Petitioners Brief — Layton v. Thayne

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SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1942

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No. 936

CLIFTON B. LAYTON,

pee Petitioner,

WILLIAM J. THAYNE,

Respondent.

SUPPORTING BRIEF.

This Court is given authority, by Section 24 of the Judi-

cial Code, 28 U. S. C. A. 347, page 359, and by Section 24

(c) of the Bankruptcy Act to issue the writ in this case.

Every step prescribed by section 75 of the Bankruptcy

Act has been resisted by creditors and technical construce-

tions have been indulged by lower courts which, had they

been sustained, would have destroyed effectually the statute

asa relief measure for farmers. In this case, if the appel-

lee, having lost his interest in the property by failing to

redeem, had any right at all to appear in court still he did

not ask for such a construction of the statute as the circuit

court of appeals saw fit to make. Perhaps for the first time,

acourt has held that even though a farmer qualified under

the act, properly invokes the jurisdiction of the court and

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seeks to conform to the prescribed procedure, still he is not

entitled to the possession of his farm. A denial of the

possession is a denial of all rights under the statute for

from a practical standpoint, a farmer, without a farm, can-

not ordinarily redeem.

There is not a word in the recent decision of this Court in

Minnie Reese Richardson Wragg v. Federal Land Bank

of New Orleans, decided January 4, 19438, 87 L. Ed.

273

which would justify a denial of the right of possession of

the petitioner in this case. Furthermore, by the express

provisions of section 75 (s) 4

“««* * * such receiver shall be divested of possession

and the property returned to the possession of such

farmer, under the provisions of this Act.’’

By what process of reasoning can the court justify a judg-

ment absolutely contradictory to the express terms of the

statute? The court says:

“* * * But it does not follow that, because a dis-

tressed farmer has a right of redemption in a farm, he

is entitled to the possession thereof, together with the

income therefrom, in a farmer-debtor proceeding.”’

Layton v. Thayne, 133 F. (2d) 287.

In support of this conclusion, the court said:

““* * * This, strictly speaking, is the ‘right of re-

demption’. It is a mere personal privilege rather than

an interest or estate in the land. It may be exercised

only by those persons named in the statute.”’

In the Wragg case, the court said:

‘‘Respondent argues that under Alabama statutes and

decisions the statutory right of redemption after fore-

closure is defined as a ‘personal privilege’ rather than

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as ‘property or property rights’ (Title 7, Sec. 743), and

hence is not within the jurisdiction of the bankruptcy

court in a farmer-debtor proceeding. But Section 75

prescribes its own criteria for determining what prop-

erty interests may be brought within the jurisdiction

of the court. In the interpretation and application of

the Bankruptey Act as in the case of other federal stat-

utes, federal not local law applies. Prudence Realiza-

tion Corp. v. Geist, 316 U.S. 89, 95, 86 L. Ed. 1293, 1298,

62 S. Ct. 978, and cases cited. It is for the bankruptcy

court to determine, by reference to the provisions of

the bankruptcy statute, what rights created by state

law—regardless of the characterization which may be

applied to them by state statutes and decisions—are

within the jurisdiction of the bankruptcy court. United

States v. Pelzer, 312 U. S. 399, 402, 403, 85 L. ed. 913,

915, 916, 61 S. Ct. 659.’’ Wragg v. Federal Land Bank

of New Orleans, 87 L. Ed., page 275.

We therefore turn to the statute itself to see what a peti-

tion under section 75 of the Bankruptcy Act brings to the

Court for administration. We quote section 75 (n):

‘‘The filing of a petition or answer with the clerk of

court, or leaving it with the conciliation commissioner

for the purpose of forwarding same to the clerk of

court, praying for relief under section 75 of this Act,

as amended, shall immediately subject the farmer and

all his property, wherever located, for all the purposes

of this section, to the exclusive jurisdiction of the court,

including all real or personal property, or any equity

or right in any such property, including among others,

contracts for purchase, contracts for deed, or condi-

tional sales contracts, the right or the equity of re-

demption where the period of redemption has not or

had not expired, or where a deed of trust has been given

as security, or where the sale has not or had not been

confirmed, or where deed had not been delivered, at

the time of filing the petition.’’

