exempt to the bankrupt. June 22, 1925, the United States filed exceptions to this report of the trustee. Thereafter, upon hearing, the referee in bankruptcy entered an order disapproving said allowance and refusing to set the same aside as exempt. On review in the District Court the order of the referee was overruled, and the report of the trustee ratified and approved. It is to revise this action of the court that this proceeding is instituted.

The contention of the government is that under the bankruptcy law federal taxes must be paid before exemptions are set aside to the bankrupt, and, in this connection, that under the laws of Nebraska there are no exemptions from taxes, state or national. It is conceded that section 9035 of the Compiled Statutes of Nebraska 1922 provides that all heads of families who have neither lands, town lots, nor houses subject to exemptions as a homestead under the laws of that state, shall have exempt from forced sale on execution the sum of $500 in personal property, except wages; but it is urged that said section 9035 must be read in connection with section 9038, which provides that "nothing in this article shall be considered as exempting any real or personal property from levy and sale for taxes."

Respondent relies upon section 6a of the Bankruptcy Act (Comp. St. § 9590), which reads: "This act shall not affect the allowance to bankrupts of the exemptions which are prescribed by the state laws in force at the time of the filing of the petition in the state wherein they have had their domicile for the six months or the greater portion thereof immediately preceding the filing of the petition"-and contends that the proviso of section 9038 of the Nebraska Statutes which provides that property set aside under section 9035 shall not be exempt from levy and sale for taxes, applies only to state and local taxes, and not to those due the United States. It is further urged by counsel for respondent that, when the United States filed its claim for taxes, whether required to do so or not, it laid aside its sovereign character, became a party to the proceeding, and is bound by the rules applicable thereto; that under General Order XVII the referee had neither power nor jurisdiction to review the action and report of the trustee setting apart the exemption of $500, unless and until exceptions to the determination of the trustee were filed within 20 days after the filing of the report.

Section 9038 of the Statutes of Nebraska has received no interpretation at the hands of the Supreme Court of that state to which our attention has been called, and, for reasons

hereinafter stated, we find it unnecessary to anticipate construction by that court. In our judgment, the conceded priority of the claim of the United States for taxes due, in absence of valid exemption under state law, is not decisive of this controversy.

By section 1 of the Bankruptcy Act (Comp. St. & 9585) the term "creditor" shall "include any one who owns a demand or claim provable in bankruptcy." The term “debt” shall "include any debt, demand, or claim provable in bankruptcy." Collier on Bankruptcy, vol. 1, pp. 1, 2.

Section 63a of the Act (Comp. St. § 9647), under the heading "Debts Which May Be Proved," includes:

"(1) A fixed liability, as evidenced by a judgment or an instrument in writing, absolutely owing at the time of the filing of the petition against him, whether then payable or not.

"In the case of income taxes, it seems that notice to the taxing power is necessary, or at least a proper condition precedent to any action by the trustee, and that after the government has received notice it must file a claim for taxes if it desires to share in the estate; that it cannot stand by, after it has been granted permission to file its claim and expect to subsequently collect the tax from the bankrupt or his trustee"-citing Matter of Anderson (C. C. A. 2) 279 F. 525. Collier on Bankruptcy, vol. 2, pp. 1447, 1448. [1] General Order No. XVII of the Supreme Court provides that the trustee shall make report to the court of his action setting aside exemptions to the bankrupt, and that any creditor may take exceptions to the determination of the trustee within 20 days after the filing of the report. It is undoubtedly held that taxes are not debts in the ordinary sense. New Jersey v. Anderson, 203 U. S. 483–492, 27 S. Ct. 137, 51 L. Ed. 284; Lane County v. Oregon, 7 Wall. 71, 19 L. Ed. 101; Meri

wether v. Garrett, 102 U. S. 472-513, 26 L. Ed. 197; Hecox v. Teller County (C. C. A. 2) 198 F. 634, 117 C. C. A. 338. Whether they are such under the Bankruptcy Act for some purposes and to the extent of constituting a demand or claim provable in bankruptcy is another question. The District Court for the District of Delaware (In re United Button Co., 140 F. 495, 502, 503) considers this phase of the matter. It says:

