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[4] A third objection is made that there the priority of the United States in the colwas no sufficient evidence that the insured lection of taxes in bankruptcy proceedings. In 1921, on an involuntary petition filed in the Southern District of New York, Finkelstein Brothers, a partnership, and the individual partners thereof were adjudged bankrupts. In 1923 the Collector of Internal

was insolvent. This was a *question of fact under the proceedings which were instituted by execution and what followed. The state courts have found it to exist and it is not for us to question their findings.

The judgment is affirmed.

(267 U. S. 408)

*410

*Revenue filed proof of claim for an income tax assessed against Abraham Finkelstein, one of the partners, for the year 1919. It is stipulated that the income on which this

UNITED STATES et al. v. KAUFMAN et al. tax was based "was derived from the busi

SAME v. COXE. (Argued Jan. 13, 1925. Decided March 2, 1925.)

Nos. 515, 516.

1. Internal revenue 7-Income tax assessed

against partner is individual tax, though income was derived from partnership business. Income tax assessed against partner under Revenue Act 1918, 40 Stat. 1057, c. 18, 218(a), was an individual tax, though income on which it was based was derived from partnership business. 2. Bankruptcy

346-United States held not entitled to priority of payment out of assets of bankrupt partnership for tax due from individual partner.

The United States is not entitled under Rev. St. § 3466, and section 3186 as amended by Act March 4, 1913, c. 166, 37 Stat. 1016, and section 3466, to priority of payment, out of assets of bankrupt partnership, of income tax due from individual partner, under Revenue Act 1918, 40 Stat. 1057, c. 18, § 218(a), but is entitled only to payment from share of such partner, if any, in the surplus remaining after the payment of the partnership debts, in view of Bankruptcy Act, § 64(a).

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ness of the co-partnership." No individual assets of Finkelstein had come into the hands of the trustee, and the partnership assets were insufficient to yield any surplus after the payment of the partnership debts. The Collector claimed that the tax against Finkelstein should be paid out of the partnership assets prior to the partnership debts. The referee denied this claim, and ordered that the partnership assets first be applied to the payment of the partnership debts. This order was affirmed by the District Judge.

In 1923 an involuntary petition in bankruptcy was filed in the same court against Jones & Baker, a partnership. A receiver was appointed, who collected and held the partnership assets. Before an adjudication of bankruptcy the partnership offered a composition to its creditors at less than the full amount of their claims. This was confirmed by the District Judge. Before the partnership assets were distributed, the Collector of Internal Revenue filed proofs of claims against the individual partners for income taxes assessed against them for the years 1918, 1919 and 1920. It does not appear that the income on which these taxes were based was derived from the business of the partnership. The Collector claimed that these taxes should be paid out of the partnership assets prior to the payments to the partnership creditors. The District Judge denied this claim of priority.

ed.

On appeals to the Circuit Court of Appeals both orders of the District Court were affirm298 F. 11. Writs of certiorari were granted by this court. 266 U. S. 596, 45 S. Ct. 92, 69 L. Ed.

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[1] 1. These taxes were assessed against the individual partners and due from them to They were neither asthe United States. sessed against, nor due from, the partner

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*ships. The tax assessed against Finkelstein was none the less an individual tax because the income on which it was based was derived from partnership business. The Revenue Act of 1918, 40 Stat. 1057, c. 18, § 218(a), being Comp. St. Ann. Supp. 1919, § 6336%i,

Mr. Justice SANFORD delivered the opin- under which it was assessed, specifically proion of the Court.

vided that "individuals carrying on business in partnership shall be liable for income tax only in their individual capacity." The

These two cases were heard together in the Circuit Court of Appeals. They involve a single question relating to the extent of provision that in computing the income of

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(45 S.Ct.)

each partner there should be included his distributive share of the income of the partnership, whether distributed or not, did not change the nature of the tax or make it one against the partnership.

