Document: 25 L.Ed.2d 340 90 S.Ct. 1049 397 U.S. 322 UNITED STATES, Petitioner,v.Sheldon A. KEY, Trustee. No. 402. Argued Jan. 21, 1970. Decided March 30, Lawrence G. Wallace, Washington, D.C., for petitioner. Sigmund J. Beck, Indianapolis, Ind., respondent. Mr. Justice MARSHALL delivered the opinion of Court. 1 In this case United States challenges treatment given to its claim unpaid taxes against an insolvent corporation in reorganization under Chapter X Bankruptcy Act, 11 U.S.C. §§ 501—676. Under plan approved by District Court, debtor, Hancock Trucking, Inc., will sell chief asset, Interstate Commerce Commission operating rights, Hennis Freight Lines, $935,000. The sale contract provides a $300,000 down payment, with balance be paid 78 monthly installments. plan, payment used satisfy certain wage and state local tax claims full, 20% unsecured creditors, about 10% States' $375,386.55. remainder out atypical one corporate reorganization, does not contemplate continued existence debtor as going concern, but amounts substance liquidation. 2 objects that aspect partial or complete creditors government units before full federal claims. This, Government urges, violates command § 3466 Revised Statutes, 31 191, '(w)henever any person indebted is * debts due shall first satisfied.' Respondent urges apply proceedings, entitled only 'payment' claim, provided 199 599. 3 Court Appeals accepted respondent's theory, affirmed order approving plan. 407 F.2d 635 (C.A.7th Cir. 1969). We granted certiorari, 396 874, 153, 24 132 (1969), we reverse. 4 Since earliest days Republic, predecessors have priority over all other claimants collecting it from debtors.1 present statute has existed almost unchanged since 1797,2 historical roots reach back similar Crown England, royal prerogative, founded upon policy protecting public revenues.3 same underlies statute, v. State Bank North Carolina, 6 Pet. 29, 35, 8 L.Ed. 308 (1832), established terms are liberally construed achieve broad purpose. Beaston Farmers' Bank, 12 102, 134, 9 1017 (1838); Bramwell Fidelity Co., 269 483, 487, 46 176, 177, 70 368 (1926). 5 Section applies literally situation here. concededly insolvent, debt 'debt within meaning statute. Price States, 492, 499, 180, 181, 373 No provision explicitly excepts debtors application 3466, so remaining question whether legislative scheme X, either logical inconsistency manifestation congressional intent, implies such exception. approaching implied exception start principle, noted above, must liberal construction consonant underlying it. Applying principle earlier statutory implicitly excluded held '(o)nly plainest would warrant our finding operation clear 3466.' Emory, 314 423, 433, 62 317, 322—323, 86 315 (1941). 7 Here discerned intent proceedings which forbids approval provide customs unless Secretary Treasury accepts 'a lesser amount.'4 further supported inference exclusionary 216(7) 221 616(7) 621. where class dissents 'adequate protection realization them value their property' four ways, last most general 'such method will, consistent circumstances particular case, equitably fairly protection.' merely sums up applicable tests valid providing '(t)he judge confirm if satisfied that' been complied 'the fair equitable, feasible.' reasoned these provisions exclusion follows: 'Within 199, 216 inter-related statutes part studied outlines nature government's 'priority', two sections establish equitable standard govern payment. If, us hold, creates absolute right addition there little need 221. These specifically should control more conflicting direction F.2d, at 638. 10 view logically inconsistent nor they rendered redundant older applied, language history reveal purpose incongruous application. place, nothing do priorities different classes X. That section affected (and here itself constitutes whole class) dealt ways specified, those disposed 'equitably fairly.' This long words, along words 'fair equitable' 221, no way authorize ignore erode otherwise law, follows cannot taken exclude implication explicit priority, 3466. short, art, can compromises rights senior protect junior creditors. Case Los Angeles Lumber Products 106, 115—116, 60 1, 7—8, 84 110 (1939); Consolidated Rock Co. Du Bois, 312 510, 527—529, 61 675, 685—687, 85 982 turn then argument respondent chiefly relies his proceedings—the alleged between 'first satisfied' requirement purposes 199. As already noted, amount.' argues establishes negative Congress did mean able insist onerous remedy time.5 13 matter logic, see satisfaction. surely could receive limited fund expense claimants, quite consistently when wherewithal make became available installments time also each succeeding until was satisfied.6 Separate effect certainly read harmony other, reason why supplement contained fashion. 14 Nor on ground satisfaction necessarily debtors.7 Yet open corporations liabilities exceed assets, solvent bankruptcy asset-liability sense yet unable meet obligations mature. Act 130(1), 530(1). Thus give extends Government's least, reorganization. 