Brief for the United States — United States v. Bloom

Question presented... ..-................... rethtsesagtwee

Auth

Under Section 3466, Revised Statutes, the United States

is entitled to priority in payment of interest on the taxes

due it from the date of assignment until the taxes are

ENS din. Conconccedipsutnmalaecheuesdvus ll

2. The interest accruing after the assignment is a

priority debt due to the United States._...._____ 18

3. The bankruptcy rules governing allowance of in-

COD BO NS CII s ccc wesicdagacesacs canese 24

4. The general rules governing allowance of post-

assignment interest to other creditors do not

WII « on cern ccewcnwneneodecccecescncsecencs 30

bb wiestoenscedconbedndebhtbiekeiedient nce 33

a CITATIONS

La Cases:

i Am. Iron Co. v. Seaboard Air Line, 233 U. 8. 261__._.___ 26

American Surety Co. v. Carbon Timber Co., 263 Fed. 295... 20

Big Diamond Mills Co. v. United States, 51 F. 2d 721____- 18

Billings v. United States, 232 U. 8. 261_........________. 19

Board of Comm'rs v. United States, 308 U. 8. 343_________ 32

3 Bousfield & Poole Manufacturing Co., In re, 3 Fed. Cas.

a i ES SERIO ETA Ba AI 27

a Bramwell v. U. 8. Fidelity Co., 269 U. 8. 483___ 19, 24, 25, 28, 30

: a A Gg eG ee 33

Byuss Mfg. Co., In re, 64 N. ¥.8. 2d 601... 33

—— Building & Loan Assn. v. Commissioner, 23 B. T. A.

idebindesentencenentddue dwbbblodbaws tiedbon ce 18

ver gears enamte agar sie 9 57 F. 2d 769__ 18

a Guarantee Co. v. Title Guaranty Co., 224 U. 8. 152__.____. 27

q Halsted, Matter of, 42 App. Div. 101_........_...______. 33

Illinois v. Campbell, 329 U. 8. 362............-.. 25, 32

Illinois v. United States, 328 U. 8.8 _______ 10, 18, 20, 22, 23, 29

amen, Soe, 667 Ped. OE... .. 2325... 2s. 26-27, 28

981155—51——1

Cases—Continued Page

Lewis, Trustee, y. United States, 92 U. 8. 618........._.. 27

Manning v. Seeley Tube & Box Co., 3388 U. 8. 561_.._. 12, 18, 30

Massachusetts v, United States, 333 U.8.611...._____ 21, 22, 28

Mothersead v. United States Fidelity. & Guaranty Co., 22

F. 2d 644, certiorari denied, 276 U. 8. 637.........____ 20

New Jersey v. Anderson, 203 U. 8. 483........... 32

New York v. Maclay, 288 U.8.200........ 3

New York v. Saper, 386 U. 8.328............. s

12, 17, 23, 25, 26-27, 28, 29

Pearsall v. Central Oil & Gas Co., 23 F. 94 716........... 20

Penrose v. United States, 18 F. SR 18

Phelps v. United States, 105 F.24904..... 18

bons Sessa ter etdeensebutseteedipenareconveeces, 22

Price v. United States, 269 U. 8,492... ss 19, 29

Rodgers v. United States, 382 U. 8. 371_........ 30, 31, 32

Royal Indemnity Co. v. United States, 313 U. 8. 289....__- 32

Sawyer Tanning Co. v. C. J. O' Keefe Shoe Co., 23 F. 2d 717. 13, 20

Simpson, Inc., Matter of v. United States, 258 App. Div. 148. 20

Spokane County v. United States, 279 U. 8. 80_____. 19, 23, 30, 31

United States v. Emory, 314 U. 8. 423.__- 23, 24, 25, 27, 29, 30, 32

United States v. Fisher, 2 Cranch 358... 31

United States v. Kaplan, 74 F. 24 664............. 28

United States v. Oklahoma, 261 U. 8. 253......____ 23, 24, 28, 31

United States v. Pelzer, 312 U. 8.399... 33

United States v. Remund, 330 U. 8. 539........._____ 20, 23, 29

United States v. State Bank of North Carolina, 6 Pet. 29. 22, 30,

United States vy. Summerlin, 310 U. 8. 414....... 28

United States v. Waddill i | 5S eee 18

Vanston Committee v. Green, 329 U. 8. 156...........___. 32

Statutes:

Act of March 2, 1867, ¢. Pee eS MDa atone 27

Internal Revenue Code:

Sec. 1400 (26 DU. 8. C. SAE SE aes Seam ll

Sec. 1401 (26 U. 8. oc RS aos) ll

Sec. 1410 (26 U.S. C. SRG Sy a ar eae 11

See. 1420 (26 U. 8. C. 1420).............. 2,

6,7, 9, 11, 12, 18, 19, 21, 29, 31

See. 1622 (26 U.S. C., 0 NEE Te ll

See. 1638 (26 U. B.C. 1693)....................... 11

Sec. 1627 (26 U. 8. C. 1627).............. 2, 6, 7,9, 11

Revenue Act of 1918, ¢. 18, 40 Stat. 1057, Sec. 250... _- 13

Revenue Act of 1921, ¢. 136, 42 Stat. 227, Sec. 250... __- 13

Revenue Act of 1924, e. 234, 43 Stat. 253, Sec. 276.___ 13-14, 17

Revenue Act of 1926, ¢. 27, 44 Stat. 9, Sec. 276... 14

Revenue Act of 1928, ¢. 852, 45 Stat. 791, Sec. 294... 14

4

Revenue Act of 1932, c. 209, 47 Stat. 169, Sec. 294... 14

Il

Statutes—Continued Page

Revenue Act of 1934, c. 277, 48 Stat. 680, Sec. 294.._.___ 14

Revenue Act of 1935, e. 829, 49 Stat. 1014, Sec. 404... __- 16

Revenue Act of 1936, c. 690, 49 Stat. 1648, Sec. 294______ 14

Revenue Act of 1938, c. 289, 52 Stat. 447, Sec. 2904. 16

Revised Statutes:

ee Dc oth | ee Z

7, 8, 9, 10, 19, 22, 24, 26, 28, 29, 31

erp he..%.. Semneienicnites: yeatrecies 3, 28

Inthe Supreme Gourt of the Wnited States

Ocroser Term, 1951

No. 100

THE Untrep Stares or AMERICA, PETITIONER

v.

Haro_p BLoom, GENERAL ASSIGNEE FoR THE BENE-

Fit OF CREDITORS oF Pavone Textie Corp.

