Buss v. Prudential Ins. Co. of America

• Decision Date: 07 April 1942
• Docket Number: No. 12109.,12109.
• Parties: BUSS et al. v. PRUDENTIAL INS. CO. OF AMERICA.
• Court: U.S. Court of Appeals — Eighth Circuit

126 F.2d 960 (1942)

BUSS et al. v. PRUDENTIAL INS. CO. OF AMERICA.

No. 12109.

Circuit Court of Appeals, Eighth Circuit.

April 7, 1942.

COPYRIGHT MATERIAL OMITTED

Howard L. Bump, of Des Moines, Iowa (LeRoy H. Johnson, of Red Cak, Iowa, on the brief), for appellants.

Quintard Joyner, of Omaha, Neb. (Harold Peyton, of Omaha, Neb., on the brief), for appellee.

Before THOMAS and JOHNSEN, Circuit Judges, and REEVES, District Judge.

THOMAS, Circuit Judge.

This is an appeal by farmer-debtors from certain orders of the bankruptcy court resulting in the dismissal of a proceeding instituted by them for a composition or extension of their indebtedness under the Bankruptcy Act, § 75, subs. a-r, wherein the debtors filed an amendment asking to be adjudged bankrupt under § 75, sub. s, 11 U.S.C.A. § 203, subs. a-r and s. The debtors, husband and wife, are tenants in common, each owning an undivided one-half interest in a 100 acre farm situated in Montgomery County, Iowa, subject to a mortgage owned by the appellee, the Prudential Insurance Company of America.

The ultimate question presented for decision is whether the parties are estopped by an adjudication of dismissal as to the security based upon a stipulation and not appealed from in a former proceeding brought under the same statute by the husband alone and to which his cotenant was not a party.

The debtors filed their petition December 12, 1940. It was approved as properly filed and referred to the Conciliation Commissioner on the same day. On December 31, 1940, the debtors filed an offer of composition and an application for an order to stay the proceedings in foreclosure brought by appellee in the state court against the 100 acres of land owned by the debtors. A temporary stay order was entered on January 2, 1941. On January 15, 1941, the appellee insurance company filed a motion to dismiss the proceedings as to it and as to the land on the ground that the claims of the debtors and the relief sought by them had been adjudicated in a proceeding instituted by the debtor Walter Clifford Buss in the same court and under the same statute in 1939, and that no appeal had been taken therefrom. The debtors resisted the motion on the grounds that Vada Darlene Buss is the owner of an undivided one-half interest in the land and that she was not a party to the former proceeding. The insurance company amended its motion alleging that the debtors were not proceeding in good faith. In reply to the resistance to the motion the insurance company alleged that in the former proceeding Walter Clifford Buss, the husband, was, with the authority of his wife, acting for her, and that she was bound by the order entered therein; that she had actual notice and knowledge of the proceedings and acquiesced therein and ratified them; and that she was thereby barred and estopped from claiming that the former proceedings did not adjudicate her rights to the 100 acres of land under § 75 of the Bankruptcy Act.

After a hearing on February 15, 1941, the Commissioner found (1) that Walter Clifford Buss has had his day in court and that the matters presented had all been decided and are now res judicata as to him, and (2) that while Vada Darlene Buss had not been a party to the former proceedings she was the wife of her co-debtor; that she was the owner of an undivided one-half interest in the land involved and that her husband was the owner of the other half; that she had full knowledge or was put on sufficient notice of the former proceeding to have caused her to act on her own behalf if she desired to assert her rights, "otherwise she must be held to have acquiesced in the proceedings"; and that she is not entitled to the relief sought. The Commissioner expressed the opinion that since the husband was barred by the former proceedings, it would serve no good purpose to permit his wife to pursue the matter further on her own behalf even though it might be found that she was entitled to do so. Based upon these findings an order was entered sustaining the motion, dissolving the stay order, and recommending to the judge that the proceedings be dismissed and the files closed.

Upon review the court approved and confirmed the order of the Commissioner and ordered further that the petition of the debtors be dismissed unless within ten days the bankrupts show cause "that there is property other than that administered in the other proceedings or other reason why the estates or either of them should be kept open." A further order was entered on June 6, 1941, dismissing and closing the proceedings. The appeal is from the order of the Commissioner thus approved, confirmed and carried out by the court.

