AUGUSTUS N. HAND, Circuit Judge.
The question raised by this appeal is whether under section 3466 of the ü. S. Revised Statutes (31 USCA § 191) claims of the United States for unpaid income taxes and for damages are entitled to priority over claims of the state of New York for franchise taxes and taxes for gross earnings. The United States and the state of New York each presented its claims to receivers who had been appointed upon the filing of a creditors’ bill alleging that the assets of McWilliams Bros., Inc., exceeded its liabilities and praying for the appointment of a receiver, and upon an answer admitting the allegations of the bill and joining in the prayer for relief. The District Court awarded priority to the United States.
The “consent receivership” in this case was in effect a “voluntary assignment.” Under the decisions, the order appointing the receivers gave the United States priority over general creditors of the insolvent estate by virtue of section 3466 of the Revised Statutes. Price v. United States, 269 U. S. 492, 46 S. Ct. 180, 70 L. Ed. 373; United States v. Butterworth-Judson Corp., 269 U. S. 504, 46 S. Ct. 179, 70 L. Ed. 380. This priority attached when the receivers wore appointed. United States v. Oklahoma, 261 U. S. at page 260, 43 S. Ct. 295, 67 L. Ed. 638. The question is whether section 3466 gives priority not only over the claims of general creditors, but over the elairns of the state of New York for taxes, even though the taxes were liens upon the property of the insolvent at the time when the receivers were appointed. This section is in terms very sweeping. It provides that: “Whenever any person indebted to the United States is insolvent * ' * the debts due to the United States shall be first satisfied. * * * ” The word “debts” has long been held to include taxes.
The state of New York relies upon the decision of the Supreme Court in Marshall v. New York, 254 U. S. 380, 41 S. Ct. 143, 65 L. Ed. 315, which gave the state, by virtue of its sovereign prerogative, a priority over the general creditors of an insolvent that had been placed in the hands of a receiver. It says that, as this prerogative right was never ceded to the federal government by the Constitution, it avails as much against the United Stales as against private creditors. But the right of the United States depends upon its delegated power under the Constitution (Const, art. 1, § 8, el. 18) to pass all laws necessary for carrying into execution the express power to levy and collect taxes and du[980]*980ties. Price v. United States, 269 U. S. 492, 46 S. Ct. 180, 70 L. Ed. 373. It is consequently paramount whenever exercised by statute.
The question of the extent of the state’s prerogative recently came before the Supreme Court in Spokane County, Wash., v. United States, 279 U. S. 80, 49 S. Ct. 321, 73 L. Ed. 621. There taxes had been assessed against the personal property of a corporation by two counties in the state of Washington, and afterwards a receiver of its assets was appointed who sold the property and reduced it.to cash. The Supreme Court of - Washington (Exchange Nat. Bank of Spokane v. U. S., 147 Wash. 176, 265 P. 722, 62 A. L. R. 139), from which the appeal lay, had held that under the law of that state the liens of the counties for the taxes assessed before the receiver was appointed had not been made specific. After the appointment of the receivers, the Commissioner of Internal Revenue assessed income taxes against the corporation for years prior to the date of the receivership. The funds in the hands of the receiver were, as in the present ease, insufficient to pay in full the claims of the United States and those of the counties. The court, per Taft, C. J., held that the taxes due the United States were entitled to payment by the receiver in priority to claims for county taxes that were not supported by a specific lien acquired prior to the appointment of the receiver. But he expressly reserved the question as to whether the taxes due the United States would have had priority if liens therefor had been perfected under the laws of the state prior to the receivership, and cited the decision of the Supreme Court of Washington in Wilberg v. Yakima County, 132 Wash. 219, 231 P. 931, 933, 41 A. L. R. 184, where it was held that, if a tax is to be collected from personal property, “it does not become a lien upon such property until it has been seized and dis-trained by the sheriff. * * * ” He emphasized the broad scope of the taxing power of the United States, referred to the decisions of the Supreme Court in United States v. Fisher, 2 Cranch, 358, 2 L. Ed. 304, Field v. United States, 9 Pet. 182, 9 L. Ed. 94, Lane County v. Oregon, 7 Wall. 71, 19 L. Ed. 101, United States v. Snyder, 149 U. S. 210, 13 S. Ct. 846, 37 L. Ed. 705, and other cases, and, after discussing the authorities, went on to say (at page 93 of 279 U. S., 49 S. Ct. 321, 324) : “The foregoing citations certainly make it clear that the United States has power, in order to collect its taxes and its revenues and debts due it, to confer priority for them over those of the states.”
