BRUNING v. UNITED STATES

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Argument of Ernest R. Mortenson

Chief Justice Earl Warren: Number 423, Paul F. Bruning, Petitioner, versus United States.

Mr. Mortenson.

Mr. Ernest R. Mortenson: Mr. Chief Justice, Associate Justices, may it please the Court.

The matter before us started out as a tax case and then got involved in bankruptcy but it ends up here as a matter involving interest.

The issue is whether or not the Government on a tax deficiency can collect interest after a petition in bankruptcy is filed from the debtor's assets.

This is not a case in which the Government seeks interest on a tax deficiency from the bankruptcy estate.

The Government concedes that it cannot do that because this Court, in City of New York versus Saper, has held that the Government may not collect interest on a tax deficiency accruing after bankruptcy out of the bankruptcy estate.

The case arose in this manner.

Bruning, the petitioner, was doing business as Bruning Construction Company.

During the fourth quarter of 1951, he became in arrears in withholding tax and social security tax in the approximate amount of $4000.

A delinquent tax return was filed and the Government assessed the tax in 1952.

It issued a notice and demand in a formal manner in 1952.

In June of 1953, Bruning filed a voluntary petition in bankruptcy.

Three years later, there were assets in the amount of $700 applied to this tax deficiency.

There was no interest applied because the Saper case, decided by this Court, was in effect at that time.

Since, as I shall explain later, taxes have a priority, the $700 applied to the tax deficiency reduced that deficiency but the general creditors received no dividend.

Bruning, on his 1953 and 1954 income tax returns had overpaid his tax.

He had overpaid his tax on both returns.

And he was entitled to a refund of about $3700.

He filed the claim and the claim was allowed.

The Government then applied this $3700 refund against the withholding taxes and social security taxes that were owed for the fourth quarter of 1951.

There was no notice and demand filed.

The Government simply applied the money.

When the Government did that, it took $795 and applied it to interest on the $3700 deficiency accruing from the date of the bankruptcy in 1953 until the payment or the credit in 1958.

We do not have in question today interest on prebankruptcy tax deficiency.

Both the taxpayer, petitioner, and the Government concede that the Government is entitled to interest on a tax deficiency up to the filing of the petition in bankruptcy.

Now, I want to point out at this time the anomalous situation that the taxpayer is in.

Suppose the tax deficiency is a $100,000 and that is not too unusual in his bankruptcy cases.

In the Mighell case, which is in conflict with the Bruning case below, the tax deficiency was $78,000.

But if the tax is $100,000, in three years at 6% interest, the interest would be $18,000.

Now, the Government, because of its priority, collects the $100,000 but if the payment -- and there's $18,000 available for payment, it cannot be used.

That $18,000 is available to general creditors but the Government can't take it up and use it for interest because this Court decided in the Saper case that it could not be done.

So the taxpayer has no way of wiping out this $18,000 in interest on the tax deficiency and the Government can and will pursue that as long as he lives.

They will pursue it and try to take it out of his after bankruptcy acquired assets.

Now, the Government is using two inconsistent arguments in trying to get at these after acquired assets of the debtor.

Section 17 of the Bankruptcy Code provides that taxes are not discharge -- that taxes are not dischargeable.

They are provable debts but they are not dischargeable debts.

As distinguished from a general creditor who has a provable debt but to the extent that it is not paid out of -- out of the assets of the bankruptcy estate, it is wiped out.

The rest of it is discharged.

Not so with taxes because under the Bankruptcy Code, as I said before, taxes are specifically accepted from discharge.

Now, we have another part of the Bankruptcy Code which comes into play, as I stated before, the Government took $700 out of the bankrupt's assets to pay the deficiency.

That was because the Government, under Section 64 of the Bankruptcy Code, has priority.

It gets paid before the general creditors get paid.

Now, that brings to the inconsistency -- that brings us to the inconsistency I mentioned before.

The Government, in trying to save its interest, argues first that it's not approvable debt dischargeable under Section 17 because it says, the interest has not become due at any time during the proceeding.

And there's no way of estimating whether it ever will be owing or in what amounts.

But then, it later argues, quoting from page 19 of the Government brief, "To the extent that interest is provable on a tax liability, it is provable as part of a single provable debt for taxes".

But provable debts for taxes are specifically accepted from discharge by Section 17.

This is the reason prepetition interest is concededly not discharged in the present case.

The same rationale would -- would control post-petition interest if it too were provable.

Now, why does the Government argue this?

First, it says interest is not taxes and then it says interest is taxes.

