Court Opinion

ID: 9651636
Source: CourtListenerOpinion
Date Created: 2023-08-23 16:29:39.481975+00
Date Added: 2024-06-11T13:28:32.158650
License: Public Domain

DENMAN, Circuit Judge
(concurring).
I prefer to confine my concurrence on the question of res judicata and jurisdiction to the controlling effect of the decision in Blair v. Commissioner, 300 U.S. 5, 9, 57 S.Ct. 330, 81 L.Ed. 465. In that case it appears there had been a previous case between Blair and the Commissioner, finally decided in the United States Circuit Court of Appeals for the 7th Circuit, 83 F.2d 655, in which a tax had been imposed on Blair on the construction of a clause of a testamentary trust, made and enforceable in Illinois, holding it a “spendthrift” trust.
Thereafter there was created what the Supreme Court describes as “a new situation.” This consisted of a decision in a proceeding in an Illinois court in which the pertinent trust clause was held not to be a “spendthrift” trust.
In a second suit between Blair and the Commissioner involving the same question of taxation, this intervening new situation was held so to change the question of law involved that the first decision was not res judicata of the second suit. The Supreme Court held: “It is not necessary to review the respective contentions upon this point, as we think that the ruling in the Tait Case is not applicable. That ruling and the reasoning which underlies it apply where in the subsequent proceeding, although relating to a different tax year, the questions presented upon the facts and the law are essentially the same. Tait v. Western Maryland Ry. Co., supra, 289 U.S. 620, at pages 624, 626, 53 S.Ct. 706, 707, 708, 77 L.Ed. 1405. Here, after the decision in the first proceeding, the opinion and decree of the state court created a new situation. The determination of petitioner’s liability for the year 1923 had been rested entirely upon the local law. Commissioner v. Blair [7 Cir.] 60 F.2d 340, 342, 344. The supervening decision of the state court interpreting that law in direct relation, to this trust cannot justly be ignored in the present proceeding so far as it is found that the local law is determinative of any material point in controversy. Compare Freuler v. Helvering, 291 U.S. 35, 54 S.Ct. 308, 78 L.Ed. 634; Hubbell v. Helvering [8 Cir.] 70 F.(2d) 668.” (300 U.S. 5, 9, 57 S.Ct. 330, 331, 81 L.Ed. 465).
In this bankruptcy proceeding we may assume that the statute, held unconstitutional in the Ashton case, is identical with that subsequently enacted upon which this proceeding rests, just as the same trust was construed in both suits between Blair and the Commissioner. However two new situations have been created since the prior proceeding under the first statute involving the same district and dissentient bonds there and a final decision that it was un*680constitutional. These new situations are (a) the enactment of the second statute and (b) a decision of the United States Supreme Court that it is constitutional.
Just as the Illinois court was the appropriate tribunal to determine the character of the Illinois trust, so here the United States Supreme Court is the appropriate tribunal to determine the constitutionality of the second bankruptcy act on which this proceeding rests. It is the “new situation” of the Supreme Court in the Bekins case which makes the decision of this court in the first proceeding involving the same District and the same bonds, not res judi-cata of the District’s present contentions regarding the rights of the same bonds and their holders.
The case of Tait v. Western Maryland Railway Co., 289 U.S. 620, 53 S.Ct. 706, 77 L.Ed. 1405, strongly relied on by appellants, differs from the case at bar in the absence of such an intervening decision on the statute as the decision in the Bekins case.
.Even assuming the identity of the two acts, and that the decision in Blair v. Commissioner is not applicable, it is of controlling significance that they are bankruptcy acts. As stated by the Supreme Court in the Ashton case, 298 U.S. page 530, 56 S.Ct. 892, 80 L.Ed. 1309, it is peculiarly the character of the bankruptcy power, delegated by the constitution to the congress, that it .is intended to alter the contract rights of the .bankrupt’s creditors. This power as much applies to contract right not to be subject to a municipal bankruptcy proceeding declared by the court’s decision on the'bonds, as to any other rights of their ownership by the bondholders. It is my opinion that because the second act is a bankruptcy proceeding, so held valid by the Supreme Court, it may take from the bondholders the right adjudicated respecting the bonds in the first proceeding.
With regard to the right of th.e Reconstruction Finance Corporation to consent for the bonds held by them under the refinancing contract with the District I rest my concurrence on the provision of the instant statute that: “Any agency of the United States holding securities acquired pursuant to contract with any petitioner under this chapter shall be deemed a creditor in the amount of the full face value thereof.” 11 U.S.C.A. § 402.
The Reconstruction Finance Corporation is holding the bonds “pursuant to a contract with” the petitioning District. It is a matter of indifference whether the contract is for a pledge of the bonds or a contract giving the Reconstrdction Finance Corporation the right to treat the bonds either as a pledge or as subject to acquisition by purchase. It is the sort of contract likely to arise in such a refinancing transaction and what Congress must have had in mind in enacting the provision.
In other respects I concur in the majority opinion.