The right of the debtor as found by the district court and

as approved by the circuit court of appeals is a right of

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redemption. It was not sold upon the foreclosure of the

Thayne mortgage because it did not then exist. It came

into existence under the Utah Statute when the Davis

County Bank foreclosed its mortgage, and through fore-

closure proceedings, made the debtor a judgment debtor.

It could not have been sold before it came into existence and

yet when it did come into existence, it was a substantial

property right. It was a right to reacquire the property by

payment of the Davis County mortgage. Under section 75,

the debtor had the right to go into the possession of the

property and to retain possession for a period of three

years provided he paid the rentals fixed by the court. It

is a right which inheres in the farm property itself. In no

sense is it a personal privilege alone. The right may be

transferred, and the successor-in-interest may redeem.

The Utah Statute so provides:

104-37-30, Utah Code Annotated, 1943.

The jurisdiction of the Court over this right is, by the

statute, made exclusive and the prescribed procedure must

be followed:

Jokn Hancock Mut. L. Ins. Co. v. Bartels, 308 U.S. 180,

84 L. Ed. 180, 60 Sup. Ct. 221, 41 Am. Bankr. Rep.

(N. S.) 296;

Kalb v. Feuerstein, 308 U.S. 433, 84 L. Ed. 370, 60 Sup.

Ct. 343, 41 Am. Bankr. Rep. (N. S.) 501;

Wright v. Logan, 315 U. S. 139, 86 L. Ed. 745, 62 S. Ct.

508 ;

Wright v. Union Central Life Insurance Co., 304 U.S.

502, 82 L. Ed. 1490, 58 S. Ct. 1025, 36 Am. Bankr.

Rep. (N. 8.) 950;

Wright v. Union Central Life Insurance Co., 311 U. 8.

273, 85 L. Ed. 184, 61 S. Ct. 196;

Mangus v. Miller, 87 L. Ed. 135, 63 8. Ct. 182.

Federal Land Bank of Louisville v. Morrison, 133 F. (2d)

613.

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As we understand, Wragg v. Federal Land Bank, supra,

this Court has simply reaffirmed the principle stated in the

above cases. The Circuit Court of Appeals has departed

from that principle. This Court said in the Wragg case:

‘‘But the dismissal of the original proceeding and de-

nial of the application to reopen it were not bars to a

new proceeding under Section 75 to secure whatever

relief the act would afford with respect to petitioner’s

remaining interest in the mortgaged property. We

find no intimation in the language and purposes of the

Act that an unsuccessful earlier proceeding would pre-

clude a new petition so long as the farmer retains an

interest which could be administered in a proceeding

under Section 75.”’

We understand this to mean that if the proceeding has

proved abortive because of a dismissal before the interest

of the farmer in the property is extinguished in the man-

ner prescribed by the statute that he may again invoke the

jurisdiction of the court. The former proceeding in this

case was halted by a ruling of the circuit court of appeals

to the effect that the failure to file an amended petition

after the holding of this Court that the original subsec-

tion (s) was unconstitutional and the reenactment of the

present constitutional provision operated as the dismissal

of the proceeding. Even so, the rights of the debtor were

not extinguished, and he comes within the clear ruling in

the Wragg case.

It is interesting and helpful to speculate as to who is

entitled to the possession of this property; not Thayne be-

cause his judgment had been satisfied of record; not the

receiver, because the statute says upon the filing of the

amended petition he shall be divested of possession, and

not the Davis County Bank because its mortgage was only

in process of foreclosure. No deed was issued entitling it

to possession; not Lois Layton, because she acquired only

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a right to redeem which right was lost when she failed to re-

deem. We have, then, a farm, but who is entitled to posses-

sion? If this decision stands, the benefits of the statute are

certainly being frittered away by narrow formalistic inter-

pretations which disregard the spirit and the letter of the

Act.

We go further: The decision states the law to be the

contrary of the express words of the statute itself.

The writ should issue in this case.

Respectfully submitted,

J. D. SKEEN,

K. J. SKEEN,

Attorneys for Petitioner.

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