Friday, December 27, 2013

Chicot County Drainage District v. Baxter State Bank case brief

Chicot County Drainage District v. Baxter State Bank case brief summary
308 U.S. 371 (1940)

CASE SYNOPSIS
Petitioner, a county drainage district, obtained a writ of certiorari to the United States Court of Appeals for the Eighth Circuit, for review of its decision affirming the judgment of the district court, allowing respondent bondholders to recover on bonds that had been cancelled by judicial decree pursuant to the Act of May 24, 1934, 48 Stat. 798, when the Act was later declared unconstitutional.

CASE FACTS
Petitioner defaulted on bonds it had issued, 14 of which were being held by respondents. Pursuant to the Act of May 24 (Act), 1934, 48 Stat. 798, which provided for municipal debt readjustments, petitioner obtained a decree from the district court readjusting petitioner's bond obligations and barring holders of old bonds from recovery unless they presented their bonds to the court for readjustment within one year of the decree. Although respondents had notice of the decree, they did not present their bonds. When the Act was declared unconstitutional, respondents filed suit on the old bonds and received judgment in their favor, which was affirmed on appeal.

DISCUSSION
  • On certiorari, the court held that since the Act was declared unconstitutional after the decree cancelling the bonds was issued, the decree was still valid. 
  • The court held that since respondents failed to challenge the statute's validity, which went to the court's jurisdiction in the original action, respondents could not attack it collaterally in the current action.
  • The court reversed the judgment and remanded the case with instructions to dismiss the complaint.
CONCLUSION
The court reversed the judgment of the appellate court because the Act had not been found to be unconstitutional at the time the decree cancelling the bonds was issued. Moreover, because respondents did not challenge the Act at the time the decree was issued, the decree was res judicata in the current action and barred respondents' claim for recovery. Thus, respondents' complaint should have been dismissed.

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