BAKER, Circuit Judge
(after stating the facts as above). 1. As more than $500 of appellant’s claim was disallowed, an appeal under section 25a (Act July 1, 1898, c. 541, 30- Stat. 553 [U. S. Comp. St. 1901, p. 3432]) is undoubtedly proper. In re Friend, Moss & Morris (C. C. A.) 134 Fed. 778. The case being here on appeal respecting the amount of the claim, we think appellant may also present any question concerning the security or rank of the debt, as an incident thereof (Cunningham v. German Ins. Co., 103 Fed. 932, 43 C. C. A. 377), though the question of lien or priority, if alone involved, could be reviewed only under section 24b (In re Rouse, Hazard & Co., 91 Fed. 100, 33 C. C. A. 356). If the case of In re Worcester County, 102 Fed. 808, 42 C. C. A. 637, is to be construed as requiring us to split the case and dismiss the portion that affects priority, we are not disposed, as now advised, to follow it.
2. Appellant argues that her highest court has decided that the charge is a tax, and that the decision is controlling here. The argument is founded on the case of Hancock v. Singer Mfg. Co., 62 N. J. Law, 289, 41 Atl. 846, 42 L. R. A. 852, decided November 14, 1898. Appellee contends with equal earnestness that the later case of In re United States Car Co., 60 N. J. Eq. 514, 43 Atl. 673, decided July 7, 1899, holds that the charge is not a tax. In Re Mutual Mercantile Agency, 8. Am. Bankr. Rep. 435, the referee relied on the Singer Co. Case, without noting the Car Co. Case, and directed the trustee to pay New Jersey a claim like this as taxes under section 64a. In Re Danville Rolling Mill Co. (D. C.) 121 Fed. 432, the District Court relied on the Car Co. Case, without noting the Singer po. Case, and refused to order the payment of New Jersey’s claim as taxes.
Long-before the passage of the act for an “annual license fee or franchise tax,” the Singer Company had been granted by New Jersey a charter which provided that upon certain conditions “the real and personal property of the said corporation not actually and in fact within the state of New Jersey, and the stock of the said corporation held or owned by any of its stockholders, shall not be liable to any tax or impost whatsoever.” The state undertook to collect from the Singer Company an “annual license fee or franchise tax.” In Singer Mfg. Co. v. Heppenheimer, 58 N. J. Law, 634, 34 Atl. 1061, 32 L. R. A. 643, the attempt was defeated. In the second Singer Co. Case, relied on by appellant, the first decision was adhered to, The rationale, it seems to its, is this: The [861]*861state could collect nothing on account of franchises except (either or both) compensation for granting them, or taxes upon their value as property after they had been granted. The consideration for the Singer Company charter was determined upon when the charter was granted. The contract in that respect could not thereafter be impaired by the state. ' Therefore, if the statute is to be construed as an attempt of the state to exact further compensation for the pre-existing franchises of the Singer Company, it cannot be given effect. The franchises to be and to do, when granted, became property, which was subject to be taxed as other property, unless the state had lawfully bargained away or limited its right. The state had agreed not to tax the company’s property which was outside of the state. It was contemplated in the charter that the company should, and it did in fact, own tangible property and exercise its franchises beyond the state’s lines. Therefore, if the statute is to be construed as an attempt of the state to tax so much of the franchise'values as lie outside of the state, it would be an impairment of the contract. The expressions in the opinion that the “license fee” is a “tax” must be read, we think, m the light of the fact that the court was dealing with a charter with relation to which the statute was subsequent legislation. Carroll v. Lessee of Carroll, 16 How. 275, 286, 14 L. Ed. 936.
