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Revision as of 10:28, 13 December 2024 by Lethargilistic (talk | contribs)(diff) ← Previous revision | Latest revision (diff) | Newer revision → (diff) 1936 United States Supreme Court case| Ashton v. Cameron County Water Improvement District No. 1 | |
|---|---|
 Supreme Court of the United States | |
| Decided May 25, 1936 | |
| Full case name | Ashton v. Cameron County Water Improvement District No. 1 |
| Citations | 298 U.S. 513 (more) |
| Holding | |
| An insolvent state agency cannot declare bankruptcy. | |
| Court membership | |
| |
| Case opinions | |
| Majority | McReynolds |
| Dissent | Cardozo, joined by Hughes, Brandeis, Stone |
| Laws applied | |
| Bankruptcy Clause | |
Ashton v. Cameron County Water Improvement District No. 1, 298 U.S. 513 (1936), was a United States Supreme Court case in which the court held that an insolvent state agency cannot declare bankruptcy.
Description
Cameron County Water Improvement District No. 1 was a public corporation managed by the state of Texas that constructed canals initially funded with debt raised by government bonds. The Great Depression severely limited Cameron County farmers' ability to pay taxes intended to fund the District's obligations. Within some years, the District accrued a debt of hundreds of thousands of dollars, and it had liabilities in the tens of millions. With the consent of Texas, the District declared bankruptcy under the Bankruptcy Act of 1938 and presented a compromise plan to rectify the debt.
Large owners of the District's debt objected to the bankruptcy, claiming bankruptcy courts had no jurisdiction over state entities. The trial court agreed with the creditors, but the Circuit Court of Appeals reversed because the Bankruptcy Clause gives Congress the power to enact uniform bankruptcy rules.
In a majority opinion by James C. McReynolds, the Supreme Court reversed the Circuit Court and held the bankruptcy courts could not have jurisdiction over state entities. In McReynolds's view, allowing a state corporation to use the bankruptcy process would have been tantamount to allowing the government to break a contract without proper compensation to the creditors. McReynolds made a federalism argument that it would be inappropriate to use the federal system's bankruptcy power to interfere with and change the conditions of state agencies.
Significance
The Court decided Ashton towards the end of the Lochner era and in direct opposition to the New Deal's reforms to the bankruptcy system. In response to Ashton and similar cases, President Franklin D. Roosevelt began threatening to pack the court with new justices who would approve the reforms. After the so-called "switch in time that saved nine," the Supreme Court de-emphasized the economic analyses that motivated Ashton.
References
- ^ Ashton v. Cameron County Water Improvement District No. 1, 298 U.S. 513 (1936).
- ^ Lieberman, Jethro K. (1999). "Court-Packing Plan". A Practical Companion to the Constitution. p. 131.
External links
- Text of Ashton v. Cameron County Water Improvement District No. 1, 298 U.S. 513 (1936) is available from: Cornell Findlaw Justia
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