Court Opinion

ID: 9640293
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:02:32.000663+00
Date Added: 2024-06-11T09:03:27.682296
License: Public Domain

HANEY, Circuit Judge.
Appeal has been taken from an order directing appellants to release a steamship from libel proceedings in the United States District Court for the Southern District of Texas, and restraining appellants from proceeding further with the libel proceedings.
The Charles Nelson Company, a California corporation, hereinafter called the debtor, entered into a written agreement with one Rogers, as trustee for a Delaware corporation to be thereafter organized, under date of January 17, 1936. By the terms of that agreement, the debtor agreed to sell to Rogers the steamship Marsodak for $55,-000, payable $10,000 in cash upon the signing of the agreement, and the balance in twelve equal quarterly installments commencing three months after the date of delivery. It was agreed that the balance should be secured “by a first preferred mortgage on the vessel,” and that the “delivery shall be free and clear of all liens and encumbrances whatsoever.” The contract further provided that the debtor agreed to sell two additional vessels to Rogers on the same terms and conditions, and in connection therewith it is provided in the contract that “Tt is the intention of the parties that the Seller shall sell and the Buyer shall buy three vessels under the terms of this agreement, and if the Seller is unable to make, delivery of three vessels *450to the Buyer in accordance with the terms of this contract then this contract shall become null and void and of no effect at the end of three hundred days from the date hereof. * * *”
The vessel Marsodak was delivered on the date of the contract. The preferred mortgage was executed January 22, 1936. On February 1-, 1936, the debtor assigned the preferred mortgage to a third party.
On February 5, 1936, the debtor filed a petition for relief under section 77B of the Bankruptcy Act (11 U.S.C.A. § 207). On the same date the lower court entered an order approving as properly filed, the above petition, and continuing the debtor in possession of its property. The order also provided “That the commencement or continuation of suits against the debtor are hereby enjoined and stayed until after final decree herein.”
On May 15, 1936, the lower court appointed appellee trustee of the debtor’s property. The order contained a provision enjoining and restraining all persons, firms, and corporations from attaching, levying upon, or enforcing liens upon, disturbing, interfering with, selling, removing, transferring the assets of the debtor, or the possession of appellee, and restraining the institution or prosecution of actions, proceeding in equity, admiralty, or bankruptcy, against the debtor or the trustee. There was a- proviso to this provision “that the Court may, upon notice and for cause shown, permit any judicial proceeding to enforce any lien upon the Estate of the Debtor.”
On July 7, 1936, the third party to whom the preferred mortgage had been assigned transferred a $20,000 interest in the mortgage to the debtor. On July 18, 1936, appellant, the Texas Company, a California corporation, by a libel filed in the federal court in Texas, caused seizure of the vessel sold Rogers, by a libel asserting a lien against such vessel for oil supplied it between August 1, 1935, and December 31, 1935. On July 23, 1936, the trustee filed a petition praying for an order discharging the vessel from the custody of the Texas marshal. On the same date an order was entered requiring appellants to appear on July 24, 1936, and show cause why the order should not be granted.
After hearing on July 24, 1936, the lower court entered an order that appellants “be and they are hereby directed to release forthwith the steamship. ‘Marsodak’ from the libel proceedings aid process issued therein in the United States District Court for the Southern District of Texas.” The order also restrained appellants from proceeding further with said libel proceedings and from instituting further proceedings without first obtaining an order of the court. The court further provided that the libel proceedings “are hereby stayed and enjoined pending the further order of” the court. From that: order, this appeal was taken.
There are twelve ass-gnments of error, all of which have been abandoned except the first four, which question the jurisdiction of the court to enter the order.
Section 77B provides that after a petition thereunder has been approved, “the court in which such order approving the petition * * * is entered shall, during the pendency of the proceedings under this section, have exclusive jurisdiction of the debtor and its property wherever located for the purposes of this section.” 11 U.S. C.A. § 207(a).
Section 207(c) provides:
“Upon approving the petition * * * or at any time thereafter, the judge, in addition to the jurisdiction and powers elsewhere in this section conferred upon him * * * (10) * * * may enjoin or stay the commencement or continuation of suits against the debtor until after final decree; and may, upon notice and for cause shown, enjoin or stay the commencement or continuance of any judicial proceeding to enforce any lien upon the estate until after final decree.”.
Jurisdiction over the persons of appellants is not questioned.
Appellants contend that the Bankruptcy Act gives the court no “power to enjoin the enforcement of liens against property not a part of the bankrupt estate.” Appellee contends that the mortgage on the vessel gave him a “special property interest” in the vessel.
The Ship Mortgage Act (46 U.S.C.A. § 911 et seq.) does not specifically state that a preferred mortgage lien is the same in nature as a maritime lien. We may assume here that the nature of the lien, as distinguished from the enforcement thereof, and other matters, is substantially the same as that of a maritime lien.
The court below ha.d no jurisdiction to stay the continuance of the proceeding in Texas as a suit against the debtor, un*451der 11 U.S.C.A. § 207(c) (10), because the proceeding was not against the debtor, but in rem.
However, that section empowers the court to stay a proceeding “to enforce any lien upon the estate” of the debtor. Here, the estate of the debtor consisted of a mortgage lien. The Texas proceeding was not one to enforce a lien on the mortgage lien. The court, therefore, had no jurisdiction under that section.