Since the decision in Spokane County, Wash., v. United States there can be no doubt that the United States should be awarded priority here, unléss the taxes due the state of New York can be regarded as supported by a sufficient lien to give them a preference over claims of the United States in spite of Rev. St. § 3460 (31USCA § 191).
Counsel for the state of New York attempt to distinguish Spokane County, Wash., v. United States on the ground that section 197 of the New York Tax Law (Consol. Laws, c. 60) provides that a franchise or gross earnings tax “shall -be a lien upon and bind all the real and personal property of the corporation * * * until the same is paid in full,” whereas the statute of the state of Washington before the court in the Spo-kafie Case was construed as imposing no effective lien prior to the taking of subsequent proceedings to enforce it. But section 197, as it read when the New York taxes in the ease at bar became payable, did not specify when the tax lien would arise, and section 201. provided that, upon the issue of a warrant by the tax commission commanding the sheriff to levy and sell the real and personal property of the taxpayer for delinquent taxes, “such warrant shall be a lien upon and shall bind the real and personal property of the * * * corporation against which it is issued, from the time an actual levy shall be made by virtue thereof.” It might have seemed to result from these two sections (when read together) that the lien for state taxes only arises when a levy is made by the sheriff. But in New York Terminal Co. v. Gaus, 205 N. Y. 588, 98 N. E. 1109, a majority of the New York Court of Appeals held that section 197 imposed a lien for taxes which was superior to a mortgage. It is true that when New York Terminal Co. v. Gaus was decided section 197 provided that the taxes should “be a lien upon and bind all the real and personal property” of the corporation “from the time when it is payable until the same is paid in full,” and 'that by amendment subsequent to that decision section 197 was changed so that the words “from the time it is payable” were omitted.
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AUGUSTUS N. HAND, Circuit Judge.
The question raised by this appeal is whether under section 3466 of the ü. S. Revised Statutes (31 USCA § 191) claims of the United States for unpaid income taxes and for damages are entitled to priority over claims of the state of New York for franchise taxes and taxes for gross earnings. The United States and the state of New York each presented its claims to receivers who had been appointed upon the filing of a creditors’ bill alleging that the assets of McWilliams Bros., Inc., exceeded its liabilities and praying for the appointment of a receiver, and upon an answer admitting the allegations of the bill and joining in the prayer for relief. The District Court awarded priority to the United States.
The “consent receivership” in this case was in effect a “voluntary assignment.” Under the decisions, the order appointing the receivers gave the United States priority over general creditors of the insolvent estate by virtue of section 3466 of the Revised Statutes. Price v. United States, 269 U. S. 492, 46 S. Ct. 180, 70 L. Ed. 373; United States v. Butterworth-Judson Corp., 269 U. S. 504, 46 S. Ct. 179, 70 L. Ed. 380. This priority attached when the receivers wore appointed. United States v. Oklahoma, 261 U. S. at page 260, 43 S. Ct. 295, 67 L. Ed. 638. The question is whether section 3466 gives priority not only over the claims of general creditors, but over the elairns of the state of New York for taxes, even though the taxes were liens upon the property of the insolvent at the time when the receivers were appointed. This section is in terms very sweeping. It provides that: “Whenever any person indebted to the United States is insolvent * ' * the debts due to the United States shall be first satisfied. * * * ” The word “debts” has long been held to include taxes.
The state of New York relies upon the decision of the Supreme Court in Marshall v. New York, 254 U. S. 380, 41 S. Ct. 143, 65 L. Ed. 315, which gave the state, by virtue of its sovereign prerogative, a priority over the general creditors of an insolvent that had been placed in the hands of a receiver. It says that, as this prerogative right was never ceded to the federal government by the Constitution, it avails as much against the United Stales as against private creditors. But the right of the United States depends upon its delegated power under the Constitution (Const, art. 1, § 8, el. 18) to pass all laws necessary for carrying into execution the express power to levy and collect taxes and du[980]*980ties. Price v. United States, 269 U. S. 492, 46 S. Ct. 180, 70 L. Ed. 373. It is consequently paramount whenever exercised by statute.
