author: GIBSON, Circuit Judge.

text:
    Walter THOMAS, Jr., Petitioner-Appellee, v. Oscar SAVAGE, Warden, Retrieve Unit, Texas Dept. of Corrections, Respondent-Appellant.
    No. 74-3987.
    United States Court of Appeals, Fifth Circuit.
    May 23, 1975.
    Rehearing and Rehearing En Banc Denied Sept. 25, 1975.
    John L. Hill, Atty. Gen., Ben M. Harrison, Asst. Atty. Gen., Max P. Flusche, Jr., Atty., Austin, Tex., for respondent-appellant.
    Donald A. Smyth, Staff Counsel for Inmates, Brazoria, Tex., for petitioner-appellee.

      Before GIBSON, THORNBERRY and AINSWORTH, Circuit Judges.

       Of the Eighth Circuit, sitting by designation.

   GIBSON, Circuit Judge.

The State of Texas appeals the issuance of a writ of habeas corpus upon the application of petitioner, Walter Thomas, Jr., pursuant to 28 U.S.C. § 2254 (1970). Petitioner was convicted in a jury trial of robbery by assault in 1968. Under Texas’ bifurcated system of criminal trials, the same jury then proceeded with the punishment stage of the trial and sentenced Thomas to a term of 99 years. One of his eodefend-ants received the same sentence, a second received 85 years. During this punishment stage five prior convictions of petitioner were introduced by the State. Four were felony convictions; the fifth, at issue here, was a 1964 misdemeanor conviction for aggravated assault.

Petitioner alleged in his application that the misdemeanor conviction was constitutionally invalid because he “did not have, could not afford, did not waive, and was not afforded the assistance of counsel.” He argues that since the misdemeanor conviction was used to enhance his punishment for the present offense, his conviction is invalid under Burgett v. Texas, 389 U.S. 109, 88 S.Ct. 258, 19 L.Ed.2d 319 (1967). Thus, actually a prior uncounselled misdemeanor conviction may often prove to be a boon to one escalating the ladder of crime to the point where he has been convicted of a major aggravated offense.

The District Court, after a review of the state court record and without an evidentiary hearing, adopted the findings and conclusions of the Magistrate and held that the use of the void misdemean- or conviction at the punishment stage of the 1968 robbery trial denied due process. The court granted the requested writ of habeas corpus unless the State retried petitioner within 120 days of its order. We granted a stay pending appeal and expedited the appeal. We have concluded that the writ should not have been granted and therefore reverse.

The State presents the question on appeal as being whether the introduction of the 1964 misdemeanor conviction at petitioner’s 1968 felony offense robbery trial was a denial of due process of law. This question requires reference to other issues, 2. e., petitioner’s indigency and lack of counsel at the 1964 misdemeanor trial, and whether, if indigent and denied counsel, the introduction of that conviction can be determined to be harmless error.

At the time of his misdemeanor conviction in 1964 there is no doubt but that Thomas was entitled to appointed counsel if he was unable to afford counsel. Olvera v. Beto, 429 F.2d 131 (5th Cir. 1970); Matthews v. Florida, 422 F.2d 1046 (5th Cir. 1970). The necessity for counsel is judged by the maximum penalty the defendant may receive. Olvera v. Beto, supra. In this respect the cases of this circuit go beyond the Supreme Court’s decision in Argersinger v. Hamlin, 407 U.S. 25, 92 S.Ct. 2006, 32 L.Ed.2d 530 (1972), which would only require the appointment of counsel when a sentence of imprisonment is imposed. This right to counsel applies retroactively. Berry v. City of Cincinnati, 414 U.S. 29, 94 S.Ct. 193, 38 L.Ed.2d 187 (1973); Olvera v. Beto, supra. Here, since Thomas was faced with a possible maximum of two years imprisonment and/or a $1,000 fine, he was entitled to appointed counsel if indigent. Thomas, at the time of the misdemeanor conviction, was not a stranger to the courts. He previously had four felony convictions where he was represented by counsel.

It is clear that Thomas did not have counsel at the time of his 1964 misdemeanor conviction. However, the record is unclear as to his indigency at the time of conviction and petitioner has the burden of proving his inability to hire counsel. Kitchens v. Smith, 401 U.S. 847, 91 S.Ct. 1089, 28 L.Ed.2d 519 (1971). Here, the findings and conclusions of the Magistrate, adopted by the District Court, were to the effect that the material facts are too inadequately developed to conclude that the petitioner was not indigent. Conversely, they are too inadequately developed to support a finding of indigency.

The record shows that Thomas made a $300 bond before trial. He plead guilty and received a sentence of a $100 fine and costs. He failed to pay the fine and was later remanded to jail. He was confined 7 days, the balance of the fine and costs of $111.95 was then paid, and he was released. In opposition to the above, petitioner in a pleading in the district court asserted that the $15 payment made to secure his bond was made by his mother, grandmother and aunt, and that the $111.95 was raised by these same persons and his grandfather. He further alleged that at the time of his conviction he earned only $35 per week and was the sole support of his mother and three sisters. However, the only way to establish whether or not the petitioner was indigent would be a remand for an evidentiary hearing as to indigen-cy. Instead, we accept arguendo petitioner’s indigency at the time of the 1964 conviction as we are convinced beyond a reasonable doubt that even if the conviction was void, the error in admitting this conviction at the 1968 trial was harmless.

We first address petitioner’s contention that the right to counsel is one of the rights referred to in Chapman v. California, 386 U.S. 18, 23 n. 8, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967), as so basic that an infraction can never be harmless error. Chapman established the federal standard for determining whether a constitutional error can be found harmless, that being that “the court must be able to declare a belief that it was harmless beyond a reasonable doubt.” 386 U.S. at 24, 87 S.Ct. at 828. See also Fahy v. Connecticut, 375 U.S. 85, 86-87, 84 S.Ct. 229, 11 L.Ed.2d 171 (1963). The Court in Chapman did state that “prior cases have indicated that there are some constitutional rights so basic to a fair trial that their infraction can never be treated as harmless error.” 386 U.S. at 23, 87 S.Ct. at 827. Accord, Harrington v. California, 395 U.S. 250, 89 S.Ct. 1726, 23 L.Ed.2d 284 (1969). The right to counsel as established by Gideon v. Wainwright, 372 U.S. 335, 83 S.Ct. 792, 9 L.Ed.2d 799 (1963), was specifically enumerated. However, our fact situation cannot be directly compared to Gideon. We are not dealing with the basic unfairness of imprisoning someone due to a conviction obtained without benefit of counsel as was the situation in Gideon and Arger-singer. Here we deal with a situation where the prior counselless conviction has been introduced in a subsequent trial, as in Burgett v. Texas, supra, a situation fraught with possibilities of prejudice but one where the taint may not be so great as to require a conclusion that such introduction can never be harmless.

Several circuits have considered whether a violation of Burgett can be considered harmless error and have concluded that it can. Bates v. Nelson, 485 F.2d 90 (9th Cir. 1973), cert. denied sub nom., Bates v. McCarthy, 415 U.S. 960, 94 S.Ct. 1491, 39 L.Ed.2d 575 (1974); Subilosky v. Moore, 443 F.2d 334 (1st Cir.), cert. denied, 404 U.S. 958, 92 S.Ct. 328, 30 L.Ed.2d 276 (1971); Gilday v. Scafati, 428 F.2d 1027 (1st Cir.), cert. denied, 400 U.S. 926, 91 S.Ct. 188, 27 L.Ed.2d 186 (1970); see Beto v. Stacks, 408 F.2d 313, 318 (5th Cir. 1969). Additionally, the Supreme Court let stand the Ninth Circuit’s harmless error determination resulting from the introduction of an invalid conviction in a case given plenary review while agreeing that reliance on the invalid conviction required resentencing, a result inexplicable if such error can never be harmless. See United States v. Tucker, 404 U.S. 443, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972), aff’g 431 F.2d 1292 (9th Cir. 1970). See also Loper v. Beto, 405 U.S. 473, 483 n. 12, 92 S.Ct. 1014, 31 L.Ed.2d 374 (1972).

We readily acknowledge that the facts of the present case do not fit into the Burgett mold in which the invalid convictions are used for impeachment, a situation in which the remainder of the evidence may be overwhelming on the issue of guilt. The error here did not infect the guilt stage of the trial at all since it was not introduced before the jury until after the jury had determined Thomas’ guilt. Since the prejudice, if any, would have affected the punishment received, the facts herein more closely resemble United States v. Tucker, 404 U.S. 443, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972), where consideration was given to prior invalid convictions at the time of sentencing. As the sentence in Tucker was “founded at least in part upon misinformation of a constitutional magnitude,” the Supreme Court required a remand for possible resentencing. This circuit has required the > same procedure. Lipscomb v. Clark, 468 F.2d 1321 (5th Cir. 1972); Davis v. Wainwright, 462 F.2d 1354 (5th Cir. 1972) (rule of Tucker must be applied with equal force to state prisoners).

While the harmless error rule of Chapman has been applied in this circuit to errors affecting a sentence, Webster v. Estelle, 505 F.2d 926 (5th Cir. 1974); Cline v. United States, 453 F.2d 873 (5th Cir. 1973), those cases involved, the operation of state enhancement statutes where other valid convictions would have mandated the sentences imposed in those cases.

Admittedly, the sentence imposed upon Thomas was discretionary with the jury. Can it ever be considered harmless to have the knowledge of a prior invalid conviction before a jury on the issue of punishment? We think that the harmless error rule of Chapman may appropriately be applied in such a situation, the burden of course being upon the State to prove beyond a reasonable doubt that the error was harmless, that is, that it had no effect upon the sentence received by petitioner.

Thomas argues that there is a reasonable probability that the invalid conviction might have contributed to his punishment since the record demonstrates that the jury considered the conviction, it being the only one which involved violence against a person, and the State mentioned that fact in its argument. He further asserts that since the State introduced this conviction for the purpose of having the jury consider it on the issue of punishment and the prosecutor stressed it for the purpose of increasing his sentence, the State should not now be heard to argue that it did not have its intended effect. Cf. Bram v. United States, 168 U.S. 532, 541, 18 S.Ct. 183, 42 L.Ed. 568 (1897).

The State notes the four prior valid felony convictions against Thomas, the serious and aggravated nature of the offense he was sentenced for, and the fact that his two co-defendants received 85 to 99 years for the same offense. From this it argues that the jury would have imposed the same penalty even though the misdemeanor conviction had not been before the jury.