Why does it say interest is taxes?

Because if it is taxes, then it is not dischargeable, and there's considerable argument here to the effect that interest is collected like taxes, it's treated like taxes, it's assimilated in the tax but the fact is that interest is not tax, it's never has been and never will be.

And as far as being determinable, at any time, you just take your 6% and apply it to the principle and there you have it.

But the -- the principle thing here is that under the decision of the Saper case, we believe that this issue was really decided.

The broad language of the case, if you'll permit me to read it because I believe it's important, covers this case.

The Court stated, and this, Mr. Justice Jackson wrote the opinion, more than 40 years ago.

Mr. Justice Holmes wrote for the Court that the rules stopping interest at bankruptcy had been -- been followed for more than a century and a half.

He said the rule was not a matter of legislative command or statutory construction but rather a fundamental principle of the English bankruptcy system that we copied, citing Sexton versus Dreyfus which was -- which was -- the opinion of which was written by Mr. Justice Holmes.

Now, there is no logical reason for cutting off interest as far as the bankruptcy estate is concerned and then taking it up as far as the debtor's assets are concerned.

The Government already has two advantages.

It has a priority and it has approvable debt that is not dischargeable.

Now, the Government seeks a third advantage.

It wants to pursue the after bankruptcy acquired assets of a debtor and pick up the interest at that point which, if it should have been paid to the Government, ought to come out of the bankruptcy assets.

Justice Arthur J. Goldberg: You're arguing also about the (Inaudible)

Mr. Ernest R. Mortenson: Justice Goldberg, I'm glad you asked that question because, I might have forgotten.

The -- the Government made quite a bit of that by -- by adding cases -- by listing some 90 cases in the appendix.

Now, that matter, as far as I know, has never been brought to this Court.

And those cases -- and the Government very clearly says that interest was almost never discussed in those.

In other words, those cases were just carried through with the -- with the interest on the -- on the liability carried along.

And there hasn't been any real adjudication of that.

And I would say -- I would say the same principle should apply.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ernest R. Mortenson: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ernest R. Mortenson: Yes, Your Honor, the interest should stop when the petition is filed.

Chief Justice Earl Warren: Mr. North -- Mr. Heymann rather.

Argument of Philip B. Heymann

Mr. Philip B. Heymann: Mr. Chief Justice, may it please the Court.

A bankruptcy case is unfortunately almost invariably somewhat complicated, and I'd like to begin by saying two things.

One, as Mr. Justice Goldberg's question suggest, the Government is not claiming anything here for taxes that we don't believe is true of ethics categories of debts that Congress felt were particularly important and therefore, should not be discharged in bankruptcy.

Now, in other words, this case has no special aspect for taxes.

We treat it as a bankruptcy case primarily.

I may now and then go out from this, into saying that there's special reasons in the Internal Revenue Code why the Government should win this case but almost entirely, I'll treat it as a bankruptcy case.

The second thing I'd like to say by way of preliminary is I'd like to emphasize a distinction that Mr. Mortenson made at the beginning of his argument.

There are two sorts of claims which can be relevant which a creditor may have in bankruptcy.

He may have a claim against the assets of the bankrupt which have passed into the hands of the trustee, now, sometimes called as the "bankruptcy estate", and he may have a claim against the debtor.

He started with a claim against the debtor and the heart of our position is he continues to have a claim against the debtor unless the Bankruptcy Act discharges it.

But the distinction between these two types of claim, a claim against the party which is in the hands of the trustee and a claim against the debtor is at the heart of this case.

The Bankruptcy Act, of course, has two primary functions.

One, to muster the assets of the bankrupt, most of the assets, the nonexempt ones, into a pot or fund which should be equitably distributed among the creditors, and two, to discharge the bankrupt from most of his debts.

The effect of these two purposes on creditors is carried out largely by Section 63 and Section 17 of the Bankruptcy Act.

Creditors who are -- who have claims against the party, which are almost all creditors under Section 63, generally can recover only against the pot.

Section 17 says that the liability of the bankrupt for provable claims, that means the claim that can be realized out of the bankruptcy estate, shall be discharged with certain exceptions, limited exceptions.

A handful of creditors received no claim against the bankruptcy estate against the party.

Certain --

Justice Byron R. White: (Inaudible) is not allowable?

Mr. Philip B. Heymann: Oh, there -- there maybe many reasons why debt maybe provable but not allowable.

Justice Byron R. White: Is interest one of them?

