Petition for Writ of Certiorari — Carter v. Kubler

Supreme Court brief1943

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_ THAD BENSON CARTER, |

ia : Petitioner,

GEORGE A. KUBLER,

—_—.

“IN THE

_ Supreme Court of the United States

Ocrésen TERM 1942, ie

xo. Wi

le the Matter of 3 _ -

: Toap Benson Canter,

Farmer Debtor.

108 pene meme /

Respondent. |

= _——————————

PETITION AND BRIEF

- FOR WRIT OF CERTIORARI TO THE UNITED STATES °

CIRCUIT COURT OF APPEALS FOR THE

: SIXTH CIRCUIT. =

/ Emer McCtar, ri

Lima, Ohio,

Attorney for Thad Benson Carter,

Petitioner, = ~*%.

_T. W. Kiser,

503 Flatiron Building, ‘Akron, Ohio.

Attorney for George. A. Kubler,

Respondent.

oe ee ee om EEE

U. 8. Law Printing Company, 2817 N. Halsted 8t., Chicago, Ti.

" SUBJECT INDEX _

at aed Page °

PETITION FOR WRIT OF CERTIORART .....00:....0c00-c-ceeeceecececeeoeo-e

I. A Summary Statement of the Matter Involved... 2

II. Statement of the Basis of the Jurisdiction of

CO ANTE sccevncevoveconmensotensiocssicnninatlaphiai cenenteneteemeneanete 3

II: The Questions Submitted nee eeeceessseees “ae

IV. Reasons Relied Upon for Allowance of a Writ °

_ of, ee RPT PAD Nee

Benr IN Support oF Forrcoine Petition FOR Ws RIT OF

Cerriorari cecceresnenrsesoccceng -cnensssnecnnsconccsoscccscossscesnencedncerescesee

I. No Report of: the Detision Below -............2....-y-.-c

II. Grounds on Which the Jurisdiction of this Duat

| IO I ns acti cas ccc tcapaenieanetanibain eecieiaiiaelentailns

- VII. Statement of the Case Te A SENECA 53) BAL ts

District Court Orders Conciliation Commis-

sioner to Conduct Valuation Hearing ......

The Hearing Before the Conciliation Com-

ne SE ARIAT STG ANI SLIT TT HE

Conciliation Commissioner’ 6 Report After

. Hearing coveceesneceennnectennattenectenngpecennecctnnncenenecesnne

Petition EE RI conte AERA, COR

“The Judge’s Memorandum Opinion ........ shames:

Final Order of the District Court PTS Ne

Application for Rehearing ......... . iinildromaass =:

See SRE TE SER Pale le ON LANE AEP OD

Final’ Judgment of the Appellate Conrt ........

aeons ii nS

| ny Page- =

IV. Specification of Errors cacheeiuisesa ds osijosniniiisenutitsi Scitaloe 12

v. Summary of thie Argument paneer Tee Peon nea iene “Te

VI. Argument siege cnts sca suclie ted h Cc Laa ae

-This case involves the whole purpose of the

op? _Farmer Debtor law. ses 15 =—

The Mandate of the Statute siesta’ Val-—

uation and the Method one w-segecenene “16

2 EM SUT ee

The Method E caphyed [ciclasendsiake dacigtaness 6

Devices.to Defeat the Purpose of the tee: stile 17

First Device: = | |

. The Price of Redemption .................. . 18

Second Device:

The Time for Redemption ......:......... 20

Third Device: |

_ Prohibition Against Farming SE ~ 21

The Evidence on Value ........ os alcllsidadiae ater eva 22

Some Extrajudicial Evidence SPORE OTOL RA a 22

The Method: Condenined BEAT nea a 23.

A Look at the ‘Mortgage Holder’ s Theory :

eR IE iene ecclotenpstibpncmtenchtemesiionnianie 25

The Statutory Standard of Value .............. cake ae

An Examination of the Evidence Submitted

at the WN ei ieee scaiientaekn 29

The Mortgage -Holder’s Evidence .......0.2.-...... 29

The Ev idence of: Other Witnesses ‘iceiaaiadidesdile 30°

The Two: Valeatios Theories Compared........ 33

ONS SM NIN A ATA HE MRSS,

<> Fa

oor

‘iil

; Page

Case INpex :

Akron v. U nited States, Se I Natnentccecermcceniace 6, 9, 25,

Aughenbaugh, In re; 125 Fed. (2d) 887 iiccameaivaaimimeleatl 6, 9, 25

_ Borehard | v. California, 310 U.S. ct neo TT ~— -18

cs Crowell v. Benson, 285 U.S. 29 a I Sasa 6,9, 25

erga Commerce Commission v. Louisville, 4

Bc le ID eecrespecamssndaeiciebleicg padehiipaitenssduanndsel ensesesapenennsesooped 6, 9, 25

John Haneock v. Bartels, 308 U.S. 180 ...........:. es 6,9, 18

Kalb v. Feuerstein, 308 U. S. 433 cineca pees 18

Moser v. Mortgage Co., 123 Fed. (2d) GB. caceccncee-- Sy 9, ZB .

Peterson v. John Hancock, 116 Fed. ( 2d) We ecccteeasd _ 7,9

_United States v. ‘Abilene, 265. U. S. 274 ......-.-n-anneenreene 6, 9, 25 ©

Wright v. Union Central, 304 U.S. 502 0. 9,18

Wright v. Union Central, 311 fe Rae

PIIEFLS EPEC TS LO scvetencessienses 1D, 18, 19, 27, 28, 34

- OrweR AUTHORITIES.

Fudicial Code, Section 240 (a) tcccsocseeennsiceen en

Section 75 ( 8) (3) Bankruptey BOb -ovirceeeeee ae

veiosaealniizias .-2, 15, 16, 18, 19, 23, 97, 34

. Rules of Civil Procedure, Rule 62, 28 U.S.C. 874... ct 21

IN THE

- Supreme Court of the United States

/ OcrToBER Tens 1942.

No. ’ i

In the Matter of

Tap Benson. CanTer, ~~

_ Farmer Debtor.

THAD BENSON CARTER, ~~ .

Petitioner,

GEORGE A. KUBLER,

Respondent. y

PETITION

For a Writ of Certiorari to the United States Circuit Court

of Appeals for the Sixth Circiit.

The brief in support of this petition begins at page 8.

