Fed. 356; Pennsylvania Steel Co. v. New York City R. Co. 193 Fed. 286; Greeley v. Provident Sav. Bank, 98 Mo. 460, 11 S. W. 980; The Roseric, 254 Fed. 154; People ex rel. Hatch v. Reardon, 184 N. Y. 431, 8 L.R.A. (N.S.) 314, 112 Am. St. Rep. 628, 77 N. E. 970, 6 Ann. Cas. 515, affirmed in 204 U. S. 152, 51 L. ed. 415, 27 Sup. Ct. Rep. 188, 9 Ann. Cas. 736; Wise v. L. & C. Wise Co. 153 N. Y. 507, 47 N. E. 788; Conklin v. United States Shipbuilding Co. 148 Fed. 129; New York Terminal Co. v. Gaus, 204 N. Y. 512, 98 N. E. 11.

Mr. Justice Brandeis delivered the opinion of the court:

Fed. 727. The case came here on writ of certiorari. 252 U. S. 577, 64 L. ed. 725, 40 Sup. Ct. Rep. 396. The propriety of allowing to the state a preference as to amounts due for the annual franchise taxes is admitted by the receiver. No question of the relative priority of the state and the United States is involved. Nor does any question arise as to priority of the state over encumbrances. The single question is presented whether the state of New York has priority in payment out of the general assets of the debtor over other creditors whose claims are not secured by act of the parties nor accorded a preference, by reason of their nature, by the state legislature or otherwise.

On December 4, 1917, the district court of the United States for the south- At common law the Crown of Great ern district of New York appointed H. Britain, by virtue of a prerogative right, Snowden Marshall general receiver of had priority over all subjects for the the property of the All Package Gro- payment out of a debtor's property of cery Stores Company, a corporation or- all debts due it. The priority was effectganized under the laws of Delaware, but ive alike whether the property remained having a place of business and prop- in the hands of the debtor, or had been erty in the state of New York. The placed in the possession of a third perlatter state asked to have certain son, or was in custodia legis. The pridebts due to it declared payable as ority could be defeated or postponed preferred claims out of the assets in only through the passing of title to the the hands of the receiver. These debts debtor's property, absolutely or by way consisted of (a) amounts due for an- of lien, before the sovereign sought to nual franchise taxes assessed under § enforce his right. Giles v. Grover, 9 182 of the New York Tax Law, and Bing. 128, 139, 157, 183, 131 Eng. Re(b) amounts due for license fees or print, 563, 2 Moore & S. 197, 1 Clark taxes for the privilege of doing busi- & F. 72, 6 Eng. Reprint, 843, 6 Bligh, ness within the state, assessed under § N. R. 277, 5 Eng. Reprint, 598, 11 Eng. 181 of that law, and payable but once. Rul. Cas. 550; in Re Henley & Co. L. The state asserted in its claim "that said R. 9 Ch. Div. 469, 48 L. J. Ch. N. S. 147, taxes accrued and became a lien on all 39 L. T. N. S. 53, 26 Week. Rep. 885. the property of defendant corporation Compare United States v. [383] Napursuant to the provisions of the Tax tional Surety Co. decided by this court Law of the state of New York prior to November 8, 1920 [254 U. S. 73, ante, the appointment of a receiver herein." 143, 41 Sup. Ct. Rep. 29]. The first ConThe district court held that both [382] stitution of the state of New York classes of claims were taxes, but that the (adopted in 1777) provided that the lien created by § 197 of the Tax Law ap- common law of England, which, together plied only to annual franchise taxes, and with the statutes, constituted the law of that no provision of the law gave a lien the colony on April 19, 1775, should be for license taxes until a levy was made and continue the law of the state, subtherefor. It accordingly allowed the ject to such alterations as its legislature preference as to the amounts due for might thereafter make. This provision annual franchise taxes, and denied it was embodied, in substance, in the later as to the amounts due for license taxes. Constitutions. The courts of New York Upon appeal by the state, the circuit decided that, by virtue of this constitucourt of appeals held that, independ- tional provision, the state, as sovereign, ently of specific statutory provision, succeeded to the Crown's prerogative the law of New York, as declared by right of priority; and that the priority its courts, gave to the state as SOVwas not limited to amounts due for ereign a lien or priority for payment taxes, but extended alike to all debt due of taxes over unsecured creditors; that to the state, e. g., to amounts due on a this priority was a prerogative right, general deposit of state funds in a bank. not a mere rule of administration; Re Carnegie Trust Co. 151 App. Div. and that it applied, therefore, in the 606, 136 N. Y. Supp. 466, 206 N. Y. 390, Federal courts. C. C. A., 262 46 L.R.A. (N.S.) 260, 99 N. E. 1096.

