Source: http://supreme.nolo.com/us/234/712/case.html
Timestamp: 2019-08-24 05:32:11
Document Index: 345135269

Matched Legal Cases: ['§ 265', '§ 720', '§ 720', '§ 265', '§ 24', '§ 720']

HULL V. BURR, 234 U. S. 712 - Volume 234 - 1914 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 234 > HULL V. BURR, 234 U. S. 712 (1914) > Full Text
The facts, which involve the jurisdiction of this Court of appeals from judgments of the circuit court of appeals and also the construction and application of § 265, Judicial Code (§ 720, Rev.Stat.), are stated in the opinion.
The amended bill, besides showing diversity of citizenship, avers in substance as follows: that, prior to the transactions in question, Stewart and Meminger were the owners in fee simple of a tract of land in Polk County, Florida, containing 440 acres, together with certain buildings and personal property situate upon it; that, on May 22, 1905, in consummation of a prior contract, they conveyed all their right, title, and interest in the property to Hull by deed duly recorded, which vested in him a good legal title in fee simple to the real estate, with full title to the personal property and the right to possession as against all persons, "and his recorded paper title to all the said properties was perfect;" that, before the delivery of the deed by Stewart and Meminger to Hull, the Port Tampa
Page 234 U. S. 714
Company claimed to own some equitable interest in the property, under a contract between it and Stewart and Meminger, which interest Hull purchased for a full consideration, and, before the delivery of said deed to Hull, the Port Tampa Company adopted and placed upon its records a resolution reciting its agreement to sell the property to Hull and authorizing and directing Stewart and Meminger to make a deed to him; that soon after the delivery of the deed Hull took possession; that, on June 7, 1907, he executed and delivered to the Prairie Company a deed of conveyance of all his right, title, and interest in said properties for the consideration of about $37,000, which deed was shortly afterwards recorded, and the Prairie Company took actual and peaceable possession of the property, and has continued to hold it until the present time, having made valuable improvements upon it; that, afterwards, and prior to March 26, 1908, the Prairie Company executed and delivered to the Trust Company a deed of trust conveying its right, title, and interest in said properties, together with other properties, to secure the payment of bonds amounting to about $1,800,000, and the deed of trust was duly recorded; that it came to the knowledge of Hull that certain creditors of the Port Tampa Company had asserted that the company owned some interest in said properties, and on the 28th of November, 1905, he commenced an action of ejectment against that company in the United States Circuit Court for the Southern District of Florida, being the district in which the property was situate; that the company was served with process therein on December 6, 1905, and such further proceedings were had that, on March 13, 1906, upon the verdict of a jury, a judgment was rendered adjudging that Hull was entitled to recover from the Port Tampa Company the fee simple title and right of possession of the lands in question. The bill sets up that, on November 8, 1905, a petition in bankruptcy
Page 234 U. S. 715
was filed against the Port Tampa Company "in this court of bankruptcy" (the District Court of the United States for the District of Massachusetts); that a subpoena was issued thereon returnable on the twentieth day of the same month, and returned served, and that, on the return day, an appearance was entered for the company by one J. H. Robinson. Copies of the creditor's petition, the subpoena, and the appearance are appended to the bill as an exhibit. The bill alleges that defendants assert that, by virtue of a decree in bankruptcy made in said district court on November 27, 1905, adjudging the Port Tampa Company bankrupt, they are the owners of an equitable interest or estate in the said lands and other properties, and that the defendant Burr was, on December 27, 1905, appointed sole trustee in bankruptcy of the company; that he resigned as such trustee on March 12, 1909, and on the same day his resignation was accepted, and Burr, Simpson, and Edwards were appointed trustees in his place, and that defendants claim that, by the adjudication in bankruptcy and their appointment, the title to an interest or estate in said lands became vested in them as such trustees; that, on or about March 26, 1908, and before he resigned as trustee, Burr brought a suit by bill in equity in the Circuit Court in and for Polk County, Florida, against complainants, to establish such interest or estate, but there has been no trial of this suit on the merits, nor had the same been brought to final issues of fact and law before Burr's resignation; that, on January 9, 1912, the defendants filed in said state court a supplemental bill of complaint wherein they averred that said suit was brought by Burr as trustee in bankruptcy, and that Burr resigned as such trustee on March 12, 1909, and prayed that they might be substituted as complainants in his place; that the present complainants filed an answer to the said supplemental bill, but that the issues have not been tried, and no decree has been rendered making
Page 234 U. S. 716
