# Petition for Writ of Certiorari — Davis v. Pringle > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_0256%3A05 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1925 - **Citation:** 268 U.S. 315 ## Text Page De a Ra I a ee ee ye Re Te eC yn eT 1 Acceptance of service_.....-.......-....--------------------- 2 IS TI. OU ad icine cn nmi ime ate anise winin nena on otamne am niece manatee t eens DOP WEG ook ke ritncimn ce anat manne manneewanmann a 5 Brief in support of petition..............-.......-.....----- j1 1. The Court erred in holding that the U nited States was not entitled to priority except for tares_.-._--------- 11 (a) Section 3466 R. S. was not repealed by the puas- sage of the Bankruptcy Act of 1898__-------- 15 (b) The United States is a“ person” within the mean- ing of Section 64(b)5 of the Bankruptcy Act--- 16 2. The questions involved are of such importance writ of certiorari should be granted........................... 20 CASES CITED Davis vy. Coyle, 260 U. 8. 721.........-..............-------- 18 Davis v. Miller Link Lumber Co., 296 Fed. 649_..------------- 20, 32 ele ©. Pollen, 277 P60, G00... nnnnccncewcunnncemesceconans 20, 32 Dupont v. Davis, 264 U. S. 456_------------------------------ 8 Forsyth v. Hammond, 166 U. S. 514_------------------------- 21 Guarantee Title & Trust Co, v. Harford v. U. Title Guaranty & Surety Co., 224 U. S. " TS, he Ae Sa ere eee , 8 Cranch 109 In re Atlantic r & P. Steamship Co., 289 Fed. 146 In re Hibuer Oil Co., 264 Fed. 667 16, 19, 28, 35 15 19, 32 17, 19, 31 In re Lau Ow Bew, 141 U. 8. 588..-...-.--...............--- 21 In re Tidewater Coal Exchange, 280 Fed. 648_.------- 8, 16, 17, 25, 31 In re Western Implement Co., 171 Fed. 80___.-------------- 8, 16,19 Lewis, Trustee, v. U. S., 92 U. 8. 618_..---------------------- 14,27 Lott vy. Saliebury, 287 Fed. 191.........-..-............--..---- 19 North American eye’ Co. V. eS: eh) | es 15 Sloan Shipyards vy. U. 8. Fleet eS 58 : S. 549__. 16, 18, 33 The Three Friends, pe Bt Ase cca bee exec neni dials ease abate 21 a Ww Beker: 2 COPANO BOG. cnc cncnnnnenccescnsmnntmananmes 15 U. S. vy, Gooding, 12 Wheaton 460...-..--.------------------- 15 U. S. v. National Surety Co., 254 U. 8S. 73.-------------- 16, 18, 20, 32 7, &. vy; Oklahoma, 261 U.S. 208.........-...-.-- eee =e 16, 19, 26, 82 U. 8S. v, State Bank of North Carolina, 6 Peters 29_----------- 14 22796——-24——_1 (1) Inthe Supreme Court of the Wnited States Ocroser TerM, 1924. James C. Davis, Director GENERAL AND AGENT (Seapoarp Arr Line RatLroap) PETITIONER, v. FE. H. Prrnare, as Truster tN BANKRUPTCY OF THE Estate or Cuaries F. Boyp Company, Inc., Bankrupt. RESPONDENT. NOTICE T. H. Prinewr, as Trustee in Bankruptcy of the Estate of Charles F. Boyd, Inc., Bankrupt, or MircHect AND Horipeck, AND WHALEY, Barn- WELL & GrimBALL, his Attorneys of Record: This is to notify you that the petitioner will, on the 5th day of January, 1925, or as soon there- after as counsel may be heard, present to the Supreme Court of the United States, in its court room at Washington, D. C., his motion for a writ of certiorari upon his verified petition and a copy of the entire record in this cause; and a copy of said motion, said petition and brief accompanying (1) “rr : nd RE Ry RSE ENTREE ES FH LE ” — same are herewith delivered to you this 5th day of December, 1924. JAMES C, Davis, Director General and Agent. By AveustinE T. SMYTHE, A. A. McLAUGHLIN, ALEx KOopLIN, LAMBERT MCALLISTER, Counsel for Petitioner. ACCEPTANCE OF SERVICE The foregoing notice, and delivery of copy thereof and of motion and petition for writ of certiorari and brief are hereby acknowledged this 5th day of December, 1924. WHALEY, BARNWELL & GRIMBALL, MITCHELL AND HOoRLBECK, Attorneys for Respondent. PEERED, NR PRN so st ma eran In Tue Supreme Court or THE UNITED STATES OCTOBER TERM, 1924 James C. Davis, Direcror GENERAL AND AGENT (Seapoarp AiR Lint RAtLroap), PETITIONER v. EK. H. Priveve, as Trustee tN BANKRUPTCY OF Ture Estate oF CHartes F. Boyp Company, Inc., Bankrupt, RESPONDENT MOTION FOR WRIT OF CERTIORARI TO THE UNITED STATES CIRCUIT COURT OF APPEALS FOR THE FOURTH CIRCUIT Now comes James ©, Davis, Director General and Agent, petitioner, by his counsel, and moves this Honorable Court that it will by certiorari, or other process, directed to the Honorable Judges of the United States Cireuit Court of Appeals for the Fourth Circuit, require said Court to certify to this Court for its review and determination a certain cause in said United States Cireuit Court of Appeals for the Fourth Circuit lately pending, wherein the petitioner, James C, Davis, Director General and Agent, was appellant and E. H. Pringle, as Trustee in Bankruptcy of the estate of Charles F. Boyd, Ine., Bankrupt, was appellee; (3) er wy WENGER RIMES SD RI PU NIE TON ER MEH YET Od’ Tey SBMTL ALREADY fa has tea tate 4 and to that end the petitioner now tenders here- with his petition and brief with a certified copy of the entire record in said cause in said United States Cireuit Court of Appeals for the Fourth Circuit. AveustTInE T. SMYTHE, A. A. McLavuGuHLin, ALEx. Kop.in, LAMBERT MCALLISTER, Counsel for Petitioner. IN THE SUPREME CovurRT OF THE UNITED STATES OCTOBER TERM, 1924 JAMES C. Davis, Director GENERAL AND AGENT (SEABOARD AIR LINE RAILROAD), PETITIONER v. E. H. Prinetr, as TRusTEE IN BANKRUPTCY OF THE Estate oF CHARLES F. Boyp Company, Inc., BANKRUPT, RESPONDENT PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES CIRCUIT COURT OF APPEALS FOR THE FOURTH CIRCUIT To the Honorable, the Chief Justice and the Associate Justices