CARDOZO, J., dissenting. 298 U.S. This change like the others had to meet a storm of criticism in Congress and the courts. Warren, op. cit. supra, at pp. 44, 45, 118–120; In re Klein, reported in a note to Nelson v. Carland, 1 How. 265, 277; Louisville Joint Stock Land Bank v. Radford, supra. Since the enactment of § 77 in March, 1933 (47 Stat. 1474; 11 U. S. C. § 205), a court of bankruptcy has been empowered to reorganize railroad corporations unable to pay their debts as they mature (Continental Illinois National Bank v. Chicago, R. I. & P. Ry. Co., supra), and since the enactment of § 77 B in June, 1934 (48 Stat. 912; 11 U. S. C. § 207), a like jurisdiction has existed in respect of business corporations generally. The Act for the relief of local governmental units is a stage in an evolutionary process which is likely to be misconceived unless regarded as a whole. Throughout that evolutionary process, the court has hewn a straight path." Disclaiming a willingness to bind 6 Warren, Bankruptcy in United States History (1935), p. 9: "The trail [of the bankruptcy clause] is strewn with a host of unsuccessful objections based on constitutional grounds against the enactment of various provisions, all of which are now regarded as perfectly orthodox features of a bankruptcy law. Thus, it was at first contended that, constitutionally, such a law must be confined to the lines of the English statute; next, that it could not discharge prior contracts; next, that a purely voluntary law would be non-uniform and therefore unconstitutional; next, that any voluntary bankruptcy was unconstitutional; next, that there could be no discharge of debts of any class except traders; next, that a bankruptcy law could not apply to corporations; next, that allowance of State exemptions of property would make a bankruptcy law non-uniform; next, that any composition was unconstitutional; next, that there could be no composition without an adjudication in bankruptcy; next, that there could be no sale of mortgaged property free from the mortgage. All these objections, so hotly and frequently asserted from period to period, were overcome either by public opinion or by the Court." The Emergency Farm Mortgage Act of 1933 was condemned in Louisville Joint Stock Land Bank v. Radford, supra, because destructive of rights of property protected by the Fifth Amendment. 513 CARDOZO, J., dissenting. itself by a cramping definition, it has been able none the less to indicate with clearness the main lines of its approach. In substance, it agrees with Cowen, J., who wrote: "I read the constitution thus: 'Congress shall have power to establish uniform laws on the subject of any person's general inability to pay his debts throughout the United States'" (Kunzler v. Kohaus, 5 Hill 317, 321), and with Blatchford, J., writing in the Matter of Reiman, Fed. Cas. No. 11,673, p. 496, that the subject of bankruptcy cannot properly be defined as "anything less than the subject of the relations between an insolvent or nonpaying. . . debtor, and his creditors, extending to his and their relief." See Hanover National Bank v. Moyses supra; Continental Illinois National Bank v. Chicago, R. I. & P. Ry. Co., supra; Louisville Joint Stock Land Bank v. Radford, supra. Such was Story's view also. “A law on the subject of bankruptcies in the sense of the Constitution is a law making provision for persons failing to pay their debts." Story, Commentaries on the Constitution, § 1113, n. 3; cf. Warren, op. cit. supra, at p. 68. It is not necessary that the debtor have any property to surrender. One may resort to a court of bankruptcy though one has used up all one's property or though what is left is exempt. Vulcan Sheet Metal Co. v. North Platte Valley Irrigation Co., 220 Fed. 106, 108; In re Hirsch, 97 Fed. 571, 573; In re J. M. Ceballos & Co., 161 Fed. 445, 450. It is enough that in an omnibus proceeding between a nonpaying debtor on the one side and the creditors on the other, the debtor-creditor relation is to be readjusted or extinguished. Cf. Warren, op. cit. supra, at pp. 8, 144. Cameron Water Improvement District Number One has no assets to surrender. If it shall turn out hereafter that there are any not exempt, the creditors may have them. Cameron Water Improvement District Number One is a debtor in an amount beyond its capacity for CARDOZO, J., dissenting. 298 U.S. payment, and has creditors, the holders of its bonds, who are persuaded that a reduction of the debt will redound to their advantage. Thirty per cent of the creditors had signified their approval of a proposed plan of composition before the filing of the petition, and 66% per cent must give approval before the judge can act. Even then the plan will count for nothing unless the judge. upon inquiry shall hold it fair and good. A situation. such as this would call very clearly for the exercise by a court of bankruptcy of its distinctive jurisdiction if the debtor were a natural person or a private corporation. Is there anything in the position of a governmental unit that exacts a different conclusion? The question is not here whether the statute would be valid if it made provision for involuntary bankruptcy, dispensing with the consent of the state and with that of the bankrupt subdivision. For present purposes one may assume that there would be in such conditions a dislocation of that balance between the powers of the states and the powers of the central government which is essential to our federal system. Cf. Hopkins Federal Savings & Loan Assn. v. Cleary, 296 U. S. 315; United States v. California, 297 U. S. 175. To read into the bankruptcy clause an exception or proviso to the effect that there shall be no disturbance of the federal framework by any bankruptcy proceeding is to do no more than has been done already with reference to the power of taxation by decisions known of all men. McCulloch v. Maryland, 4 Wheat. 