Tharpe v. Gormley

Bell, Justice.

The City Bank of Eort Valley failed and went into the hands of the superintendent of banks for liquidation in the year 1928. In October, 1931, T. E. Tharpe as tax-collector of the county in which the bank was located brought a suit in the superior court of that county against W. J. Davis, acting as superintendent of banks, alleging in his petition as amended that there was due as State and county taxes on real estate and personal property of the bank, in possession of the defendant, the sum of $994.50 as taxes accruing for the year 1929; and that the defendant had sufficient funds with which to pay the taxes, but refused to pay them. The plaintiff prayed that the defendant be directed to pay over to him, as State and county taxes for the year 1929, the sum specified with interest at the rate of seven per cent, per annum from December 20, 1929. The court sustained a general demurrer and dismissed the petition, and the plaintiff excepted. On review, the Court of Appeals held that the petition stated a cause of action and reversed the judgment, but made no specific ruling as to interest. Tharpe v. Gormley, 48 Ga. App. 731 (173 S. E. 212). On the next trial the allegations of fact contained in the petition were admitted, and the judge passed an order directing the defendant to pay the principal amount of the taxes without interest. The plaintiff again excepted, contending that he was entitled to both principal and interest,- the same being a claim for taxes. On the second appearance of the case the Court of Appeals affirmed the judgment, holding that, as the ta-xes were payable only as an expense of administration, interest was not recoverable. Tharpe v. Gormley, 55 Ga. App. 180 (189 S. E. 673). Certiorari was granted by this court, on the petition of the tax-collector.

The banking act of 1919 as amended in 1927, provided as follows: “Sec. 19. Order of paying debts. After the payment of the expenses of liquidation, including compensation of agents and attorneys, and after the payment of unremitted collections, the order of paying off debts due by insolvent banks shall be as follows: (1) Debts due depositors. (2) Debts due for taxes, State and Federal. (3) Judgments. (4) Contractual obligations. (5) Unliquidated claims for damages and the like. Provided, that nothing herein contained shall affect the validity of any security or lien held by any person or corporation.” Ga. L. 1927, p. 195; Code, § 13-821. This statute purports to declare the order of priority only- as to “debts due by insolvent banks.” This was not a debt due by the insolvent bank, as it was not in existence at the time the bank failed, but arose afterwards. In this same case the Court of Appeals (Tharpe v. Gormley, 48 Ga. App. 731, supra) held as follows: “There is nothing in the banking act as amended, or elsewhere, absolving the property of a bank or its assets from taxes accruing after the bank has been taken over by the superintendent of banks for liquidation. The constitution of this State, in article 7, section 2, paragraph 4 (Civil Code of 1910, § 6556), provides that fall laws exempting property from taxation, other than the property herein enumerated, shall be void/ The exceptions referred to are contained in paragraph 2 of this article and section of the constitution, and do not include taxes of the character of taxes accruing against the property or assets of a bank after it has been taken over by the superintendent of banks for liquidation. The property and assets of a bank which are in the possession of the superintendent of banks for the purpose of liquidation are not exempt from taxation.”

By the banking act, the State has merely waived in favor of depositors its normal right to first position in the order of priority, as to debts in existence at the time the bank failed. It has waived nothing else whatever; and since the taxes here in question arose subsequently, the banking act is not material, except that the assets of the particular bank are being administered under its terms by a statutory receiver. Accordingly, as to the question in hand, the ease must stand or fall by the same principles which would be applicable to any other insolvent corporation whose assets are being administered by a receiver. In such ease, the lien for taxes is not affected by the receivership, provided there is property sufficient, although the manner of enforcement is different because the property is in custodia legis. Empire Cotton-Oil Co. v. Park, 147 Ga. 618 (2) (95 S. E. 216); Stephens v. First National Bank of Newnan, 166 Ga. 380 (143 S. E. 386). Taxes bear interest after maturity, and the interest has the same priority of lien. Code, § 92-5001. In Sparks v. Lowndes County, 98 Ga. 284 (25 S. E. 426), it was held: “In view of the act of November 11th, 1889 (Acts 1889, p. 31), prescribing that all executions for taxes due the State or any county thereof shall bear interest at the rate of seven per cent, per annum from the time fixed by law for issuing the same, tax executions against railroad companies bear that rate of interest, and the law is applicable even as to taxes accruing and becoming due while the property of such companies is in the hands of a receiver.” As to payment of taxes as expenses of administration, the decision in Dysart v. Brown, 100 Ga. 1 (26 S. E. 767), is illuminating. It was there said: “The right to levy and collect taxes for the support of its institutions of government is one of the supreme attributes of a sovereign power, and this charge upon the property of the citizen is, by the law of this State, made superior to any other encumbrance which may be imposed upon it, either by contract or by law. It is universal in its application, and the mere fact that the property of a corporation may be in the hands of a receiver appointed by a court of equity affords no exception to the rule, and does not exempt the property of such a corporation from taxation. Property so circumstanced is as much bound to sustain its proportionate share of the burdens of government as any other, and being liable for taxation, there must of necessity be some means for the enforcement of this charge in favor of the State. Under ordinary circumstances, the property of the citizen is subject to seizure upon execution, and to sale, in satisfaction of the charge for taxes, and under the express statute law of this State there can be no judicial interference with the collection of taxes lawfully assessed. The ordinary processes of law can not be stayed in their execution when proceeding for this purpose. A difference has been held to exist where courts of equity, in the exercise of their extraordinary powers, have seized and taken into their custody property to be administered through the hands of receivers for the benefit of all persons, as their interests may appear. Under such circumstances, it has been held that the ordinary executive officers of the State are not authorized to proceed and wrest from the possession of receivers property committed to their custody, even though for the purpose of realizing sums due to the State for taxes.”

