268 U.S. 1
OLIVER et al.
UNITED STATES et al.
In re WEST COAST RUBBER CORPORATION.
Submitted March 2, 1925.
Decided April 13, 1925.
Mr. Louis V. Crowley, of San Francisco, Cal., for petitioners.
The Attorney General and Messrs. James M. Beck, Sol. Gen., of Washington, D. C., and Merrill E. Otis, of St. Joseph, Mo., for respondents.
Mr. Justice McREYNOLDS delivered the opinion of the Court.
The bankrupt's estate consisted of personal property only, and there is no suggestion of a lien thereon to secure [268 U.S. 1, 2] any of the claims now under consideration. The fund derived from conversion of all the property is insufficient fully to satisfy taxes due the United States and the city and county of San Francisco, and the allowed claims for preferred wages. Which of these must be paid first is the question for decision. The referee ruled in favor of the wages, and the District Court approved; but the Circuit Court of Appeals held to the contrary, and directed that priority should be given the taxes.
The Bankruptcy Act of 1898, 30 Stat. 544, 563, c. 541 (Comp. St. 9648), provides:
Guarantee Co. v. Title Guarnaty Co., 224 U.S. 152, 159 , 160 S., 32 S. Ct. 457, 459 (56 L. Ed. 706), held that under section 64 wages were entitled to priority over the claim of the United States for damages occasioned by the bankrupt's failure to comply with a construction contract. It was there said:
In City of Richmond v. Bird, 249 U.S. 174, 177 , 39 S. Ct. 186, past-due taxes were denied priority of payment over a debt secured by a lien which the state law recognized as superior to the city's claim for such taxes. We said:
iOf course, this opinion must be read in the light of the question under consideration: Does section 64 require that taxes shall be paid in advance of debts secured by liens which under the local law are superior to claims for such taxes? We pointed out that section 67d (Comp. St. 9651) preserves valid liens and is not qualified by the direction of section 64a to discharge taxes 'in advance of the payment of dividends to creditors,' since "dividend,' as commonly used throughout the act, means partial payment to general creditors.' We did not undertake to decide in what order, as among themselves, taxes and the debts specified by section 64 should be satisfied; that point was not presented.
The language of section 64 has caused much uncertainty, and widely different views of its true meaning may be found in the opinions of District Courts and Circuit Courts of Appeals.
Paragraph 'a' directs that 'the court shall order the trustee to pay all taxes legally due and owing ... in advance of [not next preceding] the payment of dividends to creditors'-that is, partial payments to general creditors. City of Richmond v. Bird, supra. It does not undertake [268 U.S. 1, 5] otherwise to fix the precise position which shall be accorded to them. This, we think, must be determined upon consideration of the circumstances of each case and the provisions of relevant federal and local laws-e. g., those which prescribe liens to secure or special priority for tax claims. It also appears, plainly enough, that all debts mentioned in paragraph 'b' must be satisfied before any payment to general creditors.
Guarantee Co. v. Title Guaranty Co., supra, declares that the taxes of paragraph 'a' are 'civil obligations, not personal conventions, and preference was given to them' over the wages specified by clause (4), paragraph 'b.' We adhere to this as a correct statement of the general rule to be followed whenever it does not clearly appear that the particular tax has been subordinated to claims for wages by some relevant law.
We find no error in the action of the court below. The cause will be remanded to the District Court for further proceedings consistent with this opinion.