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necessary to advert to a contention made by the Government in argument, that the true meaning of the act of 1898 is shown by the administrative construction placed upon the act of July 1, 1862, levying legacy taxes, 12 Stat. 432, 485, of which in effect the act of 1898 was a reproduction. It is undoubtedly true that both under the act of 1862 and the act of June 30, 1864, 13 Stat. 223, 285, there was an administrative construction by which vested interests, although unaccompanied with the right of immediate possession or enjoyment, were treated as at once taxable. Without entering into details on the subject, we content ourselves with saying that it is also true that the correctness of that construction was in effect repudiated by legislative action (act of July 13, 1866, 14 Stat. 98, 140), and was, moreover, in substance, treated as unsound by the reasoning of the opinion in Clapp v. Mason, 94 U. S. 589.

Thus, by legislative action and judicial interpretation, it came to pass that the acts of 1862 and 1864 signified exactly what we now construe the act of 1898 to mean. It was doubtless this concordance of legislative action and judicial interpretation concerning the earlier acts which caused the administrative department of the Government, when the act of 1898 was adopted, to interpret that, act, not as the acts of 1862 and 1864 had been originally erroneously interpreted in administration, but in accord with the subsequent legislative and judicial construction which had been placed upon the language of those acts, and which language in effect was repeated in the act of 1898.

Concluding, as we do, that there was no authority under the act of 1898 for taxing the interest of Alfred G. Vanderbilt, given him by the residuary clause of the will, conditioned on his attaining the ages of thirty and thirty-five years, respectively, it is unnecessary to determine whether such interest was technically a vested remainder, as claimed by counsel for the Government. In passing, however, we remark that in a case recently decided by the Court of Appeals of New York, Matter of Tracy, 179 N. Y. 501, it was declared

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that such interest was a contingent and not a vested remainder.

Coming to apply the construction which we have given the statute to the solution of the questions propounded by the Court of Appeals, it follows that the first, second and fourth questions are unnecessary to be answered, and the third question should be answered in the negative.

And it is so ordered.

WESTERN TIE AND TIMBER COMPANY v. BROWN.

APPEAL FROM THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH

CIRCUIT.

No. 232. Argued January 5, 1905.-Decided February 20, 1905.

The bankrupt was largely indebted to a corporation whose laborers purchased supplies from him; periodically he rendered the corporation a statement of amounts due from its laborers which it deducted from their wages and remitted to him in a lump sum. Prior to, and within four months of, the filing of the petition, the corporation several times deducted from its pay-roll, amounts aggregating over $2,000, so due by its laborers but did not pay them over, and on filing its claim it embodied as an integral part thereof the amounts so deducted and retained as a proper credit or offset. The Circuit Court of Appeals found that the corporation retained the amounts with the knowledge of the bankrupt's insolvency and with the intention to secure a preference to that extent thereby, but that the bankrupt had no such intention, and ordered that the entire claim be expunged unless the corporation paid the amount so retained to the trustee. On appeal objections were taken to the jurisdiction of this court. Held: that

As the claim to set-off is controlled by and is necessarily based on the provisions of 68 of the Bankrupt Act and its construction is necessarily involved, and the question is one which might have been taken to this court on appeal or writ of error from the highest court of a State, this court has jurisdiction of the appeal.

Under the facts as found below the deductions from pay-roll did not give rise to a voidable preference nor was the corporation entitled to credit them as a set-off as they were not mutual debts and credits within the set-off clause of the bankrupt act, but were collections made independ

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ently of other transactions and as trustee for the bankrupt. The corporation was entitled to prove its gross debt with the alleged set-off eliminated and was a debtor to the bankrupt for the amount of such deductions, and the court below has power to protect the bankrupt's estate in respect to dividends to the corporation in case it should not discharge its obligations.

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 and 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. Rep. 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 and 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

Argument for Appellant.

196 U.S.

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.

"7. After the company had retained several hundred dollars of the amount due Harrison for the supplies, it advanced to him $75 under a new and further credit."

An appeal to this court was allowed by the presiding circuit judge of the Circuit Court of Appeals.

Mr. Joseph Wheless, Mr. George M. Block, Mr. F. H. Sullivan and Mr. Charles Erd, for appellant.

This court has jurisdiction of this appeal upon the finding of facts and conclusions of law below. Act of 1898, § 25b; General Orders in Bankruptcy, XXXVI; Pirie v. Chicago Title & Trust Co., 182 U. S. 438; New York County Bank v. Massey, 192 U. S. 138.

The bankrupt had no intention to prefer appellant, and without such intention on his part there could be no preference

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arising from his sale of goods to appellant's employés. Act of 1898, § 57g, as amended February 5, 1903, and 60b; Act of 1841, §2; Act of 1867, Rev. Stat. §§5084, 5128; Buckingham v. McLean, 13 How. 169; Wilson v. City Bank, 17 Wall. 487; Clark v. Iselin, 21 Wall. 375; Barbour v. Priest, 103 U. S. 293; Rice v. Grafton Mills, 117 Massachusetts, 228.

The sale of the supplies here in question, by the bankrupt, resulted in an indebtedness from appellant to him, was not payment of, nor security for, appellant's demand, and hence was not a preference, but a case of mutual debts to be set off, the one against the other. Opinion of Circuit Court of Appeals in this case; Hendrick v. Lindsay, 93 U. S. 149; Hecht v. Caughron, 46 Arkansas, 132; Century Digest vol. II, tit. Contracts, § 798; Act of 1898, § 1, def. 25 and 68; New York County Bank v. Massey, supra.

Mr. John M. Moore, Mr. C. F. Henderson, Mr. H. L. Ponder, Mr. M. M. Stuckey and Mr. S. M. Stuckey, for appellee.

This court does not have jurisdiction of this appeal. Hutchinson v. Otis, 123 Fed. Rep. 14; Denver National Bank v. Klug, 186 U. S. 202; Holden v. Stratton, 191 U. S. 115.

An intention on the part of the bankrupt to give a preference by means of a transfer he makes is not indispensible to the existence of a voidable preference. Act of 1898, §§ 57g, 60a, 606; Ch. 487, §§ 12, 13; Collier on Bankruptcy, 4th ed., pp. 387, 537; Swarts v. Fourth National Bank, 117 Fed. Rep. 1, S. C., 54 C. C. A. 387; Opinion of Circuit Court of Appeals in this case.

The sale of supplies by bankrupt to the laborers and the appellant deducting the amount of them from the pay rolls and retaining same did not create an indebtedness from appellant to bankrupt, but was a voidable transfer of bankrupt's property and a preference, and was not a case of mutual debts to be set off the one against the other. Act of 1898, § 1 (def. No. 25), 60a, 606 and 68; In re Christainsen, 101 Fed. Rep. 802; In re Ryan, 105 Fed. Rep. 760; Libbey v. Hopkins, 104 U. S.

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