We have carefully reviewed the record of the punishment stage of the trial and have concluded that 'the introduction of the misdemeanor conviction was harmless beyond a reasonable doubt. The State’s argument stressed the facts of the particular offense committed by Thomas and his co-defendants and the fact that prior short prison sentences had left him unable to conform his conduct to the dictates of the law. While the record of his misdeameanor conviction was introduced and mentioned to the jury, we are convinced that its introduction had no effect upon the prison sentence imposed upon Thomas.

Accordingly, the judgment of the District Court is reversed and the cause remanded with directions to discharge the writ.

      . The facts underlying that conviction were aggravated. Since they are set forth in Thornton v. State, 451 S.W.2d 898 (Tex.Cr.1970), the facts will not be summarized here.

      . Breaking and entering a coin-operated machine and three burglary convictions.

      . “To permit a conviction obtained in violation of Gideon v. Wainwright [372 U.S. 335, 83 S.Ct. 792, 9 L.Ed.2d 799] to be used against a person either to support guilt or enhance punishment for another offense (see Greer v. Beto, 384 U.S. 269, 86 S.Ct. 1477, 16 L.Ed.2d 526) is to erode the principle of that case.’’
      Burgett v. Texas, 389 U.S. at 115, 88 S.Ct. at 262.

      . Under the law as existing in 1964 the Texas court was not required to appoint counsel in a misdemeanor case. Argersinger v. Hamlin, 407 U.S. 25, 92 S.Ct. 2006, 32 L.Ed.2d 530 (1972), marked the first express recognition by the Supreme Court of a right to counsel where imprisonment is imposed upon the basis of a misdemeanor conviction. In the Fifth Circuit, which earlier recognized a right to counsel in misdemeanor cases, this right did not receive expression until 1965 in Harvey v. Mississippi, 340 F.2d 263, 271 (5th Cir. 1965).

      . As noted in Webster v. Estelle, 505 F.2d at 931, “[w]here enhancement could have been based on other convictions, reliance on an invalid one is harmless.”

      . The Assistant District Attorney in his argument to the jury in the penalty segment of the trial said:
      [E]ach of these defendants has at least one prior felony conviction.
      Walter Thomas, Jr. first went to the Texas Department of Corrections back in 1961 on two felony convictions, breaking and entering a coin-operated machine and burglary.
      You will also see from the examining these packets that less than four years later he’s convicted on two more burglary cases and returned to the Texas Department of Correction. There is also physical violence involved in Walter Thomas’ record and we see that he has been convicted for the crime of aggravated assault.
      Appendix at 86-87.


source: Caselaw Access Project

author: PER CURIAM: EUGENE A. WRIGHT, Circuit Judge

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Abel TORRES-URENA, Defendant-Appellant.
    No. 74-2949.
    United States Court of Appeals, Ninth Circuit.
    March 20, 1975.

      Frank T. Vecchione (argued), San Diego, Cal., for defendant-appellant.
    William A. Shaw, Asst. U. S. Atty. (argued), for plaintiff-appellee.
    Before BROWNING and WRIGHT, Circuit Judges, and ZIRPOLI, District Judge.

       Honorable Alfonso J. Zirpoli, United States District Judge, for the Northern District of California, sitting by designation.

   OPINION

PER CURIAM:

Appellant was convicted of possession of marijuana with intent to distribute in violation of 21 U.S.C. section 841(a)(1). His sole argument on appeal is that there was no basis for a founded suspicion to justify the stop that led to his arrest. We reverse.

At approximately 6:20 on the morning of May 1, 1974, United States Customs Patrol Officer Leonard Dixon, with his partner, was patrolling Monument Road, an east-west artery in San Ysidro, California. The sun was up, the day was already bright, and Dixon noticed a pickup truck parked approximately 50 yards up a private driveway south of the road. A man was loading cardboard boxes into the pickup, but Dixon could not see him clearly enough at that distance to describe him and could not see what was inside the boxes. He had been informed that a female school teacher lived in the residence at the end of the driveway, but he had never met her, was unaware if she was married, and was not familiar with all the vehicles she used. He did know, however, that there were no other structures between this residence and the border, which was one-quarter mile away. When the pickup emerged from the driveway, Dixon stopped it and found marijuana in plain view in the luggage area and arrested appellant, the driver.

Appellant moved to suppress the marijuana, and the hearing on the motion produced the following facts in addition to the above: Dixon had been assigned to the Monument Road area for six months, and had patrolled it daily during that time. To his best recollection, there were 15 to 20 residences along Monument Road. Some of them were truck farms, so it was not unusual to see pickup trucks on Monument Road. While there are no farms south of the road, where the school teacher’s residence is located, there apparently are farms across the road from that residence. During his six months patrolling the area, Dixon had made between 500 and 1,000 arrests of aliens illegally in the country, but had made only three or four arrests for narcotics violations, although he testified he had seen “sea bags or boxes being drug from the brush out to the driveway,” and it appears he believed these to contain contraband. The trial court denied the motion to suppress.

The issue before us is whether, on the basis of the foregoing, Dixon had a founded suspicion that appellant was engaged in criminal conduct. We are not unmindful of Wilson v. Porter, 361 F.2d 412 (9th Cir. 1966), but look to Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968), and its companion case, Sibron v. New York, 392 U.S. 40, 88 S.Ct. 1889, 20 L.Ed.2d 917 (1968), for the proper standards. United States v. Ward, 488 F.2d 162, 169 (9th Cir. 1973) (en banc); see Weisgell, Stop, Search and Seize: The Emerging Doctrine of Founded Suspicion, 9 U.S.F.L.Rev. 219 (1974). Those cases teach that the central concern of the court is the reasonableness of the officer’s conduct. 392 U.S. at 19, 20, 88 S.Ct. 1868. The standard for review is an objective one, id. at 22, 88 S.Ct. 1868, and the court must evaluate each case on its unique facts, id., 392 U.S. at 59, 88 S.Ct. 1868, to determine whether the officer can “point to specific and articulable facts which, taken together with rational inferences from those facts, reasonably warrant the intrusion.” Id. at 21, 88 S.Ct. 1868, at 1880. In evaluating the inferences that may rationally be drawn from the facts at the officer’s disposal, the court takes heed of Mr. Justice Harlan’s admonition in his concurring opinion in Sibron, supra, that “[t]here must be something at least in the activities of the person being observed or in his surroundings that affirmatively suggests particular criminal activity, completed, current, or intended.” 392 U.S. at 73, 88 S.Ct. at 1907. It is not enough that the officer has a hunch that criminal activity may be afoot. Terry, supra, 392 U.S. at 22, 88 S.Ct. 1868.

Applying this standard to the facts presented at the suppression hearing, we are unable to discern any facts that would make the conduct observed by the officers anything but innocuous. See United States v. Mallides, 473 F.2d 859, 861 (9th Cir. 1973). It was not so early in the morning that appellant’s presence was inherently suspicious for that reason — -the sun was up and the day was already, in Dixon’s words, “pretty bright.” Pickup trucks are common in the area since there is a good deal of truck farming around Monument Road; while he was unfamiliar with this truck, Dixon was not familiar with all the vehicles used by the school teacher who lived in this residence. Appellant’s presence was not inherently suspicious — although Dixon knew that a female lived in that residence, he did not know if she was married and had not, indeed, ever seen her. There was nothing inherently suspicious about appellant’s box-loading. Dixon could not tell what was inside the boxes, and had very limited experience with narcotics arrests in the area, his main concern being apprehension of aliens illegally in the country, and it does not appear this was a notorious smuggling area. None of these facts, singly or together, provide any reasonable basis for inferring that appellant was smuggling marijuana, or otherwise violating the law. Had the stop taken place anywhere distant from the border, there would be no question but that it was invalid. The sole support for the government’s position, therefore, is that this residence is located one-quarter mile from the border. We are unwilling to hold that persons found or residing near the border are entitled only to diluted protections under the Fourth Amendment, and therefore reject the government’s argument that proximity to the border converts these otherwise innocuous activities into conduct suspicious enough to justify the stop here.

United States v. Jaime-Barrios, 494 F.2d 455 (9th Cir. 1974), upon which the trial court relied, is distinguishable. The officer there had encountered appellant driving an ordinary automobile at a high rate of speed over a rough, unpaved, remote road near the border. He lived in one of the four residences in the area, and knew all the other residents and the cars they drove. He had not seen appellant’s car at any of the residences in the area during his patrols throughout the night, and found it odd that a person would be driving a vehicle without four-wheel drive in that terrain. He had apprehended persons smuggling aliens or marijuana over this road on many occasions. Given his unique familiarity with the occupants of the area, his experience in past apprehensions, and appellant’s high rate of speed in á vehicle without four-wheel drive, the officer reasonably suspected that appellant was engaged in some smuggling activity. Similarly, in the recent case of United States v. Rodriguez-Alvarado, 510 F.2d 1063 (9th Cir., 1975), the officer first saw appellant’s vehicle accelerating over a bumpy road in an area near the border that has a high incidence of smuggling activity. As he followed the speeding car, the officer saw it swerve from side to side, appearing heavily loaded although there was only one visible occupant. When the vehicle reached speeds of 55 to 60 miles per hour in a residential area, the officer decided to stop it. As is apparent, in these cases the officers had indi-cia of criminality in addition to the proximity to the border to justify their inference that the drivers of these vehicles were smuggling. Here, Dixon had little experience with marijuana smuggling in the area, was only moderately familiar with the neighborhood, knew little of the school teacher and had no reason to believe appellant’s early morning box-loading involved criminal activity of any kind. His hunch that it might because of the proximity to the border is not sufficient to provide a founded suspicion for the stop.

The judgment is reversed, and the case is remanded with directions to dismiss the indictment.

EUGENE A. WRIGHT, Circuit Judge

(dissenting):

Respectfully, I dissent.

In United States v. Holland, 510 F.2d 453 (9th Cir., 1975), we again cited with approval the rule of this circuit taken from Wilson v. Porter, 361 F.2d 412 (9th Cir. 1966), where it was said:

“ . . . due regard for the practical necessities of effective law enforcement requires that the validity of brief, informal detention be recognized whenever it appears from the totality of the circumstances that the detaining officers could have had reasonable grounds for their action. A founded suspicion is all that is necessary, some basis from which the court can determine that the detention was not arbitrary or harassing.”

Id. at 415.