"A tax is not strictly a debt. It lacks the nature of a debt in that, though for a sum certain, it is not founded upon any agreement or assent of the person or persons against whom it is assessed, but is a burden for public purposes imposed in invitum. As an obligation or duty created by statute to pay money, however, it is quasi contractual. Keener, in his work on Quasi Contracts, p. 16, states that 'a statutory obligation which does not rest upon the consent of the parties, is clearly quasi contractual in its nature.' • Thus the taxes enumerated in section 17 [Comp. St. § 9601], 'legally due and owing by the bankrupt,' by section 64 are directed to be paid out of the estate, by section 17 are recognized as 'provable debts,' and are demands of a quasi contractual nature. While strict or technical 'proof' of them is not required, although often presented, there can be no doubt that they are to be treated as provable debts or demands embraced in the class 'founded upon an open account, or upon a contract express or implied."

This case was affirmed by the Circuit Court of Appeals for the Third Circuit. 149 F. 48, 79 C. C. A. 70, 8 L. R. A. (N. S.) 961, 9 Ann. Cas. 445. Speaking of section 63 the court said:

"The first of the two paragraphs into which it is divided is given up to an enumeration of the debts which are entitled to be proved against the estate, among which is to be found everything in the way of a fixed obligation, or which, as being of a commercial character, a bankrupt could expect to be relieved from."

In re William F. Fisher (D. C.) 148 F. 907-912, Judge Lanning declares that "of course a tax is provable in bankruptcy." And this is the holding of the Circuit Court of Appeals for the Second Circuit. In re Sherwoods, 210 F. 754, 127 C. C. A. 304, Ann. Cas. 1916A, 940.

This court, in Kaw Boiler Works v. Schull et al., 230 F. 587, 144 C. C. A. 641, L. R. A. 1916E, 628, has held that taxes are provable debts within the meaning of the Bankruptcy Act, and cites Crawford v. Burke, 195 U. S. 176, 25 S. Ct. 9, 49 L. Ed. 147, to the effect

that section 63a, defining provable debts, must be read in connection with section 17 (Comp. St. § 9601), limiting the operation of discharge, and that it could not have been the intention of Congress to extend the operation of a discharge under section 17 to debts that were not provable under section 63a.

That part of section 17 to which reference is made provides:

"a. A discharge in bankruptcy shall release a bankrupt from all of his provable debts, except such as (1) are due as a tax levied by the United States, the state, county, district, or municipality in which he resides.”

This section would seem, in accordance with the ordinary meaning of language, to include taxes within the category of provable debts, and this would be decisive, unless deemed to be limited by section 63a, by which provable debts are expressly defined. The two sections are not necessarily inconsistent, if it be recognized that taxes are quasi contractual in their nature, and therefore fall under the head of contracts express or implied, and thus are provable claims as defined in section 63a. This conception seems more consistent with the definitions contained in section 1 of the Bankruptcy Act, which makes the term "debt" include, not only debts strictly so called, but any demand or claim provable in bankruptcy, and defines a creditor as one who owns such a demand or claim. Section 64, indirectly, at least, recognizes a tax claim aś provable, because it provides that "in case any question arises as to the amount or legality of any such tax the same shall be heard and determined by the court." In this view, the various sections of the act, to which reference has been made, are rendered consistent and effective throughout.

Furthermore, this court (In re Minot Auto Co., 298 F. 853) has held that the United States is bound by the Bankruptcy Act, and that, when it enters one of its courts as a litigant, it lays aside its power, and to the same extent as other litigants must conform to court rules. The same view prevails in the Second Circuit. In re Anderson, 279 F. 525. That court holds that the United States is bound by the terms of the Bankruptcy Act, and upon notice served on the collector for the district the provisions of law "require the United States to file its claim within a time fixed, or otherwise be barred to the end that settlement of the estate may not be unreasonably delayed," and this although it is held that "the Bankruptcy Act does not contemplate that taxes should be proved like an ordinary debt." The same consideration is the underlying reason for the provision in Order No.

v. JONES et al.

