Moore

From an order of the referee in bankruptcy, affirmed by the bankruptcy court, disallowing the claims of the state comptroller for penalties claimed under the California tax law as a preferred lien claim entitled to full payment from the assets of the bankrupt estate, the State has appealed.

The Paul Kent Truck Company was adjudicated a voluntary bankrupt October 20, 1933. Respondent was appointed trustee thereafter. On June 23, 1933, the tangible assets of the bankrupt were seized and sold by a claimant of a conditional sales contract. In a suit by the trustee charging preference against the sales contract claimant, and challenging the sales contract, the trustee recovered judgment and collected sufficient money to pay all expense of administration, together with all claims with interest thereon of the same class as the tax claim and the penalties. At the time of the seizure of the aforesaid property by the conditional sales claimant there were unpaid taxes a lien by the laws of the State upon the property of $1,780.86 for the year 1931, and accrued penalties $222.60, and for the year 1932, $737.50 taxes, likewise a lien, and for $92.19 penalties, total tax being $2,-518.36 and…