Source: http://www.chanrobles.com/usa/us_supremecourt/303/350/case.php
Timestamp: 2017-10-18 11:18:53
Document Index: 291211772

Matched Legal Cases: ['§ 75', '§ 8', '§ 8', '§ 75', '§ 75', '§ 12', '§ 1', '§ 8']

On August 6, 1934, Andrea Cuccia, a farmer, filed an adequate petition under § 75(a) to (r) of the Bankruptcy Act, 47 Stat. 1470-1473, as amended, 48 Stat. 925, §§ 8, 9, showing by the schedules secured claims to respondent of over $12,000 and unsecured claims of a chanroblesvirtualawlibrary
The present controversy had its origin in the respondent's petition to the Court, on February 6, 1936, for an accounting by the conciliation commissioner of funds realized from crops sold off the debtor's premises in 1934. In response to the order of the District Court, the conciliation commissioner made an accounting, as appears in chanroblesvirtualawlibrary
the footnote. [Footnote 1] The Bank objected to the account on the ground that the money was the proceeds of the sale chanroblesvirtualawlibrary
First. The powers granted by the bankruptcy clause of the Constitution, Article 1, § 8, cl. 4, are not limited to the bankruptcy law and practice in force in England or the States at the time of its adoption. Continental Illinois Nat. Bank & T. Co. v. Chicago, R.I. & P. Ry. Co., 294 U. S. 648, 294 U. S. 668. Then the interests of the creditor alone were protected. Progressive liberalization of bankruptcy and insolvency laws, in an effort to avert the evils of liquidation, has furnished opportunity for composition in bankruptcy proceedings, and later for composition and extension of debts in relief proceedings for individual debtors, for reorganization of railroads and other corporations, and for public debtor proceedings. [Footnote 2] chanroblesvirtualawlibrary
Section 75 of the Bankruptcy Act [Footnote 3] provides similar opportunities for the rehabilitation of farmers. Wright v. Vinton Branch, 300 U. S. 440, 300 U. S. 456. It is sought to accomplish this rehabilitation through composition or extension of debts, subsections (e) to (l) 47 Stat. 1471, 1472. On failure of composition and extension, further opportunity for rehabilitation is afforded the debtor, through provisions enabling him to retain possession of his property, under conditions favorable to its ultimate redemption by him. These steps are carried out under judicial supervision, subsection (s). [Footnote 4]
To accomplish its purpose, § 75 provides that the filing of a petition shall effect a stay. [Footnote 5] Such a stay under chanroblesvirtualawlibrary
judicial discretion as to enforcement of claims does not take property without due process and is constitutional. Continental Illinois Nat. Bank & T. Co. v. Chicago, R.I. & P. Ry. Co., supra, at pages 294 U. S. 675 et seq. and 294 U. S. 680 et seq.; Wright v. Vinton Branch, supra, 300 U. S. 460; Home Bldg. & Loan Assn. v. Blaisdell, 290 U. S. 398. In order to operate and protect the property during the stay, and pending confirmation or other disposition of the composition or extension proposal, the statute provides in subsections (e) and (n) [Footnote 6] for the exercise by the court of "such control chanroblesvirtualawlibrary
duties, except as to questions arising out of the applications of bankrupts for compositions or discharges, as are by this Act conferred on courts of bankruptcy. [Footnote 7]"
In view of the foregoing, the conciliation commissioner had the authority, prior to the adjudication of bankruptcy under § 75(s), to act as the "court," in the first instance and subject to review, in controlling the property of the debtor "in the best interests of the farmer and his creditors." Section 75(e); In re Wiedmer, 82 F.2d 566. Under this authority, the conciliation commissioner acted in authorizing the expenditures shown on the account for gathering the crop of 1934, preparing for the crop of 1935, and paying fees and expenses. It is plain that the conciliation commissioner, like the referee (White v. Schloerb, 178 U. S. 542, 178 U. S. 546; Mueller v. Nugent, 184 U. S. 1, 184 U. S. 13) exercises some of the "judicial authority" of the bankruptcy court. The acts just detailed were judicial acts. Error within his jurisdiction does not subject him to personal liability. 74 U. S. 535. See also Bradley v. Fisher, 13 Wall. 335; Alzua v. Johnson, 231 U. S. 106; Yaselli v. Goff, 275 U.S. 503. Cf. First Nationall Bank v. Bonner, 74 F.2d 139, 142; United States v. Ward, 257 Fed. 372, chanroblesvirtualawlibrary
377. This doctrine is quite clear when, as here, no rule or positive enactment was violated and the acts were bona fide.@
The fact that the proceeds of the crop were banked to the joint account of the debtor and the conciliation commissioner may have obscured the judicial character of the latter. Better practice would suggest that the account appear in the name of the debtor, with the countersignature of the conciliation commissioner required for withdrawals. Also at an early, preferably the first, meeting of creditors, the method of handling the business of the debtor pending confirmation or further order should have been developed and proper orders entered. Cf. § 12a, Bankruptcy Act, as amended. This does not appear to have been done. These irregularities do not suffice to withdraw from the conciliation commissioner his judicial protection. Alzua v. Johnson, 231 U. S. 106.