In the ■ Car Co. Case, supra, the corporation, to judge from the decision, was organized under the general laws of New Jersey after the statute relating to the so-called “annual license fee or. franchise tax” was in force. The corporation was decreed to be insolvent, receivers were appointed, and thereafter the State Board of Assessors returned to the Comptroller an assessment of the “annual license fee or franchise tax.” The trial court, interpreting the statutory charge as a tax upon the corporate franchises, and finding that the franchises were valueless and had not been exercised by the receivers, held that the tax was not payable out of the funds in the receivers’ hands until after all indebtedness existing at the time of their appointment was discharged. The reviewing tribunal, not denying the justness of the trial court’s application of the statute to the facts, if its interpretation of the statute was correct, said:
“We cannot concur in this view. Although the statute designates an Imposition of this kind as a license fee or franchise tax, it plainly is not a tax upon corporate franchises. In fact, it is not, strictly speaking, a tax at all, nor has it the elements of one. It is in reality an arbitrary imposition laid upon the corporation, without regard to the value of its property or of its franchises, and without regard to whether it exercises the latter, or not, solely as a condition of its continued existence. The state, in creating a corporation, has the right to impose upon its creature such conditions as the Legislature, within constitutional limits, may deem proper; and the acceptance by the corporation of the franchises, powers, and privileges conferred upon it binds it to the performance of those •conditions so long as it continues to remain in possession of those franchises, powers, and privileges, and the conditions themselves remain unrevoked by the Legislature.”
We are of the opinion that the foregoing excerpt is not a mere dictum, but that, on the contrary, it is the court’s determination of the essential nature of the statutory imposition, properly given in [862]*862deciding .the question presented. If so, the case may be accepted as controlling, because, it is not for the United States bankruptcy .courts to insist upon a state’s receiving as a tax under section 64a something which the state declares is not. In re Ott (D. C.) 95 Fed. 274.
But if we are mistaken, and if the Singer Co. Case is to be accepted as an authoritative assertion that the charge in question is a tax, we do not believe that the United States bankruptcy courts are bound to follow it blindly. The question with them is the interpretation and application of section 64a. If the Legislature' of a state gives the name “tax” to an exaction which is not a tax, and if the courts of the state join in the misnomer, surely the bankruptcy courts are not required to disregard the substance of the thing, to the detriment of other .claimants. The state courts may authoritatively expound the substance, and the federal courts will adopt such exposition; but whether the substance constitutes a tax or not is independent of the name. And moreover the latter part of section 64a seems to direct the bankruptcy coürts to determine independently the “legality of any such tax.”
If it be conceded that the word “taxes,” in section 64a, includes every contribution to the support of government which any state may exact from the- persons, occupations, and possessions of its citizens and corporate subjects, is the charge in question a tax? It is not a capitation tax, for it is not laid upon corporations by the head.
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BAKER, Circuit Judge
(after stating the facts as above). 1. As more than $500 of appellant’s claim was disallowed, an appeal under section 25a (Act July 1, 1898, c. 541, 30- Stat. 553 [U. S. Comp. St. 1901, p. 3432]) is undoubtedly proper. In re Friend, Moss & Morris (C. C. A.) 134 Fed. 778. The case being here on appeal respecting the amount of the claim, we think appellant may also present any question concerning the security or rank of the debt, as an incident thereof (Cunningham v. German Ins. Co., 103 Fed. 932, 43 C. C. A. 377), though the question of lien or priority, if alone involved, could be reviewed only under section 24b (In re Rouse, Hazard & Co., 91 Fed. 100, 33 C. C. A. 356). If the case of In re Worcester County, 102 Fed. 808, 42 C. C. A. 637, is to be construed as requiring us to split the case and dismiss the portion that affects priority, we are not disposed, as now advised, to follow it.
2. Appellant argues that her highest court has decided that the charge is a tax, and that the decision is controlling here. The argument is founded on the case of Hancock v. Singer Mfg. Co., 62 N. J. Law, 289, 41 Atl. 846, 42 L. R. A. 852, decided November 14, 1898. Appellee contends with equal earnestness that the later case of In re United States Car Co., 60 N. J. Eq. 514, 43 Atl. 673, decided July 7, 1899, holds that the charge is not a tax. In Re Mutual Mercantile Agency, 8. Am. Bankr. Rep. 435, the referee relied on the Singer Co. Case, without noting the Car Co. Case, and directed the trustee to pay New Jersey a claim like this as taxes under section 64a. In Re Danville Rolling Mill Co. (D. C.) 121 Fed. 432, the District Court relied on the Car Co. Case, without noting the Singer po. Case, and refused to order the payment of New Jersey’s claim as taxes.
