Source: https://openjurist.org/244/f2d/394
Timestamp: 2019-04-18 10:38:55+00:00

Document:
W. J. Oven, Jr., Tallahassee, Fla., for appellant.
Gray C. Ramsaur, Guy W. Botts, Jacksonville, Fla., Botts, Mahoney & Whitehead, Jacksonville, Fla., of counsel, for appellee.
Before TUTTLE and BROWN, Circuit Judges, and SIMPSON, District Judge.
This is an appeal from a summary judgment enjoining appellant from prosecuting a suit in the state courts of Florida against appellee's transferees of certain property purchased by the appellee at a bankruptcy sale in and approved by the district court, and forbidding appellant from initiating any other suits for the recovery of the property or for damages for its taking. The principal issue is whether such an injunction is prohibited under the circumstances of this case by section 2283 of the Judicial Code, 28 U.S.C.A. § 2283.
On the same day the Referee modified his order of sale of May 20th to provide that the property sold should be free of liens and unencumbered. On the following day the trustee sold the entire plant, as advertised, to the appellee for $49,100, on the condition that appellee be permitted to offset against the price so much as necessary of the approximately $70,000 mortgage indebtedness owed to it by the bankrupt; the district court approved the sale on these terms on September 30th. On November 5th the trustee conveyed the plant to the appellee by a Deed and Bill of Sale which expressly covered the blow pipe system.
'* * * I * * * am, by this letter, advising you that we forthwith surrender the property in question subject to the retention title agreement in favor of your client, Jacksonville Blow Pipe Company, the same being located on the premises of Parker Manufacturing Company, Inc.
On March 15th appellee sold the entire plant, with warranty of title, to H. Pickett, who thereafter conveyed parts to the Cash Lumber Company and to others. On September 25th appellee offered to pay appellant the amount of its claim and on April 7, 1955, appellee's check for $564.92 was tendered to appellant by the trustee. On June 26th the Referee entered an order approving the accounts and discharging the trustee; no appeal was taken from this order.
The principal issue is created by appellant's contention that because of the provisions of 28 U.S.C.A. § 2283 the district court was without jurisdiction to enter such an injunction. Reliance is placed principally on Sargent v. Helton, 115 U.S. 348, 6 S.Ct. 78, 29 L.Ed. 412, followed in Piedmont Coal Co. v. Hustead, 3 Cir., 294 F. 247, 32 A.L.R. 556, certiorari denied, 264 U.S. 582, 44 S.Ct. 331, 68 L.Ed. 860, and on Toucey v. New York Life Insurance Co., 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100, and Amalgamated Clothing Workers v. Richman Brothers Co., 348 U.S. 511, 75 S.Ct. 452, 99 L.Ed. 600. It is thus necessary for us to examine this somewhat troubled jurisdictional area in which the effect of several crucial and divided Supreme Court decisions and of the 1948 revision of the judicial Code have as of yet been insufficiently explored.
Though the federal courts have ever since 1793 been forbidden by the various Judiciary Acts and Codes to enjoin the proceedings of any state court,4 over the years a number of judicial exceptions to the rigid application of the prohibition had developed. In Julian v. Central Trust Company, 193 U.S. 93, 24 S.Ct. 399, 48 L.Ed. 629, the Supreme Court held that in spite of R.S. § 720 a federal court that had approved a foreclosure sale of mortgaged property free of all except specified lines could, at the instance of the purchaser, protect its own continuing jurisdiction over the property by enjoining the prosecution of an action in the state courts which sought to enforce a lien against the property created by a judgment in the state court against the former owner based on an accident that had occurred after the foreclosure sale. In Riverdale Cotton Mills v. Alabama & Georgia Manufacturing Co., 198 U.S. 188, 25 S.Ct. 629, 49 L.Ed. 1008, the Court held that a federal court that had after much litigation settled the titile to certain property in a foreclosure action could enjoin a state suit in which the defeated parties sought to attack the title approved by the federal court on the ground that that court never had had proper diversity jurisdiction; Julian and many other cases were cited for the proposition that an equity court had power to protect its jurisdiction and to effectuate its decrees by issuing such an injunction. Cf. Also Lang v. Choctaw, Oklahoma & Gulf R.R., 8 Cir., 160 F. 355, and Bethke v. Grayburg Oil Co., 5 Cir., 89 F.2d 536, certiorari denied, 302 U.S. 730, 58 S.Ct. 54, 82 L.Ed. 564, in which this Court held that even after the termination of a receivership a federal court had jurisdiction to issue an injunction in an ancillary action against an in personam suit in a state court which sought to enforce a debt that had been settled and the lien for which had been discharged in the earlier proceeding.
