Case Name: UNITED STATES v. BIRMINGHAM TRUST & SAVINGS CO. In re STANDARD HOME CO.
Court: United States Court of Appeals for the Fifth Circuit
Jurisdiction: United States
Decision Date: 1919-04-12
Citations: 258 F. 562
Docket Number: No. 3304
Parties: UNITED STATES v. BIRMINGHAM TRUST & SAVINGS CO. In re STANDARD HOME CO.
Judges: Before PARDEE, WALKER, and BATTS, Circuit Judges.
Reporter: Federal Reporter
Volume: 258
Pages: 562–567

Head Matter:
UNITED STATES v. BIRMINGHAM TRUST & SAVINGS CO. In re STANDARD HOME CO.
(Circuit Court of Appeals, Fifth Circuit.
April 12, 1919.)
No. 3304.
1. Bankruptcy <&wkey;328 — Claims op United States.
The United States may present a claim in a bankruptcy case at any time while the bankruptcy is pending and the funds thereof are not distributed.
2. Bankruptcy &wkey;315(l), 317 — Claims Provable — “Penalty”—Costs.
A fine adjudged against a corporation on its conviction for using the mail to promote frauds, under Criminal Code, § 215 (Comp. St. § 10385), is a “penalty,” within the meaning of Bankruptcy Act July 1, 1898, § 57j (Comp. St. § 9641), not provable in bankruptcy; but the United States is entitled to prove all the costs which it paid or incurred in .the prosecution as a pecuniary loss sustained by it (citing Words and Phrases, First and Second Series, Penalty).
Walker, Circuit Judge, dissenting.
Appeal from the District Court of the United States for the Northern District of Alabama; William I. Grubb, Judge.
In the matter of the bankruptcy of the Standard Home Company. Petition by the United States that an order be made .requiring the Birmingham Trust & Savings Company, as trustee of the bankrupt estate, to pay the amount of a fine and costs adjudged against the •bankrupt on its conviction under an indictment. From a decree deny ing the petition, the United States appeals.
Reversed and remanded,, with instructions.
This is ail appeal from a decree denying the prayer of a petition of the United Stales that an order he made requiring the ‘trustee of the bankrupt estate of the Standard Home Company, a corporation, to pay the amount of tho fine and costs adjudged against that corporation on its conviction under an indictment against it charging a violation of section 215 of the Criminal Code (Act March 4, 1909, c. 321, 35 Stat. 1130 [Comp. St. § 10385]). The cause was submitted on an agreed statement of facts, which disclosed the following:
A verdict of guilty of the charge mentioned was rendered on the 20th day of February, 1915, whereupon, on motion of the defendant in that case, the im-. position of tho sentence was deferred until the 24th day of February, 1915, on which day, that defendant having filed a motion for a new trial, on its motion the hearing of the motion for a new trial and the imposition of the sentence were postponed to March 20, 1915. On February 22, 1915, that defendant, not having sufficient property to pay all its debts, executed a voluntary assignment of all its property for tile benefit of all its creditors. On the same day a petition in bankruptcy was filed against that corporation by certain of its creditors. On tho 2d day of March following that corporation was duly adjudged to bo bankrupt. On March 20, 1915, the motion for a new trial in the criminal case was overruled, and the defendant corporation was sentenced to pay a fine 'and the costs of the prosecution. A writ of error to obtain a review of that judgment was sued out, which resulted in an affirmance by this court on October 4, 1917.
On May 15, 1915, the appellee, the Birmingham Trust & Savings Company, was duly elected and appointed as trustee of said bankrupt estate, and is still performing tho duties of such trustee. The taxed costs of tho prosecution of the above-mentioned criminal case amount to the sum of .$9,024.25. No part of the fine or costs has been paid. Before the filing of the petition in this proceeding the United States demanded of said trustee in bankruptcy the payment of said fine and costs. The trustee failed and refused to pay the same, or any part thereof. The trustee now has, and at all times since its appointment as such trustee has had, in its possession and control, assets of the bankrupt greatly in excess of the amount necessary to pay said fine and costs, together with all taxes legally due and owing by the bankrupt to the United States, siate, county, district, and municipality, and all debts given priority by subdivision “b” of section 04 of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 563 [Comp. St. § 9048]).
