ficiary and the rate of tax could certainly be | ed on by the government. It is, we think, ascertained. Further elucidation as to the meaning of the amendatory act of 1901 is unnecessary in view of the subsequent legislation of Congress. By the act of April 12, 1902 (32 Stat. at L. 96, chap. 500), § 29 of the act of 1898, as amended on March 2, 1901, was repealed, to take effect on July 1. 1902.1 The repealing act, however, saved "all taxes or duties imposed by section 29 of the act of June 13, 1898, and the amendments thereto prior to the taking effect of this act." On June 27, 1902 (32 Stat. at L. 406, chap. 1160)2 an act was adopted, the 3d section of which reads as follows: incontrovertible that the taxes which the 3d section of the act of 1902 directs to be refunded and those which it forbids the collection of in the future are one and the same in their nature. Any other view would destroy the unity of the section, and cause its provisions to produce inexplicable conflict. From this it results that the taxes which are directed in the first sentence to be refunded, because they had been wrongfully collected on contingent beneficial interests which had not become vested prior to July 1, 1902 were taxes levied on such beneficial interests as had not become vested in possession or enjoyment prior to the date named, within the intendment of the subsequent sentence. In other words, the statute provided for the refunding of taxes collected under the circumstances stated, and at the same time forbade like collections in the future. "Sec. 3. That in all cases where an executor, administrator, or trustee shall have paid, or shall hereafter pay, any tax upon any legacy or distributive share of personal property under the provisions of the act approved June thirteenth, eighteen hundred and ninety-eight, entitled 'An Act to Pro- In view of the text of the act of 1898 and vide Ways and Means to Meet War Expen- the other considerations to which we have ditures, and for Other Purposes,' and amend-referred, we have not deemed it necessary ments thereof, the Secretary of the Treasury to advert to a contention made by the govbe, and he is hereby, authorized and direct-ernment in argument, that the true meaned to refund, out of any money in the Treasury, not otherwise appropriated, upon proper application being made to the Commissioner of Internal Revenue, under such rules and regulations as may be prescribed, so much of said tax as may have been collected on contingent beneficial interests which shall not have become vested prior to July first, nineteen hundred and two. And no tax shall hereafter be assessed or imposed under said act, approved June thir-unaccompanied with the right of immediate teenth, eighteen hundred and ninety-eight, upon or in respect of any contingent beneficial interest which shall not become absolutely vested in possession or enjoyment prior to said July first, nineteen hundred and two." ing of the act of 1898 is shown by the administrative construction placed upon the act of July 1, 1862, levying legacy taxes (12 Stat. at L. 485, chap. 119), 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. at L. 285, chap. 173, U. S. Comp. Stat. 1901, p. 2268), there was an administrative construction by which vested interests, although 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. at L. 140, chap. 184), and was, moreover, in substance, treated as unsound by the reasoning of the opinion in Clapp v. Mason, 94 U. S. 591, 24 L. ed. 213. In view of the provision for refunding we see no escape from the conclusion that this statute was in a sense declaratory of what we hold was the true construction of the act of 1898, and which, as we have seen, had Thus, by legislative action and judicial prevailed prior to the amendment of March interpretation, it came to pass that the acts 2, 1901, and which was only departed from of 1862 and 1864 signified exactly what we by the administrative officers under a mis- now construe the act of 1898 to mean. It conception of the import of that amendatory was doubtless this concordance of legislative act. There is no suggestion that any prior action and judicial interpretation concernpractice prevailed in the enforcement of the ing the earlier acts which caused the adact of 1898, calling for the enacting of the ministrative department of the government, refunding clause, except the mistaken con- when the act of 1898 was adopted, to interstruction placed on the amendatory act of pret that act, not as the acts of 1862 and 1901. The act of 1902 was, therefore, a leg- 1864 had been originally erroneously interislative affirmance of the construction given preted in administration, but in accord with to the act of 1898, prior to the amendment the subsequent legislative and judicial conof 1901. It follows that the act of 1902 was, struction which had been placed upon the moreover, a legislative repudiation of the language of those acts, and which language construction of the act of 1898, now insist-in effect was repeated in the act of 1898. 1 U. S. Comp. St. Supp. 1903, p 278. U. S. Comp. St. Supp. 1903, p. 282. tion in bankruptcy, which sum was due and owing the bankrupt under an agreement by which, in paying its employees, the corporation was to deduct from their wages the amount due from such employees to the bankrupt for supplies sold them by him, and to remit to him the amount thus deducted, irrespective of any indebtedness otherwise due from him to the corporation. 