In re Siegelbaum's Incorporated

• Decision Date: 20 March 1941
• Docket Number: No. 19775.,19775.
• Citation: 38 F. Supp. 1009
• Court: U.S. District Court — District of Connecticut
• Parties: In re SIEGELBAUM'S INCORPORATED.

38 F. Supp. 1009

In re SIEGELBAUM'S INCORPORATED.

No. 19775.

District Court, D. Connecticut.

March 20, 1941.

Harry Silverstone, Asst. Atty. Gen., of Hartford, Conn., for the State of Connecticut.

Abraham Wofsey, of Stamford, Conn., for George E. Wexler.

CLARK, Circuit Judge, sitting as District Judge pursuant to statutory designation.

The State of Connecticut has filed claim for $511.06 payable by the bankrupt as "contributions" assessed against it under the Connecticut Unemployment Compensation Act of 1937, now Conn.Gen.Stat.Supp. 1939, c. 280a, § 1334e et seq. The claim itself is admitted, but on the State's demand for priority of payment from the assets in the possession of the trustee the referee has ruled adversely, and the State petitions for review. The sole question is whether or not the State is entitled to priority for the amount of the claim as for "taxes legally due and owing by the bankrupt to * * * any State or any subdivision thereof," within the meaning of those words as used in § 64, sub. a(4), of the Bankruptcy Act, 11 U.S.C.A. § 104, sub. a(4).

I am bound by the recent decision in In re Independent Automobile Forwarding Corp., 2 Cir., March 17, 1941, 118 F.2d 537, to hold that such "contributions" are taxes and that the State is entitled to priority. In that case the court upheld priority on a claim in bankruptcy made by the State of New York under an unemployment insurance law, N.Y.Labor Law, art. 18, § 500 et seq., Consol.Laws, c. 31, identical in every respect here material with the Connecticut law. The court's declaration that "the amount so to be paid into the state fund is a tax" must be taken to be an approval of the district court's statement that the general characteristics of contributions, as defined by the laws of both states, justified treating them as ordinary taxes for priority purposes. In re Independent Automobile Forwarding Corp., D.C.W.D.N.Y., 35 F. Supp. 919, 922.

It may be added that in fact the characteristics of these contributions are those of a tax. They are compulsory exactions by the state, Conn.Gen.Stat.Supp. 1939, § 1336e, payable into the state treasury, § 1343e, collectible "by any means provided by law for the collection of any tax due to the state of Connecticut or to any subdivision thereof." § 1345e(b); New Jersey v. Anderson, 203 U.S. 483, 492, 27 S.Ct. 137, 51 L.Ed. 284. In only one detail does the point seem debatable. Section 1345e(c) provides that in state liquidation proceedings contributions "shall be paid in full prior to all other claims except taxes." The trustee contends that this places contributions after taxes, though before general claims, and in any event shows a legislative view that they are distinct from taxes. The petitioner argues, however, quite reasonably that this is not a subordination, but a grant of equality of contributions with taxes, as indicated in the general state priority statute. Gen.Stat.1930, § 4870. In any event, the legislative choice of names or terms does not determine whether or not the exaction is a tax within the meaning of the Bankruptcy Act. New Jersey v. Anderson, supra. Moreover, Waterbury Savings Bank v. Danaher, Conn., Nov. 6, 1940, 20 A.2d 455, holding that these "contributions" are "taxes," from which a federal instrumentality is immune, clearly refutes the inference of a contrary legislative intent and indicates that the State's view as to relative priorities in state proceedings will be the one accepted by the Connecticut Supreme Court.

Contributions have been held to be taxes when their constitutionality was put in question, Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 508, 57 S.Ct. 868, 81 L.Ed. 1245, 109 A.L.R. 1327, and assumed to be taxes when attacked by one claiming immunity as a federal instrumentality. Buckstaff Bath House Co. v. McKinley, 308 U.S. 358, 60 S.Ct. 279, 84 L.Ed. 322; cf. Waterbury Savings Bank v. Danaher, supra. And in cases before the various district courts, contributions have usually enjoyed priority as taxes. In re Sixty-Seven Wall Street Restaurant Corp., D.C.S.D.N.Y., 23 F.Supp. 672; In re Oshkosh Foundry Co., D.C.E.D. Wis., 28 F.Supp. 412; In re Mid America Co., D.C.S.D.Ill., 31 F.Supp. 601; In re Mytinger, D.C.N.D.Tex., 31 F.Supp. 977; In the Matter of Lechtman Printing Co., D.C.W.D.Mo., 38 F.Supp. 1008. But see In re Mosby Coal & Mining Co., D.C.W.D. Mo., 24 F.Supp. 1022; In re William Akers, Jr., Co., D.C.E.D.Pa., 31 F.Supp. 900; In re Fidelity Fuel Co., D.C.E.D.Pa., 35 F. Supp. 919; In re Umans Bleachery, D.C. N.J., 34 F.Supp. 694.

The fact that the unemployment insurance laws considered in these cases, as well as in the Independent Automobile Forwarding Corporation case, are...