Blair v. Brailey

• Decision Date: 01 March 1915
• Docket Number: 2720.
• Citation: 221 F. 1
• Parties: BLAIR v. BRAILEY et al.
• Court: U.S. Court of Appeals — Fifth Circuit

221 F. 1

BLAIR v. BRAILEY et al.

No. 2720.

United States Court of Appeals, Fifth Circuit.

March 1, 1915

Rehearing Denied April 5, 1915.

Alex C King and Jack J. Spalding, both of Atlanta, Ga., and George D. Welles, of Toledo, Ohio (Brown, Geddes, Schmettau &amp Williams and Tracy, Chapman & Welles, all of Toledo, Ohio, on the brief), for petitioner and appellant.

Joseph W. Bennet, F. E. Twitty, Millard Reese, and Max Isaac, all of Brunswick, Ga., and A. H. Heyward, of Macon, Ga., for respondents and appellees.

Before PARDEE and WALKER, Circuit Judges, and MAXEY, District Judge.

WALKER Circuit Judge.

More than six months before the filing in the United States District Court for the Northern District of Ohio, Western Division (hereinafter referred to as the Ohio court), of the involuntary petition in bankruptcy against the Yaryan Naval Stores Company, the B. Borchardt Company filed in the District Court for the Southern District of Georgia (which will be referred to as the Georgia court) its bill of complaint against the same company. One of the purposes of that bill, which was filed in behalf of the plaintiff therein and of all other creditors who might intervene in the suit or make proof of their claims-- many, if not all, of whom did so-- was to have the property of the defendant therein taken possession of and sold under the orders of the court, and the proceeds of the sales applied in the payment of the debts alleged to be owning to the plaintiff and other creditors of the defendant. Receivers were appointed under that bill, who pursuant to orders of the court, and more than six months before the institution of the bankruptcy proceedings, took possession of the property of the defendant and thereafter continued to administer it under the orders of the court, and proceedings looking to the sale of the property for the payment of debts under decrees already entered were in progress in that suit when the petition in bankruptcy was filed. The trustee appointed by the Ohio court filed in the Georgia court a petition which, after stating proceedings had in the court which appointed him, prayed that full force and effect be given to certain mentioned decrees in reference to the property of the bankrupt and the possession of it which had been made by that court; that he, as such trustee in bankruptcy, be recognized as entitled to the possession of all the property and assets of the bankrupt as of the date of the filing of the petition in bankruptcy; that the receivers appointed by the Georgia court be decreed to turn over and surrender to him the possession of all said property, and be enjoined and restrained from refusing to do so, or from interfering with petitioner with reference to the possession of said property, or from further acting in respect to that property, or any of it, and for all other and further relief that the case may warrant. The matter now presented for review is the action of the Georgia court, evidenced by its decree, denying the relief prayed by the trustee in bankruptcy and dismissing his petition.

By the ruling made in Yaryan Naval Stores Co. v. B. Borchardt Co. et al., 217 F. 758, 133 C.C.A. 488, this court recognized the bill filed in this case to be a general creditors' bill, and decided that it was not, on the ground that the plaintiff's claim had not been reduced to judgment, subject to be dismissed at the instance of the defendant, who had appeared, filed an answer admitting the indebtedness to the plaintiff and all equities set up in the bill, and consented to the appointment of receivers, and made no objection to the court's assumption and exercise of jurisdiction under the bill, until months after the bill was filed, and after, under orders of court, receivers had entered upon the administration of the property of the defendant and had incurred obligations and large expenditures. An intimation pertinent to the question raised by the pending appeal is found in the statement, made in the opinion rendered in the case just referred to, that:

'Inasmuch as the equity proceedings looking to the liquidation of the affairs of the Yaryan Naval Stores Company were instituted more than six months prior to the alleged voluntary bankruptcy proceedings, wherein it is claimed the Yaryan Naval Stores Company was adjudicated a bankrupt, the proceedings in the District Court in this case were not necessarily affected.'

The authorities cited in connection with the quoted statement make it manifest that the court had in mind the fact that the provisions of the Bankruptcy Act for the avoidance of judicial liens or levies have reference to such only as may have been created, obtained, or made within four months before the filing of the petition in bankruptcy. Bankruptcy Act, Sec. 67.

The Bankruptcy Act does not render inapplicable to a question raised as to what court is entitled to administer property of a bankrupt the rule that the court which first obtains rightful jurisdiction over a subject-matter is not to be interfered with by any other court, but only modifies that rule by making it inapplicable in certain instances where a court, other than the one in which a bankruptcy proceeding is instituted first assumed jurisdiction within a specified time before the institution of the bankruptcy proceedings. The general rule prevails to prevent any interference even by a court of bankruptcy with another court's control over property which rightfully has been subjected to its jurisdiction, if that jurisdiction attached more than four months before the petition in bankruptcy was filed. Pickens v. Roy, 187 U.S. 177, 23 Sup.Ct. 78, 47 L.Ed. 128. It is not 'all levies, judgments, attachments, or other liens, obtained through legal proceedings against a person who is insolvent,' which, under the provisions of section 67 of the Bankruptcy Act, are to be deemed null and void, but only such levies, judgments, etc., so obtained 'at any time within four months prior to the filing of a petition in bankruptcy. ' Where a valid judicial lien or levy has been secured or made four months or more prior to the bankruptcy, proceedings to enforce the same may be prosecuted to the end. Metcalf v. Barker, 187 U.S. 165, 23 Sup.Ct. 67, 47 L.Ed. 122; In re Koslowski (D.C.) 153 F. 823.

The Georgia court, by its appointment of the receivers and having them take possession of the property of the defendant in the suit, acquired the custody and control of that property for the purposes sought to be accomplished by the suit. Those proceedings effected a seizure of the property preliminary to making out of it the money required to satisfy the demands of the plaintiff and of other creditors who might intervene in the suit or prove their claims therein. What was done amounted to an equitable attachment of the property. From the date such seizure was effected the property was held under the process of the court, an end which the court's proceedings had in view being the application of the proceeds of the sale of that property to the satisfaction of the demands asserted by the bill or under it. There was a 'levy' within the meaning of that term as it is used in section 67f of the Bankruptcy Act. In re Tyler, 149 U.S. 164, 183, ...