ment for a fine is not entitled to priority.214 A claim for premiums due from the bankrupt to the State for Workmen's Compensation Insurance is a priority claim.215 This is regulated by the statute in England.216 (5) LIENS. As previously stated, mere liens are not priorities. They stand or fall as liens, as where under a statute a distress for rent creates a lien upon the property distrained, the lessor has no lien upon the property if the proceeding was instituted after the lessee was adjudicated a bankrupt, but is entitled to his rent as a preferred claim out of the proceeds of the sale of property.2 214. In re Alderson (D. C., W. Va.), 3 Am. B. R. 544, 98 Fed. 588. 215. Camacho v. International Express & Foundry Co. (D. C., Porto Rico), 48 Am. B. R. 317. 216. Eng. Bankr. Act of 1914, § 33 (1) (e). 217. In re Cramond (D. C., N. Y.), 17 Am. B. R. 22, 145 Fed. 966; Mott v. Wissler Mining Co. (C. C. A., 4th Cir.), 14 Am. B. R. 321, 135 Fed. 697; In re Austin (D. C., Hawaii), 13 Am. B. R. 136, 2 U. S. (D. C., Hawaii), 210; In re Thackara Mfg. Co. (D. C., Pa.), 15 Am. B. R. 258, 140 Fed. 126; Matter of Federal Biscuit Co. (C. C. A., 2d Cir.), 33 Am. B. R. 273, 218 Fed. 753. Priority between purchase money lien and mechanic's lien. See Matter of Atkinson-Kerce Grocery Co. (D. C., Ga.), 40 Am. B. R. 411, 245 Fed. 481. Equitable assignment.-A legatee assigned his interests in the estates of his father and grandfather as security for the payment of certain notes and thereafter certain other creditors having attached his interest in said estates, the assignee wrote a letter approved by such legatee, to the attorney for the attaching creditors agreeing that after payment of his debts, costs and expenses, the assignee would pay the claims of such attaching creditors "from the money coming into (their) hands on account of" said assignor, whereupon the attachment was withdrawn. Subsequently such legatee 217 went into bankruptcy. It was held that said assignment was a mortgage only, and that the promise of the assignee was merely to pay over any excess which might come into its hands, and did not operate as an equitable assignment of the fund, nor give said attaching creditors any preference in payment out of such fund in the hands of the trustee in bankruptcy. In re Ballantine (C. C. A., 3d Cir.), 26 Am. B. R. 275, 186 Fed. 91. Where property was converted by a bankrupt prior to adjudication and mingled with the other assets, the trustee takes such assets subject to the claim of the owner of the property converted, and such owner is entitled to priority of payment from the proceeds of the sale thereof. Erie Railroad Co. v. Dial (C. C. A., 6th Cir.), 15 Am. B. R. 559, 140 Fed. 689. Lien on distrainable assets. In re Duble (D. C., Pa.), 9 Am. B. R. 121, 117 Fed. 794; In re Bourlier Cornice & Roofing Co. (D. C., Ky.), 13 Am. B. R. 585, 133 Fed. 958. In Pennsylvania when the intention to so consider them is made clear in the contract between lessor and lessee, sums by way of taxes, etc., will be considered as rent and may be distrained for by the landlord and are entitled to preference over liens by execution or otherwise. In such a case the lessor upon filing a claim against the bankrupt lessee is entitled to priority over general creditors for the whole amount Other cases illustrating this distinction will be found in the foot-note. 218 (6) SHERIFF'S FEES AND DISBURSEMENTS.- One of the most difficult questions which has arisen under the present law is whether a sheriff has priority for his fees and disbursements after the property seized by him vests, clear of the lien of the execution or attachment, in the bankrupt's trustee. As a rule, a sheriff must proceed under an execution or warrant of attachment delivered to him; in case he seizes, he must insure and safely keep the property; he may be liable in damages if he fails so to do. Yet, if the lien of his attachment or execution is avoided by a bankruptcy within four months, he is obliged to surrender to the trustee, and, it has been claimed, without right even to reclaim his disbursements.219 On the other hand, the creditor represented by the sheriff was probably seeking to obtain an advantage, 220 and the general creditors should not be compelled to pay his bill. Thus, if the lien creditor or his attorney is not financially responsible, the sheriff may fall between two stools. The equities of the sheriff on the one hand and of the general creditors on the other are equally strong. The question is not yet authoritatively settled. Cases under the former law quite uniformly went against the sheriff.2 Those under the present law quite evenly balance. 222 It is impossible, however, to distinguish them; 221 of rent due, including taxes. McCann v. Evans (C. C. A., 3d Cir.), 26 Am. B. R. 47, 185 Fed. 93. 