316. The statute now in question does not dislocate the balance. It has been framed with sedulous regard to the structure of the federal system. The governmental units of the state may not act under this statute except through the medium of a voluntary 'For taxing districts other than drainage, irrigation, reclamation and levee districts, the requisite percentages are 51% and 75% respectively. 513 CARDOZO, J., dissenting. petition which will evince their own consent, their own submission to the judicial power. Even that, however, is not enough. By subdivision (k), which is quoted in the margin, the petition must be accompanied by the written approval of the state, whenever such consent is necessary by virtue of the local law. There is still another safeguard. By subdivision (e) (6), the composition, though approved by the requisite majority, shall not be confirmed by the judge unless he is satisfied that "the taxing district is authorized by law, upon confirmation of the plan, to take all action necessary to carry out the plan." To cap the protective structure, Texas has a statute whereby all municipalities, political subdivisions and taxing districts in the state are empowered to proceed under the challenged Act of Congress, and to do anything appropriate to take advantage of its provisions. This statute became a law on April 27, 1935 (Texas, Laws 1935, c. 107), after the dismissal of the proceeding in the District Court, but before the reversal of that decision by the Court of Appeals. Being law at that time it was to be considered and applied. United States v. The Peggy, 1 Cranch 103, 110; Danforth v. Groton Water "(k) Nothing contained in this chapter shall be construed to limit or impair the power of any State to control, by legislation or otherwise, any political subdivision thereof in the exercise of its political or governmental powers, including expenditures therefor, and including the power to require the approval by any governmental agency of the State of the filing of any petition hereunder and of any plan of readjustment, and whenever there shall exist or shall hereafter be created under the law of any State any agency of such State authorized to exercise supervision or control over the fiscal affairs of all or any political subdivisions thereof, and whenever such agency has assumed such supervision or control over any political subdivision, then no petition of such political subdivision may be received hereunder unless accompanied by the written approval of such agency, and no plan of readjustment shall be put into temporary effect or finally confirmed without the written approval of such agency of such plans." CARDOZO, J., dissenting. 298 U.S. Co., 178 Mass. 472, 475, 476; 59 N. E. 1033; Robinson v. Robins Dry Dock & Repair Co., 238 N. Y. 271, 281; 144 N. E. 579. There are like statutes in other states. Arizona, Laws 1935, c. 17; California, Laws (Extra Session) 1934, c. 4; Florida, Laws 1933, c. 15878; Ohio, Laws (2nd Special Session) 1934, No. 77. In Texas, at all events, it is clear to the point of demonstration, that the filing of a voluntary petition by a political subdivision does not violate the local law or any local public policy. Petitioners are not the champions of any rights except their own. Premier-Pabst Sales Co. v. Grosscup, ante, p. 226; Hatch v. Reardon, 204 U. S. 152, 160, 161. To overcome an Act of Congress invalidity must be proved beyond a reasonable doubt. Ogden v. Saunders, 12 Wheat. 213, 270; Sinking-Fund Cases, 99 U. S. 700, 718. Sufficient reasons do not appear for excluding political subdivisions from the bankruptcy jurisdiction if the jurisdiction is so exerted as to maintain the equilibrium between state and national power. Persuasive analogies tell us that consent will preserve a balance threatened with derangement. A state may not tax the instrumentalities of the central government. It may do so, however, if the central government consents. Baltimore National Bank v. State Tax Commission, 297 U. S. 209. Reciprocally, the central government, consent being given, may lay a tax upon the states. Cf. United States v. California, supra. So also, interference by a state with interstate or foreign commerce may be lawful or unlawful as consent is granted or withheld. In re Rahrer, 140 U. S. 545; Clark Distilling Co. v. Western Maryland Ry. Co., 242 U. S. 311; Whitfield v. Ohio, 297 U. S. 431. The prevailing opinion tells us in summing up its conclusions that the bankruptcy power and the taxing power are subject to like limitations when the interests of a state are affected by their action. Let that test be applied, and the Act must be upheld, for jurisdiction is withdrawn if the state does not approve. |