1. Under the Bankruptcy Act, as amended February 5, 1903, and
June 15, 1906, debts owed the United States are not entitled to
priority. So
held of claims for freight, storage, and
demurrage growing out of federal control of railroads and claims on
bills of exchange and checks. P.
268 U. S.
317.
2. Section 64(b) of the Bankruptcy Act, giving priority to debts
"owing to any person who, by the laws of the states or the United
States, is entitled to priority,"
construed with other
provisions of this and prior bankruptcy acts and
held not
to include the United States as a "person," and thus make
applicable the priority provision of Rev.Stats. § 3466.
Id.
Nos. 786, 787; 1 F.2d 860, 864 affirmed.
No. 1085, reversed
Certiorari to three judgments of the circuit court of appeals,
the first two denying and the third allowing claims of the United
States to priority of payment in bankruptcy proceedings.
See
also In re Tidewater Coal Exchange, 280 F. 648.
Page 268 U. S. 316
MR. JUSTICE HOLMES delivered the opinion of the Court.
The first and second of these cases are claims for freight,
storage, and demurrage proved in bankruptcy proceedings by the
federal agent, for which the agent asserts priority on the ground
that such claims arising during federal control of the railroads in
1918 are debts due to the United States and are preferred by
Rev.Stats. § 3466, and by the Bankruptcy Act of July 1, 1898, c.
541, § 64, amended by Acts of February 5, 1903, c. 487, § 14, 32
Stat. 800, and June 15, 1906, c. 3333, 34 Stat. 267. The third is a
claim by the United States for amounts paid by the Postmaster
General to the bankrupts for bills of exchange and checks drawn by
the bankrupts and unpaid, together with protest fees, etc., as to
which priority is asserted on the same grounds. The prority was
denied in the first two cases by the Circuit Court of Appeals for
the Fourth Circuit. 1 F.2d 860,
ibid., 864, but it was
allowed in the Second Circuit without any reported opinion,
following an earlier case in that Circuit,
In re Tidewater Coal
Exchange, 280 F. 648.
Page 268 U. S. 317
All the three cases depend upon the question whether the
government has a right to the priority it claims. If that is
denied, the additional inquiries that would be necessary before the
federal agent could prevail in the railroad cases need not be gone
into. Therefore, we take up that first. It may be assumed that the
priority must be found, if at all, in the Bankruptcy Act and in its
supposed incorporation of Rev.Stats. § 3466. That Act, as was said
in
Guaranty Title & Trust Co. v. Title Guaranty &
Surety Co., 224 U. S. 152,
224 U. S. 160,
"takes into consideration . . . the whole range of indebtedness of
the bankrupt, national, state and individual, and assigns the order
of payment." It was passed with the United States in the mind of
Congress, as is shown by the exception of debts due as taxes levied
by the United States from the discharge in § 17, pt. 1, the
limitation on debts owing to the United States as a penalty in §
57j (§ 9641), and the provisions as to priority in § 64 with which
we are principally concerned. By "a" of that section,
"The court shall order the trustee to pay all taxes legally due
and owing by the bankrupt to the United States . . . in advance of
the payment of dividends to creditors."
This, taken by itself, would seem to exclude other debts. But
the section goes on in "b" to give priority in the order named to
"(5) debts owing to any person who by the laws of the states or the
United States is entitled to priority," and the government argues
that, by § 1(19), "persons" shall include corporations and that the
United States is a corporation, and therefore within these words.
Being within them, it is said, it is entitled to priority by a law
of the United States, the well known R.S. § 3466. It is said that
no other person except the United States itself can be discovered
who is given the right by its laws.
We attach little value to this logical concatenation as against
the direct effect of § 64, taken according to the
Page 268 U. S. 318
normal usages of speech. It is incredible that, after the
conspicuous mention of the United States in the first place at the
beginning of the section and the grant of a limited priority,
Congress should have intended to smuggle in a general preference by
muffled words at the end. The states are mentioned in (5) before
the United States, showing that their laws were primarily in mind.
The United States seems added to avoid some possibly overlooked
case. The ordinary dignities of speech would have led to the
mention of the United States at the beginning of the clause, if
within its purview. Elsewhere in cases of possible doubt, when the
Act means the United States, it says the United States. We are of
opinion that, to extend the definition of "person" here to the
United States would be "inconsistent with the context," and
therefore is within the exception at the beginning of § 1. We are
confirmed in our opinion by the fact that, in earlier bankruptcy
acts, a priority was given to the United States in express terms,
and that, for instance, in the Act of March 2, 1867, c. 176, § 28;
14 Stat. 517, 530, "Fifth," persons entitled to priority by the
laws of the United States are mentioned when the United States
could not have been meant, having been fully secured by the same
section, "Second." If it be legitimate to look at them (
Schall
v. Camors, 251 U. S. 239,
251 U. S.
250), the bills that were before Congress when the
present law was passed contained the clause relied upon, but showed
by their context that they could not refer to the United States.
There was a change of purpose from that of the earlier acts.
Guaranty Title & Trust Co. v. Title Guaranty & Surety
Co., 224 U. S. 152,
224 U. S. 158
et seq. Public opinion as to the peculiar rights and
preferences due to the sovereign has changed. We agree with the
view of this point taken by the Chief Justice and Justices Van
Devanter and Clarke in
United States Shipping Board Emergency
Fleet Corp. v. Wood, 258 U. S. 549,
Page 268 U. S. 319
574, at a time when it was not necessary for the majority to
speak upon it. The priority claimed by the United States is not
given to it by the law.
Decrees in 786 and 787 affirmed.
Decree in 1085 reversed.
MR. JUSTICE SUTHERLAND was absent, and took no part in this
decision.