Commissioner of Internal Revenue v. Bedford Estate
| Citation | 65 S.Ct. 1157,89 L.Ed. 1611,325 U.S. 283 |
| Decision Date | 21 May 1945 |
| Docket Number | No. 710,710 |
| Parties | COMMISSIONER OF INTERNAL REVENUE v. BEDFORD'S ESTATE |
| Court | United States Supreme Court |
Miss Helen R. Carloss, of Washington, D.C., for petitioner.
Mr. Erwin W. Griswold, of Cambridge, Mass., for respondent.
At the threshold, the jurisdiction of the Court is challenged on the ground that the petition for the writ of certiorari was not filed within three months after 'entry' of the 'judgment' below as required by the Judiciary Act of February 13, 1925.1
The steps by which the case came here are these. On August 8, 1944, the Circuit Court of Appeals for the Second Circuit (144 F.2d 272) filed a document entitled 'Opinion'; on the same day the Clerk made a docket entry reading, 'Order reversed, A. N. Hand, C.J.'; on August 29, 1944, a document entitled 'Order for Mandate' was filed, and the mandate issued that day; on November 29, 1944, the petition for writ of certiorari was filed. The petition was filed too late if the 'Opinion', as respondent contends, constitutes the 'judgment'. It was filed in time, if the 'Order for Mandate' may properly be deemed the 'judgment'. The issue was ably pressed before us, and, since it concerns our power to review cases coming from what is perhaps the busiest circuit, it calls for more than summary treatment.
Even long continued practice cannot alter the limits within which Congress has bound the appellate jurisdiction of this Court. See Department of Banking v. Pink, 317 U.S. 264, 63 S.Ct. 233, 87 L.Ed. 254. But such practice may be decisive in interpreting procedural ways which, as a matter of dialectic or abstract analysis, may appear dubious. We are naturally impressed by the common understanding that in the Circuit Court of Appeals for the Second Circuit the so-called 'Order for Mandate' is deemed the judgment. Robertson and Kirkham, Jurisdiction of the Supreme Court of the United States (1936) § 384. We have taken and decided as a matter of course a considerable number of cases in which certiorari was sought within three months after entry of the 'Order for Mandate' but not within three months after the 'Opinion'.2 This practical understanding of the controlling significance, for appellate purposes, of the 'Order for Mandate' is supported and certainly not contradicted by all that is conveyed by the 'Opinion' and 'Order for Mandate' and the Rules of the lower court.
It does not detract from the 'Opinion' as an opinion that in its heading it gives as dates 'Argued January 6, 1944 Decided August 8, 1944', and that it concludes with 'The order of the Tax Court is reversed.' (144 F.2d 272, 274.) The same or similar phrases are commonly employed in opinions of this Court without changing their character as opinions. Nor do like phrases in the opinions of the other circuit courts of appeals turn them into judgments. since in all other circuits judgment orders are separately filed. In spite of its title, the 'Order for Mandate' on its face fulfills the function of such a judgment order. It recites that
'it is now hereby ordered, adjudged, and decreed that the order of said The Tax Court of the United States be and it hereby is reversed.
'It is further ordered that a Mandate issue to the said The Tax Court of the United States in accordance with this decree.
'Deputy Clerk.'
This language plainly imports that this is the judgment and that it is then being rendered. Nor does the fact that the order was prepared by the clerk and bears his signature detract from its quality as a judgment. A judgment 'is the act of the court', Ex parte Morgan, 114 U.S. 174, 175, 5 S.Ct. 825, 29 L.Ed. 135, even though a clerk does all of the ministerial acts, as here, in conformity with his court's standing instructions.