One-fourth of a mile from the international border at 6:20 a. m. in May 1974, customs patrol officers patrolled an area near the beach in San Ysidro, California. One officer, with three and one-half years’ experience as a customs patrol officer, customs inspector and border patrol officer, the last six months of which had involved working in the very area in question almost daily, observfed a truck parked part way up a private driveway to the west of the highway. The driveway led to the home of a female school teacher, who was known to own passenger cars but no trucks.

On his daily patrols through the area, the officer had observed “traffic around the area, what appeared to be sea bags or boxes being drug from the brush out to the driveway.” The officer knew that there were few other residences or buildings of any kind in the immediate area where he saw the truck, and none between the driveway and the border. He also knew that the area where the truck was observed that morning was a high-crime area, since he had participated in arrests of 500 to 1,000 aliens and in three or four narcotics arrests along the same road during the period he had been patrolling it.

Having never previously seen a pickup truck around the residence, and observing the defendant throwing boxes into the vehicle, the officer waited for it to return to the public road. The defendant, driving the vehicle, stopped it when he saw the uniforms of the officers. As one officer approached the driver, he noticed five or six kilos of marijuana lying in the open bed of the truck. One of the cardboard boxes had turned on its side, and the contraband therein was clearly visible. The arrest followed.

The district judge properly denied the defendant’s motion to suppress the evidence, consisting of 220 pounds of marijuana. The facts of this case, whether reconsidered in light of the totality of the circumstances (see Maj. op. at 542), or viewed in comparison with prior cases where this court has applied the leading Supreme Court decisions in the “stop and frisk” area to factual situations involving narcotics seizures, clearly support the district court’s conclusion that the “stop” at issue here was based on a “founded suspicion” of illegal activity.

This court has often held that purely arbitrary factors, alone or in combination, are of themselves insufficient to give rise to the type of “founded suspicion” necessary to justify brief noncustodial detention and interrogation. See, e. g., United States v. Brignoni-Ponce, 499 F.2d 1109 (9th Cir. 1974). However, at least in high-violation areas, we have refused to disapprove such brief investigatory “stops” where otherwise innocuous activities have taken place in combination with other activities which do appear somewhat suspicious under all of the circumstances. See United States v. Larios-Montes, 500 F.2d 941, 943-44 (9th Cir. 1974); see also United States v. Nunez-Villalobos, 500 F.2d 1023 (9th Cir. 1974); United States v. Vital-Padilla, 500 F.2d 641 (9th Cir. 1974); United States v. Patterson, 492 F.2d 995 (9th Cir. 1974).

The majority seems to imply that none of the above factors could have reasonably supported the officer’s decision to question the driver of the vehicle. As to the hour, they point out that the sun was already up and the day “pretty bright.”

But the officer, who knew the ordinary habits of those on his “beat,” might well have found activity at this hour at least unusual enough to attract his attention to other activities reasonably suspicious in that context. Such was our conclusion in the case relied upon by the district court, United States v. Jaime-Barrios, 494 F.2d 455, 456 (9th Cir. 1974), where this court attached some weight to the fact that the events there in question took place at 6:30 a. m. on a July morning.

Nor does somewhat heightened surveillance of border areas subject those living in those areas to “diluted protections under the Fourth Amendment.” (Maj. op. at 542.) In the first place, it is well recognized that limited, investigatory stops of the sort contemplated by the officer in this case involve minimal incursions into the zone of Fourth Amendment interests, and can be justified by the legitimate needs of law enforcement even though less than “probable cause” exists. Adams v. Williams, 407 U.S. 143, 145-46, 92 S.Ct. 1921, 30 L.Ed.2d 612 (1972); Terry v. Ohio, 392 U.S. 1, 20-23, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968).

Secondly, applying the objective test which the majority correctly notes is the proper one, it does not seem unreasonable that an officer might be more suspicious of the existence of a smuggling operation XA mile from an international border than if he had observed the identical facts considerably further away from any possible smuggling entry point. This court has repeatedly held that proximity to a border is a factor which may be considered in evaluating whether founded suspicion could have existed under a given set of circumstances. See, e. g, United States v. Clark, 501 F.2d 492, 494 (9th Cir. 1974); United States v. Jaime-Barrios, supra.

Finally, we note that the brief detention by the officers was neither arbitrary nor harassing. The driver stopped for the officers when he saw their uniforms. Their questioning was brief and purposeful. There was no public embarrassment or physical contact.

The final factor relied on by the district judge, which the majority finds of no value in establishing a reasonable basis for suspicion on these facts, is the agent’s familiarity with the area and its pattern of criminal activity. On this score also the district judge relied on our opinion in Jaime-Barrios. The majority attempts to distinguish that case as based on the “unique familiarity with the occupants of the area” and the more extensive “experience with past apprehensions” of the officer in that case. (Maj. op. at 543.)

I find these distinctions insignificant. It is true that the officer in this case was not a two-year resident of the area as was the apprehending officer in Jaime-Barrios. However, there is no residency requirement in order for an officer to rely on his familiarity with an area in determining when investigatory stops are warranted. Rather, it should be required only that the agent be sufficiently familiar with the area to recognize as unusual the early morning loading operations in the school teacher’s driveway.

The fact that several of the teacher’s neighbors were truck farmers did not immunize the loading operation from suspicion. And even though only three or four of the arrests this officer had made nearby over the past six months had been for narcotics smuggling, this should not have made him any less vigilant for the emergence of the type of smuggling operation which he knew from his long experience in customs work to be an all too common occurrence along the border. When he saw the boxes being loaded on the truck, his surmise that illegal activity might be afoot was certainly reasonable in light of his knowledge that the activities observed followed an identical modus operandi to that employed in other smuggling operations with which he was familiar. Cf. United States v. Larios-Montes, 500 F.2d 941, 943-44 (9th Cir. 1974); United States v. Vital-Padilla, 500 F.2d 641 (9th Cir. 1974).

While I am in disagreement with the majority’s conclusion that the judgment of the district court should be reversed, I am equally disturbed by the majority’s failure to spell out more certain standards for district courts to follow. The majority takes note of the Supreme Court’s expectation that this area of the law would develop only gradually, with the validity of investigatory stops evaluated, on the basis of careful factual determinations. (Maj. op. at 543.) However, I do not feel that such orderly common law development is inconsistent with our practice of offering as much guidance as possible to the district courts who must apply the law in myriad daily situations. I feel the majority fails to indicate with sufficient specificity what facts and circumstances may be taken into account in making the decision to detain a suspect.

Here, the district court reasonably relied on Jaime-Barrios, a case which to me appears controlling in all of its essential aspects. At some point, we must begin to pay greater deference to factual determinations of trial court that situations before them cannot be differentiated from those reported in decisions of this court. As we cautioned in Jaime-Barrios:

“[W]here the record discloses circumstances, as it does here, which could move an officer in the reasonable exercise of his duty to the action taken, we need not look for a reconstructed, after-the-fact explanation of what may have been nothing more at the time of the occurrence than the instinctive reaction of one trained in the prevention of crime.”

494 F.2d at 458, citing Wilson v. Porter, 361 F.2d at 415. The district court is in the best position to apply this standard.

Judged in terms of the relationship of the stop here to reasonable police interpretation of their law enforcement duties, the denial of the suppression motion seems entirely proper. Once the officer observed a pattern of activity paralleled an identifiable criminal mode of operation, his ability to ask those participating in the activity a few questions to satisfy himself that the loading operation was innocent should have followed as a matter of course. The facts added up to suspicious circumstances,. and the officers were obligated to make further investigations. As we said in United States v. Holland, supra:

“Clearly, the officers were not required to rule out all possibility of innocent behavior before initiating a brief stop and request for identification. The test is founded suspicion, not probable cause. Even if it was equally probable that the vehicle or its occupants were innocent of any wrongdoing, police officers must be permitted to act before their reasonable belief is verified by escape or fruition of the harm it was their duty to prevent.”

510 F.2d at 455.

I would affirm.

      . One might assume from Judge Wright’s dissent that appellant stopped his truck voluntarily when he saw the officers’ uniforms, and that he was not the subject of a “stop” that must be justified on the ground of a founded suspicion. The matter is admittedly not entirely clear from the record, which discloses the following interchange between agent Dixon and the Assistant United States Attorney:
      Q. What happened then?
      A. We waited for the vehicle to come out to the road, and we stopped him just before he entered Monument Road.
      Q. How long did you wait before the vehicle came to the intersection, or your location?
      A. Probably two or three minutes.
      Q. What happened when the vehicle came to where you were parked?
      A. My partner and I approached the vehicle. I went directly to the driver. He had stopped for us when he saw the uniforms.
      I went directly to the driver, my partner circled around to my right and checked out the truck. As I approached the driver, I noticed five or six kilos of marijuana lying in the truck.
      Q. Now, was the — is this an open-bedded pick-up truck?
      A. Yes, sir, it was.
      Q. Were you in full uniform?
      A. Yes, sir.
      Q. Were you driving a marked car?
      A. Yes, sir.
      Supp. R.T. at 10, lines 2 — 22. We are satisfied from the foregoing that appellant’s decision to stop was sufficiently influenced by the official appearance and conduct of the agents that they must show that it was based on a founded suspicion. It is worth noting that both parties, and the court below, assumed that the officers needed a founded suspicion to justify the “stop.”


author: AINSWORTH, Circuit Judge:

text:
    In the Matter of ATLANTA INTERNATIONAL RACEWAY, INC., Bankrupt. SECURITY NATIONAL BANK, Appellant, v. Stacey W. COTTON, Trustee, Appellee.
    No. 74-2787.
    United States Court of Appeals, Fifth Circuit.
    May 22, 1975.

      Frank B. Wilenskey, Richard P. Kes-sler, Jr., Morris W. Macey, Atlanta, Ga., for appellant.
    R. Neal Batson, Atlanta, Ga., for Trustee.
    Stacey W. Cotton, Atlanta, Ga., for ap-pellee.
    Heyman & Sizemore, Atlanta, Ga., Irving Picard, Securities & Exchange Comm., Washington, D. C., for other interested parties.
    Before GIBSON, THORNBERRY and AINSWORTH, Circuit Judges.

       Of the Eighth Circuit, sitting by designation.