paid out of moneys in receivers' hands. Central Trust Co. v. New York City & N. R. Co. 110 N. Y. 250, 259, 1 L.R.A. 260, 18 N. E. 92. In the case at bar the district judge relied upon § 197 as justi

This priority has been enforced by the courts of New York under a grea variety of circumstances in an unbroker series of cases extending over more than half a century. It has been enforced as a right, and not as a rule of administra-fying him in giving priority to the claim tion. for annual franchise taxes, and in denying priority to the claim for license fees, because, in respect to the latter, no corresponding provision is to be found in the Tax Law. But he had no occasion to seek statutory support for the priority sought by the state, since here it does not seek to displace any prior lien. It asks merely to have its prerogative right enforced against property on which there is no prior lien and upon which it is impossible to levy, because the property has been taken out of hands of the debtor and placed in the custody of the court for purposes of protection and distribution.

This priority arose and exists independently of any statute. The legislature has never, in terms, limited its scope; and the courts have rejected as unsound every contention made that some statute before them for construction had, by implication, effected a repeal or abridgment of the priority. The only changes of the right made by statute have been by way of enlarging its scope in [384] certain cases. Thus, while by the common law of England (Rex ex rel. Braddock v. Watson, 3 Price, 6, 146 Eng. Reprint. 174), and by that of New York (Wise v. L. & C. Wise Co. 153 N. Y. 507, 511, 47 N. E. 788), the priority does not obtain over a specific lien created by the debtor before the sovereign undertakes to enforce its right, the legislature of New York extended the prerogative right, so as to give certain taxes priority over prior encumbrances. An extension of this nature is found in § 197 of the Tax Law, which declares in respect to the annual franchise tax, that "such tax shall be a lien upon and bind all the real and personal property of the corporation, joint stock company or association liable to pay the same from the time when it is payable until the same is paid in full." [Consol. Laws. chap. 60. By reason of that provision the annual franchise tax takes priority over encumbrances on the corporate property. New York Terminal Co. v. Gaus, 204 N. Y. 512, 98 N. E. 11. Under the earlier law a debt for franchise taxes was not a "technical lien on specific property," and had been ordered

Whether the priority enjoyed by the state of New York is a prerogative right or merely a rule of administration is a matter of local law. Being such, the decisions of the [385] 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, 38 L. ed. 265, 266, 14 Sup. Ct. Rep. 424; St. Anthony Falls Water Power Co. V. St. Paul Water Comrs. 168 U. S. 349, 358, 42 L. ed. 497, 501, 18 Sup. Ct. Rep. 157; Archer v. Greenville Sand & Gravel Co. 233 U. S. 60, 68, 69, 58 L. ed. 850, 853, 854, 34 Sup. Ct. Rep. 567; Guffey v. Smith, 237 U. S. 101, 113, 59 L. ed. 856, 863, 35 Sup. Ct. Rep. 526. The priority of the state extends to all property of the debtor within its borders, whether the debtor be a resident or a nonresident, 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 Woodwork

1 See in addition to cases cited in the text: Re Columbian Ins. Co. (1866) 3 Abb. App. Dec. 239, 242; Central Trust Co. v. New York City & N. R. Co. (1988) 110 Ning Mach. Co. 133 Fed. 329; Conklin v. Y. 250, 259, 1 L.R.A. 260, 18 N. E. 92; Re Atlas Iron Constr. Co. (1897) 19 App. Div. 415, 419, 46 N. Y. Supp. 467; Re Niederstein (1912) 154 App. Div. 238. 246, 138 N. Y. Supp. 952; Re Wesley (1913) 156 App. Div. 403, 405, 141 N. Y. Supp. 1031; People v. Metropolitan Surety Co. (1913) 158 App. Div. 647, 650, 144 N. Y. Supp. 201; Mixter v. Mohawk Clothing Co. (1915) 155 N. Y. Supp. 647.

2 See Re Niederstein, 154 App. Div. 238, 244-246, 138 N. Y. Supp. 952; Re Wesley, 156 App. Div. 403, 405, 141 N. Y. Supp.


United States Shipbuilding Co. 148 Fed. 129, 130; compare Franklin Trust Co. v. New Jersey, 104 C. C. A. 629, 181 Fed. 769; Washington-Alaska Bank v. Dexter Horton Nat. Bank, C. C. A. -, 263 Fed. 304. For a receiver ap pointed 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, I those of Virginia accorded such priority. under $ 201 of the Tax Law, a lien on Here it is not sought to gain priority all the property of the company from over a lien existing at the time when the "the time of the levy made by virtue receiver was appointed; and the priority thereof." Since the prerogative right of over unsecured creditors is granted by the state could not be enforced by levy the common law of New York. and seizure, an application to the court Affirmed. for payment of the debt due was the appropriate remedy. Re Tyler, 149 U. S. 164, 184, 37 L. ed. 689, 695, 13 Sup. Ct. Rep. 785.