The question of the extent of the state’s prerogative recently came before the Supreme Court in Spokane County, Wash., v. United States, 279 U. S. 80, 49 S. Ct. 321, 73 L. Ed. 621. There taxes had been assessed against the personal property of a corporation by two counties in the state of Washington, and afterwards a receiver of its assets was appointed who sold the property and reduced it.to cash. The Supreme Court of - Washington (Exchange Nat. Bank of Spokane v. U. S., 147 Wash. 176, 265 P. 722, 62 A. L. R. 139), from which the appeal lay, had held that under the law of that state the liens of the counties for the taxes assessed before the receiver was appointed had not been made specific. After the appointment of the receivers, the Commissioner of Internal Revenue assessed income taxes against the corporation for years prior to the date of the receivership. The funds in the hands of the receiver were, as in the present ease, insufficient to pay in full the claims of the United States and those of the counties. The court, per Taft, C. J., held that the taxes due the United States were entitled to payment by the receiver in priority to claims for county taxes that were not supported by a specific lien acquired prior to the appointment of the receiver. But he expressly reserved the question as to whether the taxes due the United States would have had priority if liens therefor had been perfected under the laws of the state prior to the receivership, and cited the decision of the Supreme Court of Washington in Wilberg v. Yakima County, 132 Wash. 219, 231 P. 931, 933, 41 A. L. R. 184, where it was held that, if a tax is to be collected from personal property, “it does not become a lien upon such property until it has been seized and dis-trained by the sheriff. * * * ” He emphasized the broad scope of the taxing power of the United States, referred to the decisions of the Supreme Court in United States v. Fisher, 2 Cranch, 358, 2 L. Ed. 304, Field v. United States, 9 Pet. 182, 9 L. Ed. 94, Lane County v. Oregon, 7 Wall. 71, 19 L. Ed. 101, United States v. Snyder, 149 U. S. 210, 13 S. Ct. 846, 37 L. Ed. 705, and other cases, and, after discussing the authorities, went on to say (at page 93 of 279 U. S., 49 S. Ct. 321, 324) : “The foregoing citations certainly make it clear that the United States has power, in order to collect its taxes and its revenues and debts due it, to confer priority for them over those of the states.”
Since the decision in Spokane County, Wash., v. United States there can be no doubt that the United States should be awarded priority here, unléss the taxes due the state of New York can be regarded as supported by a sufficient lien to give them a preference over claims of the United States in spite of Rev. St. § 3460 (31USCA § 191).
Counsel for the state of New York attempt to distinguish Spokane County, Wash., v. United States on the ground that section 197 of the New York Tax Law (Consol. Laws, c. 60) provides that a franchise or gross earnings tax “shall -be a lien upon and bind all the real and personal property of the corporation * * * until the same is paid in full,” whereas the statute of the state of Washington before the court in the Spo-kafie Case was construed as imposing no effective lien prior to the taking of subsequent proceedings to enforce it. But section 197, as it read when the New York taxes in the ease at bar became payable, did not specify when the tax lien would arise, and section 201. provided that, upon the issue of a warrant by the tax commission commanding the sheriff to levy and sell the real and personal property of the taxpayer for delinquent taxes, “such warrant shall be a lien upon and shall bind the real and personal property of the * * * corporation against which it is issued, from the time an actual levy shall be made by virtue thereof.” It might have seemed to result from these two sections (when read together) that the lien for state taxes only arises when a levy is made by the sheriff. But in New York Terminal Co. v. Gaus, 205 N. Y. 588, 98 N. E. 1109, a majority of the New York Court of Appeals held that section 197 imposed a lien for taxes which was superior to a mortgage. It is true that when New York Terminal Co. v. Gaus was decided section 197 provided that the taxes should “be a lien upon and bind all the real and personal property” of the corporation “from the time when it is payable until the same is paid in full,” and 'that by amendment subsequent to that decision section 197 was changed so that the words “from the time it is payable” were omitted. Thus, when the franchise and gross earnings tax now before us accrued, section 197 had ceased to contain the words “from the time it is payable,” and only provided that such a tax should be a lien “until the same is paid in full.” Accordingly it might have been argued that by the amend[981]*981ment, words in section 197 staling when the lien was to arise had purposely been omitted so as to leave section 201 to define the time. But the difficulty with this is that a similar contention was made in Carey v. Keith, Inc., 250 N, Y. at page 219, 164 N. E. 912, and the Court of Appeals there held that such an omission did not affect the time when the lien ax'ose.