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 (Re Tracy, 179 N. Y. 506, 72 Submitted January 5, 1905. Decided FebN. E. 519), it was declared 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. (196 U. S. 502) [No. 232.] ruary 20, 1905. APPEAL from the United States Circuit Court of Appeals for the Eighth Circuit to review a decree which affirmed, as modified, an order of the District Court for the Eastern District of Arkansas, directing that the claim of a creditor against a bankrupt's estate be expunged unless the creditor pay to the trustee in bankruptcy a specified sum,. found to have been transferred to the ered. itor by the bankrupt, and decided to hav operated as a voidable preference. Decree of both courts reversed, and the cause re WESTERN TIE & TIMBER COMPANY, manded to the District Court, with direc Appt., v. tions to allow the proof of claim, and te deny any right of set-off, and for further BEN A. BROWN, Trustee of the Estate of proceedings. Appeal in bankruptcy cases-preference set-off. 1. The assertion of a right of set-off in a proceeding in bankruptcy presents a claim of Federal right which will sustain an appeal from a decision of a circuit court of appeals, rejecting the claim, to the Supreme Court of the United States, under the bankrupt act of July 1, 1898 (30 Stat. at L. 553, chap. 541, U. S. Comp. Stat. 1901, p. 3432), § 25, cl. (b) 1, authorizing such appeals when the question involved is one which might have been reviewed on writ of error from the latter court to a state court. 2. A sum retained by a corporate creditor with A sum retained by a corporate creditor with knowledge of the debtor's insolvency, and within four months of the filing of the petition in bankruptcy, which sum was due and owing the bankrupt under an agreement by which the corporation, in paying its employees, was to deduct from their wages the See same case below, 129 Fed. 728. Statement by Mr. Justice White: 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 court of the United States for the eastern district of ArkanWestern Tie & Timber Company against the sas, directing that the claim of 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 voidable preference. 129 Fed. 728. bankrupt, and decided to have operated a 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. amounts due from such employees to the bankrupt for supplies furnished them by him, and was to remit to him the amount so deducted, irrespective of any indebtedness otherwise due by him to the corporation, is not a voidable "2. The Western Tie & Timber Company preference under the bankrupt act of July 1, 1898 (30 Stat. at L. 553, chap. 541, C. S. was a corporation and a creditor of HarComp. Stat. 1901, pp. 3443, 3445), §§ 57g, 60b, rison. It presented a claim against his eswhich must be surrendered before the corpo- tate in bankruptcy of $24,358. The trustee ration can prove its claim against the bank-moved to expunge this claim on the ground rupt's debtor's estate. 8. A corporate creditor is not entitled to set off, in proving its claim against the bankrupt debtor's estate, a sum retained by it with knowledge of the debtor's insolvency, and within four months of the filing of the peti 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. Comp. Stat. 1901, p. 3432), providing that from any final decision of a court of appeals, allowing or rejecting a claim under the act, an appeal may be had "where the amount in controversy exceeds the sum of two thousand dollars, and the question involved is one which might have been taken on appeal or writ of error from the highest court of a state to the Supreme Court of the United States." "3. For some years prior to February 24, | 1, 1898 (30 Stat. at L. 553, chap. 541, U. S. 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 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. The provision of the Revised Statutes regulating the revision of judgments and decrees of state courts, which is relied upon, in conjunction with the portion of the bankruptcy act just quoted, is that portion of § 709 (U. S. Comp. Stat. 1901, p. 575) which authorizes the re-examination of a final judgment or decree in any suit in the highest court of a state in which a decision in the suit can be had, "where any title, right, privilege, or immunity is claimed under any . . statute of . . . the United States, and the decision is against the title, right, privilege, or immunity specially set up or claimed, by either party, under such statute, 99 The appellee does not question that this appeal is from a decree rejecting a claim, within the meaning of the statute, and that the requisite jurisdictional amount is involved, but the particular objection urged is that a right was not claimed under an act of Congress, nor was a right of that nature denied by the lower courts. The objection is not tenable. It clearly appears from the record that in the claim filed on behalf of the tie company there was embodied, as an integral part thereof, as a proper credit or set-off, the sum retained from the wages of employees for supplies "7. After the company had retained sev-furnished by the bankrupt, and the rejection eral 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. Messrs. Joseph Wheless, George M. Block, F. H. Sullivan, and Charles Erd for appellant. Messrs. John M. Moore, C. F. Henderson, H. L. Ponder, M. M. Stuckey, and