RESPONDENT: United States
LOCATION: Seneca County Court
DOCKET NO.: 77-1410
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Fourth Circuit
CITATION: 440 US 48 (1979)
ARGUED: Nov 27, 1978
DECIDED: Feb 21, 1979
Allan A. Ryan, Jr. -
Allan A. Ryan, Jr. - for respondent the United States
J. Steven Brackett - for petitioner
Joe N. Cagle - for respondents, Cagle et al.
Facts of the case
Media for Butner v. United StatesAudio Transcription for Oral Argument - November 27, 1978 in Butner v. United States
Audio Transcription for Opinion Announcement - February 21, 1979 in Butner v. United States
Warren E. Burger:
The judgment and opinion of the Court in Number 1410, Buttner against the United States will be announced by Mr. Justice Stevens.
John Paul Stevens:
The petitioner in this case held a mortgage in North Carolina real estate owned by a corporation that became bankrupt.
Rent was collected after the bankruptcy and before the property was sold.
Petitioner claims that he is entitled to that rent whereas the trustee and bankruptcy claims it should be used to pay general creditors.
In this situation, some state courts hold that the rent is payable to the holder of the mortgage, and others hold that it should -- it should be used to pay general creditors.
There is also a conflict among federal courts on this question.
Some hold that they will apply this same rule that the state court would apply in the State where the property is located.
Others hold as a matter of federal law that the mortgagee always wins regardless of what the state law may be.
We granted certiorari not because the outcome of this particular case is a matter of national importance, but rather because it presents the more basic and important question of how federal bankruptcy courts should decide questions of this kind.
Should they apply a federal rule that is uniform throughout the United States or should they apply -- and if they should apply a federal rule, what should the rule be or should they apply the law of the State where the property is located?
For two principle reasons, the Court has unanimously decided that state law should be followed.
First, the Congress of the United States has not enacted any statute governing this question and therefore, there is no federal rule that can be easily applied.
Second, it is primarily the responsibility of the state governments rather than the federal governments to fashion rules of property law.
And therefore, even though this case arises out of a federal bankruptcy proceeding, we hold that the law of North Carolina should be applied for -- essentially, these reasons which are stated in more detail in the opinion filed with the clerk yesterday, the judgment of the Court of Appeals for the Fourth Circuit is affirmed.
Warren E. Burger:
Thank you, Mr. Justice Stevens.