Court Opinion

ID: 6883988
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:23:16.630354+00
Date Added: 2024-06-11T16:05:39.807708
License: Public Domain

MAJOR, Circuit Judge
(dissenting).
I do not agree with the construction placed upon the section of the Bankruptcy Act in controversy. In my opinion the debtors, at the time of filing their petition, either had an interest in the property and therefore entitled to the benefits of the Act, or had no interest and not entitled to such benefits. I think the court should take one horn or the other of the dilemma. Apparently the majority takes both.
The opinion assumes that the debtors’ equity of redemption terminated with the Sheriff’s sale. Why assume? There is no ambiguity in the Statute. By its plain terms, the equity of redemption was terminated. In addition to the provisions of the Indiana Statute quoted in the opinion, Sec. 3-1808 provides as follows: “Mortgages executed after June, 1931 — Redemption. — There shall be no redemption from foreclosures of mortgages hereafter executed on real estate except as provided for under this act.”
Upon the expiration of the period of redemption, every right, claim and interest which the debtors had in the property was extinguished. After the sale the debtors would have had no right to redeem even had they possessed the ability to do so. They could have conveyed nothing by deed or otherwise. As was said in Glenn v. Hollums, 5 Cir., 80 F.2d 555, 557: “* * *■ Nothing remains to be done to complete the superior title which passed by the sheriff’s sales, except the purely ministerial act of delivering the sheriff’s deed, * *
Delivery of the deed was not necessary to vest complete ownership in the purchaser. Shreiner et al. v. Farmers’ Trust Co. of Lancaster, 3 Cir., 91 F.2d 606, 607; 19 R.C.L. Sec. 442. It was only evidence of *705the title acquired by such purchaser. At most, the debtors retained nothing other than legal title, in trust for the purchaser. 42 C.J. Sec. 1891. There is no occasion to labor this point further in view of the reasoning of the majority.
It is difficult for me to comprehend the reasoning employed in the construction placed upon Section 75, sub. n. Perhaps that is the reason I am unable to agree. The phrase “or where deed has not been delivered” is held to “authorize extension of the period of redemption.” This, in my opinion, is a fallacious interpretation, inconsistent with the purport of the paragraph when read in its entirety. It is provided that the filing of a petition “ * * * shall immediately subject the farmer and all his property * * * to the exclusive jurisdiction of the court * * * or any equity or right in any such property, * * I think it is readily apparent that all the enumerated circumstances which follow are dependent upon the premise that the debtor, upon filing his petition, be possessed of an “equity or right” in the property. If no such right or equity exists, none of the contingencies, including the one here relied upon, can be effective. For instance, among the contingencies enumerated are— “ * * * contracts for purchase, contracts for deed, or conditional sales contracts, * * Under the majority construction it would follow that a debtor who, at the time of the filing of his petition, possessed one of these instruments, would bring into the jurisdiction of the Bankruptcy Court, any land described therein, and this irrespective of the fact that any equity or interest in such land had long before expired. In the same category is the phrase “where deed had not been delivered.” There may be situations where the debtor has an “equity or right” until the delivery of a deed. There must be other cases — in fact, this is one — where the extinguishment of his “equity or right” was not dependent upon such delivery.
The construction placed upon the paragraph by the majority would, in my judgment, render it unconstitutional. Neither the Wright nor Kalb case, cited by the majority, sustains such construction. In both those cases, the court was dealing with a property right which the debtor had at the time of the filing of his petition. It seems pertinent to quote what the court in the Kalb case, 308 U.S. 433, on page 442, 60 S.Ct. 343, on page 347, 84 L.Ed. 370, said: “As stated by the Senate Judiciary Cornmittee in reporting these amendments: ‘ * * * subsection (n) brings all of the bankrupt’s property, wherever located, under the absolute jurisdiction of the bankruptcy court, where it ought to be. Any farmer who takes advantage of this act ought to be willing to surrender all his property to the jurisdiction of the court, for the purpose of paying his debts, and for the sake of uniformity. * * *
In Wright v. Union Central Ins. Co., 304 U.S. 502, on page 514, 58 S.Ct. 1025, on page 1032, 82 L.Ed. 1490, the court, in discussing the power of Congress to extend the period or redemption, as fixed by State law, said: “ * * * The debtor has a right of redemption of which the purchaser is advised, and until that right of redemption expires the rights of the purchaser are subject to the power of the Congress over the relationship of debtor and creditor and its power to legislate for the rehabilitation of the debtor. * * * ”
Further, on page 518 of 304 U.S., on page 1034 of 58 S.Ct., 82 L.Ed. 1490, the court said: “ * * * But if Congress is acting within its bankruptcy power, it may authorize the bankruptcy court to affect these property rights, provided the limitations of the due process clause are observed.”
In Union Land Bank v. Byerly, 310 U.S. 1, on page 10, 60 S.Ct. 773, on page 777, 84 L.Ed. 1041, the court considered whether the debtor had an interest in the land so as to bring it within the jurisdiction of the Bankruptcy Court, and in deciding adversely to the debtor, said: “ * * * Since the foreclosure proceedings had been completed and title had passed thereunder prior to the filing of the debtor’s petition for reinstatement, it would have been a vain thing to refer the cause to a conciliation commissioner for administration of property which no longer belonged to the debtor. * * ”
A reading of the cases leaves no doubt of the broad power possessed by Congress in the matter of bankruptcy legislation. The cases are just as convincing, however, that such power is limited to situations where the debtor has some right or interest in the property. Congress can, by legislation, protect, preserve and extend existing rights and interests, but it can not create property rights, nor can it revive an interest or right which has ceased to exist prior to the time a debtor comes into the bankruptcy court. It can administer to the patient as long as a spark of life remains, but when that spark is extinguished, its power no longer exists.
*706The construction which I place upon the paragraph would give every debtor the benefit of the Act so long as he owned any “equity or right” in the property. I would go no further. I think the action of the District Court was correct and that its order should be affirmed.