S. M. Stuckey for appellee. Mr. Justice White, after making the foregoing statement, delivered the opinion of the court: of the claim was based upon the denial of the right to set-off. As the right of set-off is controlled by the provisions of § 68 of the bankrupt act, the assertion of such a right, in a proceeding in bankruptcy, as was the case here, is necessarily based upon those provisions of the act of Congress, and in this case the construction of such statutory provision was undoubtedly involved. That the circuit court of appeals understood that reliance was had by the tie company upon the set-off clauses of the act is shown by its opinion, where, after sustaining the claim of the trustees that the credits in question constituted a preference, it prefaced a particular discussion of the contention as to a right of set-off by the following Before coming to the merits we dispose of statement: an objection to the jurisdiction. The appeal was prosecuted under clause (b) 1 of § 25 of the bankrupt act of July "Finally, it is said that this $2,210.73 was a credit to Harrison, and that the company should be permitted to set it off against his debt to it, and should be allowed to prove its claim for the balance remaining without restriction, on the ground that these claims were mutual debts and credits under § 68 of the bankrupt law." | result of the finding that Harrison had no intention to give the tie company a preference, for if Harrison, being insolvent, to the knowledge of the company, within the prohibited period, gave to the tie company authority to collect the sums due to him by the laborers for goods sold them, with the right, or even the option to apply the money to a prior debt due by Harrison to the com The record, we think, sufficiently presented a claim of Federal right (Home for Incurabies v. New York, 187 U. S. 157, 47 L. ed. 117, 23 Sup. Ct. Rep. 84), and the objection to the jurisdiction is therefore over-pany, the necessary result of the transaction ruled. would have been to create a voidable preferAnd if the inevitable result of the transaction would have been to create such a preference, then the law would conclusively impute to Harrison the intention to bring about the result necessarily arising from the nature of the act which he did. Wilson v. City Bank, 17 Wall. 486, 21 L. ed. 727. To give effect, therefore, to the finding that there was no intention on the part of Harrison to prefer, we must consider that the authority given by him to the tie company to collect from the laborers did not give that company the right, or endow it with the option, when it had collected, to retain the money for its exclusive benefit, and to the detriment of the other creditors of Harrison. The result of the facts found, then, is this: Harrison sold his goods to the laborers, and agreed with the tie company that that company, when it paid the laborers, should deduct the amount due by the laborers from the wages which the tie company owed them, and, after making the deduction, should remit to Harrison the amount thus deducted, irrespective of any indebtedness otherwise due by Harrison to the tie company. Did this give rise to a voidable preference within the intendment of §§ 57g and 60% of the bankrupt act? Passing to the merits of the controversy-ence. We must, at the outset, in the light of the facts found below, determine the exact relation existing between the bankrupt and the tie company, in order to fix the true import of the transactions by which the tie company, in making its claim against the bankrupt estate, asserted a right to retain and set off the sums which, in its proof of claim, it described as "deductions from pay rolls." We think the findings establish that Harrison sold the goods, not to the tie company, but to the laborers, and therefore the result of the sale was to create an indebtedness for the price alone between Harrison and the employees. This is not only the necessary consequence of the facts stated, but likewise conclusively flows from the nature of the proof of claim made by the tie company, since that proof, so far as the items concerning the price of the goods sold to the employees are concerned, based the indebtedness by the tie company to Harrison, not upon any supposed original obligation on the part of the tie company towards Harrison to pay for the goods, but upon the "deductions from pay rolls," made by the tie company in paying its employees. The effect of this was to trace and limit the origin of the debt due by the tie company to Harrison solely to the fact that the tie com- In view of the necessary result of the findpany had deducted, in paying its employees, ings which we have previously pointed out, money due to Harrison by the employees, it is, we think, beyond doubt that the agreewhich, from the fact of the deduction, the ment was not voidable preference within tie company had become bound to pay to the meaning of the statute, since, considerHarrison. We think, also, the facts founding the agreement alone, it brought about establish that the course of dealing between no preference whatever. This leaves only Harrison and the tie company concerning for consideration the question whether the the deductions from pay rolls was that the tie company was entitled to prove its claim, tie company, when it made the deductions, as it sought to do, for the balance owing, was under an obligation to remit the money