1. The interest of one of two joint tenants in a contract to
purchase land payable in installments, where, under state law, it
is an interest which may be alienated and subjected to execution
and separate sale, is property which may be administered in
farmer-debtor proceedings under § 75 of the Bankruptcy Act, as
amended, although, subsequent to the filing of the petition, the
interest of his co-tenant has been forfeited by default in payment
of the installments of the purchase price. P.
317 U. S.
183.
2. The farmer-debtor in this case, who was a joint tenant of a
land purchase contract, his wife being the other joint tenant, but,
so far as appears, not a farmer-debtor, was authorized to file his
petition under § 75 of the Bankruptcy Act, and thus to subject his
interest to the jurisdiction of the bankruptcy court, and he
thereupon became entitled to the benefit of the moratorium afforded
by § 75(o) for the purpose of enabling him to effect a composition
with his creditors, failing which he was entitled to proceed under
§ 75(s). P.
317 U. S.
184.
In advance of an authoritative determination by the state courts
of the rights of purchasers of land as joint tenants when the
interest of one of them has been forfeited for nonpayment of
purchase money, this Court cannot say that the difficulties of
administering the interests of the parties under § 75(s) of the
Bankruptcy Act are insurmountable. P.
317 U. S.
185.
3. The court of bankruptcy, having control under § 75(e) of the
Bankruptcy Act of the farmer's property, is free to permit and to
facilitate proceedings in the state courts to adjudicate the
interests of the parties to the contract, subject to the stay
directed by § 75(o) of any cancellation of the contract or
foreclosure of the farmer-debtor's interest in it. P.
317 U. S.
185.
4. In the event that no composition is effected, the
farmer-debtor may ask to be adjudicated a bankrupt and, as such, to
be placed in possession of the property under the provisions of §
75(s) upon terms which will enable him, by paying a suitable
rental, to redeem the property unless he is sooner able to finance
himself. If his interest is
Page 317 U. S. 179
found to be such that it is impracticable to place him in
possession or otherwise to administer the property as provided by §
75(s), he is entitled to petition the court for leave to redeem the
property, and if he is unable to redeem it, a sale of his interest
may be ordered as directed by § 75(s)(3). P.
317 U. S.
186.
5. In proceedings for a stay under § 75(s)(2) of the Bankruptcy
Act as an incident to which petitioners made a deposit of rental,
they withdrew the deposit when the court rendered a judgment,
denying its jurisdiction to review; for review of which they
obtained a writ of certiorari.
Held:
(1) That whether the withdrawal of the amount deposited is so
inconsistent with further proceedings for the three-year stay
authorized by § 75(s) upon payment of a prescribed rental could not
be determined on the record brought to this Court, and should, in
any case, be determined in the first instance by the bankruptcy
court having jurisdiction of the cause. P.
317 U. S.
187.
(2) The withdrawal is not inconsistent with other remedies which
the bankruptcy court has jurisdiction to give under § 75, or with
recourse to measures which the court may take to permit an
adjudication of the rights of the parties in the property involved.
P.
317 U. S.
187.
(3) Since deposit of rental is not prerequisite to jurisdiction,
recall and receipt of the money, whatever effect it may have had on
the right to the three-year stay authorized by § 75(s), involved no
inconsistency with the assertion in this case of the court's
jurisdiction to make an adjudication of the rights of the parties
as a basis for composition and afford other relief. P.
317 U. S.
187.
125 F.2d 507, reversed.
Certiorari, 316 U.S. 657, to review a judgment of the court
below which reversed orders of the court of bankruptcy denying
motions by the present respondent to strike from the debtor's
schedules of property certain land which respondent had contracted
to sell to the farmer-debtor and another in joint tenancy.
Page 317 U. S. 180
MR. CHIEF JUSTICE STONE delivered the opinion of the Court.
The question is whether the interest of one of two joint tenants
of a land purchase contract can be administered in farmer-debtor
proceedings under § 75 of the Bankruptcy Act as amended, 11 U.S.C.
§ 203, although, subsequent to the filing of his petition, the
interest of his co-tenant had been forfeited by default in payment
of installments of the purchase price.
