In re Haun

35 F. Supp. 338, 1940 U.S. Dist. LEXIS 2530

• Court: District Court, D. Idaho
• Decided: September 28, 1940
• Docket: No. 5288
• Status: Published

Opinion

CAVANAH, District Judge.

The Second Alliance Trust Company moves to set aside the order adjudicating the Bankrupt a bankrupt upon her amended petition in so far as it affects certain real property claimed by it to be the owner.

The determination of that issue of fact is prematurely presented at this time under the procedure provided for by the Bankruptcy Act in Subdivision s, Section 75, 11 U.S.C.A. § 203, sub. s, that the farmer after failing to obtain the acceptance of a majority in number and amount of all the creditors may amend his petition asking to be adjudged a bankrupt. This was done here, and upon the amended petition the debtor was adjudged a bankrupt and the amended p.etition referred to a referee for administration. When that is done, then either party may file objections, exceptions and take an appeal within four months, and in such proceeding the Farmer may petition the Court that all his property wherever located, whether pledged, incumbered or unincumbered, be appraised and that his unincumbered exemptions and unincumbered interest or equity in his exemption as prescribed by state law, be set aside to him, and upon such request being made the Referee under the jurisdiction of the Court shall designate and appoint appraisers who shall appraise all of the property of the debtor wherever located.

An interpretation of this statute as to the procedure was made by the Supreme Court in the casé of John Hancock Mutual Life Insurance Company v. Bartels 308 U.S. 180, 60 S.Ct. 221, 224, 84 L.Ed. 176, where the Court said: “The procedure under subsection s is intended to protect all interests. It provides, in paragraph (1), that after the value of the debtor’s property has been fixed by the prescribed appraisal, the referee shall set aside the debtor’s unencumbered exemptions and direct his retention of possession of the rest of his property subject to all liens and to the court’s supervision and control. Under paragraph (2), if there has been compliance with the statutory conditions, the Court is directed to stay all proceedings against the debtor or his property for a period of three years, and during that time the debtor may retain possession of all or part of his property subject to the Court’s control, provided he pays a reasonable rental semi-annually.” And the Court definitely said: “We are not here concerned with questions which may arise in the course of the administration under the statute, but merely with the duty to follow the procedure which the statute • defines and the District Court failed to observe. We hold that on his amended petition invoking subsection s Bartels was entitled to be adjudged a bankrupt and to have his proceeding for relief entertained’ and his property dealt with in accordance with that subsection.”

While the contention in the Bartels case was that it would not be feasible to grant the relief urged by the farmer, yet the Supreme Court definitely interpreted the Statute as to the procedure to be first taken, was to follow the procedure which the statute defines, and on the debtor’s amended petition invoking subsection (s) he is entitled to be adjudged a bankrupt and to have his proceedings for relief entertained and his property dealt with in accordance with that subsection.

That Statute does not provide that the issue of ownership of the property can be determined upon motion to set aside an order of adjudication of the bankrupt, but contemplates, first, the procedure as stated by the Supreme Court, and when the property is to be appraised under order of the referee it is there determined what property belongs to, or the bankrupt has an interest in, and the appraisal shall be made in all respects with rights of objections, exceptions and appeal granted within four months.

When the above procedure is taken, then any objecting party as to what property should or should not be included in the appraisal of the debtor or whether he is the owner thereof may, after the appraisal is made, make any objection or exception or take an appeal.

The procedure under this statute was considered and determined in the recent case of Thomas F. Shaw, Debtor, 35 F.Supp. 337, in an opinion of the Court filed September 17, 1940, where the conclusion, and the steps to be taken, was reached as here, and it was there held that the proceedings must first be taken before the Referee to whom the matter has been referred.

Accordingly, an order will at this time be made overruling the motion and objection of the Second Alliance Trust Company, and the proceeding now pending before the Referee of administration continue.