AN emphasis in this petition ‘and brief is supplie a ex-

‘cept where it is stated otherwise. —

To the Honorable Hiarlan. Fiske Stone, Chief Justice, and

the Associate: Justices of the Supreme Court of the

l nited States: maa

Your petitioner respectfully shows:

5 el

A Summary Statement of the Matter Involved.

The question presented arises out of the redemption

provisions of the farmer debtor law, Section 75 of the |

Bankruptey Act, 11 U.S. C., Section 203. The applieable

part of Section 75 (8) (3): ‘provides tliat ‘*. . . the debtor

may pay into court the amount-of the appraisal of the

property .. . Provided, That upon request . . . the

court shall cause a reappraisal of the. debtor’s property,

or’ in its diseretion set a date for hearing, and after such

hearing, fix the value of the property, in accordance with

’ the evidence submitted, and the debtor shall then pay the |

value so arrived at into court... and thereupon the

court shall, by an order turn ovdr full possession and title.

. of said property 2. . to the dkbtor’’.

uation at $5800

» first paragrapli

of Section 75 (s), the conciliation commissioner set. it at

$25,200 for redemption from mortgages of roughly the

same amount, The judge upon review reduced it to $20,000.

After originally fixing the official v

earlier in the same proceeding. urder

No opinion was rendered by the appellate court. It

merely entered its order, the substance of which reads:

jt appearing that there was no abuse of judicial disere-

tion’’ . . . **the judgments and ordegs’’ . . . ‘‘are in -

all things affrmed.’’ This final- order appears at R. 45.

Statement of ‘ie Basis of the —

of This Court.

The iuriadiction of this court is confetred hy: Section

941) (a) of the Judicial Code; 28 U.S.C. 347 (a).

The petitioner has complied with Section 8 (a) of the

Act of February 13, 1925; 28 .U. S. C. 350. The final

judgnfent of the court below ( Rt. 45) became final-on De-

cember 3, 1942, when a‘petition for rehearing was denied

(R°51).° This petition is filed within three months there-

after, - ures |

The Questions Submitted.

“The questions are’:

rer oc |

In fixing the valuation at which a farmer gebtor shall

redeem his farm does the statutory provision in Section

75 (s) (3) that the ‘court shall ‘‘set a date for hearing,

and after such. hearing, fix the value of the property, in ac-

cordance with the evidence submitted,’’ permit a concilia-

‘ tion commissioner to fix such valuation ‘upon a personal

investigation by the conciliation commissioner’’ in addi-

tion.to the evidence submitted to him at a hearing? R. 9,

next to the last paragraph.

“May he fix such valuation contrary to the evidence by

raising it from his own original official appraisal of $5800

i | ’

in the same proceeding to a sum four and one- third times

that amount, that: is, to $2: 5,2007 R. 9, next-to last para-

: graph (168 acres at $150 per acre, $25,200). ,

3.°

In fixing such valuation may the conciliation comuis-

sioner Consider the amount of liens against the farm?

4. °

In view of the statutory provision in Section 75 (s)(3) _

that after a hearing ‘the court shall fix the value “in ac-

cordance With the evidence amenitted”', . May the court

exercise a ‘*j judicial disc retion”’ in fixing the value of the

’ property? '

May a conciliation éommisfloner in. an: order fixing the

value of a farmer debtor’ s farm under Sect. 75 (8)(3)

fix. approximately two months, expiring October 15, as the

qn for redemption and prohibit the farmer debtor from

oing ‘‘any planting of any description cuntil after Octo-

ber 15°°? R. 9, bottom of page and R. 10, top of page.

6. °

May the judge on petition for review of a conciliation

_conmissioner’s order fixing farm valuation, for redemption

under Seetion 75 (s)(3),-exeuse the increase of, valuation

from an original offi¢ial appraisal, of $5800 to $25,200 by

_ the- conciliation Commissioner upon the ground that $5800

valuation ‘‘was made for taxation purposes’’, contrary to

the statement of the conciliation commissioner im the rec-

ord that “the former appraixement of Carter’s ‘farm in.

these proceedings: was $5800", no different statement or

evidence appearing in the record? ~ ,

Ke :

; Bo

May a court in fixing $20,000 as the valuation at which

a farmer debtor should redeem his farm pursuant to Sec- —

tion 75 («)(#), limit the time for such redemption to thirty .

days, and order that if redemption be not accomplished

within such time the farm shall be sold?

IV. ed wre

1 Reasons Relied Upon for Allowance of a

Writ of Certiorari. —

ay al .

There is involved a question.of importance in the initer-

pretation and- administration of a federal statute, Sec-

tion 75 (s)(3) of the Banukruptey Act, ere rege the

method of redemption by a farmer debto his farm

from secured debts, 2 | aca

The decision of the appellate court in “holding that the

bankruptcy court had a judi ial discretion in fixing the

valuation is in direct confiiet with the mandatory provi-

sion of Section 75 (s)(3) that the court ‘shall ‘‘xet a date

for hearing, and aftér hearing, fix the value of the prop-

erty, in accordance withthe evidence submitted’,

3. ,

The decision of the appellate court is in direct conflict

with the decision of the C ireuit ¢ ‘ourt of Appeals tor the

Second Circuit in Moser y. Mortgage Company, 1941, 123

Fed. (2d) 423. There also the conciliation commissioner

fixed the value of the farm for redemption after hearing

the evidence and ‘‘imaking a personal visit to the ranch

and looking over the property’. The appeliate court for

‘the: Second Cirenit held in that ease that the method pur-

sued tiolated the statutory requirement that the court

shall ‘fix the value of the property in accordance with

the évidence submitted’.

Ae 4,

The said decision of the Seeond Circuit Court of Appeals .

also held that the method of valuation followed by the bank-

ruptey court in the Woser ease (which was the method fol-

lowed in this @ arter ease) was in conflict with the decision |

in John Hane ok v. Bartels, 1939, 308 U. S. 180,. where

this court held that Section 75 ¢s) prescribes a definite

course of procedure ‘whereby the bankruptey court shall

set a date for hearing and- thereafter fix. the value of the

property in accordance with the evidence which value the

. debtor shall pay inito court to redeem his property.

dD. .

The decision of the appellate court below ‘is in direct

eonthet with the decision ‘of the Third Cireuit Court of

Appeals in In re Aughenbaugh, 1942, 125 Fed. (2d) 887,

where, in a bankruptey proceeding, the appellate court

held to be invalid an order of a referee predicated upon

the contents of papers not introduced ‘at the hearing.

