LOTT et al. v. SALSBURY. In re HYMAN, 237 F. 191

JOHNSON, District Judge. This case comes here on a petition to superintend and revise in matter of law an order of the District Court of the United States for the Eastern District of Virginia. The order complained of is dated December 18, 1915, in the matter of A. L. Hyman, bankrupt, and decides that the landlord of the bankrupt had a lien for his, rent upon goods on his premises and that out of the proceeds of such' goods the landlord is entitled to payment before clerks’ wages for the three months immediately preceding bankruptcy. The petition raised several questions of fact.

This court, in a proceeding to superintend and revise in matter of law, cannot deal-with controverted questions of fact. The order complained of was based upon an admitted state of facts, and in justice to the District Court we can only review what was before and passed upon by that court.

The referee in bankruptcy in his report says: “It was admitted by all parties that the said claims were for wages earned as clerks by the said parties within three months before the date of the_ commencement of these proceedings; and it was also admitted that the claim of the landlord for rent was for rent of the premises upon which the articles sold-by the trustee'and from the sale of which the fund arising for distribution arose were stored.” This admitted state of facts presented a clear-cut proposition of law for the District Court and that proposition the court passed upon.

Is the claim of the landlord for the rent of the premises in which the bankrupt was conducting his business superior to and entitled to priority over the claims of clerks for salary for the three months- immediately preceding bankruptcy? The statutes of Virginia (Code, §§ 2791 and 2792) give the landlord a specific lien upon any goods upon the leased premises for rent. Even against lien creditors the landlord has his lien for rent for not exceeding one year.

Chief Justice Chase, in construing the statutes of Virginia, just referred to, said: “We cannot doubt that this statute creates a lien in favor of the landlord and a lien of high and peculiar character. We have no concern with the policy of this legislation. It is upon the statute books and the lien so created must be respected and enforced.

Would it not be trifling with the plain sense of words to say thát there is a lien under the trust deed and a lien under the execution, but the claim which by law is made superior to either is no lien?” The bankruptcy law does not undertake to displace or invalidate bona fide liens upon the property of the bankrupt. It declares null and void liens that were given or accepted in fraud of the bankruptcy law, but all liens given or accepted in good faith and not in contemplation of bankruptcy nor in fraud of the bankruptcy act are entitled to recognition and. payment in accordance with the law creating them.

Section 64b of the Bankrupt Act (Act July 1, 1898, c. 541, 30 Stat. 563 [Comp. St. 1913, § 9648]) which provides for the order of distribution of bankrupt’s funds has no reference whatever to lien debts. It has reference to the distribution of the funds not subject to lien among non-lien creditors. If, for instance, there is a tract of land with mortgage or deed of trust on it, and such land is sold for an amount in excess of the lien debt, the lien debt is paid out of the proceeds, and the balance is in the hands of the trustee for distribution among nonlien creditors under

section 64b. The case most strongly relied upon is Guarantee Title & Trust Co. v. Title Guaranty & Trust Co., 224 U. S. 152, 32 Sup. Ct. 457, 56 L. Ed. 706. That case holds that the United States except for taxes due had not in the enactment of the bankruptcy law exercised its sovereign right of providing a preference for its own claims agáinst tire bankrupt. It is conceded that tire government has such a right and frequently exercises it. In the case just referred to the court held that the government had, except as to taxes, put itsglf in the plight of an ordinary unsecured creditor and under

section 64b was postponed till certain claims, wages among others, were paid. The order of the ¡District Court complained of is approved and affirmed. Affirmed.