# Petition for A Writ of Certiorari — Oliver v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for A Writ of Certiorari
- **Published:** January 1, 1925
- **Citation:** 268 U.S. 1

## Text

N

Iu the Supreme Court

OF THE

United States

OcToBER TERM, 1923

A. J. OLIVER, as Trustee in Bankruptey |
of the Estate of West Coast Rubber
Corporation, Inc. (a corporation),
and Oscar Courtrin, Dorotny E.
Knicut, D. C. TuHry, H. Buack and
Huau V. CASssERLY,

Petitioners,
i

Unirep States OF AMERICA (a sover-
eign corporation), and Crry AND
County oF SAN FRANCIsco (a munic-
ipal corporation),

Respondents.

PETITION FOR WRIT OF CERTIORARI.

To the Honorable William Howard Taft, Chief
Justice of the United States, and the Associate
Justices of the Supreme Court of the United
States:

Comes now your petitioners, A. J. Oliver, as

trustee in bankruptcy of the estate of West Coast

2

Rubber Corporation, Inc., a corporation, and Oscar
Courtin, Dorothy E. Knight, D. C. Tuhey, H. Black
and Hugh V. Casserly and respectfully petition
this honorable court that a writ of certiorari may
be granted directing the United States Circuit
Court of Appeals for the Ninth Circuit to certify
to this honorable court for its review and deter-
mination the case of ‘‘United States of America (a
sovereign icorporation) and the City and County
of San Francisco (a municipal corporation), peti-
tioners, v. A. J. Oliver, as Trustee, and Oscar
Courtin, Dorothy E. Knight, D. C. Tuhey, H. Black
and Hugh V. Casserly, respondents—In the Matter
of West Coast Rubber Corporation, Ine. (a cor-
poration), Bankrupt, No. 3966’’, pending in that
court, and in thai behalf your petitioners respect-
fully show to this honorable court as follows:

Statement of Facts.
I.

In the bankruptey matter of the West Coast
Rubber Corporation, Inc., a corporation, pending
before A. B. Kreft, Esq., a Referee in Bankruptcy
of the United States District Court for the Southern
Division of the Northern District of California,
there were filed during the course of administra-
tion priority labor claims amounting to $1217.65,
priority attachment cost claims amounting to $99.70,
a claim for manufacturer’s excise tax and penal-
ties due the United States Government for $3048.01,
and a claim for personal property taxes and penal-

pcan naaeaea

3

ties due the City and County of San Francisco
for $1008.61.
II.

There were not sufficient funds in the bankrupt
estate wherewith to pay all expenses of administra-
tion and all of these claims in full as finally al-
lowed, and the question arose before the referee
as to the relative order of priority between labor
claims, attachment cost claims, and tax claims, in
the distribution of the balance of the estate after
payment of expenses of administration.

ITT.

The labor claimants and the attachment costs
claimants are the same; that is to say, shortly prior
to bankruptcy certain employees of the bankrupt,
your petitioners Oscar Courtin, Dorothy E. Knight,
D. C. Tuhey, H. Black and Hugh V. Casserly, who
did not receive their wages earned within three
months of the filing of the bankruptcy petition,
brought suit in the state court of California and
caused an attachment to be levied upon certain
property of the bankrupt and in that suit expended
certain costs. As against taxes, said petitioners
herein asserted before the referee the right to
priority of payment of their wages by virtue of the
provisions of Sec. 64-b (4) of the Bankruptcy Act,
and of their attachment costs by virtue of the pro-
visions of Sec. 64-b (5) of the Act taken in con-
junction with Sec. 69 of the Insolvency Act of the
State of California. In the case of in re Amoratis,

————

4

178 Fed. Rep. 919, decided by the Cireuit Court
of Appeals for the Ninth Circuit, it was held that, —
inasmuch as attachment costs are given a priority
by the insolvency law of California, they should
also be given priority in bankruptcy under See,
64-b (5) as they are debts given priority by state
law.

IV.

