The conciliation commissioner, making a reappraisal of the
debtor's property pursuant to § 75(s)(3) of the Bankruptcy Act,
erred in basing the valuation partly on evidence obtained by his
personal investigation without the knowledge or consent of the
parties; but, in the circumstances of this case, the error was
cured upon review in the District Court, which reexamined all the
competent evidence introduced at the hearing before the
commissioner and thereupon modified the latter's valuation. P.
320 U. S.
246.
131 F.2d 222 affirmed.
Page 320 U. S. 244
Certiorari, 318 U.S. 753, to review the affirmance, upon appeal
by the debtor, of a judgment modifying an order of a conciliation
commissioner.
MR. JUSTICE MURPHY delivered the opinion of the Court.
The narrow issues presented by this case are whether it was
error under § 75(s)(3) of the Bankruptcy Act [
Footnote 1] for a conciliation commissioner to fix
a valuation partly on the basis of his personal investigation and,
if so, whether that error was cured on review by the District
Court.
Petitioner, the farmer debtor, was adjudicated a bankrupt under
§ 75(s). After a $5,800 appraisal of his farm had been approved by
a conciliation commissioner, petitioner was permitted to retain
possession of the property for the statutory three-year period. At
the end of that time, he petitioned the District Court for a
reappraisal of the property for redemption purposes, pursuant to §
75(s)(3). [
Footnote 2] The
judge then referred the matter to the same conciliation
commissioner who had approved the original appraisal, and directed
that he
"have a reappraisement of the farm made, and that the secured
creditor be afforded an opportunity to present evidence as to the
present fair value of such farm and that the conciliation
commissioner
Page 320 U. S. 245
determine the correct appraised value and fix a reasonable time
within which the debtor shall redeem the farm from the mortgage
lien, failing in which, a public sale is ordered."
Pursuant to this order, the conciliation commissioner held
hearings to determine the fair and reasonable value of the farm in
question. Respondent, the secured mortgage holder, called five
witnesses whose estimates of the value of the farm ranged from
approximately $29,000 to $33,000. The values given by petitioner's
five witnesses were from $6,500 to $12,000. All but one of these
witnesses were subjected to cross-examination. Subsequently, the
conciliation commissioner made the following finding:
"After hearing the testimony given by the several witnesses and
studying the briefs furnished by the defendant and the plaintiff,
and upon a personal investigation by the conciliation commissioner
of the value of said farm, I hereby fix the value of said farm at
$150 per acre (approximately $25,000 for the entire farm)."
The commissioner did not indicate when or under what
circumstances his personal investigation had been made.
Petitioner then requested the District Court to review and
reverse the commissioner's order allowing him to redeem the farm on
payment of $25,000. Included in the specification of errors was the
claim that the valuation was erroneous and void
"because made and fixed by the conciliation commissioner upon a
personal investigation . . . made outside of and independent of the
hearings . . . at which personal investigation neither the
petitioner herein nor his counsel was afforded opportunity to offer
counter-evidence or to cross-examine concerning the evidence
adduced by said personal investigation."
The District Court, after reviewing the entire testimony
introduced at the hearing before the commissioner and after reading
the briefs submitted by the parties, concluded that the
commissioner's estimate was too
Page 320 U. S. 246
high, and reduced the valuation to $20,000. It does not appear
that the District Court made any use or mention of the
commissioner's personal investigation in arriving at this
valuation, or that any evidence was utilized other than that
properly introduced at the hearing before the commissioner.
Petitioner renewed his objection to the personal investigation
in his appeal to the Circuit Court of Appeals. The latter, however,
merely stated that there was no abuse of judicial discretion by the
District Court in fixing the valuation at $20,000, and that there
was no reversible error. 131 F.2d 222. We granted certiorari,
limited to the question of the propriety of the commissioner's
personal investigation, because of an asserted conflict with
Moser v. Mortgage Guarantee Co., 123 F.2d 423.
We are of the opinion that the conciliation commissioner erred
in fixing the value of the property partly upon his personal
investigation, but that, under the circumstances of this case, such
error was cured inasmuch as the District Court reexamined all the
evidence properly introduced at the hearing before the commissioner
and thereupon modified the latter's valuation.
Section 75(s)(3) makes clear the impropriety of the conciliation
commissioner's action. If the District Court conducts a hearing to
determine the value of the property, or if the conciliation
commissioner is authorized to hold such a hearing, the statute
provides that the valuation shall be fixed "in accordance with the
evidence submitted" at the hearing. The statute confers no
authority on either the judge or the commissioner to act personally
as an appraiser or to conduct his own factual inquiry absent the
knowledge and consent of the parties to the hearing. The valuation
must thus be determined solely from the evidence adduced at the
hearing, and the use of evidence obtained in any other manner is
improper.
Moser v. Mortgage Guarantee Co., supra; Equitable
Life Assurance
Page 320 U. S. 247
Society v. Deutschle, 132 F.2d 525. And the parties are
entitled to a valuation based on a strict adherence to this orderly
procedure.