The decision delow is in conflict with the decision of this -

court: in [ntérstate Commerce Commission v. Louisville,

1913, 227 U.S. 88, where it was held that the order in-

volved was not based on evidence introduced at’a hearing:

and consequently it was invalid. To the same effect were

the decisions of this court in Akron v. United States (New

England Division Case), 1923, 261 U.S. 184; United States

v. Abilene, 1924, 265 U. S. 274; and Crowell v. Benson,

1932, 285 U.S. 22. - , "Gg

- #.

. e ?

In holding that the bankruptey court had a ‘‘judicial -

diseretion”’ to fix the sum at which a farmer debtor shall,

redeem his farm under Section 75 (s)(3) the order of the

appellate court below is in conflict with Me decision of the

Eighth Cireuit Court of Appeals in Peterson v. John Han-

gock, 1940, 116 Fed, (2d) 148, in holding that ‘‘The stat-

“ute, as construed by the Supreme Court in the Bartels

ease, is explicit and mandatory, and the District Court

had no discrétion to\act contrary to its terms’’, .and hold-

ing that ‘judicial . deci ‘ision’ and not judie ial discretion’

is what is called for.

Wherefore your petitioner prays that a. writ of cer-

‘tiorari issue to the Sixth Circuit Court of Appeals direct-

_ ing it to certify-and send to this court a transcript of the

reeord and proceedings..théreon to the end that.this causé

may be determined by this court and for all other relief as

may be. proper. |

Respectfully. submitted,

Eimer McCiars, Lima, Ohio,

Counsel for the Petitioner.

Lima. Ohio |

February 6, 1943

BRIEF

In Support of the Foregoing Petition for a

Writ of Certiorari. ©

«+

The index precedes the petition rte certiorari.

No Report of the Decision Below.

The appellate court handed down’ no opinion. Its final

order appears at R. 45. The Memorandum’ Opinion of the

- Judge of the District Court, which is not reported, ap-

pears at R. 35. | ae

Il.

Grounds on Which the Jurisdiction of This

Court Is Invoked.

The statutory basis of the jurisdiction of this court has’

_ been stated at pages 3 and 4 of the casera petition for

certiorari,

The grounds relied upon for invoking the jurisdiction.

_of this court have been set forth at pages 5, 6 and 7 of the

preceding petitions To recapitulate them, they are: That

un important question of the interpretation and admin-

istration of a federal state is involved, namely Section

79. (s)(3) ‘which preseribes the procedure whereby a farmer

debtor may redeem his farm from liens against it; that the

‘decision of the appellate court below is in direct conflict

with said statute; that said’ decision is in conflict with .

the decision of ‘the Second Circuit Court ef ‘Appeals in

Moser v. Mortgage Company, 1941, 123 Fed. (2d) .423;

that said decision is* in conflict with the decision of this

court in John Hancock v. Bartels, 19: 39, 308 U.S. 180; that

it is in conflict with the decision of the Third Cireuit. Court

of Appeals in In re Aughenbaugh, 1942, 124 Fed. (2d) 887;

with the decisions of this court in -Jnterstate Commerce

Commission v. Louisville, 1931, 227 U.S. 88; Akron v. U.S.

(New England Division case), 1923, 261 U. 8. 184; United

States v. Abilene, 1924, 265 U.S. 274; and Crowell v. Ben-

son, 1932, 280 U.S. 22, and in conflict with the decision ‘ot

the Kighth Circuit ‘Court of Appeals in Peterson vy. John

Hancock, 1940, 116 Fed. (2d) 148, which was based upon

the decision of this court in the’ Bartels ease.

III.

STATEMENT OF THE CASE.

District Court. Orders Conciliation Commissioner

to Conduct Valuation Hearing.

Following the decision of: this court in ihe second case

of Wright v. Union Central, 1940, 3li U.S. 273, holding

that‘a farmer debtor’s farm may not be sold cade Section

75 (s)(3) until he has had an opportunity to redeem it at

its appraised value, the bankruptey court issued its order

of March 21, 1941, directing the couciliation Commissioner. *

to have a hearing at which ‘the secured creditor be af-

forded an opportunity, to present evidence as to the pres-

ent fair value of such farm and that the conciliation com-

missioner determine the correct appraised value and fix

a réasonable time within which the debtor shall redeein

; the farm from the mortgage lien’’. R. 8 to 9.

10_ ee yee

A Hearing Before the Conciliation Commissioner.

A hearing was held, by the conciliation commissioner at

which evidence was submitted by the secured creditor and

by the farmer debtor. A narrative form of the evidence

appears at R. 10 to 28. As the effect of this evidence is

an important: issue in this ease, it is fully considered be-

ginning at page 29 of the Kee eee

Conciliation Commissioner’s Report After Hearing.

The conciliation commissioner reported to the court that

he conducted a hearing and ‘‘after hearing the testimony

given by the several witnesses, and studying the briefs fur-

nished by the defendant and the plaintiff, and upon a per-

‘sonal investigation by the conciliation commissioner of the.

value of said farm I hereby fix the value of said farm at

$150 per acre’’. ($25,200). R. 9.

Petition for Review.

The farmer debtor filed a petition for review (R. 29).

The Judge’s Memorandum Opinion.

Upon review the judge issued his memorandum opinion

reducing the valuation to $20,000, $119 per acre. R. 35.

Referring to the conciliation commissioner's former aj)-. a

praisal of the fair and_reasonable market value of the farm

-at $5800, $34.52 per acre, thle opinion stated: ‘‘ However,

that value the commissioner, stated was made for taxation

purposes,’’ There is no such statement ih the record.

Final Order of the District Court.:

The final order of -the district court pursuant to- the —

opinion of the judge fixed the valuation at $20,000, $119.

per acre, and set the time for redemption at December

‘15, 1941. R. 37.

J ‘

_ Application for Rehearing.

‘The farmer debtor filed an application. for rehearing in

Which he set“forth the affidavits of two of the three orig-

inal appraisers, that originally in the same proceeding they

had appraised the farm at $5800 which the said appraisers

considered to be the then fair and reasonable market value;

_ that said conciliation commissioner at the time when the

appraisal was reported to him by said appratsers said that.

