In re Reliable Furniture Mfg. Co.
| Decision Date | 06 May 1929 |
| Docket Number | No. 5306.,5306. |
| Citation | 32 F.2d 805 |
| Parties | In re RELIABLE FURNITURE MFG. CO. |
| Court | U.S. District Court — District of Maryland |
G. W. S. Musgrave and Musgrave, Bowling & Hessey, all of Baltimore, Md., for trustee.
G. C. A. Anderson and Keech, Deming & Carman, all of Baltimore, Md., for wage claimants.
The question here presented is the same as that which was decided by this court in Rodgers & Garrett Timber Co., 22 F.(2d) 571, and the court sees no reason for departing from that decision. Accordingly, the petition filed by the committee representing the various wage claimants must be granted. It is clear, from an examination of the method of accounting used by the bankrupt company with respect to the wages due the various claimants, that in each case the payments made during the three-months period immediately prior to the filing of the petition in bankruptcy were credited back against the total indebtedness due each claimant, and not against his accrued wages for the current period; that is to say, none of the amounts paid claimants between November 6th and February 6th was credited against their wages earned for that period. This method, which appears to have been adopted by express direction of the company's president, was followed in good faith and was entirely proper under the circumstances. Where there is a running account, payments may be applied to extinguish debts according to priority of time, so that the credits become payments pro tanto of the debts antecedently due. Jones v. United States, 7 How. 681, 12 L. Ed. 870.
The only distinction between the present case and the timber company case is that in the latter priority was claimed under a local law for Garrett county, Maryland, whereas in the present case priority is claimed by virtue of a general law with kindred provisions (Code Md. art. 47, § 15), which provides that, when any person or corporation makes an assignment for the benefit of creditors, or is adjudged insolvent, or has his or its property taken by a receiver, all moneys due to wage-earners contracted not more than three months prior thereto shall be paid in full. See Hess v. Jewell, 85 Md. 235, 36 A. 758. The Garrett county local law was also without limitation as to the maximum amount of wages accorded priority, but differs from the general law in that no limitation is placed upon the time within which the wages shall have been contracted in order to become preferred.
In the timber company case, this court decided (1) that, since the Bankruptcy Act controls state laws in cases of conflict, the extent of the lien given by the local law was limited in amount to $600, provided by section 64b (5) of the act (11 USCA § 104), this section in turn prevailing, as to labor claims, over section 64b (7) of the act, which recognizes priorities in general, accorded by state or federal laws; and (2) that the words "within three months before the date of the commencement of the proceeding," as used in section 64b (5), should be given a liberal construction to the extent of recognizing, not merely wages earned within three months of the date of filing of the petition in bankruptcy or the date of adjudication, but those earned within three months of the time when receivership proceedings may have been commenced in the state court which ultimately resulted in bankruptcy.
The obvious purpose of section 64b (7) is to preserve to all creditors such preferred status as they might have, independently of the bankruptcy proceedings. If this be true, courts should be loath to narrow down the preferred position of that special class of creditors, namely, wage-earners, which the Bankruptcy Act so jealously protects, unless the same is required by clear and explicit language. The language of section 64b (5) is explicit with respect to limitation of amount, but we are not justified in saying, merely because the application of the section is further limited to wages earned "within three months before the date of the commencement of the proceeding," that this can only mean three months prior to the filing of the petition in bankruptcy,...
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In re Standard Wood Products Co.
...In re Rodgers & Garrett Timber Co., D.C., 22 F.2d 571; Manly v. Hood, 4 Cir., 37 F.2d 212; In re Reliable Furniture Mfg. Co., D.C.; 32 F.2d 805. These cases hold that "before" means "immediately preceding", and that "proceeding" may mean "insolvency proceedings under the state law", where s......