Mr. Philip B. Heymann: Interest, I would say, would be one that -- that I -- I -- my contention on one part of this case is that interest during the bankruptcy proceedings is not provable at all.

But I'd -- I'd like to acknowledge, Mr. Justice White, that one possibility, that -- that what interest is in bankruptcy is a much mooted, discussed question.

It's very possible to say that interest is provable, certain interest is provable but not allowable.

Certain interest is certainly not provable.

Justice Byron R. White: Well, we had in the --

Mr. Philip B. Heymann: Your -- if I may borrow from my boss, Mr. Justice White, I'd like to ask your indulgence to let me go on to -- the -- oh, I say -- I was saying that tort creditors are creditors who don't have any claim against the estate.

They don't have provable claims and so these are generally not discharged.

I assume -- no, I didn't find any cases on it that it's taken for granted that all of their claim remains that they can collect interest as well as principle.

But again, I didn't find any cases on that.

There's a third category of creditors who get claims both against -- who -- who may have claims against the estate but whose claims are not discharged by Section 17.

Technically, they're provable under Section 63 but not discharged under Section 17.

Congress has made a policy judgment that these claims are too important to be discharged for one reason or the -- for another.

Their -- this -- the six classes of claims are set out at page 14 of our brief in summary and again at page 26.

Examples, there seem to be two reasons that -- for them.

One is, in some cases, Congress has judged that -- I believe that the creditor needs the money more than the bankrupt.

A support allowance is not discharged.

A wage earner's claim for recent wages is not discharged.

The wage earner's deposit or an employee's deposit to assure that he'll complete the job isn't discharged.

Others are not discharged perhaps because of the conduct of the debtor that lead to the claim will fall in malicious injury to another embezzlement, certain types of fiduciary frauds.

But in any rate, there are six categories of claims of which taxes are one which Congress has said shall not be discharged, although the claimant may have a claim against the pot too.

In other words, as to these six, they can collect from the debtor personally or from the trustee by going into the bankruptcy proceeding.

Now, that's the rather technical but important framework of the case.

The reason it's important are two.

One is, that this Court and the English courts, but let me restrict it to this Court, have always exercised a rather considerable common law power in deciding how the pie or how the pot, which is in the hands of the trustee, should be divided.

This is a matter that is traditionally been handed in the -- handled in the common law way in bankruptcy.

There -- there are very few provisions dealing with it in the Bankruptcy Act.

On the other hand, discharging a debtor from his liability to a creditor is an act that only the bankruptcy statute has in general have done.

This is the first importance.

The second importance of the matter is that as a common law rule, this Court has held, following English precedents that go back to 1740, that the -- some -- I'd like to -- I'd like to make the predicate of this sentence somewhat different.

This Court has followed English precedents going back to 1740 in setting up a rule for liquidating and distributing the assets in the hands of the trustee.

This rule which has been one of administrative conveniences, it's been repeatedly described as that by this Court, is a rule that says, "In valuing the claims against the bankruptcy estate, the claim should be valued as of the date of bankruptcy", that is with interest only up to the -- the date of bankruptcy.

Now, it's perhaps worthwhile pointing out the administrative inconvenience that would result if anything else were done.

The referee declares periodic dividends.

If interests were to be valued, if interests at different rates were to be computed all the way up through -- through the period -- to the period of each dividend, different creditors would get different shares of every distribution.

It would be, in short, a complete mess.

This, plus the equitable argument that creditor should not benefit or be harmed because of their rate of interest during the period, that the assets are in the hands of a court official, has caused the Court to say that as a rule of liquidation where the estate is insolvent, no interest shall be -- interest shall only be computed up to the date of bankruptcy.

The claim, in other words, should be valued as of the date of bankruptcy.

My -- in -- in the Saper case, New York versus Saper, this Court held for the first time that this rule for liquidation of the assets in the hands of the trustee applied to the United States.

There is no discussion in the Saper case of anything else except the applicability of the general rule that goes back to the Justice Holmes' opinion in Sexton versus Dreyfus and far beyond that which says that in -- that this is a rule of liquidation.

It was just applied to the United States in Saper versus New York.

I want to add only one other thing about to get rid of the Saper case and get rid of the line of cases that deal with interest against the bankruptcy estate and that is that an -- an important exception, which is as old as the rule, proves that the rule denying interest after bankruptcy against the trustee was never intended to protect the debtor.

From the beginning of the rule from 1740, if there any -- if the estate turns out to be solvent, the creditors will enjoy the benefit in the form of payment of interest.

