400 U.S. 18 (1970), 412, Lines v. Frederick

Docket NºNo. 412
Citation400 U.S. 18, 91 S.Ct. 113, 27 L.Ed.2d 124
Party NameLines v. Frederick
Case DateNovember 09, 1970
CourtUnited States Supreme Court

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400 U.S. 18 (1970)

91 S.Ct. 113, 27 L.Ed.2d 124




No. 412

United States Supreme Court

Nov. 9, 1970




A bankrupt wage earner's vacation pay, accrued but unpaid at the time of filing of his petition, doe not pass to the trustee in bankruptcy as "property" under § 70a(5) of the Bankruptcy Act.

Certiorari granted; 425 F.2d 215, affirmed.

Per curiam opinion.


This case presents the question of whether a bankrupt wage earner's vacation pay, accrued but unpaid at the time of the filing of his petition, passes to the trustee in bankruptcy as "property" under § 70a(5) of the Bankruptcy Act, 30 Stat. 565, as amended, 11 U.S.C. § 110(a)(5). The facts are not in dispute. Respondent Frederick, employed by a large manufacturing company, had accrued vacation pay of $137.28 at the time he filed his petition. He could collect this sum either during the annual period when his employer shut down the plant in which he worked or on final termination of his employment. Respondent Harris had accrued vacation pay of $144.14, which he could draw either on termination or under a conventional voluntary vacation plan of his employer. In each case, the referee in bankruptcy made a "turnover order" requiring the bankrupt to pay to the trustee on receipt all of his accrued vacation pay, less one-half of that part accrued during the 30 days prior to the filing of the petition (the deducted sum being exempt under Cal.Code Civ.Proc. § 690.11 (Supp. 1970)).

The District Court affirmed the referee in both cases, but the Court of Appeals for the Ninth Circuit reversed, holding that accrued but unpaid vacation pay is not "property" under the statute, and therefore finding it

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unnecessary to decide whether such accrued pay meets the further statutory requirement of being "transferable." As the Court of Appeals noted, its decision was squarely in conflict with that of the Court of Appeals for the Fifth Circuit in Kolb v. Berlin, 356 F.2d 269.

In Segal v. Rochelle, 382 U.S. 375, 379, we said that

[t]he main thrust of § 70a(5) is to secure for creditors everything of value the bankrupt may possess in alienable or leviable form when he files his petition. To this end, the term "property" has been construed most generously, and an interest is not outside its reach because it is novel or contingent or because enjoyment must be postponed.

But we pointed out that

"[i]t is impossible to give any categorical definition to the word `property,' nor can we attach to it in certain relations the limitations which would be attached to it in others."

The most important consideration limiting the breadth of the definition of "property" lies in the basic purpose of the Bankruptcy Act to give the debtor a

new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt. The various provisions of the bankruptcy act were adopted in the light of that view and are to be construed when reasonably possible in harmony with it so as to effectuate the general purpose and policy of the act.

Local Loan Co. v. Hunt, 292 U.S. 234, 244-245 (citations omitted).

In Segal v. Rochelle, supra, the question was whether loss carryback tax refunds arising out of business losses immediately prior to bankruptcy but not collected until the end of the calendar year were property subject to a turnover order in favor of the trustee. In that case, as in this one, the problem of classification for purposes of the Bankruptcy Act could not be resolved simply by reference to the time when the right to the payment "vested," or to definitions of property drawn from other


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