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS OF

THE STATE OF NEW YORK

BRIEF FOR THE UNITED STATES

The opinion of the New York Supreme Court,

Special Term, New York County (R. 16-18), is

reported at 195 Mise. 702. The opinion of the

New York Supreme Court, Appellate Division,

First Department (R. 22-24), is reported at 276

App. Div. 596. The opinion of the Court of

Appeals of New York (R. 25-27) is reported at

302 N. Y. 206.

(1)

———

2

JURISDICTION

The judgment of the Court of Appeals was

entered on March 9, 1951. (R. 27-28.) The peti-

tion for writ of certiorari was filed on June 6,

1951, and was granted on November 5, 1951.

(R. 31.) Jurisdiction is conferred on this Court

by 28 U. S. C. 1257 (3).

QUESTION PRESENTED

Whether, in general assignment proceedings

for the benefit of creditors, Section 3466 of the

Revised Statutes entitles the United States to

priority in the payment of interest on its tax

claims for the period from the date of the filing

of the assignment until the taxes are paid.

STATUTES INVOLVED

Internal Revenue Code:

Sec. 1420. CoLLeEcTION AND PAYMENT OF

TAXES.

* * * * +

(b) Addition to Tax in Case of Delin-

quency.—If the tax is not paid when due,

there shall be added as part of the tax

interest (except in the case of adjustments

made in accordance with the provisions of

sections 1401 (¢) and 1411) at the rate of

6 per centum per annum from the date the

tax became due until paid.

* * * * P *

(26 U. 8. C. 1420.)

Sec. 1627 [Added by See. 2 (a), Current

Tax Payment Act of 1943, ¢. 120, 57 Stat.

126]. OTHER LAWS APPLICABLE.

inated i EE ORT NT LINE ET I WARE Ee CASEI Rae Hee ow

3

All provisions of law, including penalties,

applicable with respect to the tax imposed

by section 1400 shall, insofar as applicable

and not inconsistent with the provisions of

this subchapter, be applicable with respect

to the tax under this subehapter.

(26 U.S. C. 1627.)

Revised Statutes:

Sec. 3466, Whenever any person indebted

to the United States is insolvent, or when-

ever the estate of any deceased debtor, in

the hands of the executors or administra-

tors, is insufficient to pay all the debts due

from the deceased, the debts due to the

United States shall be first satisfied; and

the priority hereby established shall extend

as well to cases in which a debtor, not hav-

ing sufficient property to pay all his debts,

makes a voluntary assignment thereof, or

in which the estate and effects of an ab-

sconding, concealed, or absent debtor are

attached by process of law, as to cases in

which an act of bankruptey is committed.

(31 U.S. ©. 191.)

Sec. 3467 [As amended by See. 518 (a)

of the Revenue Act of 1934, ¢. 277, 48 Stat.

680]. Every executor, administrator, or

assignee, or other person, who pays, in

whole or in part, any debt due by the per-

son or estate for whom or for which he

acts before he satisfies and pays the debts

due to the United States from such person

or estate, shall become answerable in his

own person and estate to the extent of such

payments for the debts so due to the United

a - ae > ab ERAN Bie

4

States, or for so much thereof as may re-

main due and unpaid.

(31 U. 8S. C. 192.)

STATEMENT

The facts, as set out in the statement under New

York Rule 234 (R. 1-3) and as agreed upon (R.

3, 4-8), are as follows:

On April 26, 1948, Pavone Textile Corporation

executed an assignment to Harold Bloom for the

benefit of creditors, which was filed in the office

of the clerk of the County of New York on May

17, 1948. (R. 2, 4.) On October 8, 1948, the

United States filed a claim with the assignee for

social security and withholding taxes in the

amount of $2,345.34, ineluding penalties and in-

terest to September 30, 1948. (R. 2, 4.) The

proof of claim contained a demand for payment

of interest to the date of payment. (R. 2.)

The assignee filed his final account on February

8, 1949, and a supplemental account on April 1,

1949. (R. 2,5.) On April 1, 1949, the New York

Supreme Court at Special Term made an order

appointing a referee to take and state the final

and supplemental accounts of the assignee, hear

objections thereto, and take proof of all services

rendered. (R. 2, 5.) On June 23, 1949, the

referee filed his final report, in which he denied

to the United States post-assignment interest on

its tax claims. (R. 2, 5-7.) Thereafter the as-

signee moved to confirm the referee’s report, and

er Pe er ne PPO Le ee +

celal a

5

to direct the distribution of assets. (R. 7.) On

July 8, 1949, the return date of this motion, the

United States filed objections to that part of the

referee’s report which denied post-assignment in-

terest on its tax claims. (R. 2,7.) In an opinion

rendered July 19, 1949, the New York Supreme

Court at Special Term overruled these objections

(R. 16-18) and on August 2, 1949, entered an

order confirming the report in all respects (R. 2,

7, 12-15). Under this order, the assignee was

directed to pay the claims of the United States,

inelusive of penalties and interest up to the date

of the filing of the assignment, in the total amount

of $2,302.81 (R. 4, 13), and to retain as a reserve

fund pending the prosecution of any appeal by

the United States the amount of $413.34 as in-

terest on the tax claims of the United States from

May 17, 1948 (the filing date of the assignment),

until June 30, 1951 (R. 14). Pursuant to this

order, the amount of $2,302.81 has been paid to

the United States. (R. 4.)

On appeal by the United States from so much

of the order of Special Term as directed payment

of interest on its tax claim only to the date of

the filing of the deed of assignment (R. 7, 10),

the Appellate Division of the State Supreme

Court, First Department, reversed on April 25,

1950, holding that Section 3466 of the Revised

Statutes compels allowance of post-assignment

interest on the claims of the United States (R.

981155--51—2

—_— EE

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ata heel. BAU ANe ae Ms

SR AS

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Bitannsiinie cng BWR

21-24). On appeal by the assignee (R. 19-20),

the Court of Appeals of New York, on March

9, 1951, reversed the Appellate Division, holding

that Section 3466 of the Revised Statutes does not

entitle the United States to post-assignment

interest (R. 25-27).

SPECIFICATION OF ERROR TO BE URGED

The Court of Appeals of New York erred in

holding that under Section 3466 of the Revised

Statutes the United States was not entitled to the

payment of interest on its tax claims from the

date of the assignment until the date of payment

as a priority debt.

