In re Casaudoumecq

• Decision Date: 08 June 1942
• Docket Number: No. 33390-RJ.,33390-RJ.
• Citation: 46 F. Supp. 718
• Court: U.S. District Court — Southern District of California
• Parties: In re CASAUDOUMECQ.

46 F. Supp. 718

In re CASAUDOUMECQ.

No. 33390-RJ.

District Court, S. D. California, Central Division.

June 8, 1942.

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Mark Watterson, of San Bernardino, Cal., for debtor.

Sarau & Thompson by H. L. Thompson, all of Riverside, Cal., for Citizens Nat. Trust & Savings Bank of Riverside.

Kelley & Hews, by Loyal C. Kelley, all of Riverside, Cal., for E. Kenneth Wood.

JENNEY, District Judge.

The farmer-debtor filed his petition on January 6, 1939, under Section 75 of the Bankruptcy Act, 11 U.S.C.A. § 203. Thereupon an order was made approving the petition and referring further proceedings to W. K. Lewis, at Riverside, who was then a Conciliation Commissioner. Thereafter Lewis was succeeded as commissioner by John G. Gabbert. In February, 1940, Gabbert resigned generally as Commissioner, but continued to act as such in this case.

When the bankruptcy commenced, the Los Angeles Production Credit Association was the owner and holder of a chattel mortgage covering sheep and other personal property of the debtor. The face amount due upon the principal of the obligation was $11,335. After the bankruptcy commenced, the principal amount was reduced, by mutual consent, to $6,750. Later, a friend of the debtor, E. Kenneth Wood, and the debtor, made an arrangement with the Citizens' National Trust & Savings Bank of Riverside, whereby the bank loaned $7,750 to Wood upon his note, so that the $6,750 could be paid to the Los Angeles Production Credit Association, and the further sum of $1,000 would be available to pay Wood for his services, for legal expenses involved, and for the use of Wood's credit at the bank. The Los Angeles Production Credit Association was paid the $6,750 and the chattel mortgage was transferred by it to the bank. The $1,000 was paid by the bank to Wood.

On December 7, 1939, the court approved an amended composition and extension proposal presented by the debtor, pursuant to the provisions of subdivisions a-r of Section 75, and the General Orders in Bankruptcy, 11 U.S.C.A. following section 53. On March 20, 1942, the bank filed with the court its "petition for leave to enforce chattel mortgage". This petition was opposed by counsel for the debtor. A hearing was held before the court on March 23, 1942. At that time a minute order was entered permitting the foreclosure of the mortgage, upon certain conditions, the principal one of which was this: "Petitioner may enforce its rights under the chattel mortgage through all proper and legal means approved by the Conciliation Commissioner in any court, either federal, or state, or otherwise. No sale shall be made at a price below that approved by the Commissioner."

On March 27, 1942, pursuant to a petition filed with him by the bank for that purpose, the Commissioner made an order permitting the bank to take possession of the sheep; and the bank thereupon immediately took such possession. On April 20, 1942, the bank filed with the Commissioner its "petition for leave to sell personal property under chattel mortgage". This petition was heard before the Commissioner on April 24 and 29, 1942. It covered the sheep and certain other property, all of which was subject to the mortgage. The gravamen of the petition was that the debtor had defaulted in carrying out his obligations under the confirmed composition and extension proposal; that the sheep were in bad condition owing to the lack of proper care and attention by the debtor; that they were of a perishable nature not only in a physical sense, but also in the sense that they were deteriorating in value by reason of debtor's neglect; and finally that there was not any reasonable hope of financial rehabilitation of the debtor. During the hearings, the bank filed its amended petition, in which was set up the nature and extent of the services of counsel for the bank in connection with the chattel mortgage and its claim thereunder, and a statement of costs and expenses incurred and paid by it. Testimony was received and considered by the Commissioner upon the value of the sheep, and items of credit and debit in connection with fixing the amount due upon the mortgage.

On April 29, 1942, the Commissioner made his order granting the petition, in which he fixed $11,808.87 as the amount due upon the mortgage, and ordered the sale of the sheep and other property at public auction before him on May 9, 1942, at their place of location, subject to specified minimum prices and his confirmation.