The debtor will not get it back.

There are more over other instances where interest runs after bankruptcy.

In fact, there's only one case where interest doesn't run after bankruptcy and that's where the estate is insolvent.

These reasons, the reasons that justify the Saper rule and the prior cases obviously have little or no application.

I -- I would say no application to a case such as this involving a claim against the debtor personally.

There's no administrative inconvenience.

There is no harm to other creditors.

And in general, the -- there's no reason to think that the Saper principle applies.

This leaves the case in the posture of going to the statute.

I had begun by saying that of the two types of claims, claims against the estate and claims against the debtor, traditionally, the Court has exercised great common law powers in claims against the estate.

It is -- it has turned to the statute in claims against the debtor in determining discharge.

And since the -- it was just another -- the Saper rule, which I've just discussed, was a rule that applied only as to claims against the trustee.

For this case, which involves a claim against the debtor, we must turn to Section 17.

Section 17 says that six classes of debts will not be discharged.

The primary position that we have argued in our brief is that Section 17 simply cannot operate to discharge interest.

Now, this is a fairly mechanical, technical argument.

Before getting to that, I'd like to argue that every reasonable implication when Congress says that a debt shall be preserved against discharge would be that Congress meant that debts, in all its parts, principle and interest, would continue.

We cited a case in our brief where the debtor was denied of discharge.

The bankrupt was denied of discharge.

The bankruptcy court held and the District Court quickly affirmed that all creditors could receive interest.

If the debt is not discharged, interest presumably is not discharged.

Beyond -- beyond this there are, in fact, positive indications that Congress contemplated interest continuing when the debt was not discharged.

In -- I've printed -- I'm afraid at the very late date, a -- a supplemental appendix in this brief.

It refers to a very particular problem that Congress was dealing with.

It's not controlling of this case.

It's on page 3 of the supplemental appendix.

Congress provided that there would be interest on any amount not paid in bankruptcy running after the date of bankruptcy.

It's on page 3, Section 298 of the 1939 Code.

The provision disappeared when all the interest provisions of 1939 Code, of which there were many, were merged into the single interest provision which you see at the bottom of the page in 1954 Code.

It's perhaps for these reasons, for the reasons of the general assumption that when the debt continues, interest continues.

Interest after all being -- almost always a con -- commitment of the debt, always -- almost always going along with the debt, that the courts, and we have set forth 90 opinions, I think in the -- in the appendix to our brief, have almost universally allowed interest.

Mr. Mortenson is correct in saying, without much discussion, have almost universally allowed interest on an undischarged debt.

The courts have said, which is our position here, that if the statute does not discharge the debt, it remains unaffected by the Bankruptcy Act.

This result is moreover confirmed, and here I'm afraid I must again become technical, by the fact that Section 17 will not operate to discharge much of the interest in this case, and we will contend, it doesn't operate to discharge any of it.

Mr. Justice White asked about the -- whether interest might not be provable but not allowable.

It's that -- it's the distinction between provable and allowable that is the technical argument as to interest in this case.

Section 17 discharges only provable debts.

If interest or any portion of interest is not provable, it's not discharged.

I'd like to direct the attention first to the interest that arises after the bankruptcy proceeding and is completed and all the funds in the hands of the trustees have been paid out of the trustee.

It appears clear that this interest simply cannot be provable.

It's not a debt that exist at any time during the bankruptcy proceeding.

It's not -- it can't be valued, it can't be estimated in any way.

Even if it could otherwise be proved, there's a specific provision of the Bankruptcy Act which says that it shall be treated, that such debts which can't be valued during the bankruptcy proceeding should be treated as nonprovable for purpose of -- for purposes of preserving them against discharge.

Now, as to that interest, I don't think there's any question but within traditional categories it's not provable.

A harder question in the technical -- in the technical area of whether it's a provable debt or not is presented by the interest that arises during the proceeding.

Now, the Saper case carefully says throughout that interest should not be allowed on a tax claim after the date of the petition.

The Saper case never says specifically it's not a provable claim.

Now, we believe that the -- the reasons Saper gave established that it's not a provable claim.

Saper said two things.

One, it turned back to the historic rule which says that provable claims must be determined as of the date of bankruptcy.

And it -- and this was the Sexton rule and it turned to that.

Its -- second of all, looked at the statute which defines provable claims, and it -- this Section 63, there are six or eight categories of provable claims.

Two of these specifically are listed as not including interest.

Saper looked to that and said therefore, interest should not be careful, regarding the word "allowable" on a tax claim.

