Petition for Writ of Certiorari — Wragg v. Federal Land Bank of New Orleans

IN THE

SUPREME COURT OF THE

UNITED STATES

OCTOBER TERM, 1944

No.

MINNIE REESE RICHARDSON WRAGG, Petitioner,

V.

FEDERAL LAND BANK OF NEW ORLEANS, ET AL.

PETITION FOR WRIT OF CERTIORARI

To the Honorable Chief Justice and Asseciate Justices of the

Supreme Court of the United States:

Your petitioner Minnie Reese Richardson Wragg respectfully

prays for a writ of certiorari herein to review a certain final

decision of the Circuit Court of Appeals of the Fifth Circuit, in

the above entitled action, the opinion and decision of said court

having been rendered and filed on November 7, 1944, and a pe-

tition for rehearing which was, after being entertained and

considered by said court, denied on December 11, 1944, the

effect of which said decision of the Circuit Court of Appeals

was that a farm debtor-bankrupt whose petition was duly filed

within the time allowed by state law for redemption of prop-

erty, should not be put in possession of her property under Sec-

tion 75(s) of the Bankruptcy Act unless she had the right of

possession under the state law; and further holding that the

real property of a farm debtor-bankrupt should not be admin-

istered in the manner provided by Section 75 of the Bankruptcy

Act unless the farm-debtor-bankrupt was entitled to possession

under the state law; the effect of the decision further was to

deny to the farm debtor-bankrupt the benefit of rents, and

profits received, and growing timber cut, from the real prop-

erty during the time that her rights under Section 75 of the

Bankruptcy Law were denied by the inferior courts because of

an erroneous construction of the Bankruptcy Act.

QUESTIONS INVOLVED

be

Whether a farm debtor-bankrupt who has an existing right

of redemption from mortgage foreclosure sale, may have her

property administered by being placed into possession under

Section 75(s) of the Bankruptcy Act.

II.

Whether the right of a farm debtor-bankrupt to have proper-

ty administered in accordance with Section 75(s) of the Bank-

ruptcy Act should be denied because right to possession under

the state law ceased upon default in the mortgage.

Il,

Whether the farm debtor-bankrupt whose right to re-file

farm debtor proceedings was erroneously denied by the Dis-

trict Court, is entitled to an accounting for rents and profits

received and timber removed from the property during the

time her right to have the property administered was errone-

ously denied.

STATEMENT OF FACTS

In 1937, after the Federal Land Bank had obtained a decree

of foreclosure, but before foreclosure sale, petitioner filed a pe-

tition under Section 75 of the Bankruptcy Act seeking a com-

position or extension of her debts. The offer of composition

not being accepted, the District Court held that petitioner was

not entitled to amend her petition so as to proceed under Sec-

tion 75(s), and directed that the proceeding be dismissed as of

January 19, 1938. Petitioner’s motion for leave to appeal to the

Circuit Court of Appeals in forma pauperis and her petition for

certiorari to this Court, were denied (95 F. (2d) 252, 305 U. S.

3

596). After the farmer-debtor proceeding was dismissed the

Federal Land Bank purchased the mortgaged property at a

foreclosure sale which was confirmed in April, 1938. In 1939,

respondent Federal Land Bank contracted to sell the property

to respondent Seth Storrs, the contract stipulating that it was

“subject to the statutory right of redemption following fore-

closure, if any exists.” Alabama allows to the mortgagor a two-

year redemption period after foreclosure sale. On March 11,

1940, prior to the expiration of this period, petitioner filed her

application praying that the case be reopened and reinstated

or, in the alternative, that she be permitted to re-file her farm

debtor proceedings, and that her former schedules be deemed

a part of the petition. The District Court denied both prayers

and was affirmed by the Circuit Court of Appeals (125 F. (2d)

1003). This Court granted certiorari, affirmed the judgment

in so far as it refused to reopen the old proceedings, but re-

versed for denial of the right to re-file farm debtor proceedings

and remanded the cause to the District Court for further pro-

ceedings (Wragg v. Federal Land Bank, 317 U. S. 325).

After remand, petitioner again submitted offer of composi-

tion and extension which was rejected, and she amended her

petition under Section 75(s) of the Bankruptcy Act and was

adjudged a bankrupt. Pursuant to Section 75(s) she then re-

quested that her property be appraised and that she be permit-

ted to remain in possession of said property, under appraisal,

to endeavor to redeem it in three years. Pending these pro-

ceedings, the United States condemned the greater portion of

the land, including the improvements, the portion taken being

appraised at Four Thousand Dollars ($4,090.00), which amount

was paid into court. The balance of the property, not taken

under condemnation, was appraised at Two Thousand, Two

Hundred Dollars ($2,200.00). This appraisal was confirmed by

the District Court on February 2, 1944.

