SECTION III.

CLAIMS HAVING PRIORITY.

IN RE ROUSE, HAZARD & CO. (INCORPORATED).

CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT, JANUARY 3, 1899.

[Reported in 91 Federal Reporter, 97.]

BEFORE WOODS, JENKINS, and SHOWALTER, Circuit Judges.
JENKINS, Circuit Judge, delivered the opinion of the court.

[This was a petition to review an order of the District Court for the Northern District of Illinois, allowing priority to certain claims for labor against the bankrupt corporation. These claims had accrued within three months prior to August 31, 1898 when the bankrupt corporation made a general assignment for the benefit of creditors. The petition in bankruptcy was filed November 1, 1898. By the law of Illinois, wages for labor earned within three months prior to the making of a general assignment are given priority over other claims.]

The question here is one of construction of the bankrupt law of the United States, and is this: Whether the Congress, having spoken by a particular provision (section 64 b, cl. 4) with respect to the priority to be allowed labor claimants, and having subsequently in me sAME AC (section 616, cl. 5) spoken generally with respect to the recognition of the priorities allowed by the laws of the State or the United States, the latter general provision overrides or enlarges the prior special provision The bankrupt act, by its terms, went into full force and effect upon its passage, July 1, 1898, and, notwithstanding the provision that no voluntary petition should be filed within one month of the passage of the Act, and that no petition for involuntary bankruptcy should be filed within four months of the passage of the Act, the bankrupt law was operative from the date of its passage, and was effective from that date to supersede the insolvency laws of the several States. Manufacturing Co. v. Hamilton (Mass.), 51 N. E. 529; Blake v. FrancisValentine Co., 89 Fed. 691; In re Bruss-Ritter Co. (E. D. Wis.), 90 property. In re Babcock, 3 Story, (1844) 393, 399, 400; In re Christy, (1845) 3 How. 293, 315.

'The omission by that eminent jurist, when framing the act of 1841, of all specific provisions on the subject as unnecessary, and his repeated judicial declarations, after he had been habitually administering that act for three or four years, recognizing that rule as still in force, compel the inference that a general enactment for the ratable distribution of the estate of an insolvent among all the creditors had the effect of preventing any individual creditor, while retaining collateral security on part of the estate, from proving for his whole debt."

Fed. 651. It is probably true that the Congress could constitutionally in the bankrupt act recognize the varying systems of the several States with respect to exemptions of property (Darling v. Berry, 4 McCrary, 407, 13 Fed. 659); and it may be possible that like recognition of the varying laws of the several States in regard to priority of payment of debts would not impair or destroy the uniformity of the system of bankruptcy authorized by the Constitution. We do not find occasion

now to consider that subject. The question recurs, What was the real intention of the Congress as expressed in clauses 4 and 5 of section 646? In the first clause Congress addresses itself to the subject of labor claims, and particularly provides that all wages that have been earned within three months before the date of the commencement of proceedings in bankruptcy, not to exceed $300 to each claimant, shall be awarded priority of payment. It recognized, it must be assumed, the various provisions of law in the several States with respect to this subject. It found them not to be in harmony, and in some States, as, notably, in Illinois, the laws upon that subject not to be consistent with each other. It found limitation as to time different in the different States. It found that in some of the States priority of payment was unlimited as to amount, and in some limited to so small a sum as $50. With this divergence within its knowledge, the Congress spoke to the subject specially and particularly, and limited the amount to $300, and as to time, to wages earned within three months before the commencement of proceedings. Can, then, the general provision of the law following immediately thereafter, allowing priority of payment for all debts owing to any person who, by the laws of the States or the United States, is entitled to priority, be held to enlarge the prior provision so that the statute should be read that, in any event, the laborer should be entitled to priority of payment in respect of wages earned within three months prior to proceedings, and in amount not exceeding $300, and that wherever the laws of the State of the residence of the bankrupt grant the laborer priority of payment without limit as to time or amount, or impose a limit in excess of that imposed by the bankrupt act, he shall be entitled to a further priority in payment according to the law of the particular State? We think not. It is not to be sup D posed, unless the language of the Act clearly so speaks, that the Congress intended that in the administration of the Act there should be a marked contrariety in the priority of payment of labor claims dependent upon locality. It is an elementary principle of construction that where there are in one Act or several Acts contemporaneously passed specific provisions relating to a particular subject, they will govern in respect to that subject as against general provisions contained in the same Act.