The tax here involved was not an obligation or expense incurred by the receiver in the course of administration, but is a charge imposed by ihe sovereign. Taxes have been referred to as expenses of administration only because it is the duty of the receiver to pay them. While the property is thus in the custody-of the court, no levy can be made; and so, if the receiver does not pay the taxes otherwise, he may be required to do so by an order of court. For this reason, and no other, can it be properly said that the taxes are paid as expenses of administration. Hence, the rule that the ordinary expenses of administration do not bear interest is altogether inapplicable to the State’s lien for taxes. In Empire Cotton-Oil Co. v. Park, supra, it was held: “It is the duty of a court of equity to direct its receiver to pay the taxes accruing on the property of an insolvent corporation while in the hands of the receiver, upon a timely application for that purpose made by the purchaser of such property at the receiver’s -sale.” This refers to “taxes,” not “expenses of administration.” As to the necessity of such a proceeding because the execution can not be levied, authority has already been cited; but see also Coker v. Norman, 162 Ga. 238 (2) (133 S. E. 243); Collier v. Gormley, 178 Ga. 142 (2), 147 (172 S. E. 340). In 26 R. C. L. 391, § 348, it is stated that a “receiver is liable for penalties and interest on overdue taxes in the same manner as any other taxpayer.” This statement is supported by the cited ease of Coy v. Title Guarantee & Trust Co., 220 Fed. 90, affirming Coy v. Title Guarantee & Trust Co., 212 Fed. 520, 525. From the foregoing authorities it would seem that the only proper conclusion is that the taxes involved in this case bear interest, and that such interest is a proper charge against the assets of this bank in the hands of the superintendent. While the decision in Standard Accident Ins. Co. v. Luther Williams Bank & Trust Co., 51 Ga. App. 635 (181 S. E. 201), dealt with a claim of the State, it was not a tax claim.

The decision under review, holding in effect that the taxes in question should rank merely as an expense of administration, can not be sustained as one based on the law of the case. The expressions in the former decision (48 Ga. App. 731, supra) as to expenses of administration can mean only that the receiver or superintendent should be required to pay the taxes in the course of administration, because the assets in his hands are not subject to levy. This is clearly apparent from the other portions of the decision which have been quoted in this opinion. Still other portions lead to the same interpretation. Certainly it was not held that this claim should not bear interest, and be paid accordingly. There is nothing in the decisions by this court, cited therein (48 Ga. App. 734) which in any way conflicts with the views herein expressed as to the implications of the phrase “ expenses of administration,” and similar expressions, as applied to tax claims.

While it appears from the record that the petition as filed in the trial court alleged that the amount claimed for State and county taxes for the year 1929 “constitutes and is a current administrative expense incident to the liquidation of said bank, and entitled to payment as such without regard to and before payment is made of any of the claims against said bank, which existed when the defendant took' possession of its assets,” the petition also alleged sufficient facts to show the priority of the' claim as one for taxes and a duty on the part of the superintendent to pay the same as such, with interest thereon. There being no demurrer on the ground of duplicity, the petition will support a recovery upon the latter theory, and under the law as applied to the facts it should be construed accordingly. Citizens & Southern Bank v. Union Warehouse & Compress Co., 157 Ga. 434 (7), 455 (122 S. E. 327). The more especially is this true since the plaintiff was suing as a public officer for the enforcement of a public right. Code, § 89-903. For the reasons stated, the decision complained of in the petition for certiorari is erroneous and must be reversed.

Judgment reversed.

All the Justices concur, except