volved are "debts," and, as they were not ascertained to be worthless and charged off during the taxable years in question, the plaintiff is not entitled to have them classed as deductions.

[3] The second observation to be made is that plaintiff contends that the state and county taxes paid by the bank during these years on bank stock of stockholders should have been included in the bank's returns as deductions as taxes paid. The Revenue Act allows as a deduction taxes assessed against a bank or on its property. The test then here is: "Were these taxes assessed against the bank itself or against the stockholders? The taxes were levied under the state law, which provides that the stockholders of every banking association must be assessed and taxed in the county and city where such bank is located on the value of their shares of stock therein, and the bank must furnish to the assessor a full and correct list of names of its stockholders, and the tax must then be assessed against the holder appearing in the list as personal property, and must be paid by the bank; but the owners of such shares are liable for the taxes paid by the bank. Sections 3297, 3299, 3302, 3303, Comp. Stats. of Idaho, 1919.

The Supreme Court of the state, in considering this statute, has held that the shares of stock in banks must be assessed against the owners of such stock, and the tax thereon must be paid by the bank, and when so done the bank has a lien against the stock, and the earnings, dividends, and profits derived therefrom, for reimbursements in the sum so paid; but it cannot charge the same up against the aggregate earnings of the bank as current expense or otherwise, as the same must be charged against the shares of stock upon which such payment was made, or against the owner of the stock. Shainwald v. First Nat. Bank of Weiser, 18 Idaho, 290, 109 P. 257. A similar statute has been construed by the Circuit Court of Appeals of the Fifth Circuit, wherein it was said: "The statute imposes the tax, not on the bank or its capital, but upon the shareholders; the bank being required to pay for them. The conclusion is that the payment in question was not for 'taxes imposed,' within the meaning of those words as used in the provisions of the Corporation Tax Act [36 Stat. 112-117] as to the deductions allowable in ascertaining the corporation's.net income, as the tax in question was imposed, not on the corporation, but upon its shareholders." First Nat. Bank of Jackson, Miss., v. McNeel, 238 F. 559.

The Revenue Act permits as a deduction from gross income the payment of taxes made within the year by the corporation, being such tax liability assessed solely upon the corporation or its property, and not to discharge liabilities for which others would be ultimately responsible. "Though payment of such taxes is a duty imposed upon the bank, it cannot be said that the taxes are imposed either upon it or its property. The taxes are imposed upon the shareholders and their property, and the payment is by the bank only as their representative." Eliot Nat. Bank v. Gill (C. C. A.) 218 F. 600, 602; Nat. Bank of Commerce v. Allen (C. C. A.) 223 F. 472; Northern Trust Co. v. McCoach (D. C.) 215 F. 991.

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[4] It seems well settled by the authorities that, under statutes similar to the Idaho one under consideration, the payment of such taxes on bank stock is a tax assessed on the stockholders of the bank, and not upon the bank itself, and is not allowed as a deduction from the gross income of the bank. In this connection it may be further said that if the claim of the parties for a refund, filed with the Commissioner, does not contain this ground, it would seem that it cannot be considered at this time, as this action should be based upon the same grounds and only such as were presented to the Commissioner of Internal Revenue in the claim for refund. The purpose of this condition is to afford the Commissioner an opportunity to correct errors, if any, and to spare the parties the burden of litigation. Tucker v. Alexander, 15 F. (2d) 356 (C. C. A. 8th Circuit, opinion filed Oct. 27, 1926); Red Wing Malting Co. v. Willcutts (C. C. A.) 15 F. (2d) 626.

[5] Finally we come to the question whether the facts of the case bring the conduct of certain officers of the bank during these years, in negotiating these loans, under the charge of the plaintiff that it constituted "constructive embezzlement," entitling the plaintiff to deductions arising out of the financial inability of certain borrowers of the bank to meet their obligations, it being urged by plaintiff in his complaint and on the argument that he is entitled to have allowed as a deduction these loans, which were not paid back to the bank for the reason that they and certain overdrafts were made to officers and stockholders of the bank who were insolvent and without proper security, and their failure to charge off overdue and unsecured loans, were all in violation of the banking laws of the state. To bring this contention under the provision of the stat

not inherent, but statutory.

Right of appeal is not inherent; it is purely a matter of statute.

whom it has been intrusted."

