The question for decision is whether section 75, subsection (s), of the Bankruptcy Act, as amended by the new Frazier-Lemke Act, August 28, 1935, c. 792, 49 Stat. 943-945, 11 U.S.C.A. § 203(s), is constitutional. In this case, the federal court for Western Virginia (see In re Sherman (D.C.) 12 F.Supp. 297) and the Circuit Court of Appeals for the Fourth Circuit (85 F.(2d) 973) held it invalid. Like decisions have been rendered in other circuits. Lafayette Life Insurance Co. v. Lowmon, 79 F.(2d) 887 (C.C.A.Seventh Circuit); United States National Bank of Omaha v. Pamp, 83 F.(2d) 493 (C.C.A.Eighth Circuit). In the Fifth Circuit the legislation was sustained. Dallas Joint Stock Land Bank v. Davis (C.C.A.) 83 F.(2d) 322. Because of this conflict and the importance of the question, we granted certiorari. 299 U.S. 537, 57 S.Ct. 312, 81 L.Ed. --.
Wright, a Virginia farmer, gave in 1929 a mortgage deed of trust of his farm to secure a debt now held by the Vinton Branch of the Mountain Trust Bank. In March, 1935, he filed a petitioner under section 75 of the Bankruptcy Act as amended June 28, 1934, c. 869, 48 Stat. 1289. When the proceedings were begun, the debt secured by the deed of trust had matured and was in default, and the trustee, at the request of the beneficiary, had advertised the property for sale pursuant to the terms of the deed of trust and the provisions of the Virginia Code. The debtor's petition prayed, among other things, 'that all proceedings against him by way of pending and advertised foreclosures of his farming lands, or by other methods contrary to the provisions' of the Act be stayed. The petition, 'appearing to be in proper form and to have been filed in good faith,' was referred to the Conciliation Commissioner as required by section 75, 11 U.S.C.A. § 203. On July 27, 1935, the debtor made a proposal for composition; but it was not accepted by the mortgage creditor. On October 8, 1935, Wright filed an amended petition under subsection (s) of section 75 as amended by the new Frazier-Lemke Act, 11 U.S.C.A. § 203(s); and asked to be adjudged a bankrupt and to have all the benefits of the provisions of said subsection (s) as so amended and approved August 28, 1935.
An order was entered adjudging Wright a bankrupt and again referring the matter to the Conciliation Commissioner. Thereafter, the Vinton Branch of the Mountain Trust Bank moved in the District Court that the proceedings before the Commissioner be terminated and 'that this case be dismissed upon the ground that subsection (s) of said Act is unconstitutional in that it deprives said creditor of its property without due process of law and that the debtor is not entitled to pursue the remedies and privileges granted therein.' On January 8, 1936, that motion was granted; all proceedings on the bankrupt's petition were terminated; and his petition was dismissed. It is that order, affirmed by the Court of Appeals, which is here for review. Both of the lower courts held that, since the applicable rights of a mortgagee in Kentucky and of the beneficiary under a mortgage deed of trust in Virginia are substantially the same, our 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, required that subsection (s) be held unconstitutional.