[387] ALEXANDER SMITH COCHRAN and William F. Cochran, as Surviving Executors of the Last Will and Testament of William F. Cochran, Deceased, Appts.,



(See S. C. Reporter's ed. 387-393.) Internal revenue succession tax recovery back of taxes paid -assessment.

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The state's right to be paid out of the assets prior to other creditors does not, as pointed out in Re Tyler, supra (quoting Greeley v. Provident Sav. Bank, 98 Mo. 458, 11 S. W. 980), arise from an express lien on the assets existing at the time they passed into the receiver's hands. State use of Phillips v. Rowse, 49 Mo. 586, 592; George v. St. Louis Cable & W. R. Co. 44 Fed. 117, 118; Hamilton v. [386] David C. Beggs Co. 171 Fed. 157; Coy v. Title Guaran-formably to a return made by executors in Taxes paid upon certain legacies contee & T. Co. 212 Fed. 520, 523, L.R.A. accordance with the War Revenue Act of 1915E, 211, 135 C. C. A. 658, 220 Fed. June 13, 1898, and the regulations of the 90. The right of priority has been lik- Internal Revenue Department, may not be ened to an equitable lien. State use of recovered back for want of a formal assess Phillips v. Rowse, supra. The anal- ment made before the repeal of such act ogous preference in payment given to by the Act of April 12, 1902, since such claims for labor by state statutes, and tax must be deemed to have been "imposed” to which the Bankruptcy Act gives pri- in the repealing act, preserving all taxes within the meaning of the saving clause ority, has been described as being imposed prior to the taking effect of such "tantamount" to a lien. Re Laird, 48 act, there being no basis for the claim that C. C. A. 538, 109 Fed. 550, 555; Re the amount of the tax was uncertain, exBennett, 82 C. C. A. 531, 153 Fed. 673, cept the possibility that, the estate not 677. The priority is a lien in the broad having been settled, the legatees might be sense of that term, which includes "those called upon to pay debts. preferred or privileged claims given by statute or by admiralty law." 2 Bouvier's Law Dict. 15th ed. 1883, 88. The prerogative right of the state resembles the privilege accorded by the civil law Argued December 15 and 16, 1920. of Louisiana to certain classes of debts, which it was assumed in Burdon Cent. Sugar Ref. Co. v. Payne, 167 U. S. 127, 42 L. ed. 105, 17 Sup. Ct. Rep. 754, 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.

Richmond v. Bird, 249 U. S. 174, 63 L. ed. 543, 39 Sup. Ct. Rep. 186, 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

[For other cases, see Internal Revenue, VII.
in Digest Sup. Ct. 1908.]
[No. 116.]

cided January 3, 1921.


APPEAL from the Court of Claims to review a judgment denying the recovery back of certain succession taxes under the War Revenue Act. Affirmed.

The facts are stated in the opinion.

Mr. H. T. Newcomb argued the cause, and, with Mr. Frederick L. Fishback, filed a brief for appellants.

Solicitor General Frierson argued the cause and filed a brief for appellee.

Mr. Justice McKenna delivered the opinion of the court:

Appeal from a judgment of the court of claims denying recovery of taxes paid

Note. As to when taxes illegally assessed can be recovered back-see note to Erskine v. Van Arsdale, 21 L. ed. U. S. 63.

under the War Revenue Act of June 13,, value of the residuary estate had not been 1898 [30 Stat. at L. 448, chap. 448, Comp. ascertained. Stat. § 6144, 4 Fed. Stat. Anno. 2d ed. p. 135], 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 Era S. Cochran were made executors. The latter has since died. The will was probated January 9, 1901, 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.

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.

[390] This sum was computed in respect to the interest of eight different legatees, of which six were residuary legatees, and the computations were made according to certain general rules, tables, and instructions for the use of internal revenue officers, administrators, and trustees in determining the amount of taxes to be paid to the United States upon legacies or distributive shares arising from personal property under the Act of June 13, 1898. There was no special investigation by the Commissioner of Internal Revenue as to the expectancy of life of the several beneficiaries, or as to the earning power of the bonds placed in trust for them respective

[389] In 1892 and 1893 litigation was instituted against the decedent which might involve the estate, it was estimated, in the payment of sev-ly, and for their benefit. eral hundred thousand dollars or more. The contentions of the parties are quite The litigation, according to the find-accurately opposed. The appellants conings of the court of claims, is still in tend that an assessment was a necessary progress, and on account of it money condition to the collection of the taxes, has been retained by the executors and that there was no assessment until that might otherwise have been dis- after July 1, 1902, and that on that date tributed. The probable outcome of the the law which established the taxes was litigation is not shown. repealed.