The referee made an order on April 7, 1922, fix-
ing the amount of the labor and attachment costs
claims and holding that these should be paid in
full prior to any payment on the tax claims. This
order was reviewed by District Judge Dooling, who
on July 8, 1922, affirmed it; and the matter was
then taken to the Circuit Court of Appeals for the
Ninth Circuit, which, on July 2, 1923, handed down
a decision reversing the order of the lower court
and holding that taxes should be paid first.

Statement of Reasons Relied on for Allowance
of Writ.

I.

The sole question involved in this case is the
proper construction of Sec. 64, subdivisions “a
and ‘‘b”’, of the Bankruptcy Act. It was eontended
by your petitioners before the Referee, the District
Judge and the Circuit Court of Appeals, that this
section establishes the following order of priority:

”

5

Cost of preserving estate. Sec. 64-b (1).
(b) Filing fees. See. 64-b (2).

(c) Costs of administration. See. 64-b (3).
(d) Wages. See. 64-b (4).

(e) Debts entitled to priority by the laws of

the United States or of the various states
(such as attachment costs). See. 64-b (5).

(f) Taxes. See. 64-a.
(g) General creditors.

This contention was upheld by the Referee and
District Judge, but the Cireuit Court of Appeals
placed taxes ahead of wages and attachment costs.

IT.

The decision of the District J udge is specifically '
based upon the language used by the Supreme
Court in the recent case of City of Richmond y.
Bird (249 U. S. 174, 43 Am. B. R. 260, 39 Sup.
Ct. 186), which he thought settled the question,

where the court said:
“Section 64a directs that taxes be paid in
advance of dividends to creditors; and divi-

dends as commonly used throughout the act
means partial payments to general ereditors’’.

Collier on Bankruptcy, Thirteenth Edition, takes
the same view as the District J udge, for in Vol. 2,
page 1441, it states:

“The tendency of the earlier cases was to con-
strue subsection ‘a’ as putting taxes in a dif-
ferent and really higher class than the debts

ennmerated in subsection ‘b’, but it is now

definitely settled that tax claims have priority

over claims of general creditors only and not

over the claims mentioned in subsection ‘b’ ”
and then cites City of Richmond v. Bird, supra.
The Court of Appeals for the Seventh Circuit in
the case of in re Utt, 5 Am. B. R. 383, 105 Fed
754, takes the same view as the Supreme Court as
to the meaning of the word “‘dividends”’.

III.

The decision of the Ninth Circuit Court of Ap
peals reversing the District Judge is specifically
based upon the language used by the Supreme
Court in the earlier case of Guarantee Title and
Trust Co. v. Title Guaranty & Surety Co., 224 U.S.
152, 27 Am. B. R. 873, where the court said:

**Labor claims are given priority and it is
provided that debts having priority shall be
paid in full. The only exception is taxes leg-
ally due and owing by the bankrupt to the
United States, state, eounty, distriet or muni-
cipality.”’

The Supreme Court evidently had in mind in
making such a statement that the words “‘except
as herein provided’’ at the commencement of See.
64-b refer to some exception contained in that see-
tion only and, therefore, necessarily in the tax
portion, 64-a; but your petitioners are of the opin-
ion that such words really mean “except as in the
act otherwise provided”’ and refer to liens upon the
property of the estate not affected by the act such

7

as vendors’ liens, mechanics’ liens, materialmen’s
liens, landlords’ liens, mortgage liens, liens on spe-
cial funds, pledges, warehousemen’s liens, ete., which
are protected by See. 67-d of the Aet and must be
recognized in the distribution of the estate; and
that the Supreme Court was of the same opinion
when it made the statement it did in City of Rich-
mond v. Bird, supra. Similar language as to ex-
ceptions is to be found in See, 21-b and See. 38-4,
but in both cases it is obvious that the words really
mean “‘except as in the act otherwise provided.’’

