1. Applicable legislation enacted while the case was pending for
review will be enforced by the appellate court. P. 309 U. S.
2. The amendment of § 77(n) of the Bankruptcy Act, approved Aug.
11, 1939, and providing that,
". . . in equity receiverships of railroad corporations now or
hereafter pending in any court of the United States, claims for
personal injuries to employees of a railroad corporation . . .
shall be preferred and paid out of the assets of such railroad
corporation as operating expenses of such railroad"
applicable in this case and within the power of
Congress. P. 309 U. S.
3. Claims of superior equities may be accorded priority of
payment from the earnings of a railroad in an equity receivership
although they arose prior to the receivership. Congress may
Page 309 U. S. 24
determine reasonable classification of claims as entitled to
priority because of superior equities in receivership' cases in the
federal courts. P. 309 U. S.
4. In an equity railroad receivership case, where the District
Court denied a petition to intervene with a claim of priority of
payment for a judgment for personal injuries recovered before the
equity proceeding was begun, held
that, inasmuch as the
Act of Aug. 11, 1939, supra,
is explicit and mandatory,
and as the District Court has no discretion to act contrary to its
terms, there is no occasion to remand to that court in order that
it may reconsider the claim under that Act and decide whether the
intervention should be allowed at the stage reached by the
proceedings; but that the court should be directed to allow the
claim in accordance with the statute. P. 309 U. S.
103 F.2d 996 vacated.
Certiorari, 308 U.S. 539, to review affirmance of a judgment of
the District Court which denied a petition to intervene in a
railroad receivership case. The review here was limited to the
right of the petitioner to intervene in order to assert priority of
a claim based on personal injuries.
MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.
In February, 1931, petitioner recovered a judgment in the state
court of Missouri for $15,000 against the Wabash Railway Company
for personal injuries sustained in
Page 309 U. S. 25
the course of his employment by that Company. On appeal, the
judgment, reduced to $10,000, was affirmed.
In December, 1931, on a complaint in equity brought by a
creditor of the Wabash Railway Company in the federal court in
Missouri, setting forth its financial difficulties and that its
undisputed liabilities exceeded the actual value of its assets,
receivers were appointed. Suits brought by mortgage trustees were
consolidated with the first suit. A special master was appointed to
take proof of claims, and it appears that, in January, 1936, the
master allowed petitioner's claim as an unsecured claim without
lien or priority.
In January, 1938, petitioner asked leave to file a petition
seeking termination of the receivership on various grounds not
important here. Among other things, petitioner then alleged that
the master's ruling was erroneous and that the claim was entitled
to priority. In denying that petition, the District Court
considered this contention and held that the
"status and classification of petitioner's claim as an unsecured
claim which is not entitled to any lien or priority of payment over
any other unsecured claim"
had been "correctly and finally determined in this cause," and
that petitioner was "estopped from asserting a claim for preference
and priority of payment." The Circuit Court of Appeals affirmed the
decree of the District Court, and, in doing so, passed upon that
question. The court said that no statute of Missouri and no
decisions of its courts had been shown which provided or held that
claims for personal injuries by employees were entitled to priority
as operating expenses. Considering the contention of petitioner
that the Wabash Railway Company was an Indiana corporation
operating in that State and in Ohio and that the laws of those
States accorded priority to his claim, the court thought that, even
if so, "that situation can have no effect upon the operation and
effect of this Missouri judgment." The court
Page 309 U. S. 26
also observed that, while by subsection (n) of Section 77 of the
Bankruptcy Act, claims for personal injuries to employees of a
railroad corporation are entitled to priority, that provision
applied expressly to proceedings in bankruptcy and the present case
at this stage is an equity receivership. And, apart from that, the
court considered petitioner foreclosed from asserting such rights
in this suit, approving the ruling of the District Court in that
respect. 103 F.2d 996, 1000.
Petition for certiorari was filed on July 26, 1939.
Subsequently, by Act of Congress approved August 11, 1939,
subsection (n) of Section 77 of the Bankruptcy Act was amended so
as to apply to equity receiverships, and thus to read as
"In proceedings under this section, and in equity receiverships
of railroad corporations now or hereafter pending in any court of
the United States, claims for personal injuries to employees of a
railroad corporation, claims of personal representatives of
deceased employees of a railroad corporation, arising under State
or Federal laws, and claims now or hereafter payable by sureties
upon supersedeas, appeal, attachment, or garnishment bonds,
executed by sureties without security, for and in any action
brought against such railroad corporation or trustees appointed
pursuant to this section, shall be preferred and paid out of the
assets of such railroad corporation as operating expenses of such
Petitioner then presented a supplemental brief in support of his
application for certiorari, directing our attention to this
statute, and, in view of the importance of the question raised by
the amendment, we granted certiorari, limited to the question of
the right of the petitioner to intervene in order to assert
priority. 308 U.S. 539.