of the Supreme Court of the United States: The petition of James C. Davis, Director Gen- eral and Agent, hereinafter called petitioner, res- pectfully shows to this Honorable Court: 1, On January 15, 1924, Honorable H. A. M. Smith, United States District Judge for the Eastern District of South Carolina, in bank- ruptey, affirmed the report of Lionel K. Legge, Esq., Special Referee in the matter of Charles F. Boyd, Inc., bankrupt, denying priority to a claim filed in the bankruptey proceedings by petitioner. (5) ERTS ee aye ek WP 6 The claim filed by petitioner for $2,207.43 duly itemized covered freight, storage, and demurrage earned and accruing on and after December 26, 1918, on a shipment to Charles F. Boyd & Com- pany, Charleston, 8S. C. These claims accrued in the operation during the period of Federal control of railroads by the Director General of Railroads of the properties of the Seaboard Air Line Railroad. No question was raised as to the amount due by the bankrupt to petitioner. The sole question raised on the record was whether the claims of petitioner were entitled to priority in the distri- bution of the assets of the bankrupt under the provisions of Sections 3466 and 3467 of the Re- vised Statutes of the United States and Section 64 (b) 5 of the Bankruptey Act of 1898 (30 Stat. 544). In the opinion confirming the Referee’s order the District Court said: The sole question is whether the claims preferred by the petitioner, James C. Davis, Federal Agent, are entitled to priority over all other claims under the provisions of Section 3466 of the Revised Statutes. In the opinion of the Court the provisions of Section 3466 do not apply to the claims of the petitioner. That Statute contemplates debts to the United States accruing to it directly under any statutory or contractual directions. The present claims do not fall into those categories. They are claims arising only incidentally to the temporary LEST PLANS AE NT OL POISE MEN CET RIN ERNE SPIE NN ——————— 7 operation by the Government of the plant of a transportation corporation, operated by the Government in like manner as it would have been operated by the corpora- tion itself had the Government not taken possession. The very description of the claims shows this. They are all for freight, storage, and demurrage charges on mer- chandise transported as shipped by private parties. The Government in possession of the Railway plant of a corporation under- took the commercial transportation of ar- ticles shipped by private persons in like manner as the same were transported by the corporation when in possession of the Railway plant and lines. For all these charges the Government Agent has a lien upon the articles transported. It was the duty of that Agent to have collected all these charges before delivery of the articles to the consignees. Having seen fit to waive that lien and deliver the articles to the consignee without collecting the charges for which he had a lien, the Agent of the Government under the circumstances of this ease is not entitled to a prior lien upon the general estate of the bankrupt consignee. 2. An appeal was taken from the order of the District Court to the United States Cireuit Court of Appeals for the Fourth Circuit. Upon this ap- peal on June 12, 1924, a hearing was had in the United States Cireuit Court of Appeals for the Fourth Cireuit, and on September 29, 1924, the Court rendered an opinion affirming the decision 22796—24-—-—-2 8 of the District Court. Copies of this decision and of the decision in case No. 2245 referred to therein are hereto attached as Exhibit ‘‘A.”’ 3. The Cireuit Court of Appeals for the Fourth Circuit in affirming the judgment of the lower court held, under the decision of this Court in the ease of DuPont v. Davis, 264 U.S. 456, that debts due to petitioner were debts due to the United States, but held that the United States was not entitled to priority in the distribution of assets of a bankrupt estate except for taxes, and there- fore affirmed the decision of the District Court. 4. The opinion of the Cireuit Court of Appeals states that its conclusion is in conflict with the decision of the Cireuit Court of Appeals for the Second Circuit in re Tidewater Coal Exchange, 280 Fed. 648, and of the Circuit Court of Appeals for the Eighth Circuit in re Western Implement Company, 171 Fed. 81. 5. Petitioner respectfully submits that the Cir- euit Court of Appeals for the Fourth Circuit in affirming the judgment of the District Court for the Eastern District of South Carolina erred as a matter of law in holding. (a) that the United States was not a ‘‘ person ”’ within the meaning of Section 64 (b) 5 of the Bankruptey Act of 1898, and (b) that the United States was not entitled to priority in bankruptcy except for taxes. 6. That the judgment of the Circuit Court of Appeals in this case is a final judgment. 9 7. The judgment of the Circuit Court of Ap- peals for the Fourth Cireuit being one arising in bankruptey is final and is reviewable by this Court only by certiorari under the provisions of the Act of September 6, 1916 (C. 448, 39 Stat. 726). 8. Certiorari should be granted in this case be- cause the question involved is one of great public importance since the effeet of the decision is to deny to the United States priority in bankruptey except for taxes. 