
    ANTONIO ACHA CAMACHO, ET AL., Plff., v. INTERNATIONAL EXPRESS & FOUNDRY COMPANY, Dft.
    San Juan,
    Bankruptcy,
    No. 262.
    Workmen’s Relief.
    Taxes — Reduced to Proper Assessment.
    1. Where a person voluntarily inflates the value of his property and returns it for assessment at an amount far exceeding its actual value, and later becomes a bankrupt, it is proper for the court to allow as a preferred claim taxes to an amount which the property would justify at a proper value.
    Workmen’s Relief Commission — Premiums Preferred.
    2. The circuit court of appeals for the first circuit having decided that the legislature of Porto Rico did have power to create the Workmen’s Relief Commission, it becomes the duty of this court to allow in bankruptcy proceedings as a preferred claim such sum as may be lawfully claimed by such commission for premiums.
    Opinion filed May 24, 1922.
    
      Messrs. O. B. Frazer and Salvador Suwu, for petitioning creditors.
   Odlix, Judge,

delivered the following opinion:"

The treasurer of Porto Pico lias filed in this proceeding' a claim amounting to $2,414.90 as taxes duo to tlio people of Porto Pico for tlie fiscal year 1920-1921, and asks that same be allowed as a preferred claim.

The referee in bankruptcy, after hearing the evidence submitted to him, found that all the property of the corporation which is now bankrupt was not worth over $15,300 at the time of the assessment of the taxes above referred to. It also appears that tluv property of the bankrupt, corporation was sold at public auction for the said sum of $15,300. The referee in bankruptcy also finds that the assessment of the property at a valuation of $130,620 was grossly exaggerated, and that it was unjust and inequitable, being based largely upon good will which was an imaginary asset and not an asset of real value. The referee in bankruptcy therefore finds that the claim of the people of Porto Pico for taxes should be reduced to the sum of $566.58, divided as follows: $266.22 for taxes upon the property itself of the bankrupt corporation, and the sum of $300.36 for premiums duo to the Workmen’s Pelief Commission.

As to the amount claimed by the treasurer of Porto Pico, the referee decided that the same should be denied.

To these findings of the referee there have been exceptions filed by the attorney general of Porto Pico, and also by counsel for the trustee. The attorney general of Porto Pico insists that the entire amount claimed by the treasurer of Porto Pico should be allowed as a preferred claim; and counsel for the trustee asks that the sum of $300.36 as premiums due the Workmen’s Pelief Commission should bo disallowed and that the amount of the preferred claim due to the people of Porto Pico should be reduced to the sum of $266.22.

This court upon beginning, its study of this case was of the view that creditors of a bankrupt corporation could have no greater rights than the corporation itself would have had in case it had remained solvent. To express the matter in another way —the writer of this opinion was inclined to think that if a corporation or an individual, by his own acts, created an estoppel, binding himself, there being no fraud upon the part of tíre person benefited by such act, such estoppel would operate as against the creditors of such person in case the latter should become a bankrupt. But an examination of the authorities shows that the provision of the bankruptcy law making taxes a preferred claim applies only to such taxes as are justly and lawfully assessed and payable; and in consideration of this clause of the bankruptcy law, it has been held that where a person voluntarily inflates the value of his own property and returns it for assessment at an amount far exceeding its actual value, which is sometimes done by parties seeking to bolster up a weakening credit, the bona fide ordinary creditors of this person, later becoming a bankrupt, may not be held to suffer losses by the payment of grossly excessive taxes, which the taxing power would never have assessed, if the person taxed had. been solvent, as against his own ordinary creditors.

In the present case, it is perfectly clear that if this International Express & Foundry Company had remained perfectly solvent, the entire claim of the people of Porto Pico for taxes might be enforceable even though the assessment of over $120,-000 was seven or eight times the actual value of the property taxed. It does not follow, however, that the people of Porto Pico must receive tbis excessive amount, now that tbe affairs of tlie International Express & Eoundry Company are being made subject to tlie bankruptcy law of tbe Congress of the United States.

It is considered by counsel for tbe trustee that tbe sum of $366.22 for property taxes is proper and just as a preferred claim, but be is insistent that tbe amount of $300.36 allowed by tbe referee for premiums due to tbe Workmen’s Relief Commission should be disallowed by me. Tbis is not tbe time or place for any arguments that tbe Workmen’s Relief Commission is an institution, tbe abolishment of which would be of great benefit, both to tbe employing class and to tbe employer class in tbis Island of Porto Rico. It has been urged, and tbis court is strongly inclined to think correctly urged, that tbe operations of tbe Workmen’s Relief Commission, under tbe existing rules and regulations in force in tbis Island, is a positive injury to tbe very persons whom it is designed to benefit. It seems clear to me that a very large proportion of tbe funds received by tbe Workmen’s Relief Commission are used in tbe ■support, of a multitude of government officials and that if employers of labor were allowed tbe option of using solvent and reputable insurance companies, tbe expenses of tbe employing classes would be very much reduced and a much more important result would follow in that tbe employed class, suffering injuries, would receive their compensation' much more quickly than under the present system. Tbis court realizes, however, that tbis is purely a matter of legislative control. Tbis court has no right or power to interfere with any law passed by the legislature, if tbe latter possess tbe power to enact such law. Tbe validity of tbe Workmen’s Relief Commission Law, having been upheld by the circuit court of appeals, at Boston, there is nothing left for this court to do but to respect and follow that decision. For this reason alone the disputed claim of $300.3G is allowed as a preferred claim.

It is, therefore, ordered that the report of the Referee in Bankruptcy, dated September 13, 1921, is hereby approved and confirmed in all respects.

Done and Ordered, this 24th day of May, 1922, at San Juan, Porto Rico.  