Petitioners, husband and wife, as "joint tenants with full right
of survivorship and not as tenants in common," entered into a
contract with respondent's assignor for the purchase of a plot of
land. They apparently entered into possession under the contract,
although the fact does not explicitly appear in the record. The
contract stipulated for a downpayment of $500 of the purchase price
and for payment of the balance in equal monthly installments
extending over a period of more than seven years. Nearly two years
later, the buyers being in default in payment of installments,
respondent gave appropriate notice, in conformity to state law,
that the contract would be forfeited unless all payments due were
made. Five days before the date on which the forfeiture was to
become effective, the husband alone, without reference to his
co-tenant, filed his petition as a farmer-debtor under § 75. After
the date of forfeiture, respondent moved, on a showing of the facts
as stated, to strike the land in question from the schedules of the
debtor's property, challenging the jurisdiction of the court to
administer it. The wife thereupon filed in the bankruptcy
proceeding a "joinder of Rose L. Mangus" in which she asked to be
permitted to adopt the petition of her husband for relief under §
75 and his schedules of property, referring to the land in
question. It does not appear whether she was an insolvent
farmer-debtor within the meaning of § 75(r), and so entitled to the
benefits of
Page 317 U. S. 181
the Act. Upon respondent's filing of a supplemental motion to
strike the land from the schedules of the debtor's property, with a
showing that, at the time of the wife's attempted joinder, she had
forfeited her interest in the property, the court denied both of
respondent's motions.
The Court of Appeals for the Tenth Circuit reversed, 125 F.2d
507, holding that the right or interest which the wife had acquired
in the land by the contract of purchase had been forfeited before
her attempted joinder in the bankruptcy proceedings,
see
Federal Land Bank v. Soreason, 121 P.2d 398;
Leone v.
Zuniga, 84 Utah 417, 34 P.2d 699, and that, in consequence,
she had no remaining interest in the land which she could ask the
bankruptcy court to administer. It thought that, by the forfeiture,
respondent became vested as her successor with the interest which
she had acquired in the land by virtue of the contract. But it was
also of opinion that, notwithstanding the forfeiture, she remained
a joint tenant of the contract with her husband, and so was an
indispensable party to any judgment or order of the bankruptcy
court making disposition of the debtor's interest in the contract
and the property. It also pointed out that, although the interest
of a bankrupt joint tenant may be sold in a regular bankruptcy
proceeding, the proceedings under § 75(a)-(r), do not look in the
first instance to a sale of the debtor's property or operate to
pass title to a trustee or the court, but contemplate maintenance
of the
status quo by a moratorium pending an adjustment or
composition of his debts, and his ultimate emergence from
bankruptcy with all his property.
See John Hancock Mut. Ins.
Co. v. Bartels, 308 U. S. 180,
308 U. S. 184;
Wright v. Union Central Life Ins. Co., 311 U.
S. 273.
From all this, the court concluded that the difficulties of
administration of the bankrupt's interest in § 75 proceedings are
so insurmountable as to require dismissal of the
Page 317 U. S. 182
proceeding.{1} In the circumstances of this case, it attributed
these difficulties to the uncertainty as to the rights of the
husband as joint tenant of the contract with his wife and as tenant
in common with respondent of the land. The uncertainty arose, it
was suggested, from the doubt whether the husband, upon effecting
an adjustment and compromise with creditors, would be entitled to
acquire all the land upon payment of the balance of the purchase
price, or only to demand half of it on payment of one-half of the
purchase money due. We granted certiorari, 316 U.S. 657, on a
petition which challenged the rulings of the Circuit Court of
Appeals that the wife was an indispensable party to the
farmer-debtor proceeding, and that the interest of the husband
alone was not susceptible of administration in that proceeding.
Section 75(n) directs that the filing of the farmer-debtor's
petitioner
"shall immediately subject the farmer and all his property . . .
for all the purposes of this section, to the exclusive jurisdiction
of the court, including . . . any equity or right in any such
property, including . . . any equity or right in any such property,
including, among others, contracts for purchase, contracts for
deed, or conditional sales contracts."
Section 75(o) provides an effective moratorium, pending further
proceedings, against the forfeiture of the debtor's interest in the
property over which the court has jurisdiction. This is
accomplishes by staying, unless otherwise permitted by the court,
proceedings for foreclosure of a mortgage, or for cancellation or
rescission of an agreement for the sale of land, or for the
recovery of possession of land, or for the seizure or sale of the
debtor's property under conditional sales agreement.
Kalb v.
Feuerstein, 308 U. S. 433;
John Hancock Ins. Co. v. Bartels, 308 U.
S. 180.
Page 317 U. S. 183
We see no reason to doubt that, under these provisions and
others presently to be noted, the bankruptcy court had jurisdiction
in a § 95 proceeding over the husband's interest as joint tenant in
the contract for the purchase of the land. Section 75(n) expressly
subjects to the jurisdiction of the bankruptcy court the vendee's
interest in such a contract. And, so far as we are advised, Utah
accepts the general common law rules relating to joint tenancies,
including the rules permitting alienation of the interest of a
joint tenant, and making it property subject to execution and
separate sale.
