Federal Bankruptcy Act, § 4 (U. S. Comp. St. § 9588): Who May Become Bankrupts? a. Any person, except a municipal, railroad, insurance, or banking corporation, shall be entitled to the benefits of this act as a voluntary bankrupt.

b. Any natural person, except a wage-earner, or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company, and any moneyed, business, or commercial corporation, except a municipal, railroad, insurance, or banking corporation, owing debts to the amount of one thousand dollars or over, may be adjudged an involuntary bankrupt upon default or an impartial trial, and shall be subject to the provisions, and entitled to the benefits of this act.

The bankruptcy of a corporation shall not release its officers, directors, or stockholders, as such, from any liability under the laws of a state or territory of the United States.

The first thought that springs into one's mind when bankruptcy is mentioned is that one may thus be relieved of a large number of obligations. This is to-day the popular idea of bankruptcy. When a person arrives at the point where it seems that he cannot succeed, he has the opportunity to file a petition in bankruptcy and make a fresh start. It is true the Bankruptcy Act does allow a person to do just that thing, but in a certain sense it is more or less the result of the act than the reason therefor. Historically, at least, the first reason for bankruptcy was to enable all of the creditors to share equally in the assets of an insolvent debtor. At an early time the debtor was not discharged from his obligations, and

the only result of bankruptcy was to allow his assets to be distributed proportionately among the creditors. Under the act in United States to-day the provision in regard to involuntary bankruptcy has that same effect, and it is also true that the debtor may file voluntarily a petition in order that some of his creditors may not squeeze the others out entirely.

The Constitution of the United States provides that the federal government may establish uniform laws on the subject of bankruptcy throughout the United States. This it has done, the last bankrupt law having been enacted in 1898 and modified later by amendment. The chapters that follow deal with certain portions. of the act, and the interpretation of the same, which it is felt are of importance to the ordinary business man.

SECTION 2.-FARMERS AND WAGE-EARNERS

FIRST NAT. BANK OF WILKES-BARRE v. BARNUM. (District Court of the United States, Middle District of Pennsylvania 1908. 160 F. 245.)

Bankruptcy proceedings. ARCHIBALD, District Judge. These are involuntary proceedings, and are resisted by the respondent on the grounds: (1) That he is a wage-earner; and (2) that the petitioners are not creditors. It appears, as to the first, that the respondent is a music teacher, giving lessons on the piano, organ, violin, and mandolin, at 50 cents an hour, earning from $35 to $40 a month, or a little less than $500 a year, some pupils coming to his house for instruction, and others being taught at their own homes. This constitutes his livelihood, in addition to which, however, he has a summer cottage at Harvey's Lake, which he rents for $175 a season, and another property from which he gets $150, besides which he has divided up certain land that he owns, and is selling it off in lots. The question is whether under these circumstances he is a wage-earner within the meaning of the law, so as not to be subject to involuntary bankruptcy.

A wage-earner is defined by the Bankruptcy Act as one "who works for wages, salary, or hire, at a rate of compensation not exceeding one thousand five hundred dollars per year." By this it is evidently intended to relieve from adverse proceedings those who, not being engaged in business or trade, depend for a living upon the result of individual labor or effort, without the aid of property or capital. But not all of this class are exempt, as is shown by the limit of $1,500. And the work done must be such as is compensated by wages, salary, or hire, other earnings not being put in the same category. These terms mean much the same thing, and are no doubt collectively used in order to cover the different possible kinds of employment comprehended within the general idea. Wages, as distinguished from salary, are commonly understood to apply to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the