[2] In our judgment, therefore, within the purview of the Bankruptcy Act, the United States stood in the position of a creditor with a provable claim. The fact that it was not compelled to prove its claim, as in the case of an ordinary debt, does not alter this status. It had a right to prove its debt, and, as a creditor, to object to the determination of the trustee. Incidentally it may be observed that no question as to the integrity of its claim is here presented. The matter under consideration is the allowance of exemption.

[3] The petitioner did file its claim for allowance in the sum of $4,605.36. That it may not have been compelled to do so is immaterial. Some months later, when its exceptions were heard by the referee, its claim had not been allowed, although income taxes due in ́the sum of approximately $2,400 were conceded. The matter was, of course, for the determination of the court under the provisions of section 64 of the act. In its exceptions filed to the report of the trustee the United States is described as a creditor of the bankrupt and prays "that the hearing may be had upon such exceptions and that the same may be argued as provided in General Order No. XVII." It thus appears, that, whatever its obligation in law may have been, the petitioner submitted itself to the jurisdiction of the bankruptcy court as a litigant under the provisions of General Order No. XVII, and subject to the procedure therein prescribed. Its application came too late under the ex press provisions of the very general order to which it appealed. We may not depart from the procedure laid down by the Supreme Court of which petitioner has sought voluntarily to avail itself. The conclusion is irresistible that the report of the referee on this matter of exemption was no longer open to attack.

[4] It is further insisted by petitioner that, in case the court holds adversely to the government on the other grounds urged, "yet this bankrupt is not entitled to this exemption because there are state taxes still unpaid." The answer to this is that the state filed no exception to the report of the referee, and is not here complaining of the action of the District Court in setting off the property to the bankrupt.

It follows, from what has been said, that the order below must be sustained, and the petition to revise dismissed.

It is so ordered.

(Circuit Court of Appeals, Fourth Circuit. November 24, 1926.)

3. Courts 343-Intervener cannot seek aid of court and at same time attack jurisdiction (equity rule 37).

An intervener cannot seek the aid of the court and at the same time attack its jurisdiction in the cause, in view of equity rule 37. 4. Creditors' suit 29-Unsecured creditor intervening in creditors' suit cannot contest rights of litigants to proceed.

Unsecured creditor intervening in creditors'

suit cannot contest right of litigants in the original or an ancillary suit to proceed therein. 5. Mortgages 492-Sale of mortgaged property may be directed before ascertainment of liens.

A federal court may direct sale of mort

gaged property in advance of ascertainment of the liens thereon.

Appeal from the District Court of the United States for the Northern District of West Virginia, at Elkins; William E. Baker, Judge.

Suit in equity by Walter A. Jones against the United States Window Glass Company, wherein the Union_Trust Company and others intervened. From the decree, the Union Trust Company of Pittsburgh, Pa., intervener, appeals. Affirmed.

Harry H. Byrer, of Martinsburg, W. Va. (Kilmer & Byrer, of Martinsburg, W. Va., on the brief), for appellant.

Roscoe M. Ewing and Paul J. Bickel, both of Cleveland, Ohio (Squire, Sanders & Dempsey, of Cleveland, Ohio, on the brief), for appellees.

Before WADDILL, ROSE, and PARKER, Circuit Judges.

WADDILL, Circuit Judge. On the 23d day of May, 1923, Walter A. Jones, the complainant below, filed his bill in behalf of himself and all other creditors similarly situated, against the United States Window Glass Company, asserting an alleged indebtedness of $300,000 due him, and a liability for the further sum of $200,000. The jurisdiction of the court was based upon diverse citizenship of the parties, the complainant Jones being a citizen of the state of Ohio, and the Glass Company a corporation of the state of West Virginia.