Without determining the effect of the unconstitutionality of subsection (s) upon the steps taken under its chanroblesvirtualawlibrary
Third. Moreover, the expenditures assailed by respondent were proper, at least with respect to the principal items (which are the only ones we shall consider) -- the amounts spent in harvesting the 1934 crop, which was sold in order to create the fund, and the amounts spent for preservation of the vineyard and for the cultivation of the 1935 crop. There is no showing that petitioner was improvident. Reference is made in his account to money paid to the farmer as "living expenses," but the record discloses that the amounts paid the debtor did not exceed the ordinary wages for the work he actually and necessarily performed in the maintenance of the vineyard. Compare Wright v. Vinton Branch, supra, 300 U.S. at 300 U. S. 466; In re Barrow, 98 Fed. 582.
Respondent certainly cannot complain of the devotion of the proceeds of the 1934 crop to the cost of harvesting that crop. The care and harvesting of that crop represented the only way to preserve its worth (cf. 117 U. S. 455), and the cost of protecting a fund in court is everywhere recognized as a dominant charge on that fund. See 68 U. S. 410; Shepherd v. Pepper, 133 U. S. 626, 133 U. S. 652; Thompson v. Phenix Ins. Co., 136 U. S. 287, 136 U. S. 293; Atlantic Trust Co. v. Chapman, 208 U. S. 360, 208 U. S. 376; Wright v. Vinton Branch, supra, 300 U.S. at 300 U. S. 468. The rule applies even in ordinary bankruptcy proceedings, [Footnote 8] since the secured creditor benefits from the disbursement. [Footnote 9]
And since the creditor in this case had a lien on the crop for future years and on the real estate, we cannot say that the money expended for maintenance of the real estate and toward production of the 1935 crop was not likewise for its benefit. Compare Wright v. Vinton Branch, supra, 300 U.S. at 300 U. S. 468. [Footnote 10] Respondent itself has chanroblesvirtualawlibrary
suggested, in another connection (see Bank of America National Trust & Savings Assn. v. Cuccia, supra), that the grape vines require "cultivation, pruning and care," lest they "deteriorate." It is unnecessary to determine the effect of an expenditure of the proceeds of a crop where the mortgagee has no lien on the property preserved and protected by the expenditures.
[fol. 18] January 22, 1935ÑD. W. Richards indemnity fee
Subsections (a) to (r) were added by the Act of March 3, 1933, c. 204, § 1, 47 Stat. 1470-1473, and subsections (a) and (b) amended by the Act of June 7, 1934, c. 424, §§ 8 and 9, 48 Stat. 911, 925. Subsection (s), the first Frazier-Lemke Act, was added June 28, 1934, c. 869, 48 Stat. 1289. Subsequent to the decision in Louisville Joint Stock Land Bank v. Radford, 295 U. S. 555, various subsections, including (s), were amended by the new Frazier-Lemke Act, August 28, 1935, c. 792, 49 Stat. 942.
Subsection (s), 48 Stat. 1289, in effect at the institution of this proceeding for the relief of a debtor, was held unconstitutional in Louisville Joint Stock Land Bank v. Radford, 295 U. S. 555. The new subsection (s) was approved in Wright v. Vinton Branch, 300 U. S. 440.