Court Opinion

ID: 9449535
Source: CourtListenerOpinion
Date Created: 2023-08-04 16:14:33.361756+00
Date Added: 2024-06-11T17:31:52.241557
License: Public Domain

GRIFFIN B. BELL, Circuit
Judge (dissenting).
I dissent. I would affirm the judgment of the District Court without reaching the capital asset question, either as presented here or in Nelson Weaver Realty Co. v. Commissioner, 5 Cir., 1962, 307 F.2d 897. The sale or exchange there was undoubted. Weaver sold his mortgage banking business. The sole question was whether what was sold constituted capital assets.
Here there is a preliminary or threshold question of whether there was a sale or exchange. In fact, Bisbee-Bald-win refused to sell. Four out of several lending institutions represented by Bis-bee-Baldwin shortly thereafter terminated their relationship with Bisbee-Baldwin. Two paid a termination fee required by contract. Two paid a negotiated fee in an amount customary in the trade. Three of the lending institutions chose the mortgage banker to represent them who had attempted to purchase their accounts from Bisbee-Baldwin, while the other chose a third mortgage banker.
The mortgage bankers reimbursed the lending institutions for the termination fees paid Bisbee-Baldwin, but by no stretch of my imagination can it be said that Bisbee-Baldwin made a sale to either of the lending institutions, or to the mortgage bankers who ended up with the accounts. Bisbee-Baldwin was simply terminated as the agent for these institutions, and continued in the mortgage banking business representing its remaining accounts.
The District Court, as did this, court in United States v. Eidson, 5 Cir., 1962, 310 F.2d 111, decided the case on two grounds: there was no sale or exchange, and the subject matter of the alleged sale or exchange was not a capital asset. Nelson Weaver was decided to the contrary by our court after the District *937Court decision, but it does not help the taxpayer on the question of sale or exchange. And this ground remains as a sound basis in law and in fact for the decision of the District Court. Cf. Commissioner v. Starr Bros., Inc., 2 Cir., 1953, 204 F.2d 673; General Artist Corp. v. Commissioner, 2 Cir., 1954, 205 F. 360, cert. den., 346 U.S. 866, 74 S.Ct. 105, 98 L.Ed. 376; and Leh v. Commissioner, 9 Cir., 1958, 260 F.2d 489. See also Roscoe v. Commissioner, 5 Cir., 1954, 215 F.2d 478; and that portion of Eidson, supra, having to do with the question of sale or exchange, and Mertens Law of Federal Income Taxation, Vol. 3B, § 22.-92.
The rule that we are to look through form to substance can hardly suffice to transform the cancellation of an agency, over the protest of the agent, into a sale or exchange. The agent’s rights simply came to an end. The language of the District Court set out in footnote 4 of the majority opinion, supra, amply demonstrates that there was no sale or exchange :
“The contracts] provided for termination without cause by either party. Plaintiff could not have sold its rights under the contract [s] unless the investor gave approval. Plaintiff did not assign its rights. Its contracts were terminated and the investors then entered into new contracts with other agents. * * * Plaintiff had no choice in selecting the new agent. The sums received by plaintiff were determined by the termination clauses in its contracts with the investors or by trade custom. There was no bargaining as to price between plaintiff and the new agents. The elements which normally are involved in a sale or exchange are lacking in this situation.”
Thus it is that the law, in my judgment, is duly expanded in this area by the majority opinion. That this has been done is all the more regrettable in the light of the unnecessary intra-circuit conflict that the majority establishes on the question of what constitutes a capital asset. Cf. Nelson Weaver, supra.
In my view, the judgment of the District Court should be affirmed for the reason that there was no sale or exchange. Any question as to the correctness of the Nelson Weaver capital asset rule should be postponed until a case presenting the question reaches us.