PETITION FOR A WRIT OF CERTIORARI TO THE [Petitioner] prays that a writ of certiorari issue to review the judgment of the United States Court of Appeals for the Second Circuit, entered in the above-entitled case on May 25, 1948. OPINIONS BELOW The memorandum opinion of the referee in bankruptcy (R. 28) is unreported. The opinion of the District Court (R. 19-25) is reported in 73 F. Supp. 685. The opinion of the Circuit Court of Appeals (R. 41) is reported in 168 F. 2d 272. JURISDICTION The judgment of the Circuit Court of Appeals was entered on May 25, 1948. (R. 45.) The jurisdiction of this Court is invoked under 28 U.S.C., Section 1251 (1). [In petitions from state courts, add material referred to in Rule 12 (1), 3rd paragraph. See pp. 171-2, supra.] QUESTION PRESENTED Whether an estate in bankruptcy is liable for interest upon tax claims of the United States for the period from and after the date of the filing of the petition in bankruptcy until the claims are paid. STATUTE INVOLVED The pertinent statutory provisions are printed in Appendix A, infra, pp. 12-15. STATEMENT An involuntary petition in bankruptcy was filed against Union Fabrics, Inc., on December 20, 1939. (R. 4.) The United States and the State of New York filed tax claims, asking for interest to the date of payment of the claims. By notices dated July 1 and 2, 1946, the trustee in bankruptcy filed objections to the demands for interest on these claims of the United States and of the State of New York beyond the date of the filing of the petition in bankruptcy. (R. 5.) After consolidated hearings, the referee in bankruptcy, on January 24, 1947, filed separate findings of fact and conclusions of law and on the same day filed a consolidated memorandum overruling the trustee's objections to the allowance of interest to the date of payment on the claims of both the United States and the State of New York, and entered orders to that effect. (R. 5, 26-30.) Thereafter the referee reopened the proceeding for the purpose of hearing a further objection by the trustee, based upon certain alleged equitable considerations, but sustained the objections to this evidence and made an order to that effect. (R. 5-8.) Upon a petition for review, the district judge reversed the orders allowing interest on the tax claims to the date of payment and sustaining objections to the trustee's offer of proof at the rehearing. (R. 14-15, 17-19.) He held that interest on the tax claims of both the United States and the State of New York should be treated in the same manner as interest on other claims and not allowed beyond the date of the filing of the petition. (R. 20-24.) With respect to the evidence offered to explain a long delay in the administration of the estate, he regarded such equitable considerations, if pertinent to the determination, as sufficiently shown by the records of the court to augment other reasons for the denial of such interest. (R. 24-25.) The court below affirmed the orders of the District Court upon the authority of Saper v. City of New York, 168 F. 2d 268,2 decided the same day, as representing the view of the majority of the five judges, sitting in 1 The claims of the United States were for social security taxes for the years 1936, 1937, 1938 and 1939, income taxes for 1935 and 1936, and a miscellaneous tax for 1935 (R. 20), aggregating $9,865.35 (R. 7). The New York State tax claims were for franchise taxes for 1936, 1937 and 1938 and for unemployment insurance taxes (R. 20), aggregating in all $1,660.92 (R. 7). The amount of interest at the rate of 6 per cent per annum on $11,526.27, the aggregate of the claims of both the United States and the State of New York, from December 20, 1939, to February 6, 1947, the date of the trustee's petition to reopen the proceeding, was $4,930.08. (R. 7.) 2 For convenience the opinion of the court below in the Saper case is printed as Appendix B, infra, pp. 16-25. either the Saper case or in the instant case, who considered the issue here involved. (R. 42.) However, two of the three judges, who sat in the instant case, did not agree with the opinion of the other three judges who sat in the Saper case nor with the decision of the District Court, but acquiesced in the decision of the court below on this question in the Saper case, supra, since: Such a mode of dealing with the appeal before us will settle the law in this circuit as to the allowance of interest on tax claims unless the Supreme Court should hereafter reach a different conclusion. Nevertheless, in the opinion below, they considered it advisable to state their personal views which were in accord with those of the First Circuit Court of Appeals in Davie v. Green, 133 F. 2d 451 (R. 42). SPECIFICATION OF ERRORS TO BE URGED The Circuit Court of Appeals erred: 1. In holding that interest on the tax claims of the United States should be allowed only to the date of the filing of the petition in bankruptcy. 