308 U.S. 433 (1940), 120, Kalb v. Feuerstein

Docket Nº:No. 120
Citation:308 U.S. 433, 60 S.Ct. 343, 84 L.Ed. 370
Party Name:Kalb v. Feuerstein
Case Date:January 02, 1940
Court:United States Supreme Court

Page 433

308 U.S. 433 (1940)

60 S.Ct. 343, 84 L.Ed. 370

Kalb

v.

Feuerstein

No. 120

United States Supreme Court

Jan. 2, 1940

Argued December 15, 1939

APPEAL FROM THE SUPREME COURT OF WISCONSIN

Syllabus

1. The effect of the filing of a petition for a composition or extension of time under § 75 of the Bankruptcy Act upon a state court's jurisdiction of a pending proceeding to foreclose a mortgage on the petitioner's property, is a federal question. P. 438.

2. The filing of a petition by a farmer under § 75 of the Bankruptcy Act for a composition or extension of time to pay his debts, operates ipso facto as a stay on the power of a state court, in a pending proceeding to foreclose a mortgage on his property, to proceed with

Page 434

foreclosure, to confirm the foreclosure sale, and to dispossess under it. Pp. 438, 440.

3. The action of the state court in this case in proceeding contrariwise, without the consent of the bankruptcy court, was not merely erroneous, but was in excess of its authority, void, and subject to collateral attack. And whether the jurisdiction of the state court to proceed thus was contested in the foreclosure proceeding, or could have been contested, is immaterial. Pp. 438, 440.

4. The language and the broad policy of the federal Act, as well as its legislative history, support this construction, and, as so construed, the Act was within the plenary power of Congress in respect of the subject of bankruptcy. Pp. 439-441.

5. The liability in tort of the state court judge, the sheriff who executed the writ of assistance, and the mortgagees, for such action as was taken against the farmer debtor without the authority of law, is to be determined according to the state law. P. 443.

231 Wis. 185, 186, 285 N.W. 431, reversed.

Appeal from affirmances of judgments dismissing the complaints in two cases. For earlier opinions of the state supreme court, see 228 Wis. 519, 525; 279 N.W. 685, 687; also 280 N.W. 725, 726.

Page 435

BLACK, J., lead opinion

MR. JUSTICE BLACK delivered the opinion of the Court.

Appellants are farmers. Two of appellees, as mortgagees, began foreclosure on appellants' farm1 March 7, 1933, in the Walworth (Wisconsin) County Court; judgment of foreclosure was entered April 21, 1933; July 20, 1935, the sheriff sold the property under the judgment; September 16, 1935, while appellant Ernest Newton Kalb had duly pending2 in the bankruptcy court a petition for

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composition and extension of time to pay his debts under § 75 of the Bankruptcy Act (Frazier-Lemke Act),3 the Walworth County Court granted the mortgagees' motion for confirmation of the sheriff's sale; no stay of the foreclosure or of the subsequent action to enforce it was ever sought or granted in the State or bankruptcy court; December 16, 1935, the mortgagees, who had purchased at the sheriff's sale, obtained a writ of assistance from the State court, and March 12, 1936, the sheriff executed the writ by ejecting appellants and their family from the mortgaged farm.

[60 S.Ct. 345] The questions in both No. 120 and No. 121 are whether the Wisconsin, County Court had jurisdiction, while the petition under the Frazier-Lemke Act was pending in the bankruptcy court, to confirm the sheriff's sale and order appellants dispossessed, and, if it did not, whether its action in the absence of direct appeal is subject to collateral attack.