9. The question involved is also one which calls for a decision by the Court in order to settle and harmonize the conflicting decisions of the Circut Court of Appeals for the Second, Eighth, and Fourth Circuits. Wherefore, upon due consideration of this peti- tion, of the annexed brief, and a certified copy of the record of the United States Circuit Court of Appeals for the Fourth Circuit filed herewith, petitioner respectfully prays that a writ of certiorari be issued under the seal of this Court, directed to the United States Cireuit Court of Appeals for the Fourth Circuit, commanding that Court to certify and send to this Court on a date to be designated a full and complete transcript of the record of al! proceedings had in this cause to the end that the same may be reviewed and determined by this Honorable Court under said writ as provided by law. And petitioner prays that upon the final consideration of this cause and of said writ, the said judgment of the United LOL P EOS LELT HEIL AT IS NIUE IBERIA AR RNAS OR 10 States Circuit Court of Appeals for the Fourth Circuit will be reversed by this Honorable Court and judgment rendered in favor of the petitioner. Petitioner further prays for such other equi- table and general relief as may appertain to this case and as may be competent for this Honorable Court to grant. AUGUSTINE T. SMYTHE, A. A. McLAvGHLIn, ALEX. KOoPLin, LAMBERT MCALLISTER, Counel for Petitioner. A. A. McLAvGHLIn, of Counsel. District OF CoLUMBIA, City of Washington, to wit: Before me, the undersigned notary public, per- sonally appeared A. A. McLaughlin, who being duly sworn, deposes and says: That he is a member of the bar of the Supreme Court of the United States, and is of counsel for petitioner herein; that he has read the foregoing application for a writ of certiorari; and that all the facts therein stated are true and correct to the best of his knowledge and belief. A. A. McLAvuaGHuin. Subscribed and sworn to before me this 3rd day of December, 1924. W. B. Rosinson, Notary Public, District of Columbia. My commission expires March 23, 1925. IN THE SupREME Court oF THE UNITED STATES OCTOBER TERM, 1924 JAMES C, Davis, DiREcTOR GENERAL AND AGENT (AtLtantic Coast LINE RatILroaD), PETITIONER v. E. H. Prineue, as TRUSTEE IN BANKRUPTCY OF THE Estate oF CuHartEs F. Boyp Company, Inc., BANKRUPT, RESPONDENT BRIEF IN SUPPORT OF APPLICATION FOR WRIT OF CERTIORARI I THE COURT ERRED IN HOLDING THAT THE UNITED STATES WAS NOT ENTITLED TO PRIORITY EXCEPT FOR TAXES The sole question involved in this case is whether the United States is entitled to priority in bankruptey for debts other than taxes. It is admitted that prior to the passage of the Bankruptey Act of 1898 (30 Stat. 544), the United States was entitled to priority for all debts. (Lewis, Trustee, v. U. S.,92 U. S. 618.) The provisions of section 64 of the Bankruptey Act of 1898, as amended, are as follows: (a) The court shall order the trustee to pay all taxes legally due and owing by the bankrupt to the United States, State, (11) 12 county, district, or municipality in advance of the pavment of dividends to ereditors, and upon filing the reeeipts of the proper public officers for such payment he shall be credited with the amount thereof, and in case any question arises as to the amount or legality of any such tax the same shall be heard and determined by the court. (b) The debts to have priority, except as herein provided, and to be paid in full out of the bankrupt estates, and the order of payment shall be (1) the actual and necessary cost of preserving the estate sub- sequent to filing the petition; (2) the filing fees paid by the creditors in involuntary eases, and, where property of the bankrupt transferred or concealed by him either be- fore or after the filing of the petition, shall have been recovered for the benefit of the estate of the bankrupt by the efforts and at the expense of one or more creditors, the reasonable expenses of such recovery; (3) the cost of administration, including the fees and mileage payable to witnesses as now or hereafter provided by the laws of the United States, and one reasonable attorney’s fee, for the professional services actually rendered, irrespective of the number of attorneys employed, to the pe- titioning creditors in involuntary cases, to the bankrupt in involuntary cases while performing the duties herein prescribed, and to the bankrupt in voluntary cases, as the court may allow; (4) wages due to — 13 workmen, clerks, traveling or city sales- men,* or servants, which have been eared within three months before the date of the commencement of proceedings, not to ex- eeed three hundred dollars to each claim- ant; and (5) debts owing to any person who by the laws of the States or the United States is entitled to priority. (c) In the event of the confirmation of a composition being set aside, or a dis- charge revoked, the property acquired by the bankrupt in addition to his estate at the time the composition was confirmed or the adjudication was made shall be applied to the payment in full of the claims of creditors for property sold to him on credit, in good faith, while such compo- sition or discharge was in force, and the residue, if any, shall be applied to the pay- ment of the debts which were owing at the time of the adjudication. Petition.2r contends that under the provisions of section 64 (b) 5, supra, the United States is en- titled te priority for debts other than taxes since a vebt to the United States is one which ‘* by the iaws of * * * the United States is entitled to priority.”’ Section 3466 of the Revised Statutes is as follows: Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is in- sufficient to pay all the debts due from the 14 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 having suffi- cient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, con- cealed or absent debtor are attached by process of law, as to cases in which an act of bankruptey is committed. It is well to bear in mind the rule of construc- tion uniformly followed by this Court that Acts granting priority being based on public policy are to be construed liberally. In United States v. State Bank of North Caro- lina, 6 Peters 29, this Court said: The right of priority of payment of debts due to the Government, is a prerogative of the crown well known to the common law. It is founded not so much upon any per- sonal advantage to the sovereign, as upon motives of public policy, in order to secure an adequate revenue to sustain the public burdens and discharge the public debts. The claim of the United States, however, does not stand upon any sovereign preroga- tive, but is exclusively founded upon the ae- tual provisions of their own statutes. The same policy, which governed in the case of the royal prerogative, may be clearly traced in these statutes; and as that policy has mainly a reference to the public good, there is no reason for giving to them a strict and 15 narrow interpretation. Like all other stat- utes of this nature, they ought to receive a fair and reasonable interpretation, accord- ing to the just import of their terms. See also U. S. v. Fisher, 2 Craneh, 358. The terms of the Acts involved are clear and we “must take the law as we find it.” (U. S. v. Gooding, 12 Wheaton, 460-478.) Section 64 (b) 5 contains the words “ debts owing to any person who by the laws of * * +# the United States is entitled to priority ’’ and section 3466 contains the words “‘ debts due the United States.’’ Petitioner, therefore, contends that Revised Statutes 3466 created the priority referred to in the above quoted provisions of sec- tion 64 (b) 5 of the Act of 1898. To sustain the position taken by the Circuit . Court of Appeals for the Fourth Circuit this Court must hold either (a) that section 3466 was repealed by the passage of the Bankruptey Act of 1898, or (b) that the United States is not a “ per- ‘son ’’ within the meaning of section 64 (b) 5. Section 3466, Revised Statutes, was not repealed by the passage of the bankruptey act of 1898 It is elementary that a repeal will not be im- plied unless there is an irreconcilable conflict between the statutes (Harford v. U. S., 8 Cranch 109; North American Commercial Company v. U. S., 171 U. S. 110, 129), and that this Court 22796—24——3 16 should so construe the statutes as to give effect to both, if possible. In fact this Court in the case of Guarantee Title d& Trust Co. v. Title Guaranty & Surety Co., 224 U. S. 152, held that section 3466 of the Revised Statutes and the Bankruptcy Acts of 1867 and 1898 should be construed in pari materia and that the Act of 1898 superseded Revised Statutes 3466, only in so far as the two statutes were in- consistent. That section 3466 Revised Statutes was not re- pealed by the Bankruptcy Act of 1898 is clearly indicated by the decisions of this Court in U. S. v. National Surety Co., 254 U.S. 73; Sloan Ship- yards v. U. S. Flect Corporation, 258 U. 8S. 549, and U.S. v. Oklahoma, 261 U. S. 253. There is no inconsistency in holding as this Court did in the Guarantee case, supra, that ex- cept as to taxes, debts due the United States were deferred until certain other claims such as labor had been paid, as that was clearly the intention of Congress in passing the Act of 1898. The United States is a “ person” within the meaning of section 64 (b) 5 of the bankruptcy act That the United States is a ‘‘ person ”’ within the meaning of section 64 (b) 5 was decided by the Circuit Court of Appeals for the Second Circuit in In re Tidewater Coal Exchange, 280 Fed. 648. See also In re Western Implement Co., 171 Fed. 81. 17 The decision of the lower Court in this case admits that the conclusion reached by it is in con- flict with the decision of the Circuit Court of Appeals for the Second Circuit in the case of In re Tidewater Coal Exchange, 280 Fed. 648, in which the same question was involved. In that case the Court said: The Circuit Court of Appeals for the Seventh Circuit, in In re E. H. Hibner Oil Co., 264 Fed. 667, A. L. R. 629, declared that unpaid freight charges for shipments by railroad during the period of federal control are the property of the United States, and the claim therefore is entitled to priority in bankruptcy under section 62 b of the Bankruptcy Act (Comp. St. see. 9648) and section 3466 of the Revised Stat- utes (Comp. St. See. 6372). The Bank- ruptcy Acts of 1800 (Act April 4, 1800, c. 19, sec, 62 (2 Stat. 36)), of 1841 (Act August 19, 1841, c. 9, sec. 5 (5 Stat. 444)), and of 1867 (Act March 2, 1867, ¢. 176, see. 28 (14 Stat. 530)) expressly recognized the priority of debts due the United States, thus pre- serving in all its essential features the pro- vision in the act of 1797, reproduced in sec- tion 3466 of the Revised Statutes relating to priorities. The Bankruptcy Act of 1898 contains no similar express provision; and, if, under that act, priority is given, it must be because of Clause 5, subd. (b), Sec. 64 18 (Comp. St. See. 9648), which reads as fol- lows: **(5) Debts owing to any person who by the laws of the States or the United States is entitled to priority.”’ We have no doubt that the United States is to be regarded as a person within the meaning of the clause cited, and can assert its priority as given to it under section 3466 of the Revised Statutes (Comp. St. Sec. 6372), which is reproduced in the margin 1. The priority secured to the United States is priority over all creditors. The statutory provision referred to is simply declaratory of the common-law rule which entitles a sovereign to priority over other creditors of an insolvent. United States v. National Surety Co., 254 U. S. 73, 75, 41 Sup. Ct. 29, 65 L. Ed. 143. The attention of this Court is directed to the fact that an application for certiorari in the last cited case was denied (Davis v. Coyle, 260 U. S. 721), and that on the application respondent sug- gested to this Court that in view of the dissent in the case of Sloan Shipyards v. U. S. Fleet Corporation, 258 U. S. 549, the writ of certiorari should be granted. Petitioner submits that the decision of the lower Court in this ease is not only in conflict with the decision of the Circuit Court of Appeals for the Second Circuit in the Tidewater case, supra, but is also in conflict with the decision of this Court in the case of U. S. v. National Surety 19 Company, 254 U. S. 73; U. S. v. Oklahoma, 261 U. S. 253, and with the decisions of the Circuit Court of Appeals for the Seventh and Eighth Circuits in the cases of In re Hibner Oil Co., 264 Fed. 667, and In re Western Implement Co., 171 Fed. 81, as well as with the decision of Judge Rose of the Circuit Court of Appeals for the Fourth Circuit in the case of In re Atlantic G. & P. Steamship Co., 289 Fed. 146. Petitioner also suggests that the decision in this ease is in actual conflict with the decision of the lower Court in the ease of Lott v. Salisbury, 237 Fed. 191, in which that Court said, page 203: The case most strongly relied upon is Guarantee Title & Trust Co. v. Title Guar- antee & Trust Co., 224 U. S. 152, 32 Sup. Ct. 457, 56 L. Ed. 706. That case holds that the United States, except for taxes due, had not in the enactment of the bankruptcy law exercised its sovereign right of providing a preference for its own claims against the bankrupt. It is conceded that the Govern- ment has such a right and frequently exer- cises it. In the case just referred to the Court held that the Government had, except as to taxes, put itself in the plight of an ordinary unsecured creditor, and under section 64b was postponed till certain claims, wages among others, were paid. The attention of this Court is directed to the fact that the Cireuit Courts of Appeal for the First and Fifth Cireuits have held that the Direc- 20 tor General is entitled to priority in receivership proceedings. (Davis v. Pullen, 277 Fed. 650; Davis v. Willer Link Lumber Co., 296 Fed. 649.) Petitioner respectfully submits that this Court in the Guarantee case, supra, merely held that claims of the United States except for taxes were subordinated to labor claims by the Act of 1898, and that the dissent in the Sloan case, supra, ean not be considered as controlling in this ease. If the position of the Circuit Court of Appeals for the Pourth Circuit in this case is correct then it was not necessary for the majority of this Court to base its decision in the Sloan case, supra, on the ground that a debt due the Fleet Corporation was not a debt due the United States; nor was it neces- sary for this Court to pass on the question in- volved in U. S. v. National Surety Co., 254 U.S. 73, since a finding by the Court that the United States was not entitled to priority except for taxes would have disposed of these cases. It is respectfully submitted, therefore, that the Cireuit Court of Appeals for the Fourth Circuit erred in its conclusion in the instant case and that this Court should grant the petition for certiorari in order that the error may be corrected. It The questions involved are of such importance writ of certiorari should be granted It is submitted that the writ herein should be granted since the question involved in this case is 21 one of great publie interest, of gravity and im- portance (Re Law Ow Bew, 141 U. S. 583), and that the writ should be granted in order that the conflict in the decisions of the various courts may he corrected. (Forsythe v. Hammond, 166 U. 8. 514, and The Three Friends, 166 U. 8. 49.) Respectfully submitted. AveusTInE T. SMYTHE, A. A. McLAUGHLIN, ALEx. KOoPLIN, LAMBERT MCALLISTER, Counsel for Petitioner. EXHIBIT A Unitep States Circuit Court or APPEALS FOURTH CIRCUIT No. 2246 JAMES ©. Davis, FEDERAL AGENT FOR CLaIMs Dut IN OPERATION OF SEABOARD AIR LINE RatLway Company, APPELLANT versus E. H. Prineie as TRUSTEE IN BANKRUPTCY OF THI Estate oF CHaRLES F. Boyp Company, INc. Bankrupt, APPELLEE Appeal from the District Court of the United States for the Eastern District of South Caro- lina, at Charleston. In Bankruptcy (Argued June 12, 1924. Decided Sept. 29, 1924) Before Woops and WappiLL, Circuit Judges, and Wess, District Judge ALEX. Kopuin, General Attorney for U. S. Rail- road Administration, and AUGUSTINE T. SMYTHE (LAMBERT McALLIsTER on brief) for Appellant, and N. B. Barnwett (F. H. Hor_pecx; WHALEY, BARNWELL & GRIMBALL and MITCHELL & HoriBeck on brief) for Appellee, Woops. Circuit Judge: ‘This appeal involves the claim of the Director General to priority of the debt due by the bank- (22) 23 rupt, acruing on the line of the Seaboard Air Line Railway Company during Federal control. The questions made are discussed and decided in the opinion filed this day in No. 2245, Davis, Federal Agent, vs. E. H. Pringle, Trustee. For — the reasons therein stated the decree of the Dis- trict Court must be Affirmed. 