[2] 2. The Bankruptcy Act (Comp. St. 88 9585-9656) gives the United States no priority of payment out of partnership assets for a tax due from an individual partner. Section 64(a) being Comp. St. § 9648, which provides that "the court shall order the trustee to pay all taxes legally due and owing by the bankrupt to the United States *

in advance of the payment of dividends to creditors," manifestly relates to the payment of the taxes out of the estate of the bankrupt from whom they are "due and owing." Where the bankrupt owing the tax is a member of a partnership, it gives the United States no priority of payment out of the partnership estate.

the surplus of the assets of a partnership of which he is a member. This follows from the decision in United States v. Hack, 8 Pet. 271, 275, 8 L. Ed. 941, a case arising under the Act of March 2, 1799,1 providing that if the maker of any bond given to the United States for the payment of duties became insolvent or committed an act of bankruptcy, the debt due the United States on such bond should be first satisfied. The maker of such a bond had become insolvent. He had no individual property, and the assets of an insolvent partnership of which he was a member, were insufficient to pay the partnership creditors. It was held, on these facts, that the United States was not entitled to priority of satisfaction out of the partnership assets, since the Act merely

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gave it priority of payment out of the property of its debtor, and the rule was too well The Bankruptcy Act clearly recognizes settled to be questioned, that his interest the separate entity of the partnership for in the partnership property was his share the purpose of applying the long-established in the surplus after the partnership debts rule as to the prior claim of partnership were paid, and that such surplus only was debts on partnership assets and of individ- liable for his separate debts. To the same ual debts on individual assets, and "estab-effect is United States v. Evans, Crabbe, 60, lishes on a firm basis the respettive equities 25 Fed. Cas. 1033, a case arising under the of the individual and firm creditors." Francis v. McNeal, 228 U. S. 695, 700, 33 S. Ct. 701, 57 L. Ed. 1029, L. R. A. 1915E, 706; Schall v. Camors, 251 U. S. 239, 254, 40 S. Ct. 135, 64 L. Ed. 247. Section 5f (section 9589) provides that:

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The intention of Congress that the partnership assets shall be first applied to the satisfaction of the partnership debts, and that only the interests of the partners in the surplus remaining after the payment of partnership debts shall be applied in satisfaction of their individual debts, is plain.

It is urged, however, on the authority of United States v. Herron, 20 Wall. 251, 255, 22 L. Ed. 275, and other cases, that as the United States is not named in this section of the Bankruptcy Act it is not bound by the rule for marshaling assets thereby established. But, however this may be, it is clear that, independently of the provisions of this section, the priority of payment of taxes given the United States by section 64(a) extends only to the bankrupt's share in

same Act. These decisions are directly applicable to section 3466 of the Revised Statutes, being Comp. St. § 6372-on which the United States relies-which incorporated the provisions of the Act of 1799 and similar Acts of August 4, 1790 (1 Stat. 169) and March 3, 1797 (1 Stat. 512), in the general provision that whenever any person indebted to the United States is insolvent, the debts due to the United States shall be first satisfied, and that this priority shall extend to cases in which an act of bankruptcy is committed. And in so far as this section, under the rule stated in Guarantee Co. v. Title Guaranty Co., 224 U. S. 152, 32 S. Ct. 457, 56 L. Ed. 706, may now be applicable in bankruptcy proceedings, it must be held that any priority of payment to which the United States is entitled for a debt due it from an individual partner, extends only to his share in the surplus of the partnership assets.

There is no conflict between the decisions in these cases and in Lewis v. United States, 92 U. S. 618, 624, 23 L. Ed. 513, and In re Strassburger, 4 Woods, 557, 23 Fed. Cas. 224, on which the United States relies. In the Lewis Case the members of the firm of Jay Cooke & Co. had been adjudicated bankrupts, and a trustee had been appointed who held their individual assets and those of the firm as well. This firm was not indebted to the United States, but another firm, of which several of the bankrupts were members, was so indebted. On these facts it was held that the bankrupt members of such other firm, as to its indebtedness, stood to the United States in the relation of "individual debtors,"

13 Laws, U. S. 136, 197; 1 Stat. 627, 676, c. 22, § 65 (Comp. St. § 6372).

and that under the priority given to debts due the United States by section 3466 of the

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either of the present cases, in which no such facts appear.

The decree of the Circuit Court of Appeals is Affirmed.

(267 U. S. 307)

Public Works of Washington,

(Argued Nov. 25, 1924. Decided March 2,

1. Commerce

1925.) No. 345.

62-State statute, prohibiting operation over state highways of bus between point in state and point in other state, held violation of commerce clause.

Revised Statutes, recognized and reaffirmed in section 28 of the Bankruptcy Act of 1867 (14 Stat. 530), it was entitled, as a creditor of these individual bankrupts, to priority of payment out of their individual estates. BUCK v. KUYKENDALL, State Director of There was, however, no suggestion that the United States as a creditor of these individual bankrupts was entitled to priority of satisfaction out of the partnership assets of Jay Cooke & Co. In the Strassburger Case, Mr. Justice Bradley, sitting at circuit, while explicitly recognizing the rule that where one member of a firm is indebted to the United States, its priority extends only to his interest in the surplus of the partnership assets, held that as the United States had a judgment against both members of the firm, it was entitled to priority of payment thereof out of their joint property in preference to their joint creditors. Whether a correct result was reached we need not inquire. And if to any extent the reasoning in this case may be in conflict with that in the Hack Case, it cannot be approved.

