272 N.Y. 221 | NY | 1936
This is an appeal by permission of the Appellate Division, first department, from an order unanimously affirming an order of the Special Term, which confirmed the report of a referee and directed the assignee for the benefit of creditors to pay the claims of wage earners prior to the claim of the United States government for taxes.
On or about November 23, 1934, Kupshire Coats, Inc., a manufacturer of ladies' coats and suits, made a general assignment for the benefit of creditors to Charles Goldberg, which assignment was recorded in the County Clerk's office on the 10th day of December, 1934. On the said date there was due and owing to employees of the assignor the sum of $420.34, representing wages for work, labor and services performed by them within three months prior to the date of the execution of the assignment. Claims for these wages were duly filed.
The Collector of Internal Revenue, on behalf of the United States government, filed a claim with the assignee for unpaid taxes due from the assignor for some time *224 prior to the date of the assignment in the sum of $760.78. The assignee applied for an order settling and allowing his accounts, and the matter was referred to a referee to determine, among other things, the manner of the distribution of the assets. He filed his report giving a preference to the wage earners over the claim of the United States government, and it is the order confirming this report which is before us on appeal.
The question may be stated in this fashion: In view of section 64 (b) of the Bankruptcy Act, as amended in 1926, are wages due to workers entitled to priority in order of payment over taxes due to the United States government, where there has been no bankruptcy, but an assignment for the benefit of creditors made under and pursuant to the Debtor and Creditor Law of the State of New York?
Assignments under the Debtor and Creditor Law (Cons. Laws, ch. 12) of this State and bankruptcy proceedings are not one and the same thing. One is governed by State law and the other by the provisions of an act of Congress. Thus, the State law, section
Voluntary assignment for the benefit of creditors is specifically mentioned in this section, and unless there has been some modification or change in this law or some subsequent act which nullifies it, we should give effect to its plain statement and meaning. Here we have a corporate entity, the Kupshire Coats, Inc., indebted to the United States for taxes, and insolvent. It has made a voluntary assignment of its assets and, not having sufficient funds to pay all the debts due, those due to the United States are to be first satisfied. The respondents have claimed, and the courts below have held, apparently, that a change or modification in this law was made by the Bankruptcy Act and that the bankruptcy provisions apply to the voluntary assignments for the benefit of creditors under State laws. Section 64 of the Bankruptcy Act of 1898, U.S. Code, title 11, § 104, as amended by the act of May 27, 1926 (Ch. 406, § 15; 44 U.S. Stat. (666), reads:
"Section 64. Debts which have priority (a) 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 the order of priority as set forth in paragraph (b) hereof: Provided, that no order shall be made for the payment of a tax assessed against real estate of a bankrupt in excess of the value of the interest of the bankrupt estate therein as determined by the Court. Upon filing the receipts of the proper public officers for such payments the trustee shall be credited with the amounts 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. *226
"(b) The debts to have priority, in advance of the payment of dividends to creditors, and to be paid in full out of bankrupt estates, and the order of payment shall be * * * (5) 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 the proceeding, not to exceed $600 to each claimant; (6) taxes payable under paragraph (a) hereof * * *."
We are of the opinion that these two statutes of the United States should be read together; that all claims of the United States in a voluntary assignment have preference over all other claims, including wages, and that the Bankruptcy Act only applies to cases of bankruptcy and to proceedings in the bankruptcy court, or coming within its jurisdiction.
In Matter of People (Casualty Co. of America) (
While we find no case exactly in point, and counsel have none such on their briefs, yet reference may be made to Cook CountyNat. Bank v. United States (
The orders should be reversed in so far as they relate to the question here presented and the claim of the United States given preference over the wage claims, without costs.
LEHMAN, O'BRIEN, HUBBS, CROUCH, LOUGHRAN and FINCH, JJ., concur.
Ordered accordingly. *228