1. In view of § 10 of the Federal Control Act, a claim for
transportation charges and for conversion of goods shipped,
presented by the Director General of Railroads against an insolvent
who made a voluntary assignment, is not entitled to the priority
granted the United States by Rev.Stats. § 3466. P.
271 U. S.
237.
2. Cause held to be reviewable by certiorari, and not by appeal.
P.
271 U. S. 240.
2 F.2d 194 affirmed.
Certiorari to a judgment of the Circuit Court of Appeals which
sustained the district court in denying priority of payment to a
claim made by the Director General of Railroads in a suit to wind
up affairs of an insolvent corporation. An appeal also was taken,
and is dismissed.
Page 271 U. S. 237
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
Creditors of the Rathbone Manufacturing Company filed a bill
against it in the United States District Court, Western District of
Michigan, wherein they alleged its inability to pay lawful debts in
due course, etc., and asked for a receiver. Answering, the
corporation (which was in fact insolvent) admitted the allegations
and gave consent to the relief prayed. Thereupon the Michigan Trust
Company was appointed receiver, took possession of the property,
and entered upon administration of the trust.
The Director General of Railroads presented claims for
transportation charges and conversion of a shipment of pig iron. He
asked priority of payment, which was denied by both the trial court
and the circuit court of appeals. 2 F.2d 194.
As pointed out in
United States v. Butterworth-Judson
Corporation, 269 U. S. 504, the
things done by the Rathbone Manufacturing Company amounted, in
substance, to a voluntary assignment of all its property within the
meaning of R.S. § 3466.
* Consequently, if
the Director
Page 271 U. S. 238
General is entitled to the priority granted to the United States
by that section, the judgment below must be reversed. But it is
said here, and was held below, that such priority is inhibited by
the provisions of § 10, Act of March 21, 1918, c. 25, 40 Stat. 451,
456, which provides:
"That carriers, while under federal control, shall be subject to
all laws and liabilities as common carriers, whether arising under
state or federal laws or at common law, except insofar as may be
inconsistent with the provisions of this Act or any other Act
applicable to such federal control or with any order of the
President. Actions at law or suits in equity may be brought by and
against such carriers and judgments rendered as now provided by
law, and in any action at law or suit in equity against the
carrier, no defense shall be made thereto upon the ground that the
carrier is an instrumentality or agency of the federal government.
Nor shall any such carrier be entitled to have transferred to a
federal court any action heretofore or hereafter instituted by or
against it, which action was not so transferable prior to the
federal control of such carrier, and any action which has
heretofore been so transferred because of such federal control or
of any act of Congress or official order or proclamation relating
thereto shall, upon motion of either party, be retransferred to the
court in which it was originally instituted. But no process, mesne
or final, shall be levied against any property under such federal
control."
Under
Davis v. Pringle, 268 U.
S. 315, if the estate of the Rathbone Manufacturing
Company were being administered
Page 271 U. S. 239
under the Bankruptcy Act, the claims of the Director General
would not be entitled to preference. It is also plain, under
Bramwell v. United States Fidelity & Guaranty Co.,
269 U. S. 483,
Price, Receiver v. United States, 269 U.
S. 492, and
United States v. Butterworth-Judson
Corporation, supra, that, in proceedings like the present one,
debts due directly to the United States, nothing else appearing,
are ordinarily entitled to priority under R.S. § 3466. Decision of
this cause therefore must turn upon the effect to be given § 10,
Act of 1918,
supra.
All agree that the rights of the Director General rest upon
statutory provisions, and not upon any sovereign prerogative of the
United States. In taking over and operating the railroads, the
United States acted in their sovereign capacity.
Du Pont de
Nemours & Co. v. Davis, 264 U. S. 456,
264 U. S. 462.
But it was for Congress to determine whether or not claims arising
out of such operation should have priority when the debtor made a
voluntary assignment. In cases of bankruptcy, the statute then in
force prohibited any preference.
In some matters at least, under § 10, the United States stand
exactly as if they were a railroad corporation operating as a
common carrier.
Director General v. Kastenbaum,
263 U. S. 25,
263 U. S. 28. As
said in
Davis v. Pullen, 277 F. 650, 655:
"there is a certain obvious injustice in giving the United
States, when engaged in an industrial and commercial venture, even
although under war powers, superior rights over other creditors
bearing like relations to insolvents."
And we think that the indicated purpose of Congress will be best
carried out by construing the relevant statutes, so far as may be,
with the general intent to preserve the substantive rights of all
parties concerned as they would have existed but for federal
control.
Section 10 subjected the Director General, as an operator of
common carriers, to the laws theretofore applicable
Page 271 U. S. 240
to them, except when inconsistent with some provision of the
federal control acts or an order of the President, and forbade him
to defend, in any suit against him as such operator, upon the
ground that he was an instrumentality or agency of the federal
government. In the circumstances presented by this record, it is
reasonable to say that the statute confined his substantive rights
to those which a carrier would have had, and prohibits him, as
though he were an actual defendant in a suit, from resisting the
demands of others for equal distribution of the insolvent's assets,
under the commonly applied rule, upon the ground that he is an
instrumentality of the federal government. To permit the claimed
preference, we think, would conflict with the spirit and broad
purpose of the statute. These become plain enough upon
consideration of the just ends which Congress had in view together
with the recent policy, revealed by the Bankruptcy Act, in respect
of priorities.
The cause is properly here on the writ of certiorari. The appeal
was improvidently allowed by the Circuit Judge, and is
dismissed.
The decree below is
Affirmed.
*
"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 cases in which an act
of bankruptcy is committed."