Cf. Spalding v. Allred, 23 Utah, 354, 64 P.
1100;
Neill v. Royce, 120 P.2d 327; § 104-37-9 Revised
Statutes of Utah, 1933,
and see 3 Tiffany, Real Property
(3rd ed.) § 425; 2 Thompson, Real Property, §§ 1714-17. When so
locally recognized, the interest of a joint tenant is a property
interest subject to the jurisdiction of the bankruptcy court under
§ 70 of the general Bankruptcy Act, 11 U.S.C. § 110;
Matter of
DePree, 30 A.B.R.(N.S.) 629;
In re Williams, 16
A.B.R.(N.S.) 218;
cf. In re Brown, 60 F.2d
269;
In re Williams' Estate, 16 F. Supp. 909.
Section 75(n) of the Farm Bankruptcy Act, 11 U.S.C. § 203(n),
which provides that the filing of a petition shall subject "the
farmer and all his property" to the jurisdiction of the Court,
further directs that,
"In proceedings under this section, except as otherwise provided
herein, the jurisdiction and powers of the courts, the title,
powers and duties of its officers, the duties of the farmer, and
the rights and liabilities of creditors, and of all persons with
respect to the property of the farmer . . . shall be the same as if
a voluntary petition for adjudication had been filed and a decree
of adjudication had been entered. . . ."
And subsection (s)(4) of § 75 commands that
". . . the provisions of this title shall be held to apply also
to partnerships,
Page 317 U. S. 184
common, entirety, joint, community ownerships . . . , and any
such parties may join in one petition."
The final clause of this provision permitting both joint tenants
to join in the petition suggests that either, if entitled to the
benefits of the Act, may file a petition without the other. Such
was declared to be its purpose by the House Judiciary Committee
which recommended its addition by way of amendment to § 75(s) as
originally enacted. In reporting this amendment, the Committee
pointed out the diversity of rulings of the courts under § 75,
saying,
"Some have held that, if a husband and wife were jointly
interested or had interests in common or were partners in the
farming operation, that then neither of them could take advantage
of the Act, nor could they join. Obviously such was not the
intention of Congress."
H.R.Rep. No. 570, 74th Cong., 1st Sess., p. 4. We need not now
determine whether the wife, who does not appear to be a
farmer-debtor, could before the forfeiture have joined in the
petition. It is enough that one joint tenant is authorized to file
his petition under § 75 and subject his interest to the
jurisdiction of the bankruptcy court, just as he may under § 70 of
the general Bankruptcy Act.
Accordingly, we conclude that the husband's interest in the
property held by him as joint tenant with his wife is property
within the meaning of § 75(n), and that the court acquired
jurisdiction over that interest upon the filing of his petition.
The husband's interest as joint tenant being subject to the
jurisdiction of the bankruptcy court, he was entitled to the
benefit of the moratorium afforded by § 75(o) for the purpose of
enabling him to effect a composition with his creditors, failing
which he was entitled to proceed under § 75(s).
John Hancock
Ins. Co. v. Bartels, supra.
The Court of Appeals cited no decision of the Utah courts, and
we are referred to none, which supports its
Page 317 U. S. 185
conclusion that respondent, as the result of the forfeiture of
the wife's interest in the land, succeeded to that interest and
became a co-tenant with the husband. So far as the law of that
state is concerned, it would seem to be an equally tenable position
that the forfeiture freed respondent's title of any equitable
interest of the wife and left it subject only to such demands as
the husband might assert by virtue of his interest. In advance of
an authoritative determination by the state courts of the rights of
the parties to the contract after the forfeiture of the wife's
interest, we cannot say that the difficulties of administering the
husband's interest under § 75(s) are insurmountable. Indeed, before
dismissing the proceedings because of difficulties in ascertaining
the rights of the debtor under state law and in administering them
in bankruptcy, it would be an appropriate exercise of the court's
jurisdiction to take suitable measures to remove those difficulties
by affording the interested parties opportunity to assert their
rights in the state courts and, when they are ascertained and
defined, by administering the debtor's interest as the Act
provides, so far as may be found to be practicable.
Section 75(e) provides that,
"after the filing of the petition and prior to the confirmation
or other disposition of the composition or extension proposal by
the court, the court shall exercise such control over the property
of the farmer as the court deems in the best interests of the
farmer and his creditors."