The Court of Appeals refers, in its decision, to
City of Richmond v. Bird, supra, but holds that
the language of the court in that case was not
necessary to the decision, and, while conceding that
the language of the court in the Guarantee Title
& Trust Co. v. Title Guaranty & Surety Co. case
may have been unnecessary to the decision, holds
that the statement of the Supreme Court in that
earlier case should be taken as the expression of
the view of the court upon the question of the re-
lative rank of taxes and labor claims and that it
is not inconsistent with what is said on the sub-
ject in City of Richmond vy. Bird. It seems to
your petitioners that the two expressions of the
Supreme Court are in direct conflict and cannot be
reconciled, and that the later expression in City
of Richmond y. Bird controls, if either.

The Court of Appeals, also, in its deeision, says:

“The power to levy and collect taxes is not
*nly an indispensible attribute of sovereignty

but it is absolutely necessary to the support
of the government, the maintenance of law
and order and the protection of life and prop-
erty. It is not to be supposed that the power
to tax would be subordinated to the claim of
any creditor however meritorious that claim
may be’’.

and yet Justice McKenna, in the Guarantee Title
& Trust Co. v. Title Guaranty & Surety Co. case,
said:

‘*The act takes into consideration, we think,
the whole range of indebtedness of the bank-
rupt—national, state and individual——and as-
signs the order of payment. The policy which
dictated it was beneficent and well might in-
duce a postponement of claims, even of the
sovereign, in favor of those who necessarily
depended upon their daily labor. And to give
such claims priority could in no ease seriously
affect the sovereign. To deny them priority
would in all cases seriously affect the claim-
ants.”’

TV.

In view of the statement of the Supreme Court
in City of Richmond v. Bird, supra, when consider-
ing the meaning of the language in the tax section,
64-a, that ‘‘taxes be paid in advance of dividends
to creditors’, that the word ‘‘dividends’’ means
“partial payments to general creditors’’, your peti-
tioners contend that the payments required to be
made by Sec. 64-b, which includes labor and at-
tachment costs claims, must be paid in advance of
taxes as the estate is not ready to pay dividends to
general creditors until all such payments have been

made. The words ‘‘in advance of’ really mean

——e—~~"

9

“next preceding’’. If, therefore, Sec. 64a is given
this construction, it would read: ‘‘The court shall
order the trustee to pay all taxes legally due and
owing by the bankrupt to the United States, state,
county, district or municipality, next preceding par-
tial payments to general creditors.’”

¥.

In the case of Matter of Kittenplan, 49 Am. B. R.
410, 285 Fed. 62, the District Court for the Southern
Division of New York, held in conformity with the
decision of the Court of Appeals for the Ninth Cir-
cuit, but in the case of in re Essenkay Produets Co.,
No. 3459, in the District Court for the Eastern
District of Illinois, District Judge Carpenter on
Jan. 8, 1923, in an unreported case held in con-
formity with District Judge Dooling’s decision that
labor claims come first. There is an expression in
Matter of Anderson, 279 Fed. 525, 48 Am. B. R.
350, 353, which may be obiter dicta, as follows:

“The order of payment to the United States
is next after wages due workmen, clerks or
servants which have been earned within three
months before the date of the commencement of
the proceedings. The Guarantee Title and
Trust Co. v. Title Guaranty & Surety Co., 224
U. S. 152, 27 Am. B. R. 873, 32 Sup. Ct. 457,
56 Law Ed. 706.”

It is to be noted that the Circuit Court of Ap-
peals for the Second Circuit takes a different view
of Guarantee Title & Trust Co. v. Title Guaranty
& Surety Co., than the Court of Appeals for the
Ninth Cireuit in the case at bar.

10

Va.

There is another and more serious conflict among
the decisions as to whether, in view of the fact
that the tax section, 64-a, precedes 64-b providing
for the priority of costs of administration, labor
claims, ete., taxes should not be placed ahead of
everything and be paid in advance of costs of ad-
ministration. A number of the early cases held
that taxes must be paid first even in advance of
expenses of administration. See

In re Weiss (D. C. N. Y.), 20 Am. B. R. 247,
159 Fed. 295;

In re Prince & Walter (D. C. Pa.), 12 Am.
B. R. 675, 131 Fed. 546;

In re Cramond (D. ©. N. Y.), 17 Am. B. R.
22, 145 Fed. 966;

In re Weissman (D. C. Conn.), 24 Am. B.
R. 150, 178 Fed. 115.

