United States may limit its priority relative to taxes as was done by this section and R. S. 3186, as amended. In re Caswell Const. Co. (D. C. 1926), 13 F. (2d) 667.

Debts due United States officers and corporations. A claim of priority in bankruptcy for a debt due under a contract

with the United States Shipping Board Emergency Fleet Corporation, a corporation organized pursuant to congressional legislation under the laws of the District of Columbia, can not successfully be asserted by such corporation on the theory that the debt is one due it as an instrumentality of the United States, since such corporation, notwithstanding the ownership by the Government of all the capital stock, is an entity, separate from the United States. United States Shipping Board, etc.. Corp. e. Wood (1922), 258 U. S. 549, affirming (C. C. A. 1921), 274 Fed, 893. To the same effect, see U. S. v. Wood (C. C. A. 1923), 290 Fed. 109, affirmed (1923), 263 U. S. 680.

Bank deposit of trust funds by Indian agent creates "debt" due United States, within this section. Bramwell v. U. S. Fidelity & Guaranty Co. (1926), 269 U. S. 483, affirming (C. C. A. 1924), 299 Fed. 705, which affirmed (1923), 295 Fed. 331.

A claim against an insolvent bank, based on cashier's checks purchased by a postmistress with funds belonging to the Government, held one in favor of the United States with right to priority of payment under this section, which right was not affected by the fact that the claim was filed by, and allowed to, the postmistress and afterwards assigned to the United States. U. S. v. Brock (D. C. 1925), 5 F. (2d) 265.

That postal and forestry moneys were deposited in names of officials would not make indebtedness any less indebtedness to United States. U. S. v. Porter (D. C. 1927), 19 F. (2d) 541.

Debts due United States officers and corporations. Notes payable to United States for price of vessel requisitioned by Shipping Board during construction held entitled to priority on appointment of receiver for purchaser. Whan v. Green Star 8. 8. Corporation (C. C. A. 1927), 22 F. (2d) 483.

Debts arising out of Federal control of railroads. A claim of the Director General of Railroads for transportation charges against insolvent corporation was not entitled to priority though receiver was appointed under circumstances amounting to voluntary assignment of property. Mellon v. Michigan Trust Co. (1926), 271 U. S. 236, affirming (C. C. A. 1924), 2 F. (2d) 194.

Unpaid freight charges for shipments by railroad during Federal control had been held to be property of the United States, and a claim therefor entitled to priority in a number of cases in the circuit courts of appeals. In re E. J. Hibner Oil Co. (C. C. A. 1920), 264 Fed. 667; Davis v. Pullen (C. C. A. Mass. 1922) 277 Fed. 650; In re Tidewater Coal Exchange (C. C. A. 1922), 280 Fed. 648, certiorari denied Davis v. Coyle (1922), 260 U. S. 721. And in In re Farmers' Co-op. Co. (Iowa, 1925), 206 N. W. 251, it was held that under this section and 725, post, a claim for freight accruing to Federal Government while operating railroads was an indebtedness due the United States and was both preferred claim on estate of insolvent corporation and a personal liability of assignee for benefit of creditors, if after notice he failed to pay claim out of assets of insolvent. These cases seem to be overruled by Mellon v. Michigan Trust Co. (1926), 271 U. S. 236, supra.

At the time of its bankruptcy a corporation had certain lumber in course of transportation by the Railroad Administration, which unloaded the lumber on its own ground and several months later sold it. Held that while demurrage until unloading, and the cost of unloading, were proper claims against the estate, a charge for storage as demurrage and at the demurrage rate after bankruptcy was not allowable as a prior or preferential claim or debt due the United States, under this section; also that the Director General was chargeable with the fair value of the lumber at the time of bankruptcy. In re Stork Contractors' Export Corporation (D. C. 1922), 285 Fed. 438.

Property to which priority applies-In general. The priority given debts due the United States by this section applies only to funds available to pay creditors of the insolvent. In re Holmes Mfg. Co. (D. C. 1927), 19 F. (2d) 239.

Rights of sureties.-R. S. 3468 (531, ante), applying an established rule of the law of subrogation (Lidderdale v. Robinson (1827), 12 Wheat. 594, 596), declares that when a surety pays to the United States the money due upon a bond, such surety shall have the like priority for the recovery of the moneys as is secured to the United States. This section, embodying the common-law rule by which the sovereign has priority over other creditors of an insolvent (U. S. v. State Bank (1832), 6 Pet. 29, 35), declares that the debts due to the United States shall first be satisfied. There is no conflict between the two sections, which are substantially a reenactment and extension of the provisions of sec. 65, act of Mar. 2, 1799 (1 Stat. 627, 676), U. S. v. National Surety Co (1920), 254 U. S. 73.

Rights of sureties.-Surety on bonds seeuring United States deposits in insolvent banks is entitled to interest at rate banks contracted to pay United States. Mothersead v. U. S. Fidelity & Guaranty Co. (C. C. A. 1927), 22 F. (2d) 644; Mothersead v. New Amsterdam Casualty Co. (C. C. A. 1927), 22 F. (2d) 654; Mothersead v. Fidelity & Deposit Co. of Maryland (C. C. A. 1927), 22 F. (2d) 654; Mothersead v. Fidelity & Casualty Co. of New York (C. C. A. 1927), 22 F. (2d) 654; Mothersead v. American Surety Co. of New York (C. C. A. 1927), 22 F. (2d) 655.

