were made executors. The latter has since died. The will was probated January 9, 1902, and letters testamentary issued the same date and administration was immediately undertaken and proceeded with without extraordinary or unnecessary delay.

Six months' notice to creditors was given as required by the law of New York and the time for the presentation of claims expired August 4, 1902. Prior to September 30, 1902, debts and claims against the estate were presented and for the most part paid to the aggregate amount of $98,589.04 of which amount $66,776.25 were paid prior to July 1, 1902. Expenses of administration during that period had been ascertained to be $125,000, of which sum $13,047.16 were paid prior to July 1, 1902. Otherwise, claims and expenses of administration had not been ascertained.

Certain sums were bequeathed to the executors in trust for the children of Cochran and there was also a legacy to a niece and one to a stranger to his blood. Trusts were set up in accordance with the will and the legatees were paid prior to July 1, 1902, the sums provided to be paid. The aggregate payment so made amounted to the sum of $3,140,979.10.

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In 1892 and 1893 litigation was instituted against the decedent which might involve the estate, it was estimated, in the payment of several hundred thousand dollars or more. The litigation according to the findings of the Court of Claims is still in progress and on account of it money has been retained by the executors that might otherwise have been distributed. The probable outcome of the litigation is not shown.

Under the laws of New York funds in the hands of executors after the expiration of notice to creditors are liable to after-discovered debts, and legatees who have received money prior to the expiration of such notice are liable up to the amount paid them for claims subsequently presented. The executors were not secured for the payments to legatees prior to July 1, 1902, and prior to that date the value of the residuary estate had not been ascertained.

In compliance with § 30 of the Act of June 13, 1898, the executors on February 17, 1903, made a return and filed it with the Collector of Internal Revenue giving a schedule of the legacies arising from the personal property of the estate and the amount of tax due thereon. The Collector accepted the schedule as correct. The amount paid to him by the executors was the amount they estimated as the amount of the taxes due. The schedule showed the taxes on each legacy and that the total was $158,321.78, which sum was by the Collector paid to the United States.

July 16, 1904, a demand was made upon the Commissioner of Internal Revenue for the repayment to the executors of the sum paid. After one rejection (October 22, 1910), the Commissioner (March 15, 1915), recommended the claim for allowance in the sum of $107,292.24, and for the rejection of $51,029.54. The recommendation was approved by the Secretary of the Treasury. The former sum was paid, the latter was not, and remains unrefunded.

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