218. In re Kerby-Dennis Co., 95 U. S. 116, 2 Am. B. R. 402; In re Lowensohn (D. C., N. Y.), 4 Am. B. R. 79, 101 Fed. 776; In re Emslie (C. C. A., 2d Cir.), 4 Am. B. R. 126, 102 Fed. 291; In re Mitchell (D. C., Del.), 8 Am. B. R. 324, 116 Fed. 87; Matter of Cole Jewelry Co. (D. C., Ga.), 40 Am. B. R. 234, 243 Fed. 790; Matter of Jackson Light & Traction Co. (D. C., Miss.), 44 Am. B. R. 222. 219. In re Young (D. C.. N. Y.), 2 Am. B. R. 673, 96 Fed. 606. 220. See generally under sections 60 and 67 of this work. 221. In re Davis, Fed. Cas. 3,616; Zeiber v. Hill, Fed. Cas. 18,206; In re Fortune, Fed. Cas. 4955; In re Preston, Fed. Cas. 11 394; In re Jenks, Fed. Cas. 7,276; In re Ward, Fed. Cas. 17,145; In re Hatje, Fed. 222. In re Lewis (D. C., Mass.), 4 Am. B. R. 51, 99 Fed. 935; In re Beaver Coal Co. (C. C. A., 9th Cir.), 7 Am. B. R. 542, 113 Fed. 889, affg. s. c., 6 Am. B. R. 404, 107 Fed. 98; In re Young (D. C., N. Y.), 2 Am. B. R. 673, 96 Fed. 606; In re Allen (D. C., Cal.), 3 Am. B. R. 38, 96 Fed. 512; Matter of Moncrief Mfg. Co. (Ref., R. I.), 31 Am. B. R. 674; Matter of Hessler Foundry & Mfg. Co. (D. C., N. Y.), 43 Am. B. R. 246. For a review of the cases, see In re Jennings (Ref., N. Y.), 8 Am. B. R. 358. Fees of a sheriff, accruing on a writ of attachment founded on a provable debt and issued before the commencement of proceedings in bankruptcy, are it is only possible to suggest therefrom the following tests which, when applied to a given case, may aid in determining the sheriff's right to payment in full: (1) has the sheriff a lien for his fees at the time the petition is filed; (2) if so, is it a lien that survives the bankruptcy? In either event, the property comes to the trustee charged with such lien and the sheriff's fees must be paid. Or, if the sheriff has no lien or it is avoided by the bankruptcy, (3) is there any State statute that gives the sheriff a priority? If not, his claim to priority for his fees will be disallowed. It is important to note that a sheriff's lien or priority may exist and yet the creditor's fall. In the ultimate analysis, the question turns solely on what the State law is. A sheriff's disbursements may sometimes be paid when his fees are not. This, however, is also on the theory that he is a custodian or that his service has been beneficial to the estate, i. e., under § 64-b (1).223 The cases under the law of 1867 are quite numerous and are still authorities.224 (7) OTHER ILLUSTRATIVE CASES.- As will be noticed from the cases cited there is some confusion in the cases and they cannot always be reconciled.225 Special deposits in banks and trust funds in the hands of bankrupts are, under some circumstances, entitled to priority of payment; but a treasurer of a municipal corporation who, under authority of law, deposits public moneys in a bank which becomes bankrupt, is not a special depositor entitled to be first paid out of the funds of the estate." State statutes frequently accord to creditors maintaining actions, in behalf of all creditors, to set aside trust 226 entitled to priority of payment, where such priority is given under the Massachusetts insolvency laws. In re Lewis (D. C., Mass.), 4 Am. B. R. 51, 99 Fed. 935. 223. Compare In re Lengert Wagon Co. (D. C., N. Y.), 6 Am. B. R. 535, 110 Fed. 927; In re Francis-Valentine Co. (C. C. A., 9th Cir.), 2 Am. B. R. 522, 94 Fed. 793; Matter of Hessler Foundry & Mfg. Co. (D. C., N. Y.), 43 Am. B. R. 246. 224. In re Fortune, Fed. Cas. 4,955; In re Ward, Fed. Cas. 17,145; In re Jenks, Fed. Cas. 7,276; Zeiber v. Hill, Fed. Cas. 18,206; In re Holmes, Fed. Cas. 6,631. 225. In re Wright (D. C., Mass.), 2 Am. B. R. 592, 95 Fed. 807; In re Goldstein (Ref., Pa.), 2 Am. B. R. 603; In re Daniels (D. C., R. I.), 6 Am. B. R. 699, 110 Fed. 745; In re Matthews (D. C., Ark.), 6 Am. B. R. 96, 109 Fed. 603; In re Meyers (D. C., Pa.), 4 Am. B. R. 536, 102 Fed. 869; Central Trust Co. v. Lueders & Co. (C. C. A., 6th Cir.), 34 Am. B. R. 61, 221 Fed. 829. 226. Priority of bank deposits.- In re Smart (D. C., Ohio), 14 Am. B. R. 672, 136 Fed. 974. See also Deere Plow Co. v. McDavid (C. C. A., 8th Cir.), 14 Am. B. R. 653, 137 Fed. 802; In re Brunsing, Tolle & Postal (D. C., Cal.), 22 Am. B. R. 129, 169 Fed. €88, holding that the special deposit or trust property must be traced into the hands of the trustee as part of the bankrupt's estate. 227 deeds and transfers of insolvent debtor's property, preferences by lien or otherwise upon the property affected; in such cases the liens or priorities are to be preserved, and the creditors are entitled to priority of payment. An award by a State industrial commission against a bankrupt, for personal injuries to an employee, is not entitled to priority under this subdivision, taken in connection with a State law providing that the right of compensation given shall have the same preference or lien against the assets of the employer as allowed by law for a claim for unpaid wages. Claims of composition creditors should be paid before the claim of a person who advanced the consideration for the composition, where default was made in carrying out the agreement. 