Wright v. Union Central Life Ins Co

• Decision Date: 31 May 1938
• Docket Number: Nos. 715,716,s. 715
• Citation: 58 S.Ct. 1025,304 U.S. 502,82 L.Ed. 1490
• Parties: WRIGHT v. UNION CENTRAL LIFE INS. CO. (two cases). *
• Court: U.S. Supreme Court

304 U.S. 502

58 S.Ct. 1025

82 L.Ed. 1490

WRIGHT

v UNION CENTRAL LIFE INS. CO. (two cases).^*

Nos. 715, 716.

Argued April 6, 1938.

Decided May 31, 1938.

Messrs. Samuel E. Cook, of Huntington, Ind., and Wm. Lemke, of Washington, D.C., for petitioner.

Mr. Arthur S. Lytton, of Chicago, Ill., for respondent.

Mr. Justice REED delivered the opinion of the Court.

Petition for writs of certiorari to the United States Circuit Court of Appeals for the Seventh Circuit was granted by this Court, 303 U.S. 630, 58 S.Ct. 644, 82 L.Ed. —-; 303 U.S. 630, 58 S.Ct. 645, 82 L.Ed. —-, to review the judgments in two appeals brought to the lower court by petitioner here. In re Wright, Wright v. Union Central Life Ins. Co., 91 F.2d 894. The judgments affirmed two orders of the District Court of the United States for the Northern District of Indiana, entered there in proceedings under section 75 of the Bankruptcy Act, 11 U.S.C.A. § 203, instituted by Wright.

The earlier order approved the recommendation of the Conciliation Commissioner to strike certain described real estate from the debtor's schedules and the later order refused to permit the debtor to amend the schedules by showing the circumstances under which the debtor claimed an interest in the same real estate covered by the earlier motion. The correctness of the orders depends largely upon the constitutional validity of certain provisions of section 75(n) of the Bankruptcy Act, as amended by section 4 of the Act of August 28, 1935, 49 Stat. 942, 11 U.S.C.A. § 203(n). These provisions, held unconstitutional by the lower court, operate to extend the period of redemption from a foreclosure sale allowed the mortgagor under state law. To decide this important constitutional question, our writs of certiorari were issued. In view of section 1 of the Act of August 24, 1937, c. 754, 28 U.S.C. § 401, 28 U.S.C.A. § 401,¹ enacted subsequent to the decision of the case below, the Court certified to the Attorney General the fact that the constitutionality of an Act of Congress affecting the public interest was drawn in question in this cause. The Attorney General disclaimed intention to intervene.

The controversy as to whether or not the land in question was subject to the administration of the court of bankruptcy had its origin in this plexus of facts. Petitioner James M. Wrigh on Oct ober 1, 1925, together with his wife, executed a mortgage to respondent com- pany on a tract of land in Indiana, containing 80.31 acres, to secure a note of $3,000. At the same time, the same parties executed another mortgage to the respondent on a different tract of land containing 200 acres, also in Indiana, to secure a note of $9,000. In 1931, the first tract was deeded to petitioner's son, and three separate forty-acre parcels from the second tract were deeded to his wife, daughter and son-in-law respectively. The property was conveyed subject to definite portions of the indebtedness but without an assumption of any of the obligation by the grantees.

On January 3, 1934, respondent brought suit to foreclose the smaller mortgage, joining as defendants petitioner and his son. Judgment of foreclosure was entered, June 9, 1934, and on July 12,1934, the 80.31-acre tract was sold, on the foreclosure sale, to respondent. Respondent received a duly executed sheriff's certificate of sale. Delivery of final deed was delayed in view of the one-year period of redemption allowed to mortgagors by Indiana statute. Ind.Ann.Stat., Burns' 1933, §§ 2-3909, 2-4001.

Wright filed a petition under section 75 of the Bankruptcy Act, October 29, 1934. In listing his property on his schedules, he set forth all 280.31 acres, despite his previous conveyances of 200.31 acres. On December 19, 1934, stating that no agreement of creditors could be had, he amended his petition under section 75(s), asking to be adjudged a bankrupt.² On April 13, 1935, petitioner's son and daughter and their spouses delivered to him a quitclaim deed for all the property, 200.31 acres, he had previously deeded to them and his wife.³

On May 27, 1935, respondent obtained a personal judgment against petitioner on the $9,000 note, and a decree of foreclosure of the 200-acre tract, which respondent purchased at the sheriff's sale on July 20, 1935, receiving a certificate of sale. On August 2, 1935, petitioner's one-year period for redeeming from sale the 80.31-acre tract having expired July 12, 1935, respondent surrendered its certificate of sale and received a sheriff's deed to this land.