“$5800 was no more thart the farm” was worth and he. ex-

pressed his agreement with the appraisers in fixing the |

appraisement of said farm at $5800."? R. 39 to 41..

The-petition for reheating was.denied. R. 41.

Appeal.

Fotiowing denial of the pe tition. for rehearing an appeal

was taken, R. 42._ |

F'al Judgmént of the Appellate Court.

Without opinion the appellate court affirnied the dis-

trict court finding ‘there was no abuse of judicial discre-

tion in the finding that the reasqnable market value of the

farm land in question was 8 $20, 000.7" R. 45. e

Specification of Errors.

oo |

The bankruptcy court based the valuation for redemption

upon a personal ‘investigation made by the- conciliation \

commissioner wholly outside of the evidence submitted at a

hearing held by the conciliation commissioner to determine

such valuation.

The bankiiptey court defeated the farmer debtor’s fed-

‘eral statutory right of redemption by fixing a valuation.

contrary to.the evidence submitted at a hearing,

3. -

The bankruptey court ‘fixed « valuation for redemption

at a price greatly in excess ‘of the official valuation pre-

viously found by the court in the same proceeding, there

being no evidence of any such increase in value,

The bankruptcy court considered the amount. of liens

against a farm in fixing its valuation for the. purpose of

redemption from such liens as prov ided in the farmer

debtor law. |

D. at

‘The appellate court held that a bankruptey court may

exercise a judicial discretion in fixing the value of a farm

for redemption under the provisions of such law. The

statute prescribes that the valuation shall be set at its

fair and reasonable market value as disclosed by the: evi-

‘dence submitted at. A hearing held for pa purpose of & aes

oo dence to support stich statement.

“s'

| —— w

The bankruptcy court fixed a-redemption value of $25,200

for farm real estate: and limited the farmer debtor te a

period of two months after such value was set within which

to- raise the required sum.

; 7.

The bankruptey court prohibited the farmer debtor from

operating his farm by ordering him not to do any planting

of any description before the date set for redemption, such

date being October 15. td: ae

Re ie So

The bankruptcy court sustained an excessive valuation

of the farmer debtor's farm for redemption by a concilia-

~ tion commissioner by finding that the conciliation commis-

sioner’s former official valuation in the same proceeding

was made for taxation purposes whereas there was no evi-

The bankruptey court limited to thirty days tlie time’

within which the farmer debtor should raise the sum of

$20,000 set by the court as necessary to redeem his farm

as provided by the farmer debtor law and ordered the

farm to be sold upon failure to pay such sum within time.

. V.

Summary of the Argument.

,. The questions presented here concern the very heart

ina center of the farmer debtor-law. If the methods em- _

_Ployed here are approved the entire purpose of the law

is défeated> ~ The-redemption_provi isions of Section 75 are

te ee

_ the culmination of the Act. +

The statute definitely lays down the method of valuation.

This court has repeatedly held that the statute prescribes -

an orderly procedure which is a mandate to be obeyed.

The bankruptey court violated the statute by preventing

redemption through three devices: (1) the device of in-

creasing the valuation up to. the neighborhood of the liens

and hiding the discrepancy between evidence and conclu-

sion under the guise of ‘‘personal investigation’’; (2) the

device of setting the time for redemption too-short for a

farm real estate loan to be consummated; 61d (3)- the—

device of ordering farming operations to stop—a sure way

of defeating a loan.

The method employed has been ‘repeatedly condemned

by this court and by the other federal courts. |

An examination of the evidence demonstrates the un-:

lawful theory upon which the mortgage holders pressed

upon the conciliation commissioner an inflated fictitious

valuation made to measure up to the mortgage liens,

15° -

ARGUMENT.

This Case Involves the .Whole Purpose of the

Farmer Debtor Law.

The purpose of the farmer debtor law, like that of the.

other debtor laws for railroads, corporations and munici-

palities, is to keep the owner debtor in permanent posses-

siotof the mortgaged property. This is‘to be accomplished

by payment to the security owner of the value of his

security in place of permitting him to take the security

itself. As thig court has-declared, ‘‘There is no constitu-

tional claim of the creditor to more than that.’’ Wright

v. Union Central, 1940, 311 U. 8. 273, 278. *

The administrative machinery, adopted by statute and

sustained by this court, to accomplish such purpose is com-

prised ig the redemption prdvisions of these various: stat-

utes, Jn Section 75 these redemption provisions are em-

hodied in Section 75 (s) (3), where it is provided that

the farmer debtor may pay into court the value of his mort-

gaged property. This value is paid to the secured creditor.

The mortgaged property is then free from all liens amet the

farmer debtor receives his discharge.

If this legal machinery is misused the purpose of the

statute is defeated and all the antecedent procedure has

been in vain. Of the redemption provisions those pertain-

ing to fixing the valuation of the security are their core

and center. If a fictitious inflated valuation is set, there

ean be no redemption and, as Lincoln. said, ‘the law is

| cheated.”’

rene

‘he statutory method set up in Section 75 and the method

employed by the bankruptey court in this case are there- ©

fore first presented.

The. Mandate of the Statute Sieeline: Valuation

and the Method Employed.

The Statute.

“Such appraisers shdll appraise all of the property of’

the debtor . . . at its then fair and reasonable market .

value.”’ Section 75°(s) first (unnumbered) paragraph:.

‘upon request. . . the court shall cause a reappraisal

. . ..0r mits diseretion set a date for hearing and after

such hearing, fix the value of the property, in accordance

with the evidence submitted.’’’ Section 75 (s) (3).°

The Method Employed.

The concilation commissioner’s increase of the farm val-

uation from his original official appraisal of $5800 to $25,200 :

(four and one-third times the original appraisal) was not

determined by the evidence submitted. It was undoubtedly ~

influenced by the fact that the first mortgage amounted to

, $34,702 and the second mortgage amounted to $2000 more.

RR, 26. BR. 27, bottom of page. |

Neither the concilation commissioner, the judge, nor the

" appellate court justilied the increase on the basis of the

evidence submitted at the hearing. The following state-

ments illustrate the point: .

The conciliation commissioner said (after stating that

he heard the evidence and studied the briefs of the par-

-17

ties): ‘‘and upon @ personal investigation by the concilia-

tion commissioner of the value of suid fart, I hereby fix

the value of said farni at $150 per acre’’ (168 acres at

$150, $25 200). R. 9, bottom of page. .