'To render effectual its prior decrees and to protect the title of one who purchased under them, it (a federal court) may notwithstanding 265 restrain state court litigation which would have the effect of defeating or impairing its jurisdiction.' 136 F.2d at page 682.
The Supreme Court denied certiorari, sub nom Salomon v. City of New York, 320 U.S. 756, 64 S.Ct. 65, 88 L.Ed. 450, and 320 U.S. 794, 64 S.Ct. 263, 88 L.Ed. 479.
'The exceptions specifically include the words 'to protect or effectuate its judgments,' for lack of which the Supreme Court held that the Federal courts are without power to enjoin relitigation of cases and controversies fully adjudicated by such courts. (See Toucey v. New York Life Insurance Co., 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100. A vigorous dissenting opinion (62 S.Ct. 148) notes that at the time of the 1911 revision of the Judicial Code, the power of the courts of the United States to protect their judgments was unquestioned and that the revisers of that code noted no change and Congress intended no change).
Relying on the revised wording as explained in the 'Note,' the Tenth Circuit in Jackson v. Carter Oil Co., 179 F.2d 524, certiorari denied 340 U.S. 812, 71 S.Ct. 39, 95 L.Ed. 597, held that a federal court could enjoin the prosecution of a state suit that would challenge an adjudication of title that had been made among the parties or their privies in an earlier action. See also Berman v. Denver Tramway Corp., 10 Cir., 197 F.2d 946.
'We need not re-examine the series of decisions, prior to the enactment of Title 28 of the United States Code in 1948, which appeared to recognize implied exceptions to the historic prohibition against federal interference with state judicial proceedings. See Toucey v. New York Life Ins. Co., 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100. By that enactment, Congress made clear beyond cavil that the prohibition is not to be whittled away by judicial improvisation. * * * The 1948 enactment revised as well as codified. The old section was thus embodied in the new § 2283: * * *.' 348 U.S. at page 514, 75 S.Ct. at page 454.
On the basis of these comments in the Richman Bros. opinion appellant argues that the only exceptions in § 2283 are the three categories specifically set forth therein and that it is thus no longer permissible to import any of the three court made exceptions that had been identified in the Toucey case, except insofar as the 'relitigation' exception is now covered in the final phrase of the statute; therefore the 'in rem' exception approved by both the opinion and the dissent in the Toucey case would be eliminated. Cf. National Labor Relations Board v. Swift & Company, 8 Cir., 233 F.2d 226; Collins v. Laclede Gas Company, 8 Cir., 237 F.2d 633.
We are unable to agree with the appellant's understanding of § 2283 based on the above decision. In view of the general approval of the in rem exception in the Toucey case, supported there by persuasive arguments and by many decisions, and in the absence of any indication that Congress wished to modify it, and in view of the Reviser's Note that: '* * * the revised section restores the basic law as generally understood and interpreted prior to the Toucey decision' we cannot see how it can be argued that the exception is now no longer viable; applied to the 'in rem' exception the broad statements in the Richman Bros. case would at most be dicta.