SUMMARY OF ARGUMENT

1. Under Sections 1420 and 1627 of the Internal

Revenue Code, the debtor in this case was uncon-

ditionally liable for the payment of interest on

the social security and withholding taxes owed

by it, as a part of the taxes, from their due

date until paid. The interest accruing after the

date of the assignment by the tax debtor for the

benefit of creditors is plainly payable under these

statutes which make no exception for the case

where the tax debtor may have become insolvent

*The Appellate Division and the Court of Appeals also

ruled on the claim of the State of New York under state stat-

utes for post-assignment interest on the unemployment taxes

due it (R. 23, 26-27). Those rulings are not before this Court

on certiorari and are not here relevant since they involve only

a construction of the state statutes.

7

and assigned his property. Nor does any other

federal statute create an exception. Apart from

the clear language of the interest sections, the

history of the treatment of interest due from in-

solvent persons in previous Revenue Acts makes

it abundantly clear that Congress intends interest

on tax debts to be collected from the estate of an

insolvent person down to the date of payment of

the tax.

2. Since the post-assignment interest was re-

quired to be paid by virtue of Code Sections 1420

(b) and 1627, it was a debt due the United States.

This being so, Section 3466 of the Revised Stat-

utes in clear terms commands that it be paid first.

The interest accruing after the assignment was

fixed as to liability and rate on the date of the

assignment. The fact that the precise amount of

the interest was not computable until the time of

payment of the tax claims had been determined,

affected, at most, the date on which the priority

attached, not the priority itself. Any other view

would not comport with the liberal construction

to which Section 3466 is entitled as a measure

designed to secure adequate public revenues.

Here the interest is a revenue expressly desig-

nated by Congress as one to be collected.

3. The lower court erroneously interpreted the

language of Section 3466 as making applicable to

assignment proceedings the rules applied in pro-

‘ceedings under the Bankruptey Act. The deci-

Cl RST a GN NY en

sions of this Court are clear that the language

relied on does not do this but merely defines the

acts of insolveney which will bring Section 3466

into play, and that proceedings in insolvency and

bankruptey are separate and distinct.

Nor does New York v. Saper, 336 U. 8. 328,

require disallowance of post-assignment interest,

as the Court of Appeals thought. It was con-

cerned only with the proper interpretation of the

Bankruptcy Act, as amended, which does not

apply here. The decision that that Act requires

disallowance of interest on tax claims, as in the

case of other creditors, is not pertinent here, since

the very terms of Section 3466 direct that the tax

claims are not to be assimilated to the claims of

other creditors but on the contrary have an abso-

lute priority.

Decisions under the original provisions of the

Bankruptey Act, which allowed post-bankruptcy

interest to be paid on tax claims, did so because

the tax claims under the original Act had an

absolute priority and were not subject to proof.

The tax claims of the United States under Section

3466 have the same status and accordingly those

decisions support allowance of the post-assign-

ment interest here.

If it be argued that there should be consistency

in the treatment of tax claims in bankruptcy

proceedings and in state insolvency proceedings,

the answer is that Section 3466 of the Revised

Statutes continues to apply where it has not been

i,

Ls Rin RR BeBe

FO an Rect HAat?', 00

9

superseded. Since it accords a priority to tax

claims not provided by the Bankruptcy Act, there

is no warrant whatsoever for trying to force into

a common mold proceedings to which Congress

has given dissimilar treatment. Since the Bank-

ruptey Act concededly does not apply to the state

proceedings, there is no reason that its limitations

on interest should. Indeed an exemption of the

interest from the priority given all debts under

Section 3466, which has the function of assuring

adequate public revenues and is construed liber-

ally to achieve that purpose, can only be implied

upon the clearest showing of Congressional intent,

which is not present here.

4. The rules adopted by the courts to determine

whether other creditors are entitled to be paid

post-assignment interest do not apply to the

priority claims of the United States for such

interest. Section 3466 of the Revised Statutes

and Code Sections 1420 (b) and 1627, which pro-

vide for the payment of the interest as a priority

debt, are supreme and cannot be displaced except

by Congress. Equitable rules of distribution ap-

plied by the New York courts cannot govern

allowance of interest on priority tax claims arising

under federal statutes. The matter is one which

may not vary with the particular state courts

distributing the insolvent estate but must be de-

termined under a fixed rule of uniform applica-

tion. If any inequities are thought to exist in the

AOE ES AeA ESTEE +

10

application of the controlling statutes as they

were written, the remedy lies with Congress, and

not the courts.

ARGUMENT

Unper Secrion 3466, Revisep STATUTES, THE

Unrrep States ts Entititep To Priority 1N Pay-

MENT oF LNTEREST ON THE Taxes Due It From

‘He Date or ASSIGNMENT UNtiL THE TAXES

ArE PAatp

Section 3466 of the Revised Statutes, supra, p.

3, provides that “the debts due to the United

States shall be first satisfied’? whenever a person

indebted to the United States is insolvent and

makes a voluntary assignment of his property. —

In this case the debtor, a corporation, did not |

have sufficient property to pay all its debts and ©

made a voluntary assignment thereof for the |

benefit of creditors. Thereupon the United States

became entitled to be paid first with respect to

the debts due it. Illinois v. United States, 328

U. S. 8, 9. This was recognized by the lower

court, which stated that the federal priority stat-

ute ‘clearly has application here’’ (R. 25), and is

conceded by the respondent assignee in his brief

opposing the granting of certiorari (Br. 2).

There is no dispute that under Section 3466

the United States was properly accorded priority

by Special Term (R. 12-15) for the payment of

the taxes due it, including interest thereon up to

the date the assignment was filed. The only ques-

ieee eerennmmennnemens . ——

ll

tion is as to whether interest accruing on the taxes

for the period after that date until the taxes were

paid is required to be paid by the assignee under

the priority provided by Section 3466. It is our

position that interest on federal taxes continues

to accrue after the date of the assignment and

that it must be paid in advance of the claims of

other creditors.

1. The running of interest was not terminated

by the assignment.

The taxes due the United States were social

security and withholding taxes." With respect to

the social security taxes, Section 1420 (b) of the

Internal Revenue Code, supra, p. 2, provides that

if the tax is not paid when due, there shall be

added as part of the tax interest at the rate of

6 percent per annum from the date the tax became

due until paid. And Section 1627 of the Code,

supra, p. 2, makes the interest provision of Sec-

tion 1420 (b) applicable to the withholding tax.

