104 F.2d 835 | 10th Cir. | 1939
This is a proceeding under section 75 of the National Bankruptcy Act, as amended, 11 U.S.C.A. § 203. On November 3, 1938, John William To'fflemoyer, hereinafter called the debtor, filed his petition in the court below in which it was recited that he was engaged in farming operations ; that he was insolvent; and that he desired to effect a composition or extension of time in which to pay his debts under such section. He scheduled assets valued at $6,900, and debts aggregating $4,378. His assets consisted of 800 acres of land in Colorado valued at $6,000 and personal property valued at $900. P. J. Sullivan, as assignee and holder of a note in the sum of $3,643 secured by a deed of trust on the land, was listed as a secured creditor; and it was recited in the schedules that proceedings for the foreclosure of such deed of trust were pending. A bank, holding a note secured by a chattel mortgage on livestock and machinery; a named company, holding a note secured by a chattel mortgage on horses; and the Farm Credit Administration, holding notes given in 1932 for feed and seed loans, were listed as creditors. Taxes in the sum of $50 were also scheduled. The court immediately approved the petition and referred it to the conciliation commissioner. The first meeting of creditors was held on December 1st, at which the debtor submitted a proposal to his creditors. He proposed that the taxes be paid within six months; that the debt due the Farm Credit Administration be extended until he should be able to pay it with proceeds from crops raised by him; and that the debts due the bank and the compány respectively be extended for such time As his needs might require. In respect to the debt due Sullivan he proposed
Sullivan - filed a motion in which he prayed that the restraining, moratorium, and rental order be vacated, and that the proceeding be dismissed. One ground of the motion was that the debtor was beyond all reasonable hope of rehabilitation. Other grounds were advanced but it is unnecessary to detail them. The motion was referred to the conciliation commissioner. He reported that there was some merit in the contention of impossibility of rehabilitation, but he recommended that the petition be denied and that the court defer action in respect to vacating the moratorium order or dismissing the proceeding until December 31, 1939, during which time the debtor be permitted to seek rehabilitation. The court entered an order approving the report, dismissing the petition, and continuing the stay order until December 31, 1939. From that order Sullivan appealed.
Subsection (s) authorizes the court to stay all judicial proceedings against the debtor or his property for a period of three years. And it further empowers the court to authorize the debtor to retain possession of all or any part oí nis property du,ring such period, subject to the control of the court, provided a reasonable rental is paid. But the statute presupposes a reasonable probability that the debtor will be able to liquidate his debts. That postulate is implicit in the act. A debtor without present or potential equity in his property, with no reasonable chance of paying or refunding the liens on his property, and who is beyond all reasonable hope of rehabilitation, is not entitled to invoke the statute and thus merely defer inevitable liquidation. A proceeding should be halted when it appears that nothing beyond postponement of inevitable liquidation can be expected. Wright v. Vinton Branch, 300 U.S. 440, footnote at page 462, 57 S.Ct. 556, at page 562, 81 L.Ed. 736, 112 A.L.R. 1455; In re Borgelt, 7 Cir., 79 F.2d 929; Massey v. Farmers & Merchants Nat. Bank & Trust Co., 4 Cir., 94 F.2d 526; Cowherd v. Phoenix Joint Stock Land Bank, 8 Cir., 99 F.2d 225, certiorari denied 59 S.Ct. 583, 83 L.Ed. -; Bender v. Federal Farm Mortgage Corporation, 8 Cir., 99 F.2d 252; Donald v. San Antonio Joint Stock Land Bank, 5 Cir., 100 F.2d 312; Wilson v. Alliance Life Ins. Co., 5 Cir., 102 F.2d 365.
The debtor is past sixty-one years of age. He executed the original deed of trust covering the land about, fourteen years prior to the institution of this proceeding. The initial loan was $1000, but it was subsequently increased to $2000. Other than an installment of interest in the sum of $80, paid in 1931, no part of the principal or interest has been paid. The property is sand-hill land, is subject to blow when tilled, and is best adapted to grazing purposes. The debtor has not resided on it and farmed it since 1925. His son resided on it in 1934. The debtor and the son farmed a part of it together that year. The debtor rented it for grazing purposes during the several years immediately preceding the beginning of this proceeding. The annual rental was approximately $160, being 20 cents per acre. Some improvements and repairs were made
The challenged order is reversed and the cause remanded with direction to dismiss the proceeding.