Long-before the passage of the act for an “annual license fee or franchise tax,” the Singer Company had been granted by New Jersey a charter which provided that upon certain conditions “the real and personal property of the said corporation not actually and in fact within the state of New Jersey, and the stock of the said corporation held or owned by any of its stockholders, shall not be liable to any tax or impost whatsoever.” The state undertook to collect from the Singer Company an “annual license fee or franchise tax.” In Singer Mfg. Co. v. Heppenheimer, 58 N. J. Law, 634, 34 Atl. 1061, 32 L. R. A. 643, the attempt was defeated. In the second Singer Co. Case, relied on by appellant, the first decision was adhered to, The rationale, it seems to its, is this: The [861]*861state could collect nothing on account of franchises except (either or both) compensation for granting them, or taxes upon their value as property after they had been granted. The consideration for the Singer Company charter was determined upon when the charter was granted. The contract in that respect could not thereafter be impaired by the state. ' Therefore, if the statute is to be construed as an attempt of the state to exact further compensation for the pre-existing franchises of the Singer Company, it cannot be given effect. The franchises to be and to do, when granted, became property, which was subject to be taxed as other property, unless the state had lawfully bargained away or limited its right. The state had agreed not to tax the company’s property which was outside of the state. It was contemplated in the charter that the company should, and it did in fact, own tangible property and exercise its franchises beyond the state’s lines. Therefore, if the statute is to be construed as an attempt of the state to tax so much of the franchise'values as lie outside of the state, it would be an impairment of the contract. The expressions in the opinion that the “license fee” is a “tax” must be read, we think, m the light of the fact that the court was dealing with a charter with relation to which the statute was subsequent legislation. Carroll v. Lessee of Carroll, 16 How. 275, 286, 14 L. Ed. 936.
In the ■ Car Co. Case, supra, the corporation, to judge from the decision, was organized under the general laws of New Jersey after the statute relating to the so-called “annual license fee or. franchise tax” was in force. The corporation was decreed to be insolvent, receivers were appointed, and thereafter the State Board of Assessors returned to the Comptroller an assessment of the “annual license fee or franchise tax.” The trial court, interpreting the statutory charge as a tax upon the corporate franchises, and finding that the franchises were valueless and had not been exercised by the receivers, held that the tax was not payable out of the funds in the receivers’ hands until after all indebtedness existing at the time of their appointment was discharged. The reviewing tribunal, not denying the justness of the trial court’s application of the statute to the facts, if its interpretation of the statute was correct, said:
“We cannot concur in this view. Although the statute designates an Imposition of this kind as a license fee or franchise tax, it plainly is not a tax upon corporate franchises. In fact, it is not, strictly speaking, a tax at all, nor has it the elements of one. It is in reality an arbitrary imposition laid upon the corporation, without regard to the value of its property or of its franchises, and without regard to whether it exercises the latter, or not, solely as a condition of its continued existence. The state, in creating a corporation, has the right to impose upon its creature such conditions as the Legislature, within constitutional limits, may deem proper; and the acceptance by the corporation of the franchises, powers, and privileges conferred upon it binds it to the performance of those •conditions so long as it continues to remain in possession of those franchises, powers, and privileges, and the conditions themselves remain unrevoked by the Legislature.”
We are of the opinion that the foregoing excerpt is not a mere dictum, but that, on the contrary, it is the court’s determination of the essential nature of the statutory imposition, properly given in [862]*862deciding .the question presented. If so, the case may be accepted as controlling, because, it is not for the United States bankruptcy .courts to insist upon a state’s receiving as a tax under section 64a something which the state declares is not. In re Ott (D. C.) 95 Fed. 274.