The complaint contained the usual allegations of bills of the kind, with respect to the financial embarrassment of the defendant, and the necessity of conserving its assets, and prayed for the appointment of a receiver. The Glass Company appeared and filed its answer, submitting itself to the jurisdiction of the court, and consented to the appointment of a receiver, and such receiver was duly appointed, and the following proceedings as bearing especially upon the merits of this appeal were thereafter had. The bill further set forth the existence of an indebtedness of $350,000 due on an outstanding mortgage, secured upon the company's plant at Morgantown, W. Va., and its other tangible estate. At the time of the filing of the bill there had been no default in the payment of principal or interest secured by the mortgage. Such default, however, occurred pending suit, and thereupon the Guardian Trust Company and L. B. Foote, trustees in the mortgage aforesaid, finding the property upon which the mortgage constituted a first lien in the hands of a receiver appointed as aforesaid, filed in this suit an application for leave to intervene and file an intervening petition setting up the facts with respect to the indebtedness due under the mortgage, and also to be afforded proper relief. Such application being granted, the intervening petition was thereupon filed, in the usual form of an original bill to foreclose a mortgage, and the said Guaranty Trust Company and L. B. Foote, trustees, along with sundry other defendants, subsequently filed, first procuring leave therefor, an amended supplemental intervening petition, in the nature of a crossbill in said cause, and the suit was duly matured on said amended pleadings. No dispute was made as to the amount or validity of the mortgage indebtedness.

On the 27th of February, 1926, Special Master L. C. Crile, theretofore duly appointed, filed his report as to the property and indebtedness of the defendant Glass Company, in which he recommended that a sale be had of

the property, because the same was depreciating in value, and was expensive to carry, and also reported the assets and liabilities of the Glass Company, and that its lien indebtedness or debts for which apparent liens existed, amounted to $432,103.54, and an unsecured indebtedness of $732,222.32, aggregating $1,164,324.86, which the master reported as the approximate indebtedness. He did not attempt, however, to pass upon the order of priorities as between lienors, or what was the exact amount due upon any of said claims other than the mortgage indebtedness aforesaid, and he likewise filed a statement showing the appraised value of the Glass Company's property to be $578,912.

After the coming in of this report, to wit, on the 6th day of March, 1926, the Union Trust Company of Pittsburgh, appellant herein, filed its petition pursuant to leave so to do, setting up an unsecured debt due it of $50,000 evidenced by promissory notes of the United States Window Glass Company, and asked leave to intervene, which was granted, the Trust Company, appellant here, being admitted as a party defendant for the purpose of setting up its debt. No claim was made by the Trust Company that its debt was other than that of an unsecured creditor, and it did not question or assail the mortgage indebtedness aforesaid.

The Trust Company moved to dismiss the bill and amended and supplemental bills because of lack of jurisdiction, and excepted to the court's ruling in permitting the amended and supplemental and cross-bills aforesaid to be filed by the United States Window Glass Company and others, as set forth in the decree of the 27th of May, 1926, and to the court's refusal to dismiss the bill as amended. Upon this state of the record, the decree of foreclosure of the 26th of June, 1926, appealed from, was entered over the objection of and against the insistence of the appellant. The decree of foreclosure was in the usual form, and directed the sale of the property and estate of appellee, the United States Window Glass Company, as fully set forth and described in the decree, and upon the terms and conditions therein specifically enumerated. The court decreed a lien to exist under the mortgage aforesaid to the Guardian Trust Company and L. B. Foote, trustees, for the sum of $381,125.20, the principal and interest of the mortgaged indebtedness as of the 26th day of June, 1926.

The assignments of error, 13 in number, relate mainly to the decree of sale, and particularly to formal matters in connection

therewith appearing on the face of the record, rather than to substantial and serious errors affecting the rights of the parties upon the merits of the case. A careful scrutiny of the same will demonstrate that the assignments, separately and as a whole, are not well taken, and that the action of the court, taking it in its entirety, is correct, and at least free from errors of which appellant can justly complain. It may not be amiss to refer to several of the questions arising upon the record, though no general discussion of the subjects alluded to need be undertaken. [1] First. As to the character of the suit, and the manner in which the same was instituted, as bearing upon the court's jurisdiction: It was an equity cause, instituted by a general or unsecured creditor against the United States Window Glass Company, asking the appointment of a receiver, with a view of preserving the property of the corporation, the company at the time being without ready money with which to carry on its business, and to prevent loss to the same. The corporation, the only defendant to the bill, appeared and filed its answer, admitted the allegations of the bill, joined in the prayer thereof, and consented to the appointment of a receiver.