Appellant also relies on the old case of Sargent v. Helton, supra, in which it was held that in view of R.S. § 720 a purchaser at a bunkruptcy sale could not be protected by enjoining a state court proceeding against the purchased property, which proceeding had been commenced by attaching the property before the bankruptcy was initiated but which was only completed after the federal court had sold the property, where no motion was made to stay the state action during the bankruptcy proceeding. Appellant cites only one relevant case which followed Sargent, Piedmont Coal Co. v. Hustead, supra, in which any purported reliance on the earlier case was dicta since it was held that there the purchaser did not take free of liens created by an earlier state court proceeding. In view of the later Julian, Riverdale, Bethke, and American Brake Shoe cases, none of which refer to Sargent v. Helton, and in view of the distinction also applicable here pointed out in Stewart v. Wisconsin Central Ry., C.C.N.D.Ill., 117 F. 782, that in the Sargent case the state proceeding had been commneced and the attachment made before the federal action had even been initiated, we feel that we are not bound by that decision.
On the substantive merits appellant's claim is easily disposed of. Principally it is based on the following points; (1) that the trustee was bound by the Referee's order either to return the property or to pay the claim, and by making arrangements for a sale that would yield no money he had indicated his election to return the property; (2) that the trustee had explicitly abandoned the property to the appellant by his letter of December 2, 1953; (3) that appellee had waived its claim to the system by the statements in a certain brief they had filed in the proceeding, by permitting the posting of a sign on the property indicating appellant's ownership, and by offering to pay the claim even though ostensibly they had purchased the property free of all liens. None of these contentions has any merit. By his advertisement, his acceptance of appellee's offer to purchase the entire plant, and by the court approved Bill of Sale the trustee had indicated clearly that he had elected not to return the system to appellant; if he failed to make any provision to pay appellant as required by the Referee's order an action could have been initiated against the trustee or his boud-- but appellant did not even appeal from the order settling the trustee's accounts and discharging him. The letter of December 2nd was ineffective to pass title to the system for the appellee had already received its Bill of Sale, and thus trustee's act in relinquishing 'all rights and claims that I may have in my capacity as Trustee' was entirely nugatory. None of appellee's acts, all of which were considered by the district court, amounted to a conveyance of its undoubted property right in the system. Finally it should be noted that there is no equity in appellant's position, for not being satisfied with receiving the entire amount of its claim with interest from a no-asset bankruptcy proceeding it now wishes to assert the forfeiture to it of property worth many times the amount of its claim and damages in excess of the original value of their contract.
With all deference, I dissent with respect to the jurisdictional question involved in this case, that is, the interpretation placed by the majority upon 28 U.S.C.A. Sec. 2283. As I read the decision, it is authority for federal courts to assume jurisdiction of all litigation affecting any property that has ever been sold in a bankruptcy proceeding, long after the close of such proceedings. The welcome mat is thus spread, requiring the district courts to entertain much vexatious litigation that should go elsewhere.
The mere confirmation of a trustee's sale of assets (a caveat emptor sale) is in no sense a judicial determination respecting the title conveyed, or the property covered.1 Here by state court replevin action against a subsequent purchaser claiming under the bankruptcy sale purchaser, the right of the trustee to sell certain property was questioned, and the title to the property was sought to be litigated for the first time. In the absence of clear legislative authority to interfere by injunctive decree with such state court proceedings, this court should not approve such interference. No reason exists for bankruptcy proceedings to be so sacrosanct. I am not convinced that the Congress, by its enactment of the last clause of Sec. 2283, has granted the power to hold them so. I would reverse, with directions to dismiss the complaint.
'* * * nor shall a writ of injunction be granted to stay proceedings in any court of a state * * *.' 1 Stat. 335.
'The writ of injunction shall not be granted by any court of the United States to stay proceedings in any court of a State, except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy.' R.S. § 720, recordified as § 265 of the Judicial Code of 1911, 28 U.S.C. § 379 (1940 ed.), 36 Stat. 1162.

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