Court Opinion

ID: 9459069
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:09:26.460183+00
Date Added: 2024-06-11T17:36:00.189092
License: Public Domain

MOORE, Circuit Judge
(dissenting):
In 1957 this Court held in a case involving the sale of sand and gravel (a situation identical to that now before' us) that the proceeds of such sale from an income tax standpoint should be taxed as long-term capital gains and not as royalties, that is, as ordinary income. Barker v. Commissioner, 250 F.2d 195 (2d Cir. 1957).
In 1963, no other reported case having passed upon the identical question in the interim, Barker still stated the law in this Circuit. The parties to the agreement involved in this case cast their agreement in a form similar to that in Barker, and they were entitled to expect that the law therein declared still applied. Accordingly, in its income tax return for 1964 Hartman reported payments received as capital gains.
Three years later, in 1967, cases arose in which a different interpretation was given to the tax consequences of the extraction of sand and gravel (Wood v. United States, 377 F.2d 300 (5th Cir. 1967)) and the quarrying of stone (Royalton Stone Corp. v. Commissioner, 379 F.2d 298 (2d Cir. 1967), cert. denied, 389 U.S. 978, 88 S.Ct. 471, 19 L.Ed.2d 473 (1967)).
Now the question comes before us in 1973: What was the law in this Circuit in 1963 on which the taxpayer was entitled to rely? If in 1963 a statute had been in effect which provided that the proceeds of the sale of sand and gravel were to be regarded as capital gains, there could be no dispute that a 1973 statute repealing the former statute could not declare the proceeds from the sale of this sand and gravel under a 1963 arrangement to be ordinary income. Had the legislature desired to change the law, it would have fixed a prospective date on which the statute would have become effective and, thus, all parties could have conducted their business affairs accordingly. Nor can there be any serious doubt that if the Commissioner had attempted to apply the 1973 law to 1963 transactions he would not have prevailed in the courts.
Just as this result would not be possible under legislative law, so it should not be possible under judicially made law.
If the Court now desires to change its law and to adopt the views of other circuits by overruling Barker, this, of course, is its privilege; but the Court by judicial legislation should not be able to do that which Congress could not do by repeal.
Much has been written regarding the doctrine of prospective overruling. The sound reasons therefor and the many cases bearing on the subject have been collected in the scholarly address of Justice Walter V. Schaefer of the Illinois Supreme Court in his Benjamin N. Cardozo Lecture (Ass’n of the Bar of The City of New York, April 13, 1967) entitled : “The Control of ‘Sunbursts’ *: Techniques of Prospective Overruling.” See also “Overruling Decisions — Application,” 10 A.L.R.2d 1371.
*1331Particularly is prospective applicability important in the field of taxation and related business situations in which decisions have been made-in reliance on the law as then written. As a Court we should be willing to accord a certain amount of “full faith and credit” to our decisions and yet at the same time retain the right to change our collective mind when greater light illuminates more brightly the path we choose to follow in the future. I am not willing to hold that the Barker panel wrote under inadequate illumination. Although joining the majority in their belief that it is time for a change, I would hold that Hartman was entitled to rely on the law as it was at the time of its sand and gravel transaction.
To this extent I must dissent.

Referring to Great Northern Ry. v. Sunburst Oil & Refining Co., 287 U.S. 358, 53 S.Ct. 145, 77 L.Ed. 360 (1932).