During such control, the court is free to permit and to
facilitate proceedings in the state courts which would adjudicate
the interests of the parties in the contract, subject to the stay
directed by § 75(o) of any cancellation of the contract or
foreclosure of petitioner's interest in it. Utah, by § 104-3-18 of
its Revised Statutes, has provided that
"all persons holding as tenants in common or as joint tenants,
or any number
Page 317 U. S. 186
less than all, may jointly or severally commence or defend any
civil action or proceeding for the enforcement or protection of the
rights involved. In all cases, one tenant in common or joint tenant
can sue his co-tenant."
And it has adopted the Uniform Declaratory Judgments Act, under
which respondent or petitioners, or either of them, are free to
proceed to an adjudication of their rights. §§ 104-64-1
et
seq., Revised Statutes of Utah, 1933. We perceive no
insurmountable obstacle, if the bankruptcy court is so advised, to
the exercise of its jurisdiction so as to permit the parties to
ascertain their respective rights by an appropriate proceeding in
the state courts.
See Thompson v. Magnolia Petroleum Co.,
309 U. S. 478,
309 U. S. 483.
While such practice is to be regarded as exceptional, the
circumstances which here suggest it appear to be exceptional. It
may be suggested too that, if, pending the proceedings for
adjustment or composition with creditors, the wife were to release
or assign to her co-tenant her interest in the contract, all
beneficial interest under which she has forfeited, the technical
difficulties thought to exist by reason of her absence as a party
from the bankruptcy proceedings might be removed.
With the court's jurisdiction over the debtor's interest in the
land and the duty to administer it established, we cannot say that
the accommodation with respondent and other creditors which the
statute contemplates could not be arrived at. But, in the event
that no composition is effected, the debtor may ask to be
adjudicated a bankrupt, and, as such, to be placed in possession of
the property under the provisions of § 75(s) upon terms which will
enable him, by paying a suitable rental, to redeem the property
unless he is sooner able to finance himself.
See John Hancock
Ins. Co. v. Bartels, supra. If his interest is found to be
such that it is impracticable to place him in possession or
otherwise to administer the property as
Page 317 U. S. 187
provided by § 75(s), he is entitled to petition the court for
leave to redeem the property, and if he is unable to redeem it, a
sale of his interest may be ordered as directed by § 75(s)(3).
Wright v. Union Central Ins. Co., supra. The sale of the
interest of a co-tenant may be separately effected in a bankruptcy
proceedings.
In re Toms, 101 F.2d 617;
In re Brown,
supra, 60 F.2d at 273. And we cannot say that a court
possessing the powers of a court of equity could not, in this case,
direct a sale on conditions which would protect the rights of the
debtor, respondent, and the purchaser.
Respondent moves to dismiss the writ of certiorari because,
after the judgment below denying the district court's jurisdiction,
petitioners procured a return of rental deposited by them in the
bankruptcy court as an incident to proceedings under § 75(s)(2). It
is argued that this action is so inconsistent with petitioners'
appeal as to estop them from further prosecution of it. The order,
if any, directing the deposit, and the attendant proceedings do not
appear in the record. Whether the withdrawal of the amount
deposited is so inconsistent with further proceedings for the
three-year stay authorized by § 75(s) upon payment of a prescribed
rental obviously cannot be determined on this record, and should,
in any case, be determined in the first instance by the bankruptcy
court having jurisdiction of the cause. But it plainly is not
inconsistent with other remedies which the court has jurisdiction
to give under § 75, or with recourse to measures which the court
may take to permit an adjudication of the rights of the parties, on
the basis of which a composition may be effected. In any case,
since deposit of rental is not prerequisite to jurisdiction,
petitioners' recall and receipt of money, whatever effect it may
have had on their right to the three-year stay authorized by §
75(s) involved no inconsistency with the assertion on this appeal
of the court's jurisdiction to resolve that question and to
take
Page 317 U. S. 188
other appropriate action. The court's authority to give relief
upon compliance with such terms as it may properly impose,
including the payment of rental, either by moratorium pending a
composition with creditors or by sale as the statute provides,
remains unaffected. At least it has authority under § 75(s), and is
required to permit redemption of the property by the debtor before
ordering a sale.
Wright v. Union Central Ins. Co.,
supra.
We are of opinion that the bankruptcy court has jurisdiction
over the debtor's interest in the property in question, and that,
in its sound discretion, it should, in every practicable way,
exercise that jurisdiction for the protection of the interest of
the debtor, as the statute directs.
The judgment below should be reversed, and the cause remanded
for further proceedings not inconsistent with this opinion.
Reversed.
*
Compare Buss v. Prudential Ins. Co., 126 F.2d 960;
In re Harris, 15 F. Supp. 404.