   AINSWORTH, Circuit Judge:

This appeal presents for review the question whether a provision for attorney’s fees in a promissory note can be enforced in a Chapter X reorganization proceeding under the Bankruptcy Act when the creditor has not attempted to fulfill the preconditions to validity of a lien for such fees until after the Chapter X petition has been filed, and in the face of a prohibitory injunction against the enforcement of all liens on the bankruptcy estate. The District Court answered this question in the negative. We affirm.

I. Factual Background

On March 24, 1969, Atlanta International Raceway, the bankrupt debtor, executed a promissory note for $1,000,000 to Michigan International Speedway, Inc. A deed to secure debt, to the raceway’s property, was also executed. As to attorney’s fees, the note provided that

Should this note, or any part of the indebtedness evidenced hereby be collected by law or through an attorney at law, the holder shall be entitled to collect attorney’s fees in an amount equal to ten per cent (10%) of the principal and interest, and all costs of collection.

On March 30, 1970, the note and deed were transferred and assigned to the Royal National Bank of New York. Security National Bank is that bank’s successor in interest to the note and deed to secure debt.

On January 18, 1971, a petition for reorganization of Atlanta International Raceway was filed and approved under Chapter X of the Bankruptcy Act. Under Section 148 of the Act, 11 U.S.C. § 548, the order approving the petition operated as an automatic stay of mortgage foreclosure proceedings and of any act or proceeding to enforce a lien against the debtor’s property. The District Court, pursuant to Section 116(4) of the Act, 11 U.S.C. § 516(4), immediately entered an injunction prohibiting all creditors and their attorneys from prosecuting any suit or doing any act to enforce claims against the bankrupt debtor. The promissory note for $1,000,000 above referred to was not then in default in payments of principal or interest.

On August 4, 1972, during the penden-cy of the Chapter X proceedings, attorneys for the bank sent the raceway and the Chapter X trustee a ten-day letter, which declared the note to be in default. The letter demanded payment and stated

This letter is written pursuant to Georgia Code Section 20 — 506 to advise that the principal and interest as stated above may be paid within ten (10) days from receipt of this notice without liability for attorney’s fees. In the event the principal and interest as stated above is not paid within ten (10) days from receipt of this notice, the provisions of said promissory note relative to the payment of attorney’s fees shall be enforced.

Under Georgia law a lien for attorney’s fees is not valid until this notice and opportunity to pay have been provided to the debtor. Ga.Code Ann. § 20-506.

The letter was received by the trustee on August 7, 1972, and on August 11 the bank applied to the bankruptcy court for permission to foreclose. The ten-day period elapsed without payment of the debt. The bank then moved for summary judgment on its claim for attorney’s fees, amounting to,over $120,000, which motion was denied by the District Court. The bank has appealed from this adverse decision.

II. Enforceability of the Claim for Attorney Fees in the Chapter X Proceeding

The validity of the bank’s lien for attorney’s fees is a question of Georgia law. The enforceability of the lien in a Chapter X proceeding, however, is a question of federal bankruptcy law. Security Mortgage Co. v. Powers, 278 U.S. 149, 153-154, 49 S.Ct. 84, 85-86, 73 L.Ed. 236 (1928). We conclude that enforcement of the bank’s attorney fee lien in this Chapter X proceeding would frustrate the District Court’s efforts to fulfill its responsibilities under the Act and would be inconsistent with the purposes of Chapter X. The bank does not contend that attorney’s fees of $120,000 have been earned herein. What the bank seeks, therefore, is a $120,000 windfall to be added to its debt, all as a consequence of the debtor being in Chapter X reorganization proceedings in bankruptcy.

A. Conflicts between Enforcement of the Claim for Attorney Fees and the Purpose of Chapter X

The bank’s ten-day letter was sent despite the federal court injunction clearly forbidding the enforcement of creditors’ rights against the debtor. The sending of the demand letter was an “act or proceeding to enforce a lien upon the property of the debtor,” 11 U.S.C. § 516, and fell within the terms of the District Court’s prohibitory injunction. The court’s injunction was entirely proper, and was necessary to preserve the court’s “exclusive jurisdiction of the debtor and its property, wherever located.” 11 U.S.C. § 511. Without'' this protection of the debtor’s assets, the court’s efforts to develop a plan or reorganization would have been in vain.

Thus the trustee was confonted with two restraints against complying with the bank’s demand for payment: first, the District Court’s injunction, which, as the court below specifically found, could not have been changed within ten days to permit the payment, in light of the statutory requirements of notice to other creditors, court approval, etc.; second, the trustee’s responsibility, as well as that of the District Court, to hold all such demands for payment in abeyance lest the bankrupt’s prospects for reorganization be jeopardized by the loss of essential assets.

The debtor and its trustee therefore had no opportunity to satisfy the bank’s demand for payment, and avoid incurring an additional $120,000 liability for attorney’s fees. We conclude that it is contrary to the purpose of Chapter X to inflict this added expense on the debtor, and derivatively, on its other creditors.

The bank argues that it was not required to obey the court’s injunction by applying for permission to send its ten-day letter, because its right to make the demand for payment is a substantive right sanctioned by state law. As we stated recently, however, in ruling on a utility company’s claim in a Chapter X proceeding:

If a creditor, like the telephone company, could continue to enforce his state law rights after the initiation of bankruptcy proceedings, the bankruptcy laws would be meaningless. Their very purpose is to suspend the normal operation of rights and obligations between the debtor and his creditors.

In re Fontainebleau Hotel Corporation, 5 Cir., 1975, 508 F.2d 1056, 1059.

B. Prior Interpretations of the Enforceability of Post-petition Contractual Claims for Attorney’s Fees

The bank’s answer to the foregoing reasoning is that the present attorney’s fee claim is controlled by two prior decisions, one by the Supreme Court and one by this court. These cases, however, are inapposite.

In Security Mortgage Co. v. Powers, 278 U.S. 149, 49 S.Ct. 84, 73 L.Ed. 236 (1928), the Court held that a claim for attorney’s fees pursuant to a provision in a note similar to the note in this case was enforceable in a bankruptcy proceeding. The creditor’s demand notice was sent, after the petition was filed, to a debtor from whom the bankrupt had purchased the land securing the note. When the creditor filed his claim with the bankruptcy court, the debt (including an amount for attorney’s fees) had already been reduced to judgment in a state court action against the original debtor. Security Mortgage, however, was a straight bankruptcy proceeding rather than a reorganization under Chapter X. The reorganization provisions of the Bankruptcy Act were not enacted until 1934, six years after the Security Mortgage case. The Supreme Court has repeatedly stated that reorganization proceedings are sui generis, and rules appropriate in an ordinary bankruptcy may be inapplicable in a reorganization. See Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 470 n. 3, 94 S.Ct. 2504, 2507, 41 L.Ed.2d 243 (1974); Continental Illinois Nat. Bank & T. Co. v. Chicago, Etc., Co., 294 U.S. 648, 676, 55 S.Ct. 595, 606, 79 L.Ed. 1110 (1935).

No prohibitory injunction was entered by the bankruptcy court in Security Mortgage against enforcement of secured creditors’ liens against the debtor. Under the circumstances of that case there was no need to delay satisfaction of secured claims in contemplation of a reorganization. The purpose of the bankruptcy system was “to convert the assets of the bankrupt into cash for distribution among creditors, and then to relieve the honest debtor from the weight of oppressive indebtedness . . . .” Maynard v. Elliott, 283 U.S. 273, 277, 51 S.Ct. 390, 392, 75 L.Ed. 1028 (1931), quoting Williams v. U. S. Fidelity Co., 236 U.S. 549, 554, 35 S.Ct. 289, 290, 59 L.Ed. 713 (1915). See Young v. Hig-bee Co., 324 U.S. 204, 210, 65 S.Ct. 594, 597, 89 L.Ed. 890; Kuehner v. Irving Trust Co., 299 U.S. 445, 451, 57 S.Ct. 298, 301, 81 L.Ed. 340 (1937); Kothe v. R. C. Taylor Trust, 280 U.S. 224, 227, 50 S.Ct. 142, 143, 74 L.Ed. 382 (1930). That purpose was not subverted by the enforcement of secured claims against the debt- or because the trustee and creditors were not restrained (as here) by an injunction or by the essential need to preserve the debtor’s assets in a pending reorganization. The trustee’s task was dismantling the debtor enterprise, rather than restructuring it for continued existence. Under these circumstances a trustee would have an opportunity to comply with a secured creditor’s demand for payment, and could legitimately be held responsible for additional contractually stipulated attorney’s fees. In the present case, as the court below found, there was no such opportunity.

In Security Mortgage the Court did not instruct the District Court to pay the attorney’s fee claim, but rather remanded the case for a hearing on several unresolved issues. The Court stated that if the trustee had not received notice of the bank’s demand for payment, the claim for attorney’s fees could not be enforced. The Court’s discussion of that issue convinces us that for such a claim to be enforceable there must be an opportunity to comply with the creditor’s demand for payment.

For, if he had been notified, the trustee might have arranged to pay the note on or before the return date of the suit against the [debtor]. The purpose of the Georgia statute is clear. It is to protect the debtor, in spite of default, from any liability for attorney’s fees, unless he fails to pay after the lapse of the ten days from receiving notice of intention to sue and such further time as must intervene between commencement of the suit and the return day. [citations omitted] The Legislature cannot have intended that the creditor should be able to impose the additional liability for attorney’s fees without giving the real debtor the notice and opportunity to pay which the statute contemplated that a debtor should have.

278 U.S. at 158, 49 S.Ct. at 87. (emphasis added). See United States v. Hattaway, 5 Cir., 1974, 488 F.2d 55, 57.

The Supreme Court has considered the question whether, during a pending reorganization and in the face of an injunction, a trustee has sufficient opportunity to comply with a demand for payment, so as to render claims similar to attorney fees enforceable. In Vanston Bondholders Protective Com. v. Green, 329 U.S. 156, 67 S.Ct. 237, 91 L.Ed. 162 (1946) the bankrupt debtor had issued mortgage bonds pursuant to an indenture agreement that provided for interest to be paid on any overdue interest coupons on the bonds. An equity receiver was appointed by the District Court, which concurrently enjoined the debtor and receiver from paying any pre-appointment debts. Thereafter the indenture trustee, acting on behalf of the bondholders, declared the entire principal due, because of the court-ordered default on the interest payments, and began accruing interest on the overdue interest. In disallowing the claim for interest on overdue interest, the Supreme Court stated;

[W]hen the equity receivership intervened, these interrelated obligations were drastically changed. The obligation to make prompt payment of simple interest coupons was suspended. In fact both Inland [the debtor] and the receiver were ordered by the court not to pay the coupons on the dates they were, on their face, supposed to have been paid. The contingency which might have created a present obligation to pay interest on interest— i. e., a free decision by the debtor that it would not or could not pay simple interest promptly — was prohibited from occurring by order of the court.
[LJegal suspension of an obligation to pay is an adequate reason why no added compensation or penalty should be enforced for failure to pay.