Nor is the contention of the United States strengthened by the provision in section 3186 of the Revised Statutes, as amended by the Act of March 4, 1913, c. 166, 37 Stat. 1016 (Comp. St. § 5908), that the amount due the United States from any person as a tax shall be a lien on all property and rights to property belonging to such person. To whatever extent this statute may be now applicable in a bankruptcy proceeding, under its very terms the lien includes only the property of the person owing the tax; and in the case of a partner owing an individual tax, it extends only to his interest in the surplus of the partnership property.

It results that in proceedings in bankruptcy against a partnership the partnership assets must be first applied to the payment of the partnership debts, and that the United States is not entitled to any priority of payment out of such assets for a tax due it from an individual partner, except to the extent of the share of such partner, if any, in the surplus remaining after the payment of the partnership debts.

415

Laws Wash. 1921, p. 341, § 4, prohibiting use of state highways by busses transporting passengers for hire over regular routes without certificate from director of public works, and prohibiting issuance of certificate where territory is adequately served, held violative of commerce clause of the United States Constitution, in so far as it prohibited operation of bus between point in state and point in other state, for which certificate had been denied because of adequacy of existing facilities over highways constructed with federal aid.

2. Constitutional law ~43 (2)—One cannot assail and rely on statute in same proceeding. One cannot in same proceeding both assail a statute and rely on it.

3. Constitutional law ~43 (2) One who avails himself of the benefits conferred by a statute cannot deny its validity.

One who avails himself of the benefits conferred by a statute cannot deny its validity. 4. Constitutional law 43 (2)-One who applied for certificate of public convenience for operation of bus under statute, but was denied certificate, was not estopped to question constitutionality of statute.

One who applied to director of public works for certificate of public convenience permitting him to operate bus, under Laws Wash. 1921, P. 341, § 4, but was denied certificate, was not estopped to attack constitutionality of such statute.

Mr. Justice McReynolds dissenting.

Appeal from the District Court of the United States for the Western District of Washington.

Suit by by A. J. Buck against E. V. Kuykendall, Director of Public Works of the State of Washington. Motion for preliminary injunction was denied by the District Court (295 F. 197, 203), and plaintiff appeals. Reversed.

*3. The United States also relies, independently of the foregoing matters, upon the decision in Re Brezin (D. C.) 297 F. 300, 306, in which it was held that as the individual partners, instead of drawing out their distributive shares of the income of the partnership from year to year, had left a large portion thereof in the partnership business, the United States had a claim in the nature of an equitable lien for the collection of their individual income taxes which it could follow into the partnership property. Whether or not this case was correctly decided on its peculiar facts, it has no application to opinion of the Court.

*308

*Mr. Merrill Moores, of Indianapolis, Ind., for appellant.

*311

*Mr. John H. Dunbar, of Olympia, Wash., for appellee.

*312

*Mr. Justice BRANDEIS delivered the

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(45 S.Ct.)

This is an appeal, under section 238 of the Judicial Code (Comp. St. § 1215), from a final decree of the federal court for Western Washington, dismissing a bill brought to enjoin the enforcement of section 4 of chapter 111 of the Laws of Washington of 1921. That section prohibits common carriers for hire from using the highways by auto vehicles between fixed termini or over regular routes, without having first obtained from the director of public works a certificate declaring

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that *public convenience and necessity require such operation. The highest court of the state has construed the section as applying to common carriers engaged exclusively in interstate commerce. Northern Pacific Ry. Co. v. Schoenfeldt, 123 Wash. 579, 213 P. 26: Schmidt v. Department of Public Works, 123 Wash. 705, 213 P. 31. The main question for

decision is whether the statute so construed

was heard by the District Judge upon a motion to dismiss the amended bill. The final decree dismissing the bill was entered without further opinion. See, also, Interstate Motor Transit Co. v. Kuykendall, 284 F. 882.

