Document: 336 U.S. 118 69 S.Ct. 469 93 L.Ed. 543 GOGGINv.DIVISION OF LABOR LAW ENFORCEMENT, CALIFORNIA. No. 35. Argued Nov. 15, 1948. Decided Jan. 31, 1949. Mr. Martin Gendel, of Los Angeles, Cal., for petitioner. Edward M. Belasco, respondent. Robert W. Ginnane, Washington, D.C., The United States, as amicus curiae, by special leave Court. Justice BURTON delivered the opinion 1 This case deals with question whether § 67, sub. c Bankruptcy Act,1 in determining priorities payment claims, speaks time filing petition bankruptcy. precise issue presented is a tax claim secured lien perfected before bankruptcy taxpayer and accompanied, at bankruptcy, Collector Internal Revenue's actual possession bankrupt's personal property, required Act to be postponed debts owed bankrupt wages claimants specified clause (2) 64, that Act,2 because later relinquished such property trustee estate sale him. We hold was valid entitled priority against wage claims date Collector's relinquishment ossession did not change result. 2 facts are undisputed. Before March 26, 1946, Revenue States statutory upon Kessco Engineering Corporation, California corporation, took pursuant lien. He attempted sell assets received bids them but complete price obtainable unsatisfactory instituted second abandoned it when he estate. On corporation filed its voluntary District Court Southern California, adjudicated George T. Goggin (who became petitioner herein) appointed receiver. Having qualified receiver on 28, communicated counsel turning over him property. In this connection, referee made finding fact which adopted follows: 3 '* * hands Revenue, turned said Goggin, who accepted terms conditions telegram from J. P. Wenchel, Chief Counsel Bureau reading 4 "Reference telephone conversation today Webb (member Angeles office Revenue) relative Bankrupt, no objection relinquishing Trustee sale. Government's attach proceeds subject Trustee's expenses including costs 5 "J. Counsel." his final capacity bankrupt, caused these sold public auction, order court. liquidated all had come into possession, hand, December 12, about $31,206.20, certified insufficient pay full administration, prior labor case. gross amount amended taxes, penalties interest $78,865.03. totaled $3,424.87. Department Employment State also $15,135, recorded or 24, 1945. Neither validity nor any here.3 6 present proceeding originated trustee, seeking an show cause why administration should determined findings reached conclusions law basis ordered that, monies there first paid balance funds then partial thereon prescribed law.4 entered judgment thereon. Appeals Ninth Circuit reversed held virtue taxes due must postponed, payment, certain Act. 165 F.2d 155. Because importance Act, we granted certiorari. 333 860, 68 746. 7 1946. accompanied physical behalf States. Those completely satisfy Act.5 Subsequent events, favor purpose facilitating material determination us.6 under consistent support result right ahead arise out arrangement trustee. 8 general point view interpreting one long standing. Everett v. Judson, 228 474, 479, 33 568, 569, 57 927, 46 L.R.A.,N.S., 154, said: 9 'We think fix line cleavage reference condition vests adjudication owned petition.' 10 See also, Myers Matley, 318 622, 626, 63 780, 783, 87 1043, 145 A.L.R. 498; Marxen, 307 200, 207, 208, 59 811, 815, 83 1222; Acme Harvester Co. Beekman Lumber Co., 222 300, 307, 32 96, 99, 56 208.7 11 While added Chandler 1938, find nothing legislative history suggest abandonment underlying Congress continue safeguard intere ts liens City Richmond Bird, 249 174, 39 186, 543; re Knox-Powell-Stockton Cir., 100 979; Van Winkle, 49 F.Supp. 711. amended, somewhat readjusts among unsecured 67 continues recognize claims. Section b has clarified liens, those even though arising while debtor insolvent within four months It expressly recognizes existing may some circumstances after c, does, however, introduce new postponement other clauses (1) (for administrative expenses, etc.) wages) 64 a. subordination is, sharply limited. For example, does apply real actually enforced or, general, background suggests conscious give narrowly limited least instances disclosing accumulations unpaid earners good reason suspect, might absorb entire unless provisions.8 requiring warning existence enforceable served instant only steps taken perfect seizure taxpayer's 12 thus established excluded application otherwise would have By subsequent lose accorded 13 between natural proper one. ame ded interest, dated August amounted $78,865.03, original claim, notices $40,921.94 (even computed 21, 1946). Of sum themselves $34,848.04. To meet this, estate, hand evidently derived originally Collector. These figures, accordingly, possibility March, reasonably been supposed surplus above realized event, obviously appropriate procedure free clear encumbrances distribute rightful claimants. Even little prospect realizing surplus, reasonable consent holder, proceeds. Huffel Harkelrode, 284 225, 52 115, 76 256, 78 453; Remington §§ 2577-2578, 4th Ed. 1937.9 propriety conclusion emphasized opposite would, many cases, operate detriment both creditors holders. compel holder retain sure claim. compelled do doing so probably yield smaller sales than if Furthermore, brought sharp conflict whenever suppose equal exceed Under court generally encumbrances. Collier 70.97, 70.99, 14th 1942; 2583, 1937. Accordingly, substantial argument holder's permitting case, carry it, matter law, here presented. 