Western Tie Timber Company v. Ben Brown
| Decision Date | 20 February 1905 |
| Docket Number | No. 232,232 |
| Citation | 25 S.Ct. 339,49 L.Ed. 571,196 U.S. 502 |
| Parties | WESTERN TIE & TIMBER COMPANY, Appt. , v. BEN A. BROWN, Trustee of the Estate of S. F. Harrison, a Bankrupt |
| Court | U.S. Supreme Court |
This is an appeal from a decree of the circuit court of appeals for the eighth circuit, affirming, as modified, an order of the district court of the United States for the eastern district of Arkansas, directing that the claim of the Western Tie & Timber Company against the estate of S. F. Harrison, a bankrupt, be expunged unless the company paid to the trustee in bankruptcy a specified sum, found to have been transferred to the company by the bankrupt, and decided to have operated a voidable preference. 129 Fed. 728.
The facts were thus found by the circuit court of appeals:
'1. On February 24, 1903, a petition to procure an adjudication that S. Frank Harrison was a bankrupt was filed in the district court of the United States for the eastern district of Arkansas, and Harrison was then adjudged a bankrupt.
'2. The Western Tie & Timber Company was a corporation and a creditor of Harrison. It presented a claim against his estate in bankruptcy of $24,358. The trustee moved to expunge this claim on the ground that the tie company had secured a voidable preference. The district court ordered the claim expunged unless the tie company should pay to the trustee $2,210.73, and an appeal from this order was taken.
'3. For some years prior to February 24, 1903, the tie company and Harrison had been engaged in removing timber from land of the former, and converting it into ties, which the company received and sold. For many months prior to October, 1902, Harrison had owned and conducted stores in the vicinity of the places where the work of cutting and hauling the ties was carried on, and had furnished the laborers engaged in that work with groceries and other supplies. These laborers and Harrison were paid by the tie company in this way: Once in two or four weeks an inspector sent to the tie company a pay roll, on which the name of each laborer, the amount he had earned, and the value of the supplies he had received from Harrison, appeared. The company deducted from the earnings of each laborer the value of the supplies the laborer had received, and sent him a check for the balance. At the same time it sent to Harrison a check for the aggregate amount of the supplies which he had furnished to the laborers.
'4. Four months before the filing of the petition in bankruptcy, or October 24, 1902, Harrison owed the tie company more than $20,000.
'5. Between December 27, 1902, and February 24, 1903, the company refused to pay to Harrison, retained and credited on its claim against him $2,210.73, which was due him for supplies he had furnished to the laborers subsequent to November 30, 1902.
'6. At all times, when the amounts which aggregate $2,210.73 became due and were retained by the company, Harrison was insolvent, the tie company knew that fact, and it intended, by retaining these amounts, to secure to itself a preference over the other creditors of the insolvent, but Harrison had no such intention.
An appeal to this court was allowed by the presiding circuit judge of the circuit court of appeals.
Joseph Wheless, George M. Block, F. H. Sullivan, and Charles Erd for appellant.
[Argument of Counsel from pages 504-505 intentionally omitted] Messrs.John M. Moore, C. F. Henderson, H. L. Ponder, M. M. Stuckey, and S. M. Stuckey for appellee.
[Argument of Counsel from pages 505-506 intentionally omitted] Mr. Justice White, after making the foregoing statement, delivered the opinion of the court:
Before coming to the merits we dispose of an objection to the jurisdiction.
The appeal was prosecuted under clause (b) 1 of § 25 of the bankrupt act of July 1, 1898 (30 Stat. at L. 553, chap. 541, U. S. Comp. Stat. 1901, p. 3432), providing that from any final decision of a court of appeals, allowing or rejecting a claim under the act, an appeal may be had 'where the amount in controversy exceeds the sum of two thousand dollars, and the question involved is one which might have been taken on appeal or writ of error from the highest court of a state to the Supreme Court of the United States.'
The provision of the Revised Statutes regulating the revision of judgments and decrees of state courts, which is relied upon, in conjunction with the portion of a decision in the suit can be had, 'where any of § 709 (U. S. Comp. Stat. 1901, p. 575) which authorizes the re-examination of a final judgment or decree in any suit in the highest court of a state in which a decision in the suit can be had, 'shere any title, right, privilege, or immunity is claimed under . . . any . . . statute of . . . the United States, and the decision is against the title, right, privilege, or immunity specially set up or claimed, by either party, under such . . . statute, . . .'
The appellee does not question that this appeal is from a decree rejecting a claim, within the meaning of the statute, and that the requisite jurisdictional amount is involved, but the particular objection urged is that a right was not claimed under an act of Congress, nor was a right of that nature denied by the lower courts.
The objection is not tenable. It clearly appears from the record that in the claim filed on behalf of the tie company there was embodied, as an integral part thereof, as a proper credit or set-off, the sum retained from the wages of employees for supplies furnished by the bankrupt, and the rejection of the claim was based upon the denial of the right to set-off. As the right of set-off is controlled by the provisions of § 68 of the bankrupt act, the assertion of such a right, in a proceeding in bankruptcy, as was the case here, is necessarily based upon those provisions of the act of Congress, and in this case the construction of such statutory provision was undoubtedly involved. That the circuit court of appeals understood that reliance was had by the tie company upon the set-off clauses of the act is shown by its opinion, where, after sustaining the claim of the trustees that the credits in question constituted a preference, it prefaced a particular discussion of the contention as to a right of set-off by the following statement:
'Finally, it is said that this $2,210.73 was a credit to Harrison, and that the company should be permitted to set it off against his debt to it, and should be...
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