The judge ‘upon Teview said proren to the original

$5800 appraisal’ by the conciliation commissioner in the

saine proceeding) : ‘‘ However, that value the commissioner

‘ stated, was made for taxation purposes.’’ R. 35, bottom of

page. This statement is not supported by any, evidence.

On the contrary the conciliation commissioner stated that ©

‘the former appraisement of Carter’s farm in these. pro-

ceedings was $5800’’. R. 26, bottom of page to top of page

-27. No appraisal for taxation is provided or mentioned

in Section 75. .

The judge also stated: ‘‘it does seem to me the appraisal

is high.’ R. 36, middle of page. ‘‘The buildings and

fences are probably of little value for appraisal purposes

‘and the timber land probably tle same.’’. R. 36, middle of

page. ‘The testimony gives the impression that there is

not an active market for farin land in this location.”’ R.

36, bottom of page. ‘‘It is seriously doubted that such a

market value [for a country place] ever will exist and it

must be regarded as merely speculative.’’ -R. 37, top of

’ page.

The appellate court: ‘‘there was no abuse of judicial dis-

cretion.’’ R. 45.

Devices to Defeat the Purpose of the Law.

The ultimate purpose and the culmination of all the

provisions of the farmer debtor law in Section 75 is the

redemption of the farmer debtor’s farm at its ‘‘fair and

18 -

reasonable market value’’ so that the farmer may be kept

on the farm and the mortgage holder may have the value

of Wis security.

_ This court made the purpose of the law very clear and

protected iti in W right y. Unton Central, 1940, 311 U. 8.

273:

“This Act provide 4 procedare to eMestuate a broad

_ program of rehabilitation of distressed farmers faced

- with the disaster of forced sales and_an oppressive

+ burden of debt. .-. . Safeguards’ were to

protest the rights of secured creditors, throaghout the

a to the extent of the value of the property.

. There is no constitutional claim of the creditor to

more than that. And so long as that right is protected

the creditor certainly is in no position to insist that -

doubts or ambiguities in the Act be resolved in its favor

and against the debtor. Rather, the Act must be liber-

ally construed to give the debter the full measure of .

the relief afforded by Congress lest its benefits be

_ frittereéd away by narrow formalistic interpretations

. whieh disregard ihe spirit and the letter of the -Act.”’

.In this statement appear the following citations: Wright v.

Union Central, 1938, 304 U. 8. 502.. John Hancock v./Bar-

tels, 1939, 308 U.S, 180. Kalb v. Feuerstein, 1940, 308 U.

S. 433. Borchard ¥. Cguforma Bank, 1940, 310 U.S, 311.

In the neverending contest by which: mortgage Holders

seek to defeat the purpose of the farmer debtor law there

‘were employed in this instance three devices:

FI RST DEVICE

The Price of Redemption.

An Inflated Valuation Prevents Redemption.

The price of ‘redemption in Section 75 is the ‘‘amount

of the appraisal’ ’ (Section 75 (s) (3)) and the standard .

acs

of the appraisal is the ‘‘fair and reapenable market value’’

(Section 75 (s), first and unnumbered paragraph), ‘tin

accordance with the evidence submitted’’. Section 75 (s)

(3). One device employed in the instant case was to set

an.appraisal determined by the amount of liens. An at-~

tempt was also made to smother out objections that the

evidence submitted does not support the valuation fixed

by a statement that the evidence submitted was supple-

mented by the “personal investigation’? of the concilia-

tion commissioner. R. 9. * .

In the same proceeding the appraisal made by the ap-

praisers who were appointed by the conciliation commis-

sioner, and which was approved by him, was $5800. R. 26,

bottom of page and R. 27,-top of pagé. Affidavits of ap- *

praisers at R. 39 and 40.. Three years later, contrary to

the evidence submitted, he raised it to $25,200, that is be

‘increased it to a ficure four and one-third times the orig-

inal appraisal. R. 9 (#150 per acre, 168 acres, or $25,200),

This new valuation came about in the following manner.

At the end of the three years statutory stay the holder

of the first mortgage, the respondent here, filed a, motion

to terminate the proceeding. About that time this Court

in Wright v. Union Central, 1940, 314 U; 8. 273, held That

the farmer debtor's statutory right to redeem could not.

be defeated by a request of the mortgagee for a sale. The

: District Court then made ap order reciting that ‘the de-

cision of the Supreme Court in the case of Wright v. Union.

Central Life Insurance Company should be followed’’ and

directed the conciliation commissioner to determine ‘the |

present fair value of such farm’’ and ‘‘determine the cor-

rect appraised value aid fix a reasonable time’’ for re-

demption ‘failing in-which a public sale is ordered.”’ R. 8,

order of March 21, 1941.- At the hearing the mortgeagé

holder brought in as witnesses bankers and mortgage hold-

ers who invariably gave estimates of: value approximating

the mortgage liens. The conciliation commissioner. then

raised the valuation’ to’ $25,200, four and one-third times

the appraisal of $5800 which he had originally approved.

Un the petition for review the judge put it at $20,000,

or nearly three and one-half-times the original $5800 ap-

_praisal: “R. 35 to 38. A- study of thé action of the con- .

cillation commissioner shows beyond any doubt that here

a new device was employed to gixe lip service to the letter

of the law but etfectually to defeat its purpose by a fictitious

valuation. No reasonable mitid can conceive such a figure

“to be the ‘fair and reasonable market ‘value”’ especially

when no evidence was. adduced to show any change in con-

ditions from the. time the same conciliation commissioner

had fixed it at FORO,

That the conciliation commissioner knew the evidence

submitted to him did not support the $25,200 valuation is

jmdicated by his statement that he made a ‘personal inves-

tigation’’ in addition to the evidence submitted at the

hearing.

SECOND. DEV ICk

- ‘The Time for Redemption. 3 :

A naked right of redemption is defeated if a reasonable

time is not fixed for its consummation.

No farmer debtor éan pay his rental and also accumulate

sufficient capital in three: years of farm operation. to re-

deem bir land. Therefore he must negotiate a loan. It is

futile to make application for a farm loan before it is

known exactly Wow much. is needed and when. To do xo

prematurely may defeat favorable“action when the time

is ripe. From application to delivery of funds is usually

at least six months, because the title must be abstracted

. and examined and objections must be met, and finally the -

title must be approved in addition to completing the. money

arrangements.