On May 8, 1942, pursuant to the debtor's petition, this court issued an order temporarily restraining such sale and requiring the bank to appear and show cause why this restraint should not be continued until further order. In the meantime, and on May 5, 1942, debtor filed his amended petition and was adjudicated a bankrupt, pursuant to the provisions of Section 75, sub. s. Further proceedings in that connection were referred to Commissioner Gabbert. Debtor alleged in this amended petition that he was aggrieved by the composition and extension, and that he desired to obtain the benefits conferred by such subdivision s. In the meantime — the exact date of which does not appear in the record before the court — debtor filed with the Commissioner his petition for a review by the judge of said order made by the Commissioner on April 29, 1942. On May 14, 1942, the Commissioner filed with the clerk of this court his certificate on review.

On May 26, 1942, the bank filed with the clerk of the court its notice of motion "to dismiss petition under section 75-(s)". The principal grounds of the motion are that (a) the order of foreclosure of March 23, 1942, became a final order by reason of lapse of time with no appeal taken therefrom; (b) the debtor is not entitled to invoke the provisions of subdivision s because of his failure to comply with the terms of his confirmed composition and extension proposal and that he was not aggrieved by the same; (c) during the time intervening, the estate has been depreciating in value, that he has not filed any accounting with the court, and that expenses of administration have accrued which cannot be paid owing to lack of funds; (d) there is no reasonable probability of financial rehabilitation of the debtor; (e) the amended petition under sub. s was not filed in good faith; (f) Section 75, sub. s, provides that liens, such as that of the bank under its chattel mortgage, shall be protected; and (g) it is necessary for the bank, as a lien holder, to proceed with the foreclosure of its chattel mortgage in order to protect it against loss.

The petition to review, the restraining order, and the motion to dismiss, are now before the court for consideration and determination. They are all so tied together that they will be considered as a whole.

The minute order of the court, entered on March 23, 1942, was, in effect, a decree of foreclosure of the chattel mortgage. It was final in its terms and has now become a final judgment, unassailable, by reason of lapse of time, either by a motion for a new trial under the Federal Rules of Civil Procedure (Federal Rules of Civil Procedure, rule 59, 28 U.S.C.A. following section 723c; General Order in Bankruptcy No. 37), or by an appeal under the Bankruptcy Act (Bankr.Act, Sec. 25; Mutual Bldg. & Loan Ass'n v. King, 9 Cir., 83 F.2d 798, 31 A.B.R.,N.S., 378). A decree is none the less final because some future orders of the court may become necessary to carry it into effect. If the judgment disposes of the merits of the particular matter before the court and terminates the controverted issues, the fact that further proceedings remain to be taken in court to make it effective does not interfere with its finality. Guaranty Trust & Savings Bank v. City of Los Angeles, 186 Cal. 110, 199 P. 35; Bronson v. La Crosse & M. Railroad Co., 67 U.S. 524, 2 Black 524, 531, 17 L.Ed. 347. The order is not void upon its face, the court had jurisdiction of the parties and of the subject matter, and the only way it can now be attacked is by a motion to vacate. A bankruptcy court has continuous power to vacate or modify its own orders, if no intervening or vested rights are disturbed. Federal Land Bank v. Hansen, 2 Cir., 113 F.2d 82, 43 A.B.R.,N.S., 76; Wayne United Gas Co. v. Owens-Illinois Glass Co., 300 U.S. 131, 57 S.Ct. 382, 81 L.Ed. 557, 33 A. B.R.,N.S., 1; In re Price, 7 Cir., 99 F.2d 691, 38 A.B.R.,N.S., 261. No application to vacate has been made; and there is nothing in the record to justify the granting of such an application.

The debtor contends that the order was void since the foreclosure was automatically stayed by the provisions of Section 75, sub. o, of the Bankruptcy Act (Kalb v. Feuerstein, 308 U.S. 433, 60 S.Ct. 343, 84 L.Ed. 370) and the order, in effect, vacated the stay without a previous hearing and report by the conciliation commissioner as required by Section 75, sub. o. However, this "hearing and report" refers to the hearing before the conciliation commissioner on the debtor's composition and extension proposal, and the Commissioner's report thereof. It does not refer to a hearing and report by the Commissioner on a petition for leave to sell. Where, as here, a creditors' meeting has been held at which the debtor has submitted his plan of composition and extension, and the Conciliation Commissioner has filed the plan with the court together with a report that the plan has been accepted by the required number of creditors, and the plan has been confirmed by the court and has been in operation for some time, the court has ample power to permit a secured creditor to sell the debtor's property under a chattel mortgage. McFarland v. West Coast Life Ins. Co., 9 Cir., 112 F.2d 567, 43 A.B.R.,N.S., 218.

The adjudication of the debtor as a bankrupt under subdivision s of Section 75 came after the time for appeal from the order of foreclosure of March 23rd had elapsed. What effect did this adjudication have upon...