329 U.S. at 166-167, 67 S.Ct. at 241-242 (emphasis added).

Like the attorney’s fees in Security Mortgage, the interest on unpaid interest in Vanston was an additional liability claimed because of a default by the debtor on his obligations to the creditor. Enforcement of both claims was undertaken after the filing of the respective petitions. The difference in result in these cases may be attributed to the difference between the straight bankruptcy proceeding in Security Mortgage and the reorganization proceeding in Vanston, with its attendant injunction against payments to creditors. The present case is like Vanston but unlike Security Mortgage. Compare In re Black Ranches, Inc., 8 Cir., 1966, 362 F.2d 8; Northtown Threatre Corporation v. Mickelson, 8 Cir., 1955, 226 F.2d 212; United States Trust Co. of New York v. Zelle, 8 Cir., 1951, 191 F.2d 822; with In re Maryvale Community Hospital, Inc., 9 Cir. 1972, 456 F.2d 410; Ruskin v. Griffiths, 2 Cir., 1959, 269 F.2d 827.

National Acceptance Company v. Zus-mann, 5 Cir., 1967, 379 F.2d 351, also relied on by the bank, is also inapposite. In Zusmann the debtor gave a promissory note to the creditor similar to the note in the present case. When the debtor failed to meet its payments, the creditor sent a ten-day letter demanding payment. Five days later the debtor filed a petition for an arrangement with his creditors under Chapter XI of the Bankruptcy Act. The District Court subsequently disallowed the creditor’s claim for attorney’s fees pursuant to the provision in the note, and we reversed.

The scope of a Chapter XI arrangement is different from that of a Chapter X reorganization. Chapter XI, unlike Chapter X, gives the court no power to alter the rights of secured creditors, such as the bank in the present case. 11 U.S.C. § 616(1); Collier’s Trustees’ and Receivers’ Handbook § 1.003[2]. Therefore the pressing need to postpone dealing with any individual secured creditor until a comprehensive plan of reorganization could be formulated was not present in Zusmann, because the Chapter XI arrangement eventually adopted there could not include secured creditors, being limited in its effect to unsecured creditors.

Moreover, in Zusmann, unlike the present case, no injunction was entered against enforcement of creditors’ claims and there was no automatic stay provided by the Bankruptcy Act in that Chapter XI case. The trustee in Zusmann was not compelled by an order of the court or by the purpose of the proceedings to refuse the creditor’s demand for payment.

The cases relied on by the bank, therefore, do not control the question presented here. The bank’s claim for attorney’s fees, under the circumstances of this case, cannot be enforced in this Chapter X reorganization proceeding.

It should be noted, as the bankruptcy court observed, that the denial of this claim does not prejudice the bank’s right to apply for reasonable compensation for attorney’s fees, costs, and expenses incurred in the bankruptcy proceeding itself, as provided in the Bankruptcy Act. 11 U.S.C. § 643.

Affirmed.

      . Section 148 provides:
      Until otherwise ordered by the judge, an order approving a petition shall operate as a stay of a prior pending bankruptcy, mortgage foreclosure, or equity receivership proceeding, and of any act or other proceeding to enforce a lien against the debtor’s property.

      . Section 116(4) provides:
      Upon approval of a petition, the judge may, in addition to the jurisdiction, powers, and duties in this chapter conferred and imposed upon him and the court—
      (4) In addition to the relief provided by section 29 of this title, enjoin or stay until final decree the commencement or a continuation of a suit against the debtor or its trustee or any act or proceeding to enforce a lien upon the property of the debtor.

      . The District Court’s injunction stated, in relevant part:
      [Ujntil Final Decree or Order of this Court, all creditors and stockholders, all Sheriffs, Marshals and other court officers, and their respective attorneys, servants, agents and employees, and all other persons, firms and corporations be, and they hereby are, jointly and severally, enjoined and stayed from commencing or continuing any action at law or suit or proceeding in equity against debt- or and in any Court, or from executing or issuing or causing the execution or issuance out of any Court of any writ, process, summons, attachment, subpoena or execution, or exercising any powers of sale, with or without judicial process, or other process for the purpose of impounding or taking possession of or interfering with or enforcing a lien upon or foreclosing upon any property owned or in the possession of debtor, or a trustee hereafter appointed, or exercising any powers of sale as to any property heretofore seized or attached, with or without judicial process, and from doing any act or thing whatsoever to interfere with the possession or management by debtor, or a trustee hereafter appointed, of the property and assets of the within estate, or to interfere in any manner during the pendency of this proceeding with the exclusive jurisdiction of this Court over debtor and its property, wherever located; and all persons, firms or corporations owning any lands or buildings occupied by debtor or wherein is contained any property of the within estate be, and they hereby are, jointly and severally stayed, pending the further order of this Court, from removing or interfering with any such property; ....

      . Section 20-506 provides:
      Attorney’s fees in notes, etc., in addition to interest.—
      Obligations to pay attorney’s fees upon any note or other evidence of indebtedness, in addition to the rate of interest specified therein, shall be valid and enforceable, and collectible' as a part of such debt, if such note or other evidence of indebtedness be collected by or through an attorney after maturity, subject to the following provisions:
      (c) The holder of the note or other evidence of indebtedness, or his attorney at law, shall, after maturity of the obligation, notify in writing the maker, indorser or party sought to be held on said obligation that the provisions relative to payment of attorney’s fees in addition to the principal and interest shall be enforced and that such maker, indorser or party sought to be held on said obligation has 10 days from the receipt of such notice to pay the principal and interest without the attorney’s fees. If the maker, indorser or party sought to be held on any such obligation shall pay the principal and interest in full before the expiration of such time, then the obligation to pay the attorney’s fees shall be void and no court shall enforce the agreement.
      (d) Obligations to pay attorney’s fees contained in security deeds and bills of sale to secure debt shall be subject to provisions of this section where applicable. (Acts 1890-1, p. 221; 1900, p. 53; 1946, pp. 761, 766; 1953, pp. 545, 546; 1957, p. 264.)

      . In Strickland v. Williams, 1959, 215 Ga. 175, 109 S.E.2d 761, the Supreme Court of Georgia held invalid a lien for attorney’s fees that a creditor tried to enforce after the filing of a petition for the appointment of a receiver under state law to liquidate the debtor’s assets. The state court had entered an injunction prohibiting creditors from “instituting, filing, or prosecuting any suits, bills, attachments, garnishments or other proceedings of whatever kind against the petitioner or any property or assets of his . .” The creditor subsequently sent substantially the same ten-day letter sent in the present case, which, under Georgia law, is a precondition to the validity of the lien for attorney fees. Ga.Code Ann. § 20-506. The court concluded that, in light of the state court injunction, entered pursuant to the state receivership statute, Section 20-506 could not be interpreted to create a valid lien for attorney’s fees when the preconditions to validity were not satisfied until after the filing of the receivership petition. We must doubt that the Georgia courts would conclude that Section 20-506 creates a valid lien when, as in this case, a similar injunction is entered by a federal court instead of a state court, pursuant to the Bankruptcy Act rather than a state receivership statute. Our resolution of the question whether the attorney’s fee lien is enforceable in this Chapter X proceeding, however, makes it unnecessary for us to inquire further into the validity of the lien under Georgia law.

      . The Court’s injunction issued pursuant to Section 116(4) of the Act, 11 U.S.C. § 516(4), was, as counsel for the bank stated at oral argument, a standard injunction of the sort entered in every Chapter X case. In construing Section 116(4) the Ninth Circuit recently stated
      The enforcement sought to be enjoined may be in the nature of a judicial proceeding or some non-judicial act or proceeding, for the words ‘any act or proceeding’ are all inclusive.
      In re Thomas J. Grosso Investment, Inc., 9 Cir., 1972, 457 F.2d 168, 172 n. 6.

      . The case cited by the bank in support of this proposition is inapposite. In re Utilities Power & Light Corporation, 7 Cir., 1937, 91 F.2d 598, presented the question whether a secured creditor could enforce an acceleration clause in a loan agreement after the filing of a Chapter X proceeding. The reason for permitting acceleration in Chapter X proceedings is to present the trustee with the full amounts owing by the debtor to various secured and unsecured creditors, so that he can intelligently undertake a restructuring of the debtor’s capital. Acceleration does not interfere with the reorganization, because the court still retains its power to modify the secured creditors’ rights, including their right to immediate payment under an acceleration clause. Thus if the court determines that immediate payment of the full amount of a secured creditor’s claim would be inappropriate, the debt can be “decelerated” upon adoption of a plan of reorganization. See Guaranty Trust Co. of New York v. Henwood, 8 Cir. 1936, 86 F.2d 347; In re Plankington Bldg. Co., 7 Cir., 1945, 148 F.2d 119.

      . A variety of rights created by state law are commonly suspended by bankruptcy courts in order to serve the policies of the Act. See, e. g., In re Schokbeton Industries, 5 Cir., 1971, 449 F.2d 321 (upholding injunction against termination of bankrupt licensee’s rights under license agreement during period for curing breach of the agreement); In re Thomas J. Grosso Investment, Inc., 9 Cir., 1972, 457 F.2d 168 (upholding injunction against running of redemption period, ordinarily giving foreclosure purchaser clear title); In re Argyle-Lake Shore Bldg. Corporation, 7 Cir., 1935, 78 F.2d 491 (id.).

      . Act of June 7, 1934, 48 Stat. 911, 912, § 1.

      . It is not clear that Security Mortgage has continuing vitality even in straight bankruptcy cases. Under the new Bankruptcy Rules, effective October 1, 1973, the automatic stay provision formerly found only in Chapters X and XII has now been extended to Chapter XI and straight bankruptcy proceedings as well. Bankruptcy Rule 601; Collier’s Trustees’ and Receivers’ Handbook § 1.002[4].

