Textile Mills Securities Corporation v. Commissioner of Internal Revenue

• Decision Date: 08 December 1941
• Docket Number: No. 34,34
• Citation: 314 U.S. 326,62 S.Ct. 272,86 L.Ed. 249
• Parties: TEXTILE MILLS SECURITIES CORPORATION v. COMMISSIONER OF INTERNAL REVENUE
• Court: U.S. Supreme Court

314 U.S. 326

62 S.Ct. 272

86 L.Ed. 249

TEXTILE MILLS SECURITIES CORPORATION

v COMMISSIONER OF INTERNAL REVENUE.

No. 34.

Argued Nov. 10, 1941.

Decided Dec. 8, 1941.

Mr. E. S. Kochersperger, of Washington, D.C., for petitioner.

Mr. Arnold Raum, of Washington, D.C., for respondent.

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, 26 U.S.C.A. Int.Rev.Acts, page 345 et seq., 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 (3 Cir., 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

The problem arises because § 117 of the Judicial Code, 28 U.S.C. § 212, 28 U.S.C.A. § 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 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 judges⁵ who were to be 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, 28 U.S.C.A. § 216, 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 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, 28 U.S.C.A. § 213, 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 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 'ac- cording 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, 28 U.S.C.A. § 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 record, with appellate jurisdiction', it cannot readily be inferred that the provision for three judges is a limitation only on the number who may hear and decide a case. There are numerous functions of the court, as a 'court of record, with appellate jurisdiction', other than hearing and deciding appeals. Under the Judicial Code these embrace prescribing the form of writs and other process and the form and style of its seal (§ 122, 28 U.S.C.A. § 219); the making of rules and regulations (§ 122); the appointment of a clerk (§ 124, 28 U.S.C.A. § 221) and the approval of the appointment and removal of deputy clerks (§ 125, 28 U.S.C.A. § 222); and the fixing of the 'times' when court shall be held. § 126. Furthermore, those various sections of the Judicial Code provide that each of these functions shall be performed by the 'court'. In that connection it should be noted that most of them derive, as does § 117, from § 2 of the Act of March 3, 1891. The first sentence of § 2 provided that the court 'shall consist of three judges'. The next sentence stated that 'Such court shall prescribe the form and style of its seal and the form of writs and other process and procedure', etc. In that setting it is difficult to perceive how the word 'court' in the second sentence was used in a different sense than in the preceding sentence. And we look in vain for any indication¹² that when those separate sentences were sectionalized in the Code, they acquired a meaning which they did not have in § 2 of the Act of March 3, 1891.

We cannot conclude, however, that the word 'court' as used in those other provisions of the Judicial Code means only three judges. That would not only produce a most awkward situation; it would on all matters disenfranchise some circuit judges against the clear intendment of § 118. Nor can we conclude that the word 'court' means only three judges when the court is sitting, but all the judges when other functions are performed. Certainly there is no specific authority for that construction. And it is difficult to reach that conclusion by inference. For to do so would be to imply that Congress prohibited some circuit judges from participation in the most important function of the 'court' (the hearing and the decision of appeals), though allowing all of them to perform the other functions. Such a prohibition as respects the ordinary responsibilities of a judicial office should be inferred only under compelling necessity, since a court usually will consist of all the judges appointed to it. That necessity is not present here. The ambiguity in the statute is doubtless the product of inadvertence. Though the problem of construction is beset with difficulties, the conclusion that § 117 provides merely the permissible complement of judges for a circuit court of appeals results in greater harmony in the statutory scheme¹³ than if the language of s 117 is taken too literally. And any sacrifice of literalness for common sense does no violence to the history of § 117. That history is largely negative in the sense that there is no clear statement by sponsors of this legislation that § 118 read in light of § 117 prevents the conclusion which we have reached.¹⁴...