U.S. Supreme Court U. S. v. BEKINS, 304 U.S. 27 (1938)

[Page 304 U.S. 27, 54]

taxation was useless. The creditors of the district were helpless. The natural and reasonable remedy through composition of the debts of the district was not available under state law by reason of the restriction imposed by the Federal Constitution upon the impairment of contracts by state legislation. The bankruptcy power is competent to give relief to debtors in such a plight and, if there is any obstacle to its exercise in the case of the districts organized under state law it lies in the right of the State to oppose federal interference. The State steps in to remove that obstacle. The State acts in aid, and not in derogation, of its sovereign powers. It invites the intervention of the bankruptcy power to save its agency which the State itself is powerless to rescue. Through its cooperation with the national government the needed relief is given. We see no ground for the conclusion that the Federal Constitution, in the interest of state sovereignty, has reduced both sovereigns to helplessness in such a case.

Fourth. As the bankruptcy power may be exerted to give effect to a plan for the composition of the debts of an insolvent debtor, we find no merit in appellant's objections under the Fifth Amendment. In re Reiman, supra; Continental National Bank v. Chicago, Rock Island & Pacific R. Co., supra.

The judgment of the District Court is reversed, and the cause is remanded for further proceedings in conformity with this opinion.

It is so ordered.

Reversed and remanded.

Mr. Justice McREYNOLDS and Mr. Justice BUTLER are of the opinion that the principle approved in Ashton v. Cameron County District, 298 U.S. 513, 56 S.Ct. 892, is controlling here and requires affirmation of the questioned decree.

Mr. Justice CARDOZO took no part in the consideration and decision of this case. Footnotes

Footnote 1 See Hearings before a Subcommittee of the Senate Committee on the Judiciary on S. 1868 and H.R. 5950, 1934, 73d Cong., 2d Sess.; Hearings before the House Committee on the Judiciary on H.R. 1670, etc., 1933, 73d Cong., 1st Sess.; Ashton v. Cameron County District, 298 U.S. 513, 533, 534 S., 56 S.Ct. 892, 897.

Footnote 2 H.Rep.No. 517, 75th Cong., 1st Sess.

Footnote 3 Sen.Rep.No. 911, 75th Cong., 1st Sess.