Chicot County Drainage District v. Baxter State Bank

In Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 60 S. Ct. 317, 84 L. Ed. 329 (1940), the defendant had filed a voluntary bankruptcy action to allow it to reorganize its debt. After the reorganization plan was approved by the defendant's creditors and affirmed by the district court, the Supreme Court declared unconstitutional the statute under which the bankruptcy court had proceeded. The plaintiff creditor then filed an action in the district court to collect on bonds originally issued by the defendant that had been extinguished under the reorganization plan. The plaintiff prevailed in the trial court, but the Supreme Court reversed, holding that, at the time of the bankruptcy proceedings, the district court had possessed "authority to pass upon its own jurisdiction, and its decree sustaining jurisdiction against attack, while open to direct review, is res judicata in a collateral action." Chicot County Drainage Dist., 308 U.S. at 377, 60 S. Ct. at 320, 84 L. Ed. at 334.