That part of the Pacific Highway which lies within the state of Washington was built by it with federal aid pursuant to Act July 11, 1916, c. 241, 39 Stat. 355, as amended by Act Feb. 28, 1919, c. 69, 40 Stat. 1189, 1200 (Comp. St. Ann. Supp. 1919, § 7477bb), 119, 42 Stat. 212 (Comp. St. Ann. Supp. 1923, and Federal Highway Act Nov. 9, 1921, c. action taken by the Washington officials, and § 7477 et seq). Plaintiff claimed that the threatened, violates rights conferred by these federal acts and guaranteed both by the Fourteenth Amendment and the commerce

clause.

the bill this argument is made. The right In support of the decree dismissing to travel interstate by auto vehicle upon the and applied is consistent with the federal public highways may be a privilege or imConstitution and the legislation of Congress.munity of citizens of the United States. Buck, a citizen of Washington, wished to operate an auto stage line over the Pacific Highway between Seattle, Wash., and Port

land, Or., as a common carrier for hire exclusively for through interstate passengers and express. He obtained from Oregon the license prescribed by its laws. Having complied with the laws of Washington relating to motor vehicles, their owners and drivers (Carlsen v. Cooney, 123 Wash. 441, 212 P. 575), and alleging willingness to comply with all applicable regulations concerning common carriers, Buck applied there for the prescribed certificate of public convenience and necessity. It was refused. The ground of refusal was that, under the laws of the state, the certificate may not be granted for any territory which is already being adequately served by the holder of a certificate, and that, in addition to frequent steam railroad service, adequate transportation facilities between Seattle and Portland were already being provided by means of four connecting auto stage lines, all of which held such certificates from the state of Washington.1 In re Buck, P. U. R. 1923E, 737. To enjoin interference by its officials with the operation of the projected *line, Buck brought this suit against Kuykendall, the director of public

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L. Ed. 745. A citizen may have, under the Compare Crandall v. Nevada, 6 Wall. 35, 18 Fourteenth Amendment, the right to travel and transport his property upon them by auto vehicle. But he has no right to make the highways his place of business by using them as a common carrier for hire. Such use is a

privilege which may be granted or withheld by the state in its discretion, without violat ing either the due process clause or the equal protection clause. Packard v. Banton, 596. The highways belong to the state. It 264 U. S. 140, 144, 44 S. Ct. 257, 68 L. Ed. may make provision appropriate for securing the safety and convenience of the public in

the use of them.

*315

U. S. 160, 37 S. Ct. 30, 61 L. Ed. 222. It may Kane v. New Jersey, 242 impose fees with a *view both to raising funds to defray the cost of supervision and maintenance and to obtaining compensation for the use of the road facilities provided. Hendrick v. Maryland, 235 U. S. 610, 35 S. Ct. 140, 59 L. Ed. 385. See, also, Pierce Oil Corporation v. Hopkins, 264 U. S. 137, 44 S. Ct. 251, 68 L. Ed. 863. With the increase in number and size of the vehicles used upon a highway, both the danger and the wear and tear grow. To exclude unnecessary vehicles-particularly the large ones commonly used by carriers for hire-promotes both character is valid even as applied to intersafety and economy. State regulation of that in-state commerce, in the absence of legislation by Congress which deals specifically with the subject. Vandalia R. R. Co. v. Public Service Commission, 242 U. S. 255, 37 S. Ct. 93, 61 L. Ed. 276; Missouri Pacific Ry. Co. v. Larabee Flour Mills Co., 211 U. S. 612, 29 S. Ct. 214, 53 L. Ed. 352. Neither the recent federal highway acts, nor the earlier post road acts (Rev. Stat. § 3964 [Comp. St. § 7456]; Act March 1, 1884, c. 9, 23 Stats. 3 [Comp. St. 7457]), do that. The state stat

works. The case was first heard, under section 266 of the Judicial Code, before three

judges, on an application for a preliminary injunction. They denied the application. 295 F. 197. A further application for the junction made after amending the bill was likewise denied. 295 F. 203. Then the case

1 An additional ground for refusing the certificate was that the applicant did not appear to have financial ability. This ground of rejection does not require separate consideration, among other reasons, because the plaintiff later asserted, in his bill, that he possessed the requisite financial ability, and the motion to dismiss admitted the allegation.