7654 Certified Copy Unitep Sratres Circuit Court OF APPEALS FOURTH CIRCUIT No. 2245 James C. Davis, FeperaL AGENT FoR CLarms DUE IN OPERATION oF AtrLaANTIC Coast LINE RalIt- ROAD COMPANY, APPELLANT versus E. H. Prinete as TRUSTEE IN BANKRUPTCY OF THE ESTATE OF CHARLES F. Boyp Company, INC., BaNkKRuPT, APPELLEE Appeal from the District Court of the United States for the Eastern District of South Caro- lina, at Charleston. In Bankruptcy (Argued June 12, 1924. Decided Sept. 29, 1924) Before Woods and Waddill, Circuit Judges, and Webb, District Judge Atex Kopuin, General Attorney for U. S. Rail- road Administration (StmEon Hype; LAMBERT McAtuisteR and RutLepGeE, Hype, Mann & Fiaa on brief), for Appellant, and N. B. — 24 Barnweuu (F. H. Horipeck; WHALEY, Bary- weEiL & GrimMBALL, and MircHEtt & HorBecK on brief for Appellee Woops, Circuit Judge: Charles F. Boyd Company, Inc., was adjudged bankrupt on August 20, 1920. The Director Gen- eral on February 3, 1921, filed claims amounting to $2,213.70 for freight, storage, and demurrage accruing to the Atlantic Coast Line Railroad Company during Federal control. Afterwards, on February 27, 1922, the Director General by petition claimed priority over general creditors in the distribution of the assets. No point seems to have been made before the Referee or the Dis- trict Court that the claim for priority was not properly set up. If demurrage, freight, and storage charges in favor of the Director General are debts due to the United States, and as such are entitled to priority, the priority was inherent in the debts and required recognition by the court when called to its attention at any time before distribution of the assets. The Referee reported against the claim of pri- ority and the District Judge confirmed his report. We are unable to agree with the Referee and the District Judge that the debts due to the Di- rector General were not debts due to the United States of the character given priority by Section 3466 of the Revised Statutes. The Supreme Court has decided otherwise. In DuPont vs. Davis, April 7, 1924, the Court says: ‘‘ In taking over and operating the railroad systems of the 25 country the United States did so in its sovereign capacity, as a war measure, ‘ under a right in the nature of eminent domain.’ North Carolina R. R. Co. vs. Lee, 260 U. S. 16; Missouri Pacific R. R. Co. vs. Ault, 256 U. S. 554; Northern Pacific R. R. Co. vs. North Dakota, 250 U. 8. 135; In re Tidewater Coal Exchange, 280 Fed. 648, 649; and it may not be held to have waived any sovereign right or privilege unless plainly so provided. Moneys and other property derived from the oper- ation of the carriers during Federal control, as we have seen, are the property of the United States, See. 12, 40 Stat. 457. An action by the Director General to recover upon a liability arising out of such eontrol is an action on behalf of the United States in its governmental capacity. Ches. & Del. Canal Co. vs. United States, 250 U. 8. 123; In re Tidewater Coal Exchange, 280 Fed. 648.’’ Davis vs. Corona Coal Co., decided by the Supreme Court May 26, 1924. The question of priority of debts, other than taxes, owing to the United States in the distribu- tion of bankrupt estates is one of difficulty. It is not to be decided on the general doctrine of prior- ity of debts due the sovereign, for the Congress has undertaken to cover the whole subject by stat- utes. The Act of 1797, R. S. 3466, provides: ‘‘ Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, 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 ~ 26 in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assign- ment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.’’ By virtue of this statute the United States had a preference in the payment of its debts under any of the conditions mentioned in the statute— but not in a distribution which for any reason did not come within the statute. United States vs. Oklahoma, 261 U. S. 253. In that ease the State setting up a claim in behalf of the depos- itors of a bank under authority of a State statute | was held to have priority over debts due the United States, on the express ground that the bank assets in the hands of a State commission | 7 did not present a condition under which the stat- ute gave the United States priority. The Bankruptcy Statute of 1867, R. S. 5101, provided the following order of priorities: ‘*In the order for a dividend, the following shall be entitled to priority, and the first paid in full in the following order: ‘¢ First. The fees, costs, and expenses of suits, and of the several proceedings in bankruptcy under this Title and for the custody of property, as herein provided. ‘¢ Second. All debts due to the United States, and all taxes and assessments under the laws thereof. ‘‘ Third. All debts due to the State in which the proceedings in bankruptcy are pending, and all taxes and assessments made under the laws thereof. an _— ‘‘ Fourth. Wages due to any operative, clerk or house servant, to an amount not exceeding fifty dollars, for labor performed within six months next preceding the first publication of the notice of proceedings in bankruptcy. ‘“ Fifth. All debts due to any person, who, by the laws of the United States, are, or may be, en- titled to a priority, in like manner as if the pro- visions of this Title had not been adopted. But nothing contained in this Title shall interfere with the assessment and collection of taxes by the authority of the United States or any State.”’ Thus not only taxes but all debts due the United States were given priority over all other liabilities, except costs and expenses of bankruptcy proceed- ings. In other words, the priority given all debts due to the United States by R. 8. 