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

In opposition it is urged by the United States that if an assessment was necessary, the right to make it was reserved by the repealing act, and that the appellants, as executors, having made a report of the legacies and the taxes thereon, the report and its acceptance by the collector of internal revenue was, to all intents and purposes, an assessment. It is further urged that if an assessment was necessary

for the purpose of collecting the taxes, it is now immaterial.

These contentions constitute the issue in the case and depend upon the relation of the law (mostly statutory) to the facts, and what it determines. As an element in the determination, the use of the rules of the Department and the mortuary tables counsel dismisses from controversy, in concession to Henry v. United States, 251 U. S. 393, 64 L. ed. 322, 40 Sup. Ct. Rep. 185, and Simpson v. United States, 252 U. S. 547, 64 L. ed. 709, 40 Sup. Ct. Rep. 367. The remaining element, that is, the necessity of an assessment prior to July 1, 1902, to the validity of the taxes in question, [391] counsel for appellants says, revolves "upon the meaning, and application of the word 'imposed,' the fifth word in the special saving clause of the Repeal Act of April 12, 1902." [32 Stat. at L. 96, chap. 500, Comp. Stat. § 6144, 4 Fed. Stat. Anno. 2d ed. p. 135.] And counsel defines the word to include all of the steps necessary to the collection of a tax, making it tantamount to "accrued." In other words, the contention is, that a tax is not "imposed" by the simple declaration of a law that property shall be subject to it, but "imposed" only when the tax becomes due and payable; and that the taxes in the present case had not reached that essential condition before July 1, 1902, because they had not been assessed. In support of the contention, counsel cites Mason v. Sargent, 104 U. S. 689, 26 L. ed. 894, and Hertz v. Woodman, 218 U. S. 205, 54 L. ed. 1001, 30 Sup. Ct. Rep. 621. There is much in the latter case which, it may be urged, is adverse to the contention, but upon this we are not called upon to pass, for counsel concedes that if a statute imposes a tax in such way as that the amount is readily reduced to a certainty, no assessment is necessary. And this is true of the taxes in question.

By § 29 of the Act of June 13, 1898 (30 Stat. at L. 448, chap. 448), legacies or distributive shares such as this case is concerned with are made subject to a duty at the rate of 75 cents for each and every hundred dollars of the clear value thereof, and the tax is made a lien and charge for twenty years, and its payment required before payment and distribution to the legatees. The section also requires the trustee to make and render to the collector a schedule, list, or statement of the legacies, together with the amount of duty that has accrued or shall

1 We disregard a distinction in the legacies as not important to the argument.

accrue thereon. Section 30 was amended
March 2, 1901 [31 Stat. at L. 948, chap.
806], but no change in anything impor-
tant to the present controversy. Section
29 and the amendments of March 2, 1901,
were repealed by Act of April 12, 1902
(32 Stat. at L. 97 et seq., chap. 500,
Comp. Stat. § 6369, 4 Fed. Stat. Anno.
2d ed. p. 228), [392] but it was pro-
vided that "all taxes or duties imposed
by § 29 and amendments thereof, prior
to the taking effect" of the repealing
to lien,
act, should "be subject, as
charge, collection, and otherwise, to the
provisions of § 30 and amendments
thereof," which are hereby "continued
in force." Except as so continued in
force, the repealing statute took effect
July 1, 1902.

The schedule under § 29 was rendered, as we have seen, accepted by the collector, and taxes were paid in accordance therewith, in the sum of $158,321.78.

The schedule included legacies that had been paid after July 1, 1902, but as, by Act of June 27, 1902 (32 Stat. at L. 406, chap. 1160, 4 Fed. Stat. Anno. 2d ed. p. 232), such legacies were not subject to a tax, the taxes on them were refunded, upon demand of the executors, but the government refused to refund the taxes on legaThis suit cies paid prior to that date. was brought for their amount; that is, the sum of $51,029.54.

To support recovery, it is contended that there was no obligation of payment, because, as has already been said, the amount to be paid was not made certain by assessment, or, to quote counsel, was not "so certain (or capable of such ascertainment) that reasonable minds could not disagree, and that the exercise of judgment and the consideration and weighing of evidence could not affect the result." For this Hagar v. Reclamation Dist. 111 U. S. 701, 28 L. ed. 569, 4 Sup. Ct. Rep. 663, and other cases, are cited and reviewed.

But we cannot agree that there was uncertainty. We have seen the amount of taxes imposed by the statute was definite, and the appellants had no trouble in estimating and returning the value of the legacies upon which it was imposed. The basis of the claim of uncertainty is that he estate was and is not settled, and that there is a possibility that the legatees may be called upon to pay debts. The contention is as strained and baseless as that rejected in Simpson v. United States,

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