The mere fact that errors were made or bad judgment exercised in negotiating these loans by officers of the bank, or a disregard of some of the requirements of the banking laws of the state, without evidence showing fraudulent intent, would not seem to be sufficient to establish that they were done with the intent to injure or defraud the bank. I am not impressed with this contention under the evidence, as this record is silent as to there being established any intent upon the part of those who negotiated these loans on behalf of the bank to appropriate the funds to their own use, or to injure or defraud the bank. It may be that they did not use the best of judgment in passing upon the financial ability of the borrowers to repay the bank, yet that would not constitute embezzlement or theft. After all, the contention takes us back to the claim that the conduct of the officers of the bank in making these loans resulted in nothing more than "bad debts," which, as has been stated, are not allowable as deductions.

These considerations lead us to the granting of the motion for nonsuit and a dismissal of the complaint.

In re MARYANOV et al. District Court, E. D. New York. July 13, 1927.

1. Bankruptcy 56-Money judgment of state court after trial by justice and jury is "final judgment," constituting act of bankruptcy, notwithstanding pendency of appeal, where no stay taken (Bankruptcy Act, § [Comp. St. § 9585]; Civil Practice Act N. Y. §614).

Money judgment of the state court against alleged bankrupt, entered after trial by a justice and jury, is a "final judgment" such as to constitute an act of bankruptcy within Bankruptcy Act, § 1 (Comp. St. § 9585), notwithstanding pendency of appeal, where no stay has been taken under Civil Practice Act N. Y. § 614; it not being necessary that judgment should be "conclusive."

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Final Decree or Judgment.]

3. Judgment 216—Judgment after trial before justice and jury is not interlocutory merely because appeal has been taken, but no stay (Civil Practice Act N. Y. § 472).

A judgment entered after trial before a justice and a jury wherein no stay has been taken is not interlocutory within Civil Practice Act N. Y. § 472, defining judgments as either final or interlocutory, simply because an appeal has been taken.

4. Bankruptcy

11-Bankruptcy proceedings are in nature of proceedings in equity. Proceedings in bankruptcy generally are in the nature of proceedings in equity.

5. Bankruptcy 56-Federal District Court cannot review judgment of state court against alleged bankrupt, but will treat it as final un til contrary appears.

Federal district court cannot review judgment of state court against alleged bankrupt from which appeal has been taken, in proceeding to determine whether he is in fact bankrupt, but will treat the judgment as final until the contrary appears.

6. Bankruptcy56-Insolvent debtor, falling to vacate money judgment within 30 days, is as to another creditor guilty of act of bankruptcy, even though appeal without stay is taken (11 U. S. C. A. § 21a, subd. 4).

Insolvent debtor who permits creditor to obtain money judgment which he has not vacated or discharged within 30 days is as to another creditor guilty of act of bankruptcy within 11 U. S. C. A. § 21a, subd. 4, even though appeal, but no stay, has been taken by the alleged bankrupt.

7. Bankruptcy 56-Statute making It act of bankruptcy for debtor to fail to discharge Judgment has not changed purpose of law to prevent preference (11 U. S. C. A. § 21a, subds. 3, 4).

11 U. S. C. A. § 21a, subd. 4, making it an act of bankruptcy to permit creditor to obtain judgment and fail to discharge it within 30 days, has not changed the purpose of bankruptcy law, as evidenced by section 21a, subd. 3, making it act of bankruptcy to fail to discharge judgment within five days before sale thereunder; the purpose in both cases being to prevent preference.

8. Bankruptcy 76(3)-Sole judgment creditor cannot avail himself of debtor's failure to discharge judgment as act of bankruptcy (II U. S. C. A. § 21a, subd. 4).

judgment in state court against alleged bankSole judgment creditor who has obtained a rupt cannot avail himself of the debtor's failure to discharge it within 30 days, as required by 11 U. S. C. A. § 21a, subd. 4, as an act of bankruptcy in petition for involuntary adjudication.

parties; whether correctly or not is not for this court to determine. Each of the partners were liable jointly and separately, and the form of judgment appears to be that approved by the state court. Judd Oil Co. v. Hubbell, 76 N. Y. 543.

The mere fact that the statutes of the state give a right of appeal to the defeated party does not take away the finality of a judgment pending such appeal. It is final for the purpose of appeal, and remains final until reversed or modified in accordance with the state procedure. The mere taking of an appeal does not take away its final character.

