291 F. 589 | D. Me. | 1923
I appointed a special master to report to the court a list of all the unpaid expenses of administration and all the priority claims against the bankrtipt company, with a statement of the amount in the hands of the trustee available to pay the expenses and claims. The special master reports that a final account of the trustee shows an amount of $10,851.71 available to pay the expenses of administration and priority claims. The amount of such expenses
The learned counsel for the United States calls the attention of the court to section 3466 of the United States Statutes (Comp. St. § 6372), which 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 in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate, and effects of an absconding, concealed, or absent debtor are attached by process of law, as to eases in which an act of bankruptcy is committed.”
He urges that the above statute controls the Bankruptcy Act, so far as establishing priority of the government over trustees, assignees, or taxes due any city, state or municipality; that the statute is in pari materia with the Bankruptcy Act; that the United States has priority as to the debts due it, to the extent of the entire amount in the hands of the trustee, and that such priority is over all claims of every nature; that the city of'Portland is not entitled to share with the government, but must await payment of the government debt for taxes, before it can collect the taxes due to the city. Reference is made to the following cases: United States v. Barnes (C. C.) 31 Fed. 705; Bayne v. United States, 93 U. S. 643, 23 L. Ed. 997; In re Stoever (D. C.) 127 Fed. 394; Lewis, Trustee, v. United States, 92 U. S. 618, 23 L. Ed. 513; and other cases.
In Guarantee Title & Trust Co. v. Title Guaranty & Surety Co., 224 U. S. 152, 32 Sup. Ct. 457, 56 L. Ed. 706, the Supreme Court had under consideration section 3466 and the two following sections, they being a reproduction of the United States statute of 1797, with immaterial changes. The court held that in the Bankruptcy Act of 1867 is found a reaffirmation of this statute of 1797; but there is no' such affirmation of that statute in the Bankruptcy Act of 1898. The court found a change in the provisions of the law, and also a change of purpose on the part of Congress, so that the Barnes Case, and other cases cited by the district attorney in the case before me, applied to proceedings under the act of 1867, but do not apply to proceedings under the present Bankruptcy Act of 1898. In Re Jacobson, 263 Fed. 883, in 1920, the Circuit Court of Appeals of the Seventh Circuit passed upon this statute. In speaking for the Circuit Court of Appeals,
Bankruptcy Act, § 64a: “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 in advance of the payment of dividends to creditors, and upon filing the receipts 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.*’
Bankruptcy Act, § 64b: “The debts to have priority, except as herein provided, and to be paid in full out of bankrupt estates, and the order of payment shall be (I) the actual and necessary cost of preserving the estate subsequent to filing the petition; (2) the filing fees paid by creditors in involuntary cases; * * * (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 petitioning 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 workmen, clerks, traveling or city salesmen, or servants which have been earned within three months before the date of the commencement of proceedings, not to exceed three hundred dollars to each claimant; and (5) debts owing to any person who by the laws of the States or of the United States is entitled to priority.”
He then observed:
“The first section quoted is a general statute. It existed prior to the passage of the Bankruptcy Act and was partly superseded by that act. In other words, sections 64a and 64b of the Bankruptcy Act are in pari materia with section 3466. Debts due the United States, other than taxes are not given the same protection in the two cited sections of the Bankruptcy Act as existed under the general statute, section 3466, or under the Bankruptcy Act of 1867.”
Judge Evans cites the decision of Justice McKenna in Guarantee Title & Trust Co. v. Title Guaranty & Surety Co., quotes from it, and adds:
“We have quoted thus freely to justify the elimination from this case * * * of section 3466, Revised Statutes, confidently relied upon by ■' * * the government.”
Judge Evans concludes that, in that case, if the petitioners’ claim were entitled to priority, it must be by section 64a of the Bankruptcy Act, and he found that the priority given to taxes must be over “creditors” ; that “creditors” of the bankrupt shall not be entitled to dividends until the taxes are paid, but there is no recognition of priority in favor of taxes, except as to creditors; and that the term “creditors” cannot be construed by any stretch of the definition of that term to include—
“clerk, trustee, referee, or any one whose relation with the bankrupt, or the bankrupt’s estate began subsequent to the filing of the petition in bankruptcy.”