229 VIII. PRACTICE 228 (8) PRACTICE.- Priority should be specifically claimed.230 This is usually done by a sentence to that effect and giving the grounds of the claim, inserted in the proof of debt. If not claimed, it will be deemed waived; though amendment setting up the claim will usually be allowed. It is not lost even if a claim is not made until after the first dividend; 231 nor although the claim of priority is not made until after the expiration of a year from the date of the adjudication, and the claimant voted at the election of trustee.232 It has been held 227. In re Goldberg (D. C., Me.), 16 Am. B. R. 521, 144 Fed. 566; Moore v. Green (C. C. A., 4th Cir.), 16 Am. B. R. 648, 145 Fed. 480. 228. Matter of Rockaway Soda Water Manufacturing Co. (D. C., N. Y.), 36 Am. B. R. 640. In England, they are allowable up to one hundred pounds. Williams on Bankruptcy (12th ed.), p. 174. 229. Matter of Bruns (C. C. A., 7th Cir.), 43 Am. B. R. 282, 256 Fed. 840. 230. Landlord's claim for rent in arrears. - Where, in Pennsylvania, a landlord makes no objection to a sale in bulk of a bankrupt tenant's liquor license, stock, fixtures and lease and accepts the purchaser as tenant, and permits him to occupy the premises as the bankrupt's successor under the lease the landlord's claim for priority of payments, from the proceeds of sale for a balance of rent which had ac crued before the filing of the petition in bankruptcy against the bankrupt will be disallowed. In re McFadgen (D. C., Pa.), 19 Am. B. R. 481, 156 Fed. 715; Kayser v. Wessel (C. C. A., 3d Cir.), 12 Am. B. R. 126, 128 Fed. 221. Forms.- Proof of priority claim for wages. see Supplementary Forms. Vol. III, post, No. 208. Petition for payment of priority claims and schedule. Form No. 222. Order for payment of priority claims, Form No. 223. 231. In re Scott (D. C., Tex.), 2 Am. B. R. 324, 96 Fed. 607, holding that the fact that the claim for an attorney's fee was not presented until after the declaration of the first dividend does not destroy its right to priority of payment out of any funds on hand when the claim is properly proved and allowed. 232. Time to claim priority under that the filing of an unsecured claim, without asserting any right of priority, does not estop the claimant from thereafter setting up his right, even after receiving a dividend on the claim, in the absence of proof that the trustee was misled or the estate injured by the delay in asserting the alleged priority.233 It is not sufficient to state in the proof of claim, that the debt therein mentioned is "preferred" or is "a preferred claim." The proof must state facts which show that the claim is entitled to priority.234 The act does not contemplate that taxes assessed upon the bankrupt's real property, and which are matters of public record, shall be proved like an ordinary debt.235 Allegations in a petition relating to an alleged priority are not to be taken as prima facie true, for the purpose of establishing such priority, in the absence of evidence for or against the fact,236 the burden being upon creditors claiming preference to bring themselves, by the evidence, within the statute creating the preference.237 A priority debt duly proved and allowed should not be ordered paid until it appears that there will be enough assets to pay in full all like debts of the same and higher classes. State laws.- Creditors who establish claims giving them a preference in the distribution of assets by virtue of a statute giving priority to those who shall furnish materials or supplies to manufacturing corporations doing business in the State, are entitled to priority of payment, though they make no special claim therefor until after the expiration of the year from the date of the adjudication in bankruptcy, though inadvertently they voted at the election for trustee, without objection. In re Ashland Steel Co. (C. C. A., 6th Cir.), 21 Am. B. R. 834, 168 Fed. 679. 233. Wuerpel v. Commercial, etc., Bank (C. C. A., 5th Cir.), 38 Am. B. R. 223, 238 Fed. 269. 234. In re Dunn (D. C., N. Y.), 25 Am. B. R. 103, 181 Fed. 701, so holding in respect to a claim which merely stated that it is for " wages due deponent as clerk and manager and is a preferred claim;" the claim should have shown that such wages were earned in the employ of the bankrupt within three months before the commencement of bankruptcy proceedings. 235. See under section 63, ante, title "Taxes." 236. In re Jones (D. C., Mich.), 18 Am. B. R. 206, 151 Fed. 108. 237. In re Crown Point Brush Co. (D. C., N. Y.), 29 Am. B. R. 638, 200 Fed. 882. |