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IN RE DAVIS

January 6, 1936

In re DAVIS


The opinion of the court was delivered by: BYERS

BYERS, District Judge.

This is a debtor proceeding under section 75 of the Bankruptcy Act, as amended (11 U.S.C.A. § 203), touching agricultural compositions and extensions.

The debtor filed on September 28, 1934; his attempted composition failed and thereafter four motions were made in respect of four mortgages under foreclosure prior to the date of filing, to procure the lifting of as many stays of further proceedings in the state court touching those mortgages, on the ground that subdivision (s) of said section 75 (the so-called Frazier-Lemke Act, 48 Stat. 1289) was unconstitutional.

 Decision of those motions was withheld, on consent of both attorneys, when it became apparent that the Supreme Court would decide the question, which it did on May 27, 1935, holding the subdivision to be in violation of the Fifth Amendment to the Constitution. Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 55 S. Ct. 854, 79 L. Ed. 1593, 97 A.L.R. 1106.

 Thereafter the motions were granted and, by several orders bearing date of July 1, 1935, the stays were vacated and the several plaintiffs permitted to proceed with their foreclosure suits. For convenience, the actions will be referred to as numbers 1, 2, 3, and 4.

 The status of each will be described presently.

 On September 6, 1935, the debtor filed his amended petition, reciting his failure to effect a composition or extension of his debts, and on that day procured an order to show cause directed to the plaintiffs in the four cases, wherein the vacation of the said orders of July 1, 1935, is sought, and special relief with reference to action No. 1 is prayed.

 The motion was argued on September 18th and, by stipulation, consideration was adjourned until November 8th, when all briefs were to be filed.

 The debtor relies upon subdivision (s) of section 75 of the Bankruptcy Act (11 U.S.C.A. § 203 (s), which became a law on August 28, 1935, being the "Frazier-Lemke Act" in its present form.

 The actions in question must be separately listed.

 Action No. 1. -- This suit was instituted April 30, 1934, by the First National Bank of Port Jefferson against the debtor, to foreclose a mortgage for $8,000.00, made by the debtor on or prior to January 6, 1927, as to which there was default of interest and taxes, and had proceeded to judgment of foreclosure and sale on June 27, 1934; thereafter the debtor's first petition was filed, under the Frazier-Lemke Act of June 28, 1934, 48 Stat. 1289.

 When the stay incident to the proceeding so begun was lifted, and the order of July 1, 1935, was signed and filed, there was no legal barrier to the further prosecution of that action. Accordingly, the property was advertised for sale at public auction pursuant to law; the sale was duly held on August 24, 1935, and on that day the referee executed, acknowledged and delivered his deed to the purchaser, who was the plaintiff in that action and whose bid was $9,000.00.

 The deed was recorded on August 26, 1935, and, while the motion papers are not clear on the subject, it is assumed that the purchaser was let into possession. If that is an erroneous assumption, the facts to the contrary should be made to appear.

 Assuming such to be the fact, the title of the debtor to the property described in that mortgage was completely divested, and on August 24, 1935, the purchaser at the foreclosure sale became the owner of an indefeasible title (unless there was some infirmity in the foreclosure action itself, which has not been asserted in this proceeding) and the debtor and no title, interest, estate, or equity or redemption over which this court could exert jurisdiction in obedience to subdivision (n) of section 75 of the Bankruptcy Act as enacted August 28, 1935 (11 U.S.C.A. § 203 (n).

 Subdivision (n) as it existed before the amendment of August 28, 1935, read as follows:

 "(n) The filing of a petition pleading for relief under this section shall subject the farmer and his property, wherever located, to the exclusive jurisdiction of the court. In proceedings under this section, except as otherwise provided herein, the jurisdiction and powers of the court, the title, powers, and duties of its officers, the duties of the farmer, and the rights and liabilities of creditors, and of all persons with respect to the property of the farmer and the jurisdiction of the appellate courts, shall be the same as if a voluntary petition for adjudication had been filed and a decree of adjudication had been entered on the day when the farmer's petition or answer was filed." 47 Stat. 1470.

 On July 1, 1935, this court had surrendered its exclusive jurisdiction over the debtor and his property, to the extent reflected in the terms of the order to which reference has been made, whereby continuance of the foreclosure was permitted, since there was then no reason existing to the contrary. That order was not appealed, nor has an effort since been made to show that it was invalid in any respect.

 With reference therefore to this particular action, it is not apparent how this court possesses the power to order the sale in foreclosure held on August 24, 1935, to be vacated or set aside, or otherwise assailed.

 Action No. 2. -- The same bank is the plaintiff in this cause, and consents that the motion be granted, and that the order of July 1, 1935, in that cause, be vacated and set aside.

 That action was started May 2, 1934, to foreclose a mortgage on other property, made by the debtor on or before June 3, 1930. Judgment of foreclosure and sale was duly entered on June 27, 1934.

 That action was stayed, and the stay lifted in all respects as stated with reference to action No. 1, but apparently there has not been a sale ...


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