Source: https://supreme.justia.com/cases/federal/us/317/447/
Timestamp: 2019-04-23 16:12:41+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 317 › Harris v. Zion's Savings Bank & Trust Co.
Harris v. Zion's Savings Bank & Trust Co.
1. Without leave of the state court which appointed him and which has jurisdiction over him, an administrator may not revive a proceeding instituted by his decedent under § 75 of the Bankruptcy Act, nor initiate proceedings to have the estate adjudged bankrupt and for other relief under § 75(s) of that Act. P. 317 U. S. 449.
2. Notwithstanding the provisions of § 75(c) of the Bankruptcy Act providing that "a petition may be filed by any farmer" for the extension and composition of his debts, and of § 75(r) declaring that, "[f]or the purposes of this section, . . . the term "farmer" . . . includes the personal representative of a deceased farmer," where the law of a State prohibits an administrator from dealing with the real estate, or conditions his power so to do, Congress did not intend to override that law and confer upon an administrator -- a mandatory of state power -- a privilege at war with the law of his official being. P. 317 U. S. 450.
3. Section 8 of the Bankruptcy Act is inapplicable. Order 50(9) of the General Orders in Bankruptcy held applicable. P. 317 U. S. 452.
Certiorari, post, p. 609, to review the affirmance of a judgment dismissing the petition of an administrator to revive a proceeding under § 75 of the Bankruptcy Act, and rejecting an amended petition for relief under § 75(s).
December 20, 1937, Anna L. Harris filed her petition for relief under § 75 of the Bankruptcy Act [Footnote 1] in the District Court for Utah. She made an offer of composition and, while this offer was pending, she died. January 16, 1939, the bankruptcy court ordered the proceeding abated because of her death. March 30, 1939, the petitioner was appointed administrator of her estate.
Thereafter, the respondent instituted a foreclosure proceeding upon a mortgage on real estate of the decedent, obtained a judgment, and, August 15, 1939, purchased the mortgaged premises at foreclosure sale and received a sheriff's certificate.
February 13, 1940, two days before the period of redemption expired, the petitioner, as administrator, secured leave from the probate court to apply, as the decedent's personal representative, for an order reviving the debtor proceedings. The probate court's decree was stayed pending an appeal to the Supreme Court of Utah. Notwithstanding the stay, the petitioner applied to the bankruptcy court for a revivor.
Pending hearing in this court, the petitioner, on September 18, 1940, lodged with the clerk of the bankruptcy court an amended petition to be adjudged a bankrupt under subsection (s) of § 75. The court ordered that the paper be not filed, and also ordered that the petitioner show cause why his revivor petition should not be dismissed. August 29, 1941, the respondent moved to strike both the original and amended petition. September 30, 1941, the district judge entered an order dismissing the administrator's petition to revive and rejecting the amended petition.
Subsection c of § 75 provides: " . . . A petition may be filed by any farmer . . . " for the extension and composition of his debts. Subsection (r) declares: "For the purposes of this section . . . , the term farmer' includes . . . the personal representative of a deceased farmer. . . ."
leave of the court which appointed him and has jurisdiction over him, or may do so where, as here, he has applied for leave and been denied it. The importance of this question, and a diversity of views amongst the federal courts, [Footnote 6] led us to grant certiorari. 317 U.S. 609.
Put another way, the question is -- if the law of a state prohibits an administrator from dealing with the real estate, or conditions his power so to do, did Congress intend to override that law and confer upon this mandatory of state power a privilege at war with the law of his official being? We must meet that question in this case, for the Supreme Court of Utah has told us that, under the law of that State, the petitioner has no such power. If such he possesses, it derives from a law which overrides the law of the petitioner's official creation.
Laying aside any issue of constitutional power, the question remains whether Congress intended so to override the law of a state and confer on the state's appointee, as persona designata, a function to be exercised not for the deceased farmer, not for the decedents' estate, the entity he represents under state law, not for the heirs who inherit the realty, but in a vacuum?
When we reflect that the settlement and distribution of decedents' estates and the right to succeed to the ownership of realty and personalty are peculiarly matters of state law; that the federal courts have no probate jurisdiction and have sedulously refrained, even in diversity cases, from interfering with the operations of state tribunals invested with that jurisdiction, we naturally incline to a construction of § 75 consistent with these principles. We think the beneficent purpose of the legislation will not be defeated by such a construction.
So the opportunity of resort to § 75 enures not to creditors, but to the debtor. His voluntary action, not theirs, determines whether the law shall be invoked. Congress extended him a privilege which he could exercise or renounce. By the provision that the term "farmer" should include a personal representative, Congress extended that privilege to an administrator. But, clearly, if that functionary elects not to avail himself of the privilege, the section is, as to him, inoperative. Moreover, if his election depends, under the law of his being not alone on his choice, but upon the exercise of the choice of his master, the state which gave him official life, and under whose tutelage he is, then the door of the bankruptcy court is open to him only when that choice has been exercised in the only way he can exercise it.