In concluding, Judge Evans holds that it is not conceivable that Congress should confer on the District Court power to administer bankrupt estates, and sequester and preserve property, and yet deny to the court the right to protect its officers in the performance of their duties, notwithstanding such performance of duties and such admin
In the matter before the court here, the cases referred to by the district attorney, for the United States, are early cases, and are of no application in view of the act of 1898, as construed in the cases cited.
In Re Chase, 124 Fed. 753, 59 C. C. A. 629, Judge Putnam, in speaking for the Circuit Court of Appeals for this circuit, held that, if an assignment for the benefit of creditors be fairly made and intended to facilitate the equal distribution of the insolvent’s property among the creditors, without any attempt to defraud or embarrass persons to whom he was indebted, it is not so contrary to the policy of the Bankruptcy Act as to preclude the assignee from recovering for disbursements and services made for the benefit of the estate prior to the filing of the bankrupt’s petition.
In Summers v. Abbott, 122 Fed. 36, 58 C. C. A. 352, the court held that in the absence of fraud, a common-law assignee is entitled to a fair compensation for himself and his attorneys, such as they would have been entitled to, had there been no adjudication in bankruptcy. See In re Scholtz et al. (D. C.) 106 Fed. 834; City of Richmond v. Bird, 249 U. S. 174, 39 Sup. Ct. 186, 63 L. Ed. 543; Collier on Bankruptcy (12th Ed.) p. 993, and cases cited in the notes.
The courts in this circuit have followed the opinion of Judge Putnam in the Chase Case. In Re Morris & Rice (D. C.) 258 Fed. 713, 715, Judge Morton, following the same general line, observed:
“The principles by which the account is to be settled are well established. The common-law assignee will be allowed for such expenses as were reason*593 ably incurred in tbe care and preservation of the property, and therefore! inured to the benefit of the bankrupt estate. Randolph v. Scruggs, 190 U. S. 533, 23 Sup. Ct. 710, 47 L. Ed. 1165; In re Chase, 124 Fed. 753, 59 C. C. A. 629 (C. C. A. 1st Cir.). Before the petition in bankruptcy is filed, the rule will be leniently applied, and the assignee will be given the benefit of any fair doubt so long as he keeps within the powers conferred upon him in the instrument of assignment.”
In Randolph v. Scruggs, 190 U. S. 533, 23 Sup. Ct. 710, 47 L. Ed. 1165, above cited, the Supreme Court laid down the general rule that, in order for services and disbursements of an assignee to obtain a preference, they must be known to be beneficial to the estate. The court said:
“The services to the voluntary assignee may be allowed so far as they benefit the estate, and inasmuch as he would be allowed a lien on the property if he had paid the sum allowed, the appellants may stand in his shoes and may be preferred to that extent.”
In the case before me the testimony taken before me clearly shows that the common-law assignee acted for the benefit of the creditors; that they were confronted with a situation tending to show fraud on the part of the bankrupt; that it became their clear duty to investigate alleged fraudulent transactions; that they were compelled to employ experienced and able counsel; that they were also compelled to employ competent and expert accountants who made a careful and thorough examination of the transactions; that if these accountants had not been employed by the assignees it clearly would have been the duty of the trustee in bankruptcy, after he was appointed, to émploy such accountants and to make such investigation; that such services were necessary in the “preserving of the estate.”
After a careful consideration of the testimony, I am brought to the conclusion that the services and expenses of the assignee were beneficial to the estate, and I so find; that the services were such as the trustee- in bankruptcy would have been compelled to render, if the work has not been already done by the common-law assignee, and, indeed, he has so testified before me.
The disbursements made by the common-law assignee include a bill of Jordan '& Jordan, experienced accountants, who did competent service in investigation of alleged fraud on the part of the bankrupt. These services were in part paid by the common-law assignee, and in their unpaid bills is a balance amounting to $1,663.34 to Jordan & Jordan. While T regard this as a lawful bill, under all the circumstances of the case, I am impelled to make some reduction in their charges, as is shown by the schedule of claims allowed, which I file with this opinion. After making such reduction, I allow the claim of the common-law assignees.
Claims under a Contract and for Wages.
Under the Bankruptcy Act I do not find that the claim under the contract, or either of the claims for wages, is entitled to a priority of payment over the claim for administration of the estate, or of the common-law assignees, or of the claim for taxes. I shall therefore give no place to the above claims under the contract or for wages in my schedule of claims allowed.
Taxes.
Pay orders may be drawn in pursuance of this opinion.
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