[The court here referred to Sutherland, Statutory Construction, § 158; State v. Inhabitants of Trenton, 38 N. J. L. 67; Taylor v. Corporation of Oldham, 4 Ch. D. 398; Attorney-General v. Lamplough, 3 Ex. D. 214; Dwarris, Statutes, p. 658; Felt v. Felt, 19 Wis. 193; State v.

Goetze, 22 Wis. 363, 365; Hoey v. Gilroy, 129 N. Y. 138; Stockett v. Bird's Adm., 18 Md. 484.]

Our conclusion is that Congress having spoken specifically to the subject of priority of payment of labor claims, what it has said upon that subject expresses the particular intent of the lawmaking power, and that provision is not to be tolled or enlarged by any general prior or subsequent provision in that Act. That which is given in particular is not affected by general words. So that the statute providing for the priority of payment of debts referred to in clause 5 must be construed to mean other debts and different debts than those specified in clause 4. We are not unmindful of the particular hardship which our conclusion, it is said, will work out here. It arises from the fact that under the law proceedings in bankruptcy, except by voluntary act of the bankrupt, could not be commenced in time to fully protect these labor claimants. We regret that this is so. It is a misfortune arising from the provisions of the Act, but to remedy this particular wrong we cannot override a recognized canon of construction of statute law.

IN RE WESTLUND.

DISTRICT COURTt for the DistrICT OF MINNESOTA, FEBRUARY 14, 1900. [Reported in 99 Federal Reporter, 399.]

LOCHREN, District Judge. In this case creditors who were owners by assignment of claims for labor performed for the bankrupt within three months before the date of the commencement of the bankruptcy proceedings, each separate claim so assigned being less than $300, duly filed and made proof of such claims; and the question certified by the referee for decision is whether such claims so owned are debts having priority. The answer to this question depends upon the proper construction of that clause of section 646 of the bankruptcy act which gives priority to "wages due to workmen, clerks, or servants, which have been earned within three months before the date of the commencement of proceedings, not to exceed three hundred dollars to each claimant." This language requires that a debt for wages, to have priority, must be due to the wage-carner. If the claimant entitled to priority might be an assignee, there would be no reason why such claimant should be restricted to $300, as he might be the owner of many small claims, each less than that amount, but aggregating more. The clause referred to is intended to favor the class whose reliance for the main- · tenance of themselves and families is generally upon their wages as earned. There is nothing in the nature of security or lien for the payment of the wages which could pass to an assignee. No right to priority arises or exists until the proceeding in bankruptcy is instituted,

and then the wages assigned are not "due to workmen, clerks, or servants," but to their assignees, and are outside the language of this clause. If debts for wages so assigned can be allowed priority, they may come in conflict, or at least in competition, with other claims for wages due and owing to the same workmen, clerks, or servants, earned within the same three months, and lessen the payments, if the assets will not pay in full all debts having priority. It must be held, therefore, that debts of a bankrupt for labor and services which at the commencement of the proceedings in bankruptcy are not due to the workmen, clerks, or servants, but to assignees, have no priority.

SECTION IV.

MUTUAL DEBTS AND CREDITS.

EX PARTE WAGSTAFF.

CHANCERY, AUGUST 11, 1806.

[Reported in 13 Vesey, 65.]

