Chicot County Drainage Dist. v. Baxter State Bank, 11342.

Citation103 F.2d 847
Decision Date18 May 1939
Docket NumberNo. 11342.,11342.
PartiesCHICOT COUNTY DRAINAGE DIST. v. BAXTER STATE BANK et al.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

E. L. McHaney, Jr., of Little Rock, Ark. (James R. Yerger, of Lake Village, Ark., Grover T. Owens and S. Lasker Ehrman, both of Little Rock, Ark., on the brief), for appellant.

Arthur J. Johnson, of Star City, Ark. (G. W. Hendricks, of Little Rock, Ark., on the brief), for appellees.

Before GARDNER and WOODROUGH, Circuit Judges, and OTIS, District Judge.

GARDNER, Circuit Judge.

This is an appeal from a judgment entered in favor of appellees, who were plaintiffs below, in an action on certain bonds owned by them and issued by the appellant Drainage District. The parties will be referred to as they appeared in the lower court. No question is raised as to the sufficiency of the pleadings. The defendant answered plaintiffs' complaint, which was in conventional form, pleading that in a bankruptcy proceeding brought in the United States District Court for the Eastern District of Arkansas, it had been adjudged in effect that the bondholders of the district, including the plaintiffs, were entitled to recover in that proceeding the sum of approximately $360 on each $1,000 bond; that under the terms and provisions of said decree, plaintiffs had no valid claim against the defendant but were forever restrained and enjoined from asserting any claim or demand whatever against defendant, except as provided in said decree.

The bankruptcy proceedings referred to were initiated on June 17, 1935, by filing in the United States District Court for the Eastern District of Arkansas, a petition for authority to effect a plan of debt readjustment, pursuant to amendments to the Bankruptcy Act, adopted May 24, 1934, and designated as U.S.C.A. Title 11, Sections 301, 302 and 303. No question is raised as to the regularity of these proceedings as prescribed by the Act. Plaintiffs were made parties to said proceedings by publication of a notice thereof pursuant to order of the bankruptcy court, and by mailing to them personally a notice of said proceedings, which notice was received by each of them, but neither of them appeared therein either in person or by attorney. The decree which was entered therein on March 28, 1936, provided in part as follows: "(c) That all the old bonds and other obligations of the petitioning district affected by the plan of debt readjustment approved in this cause, whether heretofore surrendered and cancelled or remaining outstanding, and by whomsoever held, are hereby cancelled, annulled and held for naught as enforceable obligations of the petitioning district, except as herein provided, and that the holders thereof be and they are hereby forever restrained and enjoined from other wise asserting any claim or demand whatsoever therefor as against the petitioning district or its officers, or against the property situated therein or the owners thereof;"

No appeal was taken by the plaintiffs from the bankruptcy decree above referred to.

The lower court held that the decree in bankruptcy entered March 28, 1936, was void because the court was without jurisdiction of the parties plaintiff or of the subject matter; that the plaintiffs were therefore entitled to recover the full amount of their bonds, and judgment was entered accordingly.

The determining question on this appeal is whether the bankruptcy decree constituted a defense to the maintenance of this action. The act amendatory of the bankruptcy laws under which the proceedings were had, culminating in the above-mentioned decree, was, subsequent to the entry of the decree, held to be unconstitutional because it materially restricted the states in the control of their financial affairs. Ashton v. Cameron County Water Improvement Dist., 298 U.S. 513, 56 S.Ct. 892, 80 L.Ed. 1309. It was held in that decision that the bankruptcy power of Congress does not extend to the states or their political subdivisions. This decree, as has been observed, purported to cancel the obligations upon which the present suit was brought. The bankruptcy court rendering the decree here pleaded as res judicata was a court of limited jurisdiction. Smith v. Chase National Bank, 8 Cir., 84 F.2d 608; Nixon v. Michaels, 8 Cir., 38 F.2d 420. Its powers of compositions were fixed and limited by statute. Wheeling Structural Steel Co. v. Moss, 4 Cir., 62 F.2d 37. Its jurisdiction was therefore wholly dependent upon the amendatory act which was held to be unconstitutional in Ashton v. Cameron County Water Improvement District, supra. The act itself (Title 11 U.S.C.A. §§ 301-303) indicates that Congress was of the view that the bankruptcy court was without jurisdiction except as it might be conferred by that act. Section 302 provides as follows: "Until January 1, 1940, in addition to the jurisdiction exercised in voluntary and involuntary proceedings to adjudge persons bankrupt, courts of bankruptcy shall exercise original jurisdiction in proceedings for the relief of debtors, as provided in this chapter of this title."

Then follows Section 303, which provides that a municipality or other political subdivision may file a petition setting out that the district is insolvent or unable to meet its debts, and submitting a plan of readjustment. The requirements of the petition are described in the act, and it is provided that upon the filing of such petition, the judge shall enter an order either approving or dismissing it.

Without further detailing the proceedings purported to be authorized by the act, it is sufficient for the purpose of this opinion to state that the proceeding...

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10 cases
  • Trucke v. Erlemeier
    • United States
    • U.S. District Court — Northern District of Iowa
    • March 4, 1987
    ...case. See also Security Savings Bank of Valley Junction v. Connell, 198 Iowa 564, 200 N.W. 8 (1924); Chicot County Drainage District v. Baxter State Bank, 103 F.2d 847 (8th Cir.1939). Furthermore, the Chicot County decision was reversed by the U.S. Supreme Court for reasons which suggest th......
  • Martin v. Ben Davis Conservancy Dist.
    • United States
    • Supreme Court of Indiana
    • October 2, 1958
    ...before us.' Chicot Co. Drainage Dist. v. Baxter State Bank, 1940, 308 U.S. 371, 374, 375, 60 S.Ct. 317, 319, 84 L.Ed. 329, reversing 8 Cir., 103 F.2d 847, and rehearing denied 309 U.S. 695, 60 S.Ct. 581, 81 L.Ed. In this case there the additional factors which reinforce the viewpoint we tak......
  • Chicot County Drainage Dist v. Baxter State Bank
    • United States
    • United States Supreme Court
    • January 2, 1940
    ...the final decree, was introduced. The District Court ruled in favor of respondents and the Circuit Court of Appeals affirmed. 8 Cir., 103 F.2d 847. The decision was placed upon the ground that the decree was void because, subsequent to its entry, this Court in a proceeding relating to a mun......
  • In re Summer Lake Irr. Dist.
    • United States
    • U.S. District Court — District of Oregon
    • May 20, 1940
    ...Belton, Tex., 5 Cir., 100 F.2d 655; Getz v. Edinburg Consol. Independent School Dist., 5 Cir., 101 F.2d 734; Chicot County Drainage Dist. v. Baxter State Bank, 8 Cir., 103 F.2d 847; Vallette v. City of Vero Beach, Fla., 5 Cir., 104 F.2d 59; Touchton v. City of Fort Pierce, Fla., 5 Cir., 109......
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