Sims v. Jamison, 7177.

• Decision Date: 06 November 1933
• Docket Number: No. 7177.,7177.
• Citation: 67 F.2d 409
• Parties: SIMS v. JAMISON.
• Court: U.S. Court of Appeals — Ninth Circuit

67 F.2d 409 (1933)

SIMS v. JAMISON.

No. 7177.

Circuit Court of Appeals, Ninth Circuit.

November 6, 1933.

Joseph, Haney & Veatch, of Portland, Or., and Watts & Prestbye, of Athena, Or., for appellant.

Raley, Raley & Warner, John F. Kilkenny, and Alfred F. Cunha, all of Pendleton, Or., and James H. E. Scott, of Milton, Or., for appellee.

Before WILBUR, SAWTELLE, and GARRECHT, Circuit Judges.

WILBUR, Circuit Judge.

This is an appeal from an order of the District Court enjoining the appellant from harassing and annoying the bankrupt on account of a certain chattel mortgage given by the bankrupt to M. G. Bentley and later assigned to the First National Bank covering the apple crop grown, or to be grown, on certain real estate, and from foreclosing said chattel mortgage upon the crop grown upon said real estate.

This mortgage was executed on December 23, 1930, to secure promissory notes amounting to $600 on his interest in crops grown in 1931, or to be grown thereafter on a five-acre tract of land therein described and owned by the bankrupt. The mortgage provided that, if the crop of 1931 was not sufficient to meet the obligation secured by the mortgage, "then this mortgage shall be deemed to cover the said crops for the year 1932 and all additional years until the amounts advanced unto the mortgagor by the mortgagee herein have been fully paid and satisfied." The bankrupt filed his voluntary petition in bankruptcy on November 19, 1931, setting forth, among others, the foregoing indebtedness. He was adjudicated a bankrupt on that date, and on December 24, 1931, the court entered an order setting apart the above-mentioned real estate containing five acres as exempt. The bankrupt was discharged on November 23, 1932. The action to foreclose the chattel mortgage was begun in the circuit court of the state of Oregon for Umatilla county in September, 1932, and a criminal information charging the bankrupt with disposing of and selling the apple crop of 1932, which is the means of "harassing and annoying" referred to in the order appealed from, was filed in November, 1932. The bankrupt set forth the foregoing facts, and prayed for a permanent injunction, and for an order declaring the mortgage "void and of no force and effect." The appellant moved to strike the petition on the ground that the court had no jurisdiction of the subject-matter of the petition, and was without jurisdiction "to try or determine the issues raised by the petition or to grant the relief therein prayed for." The matter was apparently submitted upon this motion, and the order appealed from was thereupon entered granting the relief prayed for by the petitioner, including a declaration that the chattel mortgage is "of no force or effect as against the above named bankrupt."

It is claimed by the appellant that the question of whether or not crops are subject to a lien, if grown upon exempt property set apart as such by the bankruptcy court, is one wholly for the state courts, to be decided according to state law. That the state law controls in the determination of the right to a lien upon such crops so grown is well established. That the state court has jurisdiction to pass upon the validity and effect of such a lien after an adjudication has been asserted cannot seriously be doubted. Public Finance Co. v. Rowe, 123 Ohio St. 206, 174 N. E. 738, 74 A. L. R. 900; Union National Bank of Minot v. Lenton, 54 N. D. 262, 209 N. W. 350; Thompson Yards v. Richardson, 51 N. D. 241, 199 N. W. 863; Eckhardt v. Hess, 200 Iowa, 1308, 206 N. W. 291, 292. But the question of jurisdiction of the bankruptcy court is not settled by conceding jurisdiction to the state court, nor by conceding that the question is one to be determined according to state law. The bankruptcy court can and should declare the effect of and enforce the state law, if it has jurisdiction of a case in which the state law is involved.

The fundamental question involved is the effect of the discharge in bankruptcy upon the debt secured by chattel mortgage. If, on the one hand, the debt is not secured by an existing lien, the discharge frees the bankruptcy from it; if, on the other hand, the debt is secured by an existing lien, it does not, and the creditor may foreclose his lien upon the property covered by it. The question may be decided by either state or federal court according to state law, but the bankruptcy court has primary and superior jurisdiction to determine the effect of its own decree of discharge, and it may exercise, or refuse to exercise, that jurisdiction according to the exigencies of the case. This we think was decided by the Circuit Court of Appeals for the Fourth Circuit in Seaboard Small Loan Corp. v. Ottinger, 50 F.(2d) 856, 859, 77 A. L. R. 956, where it was said: "In view of this purpose of the act and of the express provision that the bankrupt shall be released from all provable debts, it would be indeed a strange situation if the court vested with jurisdiction to enforce the act were without power to stay the hand of a creditor whose debt has been discharged by bankruptcy, but who nevertheless persists in harassing the bankrupt with efforts to collect it." See, also, Pell et al. v. McCabe et al. (C. C. A.) 256 F. 512, 515.

We conclude that the trial court had jurisdiction to decide whether or not the discharge in bankruptcy relieved the bankrupt of the debt and consequently of the claimed lien on which the actions were brought against him in the state court. The rule applicable...