Converse v. Highway Const. Co. of Ohio

• Decision Date: 08 November 1939
• Docket Number: No. 7935.,7935.
• Citation: 107 F.2d 127
• Parties: CONVERSE et al. v. HIGHWAY CONST. CO. OF OHIO, Inc.
• Court: U.S. Court of Appeals — Sixth Circuit

107 F.2d 127 (1939)

CONVERSE et al. v. HIGHWAY CONST. CO. OF OHIO, Inc.

No. 7935.

Circuit Court of Appeals, Sixth Circuit.

November 8, 1939.

COPYRIGHT MATERIAL OMITTED

W. H. Thomas, of Cleveland, Ohio (Hartshorn, Thomas & Abele, Martin A. McCormack, and Arnold M. Edelman, all of Cleveland, Ohio, on the brief), for appellants.

W. D. Cole, of Cleveland, Ohio (Boyd, Brooks & Wickham, Fackler & Dye, and W. H. Boyd, all of Cleveland, Ohio, on the brief), for appellee.

Before HICKS, HAMILTON, and ARANT, Circuit Judges.

HAMILTON, Circuit Judge.

Debtor-appellee, on May 11, 1936, filed its petition pursuant to the provisions of section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, which on the same day was approved and it was continued in possession of its property, with authority to operate its business with all of the powers of a trustee appointed pursuant to the provisions of the Act.

The court, by an ex parte order, enjoined and restrained all persons from interfering with the property, assets or effects in the possession of or owned by the debtor and from interfering with it in the conduct of its business "or to interfere in any manner with the exclusive jurisdiction of this Court over the debtor and its property."

The case was referred generally to a Special Master who, on September 19, 1936, issued an order requiring appellants, Frank P. Converse, Bernard Hagesfeld, R. H. Phillips and Don Scott, to appear before him and show cause why they should not be punished for contempt for disregarding the orders of the court.

Appellants responded and, after a full hearing, the Master filed his report finding each of them had "wilfully and without right, unlawfully interfered with the operation of the debtor's business contrary to and in violation of the court's injunctive order" theretofore issued. He recommended that they purge themselves by paying to the appellee the cost of the contempt proceedings in the amount of $1,145.18.

On exceptions, the court confirmed the report of the Master in all essential particulars except it decreed that appellee had been damaged in the sum of $1,145.18 by appellants' conduct and accordingly awarded a judgment against them jointly and severally from which they appealed.

The facts that the appellants were not parties to the original action, nor served with notice of the application made by the debtor for the injunction, nor served by the officers of the court with a copy of the injunction are immaterial.

Under Section 77B, sub. k, 11 U.S.C.A. § 207, sub. k, an order approving the filing of the petition "shall be taken to be the date of adjudication, and such order shall have the same consequences and effect as an order of adjudication" and under Section 77B, sub. o, 11 U.S.C.A. § 207, sub. o, in proceedings under this Section and consistent with its provisions "the jurisdiction and powers of the court, the duties of the debtor and the rights and liabilities of creditors, and of all persons with respect to the debtor and its property, shall be the same as if a voluntary petition for adjudication had been filed and a decree of adjudication had been entered on the day when the debtor's petition or answer was approved."

It follows from these provisions that the rule is applicable that the filing of a petition under section 77B, when approved by the court, is a caveat to all the world that it is in effect an attachment and injunction and that the title to the bankrupt's property has become vested in its trustee with actual or constructive possession in the custody of the bankruptcy court. Mueller v. Nugent, 184 U.S. 1, 14, 22 S.Ct. 269, 46 L.Ed. 405; Clay v. Waters, 8 Cir., 178 F. 385, 21 Ann.Cas. 897; In re Mitchell, 2 Cir., 278 F. 707.

The order of injunction in question was not only in personam but also operated in rem to prevent interference with or the invasion of the property rights of the debtor. It was broad enough in its terms to enjoin all persons from interfering with the property in custodia legis and was sufficient as a public record to impart constructive notice to all.