Priority as against adverse rights--In general.-Persons claiming exemption from the operation of this section have burden of showing that they are not within its provisions. U. S. v. People's Trust Co. (D. C. 1927), 17 F. (2d) 437.

Expenses. Decedent's reasonable funeral expenses have priority over his debts due United States for income taxes. In re Stiles' Estate (Sur. 1926), 215 N. Y. S. 134, 126 Misc. Rep. 715.

Expenses of receivership of insolvent estate have priority over taxes due United States not secured by lien under R. S. 3186, as amended, notwithstanding this section, since there is no fund for payment of insolvent's debts until receivership expenses are paid. Kennebec Box Co. v. O. S. Richards Corporation (C. C. A. 1925), 5 F. (2d) 951, affirming (D. C. 1924), 299 Fed. 871.

44

Priority over debts due a State.-Under Const. art. 6, providing that this Constitution and the laws of the United States which shall be made in pursuance thereof

shall be the supreme law of the land," and this section, taxes due to the United States from an insolvent corporation have priority over taxes due under the laws of the State. U. S. v. San Juan County, Wash. (D. C. 1922), 280 Fed. 120. Taxes due the United States from an insolvent corporation have priority over taxes due the State, and this right of priority is not affected by the fact that under the laws of the State the taxes due the State became a lien before the Federal tax accrued. Stover v. Scotch Hills Coal Co. (D. C. 1924), 4 F. (2d) 748.

Federal estate tax and transfer tax imposed by act of June 20, 1919, of Pennsylvania, are both excises on transfer of property from a decedent and take effect at instant of transfer; neither having priority in time over other. Frick v. Commonwealth of Pennsylvania (1925), 268 U. S. 473, reversing (Pa. 1923), 121 Atl. 35.

Claims for labor or material.-Under this section, paragraphs (a) and (b) of section 64, bankruptcy act, and R. S. 3186, as

amended, tax claims against bankrupt's estate have precedence over all other claims, including wage claims; "dividends to creditors," as used in section 64, not being limited to claims of general creditors, but including any dividend. In re Essenkay Products Co. (C. C. A. 1925), 5 F. (2d) 668. Decree as bar. In action by surety on deposit of Indian funds under this section and R. S. 3468, ante, 531, to have its claim declared a preference against funds of insolvent State bank in hands of State commissioner of finance, final decree of dismissal of former action was held to estop plaintiff from suing on same cause of action, though allegations that defendant took possession of funds by virtue of assignment were first made in second action. U. S. Fidelity & Guaranty Co. v. Porter (D. C. 1924), 3 F. (2d) 57.

Proceedings to enforce.-Denial of a petftion by the United States, asserting the right to priority of its claim under the statute. has been held not to bar it from subsequently seeking to establish a trust in property in the hands of the receiver. Equitable Trust Co. of New York v. Connecticut Brass & Mfg. Corporation (D. C. 1925), 6 F. (2d) 582, reversed on other grounds (C. C. A. 1926), 10 F. (2d) 913.

Where answer in suit by the United States to recover postal and forestry funds deposited in State bank specifically denied that funds belonged to United States, within meaning of this section, general motions to strike answers will be denied, for the purpose of taking testimony to determine character of such funds. U. S. v. Porter (D. C. 1927), 19 F. (2d) 541.

United States, in proceeding to recover public funds from insolvent State bank, need not pursue steps required by State law. Id.

Jurisdiction of courts.-Federal court held without jurisdiction of suit by the United States against receiver appointed by State Merryweather v. U. S. (C. C. A, 1926), 12 F. (2d) 407. Failure to obtain consent of court to sue Id. Its receiver is jurisdictional.

court.

Jurisdiction of courts. If United States asserts claim against insolvent bank under State and Federal statutes granting priority, it may have question reviewed by United States Supreme Court. People's Trust Co. v. U. S. (C. C. A. 1928), 23 F. (2d) 381.

State court proceedings for liquidation of Insolvent bank, and intervention of United States therein to establish claim, held in rem, precluding subsequent exercise of jurisdiction by Federal court. Id.

Lien of Government.-Where one telegraph company leased all lines and property of another, agreeing to make payments direct to stockholders of lessor, stockholders' right to payments was held not property of lessor company, authorizing Government lien thereon for income taxes due from such company, either under R. S. 3186, or this section, in view of R. S. 3185. U. S. v. Western Union Telegraph Co. (D. C. 1926), 19 F. (2d) 157.

Assignees and trustees.-Under this section and 724, ante, a claim for freight accruing to Federal Government while operating railroads is an indebtedness due the United States and is both preferred claim

on estate of insolvent corporation and a personal liability of assignee for benefit of creditors if after notice he failed to pay claim out of assets of insolvent. In re Farmers' Co-op. Co. (Iowa, 1925), 206 N. W. 251.

Notice of debt.-Under this section and 724, ante, it is not necessary for the Federal Government to obtain an extension of time for filing with assignee of insolvent corporation, of Government's claim for freight accruing to it while operating railroads, nor was it necessary to file claim within three months, it being sufficient that notice was given to assignee of such claim. Id.