Document: 440 U.S. 48 99 S.Ct. 914 59 L.Ed.2d 136 William E. BUTNER, Petitioner,v.UNITED STATES et al. No. 77-1410. Argued Nov. 27, 1978. Decided Feb. 21, 1979. Syllabus In Chapter XI arrangement proceedings under the Bankruptcy Act, petitioner acquired a second mortgage on certain North Carolina real estate to secure $360,000 indebtedness but received no express security interest in rents earned by property. The bankruptcy judge thereafter appointed an agent collect and apply them payment of taxes, insurance, interest, principal payments due first mortgages. mortgagor was later adjudicated bankrupt, at which time mortgages were default, trustee ordered retain all rents. bankrupt's properties ultimately sold for $174,000, that price being paid reduction estate's from $186,000. At sale date had accumulated almost $163,000 unsuccessfully sought have applied balance indebtedness, ruling $186,000 should be treated as general unsecured claim. District Court reversed. Though recognizing law is deemed owner land subject during his possession entitled profits, even after court viewed agent's appointment tantamount receiver satisfied state-law requirement change possession, giving mortgagee further action adjudication required preserve. Appeals reversed, reinstating disposition judge. appellate held terminated state-court receivership status arising out rents, because made request sequestration or receiver, not taken kind give collected adjudication. Held: Apart special provisions, Act generally leaves determination property rights assets state law. State where located accordingly governs mortgagee's right bankruptcy, federal take whatever steps are necessary ensure afforded same protection he would ensued. principle applicability determine both (and those courts properly did follow minority equity rule secured if recognize any such until foreclosure), disagreed about requirements However, issue will reviewed this Court. Pp. 51-58. 566 F.2d 1207, affirmed. J. Steven Brackett, Hickory, N.C., petitioner. Allan A. Ryan, Jr., Washington, D.C., respondent United States. Joe N. Cagle, respondents, Cagle Mr. Justice STEVENS delivered opinion 1 A dispute between over period mortgagor's foreclosure mortgaged gave rise question we granted certiorari decide. 436 955, 98 3067, 57 1120. That whether determined located. 2 On May 14, 1973, Golden Enterprises, Inc. (Golden), filed petition Act. 11 U.S.C. §§ 701-799. proceedings, approved plan consolidating various liens owned Golden. As result, securing $360,000.1 Petitioner not, however, receive 3 April 18, 1974, Golden's motion appoint directed court. order provided money tax obligations, mortgage, fire insurance premiums, mortgage. There collections pursuant order. 4 never confirmed. February 1975, appointed. default. "to end may different orders [the bankruptcy] [c]ourt." App. 342a-343a. 5 After alternatives considered, refused confirm sale, November 12, $174,000. reducing 6 fund $162,971.32 been 14 December 1, claiming seeking it indebtedness. denied motion, holding 7 It recognized law, so long retains possession. But receiver. This appointment, concluded, rents; preserve interest. 8 reversed reinstated v. States, 1207. acknowledged before equivalent receivership, relationship. Because court's view, One dissented, adopting position Id., 1211. 9 * We grant decide correctly Our concern with proper interpretation statutes governing administration bankrupt estates. Specifically, our purpose resolve conflict Third Seventh Circuits one hand, Second, Fourth, Sixth, Eighth, Ninth other, concerning approach kind. 10 latter group regard extends profits derived resolved reference law.2 few sometimes referred "title States," automatically property, rents.3 most dependent upon taking actual constructive means foreclosure, benefit, some similar legal proceeding.4 applicable varies State, results also vary Circuits. adopted affords foreclosure.5 Those reason since has power deprive remedy, requires precluded law.6 Under approach, affirmative mortgagee—in court—to acquire maintain II 12 agree majority view. 13 constitutional authority Congress establish "uniform Laws Bankruptcies throughout States"7 clearly encompass statute defining estate. chosen exercise its fashion rule. does include provisions invalidating interests fraudulent, improper preferences creditors.8 these left law.9 Property created defined Unless there why analyzed differently simply interested party involved proceeding. Uniform treatment within serves reduce uncertainty, discourage forum shopping, prevent receiving "a windfall merely happenstance bankruptcy." Lewis Manufacturers National Bank, 364 603, 609, 81 347, 350, 323. justifications application limited ownership interests; they equal force interests, including property.10 15 rejected done congressional command, their identifiable Rather, uniform perception demands equity. powers play important part estates countless situations deal particular, individualized problems. undefined considerations provide basis adoption affording mortgagees automatic soon declared bankrupt. 16 support rule, emphasized while pursue remedies prior "only found equitable assets." Bindseil Liberty Trust Co., 248 F. 112, 114 (CA3 1917).11 follow, "equitable administration" when deny benefit require recognized. What adopt today. 17 Circuits, least circumstances, matter avoids inequity looks define mortgagee. time, decision opposite depriving intervenes. For argued impair delay thus acquisition according many familiar local practice able avoid potential loss sequestering authorizing immediate foreclosures. Even though temporarily entry order, normally greater than proceeding court: persuades delay, presumably persuade withhold temporarily. essential point administered scheme basic governs, primary holder fail rent immediately default must stem III 18 Recognizing frustrated petitioner's thereby assumed permission proceed requirement. Since none 19 dissenting Appeals, well Judge, felt coupled informal requests abandonment sufficient comply Neither judges, based analysis followed They 20 parties great length, each stressing aspects record. decline review question. judges who regularly questions respective districts circuits better how dispose comparable issues.12 21 judgment 22 ordered. Originally, along Robert L. McKaughn, Jack Sipe Construction Co. Subsequently, McKaughn assigned deeds trust petitioner, making him sole See re Brose, 254 664, 666 (CA2 1918) (" 'The premises takes taken, behalf, . until, form, possession.' except cases appears situated applies rule") (quoting Freedman's Savings & Shepherd, 127 494, 502-503, 1250, 1254, 32 L.Ed. 163); Tower Grove Bank Weinstein, 119 120, 122 (CA8 1941) ("In circuit settled construction governed law"); Hotel St. James 65 82 (CA9 1933); American Fuel Power 151 470, 481 (CA6 1945). Fidelity Bankers Life Ins. Williams, 506 1242, 1243 (CA4 1974). 4A W. Collier, ¶ 70.16, pp. 157-165 (14th ed. 1975); Hill, Erie Doctrine Bankruptcy, 66 Harv.L.Rev. 1013 (1953). title exercised see Me.Rev.Stat.Ann., Tit. 33, § 502 (1964); events, attaches Uvalda Naval Stores Cullen, 165 Ga. 115, 117, 139 S.E. 810, 811 (1927). R. Kratovil, Modern Mortgage Law Practice 294, p. 204 (1972); Comment, Mortgagee's Right Rents Profits Following Petition 60 Iowa L.Rev. 1388, 1390-1391 (1975). classified "title" Default, 50 Yale L.J. 1424, 1425 n. (1941), although adhere theory purest form. case need await foreclosure. Such might either consent ejectment. remain he—not mortgagee—appears profits. Brannock Fletcher, 271 N.C. 65, 155 S.E.2d 532 (1967); Gregg Williamson, 246 356, (1957); Kistler Development 205 755, 757, 172 413, 414 (1934) absence stipulation contrary permitted Credle Ayers, 126 11, 35 128. makes charge insolvent inadequate prevailing suit begun"). supra; Central States Carlson, 102 (CA10 1938); supra, 2, 157-158. 112 1917); Pittsburgh-Duquesne 482 243 1973); Wakey, 869 (CA7 1931). See, e. g., Hanover Philadelphia Reading Coal Iron 642, 645 1938): "It creditor without demand net income needed pay amount him. Debtor doing deprived ordinary remedy reach income. It, therefore, follows principles, Judge Woolley pointed 'that insolvency debtor's hands, product belongs lien creditor, become virtual owner; issuing diverted creditors lien.' " U.S.Const., Art. I, 8, cl. 4. 96(a) (b) (authorizing void transfers four months bankruptcy); 107(a) (d) (invalidating obtained through judicial fraudulent year 110(c) strike down secret transfers); 110(e) transfer law). 60.01, 743-746. "The Federal Constitution, Article gives laws view early extent Congress, enacted authority, bankruptcies suspended. While true, suspended only system Congress. Sturges Crowninshield, Wheat. 122, 529; Ogden Saunders, 213, 606. "Notwithstanding uniformity acts particulars, recognition lead example, recognizes enforces states affecting dower, exemptions, validity mortgages, priorities like. affect constitutionality particulars operation act alike states." Stellwagen Clum, 245 605, 613, 38 215, 217, 62 507. Conversely, statutory voiding preferential protect other supra. Tungus Skovgaard, 358 588, 596, 79 503, 508, 524; New York Jersey Sandy Hook Pilots Assn. Halecki, 615, 517, 518, 541. Bishop Wood, 426 341, 345-346, 96 2074, 2077-2078, 684.

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