No. 120. After ejection from their farm, appellants brought an action in equity in the Circuit Court of Walworth County, Wisconsin, against the mortgagees who had purchased at the sheriff's sale, for restoration of possession, for cancellation of the sheriff's deed, and for removal of the mortgagees from the farm. Demurrer was sustained for failure to state a cause of action and the complaint was dismissed. The Supreme Court of Wisconsin affirmed.4

No. 121, is a suit at law in the State court by appellant Ernest Newton Kalb against the mortgagees, the sheriff and the County Court judge who confirmed the foreclosure sale and issued the writ of assistance. Damages are sought for conspiracy to deprive appellant of possession,

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for assault and battery, and for false imprisonment. As in No. 120, demurrer was sustained, and the Supreme Court of Wisconsin affirmed.5

In its first opinion, the Supreme Court of Wisconsin said:

It is the contention of the plaintiff [mortgagor] that this statute is self-executing -- that is, that it requires no application to the state or federal court in which foreclosure proceedings are pending for a stay; in other words, that it provides for a statutory, and not for a judicial, stay. Plaintiff's claims under the Bankruptcy Act present a question which clearly arises under the laws of the United States, and therefore present a federal question upon which determination of the federal courts is controlling.

Addressing itself solely to this federal question of construing the Frazier-Lemke Act, the Wisconsin court decided that the federal Act did not itself, as an automatic statutory stay, terminate the State court's jurisdiction when the farmer filed his petition in the bankruptcy court. Since there had been no judicial stay, it held that the confirmation of sale and writ of assistance were not in violation of the Act.

Appellees insist, however, that the Wisconsin court, on rehearing, rested its judgment on an adequate nonfederal ground. If that were the fact, we would not, under accepted practice, reach the State court's construction of the Federal statute.6 The statement on rehearing relied

Page 438

on as constituting the nonfederal ground was:

We need not consider nor discuss the question whether the congress has power to divest the jurisdiction of a state court which has once attached. That question is not presented by this record. It would seem from a consideration of § 75 as amended, that the filing of the petition automatically operated to extend the period of redemption. It is possible that that state of facts if made to appear would make the order of the trial court erroneous, but the order would be within the power of the court to make. No appeal having been taken, no showing having been made in the state court, an order of sale having been confirmed and the purchaser put in possession, the plaintiff is in no position to claim that the order of the circuit court is void.

[60 S.Ct. 346] But, if appellants are right in their contention that the Federal Act, of itself, from the moment the petition was filed and so long as it remained pending, operated, in the absence of the bankruptcy court's consent, to oust the jurisdiction of the State court so as to stay its power to proceed with foreclosure, to confirm a sale, and to issue an order ejecting appellants from their farm, the action of the Walworth County Court was not merely erroneous, but was beyond its power, void, and subject to collateral attack. And the determination whether the Act did so operate is a construction of that Act, and a federal question.

It is generally true that a judgment by a court of competent jurisdiction bears a presumption of regularity, and is not thereafter subject to collateral attack.7 But Congress, because its power over the subject of bankruptcy

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is plenary, may, by specific bankruptcy legislation, create an exception to that principle and render judicial acts taken with respect to the person or property of a debtor whom the bankruptcy law protects nullities, and vulnerable collaterally.8 Although the Walworth County Court had general jurisdiction over foreclosures under the law of Wisconsin,9 a peremptory prohibition by Congress in the exercise of its supreme power over bankruptcy that no State court have jurisdiction over a petitioning farmer debtor or his property would have rendered the confirmation of sale and its enforcement beyond the County Court's power, and nullities subject to collateral attack.10 The States cannot, in the exercise of control over local laws and practice, vest State courts with power to violate the supreme law of the land.11 The Constitution grants Congress exclusive power to regulate bankruptcy, and, under this power, Congress can limit that jurisdiction which courts, State or Federal, can exercise over the person and property of a debtor who duly invokes the bankruptcy law. If Congress has vested in the bankruptcy courts exclusive jurisdiction over farmer debtors and their property, and has by its Act withdrawn from all other courts all power under any circumstances to maintain and enforce foreclosure proceedings against them, its Act is the supreme law of the land which all courts -- State and Federal -- must observe. The wisdom and...

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