In re Stoever

• Decision Date: 23 January 1904
• Docket Number: 466.
• Citation: 127 F. 394
• Parties: In re STOEVER.
• Court: U.S. District Court — Eastern District of Pennsylvania

127 F. 394

In re STOEVER.

No. 466.

United States District Court, E.D. Pennsylvania.

January 23, 1904

James B. Holland and J. Whitaker Thompson, for the United States.

Arthur G. Dickson and Samuel Scoville, Jr., for the trustee.

J. B McPHERSON, District Judge.

The following report of the referee will disclose the nature of the present controversy:

'The original petition in this case was filed February 7, 1900 and adjudication thereon made March 28, 1900.

'On August 18, 1901, a deposition for proof of claim of the United States, in the sum of $7,816.95, for actual damages sustained by reason of the failure of the bankrupt to perform a certain contract with the United States, was filed.

'This contract was made July 24, 1899, by the bankrupt as principal, and the United States Fidelity & Guaranty Company as surety; and, after reciting that certain proposals had been made for supplying the Post Office Department with certain supplies of wrapping paper, designated as items Nos. 112, 112a, and 114, in such quantities and at such times, and from time to time, as the same might be ordered, during the fiscal year beginning July 1, 1899, and ending June 30, 1900, stipulated that the bankrupt should furnish and deliver the same at certain prices per ream, and, in case of failure on his part, he and his surety should become indebted to the United States in the sum of ten thousand dollars, as fixed and settled damages, and not as a penalty to be reduced or diminished, and also that, in case of failure to furnish any of said articles within thirty days after they have been ordered, the right was reserved to the Postmaster General to purchase such articles in open market, and, if a greater price than that specified in the contract be paid for such articles, the total difference between the purchase price and the contract price might be charged to the said bankrupt and his surety, and, further, that the contract might be annulled by the Postmaster General for any failure of performance, in his opinion, but that such termination of the contract should not affect or impair any right or claim of the United States to indebtedness or damages for the breach of any of the covenants.

'On August 11, 1899, an order was given for five hundred reams of item No. 114, which was eventually filled. Subsequently thereto nine orders of various items, aggregating sixteen thousand reams, were given, from September 20 to December 5, 1899; and on January 22, 1900, the Postmaster General, in an order reciting that the bankrupt had failed to furnish said articles, under various orders made upon him since July 1, 1899, he was declared a failing contractor, presumably in pursuance of the last-recited stipulation of the contract. Prior to this time, and after repeated urgent reminders and demands for the delivery of the articles referred to under the orders stated, application was made to two paper companies, and purchases to supply the deficiency were made from one of them; these purchases continuing until February 8, 1900, as to the sixteen thousand reams, and thereafter until June 4th as to the seventy-one hundred reams, for paper needed by the department after the annulment of the contract. The excess paid over the contract price for the 16,000 reams amounted to $5,741.95, and this, together with $2,075, amount paid in excess of the contract price for the 7,100 reams, makes the amount of the claim of the United States $7,816.95.

'The trustee has filed exceptions to the allowance of the claim, first, because it was not filed within one year from the adjudication; second, because the trustee is informed and believes that the United States could have had the contract filled in the open market without loss to the United States; third, because the claim is for items ordered subsequent to the filing of this petition on February 7, 1900.

'Section 3466 of the Revised Statutes of the United States (U.S. Comp. St. 1901, p. 2314) provides that, whenever any person indebted to the United States is insolvent, the debts due to the United States shall be first satisfied and the priority thereby established shall extend as well to cases wherein a debtor not having sufficient property to pay all his debts makes a voluntary assignment, as to cases in which an act of bankruptcy is committed; and by section 3467 (U.S. Comp. St. 1901, p. 2314), every executor, administrator, or assignee, or other person, who pays any debt due by the person or estate from whom or for which he acts before he satisfies and pays the debts due to the United States from such person or estate, is made answerable in his own person and estate for the debts so due to the United States, or for so much thereof as may remain due and unpaid.

'Section 3468 (U.S. Comp. St. 1901, p. 2314) gives (upon payment) to any surety on the bond of the insolvent the same right of priority for the recovery and receipt of the moneys out of the estate of the insolvent as is secured to the United States.

'The bankruptcy act of July 1, 1898 (chapter 541, Sec. 64, cl. 'b,' 30 Stat. 563 (U.S. Comp. St. 1901, p. 3448)), provides that the debts to have priority, after payment of costs of preserving the estate, filing fees, costs of administration, and wages, are '(5) debts owing to any person who by the laws of the states of the United States is entitled to priority.' The bankruptcy act of March 2, 1867 (chapter 176, Sec. 28, 14 Stat. 530), provided that after the payment of the fees, costs, and expenses, etc., all debts due to the United States, and all taxes and assessments under the laws thereof, should be entitled to priority, or preference, and to be paid first in full.

'The right of the United States under these sections of the Revised Statutes and the bankruptcy act of 1867 (14 Stat. 517, c. 176), was considered in Lewis v. United States, 92 U.S. 618 (23 L.Ed. 513), in which it was said by Mr. Justice Swayne (page 622 (92 U.S., 23 L.Ed. 513)): 'The United States are in no wise bound by the bankrupt act. The clause above quoted (referring to the right of priority under the act of March 2, 1867) is in pari materia with the several acts giving priority of payment to the United States, and was doubtless put in to recognize and reaffirm the rights which those statutes give, and to exclude the possibility of a different conclusion.'

'By section 57, cl. 'n,' of the bankruptcy act of July 1 1898 (30 Stat. 561 (U.S. Comp. St. 1901, p. 3444)), it was provided that 'claims shall not be proved against the bankrupt estate subsequent to one year after the adjudication.' While the general principle that statutes of limitation do not bind the sovereign would probably permit the proof of this claim of the United States after the expiration of the year, it is manifest that under the provisions of section 3467 the trustee's...