The second device was the conciliation commissioner’s

_ order, filed August 6, 1941 (R. 9) effective August 16, which

ealled for redemption by October 15.- As no order in a

federal court may be effective until after ten days have

/*xpired (Rules of Civil Procedure, Rule 62, 28 U. S. c

— this order allowed less than sixty davs. .

~The order of the conciliation commissioner was reviewed

by the District Court which entered its order. of November

17, 1941 (éffective November 27) changing ‘the \ redemption

date to Dee ember 15, thus giving only eighteen davs for _

redemption. The petition for rehearing was everruled on -

December 9, leaving but six davs. R. 37 and 38. R. 41.

“THIRD DEVICE

Prohibition Against Farming .

Prevention of Farm Operations Destroys the’

; Security’s Value, -

A third device was the conciliation commissioner’s order

of August 6, 1941, which further prohibited the farmer

debtor from ‘‘doing any planting of any description until -

after October 15,’ 19417”. R. 9.and top of page 10. This

prohibition is devoid of any power to issne it and therefore

a nullity. It is also contrary to the public interest and to

natural law, both of which require that agricultural land

must be cultivated and planted lest it heecome a weed pest.

De will now proceed to examine the evidence.

The Evidence on Value.

’ The Rinota for the Valuation Inc rease to $25,200.

The record. of the testimony (R. 10 to 27) shows how.

the great chasm between $5806 and $29,200 was negotiated.

The first; the original, valuation under the first paragraph .

of Section 75 (s) was conducted free from any suggestion

-by the mortgage holders and it-named the true value of the

land. - See the statement of the conciliation commissioner

at R. 26, bettom of page and top of page 27 and the affi-

davits of:two of the three appraisers at R. 39 to 40. The

second valuation under Section 75 (s) (3) was fixed upon

the suggestion and testimony. of the mortgage holders who

considered that the land ought to bring enough to pay the

mortgages. This standard is of course unlawful. Never-

theless, the appraisal was ine ‘reased to four and one-third

its original amount.

. Some Extrajudicial Evidence.

‘Apparently recognizing that the evidence submitted to

him did not support his $24,200 valuation and to make

assurance doubly sure the conciliation commissioner re-

ported to the judge that besides the evidence submitted

he went out and made -his own ‘‘personal investigation.”’

R. 9, bottom of page.

‘

This snail type of procedure is evidence that

the conciliation commissioner well knew that the evidence

submitted at his hearing did not warrant such a fantastic

valuation. By introducing an unknown and mysterious.

factor—his ‘‘personal investigation’’—an attempt was

made to knock the props out from any objection that the

evidence submitted does not support the valuation of

$25,200. This method made the valuation proceeding a

nullity by violating « ‘fundamental principle of American

jurisprudence—due process of law.

‘“

The Method Condemned.

It happened that while this procedure was going on in

Ohio another like it was going on in California where. the

conciliation commissioner was also proceeding to fix the

valuation for redemption under Section 75 (s) (3) by his

‘‘personal investigation’’ in addition ‘to the evidence sub- -

mitted. Tliere also the District Court affirmed the con-

ciliation commissioner. We quote from the opinion of the .

Cirenit Court of. appeals for the Ninth Circuit which an-

nulled the valuation:

Moser v. Mortgage Guarantee —— 1941, 123 Fed.

(2d) 423:

> ‘The conciliation commissioner’s report read in part

as follows {quoted from the opinion.of the appellate

court) :.

appraisers and after making a personal visit to the

ranch and looking the property over and I talked to

other property owners in the vicinity, I came to the

conclusion that the property: was worth Twelve Thou-.

sand Dollars ($12,000) and tlrat is my, finding and I

accordingly fixed the value at the said-amount.’ ’’

“The italic arses Ni is that of the appellate court.

24—=C«-

The opinion of the “appellate court says:-

“In providing for the hearing the statute prescribes

that the’ commissioner .shall ‘set a date for the hear-~

ing and after such hearing, fix the value of the prop-

erty in accordance with the evidence submitted. .. .’

But the commissioner did not abide by his opening

statement nor by this requirement of the statute, for

after the hearing he personally proceeded as would:

an appraiser preparing for a hearing, to gather his.

own facts and ‘to consider his own impressions there-

from together with the ‘evidence ‘submitted.’ (No

evidence taken outside the hearing is included in-the

transe ript certified to the judge.) The Act does not

recognize the conciliation-commissioner as a qualified

appraiser nor authorize him to act in such capacity

and does not authorize him to supplement. the ‘evi-

dence submitted’ with investigations and evidence

taking of his own outside the hearing and without the _

knowledge of the parties to the hearing.’ In short, the

commissioner departed from the statute in’ a very

material and prejudic ‘ial manner,

The presentation in persen or by desitaltion of wit-

nesses whose testimony is, te be considered, and a

reasonable opportunity for cross examination, is im-

plicit in all formal hearings such as the one -under

consideration. . Neither of these requisites of our

jurisprudence was afforded in this instance.’’

‘*What influence the evidence taken outside the-hear-

ing, proper or improper, may have had upon the con-

elusion reached hy-the conmissioner, or what ,;coun

ter effett cross-examination or rebuttal testimony ‘would

have had upon such conclusion, ean never be known:

The order appealed: from is rev ersed, annulled and

set aside.”’ ,

This method of reaching judicial conclusions has like-

wise ber: recently condemned in the Third Cireuit in a:

: a - 25

regular bankruptcy proceeding, In re Aughenbaugh, 1942,

C. C. A. 3, 125 Fed. (2d) 887. There the referee consid-

ered ‘papers in the file not introduced in evidence at the

hearing. The Appellate court held that such method vio-

lates due process of law because the parties to the hearing

had no opportunity to explain or refute the outside evi-

‘dence. It held that in determining an issue the court must

“consider solely the evidence presented at the trial of that

sissué.