      . Contractually stipulated attorney’s fees have been awarded, based on enforcement efforts undertaken after the filing of the petition, in several straight bankruptcy proceedings. See In re Ferro Contracting Co., 3 Cir., 1967, 380 F.2d 116; In re American Motor Products Corporation, 2 Cir., 1938, 98 F.2d 774; In re Kashmir Refinishing Co., 2 Cir., 1938, 94 F.2d 652; Tawney v. Clemson, 4 Cir., 1936, 81 F.2d 300. The bank refers us to only two cases, however, in which contractual claims for attorney’s fees were enforced in Chapter X proceedings. Both cases, unlike the present case, involved defaults declared before the filing of the Chapter X petition, and thus are inapposite. Webster Drilling Company v. Walker, 10 Cir., 1961, 286 F.2d 114; Brown v. Security Nat. Bank of Greensboro, 4 Cir., 1952, 200 F.2d 405.

      . The creditor had sent the demand letter to the original debtor, from whom the bankrupt had purchased the land, subject to the creditor’s mortgage, described in the deed securing the original debtor’s note. It was unclear whether the bankrupt’s trustee had also received notice of the creditor’s demand for payment.

      . Counsel for the bank asserted at oral argument, citing Section 428 of the Act, that the same automatic stay that takes effect upon the approval of a Chapter X petition, see 11 U.S.C. § 548, is provided for in Chapter XI and was in effect in Zusmann, rendering it indistinguishable from the present case. Section 428, however, is not part of Chapter XI, but rather Chapter XII (Real Property Arrangements), 11 U.S.C. § 828, and has no application to Chapter XI. If a stay or an injunction had been entered in Zusmann, automatically or otherwise, the creditor’s lien would never have become valid, because the running of the ten days would have been suspended. The relevant state law, Georgia Code Ann. § 20-506, required that the creditor wait ten days after sending his demand letter before instituting legal proceedings. In Zusmann the creditor initiated a foreclosure proceeding three days after giving the debtor notice of the demand for payment.


author: McWILLIAMS, Circuit Judge.

text:
    Peter J. BRENNAN, Secretary of the United States Department of Labor, Petitioner, v. OCCUPATIONAL SAFETY AND HEALTH COMMISSION and Kesler & Sons Construction Company, Respondents.
    No. 74-1518.
    United States Court of Appeals, Tenth Circuit.
    March 28, 1975.

      Carla A. Hills, Asst. Atty. Gen., and Stephen F. Eilperin and Judith S. Feigin, William J. Kilberg, Benjamin W. Mintz, Michael H. Levin, Marc R. Hillson, At-tys., Dept, of Labor, on brief for petitioner.
    D. Richard Smith, Morgan, Scalley, Lunt & Kesler, Salt Lake City, Utah, on brief for respondent Kesler & Sons Const. Co.
    Before SETH, McWILLIAMS and BARRETT, Circuit Judges.
   McWILLIAMS, Circuit Judge.

This case arises under the Occupational Safety and Health Act of 1970 and requires interpretation of certain provisions of that Act. 29 U.S.C. § 651 et seq. The issue is whether the Secretary of Labor can order immediate abatement of a safety hazard and then reinspect in less than fifteen working days after the issuance of the citation calling for immediate abatement. The Occupational Safety and Health Review Commission held, in effect, that in connection with any citation issued by the Secretary there is under the Act a built-in “grace period” of fifteen working days, during which time there can be no reinspection.

The Secretary then filed a petition in this Court to review the order thus entered by the Commission. 29 U.S.C. § 660. Our study of the matter convinces us that the Commission’s order is in error and that the interpretation which the Secretary would give the Act is the proper one.

At the outset it should be mentioned that the interpretation given a statute by the administrative agency charged with carrying out the mandate of the statute should be given great weight. Indeed, the interpretation given a statute by the administrative agency charged with its enforcement should be accepted by the courts, if such interpretation be a reasonable one. And this is true even though there may be another interpretation of the statute which is itself equally reasonable. Brennan v. Southern Contractors Service, 492 F.2d 498 (5th Cir. 1974), and Board of Directors and Officers, Forbes Federal Credit Union v. National Credit Union Administration, 477 F.2d 777 (10th Cir. 1973), cert. denied, 414 U.S. 924, 94 S.Ct. 233, 38 L.Ed.2d 158 (1973). Thus, in the instant case, the interpretation argued for by the Secretary should be accepted by us if it be a reasonable one. And we conclude that the interpretation argued for by the Secretary is indeed a reasonable one and in fact carries out the true intent of Congress. Before examining the facts of this case, let us first look at those sections of the Act which have bearing on the present problem.

29 U.S.C. § 658(a) authorizes the Secretary, after an inspection or investigation, to issue a citation to an employer who the Secretary believes has violated any standard, rule, or order promulgated pursuant to the provisions of the Act. That section of the Act also provides that the citation shall set a reasonable time for the abatement of the violations. § 658(a) reads in its entirety as follows:

“(a) If, upon inspection or investigation, the Secretary or his authorized representative believes that an employer has violated a requirement of section 654 of this title, of any standard, rule or order promulgated pursuant to section 655 of this title, or of any regulations prescribed pursuant to this chapter, he shall with reasonable promptness issue a citation to the employer. Each citation shall be in writing and shall describe with particularity the nature of the violation, including a reference to the provision of the chapter, standard, rule, regulation, or order alleged to have been violated. In addition, the citation shall fix a reasonable time for the abatement of the violation. The Secretary may prescribe procedures for the issuance of a notice in lieu of a citation with respect to de minimis violations which have no direct or immediate relationship to safety or health.” (Emphasis added).

If the Secretary issues such a citation, 29 U.S.C. § 659(a) allows the employer fifteen working days within which to notify the Secretary that he intends to contest the citation, and if such notice be not given, then the citation becomes a nonreviewable final order. § 659(a) reads in its entirety as follows:

“(a) If, after an inspection or investigation the Secretary issues a citation under section 658(a) of this title, he shall, within a reasonable time after the termination of such inspection or investigation, notify the employer by certified mail of the penalty, if any, proposed to be assessed under section 666 of this title and that the employer has fifteen working days within which to notify the Secretary that he wishes to contest the citation or . proposed assessment of penalty. If, within fifteen working days from the receipt of the notice issued by the Secretary the employer fails to notify the Secretary that he intends to contest the citation or proposed assessment of penalty, and no notice is filed by any employee or representative of employees under subsection (c) of this section within such time, the citation and the assessment, as proposed, shall be deemed a final order of the Commission and not subject to review by any court or agency.”

29 U.S.C. § 659(b) provides, in pertinent part, that where the Secretary has reason to believe that an employer has failed to correct a violation within the time limitation fixed in the citation, the Secretary shall notify the employer of such failure and the additional penalty to be assessed. The employer in such circumstance has fifteen working days within which to contest the Secretary’s notification, or the notification and assessment become a final order of the Commission and not subject to review. § 659(b) reads in its entirety as follows:

“(b) If the Secretary has reason to believe that an employer has failed to correct a violation for which a citation has been issued within the period permitted for its correction (which period shall not begin to run until the entry of a final order by the Commission in the ease of any review proceedings under this section initiated by the employer in good faith and not solely for delay or avoidance of penalties), the Secretary shall notify the employer by certified mail of such failure and of the penalty proposed to be assessed under section 666 of this title by reason of such failure, and that the employer has fifteen working days within which to notify the Secretary that he wishes to contest the Secretary’s notification or the proposed assessment of penalty. If, within fifteen working days from the receipt of notification issued by the Secretary, the employer fails to notify the Secretary that he intends to contest the notification or proposed assessment of penalty, the notification and assessment, as proposed, shall be deemed a final order of the Commission and not subject to review by any court or agency.” (Emphasis added).

29 U.S.C. § 662 generally confers jurisdiction upon the United States district courts, upon petition of the Secretary, to restrain any hazardous employment condition of such an emergent nature as to require speedier action than is otherwise permitted by the citation procedure.

The foregoing constitute those sections of the Act which counsel believe have possible bearing on our disposition of this petition for review. Let us now ex-ámine events relating to the present controversy.

Kesler & Sons Construction Company was engaged in sewer construction work near Oakley, Utah. On November 4, 1971, a representative of the Secretary inspected the worksite where employees of Kesler were digging trenches and laying pipes. . As a result of this inspection, the Secretary on November 12, 1971, issued Kesler a citation for noncompliance with certain safety standards. The citation ordered immediate abatement for all violations and assessed penalties totaling $75. Kesler did not contest this citation.

The citation alleged some seven violations of occupational safety standards. The first violation, and perhaps the most serious one, was the failure of Kesler to shore, sheet, brace, slope, or otherwise support the sides of trenches in unstable or soft material. The other violations concerned Kesler’s failure to provide an adequate supply of potable water, to maintain toilet facilities, to post legible traffic signs in construction areas at points of hazard, to conspicuously post telephone numbers of doctors, hospitals and ambulances, to provide proper protective equipment for the employees’ feet, and to post a notice advising employees of the protection and obligations provided by the Act.

On November 30, 1971, a representative of the Secretary reinspected the worksite and found that four of the violations contained in the earlier citation, including the failure to shore the trenches, had not been corrected. In addition, the earlier citation itself had not been posted at the worksite, as required by 29 C.F.R. § 1903.16. On December 3, 1971, the Secretary issued a notification of failure to correct and assessed additional penalties in the sum of $1339.

Kesler contested this notification of failure to correct and the penalty assessment. After hearing, the Administrative Law Judge found there was a failure to correct, but reduced the penalties to $1025. On review, the Commission by a 2-1 vote reversed the Judge and, as indicated, held that “in order to preserve this statutory right to the 15 working-day period, no abatement may be required and no reinspection may be conducted for the purpose of enforcing such abatement during this period.” The Secretary then instituted the present proceeding, naming as respondents the Commission and Kesler & Sons.

Let us now reexamine the facts of the instant case within the framework of those sections of the Act set forth above.

When the Secretary’s representative inspected the Kesler worksite on November 4, 1971, by statute he had to issue a citation, if he be inclined to cite, with “reasonable promptness” after such inspection. There is no contention here that the November 12, 1971, citation was not promptly issued.

The Act further provides that the citation shall fix a “reasonable time” within which the employer shall abate or correct the stated violation or violations. In the instant case the Secretary determined that the violations were of such a nature that there should be “immediate” abatement.

The fifteen working day period within which the Act allows the employer to file a notice of intent to contest expired for Kesler on December 7, 1971. Kesler did not file a notice of intent to contest the November 12 citation or the proposed penalties.

