Staley, Freedman and Aldisert, Circuit Judges.
Three taxing authorities are competing for either all or the lion's share of a $7,046.50 fund remaining in a bankruptcy estate after payment of only the costs and expenses of administration, there being no wage claimants.*fn1 In point of time they are: (1) Commonwealth of Pennsylvania, Department of Revenue, Bureau of Corporation Taxes (hereinafter "Department"), with a claim of $7,461.69; (2) Commonwealth of Pennsylvania, Bureau of Unemployment Contributions, with a claim of $5,771.44; and (3) Internal Revenue Service, Withholding and Social Security Taxes, claiming $8,242.30. The trustee in bankruptcy objected to all three claims; his objections to the second and third were overruled by the referee who held they were valid tax liens. But as to the first claim, the referee sustained the trustee's objection "that the amount claimed is an estimate and no proof of said amount has been offered." The referee further held that the Department did not have the status of a tax lien claimant but was merely presenting a tax claim and would therefore have to follow the second and third claimants in order of payment. Thus, out of the $7,046.50 fund, the Pennsylvania Bureau of Unemployment Contributions received $5,771.44, with the balance of $1,275.06 going to the Internal Revenue Service. The Department, of course, received nothing. Upon review, the district court reversed the referee's decision, holding that the Department possessed a valid lien in bankruptcy and that it had properly proved its lien claim. Before us now is the trustee's appeal from the district court's order remanding the record to the referee for further proceedings consistent with its opinion.
The corporation taxes involved here consist of capital stock taxes, corporate loan taxes, and corporate net income taxes.*fn2 Since neither the bankrupt nor the trustee filed returns for the period between 1962 and March 23, 1967,*fn3 disclosing the bankrupt's liability for such taxes, the Department estimated the taxes due and owing from the bankrupt's 1961 tax return,*fn4 see 72 Purdon's Pa.Stat.Ann. § 804, and settled these estimates with the Department of the Auditor General. See 72 Purdon's Pa.Stat.Ann. §§ 801 et seq. There is no evidence that the bankrupt ever contested these estimates.*fn5
At the audit in the bankruptcy court, the Department introduced a sworn and certified statement of claim, including settlement sheets for each of the taxes in question. The referee, relying upon dictum in our opinion in In re Lehigh Valley Mills, Inc., 341 F.2d 398 (C.A.3, 1965), where the same three types of corporate taxes were involved, held that the Commonwealth possessed only an inchoate lien since it was not thought to be summarily enforceable and had not proceeded to judgment.*fn6 In a recent decision dealing with this problem, In re Regal Petroleum Products Co., 287 F. Supp. 458 (E.D.Pa., 1968), the district court, at note 5, termed Lehigh Valley "inapplicable," and held that under section 1401 of the Pennsylvania Fiscal Code, 72 Purdon's Pa.Stat.Ann. § 1401 (Supp.),*fn7 and the Pennsylvania decisional law,*fn8 when estimated corporate taxes are settled with the Department of the Auditor General, they are valid statutory liens. On appeal, this court affirmed in a per curiam opinion, 413 F.2d 299 (C.A.3, 1969), and we now consider the issue settled.
At the time of our Lehigh Valley decision, (1965), section 67(c) (2) of the Bankruptcy Act invalidated as against the trustee all statutory liens created or recognized by state law on personal property not accompanied by possession, levy, sequestration, or distraint. See 4 Collier on Bankruptcy para. 67.281 (14th ed. 1967). And before the passage of the 1966 amendment to § 67(c) it was at least arguable that state tax liens on personalty unaccompanied by possession were invalidated by § 67(c) (2).*fn9 Compare Rochelle v. City of Dallas, Texas, 264 F.2d 166 (C.A.5), cert. denied, 361 U.S. 827, 80 S. Ct. 75, 4 L. Ed. 2d 70 (1959), and In re Baron, 165 F. Supp. 186 (D.Conn.1958), with In Matter of Gordon (Ref. E.D.Mich., 1952), 27 Ref.J. 85, July, 1953. See generally, 4 Collier on Bankruptcy § 67.281 (14th ed. 1967). After the passage of the 1966 amendment, however, the basic test of a lien's validity became whether under state or federal nonbankruptcy law the lien was perfected against bona fide purchasers. 11 U.S.C. § 107(c) (1) (B), as amended, (Supp. IV).*fn10 And since there can be no doubt that under the law of Pennsylvania the instant liens were so perfected,*fn11 we hold, in consonance with this court's per curiam affirmance of Regal Petroleum, that the Department does have the status of a tax lien claimant in bankruptcy.
The Department spent a great deal of time at oral argument and space in its brief arguing on behalf of the district court's holding that its claim was properly proved. But as stated in Greenville Banking & Trust Co. v. Selcow, 25 F.2d 78, 79 (C.A.3, 1928): "Proof of a claim is one thing, and its allowance another." And since we think the paramount issue before us is whether the Department's claim should be allowed, we will assume for purposes of this appeal that the claim was duly proved.*fn12
Section 57(d) of the Bankruptcy Act provides:
"Claims which have been duly proved shall be allowed upon receipt by or upon presentation to the court, unless objection to their allowance shall be made by parties in interest or unless their consideration be continued for cause by the court upon its own motion: Provided, however, That an unliquidated or contingent claim shall not be allowed unless liquidated or the amount thereof estimated in the manner and within the time directed by the court; and such claim shall not be allowed if the court shall determine that it is not capable of liquidation or of reasonable estimation or that such liquidation or estimation would unduly delay the administration of the estate or any proceeding under this title." (Emphasis added.) 11 U.S.C. § 93(d).
