Source: https://www.legalcrystal.com/case/96856/united-states-vs-marxen
Timestamp: 2019-04-24 08:39:52+00:00

Document:
R.S. § 3466, giving to the United States priority in payment of debts due to it by any person who is insolvent, is inapplicable to a general claim in bankruptcy which was transferred to the United States, or to which it became subrogated, after the filing of the petition in bankruptcy. P. 307 U. S. 207 .
So held as to a claim -- assumed to be a claim of the United States -- upon a note assigned to the United States by a bank after the filing of a petition in bankruptcy by the maker. The note was covered by a policy of insurance issued to the bank under the National Housing Act; the maker had defaulted, and the balance due was paid to the bank by U.S. Treasury check subsequently to the filing of the petition in bankruptcy.
Question certified by the Circuit Court of Appeals upon an appeal from an order of the District Court, 24 F.Supp. 463, which confirmed and approved an order of the referee in bankruptcy denying priority to a claim.
Treasury of the United States; the bank assigned the note to the "United States of America." Later, the Administrator filed a claim upon the note in the name of the United States of America.
"Where, prior to the filing of a petition for and adjudication in bankruptcy of the maker of a promissory note payable to a bank, the Federal Housing Administrator, under the provisions of the National Housing Act, insured the payee bank against the nonpayment of the note by its maker, upon which note the maker became in default more than sixty days prior to said filing and adjudication, and upon demand of the insured bank made after the adjudication, the Federal Housing Administrator paid to the bank its claim arising from such default, and procured an assignment to the United States of the claim of the insured bank against the bankrupt, which claim had not been presented or proved in bankruptcy by the insured bank, and presented such claim in the name of the United States to the trustee in bankruptcy having before him other allowed aims against the bankrupt, is such claim entitled to priority over such other claims under sec. 3466 of the Revised Statutes (31 U.S.C. § 191) by reason of the provisions of sec. 64(b)(7) [11 U.S.C. § 104(b)(7)]."
'person' . . . shall include . . . the United States. . . . [ Footnote 3 ]"
"Whenever any person indebted to the United States is insolvent . . . , the debts due to the United States shall be first satisfied, and the priority hereby established shall extend . . . to cases in which an act of bankruptcy is committed."
the time of the loan. The form contains this sentence, as well as information as to the applicant's employment or business, his income, and the property to be improved: "The following information is given for the purpose of inducing you to grant credit under the provisions of Title I of the National Housing Act."
and priorities of creditors may be made to appear," [ Footnote 21 ] takes place as of that time.
The question certified should therefore be answered in the negative.
THE CHIEF JUSTICE and MR. JUSTICE DOUGLAS took no part in the consideration or decision of this case.
"Sec. 2. The Administrator is authorized and empowered, upon such terms and conditions as he may prescribe, to insure banks . . . which are approved by him as eligible for credit insurance, against losses which they may sustain as a result of loans and advances of credit, and purchases of obligations representing loans and advances of credit, made by them . . . for the purpose of financing alterations, repairs, and improvements upon real property. In no case shall the insurance granted by the Administrator under this section to any such financial institution exceed 20 percentum of the total amount of the loans, advances of credit, and purchases made by such financial institution for such purpose. . . ."
Act of June 27, 1934, c. 847, 48 Stat. 1246.
United States v. Mayer, 235 U. S. 55 , 235 U. S. 66 ; cf. Wheeler Lumber Co. v. United States, 281 U. S. 572 , 281 U. S. 577 ; Indian Motorcycle Co. v. United States, 283 U. S. 570 , 283 U. S. 573 .
Act of May 27, 1926, c. 406, 44 Stat. 667, 11 U.S.C. § 104(b)(7). This section has been amended by the Act of June 22, 1938, c. 575, § 64, 52 Stat. 874.
Act of August 23, 1935, c. 614, § 344(a), 49 Stat. 722.
The purpose of the amendment was said to be "clarifying." Sen.Rep. No. 1007 on H.R. 7617, 74th Congress, 1st Session, p. 24. The House Report merely stated its substance. H.R.Rep. No. 1822 on H.R. 7617, 74th Congress, 1st Session, p. 57. The Congressional Record is silent on this clause of the Banking Act of 1935.
A corporation wholly owned by the United States is held without the advantages of § 3466. Sloan Shipyards Corp. v. U.S. Fleet Corporation, 258 U. S. 549 , 258 U. S. 570 .
Cf. Wagner v. McDonald, 96 F.2d 273, 274; In re Dickson's Estate, 84 P.2d 661, 664; Dupont De Nemours & Co. v. Davis, 264 U. S. 456 ; Clallam County v. United States, 263 U. S. 341 ; North Dakota-Montana Wheat Growers' Assn. v. United States, 66 F.2d 573, 576, 577.
