BIGELOW, Vice Chancellor
Syllabus by the Court.
1. A municipality has a lien for personal property tax on the chattels of delinquent, an insolvent corporation, and upon the sale thereof by the receiver of the delinquent, the lien is transferred to the proceeds. The claim of the city is entitled to preference.
2. A tax on real estate is only a lien on the land and not a personal obligation of the landowner or a charge on its chattels. The receiver is justified in paying it only when there is an equity in the land to be preserved for the benefit of creditors.
3. A metered water charge is a personal obligation of the consumer, but when thecharge is a lien on land, the municipality is not entitled to come in as a general creditor until it has exhausted its security.
Suit by William C. Bea against Turner & Company, wherein receiver was appointed for the defendant and wherein Jersey City filed claims with the receiver.
Order in accordance with opinion.
Leo Blumberg, of Jersey City, receiver.
James A. Hamill and Charles A. Rooney, both of Jersey City, for City of Jersey City.
William Allan Cudlipp, of Jersey City, for Trust Co. of New Jersey, mortgagee.
BIGELOW, Vice Chancellor.
Jersey City has filed with the receiver of the defendant insolvent corporation claims for taxes and water rents.
The receiver properly concedes that the claim for personal property tax for the years 1931 to 1933, amounting to $2,461.54, is valid and entitled to preference. "An Act in relation to taxes upon personal property and providing for the collection thereof," P. L. 1896, p. 181, 4 Comp. St 1910, p. 5182, § 223, directs the receiver of a corporation, appointed by this court, to pay, out of the first moneys received by him, unpaid taxes with interest and penalties. A proviso preserves the lien of employees for wages. Expenses of administration, wages, and taxes due to the state are first payable, then the personal property tax due the municipality. Spark v. La Reine Hotel Corp., 112 N. J. Eq. 398, 164 A. 589; Philadelphia Dairy Products Co. v. Summit Sweets Shoppe, 113 N. J. Eq. 458, 460, 167 A. 667. The receiver has paid all wage claims and has sufficient funds on hand. to pay administration expenses and any state taxes that may be due, as well as the personal property tax. Again, "An Act for the assessment and collection of taxes (Revision of 1918)," P. L. 1918, p. 847, §§ 513 and 606, Comp. St. Supp. pp. 3499 and 3502, §§ 208—66d (513), 208—66d (606), operates to give the municipality a lien on the chattels of the delinquent Upon the sale thereof by the receiver, the lien was transferred to the proceeds. Pasquariello v. Cordage Co., 108 N. J. Eq. 491, 155 A. 608; Chase Brass, etc., Co. v. Bart Reflector Co., 111 N. J. Eq. 59, 161 A. 54.
The claim of the city includes items for taxes levied on the company's motor vehicles Cor 1924, 1926, and 1927. Though the automobiles were assessed separately from the bulk of the company's chattels and were shown as a separate item in the tax bills, the tax thereon was a part of the general personal property tax of the company and is governed by the same rules and has the same preference. By an amendment to the tax act, P. L. 1927, c. 338, p. 790 (Comp. St Supp. § 208—66d (203), motor vehicles were exempted from taxation under the statute. Even considering this amendment as a repeal pro tanto, it did not affect liability for the automobile taxes theretofore imposed. Town of Belvidere v. RaDroad Co., 34 N. J. Law 193.
Counsel for the city agrees with the receiver that taxes on the real estate are not a charge upon the funds in the hands of the receiver, and I too agree, although there are provisions in the Tax Act pointing the other way, especially in sections 606 and 609 (Comp. St. Supp. §§ 208—66d (606), 208—66d (609). These provisions are vestiges of the method of collecting taxes that prevailed until 1854. Taxes on real estate were not a lien on the land and were enforced like personal property taxes by distraint and sale of chattels and by imprisonment of the delinquent. Paterson, Laws 1800, pp. 404, 406, 408, §§ 17 and 32. By P. L. 1854, p. 429, and P. L. 1863, p. 497, land taxes were made a lien on the lands and our present system of enforcement inaugurated. For many years, the law was that such taxes could be collected either by distraint or by sale of the land. Estell v. Hawkens, 50 N. J. Law, 122, 11 A. 265. The act for the assessment and collection of taxes, P. L. 1903, pp. 394, 422, § 43, 4 Comp. St. 1910, p. 5126, § 43, made it the duty of the collector to enforce all taxes by distress and sale of the chattels of the delinquent and not merely taxes on personalty. In the Revision of 1918, § 606, Comp. St. Supp. § 208—66d (606), this provision was changed so that it is now the duty of the collector "to enforce the payment of all taxes on personal property and poll taxes and dog taxes by distress and sale of any of the goods and chattels of the delinquent in the county." The city has no lien on chattels for the real property tax. The act of 1896 mentioned above, which requires a receiver of a corporation to pay taxes, is limited by its title to taxes on personalty. Section 202 of the Revision of 1918 (Comp. St. Supp § 208—66d (202), imposing personal liability, does not apply to a tax on real estate. Wrightstown v. Salvation Army, 97 N. J. Law, 89, 123 A. 607.
A tax on real estate is only a lien on the land and not a personal obligation of the landowner or a charge on its chattels. The receiver is justified in paying it only when there is an equity in the land to be preserved for the benefit of creditors. Since it is doubtful whether there is any such equity, the receiver will not be directed to pay the tax. Of course, I am speaking of taxes which accrued before the appointment of the receiver and not taxes which accrued while the receiver was using the property for the benefit of creditors. In the latter case, the receiverpays taxes as an operating expense. McKenzie v. Standard Bleachery Co., 109 N. J. Eq. 429, 157 A. 845.
The last question raised has to do with $39,580 due to the city for water supplied to Turner & Co. The obligation to pay water rates rests in contract, express or implied. Such a contract arises from the actual use of water by the party sought to be charged. Mayor, etc., of Jersey City v. Morris Canal & Banking Co., 41 N. J. Law, 66; Lehigh Valley R. Co. v. Jersey City, 108 N. J. Law, 574, 138 A. 467; Id., 104 N. J. Law, 437, 140 A. 920. The personal liability of the corporation is reinforced by statute. P. L. 1852, p. 419, 425, § 14, and the charter of Jersey City, P. L. 1871, p. 1094, § 81, at page 1131, and the Home Rule Act, P. L. 1917, c. 152, p. 319, article 32, § 11, at page 436, Comp. St. Supp. p. 2300, § *136—3212. The city is therefore a general creditor for the metered water charge; but the proof of claim shows that the city has taken the steps pointed out by the statutes above mentioned to impress the charge as a lien on the real estate, and it asserts that this lien is superior to the mortgage—an assertion probably well founded. Vreeland v. Mayor, etc., of Jersey City, 37 N. J. Eq. 574; Ford Motor Co. v. Town of Kearney, 91 N. J. Law, 671, 104 A. 254, L. R. A. 1918D, 361; K. S. S. Realty Co. v. Ostroff, 100 N. J. Eq. 128, 135 A. 869; Id., 101 N. J. Eq. 771,138 A. 921. A secured creditor must first exhaust his security and may come in as a general creditor for a dividend upon the balance only. President, etc., of State Bank v. Receivers, 3 N. J. Eq. 266; Butler v. Commonwealth Tobacco Co., 74 N. J. Eq. 423, 70 A. 319.
The receiver will be directed to disallow the claim for water sold to the company.