1. The provision of the Bankruptcy Act (§ 57) that claims shall
not be proved after six month from adjudication, does not apply to
the United States or the state, since they are not mentioned. P.
288 U. S.
331.
2. The Federal Government possesses supreme power in respect of
bankruptcies. If a state desire to participate in the assets of a
bankrupt, she must submit to appropriate limitations on the time
for presenting claims. P.
288 U. S. 333.
3. The court of bankruptcy made an order that claims not filed
within sixty days after service of the order should be barred. The
state, after service, allowed the time to expire, and then filed
notice of a possible demand for taxes, stating that a definite
claim would be presented when necessary reports, etc., could be
obtained.
Held that the District Court had power to
expunge the notice.
58 F.2d 980, 981, affirmed.
Certiorari, 287 U.S. 587, to review a judgment affirming, with
modification, an order expunging a notice of future claim, filed
out of time by the state, in a bankruptcy proceeding.
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
The Experimenter Publishing Company was adjudged bankrupt March
6, 1929. The Irving Trust Company became
Page 288 U. S. 330
trustee. Upon its petition, the referee, July 1, 1929, directed
that "proof of any and all claims which the New York may have
against the estate of the above named bankrupt" shall be filed
within sixty days after service of this order; otherwise, they
shall be forever barred. Proper service was had July 18, 1929.
October 20, 1929, the state filed notice of a possible demand
for additional franchise taxes for 1917 to 1928, and stated that
definite claim therefor would be presented when necessary reports,
etc., could be obtained. No further proof has followed.
March 30, 1931, the trustee asked and obtained a referee order
striking from his files the notice of October 20th. He held that
the claim for taxes "cannot be filed after the expiration of the
bar order date," and declared,
"The state has only itself to blame for the situation it finds
itself in, as the record indicates that facts were within its
knowledge upon which it could have filed this claim prior to
September 16, 1929."
The District Court approved this action, and the Circuit Court
of Appeals affirmed its judgment,
"but without prejudice to an application by the people of the
State of New York presenting an actual claim which can be audited
and showing lawful reasons why it should be paid at which time the
trustee may contest the right to payment."
In re Experimenter Pub. Co., Inc., 58 F.2d 980,
981.
The only question properly presented by the application for
certiorari is whether the District Court had power to grant the
motion to expunge. Petitioners claim that such power is
incompatible with state sovereignty as defined in
Marshall v.
New York, 254 U. S. 380.
Nothing adjudged below conflicts with anything said in
Marshall v. New York. There, we recognized the prior right
of the state to be paid license taxes, unsecured by specific lien,
from the assets of an insolvent estate. Here, no such question is
presented.
Page 288 U. S. 331
The bar order against the state, as finally modified, may be
revoked upon proper showing until termination of the cause -- it
remains within control of the court.
See United States v.
Elliott, 57 F.2d 843. And if the District Court has power to
make any such order against a state, this one seems appropriate to
the circumstances.
An ill digested brief for the state beclouds its present
position. But we consider only the point relied upon in the
petition for certiorari, and that is without merit.
The federal Constitution clothes the Congress with power to
establish uniform laws on the subject of bankruptcies.
The extant Bankruptcy Act -- § 2 -- declares the United States
District Courts shall be courts of bankruptcy and undertakes to
give them jurisdiction to adjudge persons bankrupt, to allow or
disallow claims, to take charge of the property of bankrupts, to
cause their estates to be collected, reduced to money, and
distributed, to determine controversies in relation thereto, to
close estates when fully administered, and make such general orders
as may be necessary for enforcement of the Act. Section 64 requires
payment of taxes due to the United States, state, county, district,
or municipality in advance of dividends to creditors. Section 57(n)
provides that claims shall not be proved after six months
subsequent to adjudication. Act May 27, 1926, c. 406, § 13, 44
Stat. 666.
It is admitted here that, as the United States and the states
are not mentioned in the limitation of § 57, they are not bound
thereby. The consequent necessity for bar orders is apparent.
Otherwise, estates could not be promptly closed.
Lewis v.
United States, 92 U. S. 618;
United States v. Thompson, 98 U. S.
486,
98 U. S. 490;
New Jersey v. Anderson, 203 U. S. 483;
Guarantee Title & Trust Co. v. Title Guaranty & Surety
Co., 224 U. S. 152;
United States v. Birmingham Trust & Savings Co., 258
F. 562;
Villere v. United States, 18 F.2d 409;
Wechsler v. United States, 27 F.2d 850.
Page 288 U. S. 332
In re Wood & Henderson, 210 U.
S. 246,
210 U. S.
254:
"Congress has the right to establish a uniform system of
bankruptcy throughout the United States; and, having given
jurisdiction to a particular district court to administer and
distribute the property, it may, in some proper way, in such a case
as this, call upon all interested to appear and assert their
rights."
United States Fidelity & Guaranty Co. v. Bray,
225 U. S. 205,
225 U. S.
217:
"We think it is a necessary conclusion from these and other
provisions of the Act that the jurisdiction of the bankruptcy
courts in all 'proceedings in bankruptcy' is intended to be
exclusive of all other courts, and that such proceedings include,
among others, all matters of administration, such as the allowance,
rejection, and reconsideration of claims, the reduction of the
estates to money, and its distribution, the determination of the
preferences and priorities to be accorded to claims presented for
allowance and payment in regular course, and the supervision and
control of the trustees and others who are employed to assist them.
. . . A distinct purpose of the bankruptcy Act is to subject the
administration of the estates of bankrupts to the control of
tribunals clothed with authority and charged with the duty of
proceeding to final settlement and distribution in a summary way,
as are the courts of bankruptcy."
William Filene's Sons Co. v. Weed, 245 U.
S. 597,
245 U. S.
601-602 -- receivership in a court of equity which had
possession of the corporate assets:
"When a statutory system is administered, the only question for
the Courts is what the statutes prescribe. But when the Courts,
without statute, take possession of all the assets of a corporation
under a bill like the present, and so make it impossible to collect
debts except from the Court's hands, . . . [then,] in order to make
a distribution
Page 288 U. S. 333
possible, they must, of necessity, limit the time for the proof
of claims."
Van Huffel v. Harkelrode, 284 U.
S. 225,
284 U. S.
227:
"No good reason is suggested why liens for state taxes should be
deemed to have been excluded from the scope of this general power
to sell free from incumbrances. Section 64 of the Bankruptcy Act
grants to the court express authority to determine 'the amount or
legality' of any tax. . . . Realization upon the lien created by
the state law must yield to the requirements of bankruptcy
administration."
The federal government possesses supreme power in respect of
bankruptcies.
International Shoe Co. v. Pinkus,
278 U. S. 261,
278 U. S. 265.
If a state desires to participate in the assets of a bankrupt, she
must submit to appropriate requirements by the controlling power;
otherwise, orderly and expeditious proceedings would be impossible,
and a fundamental purpose of the Bankruptcy Act would be
frustrated.
Affirmed.