But if we are mistaken, and if the Singer Co. Case is to be accepted as an authoritative assertion that the charge in question is a tax, we do not believe that the United States bankruptcy courts are bound to follow it blindly. The question with them is the interpretation and application of section 64a. If the Legislature' of a state gives the name “tax” to an exaction which is not a tax, and if the courts of the state join in the misnomer, surely the bankruptcy courts are not required to disregard the substance of the thing, to the detriment of other .claimants. The state courts may authoritatively expound the substance, and the federal courts will adopt such exposition; but whether the substance constitutes a tax or not is independent of the name. And moreover the latter part of section 64a seems to direct the bankruptcy coürts to determine independently the “legality of any such tax.”
If it be conceded that the word “taxes,” in section 64a, includes every contribution to the support of government which any state may exact from the- persons, occupations, and possessions of its citizens and corporate subjects, is the charge in question a tax? It is not a capitation tax, for it is not laid upon corporations by the head. It is not an occupation tax, for it has no regard to the business in which the corporations engage. It is not a property tax, for it pays no heed to the extent or value of property, as the state Constitution requires. Franchises are property. The franchise to be and the franchise to do both go wherever the corporation goes. Both are property. Adams Express Co. v. Ohio, 166 U. S. 185, 224, 17 Sup. Ct. 604, 41 L. Ed. 965. A state may grant franchises, and then t.ax them as property, just as it may grant or lease land, and then tax the granted estate as property. But the tax upon the estate is not to be confused with the consideration for the grant. If one pays a lump sum or annual sums as the consideration for the grant, he does so by virtue of a contract; but he is not thereby relieved from the sovereign demand, in invitum. And that is the distinguishing feature of a tax. The sovereign does not bargain with his subject; he commands. The statute here under consideration does not purport to be an amendment of the incorporation laws of the state. But when the incorporators of the bankrupt came to seek a charter, this statute expressed one of the terms on which it could be obtained and held. The sovereign state could not command the incorporators to accept a charter. It could only say, “If you do accept it, you must pay so and so for the grant.”
3. When the bankrupt failed to make its return for 1902, the state board, assuming that the authorized capital stock of $40,000,000 was issued and outstanding on January 1, 1902, fixed the amount of the charge at $5,750. The referee and the court reduced .this [863]*863to $4,250, the amount properly chargeable to a capital stock, of $10,000,000 issued and outstanding. Appellant insists that the action of the state board was quasi judicial and is not subject to collateral attack. This contention would require consideration if the charge were a tax. Holding it to be a liability under a contract, we find no error in the court’s looking to the contract for the measure of the liability. Whether, as appellee urges, the court erred in allowing any sum whatever for 1902, cannot be reviewed, as no cross-appeal was taken.
4. As to the $2,500 item, the question is whether it was a debt owing on April 23, 1903, when the petition was filed. The promise of the bankrupt, as we construe it, was to pay on or before the 1st of July in each year a sum based on the amount of stock issued and outstanding on the 1st day of January of that year. On January 1,1902, the amount of stock issued and outstanding was $10,000,000. That determined the amount, even‘though the stock was reduced to $2,500,000 on May 13, 1902, long before the obligation matured and could be sued upon. Prior to January 1, 1903, the promise to pay on or before July 1, 1903, did not evidence an accrued debt, because it could not be known whether any stock would be outstanding when the 1st of January should come around. But on that date we think the promise accrued to pay one-tenth of one per centum on $2,500,000 of stock then outstanding. That the claim bore no interest and could not be sued upon before the 1st of July affects only the maturity of the obligation.
The District Court is directed to add to its allowance of a general claim the sum of $2,500, less a rebate of interest at 1 per cent, a month from July 1, 1903, back to April 23, 1903. In other respects the decree is affirmed. Costs here to be divided equally.