Opinion ID: 433077
Heading Depth: 1
Heading Rank: 4

Heading: jurisdiction of the bankruptcy court.

Text: 23 We do not agree with the district court that the bankruptcy court had jurisdiction under the Anti-Injunction Act, 28 U.S.C. Sec. 2283. 5 The Anti-Injunction Act is not a jurisdictional statute, but goes only to the granting of a particular form of equitable relief. Smith v. Apple, 264 U.S. 274, 44 S.Ct. 311, 68 L.Ed. 678 (1924); Stewart v. Dunn, 363 F.2d 591 (5th Cir.1966). There are, however, three other possible jurisdictional bases under which the bankruptcy court could have entertained this motion and issued its injunction. Because we find that none of these is applicable to the case before us, we hold that the bankruptcy court was without jurisdiction to issue the injunction against the Fosters and Bradshaws. 24 The first jurisdictional authority under which the bankruptcy court's action might properly be cognizable is section 2(a)(8) of the Bankruptcy Act, 11 U.S.C. Sec. 11(a)(8) (1976), and Bankruptcy Rule 515 enacted thereunder. Bankruptcy Rule 515 provides that [a] case may be reopened on application by the bankrupt or other person to administer assets, accord relief to the bankrupt, or for other good cause. Although neither party, in its briefs to this court, addressed (or even cited) the provision of the Bankruptcy Act or the rule applicable to the reopening of estates, Mooney-New Jersey, when asked at oral argument, claimed that the application to reopen the estate was based upon the third basis, good cause. The only cause, good or otherwise, argued by Mooney-New Jersey was that the bankruptcy court was effectuating and protecting its prior judgment. We do not decide here whether effectuating and protecting a prior judgment can serve as good cause, justifying the reopening of an estate. However, assuming arguendo that it may, we do not find that standard met here. Because, as we show below, the bankruptcy court's prior judgment could not have encompassed the Fosters' and Bradshaws' claims, the bankruptcy court could not effectuate or protect that judgment by granting Mooney-New Jersey the relief it requested. Thus, we find that the estate was improperly reopened. 25 The second possible jurisdictional basis is the bankruptcy court's retention of jurisdiction in its order of sale. Mooney-New Jersey argues that the bankruptcy court had continuing jurisdiction to deal with claims such as the Fosters' and Bradshaws', relying on Julian v. Central Trust Co., 193 U.S. 93, 24 S.Ct. 399, 48 L.Ed. 629 (1904). In Julian, the district court ordered a foreclosure sale free and clear of the assets of the Western North Carolina Railroad Company (Western) to the Southern Railway Company (Southern) because Western was in default of a second mortgage to Central Trust Company of New York (Central Trust). Central Trust also held the first mortgage which was not in default. Three years after completion of the sale, Mrs. W.A. James brought suit against Western for the wrongful death of her husband. Southern, the employer of James' husband, was not made a party to the suit. 26 After a jury returned a verdict for James and assessed damages, the trial court rendered judgment in favor of Western. However, on appeal to the North Carolina Supreme Court, the judgment was reversed and remanded to the trial court, with instructions to enter a judgment for the damages assessed in favor of James. The state supreme court held that the prior sale to Southern was ineffectual under North Carolina law; that Western was still an existing corporation liable to suit in state court; and that the judgment in favor of James against Western constituted a lien upon the property of Western that was superior to the first or second mortgages mentioned in the foreclosure suit. James then attempted to execute her judgment by attaching the property of Western. The sheriff levied the attachment upon the property and advertised the same for sale. Southern and Central then sought an injunction in federal district court against the sale of the property. The district court granted the injunction and the Fourth Circuit affirmed. James appealed to the United States Supreme Court, contesting the district court's right to issue the injunction. The Supreme Court found that the district court had, in its order of sale, specifically retained jurisdiction to determine what liens or claims should be charged upon the title conveyed by the court .... 193 U.S. at 112, 24 S.Ct. at 407. Thus, the Court held that, [t]he ... court, in protecting the purchaser under such circumstances, was acting in pursuance of the jurisdiction acquired when the foreclosure proceedings were begun .... We think ... that the [district] court, by the order made, retained jurisdiction of the case to settle all claims against the property .... 193 U.S. at 112-13, 24 S.Ct. at 407. Mooney-New Jersey asserts that, because the purchase offer--the terms of which are incorporated in the bankruptcy court's order of sale--contained a clause retaining jurisdiction, the bankruptcy court was exercising its continuing jurisdiction over the Mooney-Texas assets. 