ute is not objectionable because it is designed | S. Ct. 83, 66 L. Ed. 206; Compare Wall v. primarily to promote good service by exclud- Parrot Silver & Copper Co., 244 U. S. 407, ing unnecessary competing carriers. That 411, 37 S. Ct. 609, 61 L. Ed. 1229. Nor can purpose also is within the state's police one who avails himself of the benefits conpower. ferred by a statute deny its validity. Pierce Oil Co. v. Phoenix Refining Co., 259 U. S. 125, 42 S. Ct. 440, 66 L. Ed. 855; *St. Louis Co. v. Prendergast Co., 260 U. S. 469, 472, 43 S. Ct. 178, 67 L. Ed. 351. But in the case at bar Buck does not rely upon any provision of the statute assailed; and he has re

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[1] The argument is not sound. It may be assumed that section 4 of the state statute is consistent with the Fourteenth Amendment; and also, that appropriate state regulations adopted primarily to promote safety upon the highways and conservation in their use are not obnoxious to the commerce clause, where the indirect burden imposed upon in-ceived no benefit under it. He was willing, terstate commerce is not unreasonable. Compare Michigan Public Utilities Commission v. Duke, No. 283, 266 U. S. 570, 45 S. Ct. 191, 69 L. Ed. decided January 12, 1925. The provision here in question is of a different character. Its primary purpose is not regulation with a view to safety or to conservation of the highways, but the proḥibition of competition. It determines, not the manner of use, but the persons by whom the highways may be used. It prohibits such use to some per*316

sons, while *permitting it to others for the same purpose and in the same manner. Moreover, it determines whether the prohibition shall be applied by resort, through state officials, to a test which is peculiarly within the province of the federal action-the existence of adequate facilities for conducting interstate commerce. The vice of the legislation is dramatically exposed by the fact that the state of Oregon had issued its certificate which may be deemed equivalent to a legislative declaration that, despite existing facilities, public convenience and necessity required the establishment by Buck of the auto stage line between Seattle and Portland. Thus, the provision of the Washington statute is a regulation, not of the use of its own highways, but of interstate commerce. Its effect upon such commerce is not merely to burden, but to obstruct, it. Such state action is forbidden by the commerce clause. It also defeats the purpose of Congress, expressed in the legislation giving federal aid for the construction of interstate highways.

[2-4] By motion to dismiss filed in this court, the state makes the further contention that Buck is estopped from seeking relief against the provisions of section 4. The argument is this: Buck's claim is not that the department's action is unconstitutional because arbitrary or unreasonable. It is that section 4 is unconstitutional because use of the highways for interstate commerce is denied unless the prescribed certificate shall have been secured. Buck applied for a certificate. Thus he invoked the exercise of the power which he now assails. One who invokes the provisions of law may not thereafter question its constitutionality. The argument is unsound. It is true that one cannot in the same proceeding both assail a statute and rely upon it. Hurley v. Commissioner of Fisheries, 257 U. S. 223, 225, 42

if permitted to use the highways, to comply with all laws relating to common carriers. But the permission sought was denied. The case presents no element of estoppel. Compare Arizona v. Copper Queen Mining Co., 233 U. S. 87, 94 et seq., 34 S. Ct. 546, 58 L. Ed.

863.

Reversed.

Mr. Justice MCREYNOLDS dissents. See, 267 U. S. 325, 45 S. Ct. 327, 69 L. Ed.

(267 U. S. 317)

GEORGE W. BUSH & SONS CO. v. MALOY
et al., Public Service Commission
of Maryland.

(Argued Jan. 16, 1925. Decided March 2,
1925.)
No. 185.

Commerce

61(1)-State statute prohibiting operation of trucks on state highways in interstate commerce without permit from commission held violative of commerce clause.

Laws Md. 1922, c. 401, § 4, prohibiting common carriers of freight by motor vehicle from using public highways over specified routes without permit from Public Service Commission, and giving commission discretion in the matter of granting such permits, held violative of commerce clause, in so far as it prohibits operation, in interstate commerce, of trucks over state highways without such permit, even though highways were constructed without federal aid.

Mr. Justice McReynolds dissenting.

In Error to the Court of Appeals of Maryland.

Suit by George W. Bush & Sons Company against Wm. M. Maloy and others, constituting the Public Service Commission of Maryland. Order sustaining demurrer to and dismissing bill was affirmed by the Court of Appeals of Maryland (143 Md. 570, 123 A. 61), and plaintiff brings error. Reversed.

$318

*Messrs. Wm. L. Rawls and George Weems Williams, both of Baltimore, Md., for plaintiff in error.

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*Messrs. Thomas H. Robinson, Edward H. Burke and William N. Maloy, all of Baltimore, Md., for defendant in error.

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*Mr. Justice BRANDEIS delivered the opinion of the Court.

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