While it is clear that in the present ease the taxes due the state of New "lock prior to the receivership were a general lien upon the real and personal property of the defendant at the lime when the receivers were appointed, the question is not whether those taxes are statutory liens of some sort, but whether they are such liens as the courts of the United States have recognized as entitled to priority over claims due the government.
The Supreme Court appears to have given priority to the gov eminent under section 3466 or similar statutes in all cases except where the legal title of the taxpayer has been in some measure divested before the tax or other indebtedness became due. In Thelusson v. Smith, 2 Wheat. 396, 4 L. Ed. 271, debts due the United States were given precedence over the lien of a judgment-creditor who had not levied an execution against the property of the debtor. Justice Washington said, at page 426 of 2 Wheat., 4 L. Ed. 271: “If * * * before the right of preference has accrued to the United States, the debtor has made a bona fide conveyance of his estate to a third person, or has mortgaged the same to secure a debt, or if his property has been seized under a fi. fa,., the property is divested out of the debt- or, and cannot be made liable to the United States. A judgment gives to the judgment creditor a lien on the debtor’s lands, and a preference over all subsequent judgment creditors. But the act of congress defeats this preference in favour of the United States, in the eases specified in the 65th section of the act of 1799.”
At common law a real estate mortgage gave the mortgagee tiile subject only to an equity of redemption, and a chattel mortgage divested the mortgagor’s title in the same way. The Supreme Court accordingly treated the title as no longer in the estate of the mortgagor, and gave government taxes priority only over interests in the equity of redemption. Conard v. Atlantic Ins. Co., 1 Pet. 386, 7 L. Ed. 189; Brent v. Bank of Washington, 10 Pot. 596, 9 L. Ed. 547. It was apparently this view of the divesting of the legal title that led the Supremo Court to subordinate government taxes to mortgages in days when the legal title was generally regarded as in the mortgagee. It was reiterated by Justice Gray in Savings Society v. Multnomah County, 169 U. S. at page 428, 18 S. Ct. 392, 395, 42 L. Ed. 803, where he said: “This court has always held that a mortgage of real estate, made in good faith by a debtor to secure a private debt, is a conveyance of such an interest in the land as will defeat the priority given to the United States by act of congress in the distribution of the debtor’s estate. * * * ”
In view of the sweeping provisions of Rev. St. § 3466 (31 USCA § 191), it seems unlikely that it was intended to allow the more statutory declaration by a state of a general lien to give the latter a preference over debts and taxes due the government. Neither the decisions of the Supreme Court nor the specified priorities allowed third parties under Rev. St. § 3186 as amended (26 USCA § 115) indicate that section 3466 is subject to any such limitation. Wo hold that the court below properly awarded priority to the United States.
The state contends that a portion of the franchise and gross earnings taxes, amounting to $238.26, which accrued after the appointment of the receivers, should be given priority as an expense of administration of the insolvent estate. Tn McGregor v. Johnson (C. C. A.) 39 F.(2d) 574, we allowed taxes on land accruing after the appointment of the receivers as a part of such administration expenses, but we did not pass on whether franchise taxes accruing during the receivership should be so treated. This question was not raised by the assignments of error which only claim priority of the taxes as a. whole by virtue of the state’s sovereignly. We accordingly shall not review the decision of the trial court as to this matter. See Spokane County, Wash., v. United States, 279 U. S. at page 85, 49 S. Ct. 321, 73 L. Ed. 621.
The order is affirmed.