Beecher v. Leavenworth State Bank, 13693

• Decision Date: 12 April 1954
• Docket Number: No. 13693,14167,13937,14224.,14020-14028,13693
• Parties: BEECHER v. LEAVENWORTH STATE BANK et al.
• Court: U.S. Court of Appeals — Ninth Circuit

211 F.2d 158 (1954)

BEECHER v. LEAVENWORTH STATE BANK et al.

Nos. 13693, 13937, 14020-14028, 14167, 14224.

United States Court of Appeals, Ninth Circuit.

February 18, 1954.

Writ of Certiorari Denied April 12, 1954.

S. P. Beecher, in pro. per.

John J. Ripple, C. D. Randall, Henry R. Newton, Spokane, Wash., for appellees.

Before DENMAN, Chief Judge, and STEPHENS and ORR, Circuit Judges.

Writ of Certiorari Denied April 12, 1954. See 74 S.Ct. 649.

DENMAN, Chief Judge.

Beecher now has two motions pending in this court.¹ The first is entitled "Motion for Amendment of Findings and Amendment of Judgment, Under Rules of Civil Procedure Section 52(b) 28 U.S.C.A.," in which he seeks to amend this court's decision on his motion for a ruling on "a jurisdictional point of law in section 75(s) proceedings". Beecher v. Leavenworth State Bank, 9 Cir., 209 F.2d 20, 21 December 24, 1953. The second is entitled "Motion by Appellant to Stay the Enforcement and Execution of District Court Orders Until the Final Determination of Proceedings in this Court and Supreme Court on Petition for Certiorari."

Both of these motions are based upon the same contention — that the money deposited into the court by him plus the money received into the registry of the court during the prolonged existence of this litigation are sufficient to redeem his farm property and should be so applied. The gravamen of this contention is that all moneys collected from the administration of the property during Section 75, sub. s proceedings are available for purposes of redemption.

Section 75, sub. s of the Bankruptcy Act, 11 U.S.C.A. § 203, provides an orderly procedure whereby a farmer-debtor may have an opportunity to rehabilitate himself and to retain his property without depriving the secured creditors of their rights. Wright v. Vinton Branch Mountain Trust Bank, 300 U.S. 440, 457, 57 S.Ct. 556, 561, 81 L.Ed. 736. If the debtor cannot arrive at a composition under Section 75, subs. a-r, or if he is aggrieved by such composition, he may petition the court to be adjudged a bankrupt and proceed under Section 75, sub. s. The essence of the statutory scheme provided by subdivision sub. s is a three-year stay of judicial proceedings during which the debtor is permitted to retain possession of all property necessary to the operation of his farm in return for the payment of a reasonable rental.² Net proceeds in excess of such rental belong to the debtor, but during this period the court may require the debtor to make payments on the principal of the debts. The rental proceeds are distributed as follows: first, taxes and upkeep in the property are paid; and second, the remainder is apportioned amongst the creditors, secured and unsecured. At the end of the three-year period, or prior thereto, the debtor may pay into court an amount up to the amount of the appraisal of the property of which he retains possession, including the amount of encumbrances on his exemptions, less the amount paid upon the principal. The creditors or the debtor may have a reappraisal at this time, but once the payment has been made, the property is turned over to the debtor free and clear of all claims and encumbrances. In this manner, the creditors get the most that they could hope for if a sale were forced — the value of the property — and the debtor is rehabilitated and retains possession of his property.

It is clear from the above that the moneys, in excess of the rental, received from the operation of the property during the stay, are available for redemption. However, this money is in the hands of the debtor and not in the registry of the court. During the period between the adjudication of bankruptcy and the commencement of the stay provided by subdivision (s), the debtor's possession is that of a trustee for the benefit of the creditors. See Beecher v. Federal Land Bank, 9 Cir., 153 F.2d 982, 984, certiorari denied 328 U.S. 869, 66 S.Ct. 1376, 90 L.Ed. 1639, 328 U.S. 871, 66 S.Ct. 1376, 90 L.Ed. 1641, 329 U.S. 822, 67 S.Ct. 34, 91 L.Ed. 699; United States v. Owens, 10 Cir., 186 F.2d 162, 164. A like rule applies at times after the termination of the stay when the bankrupt is in possession. See Beecher v. Leavenworth State Bank, 9 Cir., 192 F.2d 10, 13, certiorari denied, 343 U.S. 953, 954, 72 S.Ct. 1048, 96 L. Ed. 1354, 344 U.S. 886, 73 S.Ct. 187, 97 L.Ed. 686, where we said: "In both ordinary bankruptcy and in farmer-debtor cases the income earned from assets in the control of the bankruptcy court is generally for distribution to the creditors. Citing cases. The chief exception to this rule in Sec. 75, sub. s bankruptcy is when the debtor is in possession as a rent-paying tenant. Citing case. During that time, the rent is all that the creditors may claim against. At other times, after the...