the defendants as trustees complainants in said suit. The present bill then proceeds to attack the proceedings and adjudication in bankruptcy, and the title of the defendants as trustees, as fraudulent and void upon various grounds, which may be summarized as follows: that the Port Tampa Company's principal place of business was not in Massachusetts, as alleged in the petition, and that it had no business except in Florida; that it was not insolvent, and did not commit the act of bankruptcy alleged, or any act of bankruptcy; that the petitioning creditors were directors of the company, and knew the company was solvent and had committed no act of bankruptcy; that the jurisdictional facts were falsely and fraudulently averred, being fabricated for the purpose of pretending to state a cause within the jurisdiction of the court; that the petitioning creditors controlled both sides of the litigation through their ownership of a majority of the company's stock; that Robinson, who entered the appearance in behalf of the Port Tampa Company, was not in fact authorized to appear for or represent the company, and that the petition was fraudulently made to appear as an involuntary petition by creditors, whereas in truth and in legal effect it was a voluntary petition on the part of the company and its officers and directors. It is also alleged that the appointment of defendants as trustees in the place of Burr on March 12, 1909, was invalid, because no judge or referee appointed them, their claim being that in fact they were appointed trustees at a meeting of creditors, whereas complainants allege that the pretended call by the referee for the meeting of creditors was issued at a time when there was no vacancy in the office of trustee; that ten days' notice of the meeting was not given by mail to all the creditors, as required by law; that the only creditor who attended the meeting was one Wills, a director of the company, and that there were ten other creditors who had proven claims; that Wills did
Page 234 U. S. 717
not own a bona fide provable claim to the amount of one-half of the claims that had been proven, and that the appointment of defendants as trustees was made by Wills alone. Complainants insist that there was no power or jurisdiction in any creditor or creditors to appoint defendants as trustees on March 12, 1909, because at that time there was no vacancy in the office of trustee, since Burr had not then resigned and his resignation had not been accepted by the court. The bill further avers that in their answer to the supplemental bill in the equity suit in the Circuit Court of Polk County, Florida, the present complainants set up the defense of
"have and obtain that speedy, adequate, and appropriate relief that this court is competent to render upon this original bill of complaint, and your orators fear that the Florida courts will decline to adjudicate as to the character
Page 234 U. S. 718
and title of the defendants as trustees and their competency to attack your orators' title to said properties, as herein set forth, upon any answer to the said bills in the said state court."
The district court, in sustaining the demurrer, held that, since upon the face of the bankruptcy proceedings there was no want of jurisdiction over the parties or the subject matter, and the decree was not void in form, it could not be collaterally attacked, and could be assailed only by a direct proceeding in a competent court, citing New Lamp Chimney Co. v. Ansonia Brass & Copper Co., 91 U. S. 656, 91 U. S. 662; Graham v. Boston, Hartford & Erie R. Co., 118 U. S. 161, 118 U. S. 178. Treating the present suit as a direct attack,
Page 234 U. S. 719
the court held first that no right or interest of complainants appeared to be so prejudiced by the adjudication in bankruptcy as to entitle them to equitable relief against it; that the adjudication concerned only the bankrupt and its creditors, since it made no difference to complainants whether the claim to the Florida properties was asserted by the bankrupt itself or by its trustees; that the allegation that a final decree in the Florida suit would not bar an action brought by the company itself was a mere conclusion of law, not admitted by the demurrer, and an unsound conclusion in view of the facts alleged; that, the adjudication not having been questioned by the bankrupt or its creditors, they were bound by it, and by virtue of it the trustees were in the bankrupt's place so far as concerned any claim that it could assert to the Florida properties. And, secondly, that there was a defect of necessary parties because the only defendants named in the bill were the bankruptcy trustees, respecting whom it was not alleged that they were parties to the bankruptcy proceedings, nor that they participated in the fraud whereby the adjudication was alleged to have been procured.
The circuit court of appeals, while agreeing with this reasoning, placed its decision upon the ground that complainants were invoking not the powers of the district court in bankruptcy, but its general powers as a court in equity; that it also appeared that the proceedings in Florida were instituted by a bill in equity with the parties reversed; that the Florida court was a chancery court and a court of superior jurisdiction in equity, and for present purposes of equal dignity and authority with the District Court of the United States for the District of Massachusetts; that the bill in substance merely invoked the general equitable jurisdiction of the district court in order to restrain proceedings in a state court proceeding in equity in a prior suit between the same parties, and that this ran
Page 234 U. S. 720
counter to § 720, Rev.Stat. (§ 265, Judicial Code, 36 Stat. 1162, c. 231), as well as to the general principle that the authority of the court first acquiring jurisdiction, the parties being the same, must prevail, citing Marshall v. Holmes, 141 U. S. 589, 141 U. S. 596, and Central National Bank v. Stevens, 169 U. S. 432, 169 U. S. 462.
