Court Opinion

ID: 8723881
Source: CourtListenerOpinion
Date Created: 2022-11-26 08:53:27.427588+00
Date Added: 2024-06-11T16:59:12.689212
License: Public Domain

JONES, Chief Judge
(dissenting).
The basic act creating the Reconstruction Finance Corporation, as stated in its title, was “To provide emergency financing facilities for financial institutions, to aid in financing agriculture, commerce, and industry, and for other purposes.” 47 Stat. 5.
Section 5 of the same act, 47 Stat. 6, clearly shows that its primary purpose was to make loans to institutions in distress and that all other powers were incidental.
In these circumstances the claimant must bring itself squarely within the provision for a deduction allowance by showing an issuance of stock for the purpose of conveying actual ownership to the Government rather than as a means of affording a measure of security for money borrowed from the defendant. This it has not done. Practically all the relevant facts in this case indicate that the note and stock were issued not for the purpose of giving the Government an ownership, but for the purpose of affording the defendant a measure of security for money advanced, the repayment of which obligation would deprive the Government of any indicia of ownership.
The form is not necessarily decisive. It is the substance that governs, just as a mortgage clause at the end of an otherwise complete deed of transfer will make the transaction a secured loan by thus disclosing its purpose.
But here even the form and subsequent operations show a borrowing transaction.
In the instant case the fixed sum, the definite maturity date, the fixed rate of interest, the absence of voting rights, the sinking fund, and other facts and circumstances indicate a debt.
I would hold that the note in question evidenced borrowed invested capital and that the commissioner’s determination was correct.
I would dismiss the petition.