United States Supreme Court Cases & Opinions

U.S. Supreme Court

Segal v. Rochelle, 382 U.S. 375 (1966)

Segal v. Rochelle

No. 44

Argued November 17, 1965

Decided January 18, 1966

382 U.S. 375

Syllabus

On September 27, 1961, the individual petitioners and their business partnership filed bankruptcy petitions. After the end of that year, loss carryback federal income tax refunds were obtained for the individual petitioners based on the firm's losses during 1961 prior to bankruptcy which were offset against income for 1959 and 1960 on which taxes had been paid. These refunds, on deposit in a special account by the bankruptcy trustee, are claimed by petitioners on the ground that bankruptcy had not passed the refund claims to the trustee. The referee ruled against petitioners, as did the District Court and the Court of Appeals, the latter holding that the loss carryback refund claims were both "property" and "transferable" at the time of the bankruptcy petition, and thus had passed to the trustee.

Held:

1. These inchoate claims for loss carryback refunds constituted "property" as that term is used in § 70a(5) of the Bankruptcy Act. Pp. 382 U. S. 379-381.

(a) The classification as "property" is governed by the purposes of the Act. P. 382 U. S. 379.

(b) The main thrust of § 70a(5) being to obtain for creditors everything of value possessed by the bankrupt in alienable form at the time the petition was filed, the term "property" has been generously construed, and does not exclude interests which are novel or contingent or where enjoyment must be postponed. P. 382 U. S. 379.

(c) The term is limited by another purpose of the Act, which is to leave the bankrupt free after the date of the petition to acquire new wealth. P. 382 U. S. 379.

(d) The loss carryback refund claim is sufficiently rooted in the pre-bankruptcy past and so little enmeshed with the bankrupt's ability to make an unencumbered new start that it should be regarded as "property" under § 70a(5). P. 382 U. S. 380.

2. The refund claims were property which, prior to filing the petition, could have been "transferred" within the meaning of § 70a(5). Pp. 382 U. S. 381-385.

Page 382 U. S. 376

(a) The Assignment of Claims Act, 31 U.S. C. § 203, does not always prevent giving effect, between the parties, to a noncomplying transfer, Martln v. National Surety Co., 300 U. S. 588. P. 382 U. S. 384.

(b) In Texas, where the petitioners resided and did business, the precedents leave little doubt that an assignment of the refund claims would normally be enforced in equity between the parties. Pp. 382 U. S. 384-385.

336 F.2d 298, affirmed.