On November 30, 1971, the Secretary’s representative reinspected the Kesler worksite, as provided for in § 659(b), and found that four of the violations set forth in the original citation had not been corrected. Then, on December 3, 1971, the Secretary notified Kesler of his failure to thus correct and of the proposed penalties for such failure. Kesler thereafter notified the Secretary on December 13, 1971, that he desired to contest such notification of failure to correct and the proposed penalties therefor.

In the hearing before the Administrative Law Judge the parties were primarily concerned with whether there had, in fact, been a failure to abate the safety violations, particularly the shoring of the trenches, and with the reasonableness of the proposed additional penalties. The Judge found that there had been a failure to thus correct, but reduced the proposed penalties to $1025.

The Commission in its review of the matter became concerned, apparently on its own motion, with whether there could be any reinspeetion within fifteen working days after the receipt of the citation. As indicated, the Commission, by a 2 — 1 vote, held that in connection with an order to abate there could be no reinspection until the expiration of the fifteen working day period within which the employer could contest the citation. In our view the Act is not subject to such interpretation.

The propriety of the Secretary’s order calling for immediate abatement is not itself challenged in this case. Section 658(a) provides that a citation fix a “reasonable time” for abatement. Whether the time period within which a given violation must be corrected is “reasonable” suggests a degree of flexibility which necessarily depends upon many factors, not the least of which is the degree of danger to the employees thus exposed to the hazard in question. And the danger of trench cave-ins, for example, is not to be taken lightly. See United States v. Dye Construction Company, 510 F.2d 78 (10th Cir. 1975).

Kesler, while not disputing the Secretary’s authority to order immediate abatement, adopts in this court the Commission’s position that no reinspection is allowed within the fifteen working days following receipt of a citation. As a practical matter, if this be the proper interpretation of the Act, such would mean that Kesler would have fifteen working days to correct a condition calling for immediate abatement, even though he did not contest the citation. To us, the fact that an employer, such as Kesler, has fifteen working days to contest a citation does not in anywise mean or imply that an employer also has a fifteen-day grace period to correct a condition required to be immediately abated. The latter in our view does not flow from the former.

Of the several sections of the Act to which our attention has been directed, perhaps § 659(a) is most pertinent. That section begins by declaring that if the Secretary believes that an employer has failed to correct a violation within the period of time allowed, then the Secretary shall notify the employer of such failure to correct and the proposed penalty therefor. There is, then, no express time limitation in the statute concerning the Secretary’s right to reinspect.

Additionally, the language appearing within the parentheses in § 659(b) states that the period of time permitted by the citation for abatement does not begin to run until the entry of a final order by the Commission if review proceedings are in good faith initiated by the employer. This particular language is to us most enlightening. We believe it is clearly implicit therein that if, as here, the employer does not initiate proceedings to review the citation calling for immediate abatement, then the period of time permitted for abatement begins to run from the date of the citation and does not await a final order of the Commission. It should be noted that if the employer does not contest a citation, as is true in the present case, then the citation itself is deemed the final order of the Commission.

It is argued that the Secretary’s interpretation places the employer in an impossible position. We do not believe such to be the case, as is demonstrated by looking at this from Kesler’s standpoint.

When Kesler was served with a citation calling for immediate abatement of the trench shoring violation, for example, he could do one of two things: (1) He could comply with the citation and abate the violation at once; or (2) he could decline to immediately abate and serve the Secretary with a notice of intent to contest the citation. If he had served such a notice to contest, the period of time within which he must abate would under the statute not have begun to run till the Commission filed its final order. Such in our view does not place Kesler, or any other employer, on the horns of any real dilemma.

It is true that in the situation where the period of time permitted for correction of the violation is less than fifteen working days, the employer will not have the entire fifteen-day period within which to decide whether to contest the violation. Such fact, however, cannot bé controlling. For one thing, such would be at odds with that language in § 659(b) which clearly indicates to us that if the employer does not contest a citation, the period of time permitted to correct the violation begins to run from the date of the citation. And any such fifteen-day period of grace would be contrary to the avowed purpose of the Act, which is to insure to every working man and woman safe and healthful working conditions and to head off industrial accidents before they happen. 29 U.S.C. § 651. See also Brennan v. Occupational Safety and Health Review Comm’n, 505 F.2d 869 (10th Cir. 1974), and REA Express, Inc. v. Brennan, 495 F.2d 822 (2d Cir. 1974).

We are not impressed with Kesler’s argument that 29 U.S.C. § 662 has bearing on the present problem. Section 662 provides that under certain circumstances United States district courts may restrain employment conditions or practices which create such an imminent danger of death or serious physical harm that such danger could not be eliminated through the Act’s other enforcement procedures. This particular section, in our view, is designed to meet the situation in which, for example, immediate abatement is ordered, and the employer contests the citation. Then, if the danger be great and imminent, the Secretary may invoke the provisions of § 662 and go to court in an effort to get immediate corrective action. The fact that this route is available to the Secretary does not in our view indicate that it was the intent of Congress that immediate abatement could only be ordered by court action or that an employer who does not contest a citation calling for immediate abatement has a fifteen working day grace period before he must comply.

There is the definite suggestion in the Commission’s order that unless there is some such grace period the Commission will be flooded with “protective” notices of intent to contest. The statute, of course, provides that a notice of intent to contest must be made in good faith, and nor for purposes of delay. In any event, such possibility is not itself grounds for creating a period of grace where none otherwise exists. We, like the Commission, must take the Act as we find it. The Act, considered as a whole, and particularly in light of the language in § 659(b), indicates that an order of immediate abatement means what it says, and that unless and until the employer files a notice of contest, he is expected to comply therewith. If Congress intended to preclude reinspection for failure to correct a violation for a period of fifteen working days after the issuance of the citation, it could have said so. But it did not and, in our view, clearly indicated a contrary intent.

The Commission’s order is set aside and the matter remanded to the Commission for further proceedings consonant with the views herein expressed.


author: TRASK, Circuit Judge: SNEED, Circuit Judge JAMESON, District Judge

text:
    In the Matter of the Owners of "SW 8” Real Estate, by the Owners Management Committee, consisting of Walter L. Peterson, et al., Debtors. OWNERS OF "SW 8” REAL ESTATE, etc., Petitioners-Appellants, v. Thomas L. McQUAID, Trustee of Federal Shopping Way, Trustee-Appellee. WASHINGTON STATE INSURANCE COMMISSIONER, Statutory Rehabili-tator for Federal Old Line Insurance Company, Creditor-Appellant, v. Thomas L. McQUAID, Trustee of Federal Shopping Way, Trustee-Appellee.
    Nos. 72-3001, 72-3002.
    United States Court of Appeals, Ninth Circuit.
    March 14, 1975.

      James R. Irwin, Seattle, Wash, (argued), and Burton W. Lyon, Jr., Tacoma, Wash, (argued), for appellants.
    David Oesting, Seattle, Wash, (argued), for trustee-appellee.
    Before TRASK and SNEED, Circuit Judges, and JAMESON, District Judge.

       Honorable William J. Jameson, Senior District designation. Judge from the District of Montana, sitting by

   OPINION

TRASK, Circuit Judge:

On March 4, 1970, the Debtor-Petitioners (six individuals) filed a petition in the lower court for a real property arrangement under Chapter XII of the Bankruptcy Act. The Referee in Bankruptcy dismissed the petition and the District Court on review approved and adopted the order of the Referee. This appeal is taken by Debtor-Petitioners from the action of the District Court.

Arrangements under Chapter XII of the Bankruptcy Act are available only to persons other than corporations who own real property which is security for a debt. 11 U.S.C. §§ 801 et seq.; 9 Collier, Bankruptcy §§ 1.01, 2.07 (1972 ed.)

Section 422 of the Act, 11 U.S.C. § 822, provides:

“If no bankruptcy proceeding is pending, a debtor may file an original petition under this chapter with the court which would have jurisdiction of a petition for his adjudication.”

Section 406(6) of the Bankruptcy Act, 11 U.S.C. § 806(6), states that:

“For the purposes of this chapter, unless inconsistent with the context—
“(6) ‘debtor’ shall mean a person, other than a corporation as defined in this act, who could become a bankrupt under § 4 of this act, who files a petition under this chapter, and is the legal or equitable owner of real property . . . which is security for any debt, but shall not include a person whose only interest in property proposed to be dealt with by the arrangement is a right to redeem such property from a sale before the filing of such petition; . . . ”

The issue to be determined at the outset is whether the Debtor-Petitioners upon the facts of this case are within the meaning and purpose of Chapter XII. They allege that they are purchasers of undivided interests in real property known as the Southwest Eight Acres (SW 8), a parcel forming part of a shopping center complex in King County, Washington, known as Federal Shopping Way. Federal Shopping Way, Inc. (FSW) was the original owner and developer of the entire property and undertook to sell the southwest eight acres. To that end small interests were sold according to a formula set forth in “Exhibit A” of the Earnest Money Receipt & Agreement given to each purchaser.

“ . . . deeds shall be executed by the seller, setting forth each purchaser’s title interest in proportion to the amount paid by each party according to the following ratio hereinafter referred to as ‘U.I.F.’ or undivided interest formula.
“The undivided interest formula ‘U.I.F.’ shall be based on the aforesaid purchase price of $2,500,000.00. This total shall, in turn, be divided into 100 undivided interests in the real estate hereinafter described. Each such $25,-000.00 undivided interest shall be referred to as a ‘segment’. No segment shall be divided into a unit less than a fractional interest of Vüs of a ‘segment’, or $1,000.00 of purchase price. That such portions of a segment of the title to this real estate may be referred to herein as a ‘fractional unit,’ or of a segment.”

Thus, each purchaser of a $1,000 interest obtained a unit which consisted of an undivided interest equal to V& of a segment or V2500 of the stated purchase price of the “SW 8.” Deeds were given to each purchaser showing the description of the “SW 8” parcels and set forth the undivided interest which the purchaser had obtained. The deeds contained the following statement:

“Subject to agreements running with the land with all other owners of [FSW] undivided interests which include an agreed waived of the right to partition . . ..”

The documentation also provided that the purchaser’s interest could not be further subdivided by the interest holder or be severed or released from the contractual duties owed to other interest holders. Further, the owner was forbidden to sell, encumber, or improve the land except upon reasonable and fair decision of 75 percent of the owners at a conference called for the purpose of considering such action.