On October 11, 1935, petitioner amended his petition as authorized by section 75(s) of the Bankruptcy Act, as amended August 28, 1935, 11 U.S.C.A. § 203(s) following the invalidation by the decision in Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 55 S.Ct. 854, 79 L.Ed. 1593, 97 A.L.R. 1106, of section 75(s) as originally drafted, 48 Stat. 1289, 11 U.S.C.A. § 203(s) and again asked to be adjudged a bankrupt.

On July 20, 1936, the one-year redemption period having expired, respondent received from the sheriff a final deed for the 200-acre tract. On July 29, 1936, respondent filed a motion in the District Court for Northern Indiana, where the proceedings under section 75(s) were pending, to strike from petitioner's schedules, which had been filed October 29, 1934, these 280.31 acres of land.

On December 14, 1936, the District Court granted this motion, and entered an appropriate order. Apparently the order struck from the schedules eighty acres still owned by Wright in October, 1934, and properly scheduled at that time. Later in December, 1936, petitioner asked leave to amend his schedules to set forth the reconveyances by his children on April 13, 1935. On December 1, 1936 , the District Court denied the application to amend the schedules. Petitioner appealed from both orders of the District Court, striking the land from the schedules and denying leave to amend. The appeals were consolidated in the Circuit Court of Appeals. As stated in the opening paragraph of this opinion, that court affirmed both orders of the District Court. These judgments are under review here.

A further aspect of the controversy between petitioner and respondent may be noted. On September 13, 1935, prior to the debtor's filing of an amended petition under section 75(s) as amended, respondent instituted an action in the state court for possession of the 80.31 acres. A judgment overruling a defense grounded on the bankruptcy proceedings, and awarding possession and damages to respondent, was affirmed by the Supreme Court of Indiana on April 2, 1937. Wright v. Union Central Life Ins. Co., 7 N.E.2d 206. A similar judgment with respect to the rest of the land was affirmed October 26, 1937, Wright v. Union Central Life Ins. Co., Ind.Sup., 10 N.E.2d 726. By temporary restraining order of the Circuit Court of Appeals, and subsequent stay of mandate, respondent has been restrained from taking possession of the land.

First. (a). By October 30, 1934, when petitioner sought adjustment and extension of debts under section 75, the 80.31-acre tract had been deeded away to petitioner's son. Accordingly, although this tract was listed on petitioner's schedules, it did not at that time pass into the hands of the bankruptcy court for administration. Nor was the amended petition under section 75(s), filed on December 19, 1934, any more effective in bringing the tract within the purview of the bankruptcy court. On April 13, 1935, the members of Wright's family relinquished all their right and interest in his lands, including this 80.31-acre tract, so that petitioner then acquired an interest in the land. But Wright's receipt of this gift of land was not effective in and of itself to bring the land within the control of the bankruptcy court. This is the rule applicable to property received by a bankrupt subsequent to the filing of an ordinary petition in bankruptcy,⁴ and we see no reason why the same rule should not apply to debtor proceedings under section 75.⁵

There is no substance in any contention that this 80.31-acre tract was brought within the purview of the bankruptcy court by the Act of August 28, 1935, amending section 75(s), 11 U.S.C.A. § 203(s), or the filing of an amended petition under this section on October 11, 1935. Prior thereto, judgment of foreclosure had been entered in the state court and a judicial sale (at which respondent bought in the 80.31-acre tract) held on July 12, 1934. Conveyance and delivery of possession to the purchaser was deferred for one year, the period of redemption under thestatute § of Indiana. This period expired on July 12, 1935, and the sheriff's deed was executed on August 2, 1935. With the delivery of the deed, prior to any effective extension of the period of redemption, the purchaser's rights, flowing from the judicial sale, were no longer affected by the court's jurisdiction of petitioner and petitioner's estate under the Bankruptcy Act.⁶ Nothing in section 75 as it now stands indicates any intention that the bankruptcy courts assume control over land not previously within the jurisdiction of a bankruptcy court, and already completely divorced from any title of the debtor.

(b). On October 29, 1934, when Wright filed his original petition under section 75, he was undoubtedly the owner of 80 acres out of the 200-acre tract. He had never conveyed away these 80 acres; no proceedings to foreclose them had been begun. These 80 acres were clearly within the jurisdiction of the bankruptcy court, but we shall not give them separate discussion, for they are controlled a fortiori by our ruling with respect to the other 120 acres out of the 200-acre tract.

(c). The status of these 120 acres, deeded in forty-acre parcels, to three members of the family, is governed by other facts. These parcels passed to the other members of the family prior to the filing of the petition for composition on October 29, 1934. Petitioner, however, included them in his...