Board of Directors St. Francis Levee Dist. v. Kurn

• Decision Date: 28 June 1937
• Docket Number: No. 10824.,10824.
• Citation: 91 F.2d 118
• Parties: BOARD OF DIRECTORS ST. FRANCIS LEVEE DIST. et al. v. KURN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

91 F.2d 118 (1937)

BOARD OF DIRECTORS ST. FRANCIS LEVEE DIST. et al. v. KURN et al.^*

No. 10824.

Circuit Court of Appeals, Eighth Circuit.

June 28, 1937.

Charles T. Coleman, of Little Rock, Ark. (Burk Mann, of Forrest City, Ark., and Walter G. Riddick, of Little Rock, Ark., on the brief), for appellants.

Edward P. Russell, of Memphis, Tenn. (E. L. Westbrooke, of Jonesboro, Ark., A. P. Stewart, of St. Louis, Mo., John W. Murphy, of Huntingdon, Tenn., J. W. Jamison, of St. Louis, Mo., and Canada & Russell, of Memphis, Tenn., on the brief), for appellees.

Before WOODROUGH, THOMAS, and FARIS, Circuit Judges.

WOODROUGH, Circuit Judge.

The plaintiffs in this case are the trustees in debtor proceedings under section 77 of the Bankruptcy Act, as amended, 11 U.S.C.A. § 205, of the St. Louis and San Francisco Railway Company, having been duly appointed by the federal District Court in Missouri where the proceedings are pending. The railway company is the owner of certain real property and appurtenances situate in six counties in Arkansas, now in the possession and control of the trustees, upon which levee taxes have been assessed and levied by the St. Francis Levee District for the year 1935, (subsequent to the appointment of the trustees), and this suit in equity was brought by the trustees of the railway company to enjoin the levee district and its officers from collecting the taxes. The general nature of the levee taxes and manner of their assessment appear from the opinions of the District Court and this court in former litigation between the railway company and the levee district concerning such taxes for other years. St. Louis-San Francisco Ry. Co. v. Board of Directors of St. Francis Levee Dist. (D.C.) 2 F.Supp. 38; Board of Directors of St. Francis Levee Dist. v. St. Louis-San Francisco Ry. Co. (C.C.A.) 74 F.(2d) 183. The trustees are citizens of Missouri, more than the jurisdictional amount is involved, and it was alleged in the bill that the taxes were discriminatory, confiscatory, and void and that the trustees had no adequate remedy at law. After the bill was filed and issue had been joined, but before any hearing had been had, the St. Francis Levee District commenced six suits in the state courts in the several counties where the lands were situate, seeking to enforce collection of the levee taxes. The statutes of Arkansas contemplate that collection of the levee taxes may be enforced through suits in chancery and the six suits were brought under and in conformity to the statutes. Acts of Arkansas 1893, No. 19, p. 24, as amended, Acts 1903, No. 61, p. 103; Acts of 1909, Act No. 262, p. 783; Acts of 1917, No. 272, p. 1148. The prayer in each case was that a first and paramount lien be awarded against the lands for the levee taxes, interest, penalties, attorneys' fees, and costs, and that the lien be foreclosed and the lands sold to satisfy the same.

Upon the commencement of the six suits by the levee district the District Court in Missouri, where the proceedings for the reorganization of the railroad were pending, ordered the trustees to apply to the federal District Court in Arkansas for a restraining order and interlocutory injunction to enjoin the prosecution of the six suits in the Arkansas courts. The trustees made their application to the federal District Court in Arkansas and were awarded such a restraining order, and thereafter a hearing was had upon their petition for an interlocutory injunction. Upon such hearing the restraining order was dissolved and the court granted an interlocutory injunction enjoining the prosecution of the six suits to collect the 1935 levee taxes which were then pending, or any other suits for such purpose until the final hearing.

The defendants in the suit have prosecuted this appeal to reverse the order granting interlocutory injunction (28 U.S. C.A. § 227) and have contended that: (1) The interlocutory injunction was prohibited by section 265 of the Judicial Code (28 U.S.C.A. § 379); and (2) that the interlocutory injunction was improvidently granted.

We think it clear that the interlocutory injunction was not prohibited by section 265 of the Judicial Code (28 U.S.C.A. 379) but that the case comes within the exception of that statute. Although the section prohibits the granting of injunctions by the courts of the United States to stay proceedings in any court of a state, it specifically excepts "cases where such injunction may be authorized by any law relating to proceedings in bankruptcy." By reason of the proceedings under section 77 of the Bankruptcy Act, as amended, and the appointment and qualification of the trustees for the railway company, the District Court in Missouri acquired exclusive jurisdiction of all of the property of the railway company wherever situate, and the possession of the Arkansas property by the trustees made the custody of the court of bankruptcy complete. When such custody and control over the property was taken by the bankruptcy court the property was thereby withdrawn from the jurisdiction of other courts. It was the duty of the bankruptcy court to protect its jurisdiction from interference, and the Bankruptcy Act, in plain terms, authorized the court to enjoin judicial proceedings to enforce any lien upon the property. Section 205 (j), 11 U.S.C.A. reads, in relevant part: "In addition to the provisions of section 29 of this title for the staying of pending suits against the debtor, the judge may enjoin or stay the commencement or continuation of suits against the debtor until after final decree; and may, upon notice...