Court Opinion

ID: 9424217
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:10:50.691891+00
Date Added: 2024-06-11T17:22:48.938257
License: Public Domain

Me. Justice Douglas,
concurring.
I join the opinion of the Court. As it holds, the Chandler Act provides the standard for treatment of claims of the United States as “a secured or unsecured creditor” of the debtor. Those are the words of § 199, 52 Stat. 893, 11 U. S. C. § 599. Section 199 goes on to provide that “no plan which does not provide for the payment” of the claims of the United States for taxes or customs duties shall be “confirmed” by the judge, “except upon the acceptance of a lesser amount by the Secretary of the Treasury.”
The question therefore is what kind of “payment,” as used in § 199, the claim of the United States must receive in a Chapter X proceeding.
There is no doubt but that the claim of the United States has priority by reason of § 3466 of the Revised Statutes, 31 U. S. C. § 191.
Section 216 of the Chandler Act provides the standards for dealing with the priorities among creditors. Section 216 (7) says that where “any class of creditors” affected by the plan does not accept the plan, those claims can be dealt with in several ways, including a method which “equitably and fairly” protects them. And § 221 (2). of the Act provides that the judge shall confirm the plan if satisfied that it is “fair and equitable, and feasible.”
The words “'fair and equitable” are words of art; we have made unmistakably clear that compromising the rights of senior creditors to protect junior creditors is not “fair and equitable” treatment. Case v. Los Angeles Lumber Co., 308 U. S. 106, 115-116; Consolidated Rock *334Co. v. Du Bois, 312 U. S. 510, 527-529. We said in the Du Bois case:
"[I]t is plain that while creditors may be given inferior grades of securities, their 'superior rights’ must be recognized. Clearly, those prior rights are not recognized, in cases where stockholders are participating in the plan, if creditors are given only a face amount of inferior securities equal to the face amount of their claims. They must receive, in addition, compensation for the senior rights which they are to surrender. If they receive less than that full compensatory treatment, some of their property rights will be appropriated for the benefit of stockholders without compensation. That is not permissible.” Id., at 528-529.
The present plan is likewise infirm because it provides junior creditors with immediate, partial payment, while making the United States with a prior claim accept delayed and therefore discounted payment of its claim with all the attendant risks. If the United States is to forgo the right to be paid out of the first available funds, it must receive equivalent compensation in return. The Court of Appeals thought that it contradicted § 216 and § 221 to apply § 3466 to a Chapter X plan. Today we take the contrary view. Section 3466 is relevant in defining the priority; § 216 and § 221 are relevant in providing how that priority shall be honored.