~~,

These circuit decisions’ are firmly grounded upon the de-

cisions of this court. —

In Interstate Commerce Commission v., Louisville, 1913,

227 U.S. 88, it was held that even a Commission may not -

-go outside the record in. concluding an issue because only

when evidence is put in the record can a party have an op-

portunity to ‘‘test,. explain, or refute’? and to ‘‘cross exam-

ine witnesses and inspect documents and offer evidence —

in explanation or rébuttal: In no other way can a party

maintain its rights or r make its defense.”’

hheon v. United States (New England Division pre

1923, 261 I. S. 184, held the s same,

-* United States v. Abilene, 1924, 265 U. S. 234, this court

“again applied the rule saving that “nothing can be treated

as evidence which is not introduced as such.’ ”

In Crowell.v. Benson, 1932, 285 U.S. 22, it was said that

‘*Facts conceivably known to the deputy ¢ommissioner but

not put in evidence So as to permit scrutiny and contest, |

will not support a compensation order. . . . An award not

supported by evidence in the record is nan in accord with

law. ” :

26 ’

We State quite frankly and unequivocally that the figure

of $25, 200 was not arrived at by a judicial determination.

The evidence does not support it.

A Look at the Mortgage Holder’s Theory

of Valuation,

It is clear from the evidence submitted by the mortgage

holder that the court was expected to fix the value of the.

farm for redemption with some relation to the amount of

the first mrteee one the taxes,

At R. 27, he put in his mortgage debt at $3 4,702.

T he witnesses put on by him gave evidence of the value

at figures designed to approximate the amount of the mort-

gage. They were:

C hamberlain, $33,600, R. 11 ($200 per acre).

Scanton, exactly the same .$3 53,600. R. 11 ($200 per

aere),

Osborn, $31,290 to $33,600. -R. 12 “($190 to $200 per

acre).

Huddilston, (after hearing the farmer. debtor’ s wit-

nesses at R. 12 to-R. 22) dropped to $29,400. R. 23

($175 per acre).

Cochran, the second mortgage holder (R. 26, bot-

_ tom of, page) who cat get nothing until the first mort-

gage is satisfied, topped them all, and went up to

$237;800, R. 26 ($225. per acre).

It is consequently. apparent that the mortgage holders _

expected the conciliation commissioner to sanction an un-

Jawful act by fixing a fictitious valuation that would ap-

proximate the first mortgage claim. It is important to °

note that the respondent, being the first mortgage holder, .

could bid the amount of. his $34,702 claim without paying

a cent of cash. Any other bidder or the farmer debtor

would have to pay the full sum in cash. This does not fix

a market value. But it does prevent redemption.

This illegal scheme would place a two-edged sword in

the hands of the mortgage holders. One edge would by a

false valuation prevent redemption; the other would force

a publie sale at which, by bidding the mortgage claim, the

farmer debtor and any other bidder would be cut off from

hidding. Either edge is calculated to cheat the law by

depriving the farmer debtor of his right to redeem. '

Its suecess would effectually revérse this court’s deci-

sion in Wright v. Union Central, 1940, 311 U. S. 273, throveh

the device of a fictitious valuation which would defeat re-

. demption and thus force a public sale.

- ’

The Statutory Standard of Value.

When the law is examined by. which such a method of -

valuation is to be measured we find:

Section 75 (s) at the end of the first paragraph reads:

‘‘Such appraisers shall appraise all of the property

of the debtor, wherever located, at its then fair and

reasonable market value’’.

That provision refers te the ianiiied mide at, the be-

ginning of the three year stay under Section 75 (s) which

was set by the conciliation commissioner at $5 9800, R. 27.

At Section 15 (s) (3), the law provides thats

‘*T’pon the pequest of any secured or unseenred ered-

itor, or upon request of the debtor, the court shall

cause-a reappraisal of the debtor’s property, or in its

discretion set a date for hearing, and after such hear-

ing fix the value of the property, in ‘accordance with

the evidence . submitted. “a

That is, the debtor may redeem his farm at its ‘‘fair and

reasonable market value’’ which Ras been fixed ‘in ac-

cordance with the evidence submitted.’’

The mortgage holders‘throughout the country up to the

decision in Wright v. Union Central, decided December 9,

1940, 311 U. S273, had been violating the law by asking,

and getting, a public sale to defeat the debtor’s right to -

redeem. Here the responden’ ollowing the weil-worn path,

asked ‘the bankruptcy court in- this case to do the same

thing—that-is, to ignore the debtor’s right to redeem at

the ‘‘fair and reasonable market value*’ by holding a pub- .

lic ‘sale at-which the mortgage holder could, without using

money, bid the amount of his mortgage claim. Beeause

_ of that intervening decision the District Court held that

the statute must be observed and ordered the conciliation

commissioner to fix the valuation. R. 8 to 9, order of”

March 21, 1941. ‘

This legal history explains the peculiar gyrations of the

respondent’s evidence presented to the conciliation com-

missioner. Though Wright v. Union Central, 1940, 311

U. S.-273, was expected to restore tle right of redemption

to all farmer debtors, this new device was promptly put °

‘to work to accomplish the same object as the device which

this Court wrecked.

An Examination of the Evidence Submitted

At the Hearing.

There is a wide cleavage between two distinct types of

evidence adduced at the hearing before the conciliation

commissioner which may be grouped as follows: '

The Mortgage Holder’s Evidence.

First, there is the evidence of’ the mortgage holders

based upon the theory that the valuation should be deter-

mined by the amount of the liens on the property. In put-

ting in the amount of his first mortgage at $34,702 (R. 27)

the respondent showed his adherence to this theory. By

statute it was irrelevant. The second mortgage holder,

Cochran, showed the same. attitude and put his testimony

enough higher to cover well his claim of more than $2,000.

(R. 26.) He valued the property up to $37,800. (R. 26.)

The testimony of Chamberlain (R. 10 to 11), an official in

two banks, who did not go on the“farm, fixed the value at

' $33,600, Seanlon (R. 11 to 12), who is net a farmer and

” had not lived on a farm for fifty years, fixed it at $33,674.

Osborn (R. 12) who did not go on the farm, set it at from

$31,920 to $33,600. THuddilston (R. 22 to 24), who had not

been on the farm for five years and who says he sold 33

acres at $14,000 or over $400 per acre.in Sagamore Hills, ~

(See map at debtor’s Exhibit 1 at R. 28), a high class

‘residence section of: metropolitan Cleveland, went haek

to $29,400 after hearing the farmer debtor’s Witnesses at

R. 12 to 22.

All showed the same basis of value—the amount of |

claims against the farm.

In several instifnces the mortgage holders asked ques-

tions like this: Do ;ou know that such and ‘such a farm

was offered tor such and such a pricet The figure was

always a high one, Of course this is not evidence. The

mention of a supposed ‘offer’? can only confuse unless

it is backed up with evidence. Otherwise it is plain bluff.

