Segal v. Rochelle

LOCATION: General Petroleum Corporation

DECIDED BY: Warren Court (1965-1967)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 382 US 375 (1966)
ARGUED: Nov 17, 1965
DECIDED: Jan 18, 1966

Facts of the case


Media for Segal v. Rochelle

Audio Transcription for Oral Argument - November 17, 1965 in Segal v. Rochelle

Earl Warren:

Number 44, Gerald Segal, Individually and Segal Cotton Products, et al., Petitioners, versus William J. Rochelle, Jr.

Mr. Klepak.

Henry Klepak:

Thank you.

May it please the Court.

The facts are simple and not in dispute, nor have questions the law involved.

The facts are that one Gerald Segal and his father, Sam Segal, are engaged in a business in Dallas, Texas, known as Segal Cotton Products.

A petition of bankruptcy was filed by both father and son and also as a partner.

As a result of this bankruptcy, they received a discharge and that was in September of 1961 when the petition was filed.

In 1962, the auditor of the Segal Cotton Products filed an application for loss-carryback for refunds.

In 1963, the Internal Revenue Department did pay this refund by agreement between myself and Mr. Rochelle, the trustee and the counsel, the monies were held by him, were the outcome of this case.

We contended that the money belong to the bankruptcy.

Potter Stewart:

I just -- may I get that chronology --

Henry Klepak:


Potter Stewart:

One more time.

Henry Klepak:


Potter Stewart:

The petition in bankruptcy was filed when?

Henry Klepak:

September of 1961

Potter Stewart:

And the claim for refund?

Henry Klepak:

The claim for it was filed in 1962 after the discharge and in 1963 the money was paid, and since then we've been litigating.

Potter Stewart:

And the refund was for what taxable year?

Henry Klepak:


Potter Stewart:

1961, the -- the year of the --

Henry Klepak:

That's right.

Now in -- at that point then, we then -- and in dispute, the referee in bankruptcy held that the funds belong to the trustee in bankruptcy as part of the -- the estate of the bankrupt.

The District Court upheld a certificate of findings of the referee in bankruptcy.

It was then filled of course to the First Circuit Court of Appeals and that's when trouble started because at that time, I was armed with two Circuit Courts of Appeals decisions both favorable to my clients, one of the First Circuit and the other, the Third Circuit.

In both of those decisions, they held that this tax refund was windfall to the taxpayer, to the bankrupt.

And there were the funds of the bankrupt and not to the estate that is to the bankruptcy.

And it became a very, very unpopular decision because every magazine and more especially the National Association of Referees in Bankruptcy journal, a number of law reviews such as Texas University, Stanford, Miami University and other law reviews all wrote rather harsh articles against both the First Circuit and the Third Circuit for their findings.

The First and Third Circuit simply held that the statute as written did not give or place a property right in the bankrupt at its time of bankruptcy whereby, he could, under the term of the statute, transfer that so-called property right.