2 The social security taxes were the federal insurance con-

tributions (or so-called “Title VIII") taxes imposed by Sec-

tion 1400 of the Internal Revenue Code on employees and by

Code Section 1410 on employers. The employees’ tax Was re-

quired by Section 1401 (a) to be collected by the employer

by deducting the amount of the tax from the wages as and

when paid.

The withholding taxes were the amounts required to be

deducted and withheld as income taxes by the debtor corpora-

tion from the wages paid employees pursuant to Section 1622

of the Internal Revenue Code. Under Section 1623 the em-

ployer was Hale to pay to the United States the income tax

required to be deducted and withheld.

JP or tee ew

12

Thus, the amounts of both kinds of taxes in this

case were increased under the specific terms of the

statutes by interest at 6 per cent from the due

dates of the taxes until they were paid.

There is no suggestion in the language of See-

tion 1420 (b) that the running of the interest

there prescribed is to stop if an assignment for

the benefit of creditors is made, if a receiver is

appointed, or indeed in any situation involving

the estate of an insolvent tax debtor. And no

other federal statute contains provisions which

could be construed as evidencing a Congressional

intent to stop interest on tax debts in the case of

an assignment for the benefit of creditors. This

is in contrast to the situation in which a petition

in bankruptey is filed, where, as this Court held

in New York vy. Saper, 336 U. 8. 328, the Bank-

ruptey Act, as amended in 1926 and 1938, indi-

cated that Congress intended interest on tax

claims to stop at the date of bankruptey and

the inconsistent provisions of Section 1420 (b)

and other similar statutes, providing for the addi-

tion of interest as part of the tax, could not nega-

tive the Bankruptcy Act’s contrary requirement.

Here, then, in the absence of a statutory provision

to the contrary, it must be concluded that, as See-

tion 1420 (b) states, Congress intended interest

to run even after the tax debtor assigned his prop-

erty. See Manning v. Seeley Tube & Box Co.,

338 U.S. 561, 566.

™ -(, Ope Sra eae

13

Apart from the clear language of Section

1420 (b), there is additional persuasive evidence

that Congress intended all of the statutory in-

terest prescribed by it, including the post-assign-

ment interest, to run and be collected after an

insolvent tax debtor had assigned or otherwise

lost control over his property. Section 250 (e)

of the Revenue Act of 1918, ¢. 18, 40 Stat. 1057,

and of the Revenue Act of 1921, ¢. 136, 42 Stat.

227, provided that—

If any tax remains unpaid after the date

when it is due, and for ten days after notice

and demand by the collector, then, except

in the case of estates of insane, deceased,

or insolvent persons, there shall be added

as part of the tax the sum of 5 per centum

on the amount due but unpaid, plus in-

terest at the rate of 1 per centum per month

upon such amount from the time it became

due: * * °* [Itali¢s supplied].

This exemption from the addition of statutory

interest ’ was withdrawn from the estates of in-

solvent persons in the Revenue Act of 1924, ¢. 234,

*It is noted that in Sawyer Tanning Co. v. C. J. O'Keefe

Nhoe Co., 23 F. 2d 717, the District Court for the District of

Massachusetts held that Section 250 (e) of the 1918 Act,

quoted above, did not imply a waiver by Congress of ordinary

interest under general law on tax claims against an insolvent

person, and it allowed interest at 6 percent, rather than at

the statutory rate of 12 percent, from the due date until the

date the tax was paid as a priority debt under Section 3466.

981155--51—_—-3

FN NO BOD

14

43 Stat. 253, by which it was provided in Section

276 (°) that:

(ce) In the case of estates of incompetent,

deceased, or insolvent persons, there shall

be collected interest at the rate of 6 per

centum per annum in lieu of the interest

[1 percent per month] provided in sub-

divisions (a) and (b) of this section.

The purpose of this provision was explained by

S. Rep. No. 398, 68th Cong., Ist sess., p. 32 (1939-1

Cum. Bull. (Part 2) 266, 288), as follows:

Section 276 (c): Although estates of

‘insane, deceased, or insolvent persons”’

are excepted from the additions to the tax

provided in section 250 (e) of the existing

law, no interest upon the amounts due and

unpaid by such estates is there provided.

This subdivision provides for interest at

the rate of 6 percent. * * *

H. Rep. No. 179, 68th Cong., Ist sess., p. 26

(1939-1 Cum. Bull. (Part 2) 241, 259), is sub-

stantially the same. It is of course obvious that

the “‘estate’’ of an insolvent person is necessarily

his property in the hands of a receiver, assignee,

or other fiduciary.

The 6 percent interest rate, in lieu of the 1

percent per month rate, was continued in Section

276 (c) of the Revenue Act of 1926 and in See-

tion 294 (c) of the Revenue Acts of 1928, 1932,

1934, and 1936, but the words ‘For any period

an estate is held by a fiduciary appointed by order

5

“et

15

of any court of competent jurisdiction or by will’’

were substituted for ‘‘In the case of estates of

incompetent, deceased, or insolvent persons.”’

This change was explained in the Conference Re-

port on the 1926 Act (H. Conference Rep. No.

356, 69th Cong., Ist sess., p. 41 (1939-1 Cum. Bull.

(Part 2) 361, 369)) as follows:

Amendment No. 69: The House bill re-

tained the existing law and provided that

in the case of estates of incompetent, de-

ceased, and insolvent persons there should

be collected interest at the rate of 6 percent

a year in lieu of interest at the rate of 1

percent a month for delinquencies in pay-

ment of taxes.

Under the existing law there is consid-

erable doubt whether the reduced rate of

interest provided is applicable only to cases

where the tax is imposed upon the estate,

or also includes cases where an estate is

called upon to pay interest for the period

before the estate came under the control of

the fiduciary, for example, if notice and

demand is made upon the taxpayer, and he

is delinquent in payment, and dies, can

there be collected out of the estate interest

at the rate of 1 percent a month down to

the time of his death? Under the existing

law there is also the difficulty of determin-

ing with accuracy the time when a person

becomes incompetent or insolvent. The

Senate amendment met the above difficulties

by providing that the reduced interest rates

shouid cover only the period when the prop-

erty is under the control of a fiduciary ap-

pointed by order of any court of competent

jurisdiction or by will. The House recedes.

Thus, the reduced rate of interest was applicable

only after the tax debtor’s property had come

under the control of a court-appointed fiduciary,

and the regular interest rate continued to apply

before that time.’