It is provided under 11 U.S.C.A. § 207(a), that the trial court has “exclusive jurisdiction of the debtor and its property wherever located.” If appellee had any property in the vessel, it is quite apparent that the Texas court could not have jurisdiction over such property, for such jurisdiction is given exclusively to the court below. Therefore, we must first determine whether or not appellee had any property in the vessel.
What is property? It is “the sum of all the rights and powers incident to ownership.” Nashville, C. & St. L. R. Co. v. Wallace, 288 U.S. 249, 268, 53 S.Ct. 345, 350, 77 L.Ed. 730, 87 A.L.R. 1191. See, also, Bromley v. McCaughn, 280 U.S. 124, 136, 50 S.Ct. 46, 47, 74 L.Ed. 226. In 22 R.C.L. 37, § 2, it is said:
“The term ‘property’ has a most extensive signification, and in its strict legal sense means that dominion or indefinite right of user and disposition which one may lawfully exercise over particular things or objects. But the word is often used to indicate the subject of the property or the thing owned, as a chattel or a tract of land. These things, however, though the subjects of property, are, when coupled with possession, but the indicia, the visible manifestations, of invisible rights, the evidence of things not seen. Much of the uncertainty and confusion observable in the decisions have arisen from overlooking this distinction; and such is the uncertainty of language that it is necessary to consider the context in order to determine the sense in which a particular word is employed, if it can ever be employed in more than one. * *
Following this, in section 3, it is said:
“Property in a determinate object as heretofore defined is composed of certain constituent elements, to wit, the unrestricted right of use, enjoyment, and disposal of that object. * * *”
It is thus plainly seen that when the word “property” is used, it may mean either the rights in a physical thing, or the physical thing itself, or both. What was intended in the statute before us? The controlling rule is stated in Fidelity & Deposit Co. v. Arenz, 290 U.S. 66, 68, 54 S.Ct. 16, 17, 78 L.Ed. 176, as follows:
“ ‘Property’ is a word of very broad meaning, and, when used without qualification, expressly made or plainly implied, it reasonably may be construed to include obligations, rights, and other intangibles as well as physical things.”
There being neither an express nor an implied qualification, we must hold that the word as used in the statute includes both intangible rights and physical things. It is inconceivable that Congress intended to protect only a physical object, such as a stock of goods, and not protect an intangible, such as a debt.
It would seem that the foregoing is sufficient, for one of the rights of property, is that of disposal. Appellee had such a right under the mortgage lien. We need not rest the problem there, however, for the cases hereinafter cited show that a maritime lien vests in the owner thereof a right of disposal in the vessel.
In The Propellor Commerce, 1 Black (66 U.S.) 574, 580, 17 L.Ed. 107, and in The Maggie Hammond, 9 Wall. (76 U.S.) 435, 456, 19 L.Ed. 772, it is said:
“Process in rem is founded on a right in the thing, and the object of the process is to obtain the thing itself, or a satisfaction out of it, for some claim resting on a real or quasi proprietary right in it.”
In The Rock Island Bridge, 6 Wall. (73 U.S.) 213, 215, 18 L.Ed. 753, it is said:
“A maritime lien, unlike a lien at common law, may, in many cases, exist without possession of the thing, upon which it is asserted, either actual or constructive. It confers, however, upon its holder such a right in the thing that he may subject it to condemnation and sale to satisfy his claim or damages.”
In Merchants Mut. Ins. Co. v. Baring, 20 Wall. (87 U.S.) 159, 163, 22 L.Ed. 250, it is said that:
“* * * it is well-settled law that a maritime lien is a jus in re.”
In that case the statement quoted from The Propellor Commerce, supra, is again stated. In The Glide, 167 U.S. 606, 624, *45217 S.Ct. 930, 936, 42 L.Ed. 296, the court summed up a review of many cases therein, saying:
“A lien upon a ship for repairs or supplies, whether created by the general maritime law of the United States, or by a local statute, is a jus in re, a right of property in the vessel, and a maritime lien, to secure the performance of a maritime contract.”
In The John G. Stevens, 170 U.S. 113, on page 117, 18 S.Ct. 544, 546, 42 L.Ed. 969, a review of many cases is made, and it is said:
“Accordingly, in our own law, it is well established that a maritime lien or privilege, constituting a present right of property in the ship, jus in re, to be afterwards enforced in admiralty by process in rem, arises, not only from a collision and for the damages caused thereby * * * but also for necessary supplies or repairs furnished to a vessel, whether under the general maritime law in a foreign port, or according to a local statute in her home port.”
It is quite clear from the foregoing that appellee had a property right in the vessel over which the lower court had exclusive jurisdiction, which means that the Texas court had no jurisdiction thereover.
We believe, however, that the order appealed from is too broad. It directs appellants to release forthwith the vessel from the libel proceedings; restrains appellants from proceeding further with the the libel proceedings; restrains appellants from instituting further proceedings; and stays the proceedings in Texas. There are many other property rights in the vessel in addition to the one owned by appellee. Over such other rights, the lower court had no jurisdiction. The lower court may restrain interference with, or disposal of the right within its jurisdiction. If such right were so inseparable from the rights not within its jurisdiction, it might be that an order as broad as the one here made would be valid. However, it is apparent that ap7 pellee’s right is separable, for .the vessel may be sold, subject to the right of appellee. The order should be modified so that the proceedings are stayed, and appellants are restrained from proceeding further, or instituting further proceedings, only in so far as the present proceeding in Texas attempts to assert jurisdiction over appellee’s right.
Reversed, with directions to modify the order in conformity with this opinion.