# Brief for the United States — United States v. Bloom

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Brief for the United States
- **Published:** January 1, 1951
- **Citation:** 342 U.S. 864

## Text

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

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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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385610_0511%3A04. Public record. Not legal advice.