Court Opinion

ID: 6896643
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:50:28.401202+00
Date Added: 2024-06-11T16:06:01.490420
License: Public Domain

GOODRICH, Circuit Judge
(dissenting).
With the impact of the New Jersey decision of Wilentz v. Hendrickson, 1944, 135 N.J.Eq. 244, 38 A.2d 199 upon the other possible questions which may be presented either in federal or state court, we are not at this time concerned. So much of the majority opinion under division II as discusses these matters seems to me uncalled for at this time. There is no occasion at this point to agree or disagree with certain legal propositions there stated.
There seems to be no difference between the majority and minority on the question of the general power and duty of a federal court to decide questions presented to it whether they be hard or easy. We are not *54confronted here with the problem of reference to the state court to decide whether a statute is to be construed so as to bring it in conflict with federal constitutional provisions as in Spector Motor Service, Inc., v. McLaughlin, 1944, 323 U.S. 101, 65 S.Ct. 152, 89 L.Ed. 101 and that group of cases. We all agree that the general responsibility of the federal court is that stated in Meredith v. Winter Haven, 1943, 320 U.S. 228, 64 S.Ct. 7, 88 L.Ed. 9.
It seems to me that the sole question in the case before us is whether the Reorganization Court committed reversible error in declining to order the debtor and trustees to become parties to litigation in the New Jersey State Courts involving questions of whether, following the declaration of the unconstitutionality of the Settlement Acts, the petitioner has rights growing out of conduct, or agreement, or what not, prior to that declaration.
There is argument to be made either way on this point and the Supreme Court in the Gardner case quoted in the majority opinion, recognized the possibility that the choice might be for one tribunal or the other. If the matter is one of discretion, that discretion is lodged in the District Court and not ourselves. We should uphold the action there taken unless we find that the exercise of discretion is not legally supportable.
The majority finds the question shifting from one of discretion to one of law because of outstanding injunctions issued by New Jersey State Courts by which New Jersey tax officials are forbidden to accept payment of taxes under certain conditions. The conclusion from the fact that such injunctions have been issued seems to be that the Bankruptcy Court is somehow deprived of authority which it otherwise has. That proposition, it is submitted, is not well taken. State courts may enjoin state officials, generally speaking, in any way they please. And it is certainly true, since Erie Railroad v. Tompkins, that findings of state law by federal courts do not bind state courts subsequently in proceedings between different parties. But it is a far cry from these perfectly acceptable propositions to conclude that a state court, by issuing an injunction against a state official, can affect Tn any way the operation of a federal court sitting in bankruptcy and exercising a power given by the Constitution of the United States. A state court can stop a state officer from taking money, if it wants to, but it cannot interfere with the effect of a discharge given in bankruptcy proceedings by a federal court. It is interesting in this respect to-take a look at the express language of the provision in the United States statute as to the effect of a confirmation of a plan in reorganization proceedings as set out in 11 U.S.C.A. § 207(g): “* * * the order of confirmation shall be binding upon (1) the debtor, (2) all • stockholders * * * and (3) all creditors * * * whether or not their claims shall have been filed * * * including creditors-who have not, as well as those who have,, accepted it.” It needs no argument to-establish the point that a statute passed by the Congress pursuant to a power granted it by the Constitution becomes-the supreme law of the land. The effective-operation of this power is surely not to be interfered with by orders made in the intra-state operation by state governments-in whatever functions they may be at the time performing.
I disagree with the majority, therefore, on two grounds. The first is on the question of exercise of discretion by the District Judge. I think his discretion was properly-exercised. He was sitting in bankruptcy. Questions of state law arise in bankruptcy all the time and it is part of the federal judge’s ordinary function to deal with them in his stride as and when they arise.1 It does not seem to me that we have here-*55the kind of question of state law which the delicate operation of our federal system requires to be referred to a state court. This, like all matters of discretion, is .not demonstrable by any litmus paper test and I can quite see good argument the other way, although to me it is unconvincing. The second reason for the dissent is because I think the majority announces a very dangerous doctrine. It is inconceivable to me that the exercise of federal function by the court acting under a statute in turn resting on a Constitutional grant of power, can be interfered with by the fact that a state court has previously enjoined somebody from doing something'

 A review of the last five volumes of the Federal Reporter, Second Series, 155 to 159, inclusive, sustains this statement:
Master Lubricants Co. v. Cook et al., 9 Cir., 1947, 159 F.2d 679 (California homestead laws used to ascertain exemption privileges.); Town of Agawam v. Connors, 1 Cir., 1947, 159 F.2d 360 (Right of redemption of trustee measured by state law.); In re V-I-D, Inc., 7 Cir., 1947, 158 F.2d 964 (Indiana law-*55regarding effect of judgment rendered without jurisdiction over subject matter or person used to exclude realty from debtor’s assets.); Rudnick et al. v. Fish-beck, 2 Cir., 1946, 158 F.2d 940 (New York law of assignments applied to a claim filed against bankrupt.); New York, O. & W. Ey. Co. v. People of State of New York et al., 2 Cir., 1947, 158 F.2d 769 (Court considered relationship of two New York statutes and duty of state officers thereunder for pledged funds of railroad.); United States v. Heffron et al., 9 Cir., 1947, 158 F.2d 657 (California homestead and exemption laws examined for effect upon federal tax liens in bankruptcy); In re Lorraine Castle Apartments Bldg. Corp., Inc., 7 Cir., 1946, 158 F.2d 44, at page 45 the Court stated: “The rate of interest after maturity upon real estate obligations which make no express provision as to it is fixed by the laws of the state where the property is located. * * *»; Walker et al. v. Leach et al., 10 Cir., 1946, 158 F.2d 15 (Attachment of bankrupt’s furniture by a Colorado justice court ruled void for lack of ju- . risdiction of that court under Colorado law.); In re Eosen, 3 Cir., 1945, 157 F. 2d 997, at page 99S: “ * * * The rule is, therefore, clear to this extent, that we determine the efficacy of the transfer against the trustee under Section 60, sub. a [11 U.S.C.A. § 96, sub. a], by the applicable state law.”; Wohlschlaeger et al. v. Duncan, 8 Cir., 1946, 157 F.2d 933 (Missouri law of assignments applied to ascertain whether debtor committed an act of bankruptcy.); Martin v. Companaro et al., 2 Cir., 1946, 156 F. 2d 127 (New York contract law applied to determine whether claimants’ claims arose out of contract or a quantum meruit theory.); In re Chicago, R. I. & P. Ry. Co., 7 Cir., 1946,155 F.2d 889, at page 893,-the Court stated: “We believe, however, that federal decisions are of no binding effect here, but rather that, under the doctrine of Erie E. Co. v. Tompkins, * * where the bankruptcy court is charged with the duty of protecting a lien unaffected by bankruptcy, the law of the state of performance must control. Of course the bankruptcy court determines all questions arising under the bankruptcy statute in accord with federal decisions, but when it deals with the right of a citizen to enforce a lien under the state law, unaffected by bankruptcy, or interprets the rights of the mortgagee, it must grant relief demanded by the laws of the state. * * * ”; Rountree v. Lane et al., 4 Cir., 1946, 155 F.2d 471, at page 472: “The question at issue is whether the provisions of § 7 of Article VI of the will created a spendthrift trust under the permissive terms of § 5157 of the Code of Virginia * Si ¡s »