By a decree of March 10, 1944, the District Court, holding

that, since the farm debtor-bankrupt owned no right, title, or

interest in and to the property except the statutory right of re-

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4

dempion under Alabama law as modified and extended by

Section 75 of the Bankruptcy Act, she was not entitled to pos-

session of the real property, and gave her a period of six

months within which to redeem the sixty acres by paying the

appraised value of $2,200.00. Petitioner then, in order to have

all of the facts before the court, filed a petition setting up the

erroneous denial to her in 1940 of her right to re-file the pro-

ceedings; alleging that the value of the entire tract of land in

1940 was the sum of $3,500.00 which she was ready and willing

to pay, and that her right to redeem for this sum was denied by

the erroneous decision of the District Court in 1940; that the

property increased in value between 1940 and 1944 to the extent

that the property was appraised in 1944 to be worth $6,200.00,

and that, in addition, timber of the reasonable value of

$1,500.00, which was on the property in 1940 and to which peti-

tioner had title had she been permitted to redeem, had been re-

moved from the property by the respondent S. P. Storrs. This

petition alleged that it would be unjust and inequitable to per-

mit the respondents and the parties claiming under them to

receive all of the benefits of rents, profits, timber, and increase

in value during the period that her rights under Section 75 of

the Bankruptcy Act were erroneously denied, and therefore

prayed an accounting for rents and profits received and timber

cut after 1940, and that she be permitted to redeem at the value

in 1940, and that her rights be established as of the time she

sought the benefits of the Act and her rights were erroneously

denied. This petition was likewise denied by the District

Court, and petitioner appealed to the Circuit Court of Appeals

for the Fifth Circuit.

The Circuit Court of Appeals on November 7, 1944, rendered

its decision and judgment in said cause affirming the judgment

of the District Court except in so far as the petitioner’s right to

accounting for timber cut after the date of the appraisal of the

property, which appraisal was affirmed by the Court on Feb-

ruary 2, 1944. Petitioner properly filed petition for rehearing

which was denied by the Circuit Court of Appeals on Decem-

5

ber 11, 1944. It is to correct this decision that the present

proceedings are prayed.

RULINGS OF THE COURTS BELOW

The District Court in denying petitioner’s application for pos-

session of the property rendered a decree but no reported opin-

ion. This decree recited a conclusion of law that the farm

debtor-bankrupt owned no right, title, interest, or claim in and

to the real property except the statutory right of redemption

under Alabama law as modified and extended by Section 75 of

the Bankruptcy Act; that she was not entitled to possession of

the real property listed in her assets. The District Court in

denying the petition for an accounting rendered no opinion

which was reported.

The Circuit Court of Appeais for the Fifth Circuit in affirm-

ing the judgment of the court below as to the denial of the

right of possession, held in its opinion:

“The right to redeem within two years property sold at

execution or foreclosure sale which is established by the

Alabama statute is peculiar and strictly limited. It is de-

clared not to be an interest in the land, but a personal privi-

lege, exercisable by the debtor or in succession by other

persons named in the statute, but capable of sale by the

debtor. The statute requires pxyment of the entire debt

and not merely the price bid at the sale, with ten percent

interest per annum, and compensation for taxes paid and

improvements made since the sale, and expressly excludes

accountability for rents and profits prior to the date of re-

demption. A court of equity is given jurisdiction to settle

any disputes about it. This right the federal Supreme

Court, (317 U. S. 325), held to be among the redemption

rights covered by Section 75 of the Bankruptcy Act. A

provision of Subsection (n) is: ‘In all cases where at the

time of filing the petition the period of redemption has not

or had not expired . . . the period of redemption shall be

y

extended . . . for the period necessary for the purpose of

carrying out the provisions of this section.’ Accordingly,

although the period of redemption under the statute ex-

pired soon after March 11, 1940, the district judge correctly

held he had power to give a reasonable time for the exer-

cise of the privilege of redemption in bankruptcy.

6

“Section 75, however, does not attempt to give the farm-

er-debtor any interest in land which he does not have un-

der the State law at the time his petition is filed. Mrs.

Wragg had lost title and possession of the land over a year

before her petition was filed and she had only the personal

privilege of redemption extended to her by the Alabama

statute. She had no title, no possession, and no right of

possession of the land. The bankruptcy court could give her

none unless the land be redeemed. Storrs bought the land

subject to her right to redeem it, but otherwise he was

the full owner. Possession cannot be taken from him with-

out redemption. The bankruptcy court recognized her

right as far as it could by reasonably extending the time for

redemption, and providing for a sale of the right, if anyone

would buy it.” (Italics supplied.)

In affirming in part and reversing in part the judgment of

the District Court as to the right of petitioner to an accounting

for rents, profits, and timber, the Circuit Court of Appeals held

in its opinion:

“But we think she may be entitled to deduct from the |

redemption money the sum, if any, received by Storrs from

the sale of timber after the filing of her petition. The

growing timber was a part of the land itself which was

subject to redemption, and the filing of the petition under

Section 75, though not a redemption, was a notification that

a redemption in bankruptcy was to be undertaken. The

farmer-debtor’s rights passed at once under the protection

of the court. Section 75(n). Thereafter the purchaser of

the land could not dispose of any part of it without account-

ability therefor if redemption be effected.