When the interest rate in the case of any in-

ternal revenue tax or customs duty was reduced

te 6 percent dy Section 404 of the Revenue Act

of 1935, «. 829, 49 Stat. 1014, the provision for a

6 percent interest rate during the period an estate

is held by a court-appointed fiduciary became sur-

plusage and it was omitted in Section 294 of the

Revenue Act of 1938, ¢. 289, 72 Stat. 447. H. Rep.

No. 1860, 75th Cong., 3d sess., p. 49 (1939-1 Cum.

Bull. (Part 2) 728, 763), stated:

Section 294 (¢) of the Revenue Act of

1936 is not retained in this bill, since it is

clearly surplusage. Prior to the enactment

of section 404 of the Revenue Act of 1935,

reducing the rates of interest on unpaid

taxes from 1 percent per month te 6 percent

* Since an assignee for the benefit of creditors is not a fidu-

ciary appointed by court order. the regular interest rate of |

percent per month applied to the insolvent estate after a vol-

untary assignment for the benefit of creditors under the pro-

visions as amended in 1926. The Commissioner of Internal

Revenue so instructed collectors, revenue agents, and other

employees of the Bureau of Internal Revenue in Mim, 4496,

XV-2 Cum. Bull. 530, 531 (1936).

16 =O

_ —— nM ee o ne

17

per annum, the matter eliminated provided

a special rule in the case of estates held by

fiduciaries appointed by courts of competent

jurisdiction or by will. Now that all unpaid

taxes bear interest at the rate of 6 percent

per annum, there is no further need for

continuing the matter eliminated, and the

interest rate in such cases is governed by

other provisions of section 294,

The withdrawal in 1924 of the complete exemp-

tion from statutory interest on income taxes pre-

viously enjoyed by estates of insolvent persons,

accompanied by the express provision for collec-

tion of interest from such estates, albeit at a

reduced rate, which has since been changed to the

statutory rate applicable generally as set out

above, certainly requires the conclusion that Con-

gress now intends the estates of insolvent persons

in the hands of assignees and other nonbank-

ruptey fiduciaries ® to be liable for payment of ,

the statutory interest. Although these statutory

provisions refer specifically to income taxes. there

is no reason to suppose that interest on claims for

social security and withholding (employees’ in-

come taxes) taxes here involved were intended to ;

he treated differently. 4

la Mi a ot ea tl

* As already indicated, Vew York v. Saper, 336 U.S. 328, ;

340-341, fn. 18, holds that the Bankruptey Act, as amended,

has a special contrary requirement which governs in estates :

administered under that Aet.

18

It is thus plain, we believe, that there is no basis

for implying an exception of postassignment in-

terest from the general provision of Section 1420

(b) that interest shall run on, and be added as

part of, the taxes due the United States until

they are paid.

2. The interest accruing after the assignment is a

priority debt due to the United States

If, as the language of Section 1420 (b) seems

plainly to say, the interest until date of payment

of the taxes became part of the taxes* (cf. Man-

ning V. Seeley Tube & Box Co., 338 U. 8. 561,

570), that interest, as taxes, was a debt due the

United States under Section 3466 of the Revised

Statutes. There can be no question now that

social security and withholding taxes are debts

due the United States under that section. Ilinois

v. United States, 328 U. S. 8; United States v.

* Big Diamond Mills Co.v. United States, 51 F.2d 721, 725

(C. A. 8), held that under earlier revenue statutes making the

interest a part of the tax, the liability for the tax and interest

is a single liability. See also Colorado Milling & Elevator

Cov. Howbert, 57 F.2d 769, 772 (C. A. 10) ; Phelps v. United

States, 105 F. 2d 904, 905 (C. A. 2).

Penrose v. United States, 18 F. Supp. 413 (E. D. Pa.), held

that interest on an estate tax collected under Section 308 (h)

of the Revenue Act of 1926, ¢. 27, 44 Stat. 9, was not a tax,

but that statute was not phrased exactly as is Section 1420

(b) here; it provided that interest should be assessed at the

same time as the deficiency in tax and be collected as a part

of the tax. Nor did the statute construed in Capital Building

& Loan Assn. v. Commissioner, 23 B. T. A, 848, contain pro-

visions comparable to Code Section 1420 (b), involved here.

aE PD ine AS IN A TSS BNE oN Oa SEE TE BCAA EO

Waddill Co., 323 U.S. 353; Price v. United States,

269 U. S. 492, 499. If, on the other hand, the

interest prescribed by Section 1420 (b) is, despite

the phrasing of that section, not deemed to be a

part of the tax as such, it is plain, as shown above,

that that section creates an unconditional liability

to the United States for the interest which accrued

after the assignment until the taxes were paid and

that liability is a debt, as much as is any other

liability imposed by an Act of Congress, as, for

example, taxes. Cf. Spokane County v. United

States, 279 U. 8. 80, holding that both taxes and

penalties assessed for understatement of income on

tax returns were debts entitled to priority under

R. 8. Section 3466; Billings v. United States, 232

U.S. 261, 284-288.

Since, under any theory, the post-assignment

interest fixed by statute is a debt owing to the

United States, the terms of Section 3466 demand

that it be given priority in payment. The interest

aceruing after the date on which the assigument

was filed was as much a part of the statutory debt

for interest as was the interest accruing before

the filing of the assignment, and if Section 3466

accorded priority to one part, as is not here dis-

puted, it must also to the other. The statutory

language is all-inelusive, embracing all debts

(Bramwell v. U.S. Fideliiy Co., 269 U.S. 483,

487-488), and it therefore negatives the view that

post-assignment interest, or any other debt due

20

the United States, is to be excepted from its

operation. And, indeed, it has been the rule to

allow the entire interest on a tax claim of the

United States down to the date of payment as a

priority debt in assignment and receivership pro-

ceedings to which Section 3466 applied. See Pear-

sall v. Central Oil & Gas Co., 23 F. 2d 716 (W. D.

Pa.) ; Sawyer Tanning Co. v. C. J. O'Keefe Shoe

Co., 23 F. 2d 717 (D. Mass.) ; Matter of Simpson,

Ine., Vv. United States, 258 App. Div. 148; ef.

Iilinois v. United States, 328 U. S. 8, in which

the federal tax claims, which were held to have

priority, included interest at 6 percent until paid

(see p. 2 of the record in that case, No, 749, Oc-

tober Term, 1945), although the fund available

to pay all creditors was less than the total amount

of the taxes alone and no separate issue as to the

interest was presented. Also cf. United States v.

Remund, 330 U. 8. 539, which gave priority to a

debt claimed by the United States for feed and

crop loans which included interest to date of pay-

ment (R. 3, No. 417, October Term, 1946), al-

though again no separate issue as to allowance of

the interest was raised. Similarly, in the case of

sureties who were subrogated to the priority of

the United States under Section 3466, interest

has been allowed until their claims were paid.

Mothersead v. United States Fidelity & Guaranty

Co., 22 F. 2d 644, 654 (C. A. 8), certiorari denied,

276 U. S. 637; American Surety Co. v. Carbon

Timber Co., 263 Fed. 295, 302 (C. A. 8).

RHE HE SE SSA.

Ss

get

<

*

§

§

F

21

The priority of the United States attached from

the time when the debtor assigned his property.

Massachusetts v. United States 333 U. 8. 611,

617, fn. 8. On that date, the taxes were owing

and the liability to pay interest at the rate of 6

percent, as a part of the tax debt, until the taxes

were paid existed by virtue of Section 1420 ( b)

of the Internal Revenue Code. Thus, the amount

of the taxes, the liability, and the interest rate

were all fixed and the amount of the interest had

not been computed only because the date on which

the taxes would be paid was not then known. In

these circumstances, the post-assignment interest

would seem clearly to be an obligation to the

United States at the time of the assignment. But

in any event, the amount of the preexisting lia-

bility for the post-assignment interest was com-

putable finally on the date of the Special Term’s

order of distribution (R. 12-15), or the date of

payment soon thereafter (R. 4), and the priority

of the United States for its payment attached at

the very latest at that time. The uncertainty,

until payment was authorized, as to the precise

amount of the interest for which liability existed

on the date of assignment, whatever the amount

finally was, affected at most the time at which the

priority of the United States attached as to it,

and not the priority itself. There is nothing to

warrant the view that the federal priority fails

as to an interest liability which is fixed as to

Pe AS Pe.

a ee ae

2ST ee Ped IN ee

22

liability and rate by statute on the date of the

assignment and the final amount of which will be

affected only by the date of payment. In United

States v. Bank of North Carolina, 6 Pet. 29, the

statutory priority was held to extend to a debt

whether then payable to the United States or pay-

able only in futuro. Significantly, Mr. Justice

Story there said (p. 38):

In cases of general assignments by debt-

ors, there would be a still stronger reason

against making a distinction between bonds

then payable and bonds payable in futuro;

for the debtor might, at his option, give any

preferences to other creditors, and postpone

the debts of the United States, of the latter

description, and even exclude them alto-

gether.

In Matter of Phillips, 196 App. Div. 17, affirmed,

939 N, ¥. 559, the New York courts held Section

3466 to afford priority in all cases of insolvency

to any obligations due to the United States, even

when claims had not matured. Cf. Massachusetts

v. United States, 333 U.S. 611, 626-627, where

Mr. Justice Rutledge posed a situation in which

liability itself, as well as the date on which it

matured, would have been wholly contingent on

events after the assignment.

Section 3466 is one of the measures designed

to aid in the collection of taxes (I//inois v. United

States, 328 U. 8. 8, 11), which as an integral part

inelude interest to date of payment, and it is to be —

pie

23

construed liberally in order to achieve its purpose

of securing adequate public revenues. United

States v. Emory, 314 U.S. 423, 426, and see infra,

pp. 29-30. To deny priority to the statutory

post-assignment interest here would not comport

with the rule calling for a liberal construction.

The lower court cited no other federal statute *

as creating an exemption of post-assignment in-

terest from the priority granted by Section 5466,

either expressly or by implication. Cf. Illinois v.

United States, 328 U. S. 8, United States v. Re-

mund, 330 U.S. 539, 543-545, and United States

v. Emory, 314 U. S. 423, 429-433, in which the

contention was rejected that other federal statutes

were so inconsistent that an intention to relin-

quish the federal priority as to a particular debt

must be implied. However, it attempted to

justify the denial of priority for the post-assign-

ment interest on the grounds (1) that, as it inter-

preted the language of Section 3466, the interest

rules applicable to tax claims in proceedings

under the Bankruptcy Act were incorporated and

that New York v. Saper, 336 U. 8. 328, required

"It is of course clear that no provision of the New York

Debtor and Creditor Law can impair the federal priority

established by Section 3466, even though it may otherwise

govern the insolvency proceeding. United States v. Okla-

homa, 261 U.S. 253, 260; Spokane County v. United States,

279 U.S. 80. While the Court of Appeals apparently did not

deem the state law to be controlling on the federal claim (R.

25-27), the Supreme Court at Special Term erroneously did

support its ruling on that ground (R. 17-18).

OA take”! Poets an

mace

fe a

I ore ee 28 corer AOE B RS Ca 8 ae Bn Eta

aS

ashe

24

disallowance of post-assignment interest (R,

25-26); and (2) that eases applying the general

rule that creditors are not entitled to such interest

where the proceeds are insufficient to pay all

creditors in full supported its conclusion (R. 25).

Neither of these purported reasons for its decision

has any validity.

3. The bankruptey rules governing allowance of

interest do not apply

The language of Section 3466 of the Revised

Statutes that ‘‘the priority hereby established

shall extend as well to eases in which a debtor,

not having sufficient property to pay all his debts,

makes a voluntary assignment thereof * * *

as to cases in which an act of bankruptcy is com-

mitted’? does not, as the court below seemed to

think (R. 25-26) confine the federal priority in

assignment proceedings to the same priority

status the United States has for its claims in pro-

ceedings under the Bankruptey Act. On the con-

trary, the reference to an act of bankruptcy there

“is general, and is for the purpose of defining

one of the ways in which the debtor’s insolvency

may be manifested.’’ Bramwell v. U. S. Fidelity

Co., 269 U. 8. 483, 490. See also United States v.

Emory, 314 U.S. 423, 426; United States v. Okla-

homa, 261 U. S. 253, 260. Following an act of

bankruptey, an insolvent person's estate may be

administered either in proceedings under the

Bankruptey Act or in non-bankruptey insolvency

ees ee

25

proceedings, and where the latter procedure is

followed, the provisions of the Bankruptcy Act

do not extend to, or modify, the priority con-

ferred by Section 3466. United States v. Emory,

314 U.S, 423, 426-429; Bramwell v. U.S. Fidelity

Co., 269 U. S. 483, 490; ef. Illinois v. Campbell,

329 U.S. 362, 367-370. It follows that the court

below erroneously concluded from the language

of Section 3466 (R. 26) that inasmuch as the

priority in bankruptey does not include post-

bankruptcy interest, so the priority in assignment

proceedings does not inelude post-assignment

interest.