It may be conceded that bills in equity. asserting claims against a corporation, and seeking to take possession of its assets, are filed by lien creditors, as distinguished from open account or unsecured creditors whose debts have not been judicially determined and their legal status ascertained. In cases of the character here, this is not necessarily so, and there are well-known exceptions to the general rule in respect thereof. The following authorities relate especially to this subject: Hollins v. Brierfield Coal Co., 150 U. S. 371, 14 S. Ct. 127, 37 L. Ed. 1113; In re Metropolitan Railway Receivership, 208 U. S. 90, 28 S. Ct. 219, 52 L. Ed. 403; McGowan v. Parish, 237 U. S. 285, 295, 35 S. Ct. 543, 59 L. Ed. 955; American Brake Shoe & Foundry Co. v. Pere Marquette R. R. Co. (C. C. A.) 205 F. 14; In re William S. Butler & Co. (C. C. A.) 207 F. 712; L. D. George Lumber Co. v. Daugherty, 214 F. 958, 961 (C. C. A. 4th Cir.); Simkins, Federal Equity Suits, pp. 734, 738,

740.

In Hollins v. Brierfield Coal Co., 150 U. S., supra, Mr. Justice Brewer, speaking for the court, at pages 380 and 381 (14 S. Ct. 128), said:

"It is urged, however, that this court has sustained the validity of proceedings and decrees in suits of this nature, in which it

appeared that the plaintiffs had not exhausted their remedies at law, and the cases of Sage v. Memphis & Little Rock Railroad, 125 U. S. 361 [8 S. Ct. 887, 31 L. Ed. 694], and Mellen v. Moline Iron Works, 131 U. S. 352 [9 S. Ct. 781, 33 L. Ed. 178], are cited as illustrations. But, passing by other matters disclosed by the facts of those cases, it will be noticed that in neither of them was the objection made at the outset and when action on the part of the court was invoked. Defenses existing in equity suits may be waived, just as they may in law actions, and when waived, the cases stand as though the objection never existed. Given a suit in which there is jurisdiction of the parties, in a matter within the general scope of the jurisdiction of courts of equity, and a decree rendered will be binding, although it may be apparent that defenses existed which, if presented, would have resulted in a decree of dismissal. Take the present case as an illustration: Suppose the corporation and other defendants had made no defense, and, without expressly consenting, had made no objection to the appointment of a receiver, and the subsequent distribution of the assets of the corporation among its creditors; it cannot be doubted that a final decree, providing for a settlement of the affairs of the corporation and a distribution among creditors could not have been challenged on the ground of a want of jurisdiction in the court, and that notwithstanding it appeared upon the face of the bill that the plaintiffs were simple contract creditors, because the administration of the assets of an insolvent corporation is within the functions of a court of equity, and the parties being before the court, it has power to proceed with such administration. If there was a defense to the bills as framed, an objection to the right of these plaintiffs to proceed on the ground that their legal remedies had not been exhausted, was a defense and should have been made in limine, and does not of itself oust the court of jurisdiction. This doctrine has been recognized not merely in the cases cited, but also in those of Reynes v. Dumont, 130 U. S. 354 [9 S. Ct. 486, 32 L. Ed. 934]; Kilbourn v. Sunderland, 130 U. S. 505 [9 S. Ct. 594, 32 L. Ed. 1005]; Brown v. Lake Superior Iron Co., 134 U. S. 530 [10 S. Ct. 604, 33 L. Ed. 1021]. None of these cases question the proposition that, if the objection is seasonably presented. it will be effective."

In Metropolitan Receivership Cases, 208 U. S. supra, Mr. Justice Peckham, speaking for the court, at pages 109 and 110 (28 S. Ct. 224), said: