Court Opinion

ID: 9419100
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:45:55.167746+00
Date Added: 2024-06-11T16:41:49.381839
License: Public Domain

Mr. Justice Black, Mr. Justice Douglas, and Mr. Justice Murphy,
dissenting.
We believe that to deny this farmer the benefits of the Act because the purchase by the mortgagee at the sheriff’s sale was confirmed during the short interval between the dismissal of his petition and its reinstatement, would be largely to defeat the purposes of the Act.
After the original subsection (s) of the Frazier-Lemke Act was declared unconstitutional by the decision of this Court, May 27,1935,1 this farmer’s petition was dismissed, August 26, 1935. A scant two days after the dismissal, August 28, Congress enacted the present Frazier-Lemke Act designed to supply the constitutional deficiency and providing that all cases dismissed because of that decision “be promptly reinstated.” 2 After the filing of the petition and even before dismissal, the bankruptcy court allowed this-farmer’s property to be sold by the sheriff under foreclosure in the state court. And it is admitted that the order purporting to permit the sale was erroneous because entered in disregard of the requirements of subsection (o).3 The Ohio state court confirmed the sheriff’s sale, September 10, 1935, a date prior to the lapse of the thirty day *12period within which an appeal would lie from an order of dismissal.4
Instead of appealing, the farmer, within the thirty day period, prayed relief from the dismissal decree by reinstatement in the District Court itself. In his application for reinstatement, he alleged that dismissal of his petition had been induced by the deliberate misrepresentations of the mortgagee-bank, that he had no notice of the consummation of the sheriff’s sale until several days after it took place and that he wished to avail himself of § 75 as amended August 28. Upon the prayer “that his . . . proceeding ... be reinstated as of the date of its . . . dismissal,” the case was reinstated. We do not understand that either the power of the bankruptcy court to reinstate or the reinstatement which was in fact granted, is questioned.
Until disposition of the farmer’s petition, he was entitled to the protection and benefit of the Act, and the bankruptcy court had exclusive jurisdiction of his property.5 Dismissal of the proceeding did not constitute its final disposition where reinstatement was available. Certainly, this must hold true at least for the period of time after dismissal during which the farmer had a statutory right to appeal from the District Court’s action.6 *13Otherwise, even appeal might be wholly unavailing and futile. When a court of bankruptcy reinstates a case previously retired from the docket, as this farmer’s case was reinstated, the court reconsiders the cause on the merits upon the original as well as any supplemental petitions unless rights have “intervened which would render it inequitable to reconsider the merits.” Wayne Gas Co. v. Owens Co., 300 U. S. 131, 137, 138. We find no intervening equities here.
In the Wayne case, a corporate reorganization in 77B was dismissed and subsequent to the dismissal a state court confirmed a foreclosure sale of the debtor’s property which had been decreed prior to the filing of the 77B proceeding. After the Circuit Court of Appeals had denied the debtor’s petition for allowance of an appeal and the time for appeal as of right had expired, the bankruptcy court reinstated the proceeding and reheard the case upon the merits. The plan of reorganization was again found wanting and the court entered a second order of dismissal. The debtor’s appeal from the second dismissal was in turn dismissed by the Circuit Court of Appeals on the ground that lack of power in the District Court in bankruptcy rendered the order of reinstatement — as well as the second order of dismissal — void.7
When the case reached here, arguments presented by the foreclosure purchaser were, in substance those upon which we are now asked to reverse the court below — that the first order of dismissal had terminated the cause (so that an appeal not taken within thirty days of its entry was not timely); and that the state court’s confirmation *14of sale, after dismissal, had finally divested the bankrupt of all title to its foreclosed property leaving no property for administration by the bankruptcy court (and the controversy was therefore moot).
This Court denied these contentions, and held that the dismissal had not terminated the proceeding; that the controversy was not moot and that the District Court had properly found that no intervening rights had accrued to divest the debtor of its property foreclosed subsequent to the dismissal in the bankruptcy court; that the rehearing had been sought in good faith and with due diligence and that the Circuit Court of Appeals had erred in not passing upon the merits of a plan of reorganization which included the property sold under the state court’s order. The decision here thus approved the exercise of the bankruptcy court’s jurisdiction over the encumbered property of the debtor which, after dismissal,, had been bought-in the state court foreclosure by creditors who were parties to the 77B proceedings and who “went forward with the proceedings in the state court, looking to a sale of the debtor’s property, with full knowledge that a rehearing might be granted . . .” Id., 135. ■
Accordingly, the case was not remanded to the District Court for reconsideration of its finding that no rights cognizable in equity had intervened as a result of the state court foreclosure. Instead, the remand went to the Coürt of Appeals for further proceedings. And that court properly construed the mandate to require consideration of the merits of the debtor’s plan which assumed ownership in the debtor of the particular property upon which foreclosure had been attempted.8
So here, as in the Wayne case, state court proceedings subsequent to dismissal, but while further proceedings could be had in bankruptcy, did not divest the debtor of *15his property.; there “was no abuse of sound discretion in granting the motion [for reinstatement] and reconsidering the cause”; the district court in bankruptcy had “the power, for good reason, to revise its judgments [of dismissal and to reinstate] upon seasonable application and before rights . . . [had] vested on the faith of its action.” Id., 137, 138. And its general power to do so, at least during the period allowed for taking an appeal,9 was reinforced by recognition of the specific statutory right of reinstatement in the amended 75(s), which sprang into being only two days after dismissal of this farmer’s petition. Paralleling the situation presented by the Wayne case, not only was the mortgagee-purchaser here a party to the 75 proceeding, but the state court itself may be said to have acted with knowledge that the dismissal — of which it was notified — did not necessarily represent the last step in the federal court proceeding. Cf. Id., 135.
Here, the only asserted rights which intervened against this farmer-debtor were not those of a bona fide purchaser. The purchaser was the mortgagee who was a party to the § 75 proceeding and who relied — at least in part — on an order of the bankruptcy court admittedly erroneous because contrary to the Erazier-Lemke Act, and rendered at the mortgagee’s instigation. Therefore, the mortgagee-purchaser is not entitled to rely upon the status acquired by it in the state court, after dismissal “as precluding further consideration of the petition” for composition. Cf. Id., 135. To decide otherwise than that the dismissal here did not deprive the farmer-debtor of the right to proceed — before rights have vested — by reinstatement to obtain the benefits of the Act, is to permit dismissal at the instance of the farmer’s creditors and without the farmer’s knowledge to prove a ready means of circumvent*16ing the Act.10 Title to a farmer’s property acquired in the manner pursued by petitioner cannot limit the power of the bankruptcy court to afford the protection of and to enforce this remedial legislation.

 Louisville Joint Stock Land Bank v. Radford, 295 U. S. 555

§75 (s) (5).

 As we view the effect of reinstatement, it is unnecessary to determine whether the bankruptcy court’s order was not merely erroneous, but void.

 11 U. S. C. 47, 48.

 Kalb v. Feuerstein, 308 U. S. 433.

“An appeal is a proceeding in the original cause and the suit is pending until the appeal is disposed of. . . . When the final judgment was reached it determined the rights of . . . [the parties] ab initio, . . .” MacKenzie v. Engelhard Co., 266 U. S. 131, 142-143. “Where a decree has not been enrolled, or where it is subject to modification upon motion, or where the court might grant a rehearing, or where an appeal might be taken, or where the costs had not been taxed, or where no execution had issued — it not being in condition to issue execution — the case could not be said to have reached that stage where it could be said it was not pending in that court.” Brannon v. Kentucky, 162 Ky. 350, 357-8; 172 S. W. 703, 706. Cf. *13State v. Tugwell, 19 Wash. 238; 52 P. 1056; 43 L. R. A. 717; Bloom v. People, 23 Colo. 416; 48 P. 519; State ex rel. Andreu v. Canfield, 40 Fla. 36, 44; 23 So. 591; Brown v. Campbell, 100 Cal. 635, 646; 35 P. 433; Ex parte Howland, 3 Okla. Crim. 142; 104 P. 927; Aim. Cas. 1912A, 840.

 84 F. 2d 965.

 Wayne Gas Co. v. Owens-Illinois Glass Co., 91 F. 2d 827.

 See note 6, supra.

 Cf. In re Price, 99 F. 2d 691, 694.