New York vy. Saper, 336 U. 8. 328, does not war-

rant the lower court’s conclusion that post-assign-

ment interest is not entitled to be accorded pri-

ority under Section 3466. The Saper case was

concerned only with priority under the Bank-

ruptey Act, which as shown above does not govern

priority under Section 3466, As the Court stated

(p. 341) the case presented only a question as to

the proper interpretation of the current Bank-

ruptey Act. The disallowance of the post-bank- ;

ruptey interest in that case was based essentially i

on the ground that no provision of the Bank- |

ruptey Act could be construed as allowing tax

claims to be excepted from the general rule that

stops interest at bankruptey (pp. 330-332) and to

the contrary that, in the amendments to the Bank-

ruptey @et, Congress had evidenced an intention

fo assiNilate taxes to other debts for nearly all

a —®

|

'

;

;

|

|

|

@

|

od

NRE i anh Lien Ins TW

26

purposes, including denial of post-bankruptey

interest (pp. 337-341)." Indeed, the opinion ree-

ognizes, we believe, that interest accruing after

bankruptey on tax claims is clearly a debt of the

bankrupt but decides that a court of bankruptcy

should not recognize it in distributing the estate.

Cf. Am. Iron Co. v. Seaboard Air Line, 233 U.S.

261, 266.

Obviously the Saper opinion does not support

the lower court’s decision in this case but on the

contrary leads to the opposite conclusion, Here,

the terms of Section 3466 itself show that debts

due the United States are not assimilated to the

claims of other creditors, as are tax claims in

bankruptey, but instead are absolutely prior to

other claims, and the post-assignment interest, as

a debt, expressly comes within that priority. Also,

the practice has been to allow post-assignment in-

terest as a preferred debt (see above, p. 20), and

the failure of Congress to amend Section 3466 to

change this rule has some significance.

In another respect, moreover, the Saper case

furnishes support for the Government’s position

here. The opinion pointed out that the Kallak

* The Court held further that even though interest had been

allowed by the courts on tax claims after bankruptcy as @

matter of practice prior to enactment of the Chandler Act,

this did not amount to a settled judicial construction that

such interest was properly allowable under Section 57 (j) of

the original Bankruptcy Act, so that reenactment of Section

57 (j) inthe Chandler Act did not constitute a Congressional

approval of the policy of allowing post-bankruptey interest

(pp. 332-337).

27

(In re Kallak, 147 Fed. 276 (D. N. D.)) line of

cases, Which had allowed interest in bankruptey

proceedings on tax claims until payment, had done

so because Section 64a of the Bankruptey Act

originally gave those claims an absolute priority

and dispensed with proof of them as claims (pp.

333-335, 337).” The opinion emphasized that the

amendments to the Bankruptey Act had changed

the status of tax claims in both respects (pp.

334-335). In contrast, in this case the tax claims

due the United States have the status that tax

claims originally had in bankruptey and that

status has not been changed by amendments—that

is, the tax claims have an absolute priority under

Section 3466. Also, while the tax claims, includ-

ing interest, are generally filed in the insolvency

proceedings, Section 3466 does not require this.

Indeed, the person administering the insolvent

* The first three federal bankruptcy acts specifically pre-

served the priority of the United States over all other claim-

ants even in bankruptey proceedings, and it was only the

express provision of Congress in the Bankruptcy Act of 1898

that disturbed this state of affairs. Guarantee Co. v. Title

Guaranty Co., 224 U. S, 152; United States v. Emory, 314

U.S. 423, 428. The United States was not obliged to prove

its debts and was in no wise bound by the 1867 Act. The

provision therein granting priority to the United States

merely reaffirmed the then existing priority now found in

Section 3466, and was intended to exclude the possibility of a

different conclusion. Lewis, Trustee v. United States, 92 U.S.

618, 620-622; Act of March 2, 1867, c. 176, 14 Stat. 517, See.

28. Interest was allowed to the United States in a claim

under the 1867 Act until date of payment. /n re Bousfield

& Poole Manufacturing Co., 3 Fed. Cas. No. 1704.

—

28

estate becomes a trustee for the United States

(Bramwell vy. U. S. Fidelity Co., 269 U.S. 483,

488; United States vy. Oklahoma, 261 U. 8S. 253,

260) and would distribute the assets to others at

his peril even if the United States did not file a

claim. See United States vy. Kaplan, 74 F. 2d 664

(C. A. 2). Section 3467 of the Revised Statutes,

supra, p. 3, make him personally answerable in

his own person and estate to the extent he pays

other debts before he satisfies and pays the debts

due the United States,” and in United States v.

Summerlin, 310 U. 8, 414, it was held that no

state statute relating to the filing of claims can

affect this liability. Thus, as in the case of tax

claims in bankruptcy originally, there is no re-

quirement that a claim of the United States under

Section 3466 must be proved or even filed in the

insolvency proceedings. Accordingly, the Kallak

line of cases as discussed in the Saper opinion by

analogy supports allowance of post-assignment

interest here.

The interest on tax claims accruing after the

assignment is not to be denied priority on the

theory that Congress must intend the rule in state

proceedings subject to Section 3466 to be the same

as in bankruptcy proceedings. The absolute pri-

ority accorded tax claims by Section 3466 in in-

ee ee ee ee

a ea RAIS wb Tels PAS tS ea ES AB IG

re ee

en —_ —

In Massachusetts v. United States, 333 U. S. 611, the

United States commenced suit to enforce a personal liability

against the assignee under Section 3467 for paying a state

claim before he paid debts due the United States.

29

solvency proceedings is quite different from the

status of tax claims under the Bankruptcy Act

(New York v. Saper, 336 U. 8. 328, 332). The

failure to alter the priority given by Section 3466

is, in itself, convincing evidence that Congress

did not intend consistency in the treatment of

tax claims under the two acts.

Moreover, a surrender of priority by Congress

as to any debt is not to be implied except on the

clearest showing. As this Court stated in United

States v. Emory, 314 U.S. 423, 433, with respect

to a claim that the provisions of another federal

statute were inconsistent with the federal priority,

“only the plainest inconsistency would warrant

our finding an implied exception to the operation

of so clear a command as that of Section 3466.”’