This is not in accord with the practice under Title I of the National Housing Act. The act is administered so as to create an insurance reserve for each approved financial institution of not to exceed the authorized percentage of the total amount of qualified paper. Cf. Regulations, Federal Housing Administration, Property Improvement Loans, 3 Federal Register 358, regulation number 17.
"The question of the financial condition of the borrower is left to the reasonable judgment of the insured institution as a credit matter. The borrower must furnish the lending institution a financial or credit statement, approved as to form by the Administrator, which, in the judgment of the insured institution, shows the borrower to be solvent, with reasonable ability to pay the obligation and in other respects a reasonable credit risk in view of the insurance provided by the National Housing Act."
Cf. Leslie v. Compton, 103 Kan. 92, 172 P. 1015; Marsh v. Hayford, 80 Me. 97, 13 A. 271; McPherson v. Meek, 30 Mo. 345.
"Whenever a creditor whose claim against a bankrupt estate is secured by the individual undertaking of any person fails to prove such claim, such person may do so in the creditor's name, and, if he discharge such undertaking in whole or in part, he shall be subrogated to that extent to the rights of the creditor."
Act of July 1, 1898, c. 541, § 57, 30 Stat. 560, 11 U.S.C. § 93.
"The Act of July 31, 1789, § 21, c. 5, 1 Stat. 29, 42, first gave the United States priority, but was limited to debts due on bonds for duties. The Act of May 2, 1792, § 18, c. 27, 1 Stat. 259, 263, allowed sureties who paid their debts to the United States to exercise their priority. The Act of March 3, 1797, § 5, c. 20, 1 Stat. 512, 515, extended the priority to all debts due from any person. The Act of March 2, 1799, § 65, c. 22, 1 Stat. 627, 676, applied to bonds for duties. R.S. § 3466 is derived from the Acts of 1797 and 1799."
United States v. Fisher, 2 Cranch 358; Harrison v. Sterry, 5 Cranch 289, 9 U. S. 298 -299; United States v. State Bank of North Carolina, 6 Pet. 29, 31 U. S. 35 ; Beaston v. Farmers' Bank, 12 Pet. 102, 37 U. S. 134 ; Lewis, Trustee v. United States, 92 U. S. 618 , 92 U. S. 621 ; Bramwell v. United States Fidelity & Guaranty Co., 269 U. S. 483 , 269 U. S. 487 ; Price v. United States, 269 U. S. 492 , 269 U. S. 500 .
Beaston v. Farmers' Bank, supra.
Mellon v. Michigan Trust Co., 271 U. S. 236 , 271 U. S. 239 .
Sloan Shipyards v. U.S. Fleet Corp., 258 U. S. 549 , 258 U. S. 570 . Even though private parties might have participated in stock ownership under the law. See p. 258 U. S. 565 .
Mellon v. Michigan Trust Co., supra, 271 U. S. 240 .
United States v. Guaranty Trust Co., 280 U. S. 478 , 280 U. S. 485 -486.
White v. Stump, 266 U. S. 310 , 266 U. S. 313 ; In re C. H. Earle, Inc., 2 F.Supp. 15, aff'd on the opinion below, 65 F.2d 1013. Cf. Spokane County v. United States, 279 U. S. 80 , 83 [argument of counsel -- omitted]; United States v. Oklahoma, 261 U. S. 253 , 261 U. S. 260 , as to receivership proceedings.
The lower courts have divided upon the issue whether a Federal Housing Administration claim is entitled to priority. Priority has been given in Wagner v. McDonald, 96 F.2d 273; In re Wilson, 23 F.Supp. 236; In re T. N. Wilson, Inc., 24 F.Supp. 651; cf. In re Dickson's Estate, 84 P.2d 661. Priority has been denied in In Re Hansen Bakeries, Inc., 103 F.2d 665; Federal Housing Administrator v. Moore, 90 F.2d 32; In re Stamford Auto Supply Co., 25 F.Supp. 530; In re Miller, 25 F.Supp. 336; cf. Paul v. Paul Lighting Fixture Co., 13 Ohio Op. 27. The assignment was made prior to bankruptcy or insolvency in the Wagner and Dickson cases. In the Wilson and T. N. Wilson, Inc., cases the time of assignment is uncertain. In the remaining cases, it came after bankruptcy or insolvency.
Mueller v. Nugent, 184 U. S. 1 , 184 U. S. 14 ; May v. Henderson, 268 U. S. 111 , 268 U. S. 117 .
Bramwell v. United States Fidelity & Guaranty Co., 269 U. S. 483 , 269 U. S. 490 .

References: § 3466
 § 191
 § 104
 v. 
 v. 
 v. 
 § 104
 § 64
 § 344
 § 3466
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 § 57
 § 93
 § 21
 § 18
 § 5
 § 65
 § 3466
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.