In re Rodgers & Garrett Timber Co.

• Decision Date: 03 November 1927
• Docket Number: No. 294.,294.
• Citation: 22 F.2d 571
• Parties: In re RODGERS & GARRETT TIMBER CO.
• Court: U.S. District Court — District of Maryland

22 F.2d 571 (1927)

In re RODGERS & GARRETT TIMBER CO.

No. 294.

District Court, D. Maryland.

November 3, 1927.

Ernest Ray Jones, of Oakland, Md., for ancillary receivers.

Julius C. Renninger and Gilmor S. Hamill, both of Oakland, Md., for petitioner.

COLEMAN, District Judge.

A partnership composed of Frank W. Rodgers and L. Guy Garrett, trading under the name of the Rodgers & Garrett Timber Company, lumber dealers, was adjudicated an involuntary bankrupt in the District Court for the Western District of Pennsylvania on April 19, 1926. Previously — that is, on April 5, 1926 — the circuit court for Garrett county, Maryland, had appointed three persons receivers of the partnership's assets in Maryland on petition of numerous labor creditors. Thereafter, a trustee in bankruptcy having been elected under the proceeding in the District Court in Pennsylvania, this trustee filed a petition here for appointment of an ancillary receiver, and on May 11, 1926, an order was signed by this court appointing these same three persons ancillary receivers.

Certain sales of the bankrupts' assets were duly completed and the ancillary receivers are ready to make their report. The petition now before this court was filed by the various labor creditors above referred to, claiming a right to priority of payment out of the fund in the hands of these receivers by virtue of chapter 108, §§ 50 and 53, of the Act of 1878, of the laws of Maryland. These provisions are as follows:

Section 50: "If any individual engaged in mining or manufacturing in Garrett county, or any association or body corporate, engaged in any business whatever therein, shall for the space of thirty days be indebted to the person in their employ, or to furnishers of any raw material, in the aggregate sum of twenty-five dollars, and shall neglect or refuse to pay the same for the space of thirty days, the circuit court for said county, as a court of equity or the judge thereof in vacation, shall upon the petition of the employees or furnishers of raw material, or any number of them, appoint a receiver to take charge of the affairs of such individual, association or body corporate, with a view of their liquidation and settlement under the authority of said court."

Section 53: "The receiver shall take charge of the personal estate, goods, chattels, property and effects of every description whatever, other than real estate of such individual, association or corporation, and collect and make available the evidences of debt, and sell and dispose of upon such terms as the court shall direct, the goods and chattels, and pay off and discharge the debt owing from such individual, association or corporation to the persons in their employ, and the furnishers of raw material, or to each a pro rata proportion of his claims, and there shall be no priority or preference allowed in the payments of such claims, and no attachment, execution, mortgage, bond, deed, bill of sale, or deed of trust or other lien, except mechanics' liens, shall bind or operate as a lien upon said property or debts to the prejudice or disadvantage of the employee, or furnishers of raw material, as aforesaid, but the said claims, all and severally, shall be first fully paid and discharged, or as far as the same can be done, before any attachment, execution, mortgage, bond, deed, bill of sale, deed of trust, or other lien, except as hereinbefore specified, shall bind, hold, operate or take effect."

The petition presents two questions: First, are these claimants entitled to priority of payment under the foregoing Maryland law? And, second, should the ancillary receivers account for, and distribute, such funds as they have in their hands, including distribution to the claimants in this case, if so entitled; or should such funds be turned over to, and distributed by, the trustee in Pennsylvania, including distribution to the claimants in this case, if so entitled?

Does the statute of Maryland, above set forth, give the priority as claimed? No case has been cited to the court construing it, nor has any been found, but similar legislation in other states has been recognized and applied. Emerson v. Castor (C. C. A.) 236 F. 29; Kennison v. Kanzler (C. C. A.) 4 F.(2d) 315. Maryland has a general law with provisions somewhat akin to this local law. Code Md. art. 47, § 15; Lewis v. Fisher, 80 Md. 139, 30 A. 608, 26 L. R. A. 278, 45 Am. St. Rep. 327. It appears that the petitioner has done everything requisite to establish his right of priority under the state law, which priority, it is to be noted, is without limitation as to the maximum amount of the wage claim; nor is there any limitation as to the time within which the wages must have been earned.

We must, therefore, now turn to the Bankruptcy Act. Section 64b (5) gives priority to "wages due to workmen, clerks, traveling or city salesmen, or servants, which have been earned within three months before the date of the commencement of the proceeding, not to exceed $600 to each claimant." Prior to the amendment of 1926 (11 USCA § 104), the maximum allowance was $300. Section 64b (7) provides that "debts owing to any person who by the laws of the states or the United States is entitled to priority" shall also be preferred.

The question, therefore, is whether relief under the Maryland statute is so controlled by the provisions of the Bankruptcy Act that priority of wages should only be recognized up to the amount of $600, and then only within three months before the date of the commencement of the proceedings. The general proposition is, of course, clear that the Bankruptcy Act controls state laws in cases of conflict, and it must be equally clear that, if a state statute gives a lien for wages or services, the extent of such lien is limited by the provisions of the Bankruptcy Act. Therefore the $600 limitation in the Bankruptcy Act must control. In re Western Condensed Milk Co. (C. C. A.) 261 F. 62; In re Crawford Wollen Co. (D. C.) 218 F. 951; In re Rouse (D. C.) 91 F. 514.

We have still to determine the question as to the exact meaning of the three months' limitation. As to this, the decisions have very properly applied a rule of reasonable construction, in the light of the language of sections 64b (5) and 64b (7), read together. The former says that only such wages shall have priority as "have been earned within three months before the...