15 Thus, face arises applying both much less 'plain inconsistency' required prevail test supra. strongly suggests here, examination background generally contrary Congress. 16 Before legislation 1930's, reorganizing were equity receivership. judge-made device designed preserve business concern cancelling it, return cancellation received interests new corporation, acquired assets old judicial sale. See T. Finletter, Law Reorganization 1—17 (1939). By 1926, applied U.S., 502—503, S.Ct., 181—182; Blair, Priority Equity Receiverships, 39 Harv.L.Rev. (1925). 17 1933, enacted 77 47 Stat. 1474, procedure railroads. 77, well later discussed below, follow format early commentators principles receivership underlie nearly every substantive (reorganization acts).' supra, 3. not, course, mere codifications law governing receiverships. They correct abuses inefficiencies had prior regime. Duparquet Huot & Noneuse Evans, 297 216, 218—219, 56 412, 413—414, 80 591 (1936). However, problems led intervention include relatively uncontroversial procedure. 18 Nothing casts doubt Indeed affecting 77(e), pertinent part: 19 'If America directly creditor stockholder, hereby authorized accept reject respect States.' 1478. 20 overcome rulings Attorney General lacked authority compromise indebtedness owed railroads, 33 Op.Atty.Gen. 423 (1923), 34 108 (1924).8 21 1934, 77B 48 911, generally, closely modeled railroad 77; 77B(e)(1) power claims, identical 77(e). 918. There history, suggest intention alter 22 1935, called attention fact courts construing among plans disapproved failure nevertheless confirmed necessary majority approved. S.Rep. 953, 74th Cong., 1st Sess. (1935). proposed amendment, which, after some weakening House, 1386, (1935), adopted.9 49 966 relevant provisions, amendment 1938 revisions culminated replacement affect 23 derived enactment grant debtors, ensure lends support draftsmen meant practice receiverships, acknowledged predecessor proceeding, combined indicate statutes, supports conclusion affirmatively reorganization.10 outset, according except expressly superseded, 'plainly inconsistent' applies, plain appears. clearly question, nonpreferred claimants11 claim. Therefore judgment upholding reversed, remanded opinion. Reversed. 26 DOUGLAS (concurring). 27 I join holds, Chandler secured creditor' debtor. Those 52 893, goes 'no payment' duties 'confirmed' judge, 'except acceptance amount Treasury.' 28 therefore what kind 'payment,' proceeding. 29 191. 30 standards dealing says 'any creditors' several including fairly' protects them. And 221(2) art; made unmistakably compromising treatment. 110; 982. said Bois case: 32 '(I)t while may inferior grades securities, 'superior rights' recognized. Clearly, recognized, cases stockholders participating securities equal receive, addition, compensation surrender. If than compensatory treatment, property appropriated benefit without compensation. permissible.' Id., 528—529, 686. likewise infirm because immediate, making delayed discounted attendant risks. forego funds, equivalent return. thought contradicted Today take view. defining priority; how honored. See, e.g., July 31, 1789, 42; August 4, 1790, 45, 169. 3, 1797, 5, 515, amended 2, 1799, 65, 676. Hen. 8, c. 39, 74 (1541); Eliz. (1570). provides: stockholder stock thereof deemed chapter, States. proceeding (whether interest in, stockholder), certified court: Provided, fail ninety receipt written notice court proposed, accomplained copy consent conclusively presumed.' alternative even defective alone, defendant cash flow installment lower ranking means receiving 'lesser amount,' contrasts came in. premised collect post-petition City New York Saper, 336 328, 69 554, 93 710 (1949); Edens, 189 876 (C.A.4th 1951), aff'd per curiam, 342 912, 72 357, 96 682 (1952). Because determination requires time, contention. normal Claimants usual situation, claimant another insufficient going-concern anything. second involved: becomes pay off outstanding period 'priority' receives time; nonpriority later. literal language—' satisfied'—s argued It seems assumed term sense, Oklahoma, 261 253, 260 261, 43 295, 297—298, 67 638 (1923). Senate Committee Judiciary, Criticisms Suggestions Relating H.R. 14359 S. 5551, Amending 19—20, 72d 2d (Comm.Print.1933). he veto failed House imposed possibly intending leave position form adopted. preserves apparent distinction text n. However courts, relying strong presumption exceptions treated nontax rather Anderson, 334 111 (C.A.5th 1964); re Cherry Valley Homes, 255 706 (C.A.3d 1958); Reconstruction Finance Corp. Flynn, 175 761 (C.A.2d 1949). 'If, appears applicable, may, instances, greater anomalous deny granting intended protection. leading authorities agree proceedings. 388—393; 6A Collier (14th ed. raise never decided grants specific liens Gilbert Associates, 345 361, 365—366, 73 701, 704—705, 97 1071 (1953).

Category: 11