27 Julian simply does not support Mooney-New Jersey's argument. The Court in Julian based its determination that the district court had retained jurisdiction on a clause which provided that the district court retained jurisdiction to determine what liens or claims should be charged upon the title conveyed by the Court .... The clause in the purchase offer upon which Mooney-New Jersey bases its argument declares that the bankruptcy court shall retain jurisdiction and adjudicate the validity and amount of every lien and secured claim asserted in the bankruptcy proceeding .... The purchase offer clause is not nearly so broad a retention of jurisdiction as in Julian. This retained jurisdiction could not extend to the claims of the Fosters and Bradshaws, because those claims were not liens or secured claims, and were not asserted in the bankruptcy proceeding. Nor, indeed, could they have been in view of the fact that the accident that gave rise to the claims had not yet occurred. Thus, we find that the bankruptcy court did not retain jurisdiction over the Fosters' and Bradshaws' claims. 28 The third possible basis for the bankruptcy court's jurisdiction is the ancillary proceeding doctrine of Local Loan Co. v. Hunt, 292 U.S. 234, 54 S.Ct. 695, 78 L.Ed. 1230 (1934). Mooney-New Jersey argues that the bankruptcy court is authorized to issue the injunction against the Fosters and Bradshaws by the third exception to the Anti-Injunction Act--the in order to protect or effectuate its judgment exception. While, as we have pointed out above, the Anti-Injunction Act is not a grant of jurisdiction, no independent basis of jurisdiction is required for a federal court to entertain an application to enjoin relitigation in state court. The jurisdiction that the federal court had when it entered its original judgment is enough to support its issuance of an injunction. See 17 C. Wright & A. Miller, Federal Practice and Procedure Sec. 4276, at 345 (1978). As the Supreme Court said in Local Loan Co. v. Hunt, supra: 29 That a federal court of equity has jurisdiction of a bill ancillary to an original case or proceeding in the same court, whether at law or in equity, to secure or preserve the fruits and advantages of a judgment or decree rendered therein, is well settled. And this, irrespective of whether the court would have jurisdiction if the proceeding were an original one. The proceeding being ancillary and dependent, the jurisdiction of the court follows that of the original cause, and may be maintained without regard to the citizenship of the parties or the amount involved .... 30 292 U.S. at 239, 54 S.Ct. at 697 (citations omitted). However, Hunt does not support jurisdiction of a court to issue an injunction to enforce an order the bankruptcy court did not make. Matter of Federal Shopping Way, Inc., 717 F.2d 1264, 1270 (9th Cir.1983) (where prior judgment of bankruptcy court did not encompass claims sought to be enjoined, Hunt does not support jurisdiction). 31 The bankruptcy court, in issuing the injunction in this case, thought that it was protecting its prior order of a sale free and clear of all claims and liabilities, which it deemed to have barred the Fosters' and Bradshaws' claims. We do not agree. The bankruptcy court's prior judgment did not, and indeed could not, affect the Fosters' and Bradshaws' claims; thus, an injunction against the California state court proceedings could not in any way protect or effectuate that prior judgment. 32 The Fosters and Bradshaws urge that the bankruptcy court's prior judgment did not affect their claims because they did not receive notice prior to the proposed sale. They argue that due process requires that they be given notice prior to a deprivation of their property right (their claim). We recognize that a sale free and clear is ineffective to divest the claim of a creditor who did not receive notice, Factors and Traders Insurance Co. v. Murphy, 111 U.S. 738, 4 S.Ct. 679, 28 L.Ed. 582 (1884); Ray v. Norseworthy, 90 U.S. (23 Wall.) 128, 23 L.Ed. 116 (1874); In re Wiltse Brothers Corp., 361 F.2d 295 (6th Cir.1966); see generally 4B Collier on Bankruptcy Sec. 70.99 (14th ed. 1978), and that, were it necessary to reach this question, this lack of notice might well require us to find that the bankruptcy court's prior judgment was ineffective as to the Fosters' and Bradshaws' claims. But, this argument raises another, even more basic question which leads us to the same result. The Fosters and Bradshaws did not even have a claim at the time of the bankruptcy court's order of sale. 6 There was no property right to be deprived; by the same token, there was no claim to be divested. The Fosters' and Bradshaws' claims did not arise until more than five years after the sale and more than a year after the bankruptcy estate was closed. The bankruptcy court could not sell free and clear of claims asserted by the victims of an accident which did not occur until five years later. Consequently, the injunction sought by Mooney-New Jersey against the California state court proceedings is entirely unnecessary to protect or effectuate the bankruptcy court's prior judgment, because that judgment was ineffective as to the Fosters' and Bradshaws' claims. 7 33 Accordingly, we find that the bankruptcy court lacked jurisdiction over Mooney-New Jersey's complaint. Because we determine that no jurisdiction exists, we do not find it necessary to address the merits of Mooney-New Jersey's appeal. 34 The case is remanded to the district court; we direct the district court to remand to the bankruptcy court with instructions to dismiss for want of jurisdiction. Costs shall be borne by appellant. 35 REMANDED with instructions to dismiss.