The Rules of the court below governing opinions, rehearings, issuance of mandate and stay of mandate are invoked to show that the 'Opinion' is the appealable 'judgment'. These Rules, like other rules, are not phrased with such fastidious precision as to make of all the parts a perfect harmony. But while substantial debating points may be taken,3 nothing in these Rules contradicts the natural meaning yielded by the terms of the 'Opinion' and the 'Order of Mandate', as reflected in the practice of the Second Circuit and in our own, which treats not the 'Opinion' but the 'Order for Mandate' as the order of judgment. The Rules would have to be far less artistic than they are to warrant us in holding that the Circuit Court of Appeals has consistently misinterpreted some of its own Rules. Whether the announcement of an opinion and its entry in the docket amounts to a judgment for purposes of appeal or whether that must await some later formal act, ought not to be decided on nice-spun argumentation in disregard of the judicial habits of the court whose judgment is called into question, of the bar practising be- fore it, of the clerk who embodies its procedural traditions, as well as in conflict with the assumption of the reviewing court.
But now that the existing practice has revealed abstract disharmonies, if not difficulties, the Circuit Court of Appeals will doubtless establish a more tidy system for meeting the technical requirements for review here. The normal time for entering a judgment, as the starting point for determining whether review will be sought or whether there has been acquiescence in a judgment, should be fixed. The uncertainties inherent in litigation should not be needlessly prolonged. The entry of the 'Order for Mandate', which in the Second Circuit begins the running of the period for appeal, is apparently variable and vagrant. In these days of rapid communication, the statutory allowance of three months is more than ample for an unsuccessful litigant to determine whether to seek further review. So long a period ought not to be extended by delay in entering a judgment nor should the burden of securing such entry be put upon the successful litigant. There are bound to be diversities in the modes of rendering and recording judgments of the forty-eight systems of State courts. Uniformity in the entry of judgment among the eleven circuits forming the single federal judicature ought to be capable of achievement without loss to the geographic flexibility of the system.
This brings us to the merits, which involve the validity of an income tax deficiency assessment for 1937. The case is this. The estate of Edward T. Bedford, who died May 21, 1931, included 3,000 shares of cumulative preferred stock (par value $100) of Abercrombie & Fitch Company. Pursuant to a plan of recapitalization respondent, as executor of the estate, in 1937 exchanged those shares for 3,500 shares of cumulative preferred stock (par value $75), 1,500 shares of common stock (par value $1), and $45,240 in cash (on the basis of $15.08 for each of the old preferred shares). The recapitalization had been pro- posed because the company, after charging against its surplus account stock dividends totaling $844,100, distributed in 1920, 1928, and 1930, had incurred a book deficit in that account of $399,771.87. Because of this deficit, the company, under applicable State law, was unable to pay dividends although for the fiscal year ending January 31, 1937 it had net earnings of $309,073.70.
By comparing the fair market value of the old preferred shares at the date of Bedford's death with the market value of the new stock and cash received the gain to his estate was $139,740. Admittedly the recapitalization was a reorganization, § 112(g)(1)(D) of the Revenue Act of 1936, 49 Stat. 1648, 1681, 26 U.S.C. § 112(g)(1)(E), 26 U.S.C.A. Int.Rev.Code, § 112(g)(1)(E), so that only the cash received, but none of the stock, is taxable. Sections 112(b)(3), 112(c)(1), 49 Stat. 1648, 1679, 1680, 26 U.S.C. §§ 112(b)(3), 112(c)(1), 26 U.S.C.A. Int.Rev.Code, § 112(b)(3), (c)(1). The sole issue is whether the cash, $45,240, is taxable as a dividend, or merely as a capital gain to the extent of 40%. The Tax Court sustained the determination of the Commissioner that the cash was taxable as a dividend, 1 T.C. 478, but was reversed by the Circuit Court of Appeals. 144 F.2d 272. On a showing of importance to the administration of the Revenue Acts, we granted certiorari. 323 U.S. 707, 65 S.Ct. 439.
The precise question is whether the distribution of cash in this racapitalization 'has the effect of the distribution of a taxable dividend' under § 112(c)(2) of the Revenue Act of 1936 and as such is fully taxable, o is taxable only at the rate of 40% as a capital gain under § 112(c)(1) of that Act. The relevant provisions read: 26 U.S.C.A. Int.Rev.Acts, page 857.
The history of this legislation is not illuminating. Section 112(c)(2) originated in § 203(d)(2) of the Revenue...
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