after crediting as a set-off the "deductions collected from the laborers for account of from pay rolls," to which we have referred. Harrison to him, irrespective of any debt Now, as we have seen, from the facts found, which he might owe the tie company. This it must be that the agreement between Harfollows from the finding that, although rison and the tie company obligated the latthere was a debt existing between Harrison ter, when it made the deductions from pay and the tie company, the course of dealing rolls, to remit to Harrison the amount of between them was that when the tie com- such deductions, irrespective of the account pany made deductions from the wages of between itself and Harrison. It follows the laborers of sums of money due by them that as to such deductions the tie company to Harrison the tie company regularly re- stood towards Harrison in the relation of a mitted the proceeds of the deductions to trustee; and, therefore, the case was not one Harrison. This conclusion, moreover, is the of mutual credits and debts, within the be that the tie company will be a creditor of the estate for the whole amount of its claim, and will be, at the same time, a debtor to the estate for the amount of the deductions from the pay rolls collected by it, the court below, of course, having power to take such steps as may be lawful to protect the estate in respect to the payment of dividends to the tie company, in the event that company does not discharge its obligations to the bankrupt estate. meaning of the set-off clause of the bank- | alleged set-off eliminated. The result will rupt law. Libby v. Hopkins, 104 U. S. 303, 26 L. ed. 769. And, irrespective of the trust relation which the findings establish, it is equally clear from the general considerations that the right to set-off did not exist. To allow the set-off under the circumstances disclosed would violate the plain intendment of the inhibition contained in clause b (2) of § 68 of the bankrupt act, which forbids the allowance to any debtor of a bankrupt of a set-off or counter-claim which "was purchased by or transferred to him after the filing of the petition, or within four months before such filing, with a view to such use, and with knowledge or notice that such bankrupt was insolvent, or had committed an act of bankruptcy." That is to say, whether or not the trust relation was engendered, the result would still be that the tie company, within the prohibited period, GUS G. COULTER, S. W. Hager, and C. B. and with knowledge of the insolvency of Harrison, acquired the claims of the latter against the laborers, with a view to using the same by way of payment or set-off, so as to obtain an advantage over the other creditors, which it was not lawfully entitled to do. As we have concluded that, under the findings, there was no voidable preference, we think the court below erred in refusing to allow the tie company to prove its claim, unless it surrendered the sums which it owed Harrison and his bankrupt estate. Section 57g of the bankrupt act, as amended by the act of February 5, 1903 (32 Stat. at L. 799, chap. 487),1 empowering the court to compel creditors to surrender preferences as a prerequisite to the proof of claims against the estate of the bankrupt, relates only to those creditors "who have received The decree of both courts are reversed and the case is remanded to the District Court with directions to allow the proof of claim, rejecting the alleged set-off, and for further proceedings in conformity with this opinion. Hill, Appts., บ. (196 U. S. 599) LOUISVILLE & NASHVILLE RAILROAD Courts-conflict of jurisdiction between 1. 1. 2. valuation. A Federal court cannot enjoin the collection of a franchise tax assessed under the authority of a state because of inequality in valuation as compared with other taxable property, nor can it order the state treasurer to issue a receipt in full to the complainant, which has paid so much of the tax as it thinks was justly due. The Federal Constitution does not forbid state taxation of the franchise of a domestic corporation at a different rate than is assessed upon the tangible property in the state. preferences voidable under section sixty, 3. Inequality in valuation for taxation of a franchise, as compared with other taxable property, must be systematic and intentional in order to justify a Federal court in enjoining the apportionment and certification of the tax to the several counties, where the assessment does not appear to have been made on such a different scale of values from that adopted elsewhere as to deny the equal protection of the laws guaranteed by U. S. Const. 14th Amend., which was the only ground invoked to sustain the Federal jurisdiction. subdivision b." But it also is demonstrated, [No. 244.] November 29, 30, 1904. Decided that although the judgment below must be APPEAL from the Circuit Court of the reversed for the reasons stated, the case should be remanded with directions to disregard the alleged claim of set-off, to reject any proof of claim asserting the same, and to permit a claim to be filed for the gross indebtedness to the tie company, with the U. S. Comp. St. Supp. 1903, p. 415. of United States for the Eastern District Kentucky to review a decree which restrained, for inequality in valuation for taxation, the apportionment and certification to the several counties of a tax imposed on the franchise of a domestic corporation, |