THE petition stated, that the petitioners had various dealings in trade with James and William Kershaw: the petitioners being in the habit of purchasing goods from the Kershaws, receiving remittances for their use, and accepting bills drawn on the petitioners; by means of which several dealings mutual accounts subsisted between them. On the 29th June, 1804, a Commission of Bankruptcy issued against James and William Kershaw. At that time the petitioners were in advance for money paid by them for the use of the bankrupts, exceeding the amount of their remittances, received and applied to their credit, with interest, the sum of £2,277 17s. 6d. The petitioners were also at that time under acceptance of a bill of exchange, drawn on them by the bankrupts, but not due at the date of the Commission, to the amount of £399 68.; which bill became due, and was paid by the petitioners on the 5th of July, 1804. The petitioners were at the time of the bankruptcy indebted to the bankrupts for goods sold the sum of £360; the stipulated credit for which had not then expired; the goods having been purchased on credit, to expire on the 21st of May, 1805. The petitioners were also indebted to the bankrupts on a prior account for money had and received to their use, the sum of £3 13s. 3d.

The petitioners applied to prove under the Commission the sum of £2,277 17s. 6d. : but the Commissioners refused to admit the proof; the assignees contending, that the two sums of £360 and £3 13s. 3d. ought to be deducted; and that the amount of the bill, not being due or paid till after the bankruptcy, could not be debited in account

against the bankrupts; but was a debt accruing after the bankruptcy, and not barred by the certificate. The petition was therefore presented; insisting, that the amount of that bill, though not due till after the bankruptcy, was an item of credit to the bankrupts in the mutual account between them and the petitioners; and, that the petitioners had a right to apply in account in the nature of set-off what was due from them to the bankrupts for goods and otherwise to their protection, against and towards the extinguishment of their acceptance, and to prove the sum of £2,277 178. 6d.; and praying accordingly.

The Lord CHANCELLOR [ERSKINE]. The bankrupt, being a creditor of the petitioners, drew a bill upon them before the bankruptcy; which bill they accept. Is not that a mutual account: mutual credit to all intents and purposes?

The order directed the proof to be admitted.1

EX PARTE WHITING. RE DOW ET AL.

DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, MARCH, 1876. [Reported in 2 Lowell, 472.]

LOWELL, J. The facts, as I understand them, are, that in 1874 the firm of Dow, Hunt, & Co., the bankrupts, of which firm A. C. Cushing was a partner, borrowed $3,000 of a savings-bank, for which they, as a firm, and Cushing and the petitioner, Whiting, individually, gave their joint and several promissory note. This note the petitioner paid to the bank in full, after the failure of Dow, Hunt, & Co., but before their bankruptcy. The parties differ in their mode of looking at this note. The petition represents it as signed by Dow, Hunt, & Co., and Cushing, as principals, and by the petitioner as surety, while the answer represents it to be the note of Dow, Hunt, & Co. as principals, and Cushing and the petitioner as co-sureties, and alleges that the money went to the firm exclusively. Upon the face of the note I should suppose that the answer puts the contract correctly, and I shall so

1 Ex parte Prescot, 1 Atk. 230; Sheldon v. Rothschild, 8 Taunt. 156; Smith ». Hodson, 4 T. R. 211; Atkinson v. Elliott, 7 T. R. 378; Alsager v. Currie, 12 M. & W. 751; Marks v. Barker, Wash. C. C. 178; Catlin v. Foster, 1 Sawy. 37; Drake v. Rollo, 3 Biss. 273; Ex parte Howard Bank, 2 Low. 487; Re City Bank, 6 B. R. 71; Re Kalter, 2 N. B. N. 264 (referee), acc.

Except in bankruptcy, no right of set-off is allowed in England unless both debts are due, even though one of the parties is insolvent. Re Commercial Bank of India, L. R. 1 Ch. 538. In this country the set-off is generally allowed where the debt due from the insolvent has matured, though the debt due to him has not. Where, how-! ever, the debt due from the insolvent has not matured, the weight of authority is against the allowance of a set-off, but there are recent decisions which strongly support the bankruptcy rule as one of general application where one of the parties is insolvent. See 17 L. R. A. 456 n., and an essay by James L. Bishop in 1 Columbia L. Rev. 391.