The files and records of FSW show that it began selling interests in June 1962, and that a total of 2,576 interests were sold for an aggregate of $2,734,980 to 1,057 different persons. Six hundred and ten purchasers of 1,525 units paid approximately $1,613,325 and received deeds. Three hundred and eighty-one purchasers of 759 units, paid approximately $827,030 but received no deeds. Sixty-six purchasers of 143 units have unpaid, contract balances totaling $59,-685.57. In addition, 149 units were sold but no payments are reflected for such units.

In 1962 the Administrator of Securities of the State of Washington brought suit against FSW alleging that the offer or sale of interests in “SW 8” without registration constituted a violation of the State Securities Act. A temporary injunction was issued but later modified upon condition that certain changes be made in the agreement, one of which was that the number of interest holders necessary to approve a sale, encumbrance, lease or improvement of the land was reduced to a simple majority.

An involuntary petition for reorganization under Chapter X of the Bankruptcy Act was filed against FSW on November 13, 1967. On May 3, 1972, an order was entered adjudicating FSW a bankrupt, and a trustee was appointed.

The Chapter XII petition was filed on March 4, 1970, and a trustee appointed. On May 14, 1970, the Insurance Commissioner filed a motion to dismiss the petition for the reason that the petitioners were not debtors within the meaning of the Chapter and because the arrangement attached to the petition was insufficient. The Insurance Commissioner was the statutory receiver of Federal Old Line Insurance Company (FOL) currently under liquidation. It held what purported to be a real property mortgage on a portion of the “SW 8.”

The FSW Trustee (Trustee) under the Chapter X proceeding contends that the interests which the Debtor-Petitioners acquired from FSW were only intangible contract rights between themselves inter se and FSW, are personal as opposed to real property and that petitioners are therefore not “owners of real property” within the meaning of section 406(6) of the Bankruptcy Act. The Trustee also contends that the deeds are legally insufficient to effect a conveyance of real property; that the restraints on aliena-bility are such as to render them void as against public policy;. and that the other 1,051 co-tenants are indispensable parties under a Chapter XII proceeding.

The Bankruptcy Court concluded that the Debtor was not one as defined by the Act; that the plan of arrangement was insufficient; and that the interests created in “SW 8” are securities in the nature of personal property. Except for the three rather general statements thus made, the Referee did not find any facts specially. He summarized the admitted facts as stated herein and discussed the contentions of the parties in narrative form. Under those contentions the Referee questioned whether one tenant in common could file a petition on behalf of another and cited authority that all must consent. Thereafter he acknowledged that a waiver can be made by the holder of a fractional interest but stated that not all interest holders here had waived and two had objected.

He then questioned whether the Debt- or had the requisite interest in real estate and inquired whether the absence of a right to occupy and enjoy the fractional interest or to deal with it by way of alienation prevented its classification as an interest in realty, concluding that:

“In summary, the undivided interests, intrinsically and in terms of public policy, should not be considered real estate. If anything, they are securities.”

With this mixed finding of fact and of law we cannot agree.

It appears clear that the formal conveyance of a fractional interest was of a size and nature to make it useless in the hands of the grantee for use as an ordinary parcel of real estate. The interest often purchased was of a V2500 interest in 8 acres of improved realty. The right to partition was waived, if in fact a partition in kind ever existed. No right of possession existed because the parcel was then subject to a 40-year lease. The grantee could not encumber, lease or improve his interest except upon an agreement of a large number of co-owners (either a majority or 75 percent). The essence of his purchase was an investment. SEC v. W. J. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946). But the fact that it was an investment does not prevent it from being a purchase of an interest in real property. When the house of cards commenced to fall the combined interests of all of the “SW 8” investors represented a parcel of real property having a considerable value. FOL does have a mortgage under which it has asserted a right to foreclose. Some of the “SW 8” is under leases and producing income. The overall situation appears to be one for which Chapter XII would be appropriate to afford a remedy unless other considerations foreclose its application. We consider the other objections.

It is contended that the deeds are void because they violate a public policy against restraints on alienation or because the estate conveyed is so ambiguous and uncertain that the grant is void. As to the latter we see no such objection upon an examination of the copies of the conveyances in the record. The grantor and grantee are specified; the description of the land is traced by a metes and bounds description of a surveyed parcel; and the particular interest of the grantee is stated. The instruments were in writing signed by the grantor and acknowledged. Revised Code of Washington, §§ 64.04.020, 64.04.030. That the grant is of a fraction which must be computed does not render the deed void when the instrument on its face makes clear how the computation may be made. Nor does the waiver of the right to partition constitute a condition rendering the deed void. See Carter v. Weowna Beach Community Corp., 71 Wash.2d 498, 429 P.2d 201 (1967). If it offends the public policy of the State of Washington, that state need not invalidate the deed. It could simply declare the restriction invalid. Richardson v. Danson, 44 Wash.2d 760, 270 P.2d 802 (1954); Fowler v. Wyman, 169 Wash. 307, 13 P.2d 501 (1932).

In the brief for the Appellee-Trustee of FSW it is asserted generally that the arrangement “does not comply with the mandates of §§ 423 and 461(1) of the Bankruptcy Act, 11 U.S.C. §§ 823, 861.” Appellee then quotes section 823:

“A petition filed under this chapter shall state that a debtor is insolvent or unable to pay his debts as they mature, and shall set forth the terms of the arrangements [sic] proposed by him. 11 U.S.C. § 823 (Emphasis added).”

The emphasis is to the portion of the section requiring the terms of the arrangement to be set forth. No point is made as to the sufficiency of the allegation of insolvency in the petition. The Trustee continues by challenging the sufficiency of the proposal for an arrangement insofar as it affects FOL. This challenge is based on the contention that FOL would not consent to any arrangement and since an arrangement under Chapter XII must be “voluntary,” the petition must be dismissed. It is correct that where there is a sole affected creditor and that creditor rejects a plan, dismissal is proper. Taylor v. Wood, 458 F.2d 15 (9th Cir. 1972); see Sumida v. Yumen, 409 F.2d 654 (9th Cir. 1969). However, so far as the record discloses, the Receiver of FOL has thus far moved to dismiss only upon technical grounds, and not for the reason that he would not be adequately secured.

The Referee makes a similar attack upon the sufficiency of the arrangement, again, in general terms with no express finding.

The petitioners should have an opportunity to promptly present an amended or new proposal for an arrangement which meets the requirements of Chapter XII. We leave the time within which this must be done to the determination of the District Court. If it is not accomplished or is not adequate within the context of the statutes or of the authorities here cited, then the District Court must determine whether the petition should be dismissed or an adjudication in bankruptcy made. See Rader v. Boyd, 267 F.2d 911 (10th Cir. 1959)..

The case is remanded for further proceedings in accordance with the views expressed herein.

SNEED, Circuit Judge

(concurring):

I agree that the interests created in “SW 8” are interests in real property and that the deeds creating such interests are not void under the law of Wash,-ington. I am also prepared to acknowledge that there exists no adequate challenge to the sufficiency of the allegation of insolvency in the petition.

I do wish, however, to register my strong doubt that the Debtor-Petitioners can demonstrate the insolvency of the mortgagors and their inability to pay their debts as they mature by reference only to the mortgaged property. For the purposes of Chapter XII a “debtor” is defined as a “person, other than a corporation as defined in this title, who could become bankrupt under section 22 of this title, ...” 11 U.S.C. § 806(6). The petition required to be filed by a “debtor” must state “that the debtor is insolvent or unable to pay his debts as they mature, . . . ” 11 U.S.C. § 823. The Bankruptcy Act provides that “a. person shall be deemed insolvent within the provisions of this title whenever the aggregate of his property, . , shall not at a fair valuation be sufficient in amount to pay his debts;” 11 U.S.C. § 1(19). These provisions have led a commentator to observe: “If, a Chapter XII petition is filed jointly in behalf of a partnership and of one or more general partners, the petition should allege insolvency or inability to pay debts with respect to each petitioner.” (emphasis added) 9 Collier on Bankruptcy, 848 (14th ed. 1972). This observation and the authorities upon which it is based strongly suggest that as a minimum the Debtor-Petitioners must allege the insolvency or inability to pay debts with respect to each Debtor-Petitioner and that such insolvency shall be determined by reference to the aggregate of the property (not just the mortgaged property) of each such Debtor-Petitioner. It is also clear that it would not be illogical to insist that the insolvency of each co-tenant be alleged if his interest is to be subjected to a Chapter XII arrangement.

These doubts incline me toward believing that Chapter XII is a singularly unsuitable device for adjusting the competing interests which are present under the facts of this case. However, counsel did not address themselves to these problems nor have they been ventilated in proceedings before the Referee or district court. For this reason I join in the decision to reverse and remand.

JAMESON, District Judge

(concurring):

I concur in the decision to reverse and remand.

In addition to the question raised by Judge Sneed, I doubt whether the six petitioners were authorized to represent the other co-owners. As Judge Trask has noted in his opinion, however, the petition contained an allegation that the petitioners were authorized to act for all of the owners by an Owners’ Conference. While the Referee concluded that tenants in common may not file a petition on behalf of co-tenants, he did not expressly address the question of whether the Management Committee had been authorized to act for all the owners, simply noting the contention of the Insurance Commissioner that the Management Committee was not authorized to file the petition. I agree accordingly that this question should be determined on remand.

      . The “SW 8” originally consisted of two parcels, Parcel A and Parcel B. Later a Parcel C was added resulting in a change of the basic price. The addition and change is not significant in a consideration of the legal issues.

      . In re Chakley, 34 F.Supp. 969 (E.D.Tenn. 1940), the principal case cited, was a case where no issue as to delegation of authority was raised.

      . The record discloses that an attempt to circularize all interest holders was discontinued under court order. Of the two objectors one is the mortgagee and thus probably not an “owner.”
      In the face of the express allegation in the verified petition that “The Petitioners were duly chosen pursuant to a real estate instrument which is included in Exhibit 1, attached hereto and by reference made a part hereof and have been duly authorized to act for said owners as therein prescribed by an Owners Conference,” there is no finding whether the allegations are correct or incorrect. Although testimony was taken, the Reporter’s Transcript of that testimony has not been made available in the appellate record. The allegation is not challenged in the briefs, and we make no determination with regard thereto.

      . Such leases were asserted to have been executed by the Owners Management Committee.

      . Neither the District Court, the Referee, nor either of the parties has challenged the allegation of insolvency of petitioners in the petition or discussed the sufficiency of the petition in that regard. In the absence of such and of a Reporter’s Transcript we do not address the question.