314 U.S. 326 (1941), 34, Textile Mills Securities Corp. v. Commissioner of Internal Revenue

Docket Nº:No. 34
Citation:314 U.S. 326, 62 S.Ct. 272, 86 L.Ed. 249
Party Name:Textile Mills Securities Corp. v. Commissioner of Internal Revenue
Case Date:December 08, 1941
Court:United States Supreme Court
 
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Page 326

314 U.S. 326 (1941)

62 S.Ct. 272, 86 L.Ed. 249

Textile Mills Securities Corp.

v.

Commissioner of Internal Revenue

No. 34

United States Supreme Court

Dec. 8, 1941

Argued November 10, 1941

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

1. A Circuit Court of Appeals may be composed of all the circuit judges of the circuit in active service, more than three in number, sitting en banc. P. 333.

2. The expenses of lobbying and propaganda paid by an agent employed to secure legislation from Congress authorizing the recovery of German properties seized during the World War under the Trading with the Enemy Act are not deductible as "ordinary and necessary expenses" of the agent within the meaning of § 23(a) of the Revenue Act of 1928, construed by Art. 262 of Treasury Regulations 74. P. 335.

117 F.2d 62, affirmed.

Certiorari, 312 U.S. 677, to review a judgment reversing a decision of the Board of Tax Appeals, 38 B.T.A. 623, which had overruled a deficiency assessment based on the disallowance of certain deductions.

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DOUGLAS, J., lead opinion

MR. JUSTICE DOUGLAS delivered the opinion of the Court.

This case presents two problems: (1) whether a Circuit Court of Appeals may be composed of all the circuit judges of the circuit in active service, more than three in number, sitting en banc; (2) whether petitioner may deduct under the Revenue Act of 1928, 45 Stat. 791, certain expenses incurred by it under contracts in connection with the presentation of claims to Congress on behalf of former enemy aliens for the procurement and enactment of amendatory legislation authorizing the payment of the claims. We granted the petition for certiorari because of the public importance of the first problem and the contrariety of the views of the court below (117 F.2d 62) and judges of the Circuit Court of Appeals for the Ninth Circuit (Lang's Estate v. Commissioner, 97 F.2d 867) as respects its solution.

First: there are five circuit judges,1 in active service,2 of the Circuit Court of Appeals for the Third Circuit. All five heard and decided this case. Though they divided three to two on the deductibility of the expenses in question, they were unanimous in the conclusion that five were authorized to hear and decide the case.3

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The problem arises because § 117 of the Judicial Code (28 U.S.C. § 212, 36 Stat. 1131) provides that

There shall be in each circuit a circuit court of appeals, which shall consist of three judges, of whom two shall constitute a quorum, which shall be a court of record, with appellate jurisdiction, as hereinafter limited and established.

That provision derives from § 2 of the Act of March 3, 1891, 26 Stat. 826, which established the circuit court of appeals.4 Though Congress, by that Act, created these new courts, it did not make provision for the appointment [62 S.Ct. 275] to them of a new group of judges. It provided, however, by § 3 of that Act, that the Chief Justice and Associate Justices of the Supreme Court assigned to each circuit and the circuit judges and district judges within each circuit "shall be competent to sit as judges of the circuit court of appeals within their respective circuits." Thus, it is apparent that the newly created circuit court of appeals was to be composed of only three judges,5 who were to be

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drawn from the three existing groups of judges -- the circuit justice, the circuit judges, and the district judges.

That arrangement continued until enactment of the Judicial Code. Act of March 3, 1911, c. 231, 36 Stat. 1087. The Judicial Code abolished the existing circuit courts. §§ 289, 297. It carried over into § 117 without substantial change the provision of § 2 of the Act of March 3, 1891, that there should be a circuit court of appeals in each circuit "which shall consist of three judges." Though this section was said merely to represent existing law,6 § 118 of the Judicial Code provided for four circuit judges in the Second, Seventh, and Eighth Circuits, two in the Fourth Circuit, and three in each of the others. An anomalous situation was presented if § 117 were to be taken at that juncture as meaning that the circuit court of appeals would continue to be composed of only three, in face of the fact there were more than three circuit judges in some circuits. Though § 3 of the Act of March 3, 1891, made the circuit judges "competent to sit as judges of the circuit court of appeals within their respective circuits," § 120 of the Judicial Code, into which the provisions of § 3 were carried, eliminated the circuit judges from the groups of judges "competent to sit." Yet it retained the provision that the circuit justices and the district judges were so qualified. We agree, however, with the view of the court below that the circuit judges became ex officio judges of the respective circuit courts of appeal when the circuit courts were abolished. Though § 120 did not designate them as "competent to sit," its other provisions made clear that they were intended to sit. Thus, it was provided that the district judges should be drawn upon only in case the court could not be made up by the

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circuit justices and the circuit judges.7 Yet, if § 117 were to be read literally, the circuit court of appeals was to "consist" of only three judges, in spite of the fact that Congress had already provided in some circuits for more than three circuit judges. Clearly, where there were four, all could not be members of a court of three. Yet there was plainly inferable a Congressional purpose to constitute in some circuits a circuit court of appeals of four judges.8

Any doubts on that score9 were resolved by the Act of January 13, 1912, c. 9, 37 Stat. 52, which amended § 118 of the Judicial Code by the addition of the provision that

The circuit judges in each circuit shall be judges of the circuit court of appeals in that circuit, and it shall be the duty of each circuit judge in each circuit to sit as one of the judges of the circuit court of appeals in that circuit from time to time according to law.

Senator Sutherland, who had charge of the bill in the Senate, stated on the floor:

It makes no change whatever in the existing law except to make it clear that the circuit judges in the various circuits of the United States shall constitute the circuit

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court of appeals.10

The purpose seems plain: the size of each circuit court of appeals was not to be less than the number of circuit judges authorized by law.11

And so we reach the question as to whether the avowed purpose of § 118 was defeated by § 117. We do not think it was.

That purpose was not thwarted by the provision in the 1912 amendment to § 118 that

it shall be the duty of each circuit judge in each circuit to sit as one of the judges of the circuit court of appeals in that circuit from time to time according to law.

It has been suggested that "according

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to law" refers to § 117. In our view, however, it is the time of the sitting which is to be "according to law." Hence, the reference must be to § 126 of the Judicial Code, 28 U.S.C. § 223, which regulates the times when the circuit courts of appeal shall sit.

If § 117 could reasonably be construed to provide that the court, when sitting, should consist of three judges drawn from a panel of such larger number as might from time to time be authorized, reconciliation with § 118 would be obvious. Sec. 117, however, contains no such qualification. And, since it establishes the court as a "court of...

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