For the present purpose, we may assume, without deciding, that
the determination of the court below was
Page 309 U. S. 27
correct upon the record before it and in the light of the law as
it then stood. But it is our duty to consider the amended statute
and to decide the question in harmony with its provisions, if found
to be applicable. The controlling rule was thus stated by Chief
Justice Marshall in United States v. Schooner
1 Cranch 103, 5
U. S. 110
"It is in the general true that the province of an appellate
court is only to inquire whether a judgment, when rendered, was
erroneous or not. But if, subsequent to the judgment and before the
decision of the appellate court, a law intervenes and positively
changes the rule which governs, the law must be obeyed, or its
obligation denied. . . . In such a case, the court must decide
according to existing laws, and if it be necessary to set aside a
judgment, rightful when rendered, but which cannot be affirmed but
in violation of law, the judgment must be set aside."
See also Dinsmore v. Southern Express Co., 183 U.
, 183 U. S. 120
Crozier v. Krupp, 224 U. S. 290
224 U. S. 302
Gulf, C. & S.F. Ry. Co. v. Dennis, 224 U.
, 224 U. S. 506
Watts, Watts & Co. v. Unione Austriaca di Navigazione,
248 U. S. 9
248 U. S. 21
We are of the opinion that the amended statute is applicable to
this proceeding. The statute applies to "equity receiverships of
railroad corporations now . . . pending in any court of the United
States." This is such a case. The statute applies to "claims for
personal injuries to employees of a railroad corporation." This is
such a claim. The statute says that a claim of that sort "shall be
preferred and paid out of the assets of such railroad corporation
as operating expenses of such railroad." This is a direct
requirement governing the action of the court in this cause.
We have no doubt that Congress has constitutional power to
impose this requirement. We have held that earnings, while a
railroad is in possession of the court and
Page 309 U. S. 28
operated by its receivers, "are not necessarily and exclusively
the property of the mortgagees," but are subject to the payment of
claims which have superior equities as these may be found to exist.
Fosdick v. Schall, 99 U. S. 235
Hale v. Frost, 99 U. S. 389
99 U. S. 392
Claims having such equities may be accorded priority in payment
although they arose prior to the receivership. Miltenberger v.
Logansport, C. & S.W. Ry. Co., 106 U.
; Burnham v. Bowen, 111 U.
; Union Trust Co. v. Illinois Midland R.
Co., 117 U. S. 434
is manifest that the reasonable classification of claims as
entitled to priority because of superior equities may be the
subject of determination by Congress in providing for the
distribution of assets in bankruptcy proceedings. See Kuchner
v. Irving Trust Co., 299 U. S. 445
299 U. S.
-452. In this view, the provision of subsection (n)
of Section 77 of the Bankruptcy Act, as it stood prior to the
amendment of August 11, 1939, was sustained by the Circuit Court of
Appeals of the Seventh Circuit in Wise v. Chicago, R.I. &
P. R. Co.,
90 F.2d 312, with respect to certain unsecured
surety bonds, and by the Circuit Court of Appeals of the Eighth
Circuit with respect to claims for injuries to railroad employees.
Central Hanover Bank & Trust Co. v. Williams,
210; Thompson v. Siratt,
95 F.2d 214.
We see no ground for a different conclusion with respect to the
power of Congress to enact the amendment in relation to the
distribution of assets in the case of an equity receivership. And
the fact that the provision as to the latter is included in a
section of the bankruptcy statute does not derogate from its
controlling authority as an expression of the will of Congress. The
Circuit Court of Appeals of the Eighth Circuit has recently held
this provision as to equity receiverships to be applicable and
valid in relation to claims for personal injuries sustained by
employees of this railroad corporation. American
Page 309 U. S. 29
Surety Co. v. Wabash Railway Co.,
107 F.2d 685. We
think the conclusion is sound.
It is urged in opposition to petitioner's contention that,
unless and until the District Court upon proper application has
passed upon the question as to extending the time for filing
petitioner's claim under the amended statute, the question of its
priority is not properly before this Court; that petitioner has not
asked the District Court to pass upon that question in the light of
the amended statute. But, when the Act of August 11, 1939, was
passed, the case was before this Court upon petition for
certiorari, which has been granted, and, in order properly to
dispose of the case, we are bound, as already stated, to consider
and apply the amended statute. Then, the argument is pressed that
at least we should remand the case to the District Court in order
that it may determine whether the claim for preference and payment
under the amendment should be entertained. It is said that such
applications may be considered in the light of existing
circumstances, or of the stage which the proceedings have reached
-- as, for example, in relation to steps which may have been taken
in carrying out plans for reorganization.
We find no provision in the statute for the exercise of such a
discretion by the District Court where the proceedings to which the
statute refers are pending and the claims are within the statute.
There is no suggestion that the present proceeding had been
terminated prior to the enactment of the amendment. or that it is
not now pending. The statute is explicit and mandatory, and the
District Court has no discretion to act contrary to its terms. The
statute says that the described claims "shall be preferred and paid
out of the assets of such railroad corporation as operating
expenses of such railroad." Petitioner's claim is within the class
described, and should be preferred and paid accordingly.
Page 309 U. S. 30
The judgment of the Circuit Court of Appeals is vacated, and the
cause is remanded to the District Court with directions to allow
petitioner's claim in accordance with the statutory provision.