2. In failing to hold that interest on the tax claims of the United States should be allowed after the date of the filing of the petition in bankruptcy and to the date of the payment of these claims. 3. In affirming the order of the District Court. REASONS FOR GRANTING THE WRIT 1. The decisions of the court below in the instant case and in Saper v. City of New York, 168 F. 2d 268 (Appendix B, infra, pp. 16-25), upon the authority of which the instant case was decided, are directly in conflict with the decision of the First Circuit Court of Appeals in Davie v. Green, 133 F. 2d 451. This conflict was conceded in the court below both by the three majority judges who sat in the Saper case3 (Appendix B, infra, p. 18) and by the two judges in the minority who wrote the opinion in the instant case* (R. 42-43). In the Saper case, the majority of the court below reversed the decision of Judge Coxe in the District Court for the Southern District of New York, sub nom. In re Spotlight Productions, 75 F. Supp. 458, whose opinion supported the Government's position here; on the other hand, in the instant case, on the authority of the Saper case, the opinion of the District Court by Judge Bright (R. 19-25) was affirmed. Indicating the necessity for the settlement by this Court of the disputed question here involved, Judge Clark, writing for the court below in the Saper case, succinctly defined the division in the court below and the conflict of the majority with the decision 3 Judges Learned Hand, Swan and Clark. Judges Augustus N. Hand and Chase. 5 Judge Clark was the third judge who sat in the instant case. While concurring in the result (R. 44), he did not, of course, join in the opinion below, which, as already stated, expressed the contrary views of Judges Augustus N. Hand and Chase. of the First Circuit Court of Appeals, as follows (Appendix B, infra, pp. 17-18): The matter has been in dispute and must remain so until settled by the Supreme Court. As will appear, the members of this court are not in accord as to the result to be reached. The court as presently constituted is agreed that Judge Coxe's decision, D. C. S. D. N. Y., 75 F. Supp. 458, should be reversed. His decision, however, was in accord with Davie v. Green, 1 Cir., 133 F. 2d 451 (which had reversed a referee and a district judge), and has the support of some other district court opinions, e.g., In re Flayton, D. C. E. D. N. Y., 42 F. Supp. 1002; and cf. In re L. Gandolfi & Co., D. C. S. D. N. Y., 42 F. Supp. 706. It is contrary to the decision of Judge Bright in Re Union Fabrics, D. C. S. D. N. Y., 73 F. Supp, 685, the appeal from which is decided herewith, with the writer of this opinion alone of the court there sitting in agreement with Judge Bright. 2. Clearly, the question presented is of importance in the administration of the federal bankruptcy and tax laws. Indeed, in the Saper case the court below observed (Appendix B, infra, p. 17): The decision must affect all tax claims in bankruptcy, from those of the federal government to those of any state or subdivision thereof. Settlement of the question by this Court is plainly in the public interest, since it is likely to be presented in almost every bankruptcy proceeding, including many hundreds now pending, and involves not only tax claims of the Federal Government, but also tax claims of every state or subdivision thereof. Bankruptcy Act of 1898, c. 541, 30 Stat. 544, Sections 57j and n and 64a, as amended (Appendix A, infra, pp. 12-15). 6 3. The decision of the court below is believed to be erroneous and the conflicting decision of the First Circuit Court of Appeals in Davie v. Green, supra, correct. Moreover, the decision below probably conflicts with applicable decisions of this Court. It is generally agreed that in 1924 this Court held, in United States v. Childs, 266 U. S. 304, though without separate discussion, that claims in bankruptcy for taxes drew interest until paid. (First Circuit in Davie v. Green, supra, and the court below, both in the majority opinion in the Saper case (Appendix B, infra, p. 19) and the minority opinion in the instant case.) (R. 42-43.) In the Saper case, however, the majority of the court below held that Congress, by the Act of June 22, 1938, c. 575, 52 Stat. 840, commonly known as the Chandler Act, changed the prior rule with the consequence that thereafter claims for taxes, like other 6 However, as noted in the opinion below, the question was raised in this Court in the arguments of counsel as reported. (R. 42-43). Indeed, it had been expressly decided in the Government's favor by the court below, in the cited case, sub nom. In re J. Menist & Co., 290 Fed. 947, 949-950 (C. C. A. 2d). |