day, week, month, or season. Neither is it so broad a term as "earnings" which comprehend the returns from skill and labor in whatever way acquired. Indeed the act itself in exempting wage-earners recognizes that there are other kinds. Salary, on the other hand, has reference to a superior grade of services and implies a position or office. By contrast, therefore, "wages" indicate inconsiderable pay for a lower and less responsible character of employment. Where salary is suggestive of something higher, larger, and more permanent. The word "hire" is rather associated with the act of employment than the reward for services done; and in the latter connection is more on the plane of wages than of salary, although in a sense it comprehends both; and is also applied to engaging the use of property. We hire a coachmen, a gardener, or a cook; or a carriage to take a ride. And may also be said to hire a superintendent, a bookkeeper, or a clerk, although it would seem more correct, in the latter instances, to say engage or employ. In some communities, a farm hand is called a hireling, without intending any reflection, although in general speech the term is one of reproach. As further defining its use, a laborer, according to Sacred Writ, is said to be worthy of his hire. And coming up from the people, as the word thus does, it is sometimes applied, out of place, to the securing of professional services, as where one is said to hire a lawyer, a doctor, or a person of that class.

The cases directly decided under the bankruptcy act confirm these views. Thus, it is held that a person doing hauling with his team by the day-which affords a good example of what may in strictness be termed a hiring-is a wage-earner. Although it is said that, in allowing the priority given to wages by the act, the amount due for the use of the team must be distinguished from that for the services of the person himself. So money due for piecework, paid weekly, is held to be wages. And a bookkeeper, in the employ of others, receiving a salary of $65 or $70 a month, is a wage-earner within the meaning of the law. And so, as we may assume-applying the same principle-would be the chorister of a church, paid a specified yearly sum for his services. Or a traveling salesman receiving a percentage. commission on the amount of his sales. But not a factor or broker, engaged in the business of selling goods on commission. Nor a millowner, who saws lumber for others at so much a thousand. Nor one who builds a house or other structure, by contract, even though he does a part of the work himself. Nor one who tows a canal boat. Or threshes out grain by the job. Nor are the fees of lawyers, physicians. and the like to be classed as wages. Nor the debts due to a blacksmith from his customers for his services. Nor is a school teacher a laborer or servant; however, we may speak of one, at times, as being hired. From these considerations, as it seems to me, but one conclusion can A person, like the respondent, giving music lessons at so much an hour, is not a wage-earner within the meaning of the act. Teaching is a profession, denoting a nicer relation and involving a finer character of work, and entitled, like that of the lawyer, doctor, the engineer, the architect or the minister to be regarded as upon a higher plane. His work is mental not physical. He labors with his head, not his hands. And while that may not be distinctly conclu

1 Authorities cited in opinion are omitted.

sive, it has its weight. He is the tutor, or instructor, of his pupil, not his servant; his of the two, being the master mind. This is not to say that one who works for a salary like the teachers in our public schools, may not be wage-earners, within the meaning of the bankruptcy law. The fact of being under a salary makes a difference, and brings the case squarely within the act, although it may be noticed in passing that, in the school laws of the state, teachers are said to be appointed, not employed or hired. But the compensation received by the respondent, in the present instance, is certainly not a salary. Neither is it wages. And notwithstanding the misuse of the term, alluded to above, neither can he be said to work for hire. He is simply paid a stipulated sum or stipend in return for the instruction which he gives, which he holds himself out as competent to impart, being engaged so to do by his pupils or their parents, but not hired, any more than the lawyer, doctor, or others in professional life. The returns from his teachings may be earnings, which as we have seen is a comprehensive term, but not wage-earnings, and so not effective to exempt him from liability here.

* * *

In re TYLER.