In this view, Congress has extended the benefits of the act only to administrators who can lawfully elect to avail of them. Thus, conflict between federal and state power is avoided, and the two are accommodated.
may, or may not, be acting in their true interests. The law of the State demands the speedy settlement of the estate. If, independently of that law, the administrator may apply under § 75, it may well happen that this state policy will be nullified. In other states, an administrator may succeed to the realty absolutely, or in such measure and for such purpose that no state policy would be contravened by resort to § 75. But, in any case, the interests of those entitled to inherit ought to be considered before choice of action is determined. The probate court, not the bankruptcy court, is the appropriate forum for weighing the respective benefits or detriments to those who share in the equity of the decedent's estate.
Congress, when the matter has come to its attention, has expressly recognized that, if a moratorium proceeding such as this is to be brought or revived by an administrator, he ought to obtain leave from the probate court. So § 74, as amended, provides. [Footnote 10] We think the same intent should be implied as to § 75.
We believe that it was with these considerations in mind that this court adopted Order 50(9) of the General Orders in Bankruptcy. [Footnote 11] That order provides that the personal representative of a farmer shall annex to his petition filed under § 75, amongst other things, a copy of the order of the probate court authorizing him to file the petition. The court below thought the General Order applicable and felt bound to apply it. It is suggested that this portion of the Order is void as running counter to the clear mandate of the statute. And so it would be if the Act conferred upon the administrator the right, notwithstanding state law, to invoke the bankruptcy powers. But the rule comports with what we have endeavored to show is the natural and reasonable construction of § 75. If the state law permits resort to the remedy afforded by the section, no difficulty will be created by requiring the obtaining of such an order. If it forbids, then no conflict between the policies of state and nation will arise.
In re Harris' Estate, 99 Utah 464, 105 P.2d 461.
Harris v. Zion Savings Bank & Trust Co., 313 U.S. 541.
Compare In re Buxton's Estate, 14 F.Supp. 616; In re Reynolds, 21 F.Supp. 369; Lemm v. Northern California National Bank, 93 F.2d 709; Hines v. Farkas, 109 F.2d 289.
Local Loan Co. v. Hunt, 292 U. S. 234, 292 U. S. 244; Continental Illinois Natl. Bank & T. Co. v. Chicago, R.I. & P. Ry. Co., 294 U. S. 648, 294 U. S. 667-675; United States v. Bekins, 304 U. S. 27, 304 U. S. 47; Wright v. Union Central Life Ins. Co., 304 U. S. 502, 304 U. S. 514; Wright v. Union Central Life Ins. Co., 311 U. S. 273, 311 U. S. 279.
See Shute v. Patterson, 147 F. 509.
General Orders in Bankruptcy of January 16, 1939, 305 U.S. 681, 11 U.S.C.A. following section 53.
"the jurisdiction and powers of the courts, the title, powers, and duties of its officers, the duties of the farmer, and the rights and liabilities of creditors, and of all persons with respect to the property of the farmer . . . shall be the same as if a voluntary petition for adjudication had been filed and a decree of adjudication had been entered on the day when the farmer's petition, asking to be adjudged a bankrupt"
"shall not abate the proceedings, but the same shall be conducted and concluded in the same manner, so far as possible, as though he had not died."
That section "makes no exception or qualification; after the proceedings have been commenced, they are not to be abated by death." Hull v. Dicks, 235 U. S. 584, 235 U. S. 588. It has long been considered mandatory. Shute v. Patterson, 147 F. 509; 1 Collier, Bankruptcy (14th Ed.) § 8.02. On death of a bankrupt, where his personal representative succeeds to the personalty and his heirs to the realty, the proper procedure is to make them parties. Shute v. Patterson, supra, p. 512; Benitez v. Anciani, supra, p. 125. And see In re Schwab, 83 F.2d 526. And the death of a bankrupt does not prevent his discharge (Collier, loc. cit.) at the instance of the administrator. In re Agnew, 225 F. 650.
"the personal representative of a deceased individual for the purpose of effecting settlement or composition with the creditors of the estate: Provided, however, That such personal representative shall first obtain the consent and authority of the court which has assumed jurisdiction of said estate, to invoke the relief provided"
more important here than was the collision in Kalb v. Feuerstein, supra. In this case, as in other situations (In re Devlin, 180 F. 170, 172), it is the bankruptcy act, not local probate law, which must control the administration of the estate. The bankruptcy power is supreme. Sec. 8 is a valid exercise of that power. The result is that General Order 50(9) must give way insofar as it is inconsistent with this result. For those rules are intended merely "to execute the act" (West Co. v. Lea, 174 U. S. 590, 174 U. S. 599), not to "authorize additions to its substantive provisions." Meek v. Centre County Banking Co., 268 U. S. 426, 268 U. S. 434.

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