3466 was sanc- tioned and re-enacted by the Bankruptcy Statute of 1867. As the court said in Lewis, Trustee, vs. < United States, 92 U. S. 618, the statute contained no qualification of priority of the United States, and the court could not interpolate one. What limitation, if any, in the distribution of bankrupt assets did the subsequent Bankruptey Act of 1898 put upon the general priority given the United States under the previous statutes? The Act of 1898 was intended to cover completely all matters of adjudication, administration, discharge, priorities, and distribution of assets. The Statute and rules made under it supplanted and annulled all previous inconsistent statutes and rules of the courts of common law and equity. United States Fidelity d} Guaranty Company vs. Bray, 225 U.S. 205, 217. ‘* The Act takes into consideration, we 27 —— 28 think, the whole range of indebtedness of the bank- rupt, national, State and individual, and assigns the order of payment.’’ Guarantee Company vs. Title Guaranty Company, 224 U. S. 152, 160. The Statute provides the following order of priority : (a) The court shall order the trustee to pay all taxes legally due to the United States, State, county, district, or municipality in advance of the payment of dividends to creditors. (b) Debts to have priority, except as herein provided, and to be paid in full, * * * and the order of payment shall be: (4) wages due to work- men, clerks, traveling or city salesmen, or servants, which have been earned within three months be- fore the date of the commencement of the pro- ceedings; and (5) debts owing to any person who by the laws of the States or the United States is entitled to priority. The Congress thus took from debts due the United States, other than taxes, the priority given such debts along with taxes by the Act of 1867 by leaving out of the Act of 1898 other debts in providing for priority of taxes. This seems too clear for discussion; and so the court decided in Guaranty Company vs. Title Guar- anty Company, supra. There it was held that the Act of 1797, R. S. 3466, the Bankruptcy Statute of 1867, R. S. 5101, and the Bankruptcy Statute of 1898 must be considered in pari materia; and that in bankruptcy proceedings the Act of 1895 superceded Section 3466, R. S., so far as the two statutes were inconsistent. It is argued, however, that priority is given the United States next in order to debts for ees 29 wages, by Sec. 64-b (5), “‘Debts owing to any person who by the laws of the States or the United States is entitled to priority."" This grade of priority is not given to the United States by virtue of R. S. 3466 unless the United States falls under the designation of ‘“tany person.” The Statute itself gives this definition: ‘‘(19) ‘persons’ shall include corporations except where otherwise specified, and officers, partnerships, and women, and when used with reference to the com- mission of acts which are herein ferbidden shall include persons who are participants in the for- bidden acts, and the agents, offices, and mem- bers of the board of directors or trustees, or other similar controlling bodies of eorporations.’’ See. 1, el. (19), Bankruptey Act of 1898. The failure to include the United States and the States in the definition could aot have been inadvertant. The United States and the several States of the Union are not persons and are not commonly thought of as persons, and if it had been intended that ‘‘persons’’ should have such a comprehensive and unusual meaning as to include them, the framers of the definitioa would have said so. Again, when the Congress had already dealt with claims of the United States under the name of the United States and had deliberately limited its priority to taxes, it is hardly reasonable to at- tribute to the Congress an intention to deal again with the claims of the United States and include them in provision relating to debts of ‘‘ any per- son. *’ It will be noticed further that the language of (5) Seetion 64-b of the Act of 1898 is taken al- i, 30 most literally from the corresponding sub-division of the Bankruptey Act of 1867, and in the absence of the expression of a contrary intention the lan- guage should be held to have the same meaning in the latter statute as in the former from which it was taken. In the Act of 1867 ‘‘ persons ”’ in sub-division (5), R. 8. 5101, could not have been intended to include the United States because all the debts due to the United States had been pro- vided for and given priority over all other debts of any kind by sub-division (2) of the same See- tion. The record of the passage of the Bankruptey Act of 1898 is significant. The bill as passed by the Senate contained the following priorities: ‘* See. 9. That the following debts shall have preference in the order named, over other debts in the distribution of the estate of the bankrupt, to- wit: ‘* First. Debts due to servants or laborers em- ployed by the bankrupt * * * ‘* Second. Taxes or revenues due the United State. ‘* Third. Taxes due any State or Territory or the District of Columbia. ‘* Fourth. Taxes due any County, ‘‘But none of such debts shall be recognized or paid unless duly proved and allowed as pre- seribed in reference to other debts and claims against the bankrupt.”’ All that followed the enacting clause of the Senate bill was struck out by the Committee of the House, and the House bill with about eighty amendments was substituted. The original House * 5 * 9) Be ob et er 31 bill as introduced and referred to the Committee contained the following as to priorities: ‘‘See. 64. Debts which have priority: (a) Debts owing to the United States, a State, a county, a parish, or a municipality, after being proved and allowed, shall have priority only in the event and to the extent that they constitute a lien upon the property of the estate.’ The Committee changed this Section to the form in which it was enacted in the Act of 1898. Thus it appears that after consideration of the question the Congress struck out a provision for priorities of all lien debts owing to the United States, the States and municipalities, and substituted for it a provision in the Act of 1898 limiting the priority of the United States, the States and municipalities to taxes. As it seems to us, the analysis of the statutes and the record of the passage of the Act of 1898 require the holding that the law making power of the United States has limited its priority in bankruptey to its claim for taxes. This conclusion is opposed to the high authority of the Cireuit Court of Appeals of the Second Cireuit: In re Tidewater Coal Exchange, 280 Fed. 648, 650; and of the Eigbth Cireuit; Jn re Western Implement Company, 171 Fed. 81. In the view of these courts the United States and States are persons within the meaning of sub- division (5) of Section 64-b of the Bankruptcy Act of 1898, and, therefore, entitled to priority under R. 8S. 3466 over general creditors after pay- ment of wages. In the Tidewater case the court cited as authority for the holding In re Hibner Oil 32 2 Company, 264 Fed. 667. But the Circuit Court of Appeals of the Seventh Cireuit in the latter case was called on to discuss and decide only the ques- tion whether a debt due to the Director General was a debt due to the United Stites; the court did not discuss the priority of a debt due to the United States, for in the opinion it is stated the priority of such a debt was conceded. Judge Rose in the District Court of Maryland expressed assent to these authorities Zn re Atlantic, G. d& P. S. 8. Company, 289 Fed. 146, but as the court held there was no debt to the United States the point was not really involved. The State of Minnesota was held to be ** a person *’ within the meaning of Section 64-) of the Bankruptey Act of 1898 by Judge Purdy in the District Court for that State, Jn re Western Implement Company, 166 Fed. 578; and the judgment was affirmed by the Circuit Court of Appeals of the Eighth Cireuit for the reasons stated by the District Judge, 171 Fed. 81. The United States v. National Surety Company, 254 U. S. 73, does not decide the question. There the priority of debts due the United States over general creditors seems to have been conceded by the parties, for the court is careful to say that the sole question presented was whether in the dis- tribution of a bankrupt estate the United States has priority over a surety company claiming sub- rogation to the rights of the United States. Mar- shall, Receiver, vs. The People, 254 U. 8S. 380; United States vs. Oklahoma, 261 U. S. 253; Davis, Director General, vs. Pullen (First Circuit), 277 Fed. 650, and Davis, Director General, vs. Miller- Link Lumber Company (Fifth Circuit), 296 Fed. 649, are not authorities for either side, for the — question of the right to priority arose in receiver- ship proceedings, and, therefore, did not involve the meaning of the provisions of Section 64 of the Bankruptey Act of 1898 fixing priority. We find no binding authority opposed to the conclusion that the United States has no priority in bankruptey except for taxes. On the contrary we venture to think it is supported by the reason- ing and conclusion of the court in Guarantee Company vs. Title Guaranty Company, 224 U. S. 152. In Sloan Shipyards vs. United States Flect Corporation, 258 U. 8. 549, the majority of the court denied priority in a bankruptcy proceeding set up by the Emergency Fleet Corporation on the ground that even if the United States would | be entitled to priority, the Emergency Fleet Corporation was a separate entity and its claim for priority could not be sustained. The majority intimated no opinion on the question whether a debt to the United States other than for taxes would have been entitled to priority. The Chief Justice and Justices Van Devanter and Clark dissented from the reasoning of the majority, but as to the claim to priority concurred in the result in this language used by the Chief Justice: ‘‘And to the preference claimed against a bank- rupt in No. 526 by the Fleet Corporation, I con- eur in the conclusion of the court that it can not be allowed under the statute as to preferences in bankruptcy, because I do not think it extends to claims of the United States except those for | tues.” For the reasons stated, and on the authority of Guarantee Company vs. Title Guaranty Com- pany, supra, and the views expressed by the Chief 30 34 Justice and Justices Van Devanter and Clark above quoted, we hold that in bankruptcy, debts due to the United States other than for taxes have no priority over general creditors. No sound principle of public policy can be invoked in support of preference to the Federal Government and to the States over citizens in the collection of ordinary debts. On the contrary, the contractual operations of the Federal Govern- ment and of the States have become so extensive and so involved with the business of private citizens that priority to the Federal Government and to the States except for taxes would operate as an oppressive hardship on other creditors of bankrupts. Affirmed. True copy, Teste: [SEAL | CLAUDE *M. DEAN, Clerk, U. S. Circuit Court of Appeals, 4th Ct. Deputy Clerk. O --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_0256%3A05. Public record. Not legal advice.