In reviewing the order of the Commissioner the court found (1) that by an agreement made in a former proceeding Walter Clifford Buss, for a consideration which he and his wife have received, gave his permission to the appellee to proceed with the foreclosure of its mortgage in the state court; (2) that in so doing he was acting as the agent for and with the knowledge, acquiescence and consent of his wife; and (3) that to permit administration of the farm in bankruptcy would be a violation of that agreement.

Upon the basis of these findings of fact the court held (1) that both parties are now estopped and without right or authority to prosecute this proceeding, and (2) that the orders entered in the former proceeding are res judicata of the rights invoked in this proceeding by all the parties.

The contentions of the parties present for determination these problems: 1. Does the evidence support the findings of fact? 2. Is Walter Clifford Buss estopped by his conduct in the former proceeding to join with his wife, his cotenant, in invoking the benefits of § 75 of the Bankruptcy Act? 3. Is Vada Darlene Buss estopped by her conduct from invoking the benefits of the Act? 4. Are the orders entered in the former proceeding res judicata?

It will contribute to brevity to summarize the evidence taken before the Commissioner at the hearing February 15, 1941, on the appellee's motion to dismiss. The evidence consisted of the oral testimony of the appellants and the record of a proceeding commenced by Walter Clifford Buss alone in the district court, southern district of Iowa, on March 1, 1939, by the filing of a petition for relief under § 75, subs. a-r, of the Bankruptcy Act. The record of the former proceeding shows that in his schedules Buss described the same 100 acre farm involved in this proceeding. In the former proceeding his wife was not mentioned as co-owner. The farm was subject at that time to the same mortgage still held by the insurance company. The mortgage was then in foreclosure in the state court. Failing to secure a composition with his creditors, the debtor amended his petition and asked to be adjudicated a bankrupt under § 75, sub. s, and the case was referred to a Conciliation Commissioner. The insurance company filed an application for leave to enforce its mortgage in the state court. Upon the day fixed for hearing on the application counsel for the parties filed a written agreement signed by counsel providing (1) that an order be signed forthwith granting the application for leave to enforce the mortgage; (2) that Buss agree that a judgment in rem and decree in foreclosure be rendered in the foreclosure proceeding; (3) that a receiver be appointed in the state court to take possession of the farm during the period of redemption; (4) that the claim should be computed at 5½ per cent interest; (5) that the receiver lease the farm to Buss for the year March 1, 1939, to February 28, 1940, and from March 1, 1940, to February 28, 1941, for one-half the corn, two-fifths of the oats, and $2.50 an acre for the hay and pasture land; and (6) that in case of redemption the rents be assigned to the redemptioner; and if not redeemed, to the insurance company. Thereupon an order was entered on September 6, 1939, granting leave to the insurance company to enforce its mortgage in the state court. At that time the decision of the Supreme Court in the case of John Hancock Mutual Life Insurance Co. v. Bartels, 308 U.S. 180, 60 S.Ct. 221, 84 L.Ed. 176, decided December 4, 1939, had not been rendered. After the decision in that case Buss moved that the court reassume jurisdiction over the farm and stay the foreclosure proceeding. On February 10, 1940, the insurance company filed a resistance to the motion. The Commissioner denied the motion and upon review the court affirmed the order. No appeal was taken.

At the hearing on February 15, 1941, Mrs. Buss testified that in January, 1939, she knew that her husband filed a proceeding in bankruptcy; that it was not discussed with her; that she did not know what was involved in it; that she signed no papers; was never at the attorney's office; and was not at the hearings. When asked if she ever authorized her husband to involve property owned by her in the proceedings, she answered that nothing was said about it. She testified that she did not know at that time what the proceeding was all about; that she knew nothing about the settlement that was made. She did not remember telling her husband that she disapproved of the action he was taking and that he had no right to do it. Mrs. Buss testified also that during their married life she looked after the household affairs and left the business affairs connected with the running of the farm to her husband.

At the same hearing Buss testified that he knew nothing about the law at the time he filed the first petition; that in filing his schedules he did not intend to deceive the court as to the ownership of the land; that the mistake in the schedules as to the ownership of the farm was the fault of his attorney at that time, and not of his present attorney; that his wife knew he was filing a petition and did not remonstrate with him; and that he afterwards told his wife about the agreement and that she objected to it, did...