(District Court of the United States, Northern District of Iowa, 1922. 284

F. 152.)

In Bankruptcy. In the matter of Lewis E. Tyler, alleged bankrupt. SCOTT, District Judge. The above-entitled matter came before the court on the 19th day of June, 1922, upon a petition in involuntary bankruptcy by three of his creditors and the alleged bankrupt's answer thereto. The acts of bankruptcy alleged consist of executing certain mortgages as security for debts within four months while insolvent. The answer denies the alleged acts of bankruptcy, denies insolvency, and pleads that the alleged bankrupt is within the exempt class from involuntary adjudication, for that he is a farmer whose principal business is the tilling of the soil, and that he has no other business or occupation, and upon the question of the commission of acts of bankruptcy and his solvency the alleged bankrupt demands a jury trial. The petitioners appeared by their attorney, Clarence M. Hanson, of Ft. Dodge, Iowa, and the alleged bankrupt by his attorneys, Healy. Thomas & Healy, of Ft. Dodge, Iowa, and, when the case was called for trial, by stipulation in open court it was agreed that the matter should be submitted upon the one issue as to the exemption of the alleged bankrupt from involuntary bankruptcy by reason of Lewis E. Tyler, at time of the alleged acts of bankruptcy, being a person engaged chiefly in farming or the tillage of the soil. It was further stipulated that, in case that issue was found in favor of Tyler, the creditors' petition should be dismissed. Upon the issues and stipulation. stated, the matter proceeded to trial upon the testimony of witnesses and the introduction of certain documentary evidence identified, and the trial concluded, and the cause submitted to the court and taken under advisement. And now, on this 31st day of July, 1922, said cause came on for final consideration and determination.

The question upon which the matter is submitted is a mixed question of law and fact. Whether an alleged bankrupt is within the ex

empted class is a question of fact, however, it must be determined from the evidence introduced in' each particular case. The evidence in this case shows that Lewis E. Tyler is a man 66 years old, the owner of a 400-acre farm in Hamilton county, Iowa, upon which he had lived for many years as an active farmer, until about 9 years before the hearing. About 9 years ago Tyler removed from the farm to the town of Ellsworth, a few miles distant, where he purchased a home and has since lived. He entered into a verbal contract with his son Ernie, by the terms of which it was agreed that the son would move upon the farm, and that the farm should be operated as an ordinary stock farm. At the time the plan came under discussion the son raised the objection that he doubted his ability to handle all of the land without help, and the testimony of the father and son both tends to show, and such testimony is uncontradicted that it was agreed that the father should during all busy seasons personally assist his son in the work upon the farm; that the son should furnish the teams, and tools, the father would furnish the land, the son devote all of his time to the work, and the father devote his time, as was required during the busy season; that the farm should be stocked, the father and son paying for and owning the stock jointly and in equal shares, the stock to consist of cattle and hogs; that the seed should be furnished jointly, and that they should jointly co-operate in the supervision and planning of the work and enterprise; that the losses in stock should be jointly and equally borne, and that the product of the farm, grain, and stock as the same might be sold, after deducting such expense as was agreed to be joint, should be divided equally. The testimony shows that Tyler did work, assisting his son on the farm during all of the busy seasons, during seeding, haying, harvesting, and whenever extra help was needed; that the father and the son consulted as to the amount of the respective crops to be sown, and planned as to the time of marketing the product, and upon other matters which were handled together under consultation under the circumstances; that, if the judgment of the father and son disagreed on these matters, the custom was that the father's judgment controlled. During this period of time the father had no other business.

It appears from the evidence that the father had another son, who some years ago was engaged in the piano and sewing machine business; that later he became interested in a corporation known as the Hanson & Tyler Auto Company, and that in connection with the business of this son the alleged bankrupt had been induced to become his surety upon certain obligations, under such circumstances and to such extent as has involved the alleged bankrupt to a condition of this alleged insolvency. The testimony shows however, that the alleged bankrupt was in no way interested in the business of his son, and that any liability incurred in that respect was gratuitous and as an accommodation.

It is contended by counsel for petitioning creditors that the alleged bankrupt is an ordinary retired farmer, and not engaged in farming, and that he receives his income from the farm for the use of the land. It is contended that the case should be ruled by the decision in In re Driver (D. C.) 252 F. 956, and In re Leland (D. C.) 185 F. 830, and In re Matson (D. C.) 123 F. 743. The instant case is clearly distinguishable from In re Driver, in the opinion of the court. It is true.