Later cases have repudiated this doctrine and
held that expenses of administration must be paid
before taxes. See

State of New Jersey v. Lovell (C. C. A. 3rd
Cir.), 24 Am. B. R. 562, 179 Fed. 321;

Matter of Jacobson (C. C. A. 7th Cir), 45
Am. B. R. 1, 263 Fed. 883;

Polk County, Iowa v. Burnes (C. C. A. 8th
Cir.), 40 Am. B. R. 727, 247 Fed. 399;

In re Oxley (D. C. Wash.), 30 Am. B. R.
406, 204 Fed 826;

In re Hessler Foundry & Mfg. Co., 45 Am.
B. R. 382.

cages aera i

11

Vil.

The question as to the proper place for taxes
in the distribution of bankrupt estates has be-
come important throughout the United States ow-
ing to the many cases in which large claims for
back income taxes have been filed by the United
States Government and in which labor claims have
also been filed. Trustees and referees have been
in doubt, owing to the conflict in decisions above
noted, as to which should be paid first. Your peti-
tioners have been informed through the office of
the Attorney-General of the United States that
there are now pending in the various Federal Courts
throughout the United States seven cases in which
the precise question is the same as the one in the
ease at bar.

Your petitioners believe that, in view of the con-
flict in the decisions, and the divergent opinions
respecting the meaning of the language of the
Supreme Court used in City of Richmond v. Bird,
supra, and Guarantee Title & Trust Co. v. Title
Guaranty & Surety Co., supra, it is essential to a
uniform contruction throughout the United States
of Sec. 64, subdivisions ‘‘a’’ and,‘“‘b’’, of the Bank-
ruptey Act, that an authoritative ruling be made
by the Supreme Court in the ease at bar.

Wherefore, your petitioners pray that a writ
of certiorari be issued out of and under the seal
of this court directed to the United States Circuit
Court of Appeals for the Ninth Circuit commanding

12

said court to certify and send to this court on a
day certain to be designated a full and complete
transcript of the record and all proceedings of said
court of appeals in this ease, being Cause No. 3966
in said court, to the end that said cause may be
reviewed. by this court as provided by law; and
that your petitioners may have such other relief
or remedy in the premises as to this court may
seem appropriate; and that the judgment of said
United States Court of Appeals for the Ninth
Circuit so complained of herein may be reversed
by this honorable court.

Dated, San Francisco,
September 15, 1923.

A. J. OLIVER, as Trustee in Bank-

_ ruptey of the Estate of West
Coast Rubber Corporation,
Inc., (a corporation),

Oscar CouRTIN,

DororHy E. Kniant,

D. C. Tuney,

H. Brack,

Huan V. Casserry.

Petitioners.

RevBEN G. Hunt,
Attorney for Petitioners.

Lovis V. CRowLEY,
Of Counsel.

13

State of California,
City and County of San Francisco,—ss.

A. J. OLIVER, being first duly sworn, deposes and
says:

I am one of the petitioners named in the fore-
going petition, and make this verification also on
behalf of the other petitioners. I have read the
said petition and know the contents thereof and
the same is true of my own knowledge, except as
to the matters therein stated on information or
belief and as to those matters T believe it to be
true.

A. J. Ouiver,

Subscribed and sworn to before me this 15th day
of September, 1923.

(Seal) J. D. Brown,
Notary publie in and for the City and County
of San Francisco, State of California.

14

CERTIFICATE OF COUNSEL.

I hereby certify that I am counsel for petitioners
in the above entitled cause and that in my judg-
ment the foregoing petition for writ of certiorari is
well founded in point of law as well as in fact an
that said petition for writ of certiorari is not inter
posed for delay.

Dated, San Francisco,
September 15, 1923.

Louis V. CROWLEY,
Of Counsel for Petitioners

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_0219%3A2. Public record. Not legal advice.