"The rule is well settled and of long standing that a judgment or decree to be final, within the meaning of that term as used in the acts of Congress giving this court jurisdiction on appeals and writs of error, must terminate the litigation between the parties on the merits of the case, so that, if there should be an affirmance here, the court below would have nothing to do but to execute the judgment or decree it had already rendered. Whiting v. Bank of United States, 13 Pet. 6 [10 L. Ed. 33]; Forgay v. Conrad, 6 How. 201 [12 L. Ed. 404]; Craighead v. Wilson, 18 [How.] Id. 199 [15 L. Ed. 332]; Beebe v. Russell, 19 How. Id. 283 [15 L. Ed. 668]; Bronson v. Railroad Co., 2 Black, 524 [17 L. Ed. 347]; Thomson v. Dean, 7 Wall. 342 [19 L. Ed. 94]; St. Clair County v. Lovingsston, 18 [Wall.] Id. 628 [21 L. Ed. 813]; Parcels v. Johnson, 20 [Wall.] Id. 653 [22 L. Ed. 410]; Railroad Co. v. Swasey, 23 [Wall.] Id. 405 [23 L. Ed. 136]; Crosby v. Buchanan [23 Wall.] Id. 420 [23 L. Ed. 138]; Commissioners v. Lucas, 93 U. S. 108 [23 L. Ed. 822]. It has not always been easy to decide when decrees in equity are final within this rule, and there may be some apparent conflict in the cases on that subject, but in the common-law courts the question has never been a difficult one. If the judgment is not one which disposes of the whole case on its merits, it is not final." Bostwick v. Brinkerhoff, 106 U. S. pp. 3 and 4, 1 S. Ct. 15, 16 (27 L. Ed. 73).

Here the pleadings submitted defined the issue. The case was duly tried so far as this court can determine. The merits were determined by the justice and jury, constituting the court, having jurisdiction. Ex parte Watkins, 3 Pet. (28 U. S.) 193, 7 L. Ed. 650. It was final for the purpose of taking an appeal. Fuentes v. Mayorga, 7 Daly (N. Y.) 103.

[2] The right of an appeal is not inherent. It is purely a matter of statute. It did not exist at common law. Evansville & T. H. R.

Co. v. Terre Haute, 161 Ind. 26, 67 N. E. 686; National Bank v. Peters, 144 U. S. 570, 12 S. Ct. 767, 36 L. Ed. 545.

[3] The Civil Practice Act of New York defines "judgments" as either "final" or "interlocutory." Civil Practice Act, § 472. Certainly the judgment in question cannot be considered "interlocutory" simply because an "appeal" has been taken.

The state court has stated the difference between a "final" judgment and one that becomes "conclusive" as follows: "The term 'final judgment' is susceptible of two significations, one of which, in a strict legal sense, is its true meaning. It is a determination of the rights of the parties after a trial whether such is the subject of review or not, and the other is its colloquial use or signification, which makes it synonymous with 'decisive,' or a judgment that cannot be appealed from, and which is perfectly conclusive upon the matter adjudicated. Dean v. Mar

schall, 90 Hun, 335 [338], 35 N. Y. S. 724, 725." 3 Words and Phrases, First Series, 2777.

Certainly Congress did not intend by its broad language that such a bar must exist as a "conclusive" judgment before other creditors could claim that a preference had been, or was about to be, obtained. A "final" judgment would plainly be sufficient. [4] "Proceedings in bankruptcy generally are in the nature of proceedings in equity." Bardes v. Bank, 178 U. S. 524, 20 S. Ct. 1000, 44 L. Ed. 1175. It has been held recently that a state judgment is sufficient in this court, in equity, to prove the existence and amount of the indebtedness. Hatch v. Moroseo (C. C. A. 2d) 19 F. (2d) 766, decided May 9, 1927.

The plaintiffs have appealed from said judgment, and said appeal is still pending, but no attempt to pay the judgment or to stay execution has been made. Civil Practice Act, § 614.

The plaintiffs claimed on said state trial, and now claim, that the defendant in said action owed them some $10,000; that this claim constituted, and now constitutes, sufficient assets to render them solvent; that because of said appeal pending there has been no final judgment entered. In arguing thus, they give little importance to the judgment roll duly filed in the state court. [5] There is no statute that I am aware of that gives this federal court the right to act as a court of review over suits and proceedings of a state court. There is no constitutional question involved. The state appellate courts constitute the forum for such discussion.