WRIGHT V. VINTON BRANCH, 300 U. S. 440 (1937)

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U.S. Supreme Court

Wright v. Vinton Branch, 300 U.S. 440 (1937)

Wright v. Vinton Branch

No. 530

Argued March 3, 4, 1937

Decided March 29, 1937

300 U.S. 440


1. A motion to dismiss a petition under § 75(s), as amended, of the Bankruptcy Act upon the ground that, as applied to the owner of a farm loan secured by deed of trust, provisions of that subsection are unconstitutional, held not premature where the farmer debtor had taken all affirmative action required of him under the section to initiate proceedings leading to a stay of foreclosure. P. 300 U. S. 456.

Louisville Joint Stock Bank v. Radford, 295 U. S. 555, did not

Page 300 U. S. 441

question the power of Congress to offer to distressed farmers means of rehabilitation under the bankruptcy clause.

2. When the validity of an Act of Congress is drawn in question, and even if a serious doubt of constitutionality is raised, it is a cardinal principle that this Court will first ascertain whether a construction of the statute is fairly possible by which the question may be avoided. P. 300 U. S. 461.

3. Section 75(s) of the Bankruptcy Act, as amended (the new Frazier-Lemke Act), is construed with committee reports and is found adequately to preserve the following substantive rights of a farm mortgagee, which this Court held in Louisville Joint Stock Land Bank v. Radford, 295 U. S. 555, were not protected before the amendment -- viz., (a) The right to retain the lien until the indebtedness thereby secured is paid; (b) the right to realize upon the security by a judicial sale; (c) the right to protect the mortgagee's interest in the property by bidding at such sale whenever held. P 300 U. S. 458.

4. In the Radford case, supra, it was not held that deprivation of any one of the five rights of a mortgagee enumerated in the opinion (pp. 295 U. S. 594-595) would render the original Frazier-Lemke Act invalid, but that the effect of the statute in its entirety was to deprive the mortgagee of his property without due process of law. P. 300 U. S. 457.

5. While the new Act affords the farmer debtor, ordinarily, a three-year stay of foreclosure, the stay is not an absolute one; the court may terminate it earlier and order a sale. P. 300 U. S. 460.

6. Construed in the light of committee reports, and the exposition of the bill made in both Houses by its authors and those in charge of the bill and accepted by the Congress without dissent, the amended Act gives the court broad power to curtail the stay of foreclosure, for the protection of mortgagees. The property of which the debtor retains possession is at all times in the custody and under the supervision and control of the court. If the debtor defaults at any time in his obligation to pay a reasonable rental for the part of the property of which he retains possession, or fails at any time to comply with orders of the court issued under its power to require interim payments on principal, or other orders issued in the course of the court's supervision and control of his possession, or if, after a reasonable time, it becomes evident to the court that there is no reasonable hope that the debtor can rehabilitate himself financially within the three-year period, or if,

Page 300 U. S. 442

within that period, the court finds that the emergency that gave rise to the legislation has ceased to exist -- the court may terminate the stay and order a sale. P. 300 U. S. 461.

7. The amended Act is not unconstitutional as applied to a mortgagee because possession of the property during the stay of foreclosure is in the debtor subject to the obligations imposed by the Act, and under the supervision and control of the court, rather than in a receiver or trustee. P. 300 U. S. 465.

8. The clause of the amended Act, § 75(s), par. 2, providing that the first payment of rental by the debtor in possession shall be within one year of the date of the stay order, is construed, in view of the additional requirement that the payments shall be semi-annual, not as meaning that the debtor may not be required by the court to pay any rent before the close of the first year, but as forbidding the court to postpone the payment beyond one year. So construed, the clause is not unreasonable or arbitrary. P. 300 U. S. 467.

9. The requirement of the amended Act that the rents paid into court by the debtor in possession during stay of foreclosure shall be applied first on taxes and upkeep is consistent with the constitutional rights of the mortgagee. P. 300 U. S. 468.

10. The objection that the amended Act unconstitutionally restricts a lienor's remedy under the state law by delays interposed to the enforcement of his rights is to be tested not by what might be permitted to a State under the contract clause of the Constitution, but by whether, as an exercise of the bankruptcy power, for the rehabilitation of the farmer mortgagor, the Act so far modifies the lienor's rights, remedial or substantive, as to deny the due process of law guaranteed by the Fifth Amendment. P. 300 U. S. 468.

85 F.2d 973 reversed.

Certiorari, 299 U.S. 537, to review a judgment affirming a judgment of the Bankruptcy Court, 12 F.Supp. 297, which, on the motion of a secured creditor, dismissed a petition filed by a farmer under § 75, subsection (s), as amended, of the Bankruptcy Act.

Page 300 U. S. 453

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