See also Illinois v. United States, 328 U.S. 8,

11-12; United States v. Remund, 330 U. 8. 539,

544-545. There is no other federal statute which

could be regarded as countermanding the mandate

of Section 3466 and Code Section 1420 (b) in re-

spect of the post-assignment interest, and it is

clear that only Congress could bring about that

result. Cf. New York vy. Saper, 336 U. 8. 328.

; Indeed, in no case of which we are aware has

this Court implied an intention to abandon pri-

ority under Section 3466 with respect to any

claims arising under a revenue statute. Section

3466, which has been in force since 1797, is de-

rived from earlier statutes enacted for the collee-

tion of taxes. Price vy. United States, 269 U. 8.

492, 500-501. Its function is to assure adequate

| public revenues to sustain the public burden, and

RU tay _—

aoe

DR RE RNR | MRI 1) eH

30

it is to be liberally construed in order to effectuate

that purpose. United States Vv. State Bank of

North Carolina, 6 Pet. 29, 35; Bramwell v. U.S.

Fidelity Co., 269 U. 8. 483, 487; 8 pokane County

v. United States, 279 U. 8. 80, 92; United States

v. Emory, 314 U. 8. 423, 426, The interest allow-

ance in the case of a tax rests ‘on the basic neces-

sity of the Government to collect a carefully esti-

mated sum of money by a particular date in order

to meet its anticipated expenditures” ( Rodgers Vv.

United States, 332 U. 8. 371, 374), and it is added

to the tax by the statute to compensate the Govy-

ernment for being deprived of the use of the tax

moneys from and after the due date. Manning V.

Seeley Tube & Bow Co., 338 U. 8. 561. In these

cireumstances, only the clearest of Congressional

language, of which there is none here, could sug-

gest that the federal priority was intended to be

relinquished as to any part of the interest fixed

by the revenue statutes. Certainly, a mere belief

that the proceedings under an assignment and in

bankruptcy ought to be consistent m this respect

is far from enough to warrant the lower court’s

decision.

4. The general rules governing allowance of post-

assignment interest to other creditors do not

apply

The lower court also denied post-assignment in-

terest to the United States apparently on the

basis of what it regarded as the settled rule that

t

31

“ereditors are not entitled to post-assignment in-

terest where the proceeds are insufficient to pay

all creditors in full.” (R. 25.) However, it is

manifest that the rule applicable to creditors gen-

erally does not govern the priority right of the

United States for such interest.

It seems already sufficiently established from

the preceding argument that Section 3466 is abso-

lute in terms, that it gives priority to debts due

the United States, and that the post-assignment

interest which is made payable by Code Seetion

1420 (b), without any exception, is such a debt.

These statutes enacted by Congress are supreme

and cannot be displaced by the laws of any state.

United States v. Fisher, 2 Cranch 358, 396; United

States vy. Oklahoma, 261 U. 8. 253, 260; Spokane

County v. United States, 279 U. 8. 80; New York

v. Maclay, 288 U. S. 290, 292. It must therefore

follow that they cannot be superseded by the

general rules, based on equitable considerations,

which are applied by courts in disposing of the

claims of other creditors for post-assignment in-

terest. The controlling statutes are not silent on

the matter of interest after the assignment but on

the contrary command its payment as a priority

debt in advance of the claims of other creditors,

and there is thus no oeeasion for the application

of court-fashioned rules. Cf. Rodgers v. United

States, 332 U. 8. 371, 373. If it is thought that

the application of these statutes as they were

enacted and intended by Congress results in in-

32 |

equities to other creditors, the remedy does not lie

with the courts but must be sought from Congress,

United States v. Emory, 314 U. 8S. 423, 431; Ili-

nois V. Campbell, 329 U.S. 362, 376; New Jersey

v. Anderson, 203 U. 8S. 483, 489-490. |

Where a right is created by the statutes of the

United States and does not originate in the laws

of any State, the granting or withholding of in-

terest as part of the remedy is also a function of

federal law. Vanston Committee v. Green, 329

U. §. 156, concurring opinion, p. 168; accord,

Rodgers v. United States, 332 U.S. 371, 373. See

also Royal Indemnity Co. v. United States, 313

U. 8S. 289, 295-297; Board of Comm’rs v. United

States, 308 U.S. 348, 350, 352. Not only were the

taxes in this case imposed by Act of Congress,

but the interest on the taxes accruing after the

assignment and indeed the priority of the United

States for these debts also arose under statutes

of the United States. It follows a fortiori that

the rights created by these statutes are not to be _

circumscribed by any rules of equitable distribu-

tion applied by the courts of New York," or of

" Under Section 23 of the Debtor and Creditor Law (12

McKinney's Consolidated Laws of New York), as it was effee-

tive until September 1, 1950, when the right to create a prefer-

ence was withdrawn, an insolvent debtor was permitted in his

assignment for the benefit of creditors to create a preference

in favor of particular creditors as to the amount of one-third

in value of the assigned estate after deducting the wages and

salaries given preference by Section 22 and the costs and ex-

penses of executing the trust. Although this section was

construed as not applying to New York corporations, which

a were . ork FLD AOP LEAL ISILON: at bet

any other state. The question of whether post-

assignment interest is to be allowed to the United

States as a priority creditor under Section 3466

is not a matter which should be left to be decided

in each case by the equitable rules of the par-

ticular jurisdiction administering the insolvent

estate, but is one which requires a rule of uniform

application which will not depend on the vagaries

of local law. Cf. United States v. Pelzer, 312

U. 8. 399, 402-403; Burnet v. Harmel, 287 U.S.

103, 110. Here the federal statutes themselves

fix the rule.

CONCLUSION :

The judgment of the Court of Appeals of New

York is erroneous and should be reversed.

Respectfully submitted.

Puitie B. Pertman,

Solicitor General.

Euis N. Siack,

Acting Assistant Attorney General.

Joun F. Davis,

I. Henry Kutz,

HELEN GoopNER,

Special Assistants to the Attorney General.

JANUARY 1952.

ba Ee MS th a a

SN ES

were forbidden to make preferences, the fact remains that

other debtors could prefer such creditors as they wished.

Matter of Halsted, 42 App. Div. 101; In re Byuss Mfg. Co.. ;

64 N. Y. S. 2d 601. In this situation, the use of equitable

rules to deny the United States, which has a first priority,

payment of its tax claims in full, including the interest accru-

ing after the assignment, hardly seems consistent. See also

United States v. Bank of North Carolina, 6 Pet. 29,38, quoted,

supra, p. 22.

U. S. COVERNMENT PRINTING OFFICE: 1951