The record discloses the claim of the United States in this ease was first presented to tho referee, who rejected the same as not provable in bankruptcy. Then, on review, the District Judge in an elaborate opinion affirmed the report of rhe referee disallowing the claim. From that decision the appeal in this case is taken, and the following errors assigned:
“A. The District Judge erred in his order disallowing and expunging the claim of the United States +o have said fine paid as a claim entitled to priority.
“B. The District Judge erred in his order disallowing and expunging the claim of the United States to have said costs paid as a claim entitled to priority.
“O. The District Judge erred in his order disallowing and expunging in toto the claim of the United States to have said fine paid by the trustee in whole or in part as the law might require.
“D. The District Judge erred in his order disallowing arid expunging in toto the claim of the United States to have said, costs' paid by the trustee in whole or in part as the law might require.
“E. Tho District Judge erred in his order holding that petitioner was not entitled to priority of payment either as to the fine or costs of said prosecution.
“F. Tho District Judge erred in his order that the United States was not entitled to a payment of said fine ratably with other creditors.
“G. The District Judge erred in his order that the United States was not entitled to a payment of the costs accruing before bankruptcy-ratably with other creditors.
“H. The District Judge erred in his order that the United States was noi; entitled to a payment of the costs accruing after bankruptcy ratably with other creditors.
“I. The District Judge erred in his order disallowing and expunging said claim of the United States.
“J. The District Judge erred in his order that the claim of petitioner as to the fine fell within section 57j of the Bankruptcy Act.
“K. The District Judge erred in his order that the United States must prove its claim in the common form to get the benefit of section 57j of the . Bankruptcy Aet.
“B. The District Judge erred in his order that the United States could not prove its claim to an allowance under section 57j of the Bankruptcy Act after the expiration of one year.
“M. The District Judge erred in his order that the procedure adopted in this matter by the United States was not a sufficient proof of its claim to secure the benefit of section 57j of the Bankruptcy Act.”
Oliver D. Street, Sp. Asst. U. S. Atty., of Guntersville, Ala.
John P. Tillman and Wm. Bew White, both of Birmingham, Ala., for appellee.
Before PARDEE, WALKER, and BATTS, Circuit Judges.

Opinion:
PARDEE, Circuit Judge
(after stating the case as above). The right of the United States to present a claim in a bankruptcy case at any time while the bankruptcy is pending and the funds thereof are not distributed cannot be. disputed.
The right of the United States to claim priority under section 3466, R. S. (Comp. St. § 6372), was unquestionably modified and restricted by section 57j of the Bankruptcy Act (Comp. St. § 9641). Guarantee, etc., Company v. Title Guaranty, etc., Company, 224 U. S. 152-160, 32 Sup. Ct. 457, 56 L. Ed. 706. And see Robertson v. Howard, 229 U. S. 254, 33 Sup. Ct. 854, 57 L. Ed. 1174. Section 57j of the Bankruptcy Act reads as follows:
"Debts owing to the United States, a state,'a county, a district, or a municipality as a penalty or forfeiture shall not be allowed, except for the amount of the pecuniary loss sustained by the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby and such interest as may have accrued thereon according to law."
Under the provision of this section it seems clear the right of the United States to claim the penalty or a forfeiture is denied, except as to the actual pecuniary loss suffered by the United States. The fine of $1,000 claimed in this case is unquestionably a penalty. C. C. §, 215. See Words and Phrases, vol. 6, verbo "Penalty''; United States v. Reisinger, 128 U. S. 398, 9 Sup. Ct. 99, 32 L. Ed. 480. As there is no question-'or suggestion that in the matter of this penalty the United States suffered any pecuniary loss, it cannot be allowed.
As to the costs claimed, a different question is presented, to wit, for the pecuniary loss suffered by the United States in the prosecution and conviction under which the penalty was inflicted. The suggestion made that the costs incurred in such prosecution should be in- ciucied as a part of the penalty, because when awarded the matter was in the discretion of the court imposing the penalty, does not seem to need consideration. Under the showing made the United States suffered pecuniary loss in all the costs of the case which they paid or incurred in the prosecution of the suit.
The judgment appealed from is reversed, and the cause is remanded, with instructions to permit the United States to prove all their pecuniary loss as charged.