Dallas Joint Stock Land Bank v. Davis

• Decision Date: 05 May 1936
• Docket Number: No. 7966.,7966.
• Citation: 83 F.2d 322
• Parties: DALLAS JOINT STOCK LAND BANK v. DAVIS.
• Court: U.S. Court of Appeals — Fifth Circuit

83 F.2d 322 (1936)

DALLAS JOINT STOCK LAND BANK v. DAVIS.^*

No. 7966.

Circuit Court of Appeals, Fifth Circuit.

May 5, 1936.

Chas. S. McCombs, C. C. Renfro, and James A. Kilgore, all of Dallas, Tex., for appellant.

John Davis, of Dallas, Tex., for appellee.

Before SIBLEY, HUTCHESON, and WALKER,¹ Circuit Judges.

HUTCHESON, Circuit Judge.

Appellees are farmer debtors, who, when their homestead was about to be sold under a state foreclosure decree, applied in their pending bankruptcy proceedings for relief under subdivision (s) of section 75 of the Bankruptcy Act, as amended August 28, 1935, 11 U.S.C.A. § 203 (s). Appellant is the holder of the mortgage. Insisting that the amendment has not cured the defects in the statute pointed out in the Radford Case (Louisville Joint Stock Land Bank v. Radford), 295 U.S. 555, 55 S.Ct. 854, 79 L.Ed. 1593, 97 A.L.R. 1106, appellant moved for a dismissal of the application on the ground that the act, in undertaking in effect to provide for a transfer of foreclosure proceedings to the bankruptcy court and a stay of them there, deprives movant of substantial rights in its security, in violation of the Fifth Amendment.

The District Judge thought the act as amended did not take, but safeguarded, appellant's substantial rights as a secured creditor. He found, on sufficient evidence, that at that stage of the proceedings there was no such showing of inability to finance the debt with the assets involved as would justify the court in refusing to take jurisdiction. He ordered the case referred to a special conciliation commissioner for statutory proceedings. It was at this juncture and from this order that this appeal was taken.

The record before us stops at this point. We do not know, there is no showing, whether appellees could or did comply with the provisions of the act to obtain, there is no order granting, the statutory stay. The only order here for review is the one refusing to dismiss the application, and referring it for statutory proceedings. On the record we have, the only effect of this order on appellant at this time is to prevent the collection of its debt through the state court proceedings, by requiring its collection through the bankruptcy court. Though the attack is predicated upon the claim that the necessary effect of the order under the act will be to deprive appellant of substantial property rights, no evidence is offered to show this. The appeal is here on the broad claim that on its face, and as a necessary result of its operation, the invoked section takes away substantial rights of appellant in its security, and within the Radford Case is unconstitutional and void.

This claim raises a preliminary question of prime importance whether, at this stage of the proceedings, when nothing has been done but to take jurisdiction, appellant's constitutional attack is premature. It is urged that an inquiry will not be conducted into a complainant's constitutional rights until there has been a substantial invasion of them, and that nothing of that kind has occurred here. It is insisted that while the act as amended does direct the granting of a stay of collection for a maximum period of three years, this stay is not granted as of right absolutely and at all events, but only upon conditions, the prime one of which is the exercise of judicial discretion whether the stay may be granted with a due regard for the substantial rights of creditors in their securities.

It may not be doubted that if the necessary result of the act is to take away appellant's substantial rights in its security, it need not wait until all the forms prescribed for that taking away have been gone through with, but may sue at once to save itself. Pierce v. Society of Sisters, 268 U.S. 510, 45 S.Ct. 571, 69 L.Ed. 1070, 39 A.L.R. 468; Village of Euclid v. Ambler, 272 U.S. 365, 47 S.Ct. 114, 71 L.Ed. 303, 54 A.L.R. 1016; Terrace v. Thompson, 263 U.S. 197, 44 S.Ct. 15, 68 L.Ed. 255. It is equally without doubt, however, that the action is premature, and that no constitutional question is presented for decision if the pinch of the act will be felt by appellant not as a necessary, but only as a possible, result of its application. For it is a settled rule in the federal courts that questions of constitutional law will not be anticipated, but will be decided only where a present necessity for such decision exists, and then only no more broadly than the precise situation in question requires. Liverpool, N. Y. & P. S. S. Co. v. Commissioners, 113 U.S. 33, 5 S.Ct. 352, 28 L.Ed. 899; Massachusetts v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078; Chicago & Grand Trunk R. Co. v. Wellman, 143 U.S. 339, 12 S.Ct. 400, 36 L.Ed. 176.

In approving the amendment, the judiciary committees of both House and Senate agreed that its object and purpose was the clarification of section 75 and the addition of a new subsection (s) in place of the subsection (s) held unconstitutional. Both committees in recommending the bill for passage declared that the new subsection had been written so as to conform to the decision of the Supreme Court and that they felt that it did conform. We think it not a strained construction to hold that it does.

On its face the act merely transfers the liquidation of the indebtedness from state courts to the court of...