Court Opinion

ID: 6869305
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:58:50.590333+00
Date Added: 2024-06-11T16:05:22.631143
License: Public Domain

HUTCHESON, Circuit Judge
(concurring in part and dissenting in part).
Except as it affirms the denial of the State’s petition to be allowed to proceed in condemnation against the alleged “unlawful oil,” I concur in the general result of the decision. I agree, too, with the general statement of the opinion as to the jurisdiction of the bankruptcy court in reorganization proceedings, and in all that is said with regard to the first suit. I do not agree with, but' respectfully dissent from, what is said as to the effect on the second suit of the filing of the debtor’s petition for reorganization. The authorities the opinion-cites lead, I think, to a conclusion exactly the opposite of that the opinion announces, that because the court declined to appoint receivers it did not acquire jurisdiction over the property. They make it clear, I think, that in the case of a suit to foreclose a lien, valid as well after as before the institution of bankruptcy proceedings, “jurisdiction thus attaches upon the filing of the bill of complaint in court, at least where process subsequently issues [on a bill] in due course.” *53Penn General Cas. Co. v. Pennsylvania, 294 U.S. 189, 55 S.Ct. 386, 389, 79 L.Ed. 850; Harkin v. Brundage, 276 U.S. 36, 43-45, 48 S.Ct. 268, 72 L.Ed. 457; Metcalf v. Barker, 187 U.S. 165, 23 S.Ct. 67, 47 L.Ed. 122; Palmer v. Texas, 212 U.S. 118, 29 S.Ct. 230, 53 L.Ed. 435; Farmers’ Loan & Trust Co. v. Lake Street El. R. Co., 177 U.S. 51, 20 S.Ct. 564, 44 L.Ed. 667. In this case process issued in due course.1 The majority opinion is therefore in error in stating that this is not a case where process subsequently issued in due course. The error of the majority arises, I think, from the mistaken view that the appointment of a receiver, or other process of seizure, is necessary to give jurisdiction. White Star Refining Co. (C.C.A.) 74 F.(2d) 269, 271, cited by the majority, announces, ¿nd the announcement is supported by uniform authority, “that the foreclosure of a lien not invalidated by bankruptcy on specific property undertaken in a state court with or without receivership is unaffected by the subsequent filing of a bankruptcy petition against the owner of the property, and that the bankruptcy court as to that property has not paramount jurisdiction but only concurrent jiirisdiction and must observe due comity is now well settled.” (Italics mine.)
Notwithstanding my difference with the majority in these respects, I believe the decision of affirmance, except as to the condemnation proceeding, was right, for, the property not having been taken into the actual physical possession of the state court through its receivers (cf. Moran v. Sturges, 154 U.S. 256, 14 S.Ct. 1019, 38 L.Ed. 981), the jurisdiction of the state and federal courts as to the determination of liens upon or claims against the property was concurrent up to the point of its seizure for the purpose of satisfaction of those claims. Fred T. Ley & Co. v. Wheat (C.C.A.) 64 F.(2d) 257. If, then, the jurisdiction and power of the court in reorganization proceedings were no greater than it is in ordinary bankruptcies, its action in taking the property over would have been error. But, under section 77B (c) (10), 11 U.S.C.A. § 207 (c) (10), the reorganization court has power to enjoin or stay lien suits until after final decree, and whether the state court had actual possession of the property, or not, it could have stayed all proceedings in the suit. Its action therefore in taking charge of the property, and holding it to preserve the status while permitting the state suits to go on, was, I think, no violation of comity but the exercise of a sound administrative discretion in recognition of it. In this way the court prevented the dissipation of the property during pendency of the reorganization proceedings, while permitting the State to proceed in its own courts in the enforcement of its own laws against a company which on the pleadings, the only record we have, appears to have been an egregiously' willful tax evader and violator of those laws. Bankruptcy does not of itself destroy the jurisdiction of state courts. It is competent for the court of bankruptcy to permit administration to go on in them. Ex parte Baldwin, 291 U.S. 610, 54 S.Ct. 551, 78 L.Ed. 1020; Connell v. Walker, 291 U.S. 1, 54 S.Ct. 257, 78 L.Ed. 613. It is usual and proper for federal courts to defer to prior state court proceedings to the extent of relinquishing jurisdiction to them, especially where the suits, like those dealt with in this proceeding, are brought by a state in respect of its fiscal affairs. Pennsylvania v. Williams, 294 U.S. 176, 55 S.Ct. 380, 79 L.Ed. 841, 96 A.L.R. 1166; Penn General Cas. Co. v. Pennsylvania, 294 U.S. 189, 55 S.Ct. 386, 79 L.Ed. 850. The suits brought here are not only in the interest of preventing tax evasion, but, if successful, would establish the complete insolvency and inability of the debtor to reorganize. Their prosecution should not be drawn into the bankruptcy court, but should be left in the state courts. In re Sentinel Oil Co. (D.C.) 12 F.Supp. 294; In re Missouri Gas & Electric Service Co. (D.C.) 11 F.Supp. 434. To the condemnation proceeding which the state sought permission to bring, these observations apply with peculiar force. • If the oil is “unlawful oil,” and subject to condemnation, certainly, by taking bankruptcy or by proceeding in reorganization, a willful violator may not change it into lawful oil. If the State was entitled to condemn it before the petition was filed, it was equally so entitled after it was filed. The proceeding to condemn is a special one; it must be followed exactly as provided for by the statute. U. S. v. Smelser (C.C.A.) 87 F.(2d) 799; Mingus v. Wadley, 115 Tex. 551, 285 S.W. 1084. The bankruptcy court sitting in reorganization is not competent to inquire into or adjudge the condemnation. The result of the court’s order in refusing permission to proceed, if effective *54would be that the reorganization would proceed on the assumption that the oil was the debtor’s property only to have that assumption disappear if in a condemnation suit filed after reorganization judgment went for the State. For it is perfectly plain that a proceeding, in which the question of whether the property is to be forfeited may not be tried and decided, cannot affect that question. Though, therefore, I am of the opinion that the bankruptcy court was without power to prevent the State’s first proceeding with its suit to condemn, and that the State may proceed without permission, for such a suit is not one in rem, and does not require the court to have possession of the property until the judgment of condemnation is entered, I think the State did the seemly thing in applying for permission, and that permission should have been granted as matter of course. If the oil is condemned while the property is still in the custody of the reorganization court, certainly that court can be depended upon in the exercise of the comity due between courts to surrender it on the State court’s writ for sale as the statute requires. I therefore dissent from the judgment of affirmance as to the condemnation proceeding.

 Finding of fact of the trial court VIII: “Citation and notice were duly issued in the cause, and service thereon was had.”