John Hancock Mutual Life Ins. Co. v. Bartels,
308 U. S. 180;
Borchard v. California Bank, 310 U.
S. 311.
Moreover, once a hearing has been ordered, § 75(s)(3)
necessarily guarantees that it shall be a fair and full hearing.
The basic elements of such a hearing include the right of each
party to be apprised of all the evidence upon which a factual
adjudication rests, plus the right to examine, explain, or rebut
all such evidence. Tested by that standard, the personal
investigation by the conciliation commissioner cannot be justified.
It was apparently made without petitioner's knowledge or consent,
and no opportunity was accorded petitioner to examine or rebut the
evidence obtained in the course of such investigation. The use of
this evidence was therefore inconsistent with the right to a fair
and full hearing.
Moser v. Mortgage Guarantee Co., supra;
Wigmore on Evidence, § 1169 (3rd edition). [
Footnote 3]
The irregularity of the commissioner's personal investigation,
however, appears to have been cured by the District Court's review
and modification of the commissioner's valuation. Order 47 of the
General Orders in Bankruptcy, [
Footnote 4] which is applicable to the review of the
commissioner's valuation, [
Footnote
5] provides in effect that the commissioner's findings of fact
shall be accepted by the
Page 320 U. S. 248
judge "unless clearly erroneous." Order 47 further provides
that
"the judge, after hearing, may adopt the report or may modify
it, or may reject it in whole or in part, or may receive further
evidence, or may recommit it with instructions."
Had the District Court done no more than summarily affirm and
adopt without change the commissioner's finding of a $25,000 value,
the defect upon which that finding rested would not have been
cured, and petitioner would have been deprived of the fair hearing
to which he was entitled.
Moser v. Mortgage Guarantee Co.,
supra. But here, the commissioner's error was brought to the
judge's attention by petitioner, and we cannot assume that the
judge was unmindful of this objection. The District Court
disregarded the commissioner's $25,000 valuation, heard argument by
counsel, made an independent and complete review of the conflicting
evidence introduced at the hearing before the commissioner, and
fixed the valuation at $20,000 "under the evidence before me." All
of this was authorized by Order 47, inasmuch as the commissioner's
personal investigation made his finding as to value "clearly
erroneous."
It is thus apparent that the error of which petitioner complains
was cured by the District Court. Since none of the evidence
procured by the commissioner through his personal investigation was
included in the record certified to the judge, it cannot be said
that the judge's $20,000 valuation was in any way grounded on such
improper evidence. Petitioner had full opportunity to examine and
rebut all the evidence utilized by the judge in fixing this
valuation.
This procedure, furthermore, gave petitioner the full and fair
hearing guaranteed to him by Congress. If the conciliation
commissioner is properly authorized to conduct a reappraisal
hearing and commits an error which can be and is corrected by the
District Court on appeal,
Page 320 U. S. 249
the hearing contemplated by § 75(s)(3) has been had. A party is
not entitled to a trial
de novo as of right on the review
in the District Court,
Equitable Life Assurance Society v.
Carmody, 131 F.2d 318, and none was requested by petitioner.
Nor is there any requirement that the judge must reverse and remand
the case to the commissioner for further hearings or for his
considered judgment based solely on the competent evidence. To so
hold would render nugatory the discretionary power given the judge
by Order 47 to receive further evidence himself or to modify or
reject, in whole or in part, the commissioner's findings on appeal.
In addition, it would make mandatory what is, at most, a
discretionary power of the judge under § 75(s)(3) to authorize a
hearing before the commissioner.
The judgment below is accordingly
Affirmed.
[
Footnote 1]
11 U.S.C. § 203(s)(3).
[
Footnote 2]
The pertinent portion of § 75(s)(3), provides that,
"upon request of any secured or unsecured creditor, or upon
request of the debtor, the court shall cause a reappraisal of the
debtor's property, or, in its discretion, set a date for hearing,
and after such hearing, fix the value of the property in accordance
with the evidence submitted, and the debtor shall then pay the
value so arrived at into court . . . , and thereupon the court
shall, by an order, turn over full possession and title of said
property, free and clear of encumbrances to the debtor."
[
Footnote 3]
See also Atlantic & Birmingham Ry. Co. v. Cordele,
125 Ga. 373, 54 S.E. 155;
Ralph v. Southern Ry. Co., 160
S.C. 229, 158 S.E. 409;
Denver Omnibus & Cab Co. v. J. R.
Ward Auction Co., 47 Colo. 446, 107 P. 1073;
Elston v.
McGlauflin, 79 Wash. 355, 140 P. 396;
Anderson v.
Leblang, 125 Misc. 820, 211 N.Y.S. 613.
[
Footnote 4]
11 U.S.C. following section 53.
[
Footnote 5]
Sec. 75(s)(4) of the Bankruptcy Act, 11 U.S.C. § 203(s)(4);
Order 50(11) of the General Orders in Bankruptcy;
Equitable
Life Assurance Society v. Carmody, 131 F.2d 318, 322;
Rait
v. Federal Land Bank, 135 F.2d 447, 450.