The law is clear that even if the trustee had not objected to the Department's claim, if the referee had doubts as to its nature, validity, or amount, he not only had the power but the obligation to order proper inquiries and satisfy himself that the claim was entitled to allowance. See Katchen v. Landy, 382 U.S. 323, 329, 86 S. Ct. 467, 15 L. Ed. 2d 391 (1966); Lesser v. Gray, 236 U.S. 70, 75, 35 S. Ct. 227, 59 L. Ed. 471 (1915); In re Noble, 15 F. Supp. 648, 650 (W.D.N.Y., 1936). It is evident from this record that the referee had grave doubts concerning the propriety of the amount of the claim, declaring it to be "nothing more than a guess" in his supplemental findings, and at the audit he directed counsel for the trustee to file a tax return for the bankrupt so that the proper amount of the bankrupt's corporate tax liability could be determined. Although a tax return was never filed, it seems almost certain from the record before us that had the referee not erred in thinking that the Department did not have a valid tax lien, he would have insisted that the trustee's attorney comply,*fn13 and thus, because it had the first lien in point of time, the Department would have been paid first, but only in the amount of the actual taxes that were due and owing. Judging from the Department's brief in this court, it appears that it would not have objected to being so paid, but now it argues, in effect, that all it had to do was to present an estimate; then it was the trustee's duty to show that the estimate was inaccurate by determining exactly how much the bankrupt owed, but since the trustee failed to do this, the referee must allow the claim in full. We think this argument confuses proof of a claim with its allowance.*fn14
In passing upon what claims should be allowed or disallowed, the bankruptcy court sits as a court of equity and, as such, is empowered "to sift the circumstances surrounding any claim to see that injustice or unfairness is not done in administration of the bankrupt estate." Pepper v. Litton, 308 U.S. 295, 308, 60 S. Ct. 238, 246, 84 L. Ed. 281 (1939). The referee leaves the impression in his supplemental findings that even if he believed that the department had a valid tax lien, he had the option to disallow it because it represented "nothing more than a penalty for failure to file a tax return." While it is true that courts have long held that section 57(j) of the Act, 11 U.S.C. § 93(j), prohibits the allowance of tax penalties for nonpayment, see e.g., In re Hankey Baking Co., 125 F. Supp. 673 (W.D.Pa., 1954); In re 168 Adams Building Corp., 27 F. Supp. 247 (N.D.Ill.), aff'd, 105 F.2d 704 (C.A.7), cert. den. sub nom. Steinbrecher v. Toman, County Treasurer and County Collector of Cook County, Illinois, 308 U.S. 623, 60 S. Ct. 378, 84 L. Ed. 520 (1939), and that the Supreme Court in Simonson v. Granquist, 369 U.S. 38, 82 S. Ct. 537, 7 L. Ed. 2d 557 (1962), ruled against allowance of tax penalties, even when secured by liens, to say that the Department's entire claim is a penalty does not seem quite accurate. We think perhaps it would be more precise to say that to the extent the claim exceeds the actual taxes due and owing it is "swollen by the inclusion of a forbidden penalty," Gardner v. New Jersey, 329 U.S. 565, 580, 67 S. Ct. 467, 475, 91 L. Ed. 504 (1947), and only to that extent is it non-allowable.
But what are the taxes due and owing? For all we know they could be $7,000.00 or $700.00. The very fact that the bankrupt's actual tax liability is unknown strongly suggests that the Department's claim is in the nature of an unliquidated tax claim rather than an outright penalty. The Department, no doubt, would vehemently object to such a characterization because of its status as a lien claimant, but the possibility that it could have summarily enforced its lien for the full amount under state law had bankruptcy not ensued need not sway the bankruptcy court. If the court, in the exercise of its equitable powers, can look behind a state judgment to determine whether it was part of a planned and fraudulent scheme, Pepper v. Litton, supra, and if it can disallow a perfected lien for tax penalties, Simonson v. Granquist, supra, we think it can also look behind the formal proof of a tax lien claim, when there has been no prior hearing nor contest, to see whether its amount was computed in a manner calculated reasonably to approximate the bankrupt's actual tax liability.
Here, we have a situation where the Pennsylvania Bureau of Unemployment Contributions and Internal Revenue Service have submitted claims based upon either an examination of the books of the bankrupt or by self-assessed returns filed by the bankrupt. The Department, on the other hand, has submitted a claim based on the bankrupt's 1961 tax return from which, for example, it has estimated that the bankrupt's taxable net income for the period from June 30, 1963 to June 30, 1964, was $11,898.45. Then, for the next three years it very conveniently estimates the taxable net income to be the same $11,898.45. According to the referee, if these figures are accurate, they "would purport to show that this corporation was solvent." Solvent vel non, we cannot help but conclude that when an agency estimates, without examination of books or records for the years assessed, that a corporation ...