As we view the case, the question of the injunction is immaterial. The rule is applicable under a 77B proceeding that when the petition is approved by the court and it continues the officers of the corporation in possession of the property, it is in the custody of the court and it is not competent for any person to interfere with the possession of the corporate officers without first obtaining its consent. We consider this rule of such importance to the interest and safety of the public and the administration of justice that it should be inflexibly maintained on all occasions.

Its application imposes no undue hardship. In the present case appellants could have applied to the court to be heard on any just ground of complaint or for the establishment of any right they had in the premises. In re Swan, 150 U.S. 637, 652, 14 S.Ct. 225, 37 L.Ed. 1207; Thomas v. Cincinnati, N. O. & T. P. Railway Company, C.C., 62 F. 803. Under such circumstances, the rule is inapplicable that in order to charge a person with contempt for violating an injunctive order of the court, actual notice or knowledge of it must be brought home to the violator. This conclusion is based upon a familiar doctrine applicable to proceedings in bankruptcy courts. If this exception were not recognized, endless delays would be encountered to the great detriment of litigants and others interested in the expeditious administration of bankrupt estates.

The court was not compelled to observe the inhibitions of 29 U.S.C.A. § 107 and other related sections commonly known as the Norris-LaGuardia Anti-Injunction Act of March 23, 1932 (29 U.S.C.A. §§ 101-115). The right of the Bankruptcy Court is inherent to issue an injunction when necessary to prevent the defeat or impairment of its jurisdiction. Continental Illinois National Bank & Trust Company v. Chicago, Rock Island & Pacific Railway Company, 294 U.S. 648, 676, 55 S.Ct. 595, 79 L.Ed. 1110; Ex parte Baldwin, 291 U.S. 610, 615, 54 S.Ct. 551, 78 L.Ed. 1020.

The injunctive order here complained of had no relation to a labor dispute at the time of its entry. It was the usual one entered in bankruptcy cases under section 77B for the protection and preservation of the bankruptcy estate pending the proceedings. A review of the facts shows that the contempt charges did not grow out of a labor dispute, as defined under Section 13 of the Act (29 U.S.C.A. § 113, 47 Stat. 73).

Section 13(a) provides a case shall be held to involve or grow out of a labor dispute when it concerns persons engaged in the same industry, trade, craft or occupation; or having a direct or indirect interest therein; or having the same employer or the same employees or who are members of the same or an affiliated organization of employers or employees; whether such dispute is (1) one between one or more employers or associations of employers and between one or more employees or associations of employees; (2) between one or more employers or associations of employers and one or more employers or associations of employers; or (3) between one or more employees or associations of employees and one or more employees or associations of employees; or when the case involves any conflicting or competing interests in a labor dispute of persons participating or interested therein.

Subsection (b) provides that a person or association shall be held to participate or be interested in a labor dispute if relief is sought against him and if engaged in the same industry, trade, craft or occupation in which such dispute occurs or has a direct or indirect interest therein or is a member, officer, or agent of any association composed in whole or in part of employers or employees engaged in such industry, trade, craft or occupation.

Subsection (c) defines the term "labor dispute" to include any controversy concerning terms or conditions of employment or concerning the association or representations of persons in negotiating, fixing, maintaining, changing or seeking to arrange terms or conditions of employment regardless of whether or not the disputants stand in the proximate relation of employer and employee.

The facts found by the Special Master and concurred in by the court show that the Cleveland Truckers Association is a corporation organized under the laws of Ohio and the Pavers Exchange is also an Ohio non-profit corporation, and its members are paving contractors doing business in the County of Cuyahoga, Ohio; that the International Union of Operating Engineers is an unincorporated labor organization and had three locals or subordinate bodies with their headquarters in the City of Cleveland, Ohio, and that the appellant, Frank P. Converse, is its international representative, and appellant, Bernard Hagesfeld, is the vice-president and business agent of the locals. The International Union of Pavers and Rammermen is an unincorporated labor organization and has a subordinate body at Cleveland, Ohio, associated with the...