We believe that meant provable.

Now, I -- I don't mean to suggest that there's no question as to whether interest arising during the proceeding could be considered a provable claim.

I suppose there -- I suppose, perhaps, it could be considered a provable claim.

I don't believe that interest arising after the proceeding could be considered a provable claim.

Justice Byron R. White: (Inaudible)

Mr. Philip B. Heymann: Yes.

Excuse me, sir.

Justice Byron R. White: (Inaudible)

Mr. Philip B. Heymann: Yes, sir.

Justice Byron R. White: (Inaudible) proof and allowance of the interest?

Mr. Philip B. Heymann: I -- (Inaudible) --

Justice Byron R. White: I mean, you got this particular time to file your claim and approve it.

I suppose you're going to say what the interest is up to the date you filed your claim, aren't you?

Mr. Philip B. Heymann: Mr. Justice White, as a practical matter, I don't think there is proof and allowance in those cases.

The leading case which says that interest is allowable out of the surplus is an early Circuit Court case.

Justice Byron R. White: And so should they -- in -- in those cases, could they refer to the state law and -- and make them a matter of general state law rather than a matter of contract?

Mr. Philip B. Heymann: I think they make it a matter of general equitable law under the Bankruptcy Act.

Mr. Justice Black discussed the source of the law at some length in the Vanston Bondholders case.

I think they treat this as a matter of general equities.

When the estate is solvent, who should -- who is more equitably entitled to the money, the debtor or the creditor, who has not received his interest and the answer has been the creditor who has not received his interest.

Justice Byron R. White: Well, can the Government stay out of the bankruptcy court prior to the claim?

Mr. Philip B. Heymann: We believe it can, Justice White.

Justice Byron R. White: I thought --

Mr. Philip B. Heymann: (Inaudible) -- there are -- there are two -- there are two courts.

The Second Circuit and Ninth Circuit have ruled squarely on it and have held squarely in our favor.

We believe that we could forget about the bankruptcy proceeding, that all of the assets go to the other creditors, move against the debtor and collect the full amount of our debt including interest.

Now, the -- this isn't essential to this case that we maintain this position but this is our position.

I -- there's only one more point I have on the technical argument then I'll be happy to leave that.

Mr. Mortenson referred to what he called an inconsistency in our brief.

We do argue that to the extent that taxes -- to the extent that interest is provable, it's provable as a part of the claim that it's not discharged.

In other words, if we're wrong in saying that Saper says -- if we're wrong in our construction of Saper, we believe that Saper says that interest is not provable and therefore not dischargeable.

But if we're wrong about that, and some interest is provable, interest arising during the pendency of the proceeding, not afterwards but during the pendency of it, then this would be provable as part of the claim.

The -- I was going to say the leading earlier cases, Johnson against Norris which says just this.

This is what Judge Frank said in a dissent in Sword Line, "No separate proof would be required, would be all part of the same claim."

And for that reason, it wouldn't be discharged.

This would be true of all six categories.

It would be particularly true of tax claims where the Internal Revenue Code says that interest is always part of the tax.

That's one of the few places or the part from my principle of discussing on the bankruptcy law.

I'd like to move on from -- what I've tried to say so far is that the Saper case has nothing to do with claims against debtors.

It only has to do with claims against the estate, it's a liquidation rule.

As Collier says very clearly before distributing the assets in the hands of the trustee, I've tried to say it on its face, Section 17 would seem to leave the whole debt intact, principal as well as interest and that construed technically half of the interest to the most important part of the interest.

The interest that arises after the end of the bankruptcy proceeding can't be discharged by Section 17 and Congress recognizes this in the statute in the Internal Revenue Code.

I think in fairness and perhaps to guard myself, I'd like to say a word about the equities of the situation.

On the surface, it appears that it's highly inequitable to allow interest to be collected after bankruptcy against the debtor.

Now, to that, we have three responses.

One is, the Government is one of six classes of claimants in this case.

I don't believe there's anyway that the Government can be separated off from its five neighbors.

Many of those classes or several of those classes were apparently chosen because Congress believed that the creditor deserved the interest more than the bankrupt debtor, needed the interest more.

A leading example would be a case of a wife with a child who is owed a support payment.

Now, the -- her husband goes through bankruptcy.

Congress determined that she needed the support payment more than the bankrupt needed the discharge.

If, because, she didn't have the support payment, she had to borrow money and pay interest.

Congress would also want the husband to be liable for interest on the amount on the -- on the length of time he didn't pay it back.

