In re Wm. Akers, Jr., Co., 7411
Citation | 121 F.2d 846 |
Decision Date | 30 June 1941 |
Docket Number | No. 7411,No. 7622.,7495,7411,7622. |
Parties | In re WM. AKERS, JR., CO., Inc. SECRETARY OF LABOR AND INDUSTRY OF PENNSYLVANIA v. EPP. In re FIDELITY FUEL CO. BUREAU OF EMPLOYMENT & UNEMPLOYMENT COMPENSATION OF DEPARTMENT OF LABOR & INDUSTRY OF PENNSYLVANIA v. LITTLETON. In re UMANS BLEACHERY, Inc. STATE OF NEW JERSEY v. MORRILL. |
Court | U.S. Court of Appeals — Third Circuit |
David R. Perry, of Harrisburg, Pa. (Claude T. Reno, Atty. Gen., on the brief), for appellant.
Sidney Chait, of Philadelphia, Pa. (Hirschwald, Goff & Rubin, of Philadelphia, Pa., on the brief), for appellee.
David R. Perry, of Harrisburg, Pa. (Claude T. Reno, Atty. Gen., on the brief), for appellant.
Howard H. Rapp, of Philadelphia, Pa. (Martin P. Snyder, of Philadelphia, Pa., on the brief), for appellee.
Herman D. Ringle, and Charles A. Malloy, both of Trenton, N. J., amici curiae.
Herman D. Ringle, of Trenton, N. J. (Charles A. Malloy, of Trenton, N. J., on the brief), for appellant.
William Harris, of Newark, N. J., and Mendon Morrill, of Paterson, N. J. (Harry A. Pechenik, of Newark, N. J., on the brief), for appellee.
Before BIGGS, CLARK, and JONES, Circuit Judges.
These cases suffered from casual presentation in the courts below. The hopelessness of bankruptcy seems to paralyze the zeal and skill of litigants and counsel alike. The issue is an important one. It is the position of unemployment compensation payments in Federal bankruptcy. Although there are three cases and two jurisdictions, the question is by concession single. The Pennsylvania appeals are from the affirmance by two different judges of a referee's order denying priority under the Bankruptcy Act.1 In New Jersey a referee had decided that property sold "subject to taxes and assessments" was sold subject to the unemployment compensation payments. His holding was reversed by the District Court.2 Subsequently, the same learned district judge affirmed the same referee's compliance therewith in the proceedings to establish priority.
The principle underlying tax priority is ancient and well-established. It is one of the many illustrations of the maxim "salus populi suprema lex est". Mr. Justice Story gave it expression and effect over 100 years ago.
United States v. State Bank of North Carolina, 6 Pet. 29, 35, 8 L.Ed. 308.3
This admonition has been followed in the overwhelming weight of authority.4
The acts of both statutes refer to the payment as a "contribution". The laws provide that delinquencies are to be collected in New Jersey by an "action at law"5 and in Pennsylvania by a "civil action".6 The New Jersey statute declares the contributions "shall be a personal debt"7 and the Pennsylvania Act gives the contributions priority over other claims "except taxes".8 The use of the generic term debt for an obligation to the state is frequent in bankruptcy and insolvency laws.9 It occurs in the national bankruptcy act itself.10 So, also, the method of collection of the particular debt due the sovereign has no significance.11 The state can direct any constitutional method for the collection of its obligations.12 The suggestion that a different result would follow from the inclusion of the word "other" before taxes as well as before claims in the phrase "priority over" etc. would indeed put a premium on the tag. The phrase as written effects not a distinction from but a similarity to.13
There is more than a question of nomenclature involved in a determination of the character of the exaction of these unemployment compensation acts.14 Their true nature had given the draftsmen some concern and for an obvious reason. Upon its resolvement might depend their ultimate constitutionality.15 This because the taxing power has served as an excuse for greater judicial flexibility. The question is not answered by emphasis on compulsion. There are, at least, three other forms of governmental exaction which have been held not to be taxes. We refer to fees or assessments for special services or benefits, penalties for the determining of socially undesirable acts and finally the regulatory expropriation of money from one group to another.
Clearly the line here runs between tax and regulatory expropriation. As the Supreme Court has now spoken any extended discussion would be presumptuous. The distinction between regulation and revenue has given the courts some difficulty.16 They have felt obliged to deal with such depressing niceties as "functional separability" and "concomitant purpose".17 Some writers predicted the conduct-coercing theory,18 and others called attention to the 10% over the offset.19 A writer in the Pennsylvania Law Review thirty years ago pointed out:
Snow, Social Insurance, 59 University of Pennsylvania Law Review 283, 286-287.
And more recently Professor Shulman of the Yale University School of Law said:
Shulman, The Case For The Constitutionality of The Social Security Act, 3 Law and Contemporary Problems 298, 309, 310.
As is known, the Social Security Act, 42 U.S.C.A. § 301 et seq., and its unemployment compensation provisions reached the Supreme Court in 1936. The decision of the New York Court of Appeals20 in favor of constitutionality was upheld by an equally divided court.21 Later two cases from Alabama22 were argued and resulted in a five to four declaration of validity.23 That declaration flowed from the adoption of the true tax theory. The Justice who wrote the majority opinion in the Carmichael case said:
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