as the medium of negltiating and contracting any kind of bargain. Thus, there are ship brokers, insurance brokers, realestate brokers, etc. The term is, however, emphatically applied to persons whose business it is to negotiate and effect contracts of sales between merchants. 2 Amer. & Eng.Ency.Law, p. 572. In most countries a person who holds himself out to the public, and engages in business as a broker, must take out a license to enable him to act as such. Whart.Ag. p. 458, § 695. In Pennsylvania, by the act of May 15, 1850 (P.L. 773), all stock, bill, exchange, merchandise, and real-estate brokers were required to pay for their respective licenses three per cent. upon the annual receipts and commissions, discounts, abatements, allowances, or other similar means in the transaction of their business.'
"'A commission merchant or factor is an agent for the sale of goods in his possession, or consigned to him.' 3 Amer. & Eng.Ency.Law, p. 317. 'He must be a specialist; that is to say, he must be a proficient in this particular business, pursuing it as a trade.' Whart.Ag. p. 488, § 735. He has possession of the goods he is authorized to sell, and is entitled to a lien upon them for his charges and disbursements. He receives and sells goods for others, as an occupation. Being a specialist, he cannot, without his principal's consent, delegate his authority to another; but he may, and ordinarily must, employ assistants in the merely manual and clerical service pertaining to his business.
" A traveling salesman, who exhibits samples of, and takes orders from purchasers for, his employer's goods is not, in a technical or popular sense, a broker, or factor, although he may be compensated for his services by commissions on the sales so effected by him. * * *" (Emphasis supplied.)
The previous Bankruptcy Act of July 1, 1898, c. 541, 30 Stat. 563, as amended June 15, 1906, c. 3333, 34 Stat. 267, gave priority in section 64, sub. b(4), to: "Wages due to workmen, clerks, traveling or city salesmen, or servants which have been earned within three months before the date of the commencement of proceedings, not to exceed $300 to each claimant."
This section was construed in a leading case, In re Dexter (also known as In re New England Thread Company), 1 Cir., 158 F. 788, at pages 790, 791, in which the court said: "A traveling salesman, as commonly understood, may be defined as a man who travels about the country soliciting orders for goods, which orders are sent to his employer for approval. This is the primary service for which he is employed, and it measures the full extent of his responsibility. He is not employed or authorized to fix prices. He cannot pass upon the credit or standing of customers. He does not collect accounts. He is not responsible for the quality, condition, or delivery of the goods.He makes no personal contracts, and he has no other interest in the sales than his compensation for those which are approved by his employer. * * * The territory assigned to him may be confined to a simgle city or state, or it may cover many cities or states. Commonly, the employer pays the salesman's expenses, but sometimes, especially if he works for a commission, he pays his own expenses. * * * Sometimes he is allotted a certain territory, and he receives a commission upon all sales which are sent in from that territory. In some cases the employer may direct the routes he is to travel, and in other cases the salesman chooses his own routes. Sometimes the salesman sends the orders directly to his employer, and sometimes the customers themselves send in the orders to the employer. * * *"
See also In re Roebuck Weatherstrip & Wire Co., D.C., 180 F. 497.
Even before the passage of the Chandler Act it was uniformly held that the mere fact that the salesman was employed by others as well as by the bankrupt, or that he had other duties or occupations in addition to that of salesman, did not exclude him from priority: In re Shapiro, D.C., 300 F. 566 (which quotes In re Dexter, supra, with approval); In re Collin, D.C., 18 F.Supp. 848; National Marble & Granite Co., D.C., 206 F. 185; In re Moore, D.C.Ohio, 1920, 45 A.B.R. 388.
Section 64, sub. a(2), of the present Bankruptcy Act definitely establishes beyond question the rights of a " traveling or city salesman on salary or commission basis, whole or part time, whether or not selling exclusively for the bankrupt. " Indeed, Mr. Chandler, author of the Bankruptcy Act of 1938, stated in his report to the Judiciary Committee of the House of Representatives (III House Reports on Public Bills, 75th Congress, 1st Session, Report No. 1409, p. 14): "Section 64: In Clause (2) the provision is expanded to include a traveling or city salesman who may be selling one or more lines for the bankrupt, but is not selling exclusively for him. The priority would cover not only wages but commissions, as is now held in the case of salesmen working exclusively for the bankrupt. " (Emphasis Supplied.)
Senator Mahoney made a similar report to the Judiciary Committee of the Senate, which appears in II Senate Reports on Public Bills (75th Congress, 3rd Session, Report 1916, p. 17).
The court therefore concludes that the claimant was a traveling salesman and is entitled to priority.
There remains to be determined the amount of the commissions due the claimant. The bankruptcy occurred on October 4, 1940. The commissions are claimed from November, 1939, to October 21, 1940, at the rate of two and one-half per cent and total $1,233.07. The claimant was paid $100 on account in May, 1940, and $50 in August, 1940, leaving a net commission due in the sum of $1,083.07. The commission earned during the period of three months immediately preceding bankruptcy amounts to $162.61. The Trustee takes the position that if a priority is allowed, the payment of $50 made to claimant in August, 1940, should be applied on account of the priority, thus making him a priority creditor only in the amount of $112.61; citing Blauvelt v. Walker, 4 Cir., 72 F.2d 915. In that case the record discloses that when the payment on account was made to the claimant the bankrupt was insolvent, and the claimant knew of this, so that the payment was a preferential one given within four months prior to bankruptcy and hence voidable. There is nothing in the record before this court in the instant case to show insolvency or knowledge of insolvency at the time of payment. As a matter of fact Judge Parker emphasizes in Blauvelt v. Walker, supra, that very distinction. Ordinarily, where the debtor does not direct the application of payments, the right of making the application is in the creditor: Maryland Casualty Co. v. City of South Norfolk, 4 Cir., 54 F.2d 1032. In Blauvelt v. Walker, supra, the court said at pages 916, 917: "A number of cases are cited as sustaining the position that a wage claimant is not required to credit payments made to him within the last three months preceding bankruptcy on wages earned within that period, but is entitled to credit all the payments to the earlier items of the account. See In re Van Wert Machine Co., D.C., 186 F. 607; In re Flick, D.C., 105 F. 503; In re Andrews, 19 A.B.R. 441; In re McIntyre Bros., 21 A.B.R. 588. The rule thus stated is correct where there is no showing, as there is here, that the bankrupt was insolvent at the time of the payments and that claimant had reasonable cause to believe that so crediting them would effect a preference in contravention of the provisions of the bankruptcy act.Where there is such showing, however, a different rule applies."
I have discussed the question presented herein in some detail in view of the fact that this appears to be the first case under Section 64, sub. a(2) of the Chandler Act.
For the reasons stated the order of the referee entered on June 17, 1941, is therefore modifed to read as follows:
That the claim of Samuel Gleit as filed on November 28, 1940, is allowed as a priority in the sum of $162.61 under Section 64, sub. a(2), of the Bankruptcy Act and as a general claim in the sum of $920.46.
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