Evidence showing that an offer bad been made to sell a

farm for $230 an acre would be evidence that its value

probably was no higher or the price would be higher. If

actually offered and there were inquiries but ‘no taker it .

would tend to prove thatthe price. was too high—nothing

more. To say to a witness **Do yon know that the National

Press Building was offered ‘at a billion dollars?t’’ is no

evidence ofits value. — , |

Such was the evidence of value submitted by the re-

spondent. : %

The Evidence of Other Witnesses.

Second, there is the evidence of the witnesse’. who had

no other interest or’ motive than to arrive at the “fair

and reasonable market value’’ of this farm. .

| Mr. Howarp

: ; R: 12. to 14

Mr. Howard had no interest in the case. He is City

Planner of the Regional Association of Cleveland. He has

made an extended study of that metropolitan district and

has published several works on the subject. He shows

that this farm lying near the line between Cuyahoga and

Summit Counties (R. 28, See Macedonia which is encir-

cled in red on the map) ean have no site value. There

are already 40,000 acres of vacant un-subdivided land in

‘ Cuyahoga County. There are 80,000 acres of farms like

the Carter farm which could also be subdivided. There

are now 28,000 vacant lots already-subdivided which would -

house 500,000 people.’ (At the same ratio ‘the already

available. home site land would provide for an additional

possible farm land would be in competition, the 28,000

acres plus 40,000 acres (68,000 acres) alone would pro-

vide for a population of 1,180,000.) There are also 160,000

tax. delinqnent lots in fhe county. He also testified that

the proportion of all these figures for. the vicinity of this’

farm is higher than for’ the County as a whole.

For Summit County of course the ‘amount of available

farm land which is available for. residence purposes. is

very much larger.

| The United States population census shows Cuyahoga

' County, 1930, 1,201,455; 1940, 1,217,250- (an increase of

. about 16,000 in ten vears). Summit County, 1930, 344, 131; .

1940, 339,405 (a decrease of about Ano)

Mr. Apams .

R. 14

Mr. Adams had no’ interest in the case. He has owned

. farms and been a farmer all his life and still owns over 400

‘\: acres. He has offered his farm at $40 to $50 an acre and.

‘

has not been able to sell it although buyers, have looked

at it. He has been over the Carter farm and he valued

it at $00 an acre or $8415.

“Ma. Factz |

| R. 15 to 16

Mr. Eagle is not interested in the ease. He is a farmer —

and anCuppraiser of wide experience for the: government

and for. federal land banks. He took samples of the soil

as in his official appraisajs. He went over every part of

the farm and found some good soil. He found mueh light —

top soil with a very heavy subsoil that is very poor.

Much of :it is stony and underlaid with rock. He found

about one-third of the peach trees frozen out and without

value, leaving but two and two-thirds acres of peaches.

The house*roof is about gone—the singles curling up. His

valnation is $7795.00 or about $46 per acre,

Me. Hever

B..17 to 19...

Mr. Huber had no interest in the case. Hle-has been a

farm real estate dealer for more than thirty years and.

has sold hundreds of farms, many in this very community..

: He went over the farm.. It has no scenic value whatever.

Because it is situated between the two ¢ities, although’ he

had serious doubts, he added some to what he deemed the

real value to be. He named $12,040, or $71.66 per acre.

Mr. PiecHaty

: R. 21 to 22 ; ;

Mr. Plechaty has been a farmer for nahin. hy

He was a farm real estate dealer for many years in this

part of the state. He was looking for a farm in the

vicinity for himself last year until he bought the Bowman.

farm nearby.

- Of this Bowman farm Mr. Huber had testified, (R. 19),

that ‘‘It had about 98 acres and he sold it to Plechaty

for $12,000. It had excellent buildings, the barn ‘being

one that nobody wonld want to build’. The house has

three baths, vapor heat, and is ‘in very good condition.

It also had spring water running by gravity right into

the barn and house, and -in the orchard on-out to the

ereek.”’

Mr. Plechaty has been on the Carter farm and knows

it. He knows other farms nearby that are for sale. He

. values the Carter farm at $6500 to $8500, or about $39 to

$50 per acre.

' The Two Valuation Theories Compared.

There can be but one conclusion. in considering these

valuations running from $6500 to $12,400 by the disinter-

ested’ witnesses, and from $29,464 to $37.883 by the mort-

4 gage holders., The disinterested witnesses were confronted

with the difficult job of. fixing the actual value of the fatm .

' as itis now. They were not subject to any other considera-

tion. The mortgage holder's witnesses were thinking of

' what the value should be in relation to the mortgage claims.

They were concerned with a valne that would freeze -ont

the debtor from his right of. redemption under Section

75 (s).

ee kgs oe ae

"*.

- The court can ‘not accede to such a scheme without stulti-

fving the laws of the U nite qd States and the decisions’ of -

this court. | k

CONCLUSION. vat

~The method of valuation for the purpose of redemption~

provided in Section 7 (s) (3) of: the farmer debtor law‘

is violated by the method employed by the bankruptcy

court, and sustained, hy the appellate court on the theory

there Was no abuse of ‘judicial discretion.’ .

‘

The effect of the methods pursned presents an important

question concerning, the administration, of the statute.

~The method of the conciliation. corimissioner in fixi

valuation by his ‘‘personal investigation’? as su |

bw the courts below is in-conflict with the decisions in other.

cirenits and with the decisions of this court.

Tf the purpose of the farmer débtor law, which -is ‘to

afford,te the farmer debtor an honest, opportunity. to ‘re-:

deem his farm at its present real market value, is’ to -be

thwarted by merely setting up A fictitious valuation which -

will foree.a publie‘sale at which-the mortgage holder. may

without’ paving cash bid the ameunt of his lien, ‘then the

deeision of this court at Wright v.. Union Central, 1940,

“3h U. 8,273, 7 is. overruled and the farmer debtor law is

o iInnocuons to holders of farm, martgages which overtop the .

value of their seeuritv-—the mortgage holders may fake

hast

the farme. '

Wherefore your petitioner prays that a writ of cer-

tiorari may issue. | ast

eae » Respectfully submitted,

Eimer McCuarn, Lima, Ohio,

Counsel for the Petitioner.

Lima, Ohio. Raper, } oF

- February, 6, 1948 .

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.