7

“The Alabama statute, Title 7, Sect. 32 (6), provides that

‘the purchaser shall be entitled to all rents paid or accrued

to the date of redemption.’ The Alabama court says of the

purchaser, ‘He is not a mortgagee in possession, but a pur-

chaser, the absolute owner, entitled to the rents and profits

and unimpeachable for waste.’ Cramer v. Watson, 73 Ala.

127. An account as for waste in cutting trees before re-

demption has been denied. Johnson vs. Davis, 180 Ala.

143, 60 So. 799; Duncan vs. Hornsby, 236 Ala. 317, 181 So.

763. In fixing a redemption price Section 75(s) of the

Bankruptcy Act modifies the price of redemption under

the Alabama statute much as it does the price of redemp-

tion under mortgage contracts and the laws of other States,

by substituting the present value of the land for other

measures. We think the district court correctly held that

the appraised value of the land is not to be reduced by rents

and profits before the redemption takes place, because

there is, as we have held, no right to possession; but if,

pending the proceeding, the purchaser sells part of the very

thing to be redeemed and realizes its value, he ought to

credit that value on the redemption price. If, as Mrs.

Wragg alleges, he has thus realized $1,500 by cutting tim-

ber, he will get $1,500 more and Mrs. Wragg will get $1,500

less in value than the redemption contemplates. It may be,

however, that the timber was cut before the appraisal

which appears to have been made Oct. 1, 1943, and not be-

tween that date and March 24, 1944, when the pleading

which complains of it was filed. In that event the ap-

praisal would have excluded the value of the timber, and

no further adjustment would be necessary. The judge

heard evidence on this pleading, but made no fact finding

about the timber at all. He seems to have regarded the

issue as irrelevant. The evidence has not been brought up.

The refusal to consider the matter of the timber without

finding either that no timber was cut or that it was cut

before the appraisal seems to us to be in error on the face

of the record, since the facts found do not fully support the

DERRY Se Pea or Setene

8

judgment. We reverse and remand the cause with direc-

tion to find what if any timber was cut from the land since

the appraisal, and to deduct it from the redemption price;

and to fix again a reasonable time to effect redemption or

a sale of the right. Let the costs of this appeal be paid one-

half by appellant and one-half by appellees.”

REASONS FOR GRANTING

The Circuit Court of Appeals for the Fifth Circuit held in

effect that the right of a farm debtor-bankrupt to have prop-

erty administered in accordance with the provisions of Section |

75(s) of the Bankruptcy Act by being placed in possession of

the property upon terms which will enable him, by paying a

suitable rental, to redeera the property, should ke denied un-

less the farm debtor-bankrupt has a right of possession under

the state law. Such decision by the Circuit Court of Appeals

is in conflict with the applicable decision of this Court and par-

ticularly the decisions of Wragg v. Federal Land Bank, 317 U.

S. 325; and Mangus v. Miller, 317 U. S. 178.

The Circuit Court of Appeals for the Fifth Circuit held in

effect that the administration of the property of a farm debtor-

bankrupt is limited by the determination of whether, under

the state law, the farm debtor-bankrupt had a right to posses-

sion. Such decision by the Circuit Court of Appeals is in con-

flict with the applicable decisions of this Court and particular-

ly the decision of Wragg v. Federal Land Bank, 317 U. S. 325;

United States v. Pelzer, 312 U. S. 399; Mangus v. Miller, 317 U.

S. 178.

The Circuit Court of Appeals for the Fifth Circuit held in

effect that the method of administering the right of redemp-

tion of a farm debtor-bankrupt was limited by the law of the

State as to right of possession and could not be administered in

accordance with the terms of Section 75(s) of the Bankruptcy

Act by placing the farm debtor-bankrupt in possession unless

the State law gave to the mortgagor in default a right of pos-

9

session. Such decision by the Circuit Court of Appeals is in

conflict with the applicable decisions of this Court and partic-

ularly the decisions of Wragg v. Federal Land Bank, 317 U.S.

325; United States v. Pelzer, 312 U. S. 399; Mangus v. Miller, 317

U. S. 178.

The Circuit Court of Appeals for the Fifth Circuit decided a

federal question in a way probably in conflict with applicable

decisions of this Court, to-wit: That a Bankruptcy Court

should not determine the rights of the farm debtor-bankrupt

to redeem and to have an accounting for rents, profits and tim-

ber, upon the status quo existing on the date her attempt to

secure the benefits of Section 75 of the Bankruptcy Act was

erroneously denied to her by the District Court.

The Circuit Court of Appeals for the Fifth Circuit decided a

federal question in a way probably in conflict with applicable

decisions of this Court, to-wit: The Circuit Court of Appeals

by its decision denied to a farmer the income, rents, profits and

growing timber and the benefit of increased value during the

time her rights under Section 75 of the Bankruptcy Act were

erroneously denied.

CONCLUSION

For these reasons it is respectfully submitted that this peti-

tion should be granted.

‘ a ‘ eae ya “4 ne

a) risen J. KNABE,

JACK CRENSHAW,

Counsel for the Petitioner.