This shouldn't be her cost.

It should be the husband's cost.

When Congress decided that she needed it more, Congress presumably decided that she needed the interest more, too.

She's doing without money.

In the tax area, which I don't think can be separated off, even there, the equities are not 100% clear.

In this case, Mr. Bruning collected interest from us for the very period that he's objecting to pay an interest.

Now, I just mean to give this as an example.

I don't think this is controlling in this case, an example of the fact that the equities are never clear.

As I calculate it, this is -- the interest is referred to in the record, as I calculate it, the interest is very close to the same amount going both ways.

Now, this -- if there's any equity here, it's not, in this particular case if there's any equity, it's not in Mr. Bruning's favor.

Finally on the equities, I want to say that it's very questionable policy to deny a creditor the price he gets for forbearance in collecting his debt.

Now, anyone of the six classes of creditors in this case, can collect against the exempt assets of the debtor and can collect against anything the debtor gets immediately.

The Government, in particular, has very broad collection powers.

I think the Government has heart and would not collect against the home or any other exempt assets of the debtor.

But the Government could and forbears, perhaps in part, because it receives interest for its forbearance.

It's paid for its forbearance and that's what -- that's what interest is.

It's very questionable policy to force creditors to collect immediately or as soon as possible or to encourage them to rather than to forbear.

In the very few minutes I have remaining, I'd like only to say -- perhaps a good way of saying it is explaining -- is to explain why I set forth the first part of the supplemental appendix.

Mr. Mortenson hasn't referred here to a provision of the 1954 Internal Revenue Code which says that the United States can collect interest on any -- on a portion of a tax which is allowed but not paid but he relied on it in his brief.

I set forth the supplemental appendix because it -- this Act came in in 1926.

The function of the Act was to permit the bankruptcy court to serve in place of what is now the tax court, the board -- Board of Tax Appeals.

The Government was permitted, instead of waiting the length of time it would have to in an income tax case, to go directly -- assist the tax directly in going to the bankruptcy court and litigate it.

The bankruptcy court would decide whether it was valid or invalid, that is whether it was allowed, to be allowed or not to be allowed.

The Government was given in exchange by provision (b) which is now the provision that Mr. Mortenson -- the predecessor of provision Mr. Mortenson relies on, the statute of limitations of six years after the bankruptcy proceeding was over, after it was determined whether the Government was entitled to its tax.

The Government was also given an interest on any amount that was then determined to be due and not paid at that time.

Nothing could be clearer than this interest provision in rebutting any contention that the statute was intended to cut off interest.

Finally, in the Committee Reports on that very tax bill on which it came in, the House Committee made entirely clear that it believed interest was owing not only for the period after the end of the bankruptcy proceeding but also for the pendency of the bankruptcy proceeding.

I've set that forth in the little Appendix 2.

It says that there has to be a special rate of 6% instead of 12% during the pendency of the proceeding.

Thank you.

Rebuttal of Ernest R. Mortenson

Mr. Ernest R. Mortenson: I would take just a -- just a few minute.

As far as the solvent estate is concerned, I don't think -- I don't think how it handled proves anything because if there's enough money to go around, the whole thing is treated as if there weren't any bankruptcy in the first place.

But the argument about different rates of interest and inequity among creditors doesn't seem to have any application at all to a government claim for taxes because the Government has a fourth priority.

The Government comes in before any general creditor does.

It has 6% interest.

If it's taken out, we don't have any interest problem as far as the general creditors are concerned.

But I just want to call the attention to one more thing.

The sections of the Code, set out in the appendix by the Government, do not apply because they deal with a situation where there has been a notice and demand.

In this case, there was no notice and demand, and that's a technical term and it's a prerequisite to a collection of taxes except where you get a credit.

We -- in this case, there was a credit from 1953 and 1954 taxes on a 1951 taxes that it don't apply.

But here's something that I consider very important.

The first section set out from the 1926 Code is Section 282 (a) and calls for interest.

That is carried over into the next section given in the Government appendix to Section 298.

And you will note, it calls for interest at the rate of 6%.

Now, between 1939 and the 1954 Code, this Court decided Saper.

And after Saper was decided, in the 1954 Code, as you will find in the petitioner's brief, Section 6 at page 29, petitioner's brief, Section 6873, unpaid claims, it does not call for interest.

Under the 1939 Code, Section 298, if you read it you'll see it calls for interest.

After the Saper case, Section 6873 (a) does not call for interest.

The inference is that Congress codified the Saper case.

Thank you very much.