We have not considered whether the action could be regarded as ancillary to the proceedings in bankruptcy, and for that reason maintainable in the district court as a suit arising under the laws of the United States, See Freeman v. Howe, 24 How. 450, 65 U. S. 460; Minnesota Co. v. Milwaukee & St. Paul Co., 2 Wall. 609, 69 U. S. 633; Buck v. Colbath, 3 Wall. 334,
Page 234 U. S. 721
70 U. S. 345; Christmas v. Russell, 14 Wall. 69, 81 U. S. 81; Krippendorf v. Hyde, 110 U. S. 276, 110 U. S. 281; Lammon v. Feusier, 111 U. S. 17, 111 U. S. 19; Covell v. Heyman, 111 U. S. 176, 111 U. S. 179-180; Dewey v. West Fairmont Gas Coal Co., 123 U. S. 329, 123 U. S. 333; Gumbel v. Pitkin, 124 U. S. 131, 124 U. S. 144; Morgans' Co. v. Texas Central Railway, 137 U. S. 171, 137 U. S. 201; Byers v. McAuley, 149 U. S. 608, 149 U. S. 615; Root v. Woolworth, 150 U. S. 401, 150 U. S. 413; Moran v. Sturges, 154 U. S. 256, 154 U. S. 274; White v. Ewing, 159 U. S. 36, 159 U. S. 39; Carey v. Houston & Texas Ry., 161 U. S. 115, 161 U. S. 130; In re Johnson, 167 U. S. 120, 167 U. S. 125; Pope v. Louisville &c. Ry., 173 U. S. 573, 173 U. S. 577; Wabash Railroad v. Adelbert College, 208 U. S. 38, 208 U. S. 54, because complainants have not planted themselves upon that ground.
Complainants are not parties to the proceeding in bankruptcy, and are setting up rights in opposition to the adjudication and the appointment of trustees therein. They seek to have the trustees restrained from prosecuting the equity suit against them in the state court of Florida, and to that end undertake to show (a) that the bankruptcy proceedings were void for want of jurisdiction; (b) that the entire proceedings were a fraud upon the bankrupt act, and (c) that, even if the proceedings were valid, the appointment of the trustees was void. This is the theory of the bill of complaint, and it is by this that the right of ultimate appeal to this Court is to be tested, rather than by the grounds upon which the district court and the circuit court of appeals reached conclusions adverse to the relief prayed. Were the views adopted by those courts found to be untenable, it would be necessary to pass upon the attack made by complainants upon the title of the trustees in bankruptcy, and to do this would require us to determine the construction and effect of those provisions of the Bankruptcy Act that bear upon the matters of fact averred as the basis of the attack. We deem, therefore, that the suit is one arising under the laws of the United States, within the meaning of
Page 234 U. S. 722
§ 24, Judicial Code, and the motion to dismiss will be denied.
"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. "
Page 234 U. S. 723
The contention that the present case falls within this exception to the general application of § 720, because the bill is really filed in aid of the judgment of a federal court -- that is to say, the judgment in favor of Hull in the ejectment suit in the Circuit Court of the United States for
Page 234 U. S. 724
the Southern District of Florida -- will not bear analysis. The ejectment suit was commenced after the adjudication of bankruptcy, and the bill does not aver that the judgment cut off the equitable rights of the Port Tampa Company, but, on the contrary, declares that, if that company had any title to the property, legal or equitable, at the time of the adjudication of bankruptcy, such title still remains in the company. It is not averred that the claim of equitable right on the part of the company is inconsistent with the judgment, or should be subordinated to it. The present trustees, or either of them, were not made parties to the ejectment suit, nor is the company made a party to the present action. And, upon the whole, it seems to us that by no interpretation or construction can the present bill be deemed to have been filed in aid of the judgment in ejectment or be sustained upon that theory.
To the suggestion that the term "any court," in the bill of complaint, may include other federal courts, it is
Page 234 U. S. 725
sufficient to say that the bill is devoid of any showing that defendants are asserting claims against complainants' title in any court other than the Florida state court. Hence, there is no occasion to invoke the general rule that the court first obtaining jurisdiction of a controversy should be permitted to proceed without interference. Peck v. Jenness, 7 How. 612, 48 U. S. 624; Central Nat. Bank v. Stevens, 169 U. S. 432, 169 U. S. 459; Bigelow v. Old Dominion Copper Co., 74 N.J.Eq. 457, 473 et seq.
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