Mellon v. Michigan Trust Co, 272

• Decision Date: 24 May 1926
• Docket Number: No. 272,272
• Citation: 46 S.Ct. 511,70 L.Ed. 924,271 U.S. 236
• Parties: MELLON, Director General, Agent U. S. Railroad Administration, v. MICHIGAN TRUST CO
• Court: U.S. Supreme Court

271 U.S. 236

46 S.Ct. 511

70 L.Ed. 924

MELLON, Director General, Agent U. S. Railroad Administration,

v MICHIGAN TRUST CO.

No. 272.

Argued April 27, 1926.

Decided May 24, 1926.

Messrs. Sidney F. Andrews, of Washington, D. C., A. A. McLaughlin, of Des Moines, Iowa, and Leorge M. Clapperton and Charles M. Owen, both of Grand Rapids, Mich., for appellant.

Messrs. S. E. Knappen, of Grand Rapids, Mich. (Knappen, Uhl & Bryant, of Grand Rapids, Mich., of counsel), for appellee.

Mr. Justice McREYNOLDS delivered the opinion of the Court.

Creditors of the Rathbone Manufacturing Company filed a bill against it in the United States District Court, Western District of Michigan, wherein they alleged its inability to pay lawful debts in due course, etc., and asked for a receiver. Answering, the corporation (which was, in fact, insolvent) admitted the allegations and gave consent to the relief prayed. Thereupon the Michigan Trust Company was appointed receiver, took possession of the property and entered upon administration of the trust.

The Director General of Railroads presented claims for transportation charges and conversion of a shipment of pig iron. He asked priority of payment, which was denied by both the trial court and the Circuit Court of Appeals. 2 F. (2d) 194.

As pointed out in United States v. Butterworth-Judson Corporation, 269 U. S. 504, 46 S. Ct. 179, 70 L. Ed. 380 (January 11, 1926), the things done by the Rathbone Manufacturing Company amounted, in substance, to a voluntary assignment of all its property within the meaning of R. S. § 3466 (Comp. St. s6372)¹. Consequently, if the Director General is entitled to the priority granted to the United States by that section, the judgment below must be reversed. But it is said here, and was held below, that such priority is inhibited by the provisions of section 10, Act of March 21, 1918, c. 25, 40 Stat. 451, 456 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 3115 3/4 j), which provides:

'That carriers while under federal control shall be subject to all laws and liabilities as common carriers, whether arising under state or federal laws or at common law, except in so far as may be inconsistent with the provisions of this act or any other act applicable to such federal control or with any order of the President. Actions at law or suits in equity may be brought by and against such carriers and judgments rendered as now provided by law; and in any action at law or suit in equity against the carrier, no defense shall be made thereto upon the ground that the carrier is an instrumentality or agency of the federal government. Nor shall any such carrier be entitled to have transferred to a federal court any action heretofore or hereafter instituted by or against it, which action was not so transferable prior to the federal control of such carrier; and any action which has heretofore been so transferred because of such federal control or of any act of Congress or official order or proclamation relating thereto shall upon motion of either party be retransferred to the court in which it was originally instituted. But no process, mesne or final, shall be levied against any property under such federal control.'

Under Davis v. Pringle, 268 U. S. 315, 45 S. Ct. 549, 69 L. Ed. 974, if the estate of the Rathbone Manufacturing Company were being ad- ministered under the Bankruptcy Act, the claims of the Director General would not be entitled to preference. It is also plain, under Bramwell v. United States Fidelity & Guaranty Co., 269 U. S. 483, 46 S. Ct. 176, 70 L. Ed. 368, Price, Receiver, v. United States, 269 U. S. 492, 46 S. Ct. 180, 70 L. Ed. 373, and United States v. Butterworth-Judson Corporation, supra (January 11, 1926), that, in proceedings like the present one, debts due directly to the United States, nothing else appearing, are ordinarily entitled to priority under R. S. § 3466. Decision of this cause, therefore, must turn upon the...