Bushong v. Theard

• Citation: 37 F.2d 690
• Decision Date: 07 March 1930
• Docket Number: No. 5760.,5760.
• Parties: BUSHONG v. THEARD.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

37 F.2d 690 (1930)

BUSHONG v. THEARD.

No. 5760.

Circuit Court of Appeals, Fifth Circuit.

January 28, 1930.

Rehearing Denied March 7, 1930.

John D. Miller, of New Orleans, La., for appellant.

Delvaille H. Theard and Joseph W. Carroll, both of New Orleans, La. (Joseph W. Carroll, Henry G. McCall, Azzo J. Plough, and Delvaille H. Theard, all of New Orleans, La., on the brief), for appellee.

Before BRYAN and FOSTER, Circuit Judges, and GRUBB, District Judge.

GRUBB, District Judge.

This is an appeal from an order of the District Court for the Eastern District of Lousiana, denying the application of the appellant for the modification of a stay order issued by the District Judge, so as to be allowed to proceed in the state court with a suit instituted by him before bankruptcy against the bankrupts. The stay order restrained the appellant from proceeding with a pending suit against the bankrupts, pending the appointment and qualification of the trustee, and the discharge of the bankrupts. Prior to the institution of the bankruptcies, the appellant, Bushong, had instituted in the civil district court, in the Parish of Orleans, a suit on notes secured by a mortgage on lands and for the recovery of money advanced by him for the payment of taxes on the lands, and for which he claimed subrogation. The suit had been pending for some time, when the petitions in bankruptcy were filed. Dilatory pleadings had been filed by the defendants, no answers had been filed, but the case had been set down for trial and on the eve of the trial the voluntary bankruptcy cases were filed by the bankrupts, and the stay order secured. The appellee has now qualified as trustee. The appellant later filed the application to modify the stay order, which was denied by the District Court, and from the order denying which this appeal was taken.

The suit in the civil district court was a mortgage foreclosure of the type called "via ordinaria" under the Civil Code of Louisiana, and the cause of action arose out of these facts: Appellant was the owner of a large amount of waste land fit for trapping only. On March 10, 1919, appellant sold 136,474 acres of it to William J. Castell, who is now dead, for $400,000, of which $15,000 was paid in cash, and for the balance a special mortgage and vendor's privilege was reserved upon the lands conveyed. Thereafter Castell organized a corporation, called the Castell Land & Harbor Company, one of the bankrupts, and to it conveyed all the lands he then owned, the corporation assuming the mortgage indebtedness. Thereafter the Castell Land & Harbor Company conveyed to the Castel Company, Inc., the other bankrupt, about 100,000 acres of the tract conveyed to it by Castell, the Castell Company, Inc., assuming the mortgage indebtedness, to appellant. The bankrupts failed to pay enough to appellant to prevent default, and on March 13, 1929, the appellant filed in the civil district court the suit, which was stayed upon the institution of the two bankruptcies. Appellant claims there was due him at the time the suit was filed $346,945.41, with interest on his mortgage and vendor's privilege, and the sum of $38,128.24 advanced by him to pay taxes, together with attorney's fees; that the total indebtedness then amounted to $667,956 and now amounts to more than $680,000. In addition, the Castell Company, Inc., issued second mortgage bonds secured by the 100,000 acres conveyed to it, of which there were outstanding an amount, with interest, in excess of $438,000. The total indebtedness, secured by liens and privileges upon the lands in question amounted to $1,120,000. The affidavits of Webb and Harrison valued the lands at $5 an acre. The foreclosure suit was filed as a lis pendens in Terrebonne parish, where the lands were situated. Trial of that suit was set for July 1, 1929, and the voluntary petitions, which have been consolidated, were filed June 27, 1929.

The question presented for our decision is whether the suit instituted by the appellant in the civil district court of the parish of Orleans should have been stayed by an order in the bankruptcy proceedings. The stay order complained of was made by the District Judge under authority of section 11a of the Bankruptcy Act (11 USCA § 29). This section limits stay orders to suits which are founded upon a claim from which a discharge in bankruptcy would be a release. The mortgage and vendor's lien did not constitute a claim against which a discharge in bankruptcy would be a release. The lien was valid and recognizable by the bankrupt court. Under general jurisprudence, the appellant had the right to proceed in the suit in the state court to a judgment declaring his lien to be valid and enforcing it, as his lien was valid and a suit foreclosing it was pending at the time of bankruptcy. In re Gillette Realty...