14 reasons reversed. 15 Reversed. As referred interpretation, subdivisions quoted below: 'Sec. 67. Liens Fraudulent Transfers.-* 'b. provisions section 60 contrary notwithstanding, employees, contractors, mechanics, landlords, classes persons, owing subdivision thereof, created recognized laws State, chapter X, XI, XII, XIII Where they nevertheless valid, permitted accordance requirements laws, except require shall instead notice thereof 'c. section, not, distress rent and, restricted their same extent provided respectively Act.' (Italics supplied.) 1898, c. 541, 30 Stat. 544, 564, June 22, 575, 840, 875-877, U.S.C. 107(b) (c), U.S.C.A. 107, subs. b, Not portions specifying controversy related issues 64. Debts Which Have Priority.-a. priority, advance dividends creditors, estates, necessary preserving petition; fees referees' salary fund expense fund; involuntary cases; where transferred concealed either petition, recovered benefit efforts cost more recovery; trustee's opposing discharge, mileage payable witnesses now hereafter attorney's fee, professional services rendered, irrespective number attorneys employed, petitioning cases allow; wages, $600 each claimant, earned three commencement proceeding, workmen, servants, clerks, traveling city salesmen commission basis, whole part time, selling exclusively bankrupt; (4) legally t ereof: Provided, That assessed excess value therein court: And further, That, arises legality heard court; (5) person, (is) landlord applicable law: use occupancy premises affected, accrued bankruptcy.' 563, 874, 323, 330, 104(a), 104, There included computed. difference were less time. claimed exceeds available, brief sole party opposition respondent, Division Labor Law Enforcement appears items include addition Provision, here, additional money came court, parties, determine respective priorities, be, claimants, heard. note 1, supra. Davis New York, 119 559. retail taxpayer, May 16, 1939. An 7, 17, thereafter execution warrant issued treasurer. levy allowed sale, 1938. converse si uation see York Hall, 139 935. delinquent business delivery warrants January 14, 1943, 10:15 a.m., city's agent on, inventory of, posting effected until shortly 4:30 p.m. meantime, 4:22 p.m., bankrupt. Pursuant declined net City. but, attached. It, therefore, subordinated, covered 'Notwithstanding admonition chose slumber rights. intended penalize somnolence.' page 936. 'Section 1. Meaning Words Phrases.-The words phrases used proceedings hereto shall, inconsistent context, construed '(13) 'Date bankruptcy', 'time 'commencement proceedings', 'bankruptcy', mean filed; *' 841, 1(13). rights fixed true themselves. segregated creditors. transfer someone 'the insolvent, appear' (citing Bramwell Fidelity & Guaranty 269 483, 490, 176, 178, 70 368), takes place time.' 1222. 'The rule freezes parties interested Exceptions emphasize rule. Whatever disagreement although perfection law.' 228-229, 1942. apparently Amendments proposed National Conference Committee Report Analysis H.R.12889, 74th Cong., 2d Sess. (1936). report states bill introduced Chandler, 1936, containing Conference, several Sections ac- companied explanatory notes. proposed, resembles substantially finally enacted. attributed Jacob I. Weinstein, member includes following statement: (of amendment Act) declaratory policy connection distribution. sound principles well liquidation proceedings. But limitation respect liens. Supreme Court, 1919, 543, 43 Am.Bankr.Rep. 260, resolved lower decisions holding 'It significant recent years state legislatures enacting legislation debts, variety private Statistics effective seriously suffered therefrom. Such particularly often consume leaving incurred reducing cash. represent accumulation covering period w thout attempt collectors enforce proceeding. 'There therefore need provision protect expenses; similar considerations Accordingly selected, (as revised), particular protection. However, historical development inherent differences incidents attaching seem advisable restrict remedy Id. 212, n. At 'accompanied property.' gives emphasis effect possessed, will available instance Judiciary, July 29, 1937, accompany known H.R.8046 merely stated: 'In protected perfecting expired.' H.R.Rep.No.1409, 75th 1st 34 (1937), references pages 9, 16. 1938 (1938): 'This designed correct inequitable existed old allowed, through inaction authorities, accumulated Frequently, consumed exclusion subd. sec. provides affect impair otherwise. take form sovereign, way local statutes. indicated, lien, reduced affected to, like protection development, paragraph supplied instance.) 144, 145. deduct itself. touched agreement it.

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