Ex parte, the City Bank of New Orleans In the Matter of William Christy, Assignee of Daniel T. Walden, a Bankrupt

• Decision Date: 01 January 1845
• Citation: 3 How. 292,11 L.Ed. 603,44 U.S. 292
• Parties: EX PARTE, THE CITY BANK OF NEW ORLEANS IN THE MATTER OF WILLIAM CHRISTY, ASSIGNEE OF DANIEL T. WALDEN, A BANKRUPT
• Court: U.S. Supreme Court

44 U.S. 292

3 How. 292

11 L.Ed. 603

EX PARTE, THE CITY BANK OF NEW ORLEANS IN THE MATTER

OF WILLIAM CHRISTY, ASSIGNEE OF DANIEL T.

WALDEN, A BANKRUPT.

January Term, 1845

THIS was a motion on behalf of the City Bank of New Orleans, for a prohibition, to be issued to the District Court of the United States for the district of Louisiana.

The suggestion for the prohibition stated the following as facts in the case:

First. That Daniel T. Walden, of the city of New Orleans, on the 27th July, 1839, and on the 17th day of August, 1839, executed two several mortgages to the City Bank of New Orleans, on a certain plantation, and on lots of land in said state, to secure payment of $200,000 borrowed of said bank; which mortgages were duly recorded, and in all respects good and valid, and created a good, legal, and equitable lien on the property mortgaged for payment of said debt. That, on or about 20th October, 1840, Walden instituted suit in the state District Court, to set aside said mortgages, for the same causes, substantially, as William Christy (Walden's subsequent assignee in bankruptcy) has presented by his petition and amended petition in the District Court of the United States at New Orleans, exercising summary jurisdiction in bankruptcy, to set aside the same mortgages, as per certified copy of the proceedings in the District Court of the United States herewith annexed; and the state court, on appeal, decided finally against Walden's complaint, and sustained the mortgages.

Second. That, afterward, the bank proceeded to foreclose its mortgages in the state court; and thereupon, on 17th May, 1842, an order of seizure and sale was made, and an actual seizure of the property executed on 19th May, 1842.

Third. That, on 18th June, 1842, the said Walden filed his petition for the benefit of the bankrupt act, in the District Court of the United States at New Orleans, and on the 18th July, 1842, said court decreed him to be a bankrupt.

Fourth. That, after Walden filed his petition, and before decreed a bankrupt, viz., on 27th June, 1842, he applied to the said District Court of the United States for its injunction to stay the sale ordered in the state court of the mortgaged premises; setting forth, as grounds therefor, the same facts, substantially, as subsequently again set forth by Christy, his assignee, in his petitions aforesaid. After full hearing of said bill, the court refused the injunction; and thereafter the premises seized were duly sold, with every legal requisite and formality, in execution of the previous orders of the state court, and the City Bank became the purchasers.

Fifth. That the said bank has, in no wise, presented or proved its claim against Walden, in the bankrupt court, but pursued the said mortgage claim adversely in the state court, relying on its lien by the state law, and the proviso in the bankrupt act, saving such lien from its operation.

Sixth. That the matter in dispute exceeds two thousand dollars in value.

Seventh. That the said Christy, assignee, &c., knowing all the premises, but contriving to impair the lien of the bank by the mortgages aforesaid, contrary to the saving clause of the bankrupt act, is endeavoring, by his petition and supplemented petition, to subject all the previous proceedings of the state court upon the mortgages to review and revision in the District Court of the United States, by its summary process in bankruptcy. And the said Christy and Walden, and the Hon. Thedore H. McCaleb, judge of the said District Court of the United States, have wrongfully and vexatiously forced the said bank to appear in said court, upon its summary process, to answer said 'Christy's petition. And though the bank has objected, by plea, to the summary jurisdiction of the court over the matters aforesaid, yet the court adheres—hath overruled the plea—and persists, by its summary process, to proceed with the cause, to the embarrassment of the bank, and to the deprivation of all redress by appeal.

In addition to the foregoing statement filed by the counsel in support of the motion for a prohibition, it may be proper to state that,

On the 8th of October, 1842, Christy filed the petition mentioned in the seventh proposition just quoted. It recited that Walden, the bankrupt, was, at the time of filing his schedule and surrender, the owner of a large amount of real estate; that the bank claimed to have a mortgage upon it; that the bank caused it to be sold and possession delivered; that the sale was void, because the application of Walden operates as a stay of proceeding; that the property was offered for sale in block, though composed of twenty different stores or buildings, and for cash; that the mortgage debt was not justly due, but void on account of usury; and prayed that the sale might be declared void, or if adjudged valid, that the amount thereof should be paid over to the petitioner, to be distributed according to law.

On the 31st of October, 1842, the bank filed a plea to the jurisdiction of the court, with other matters in defence.

On the 17th of February, 1843, the questions raised by the answer of the bank were adjourned to the Circuit Court of the United States.

At April term, 1843, the Circuit Court returned the following answers:——

'In answer to the questions adjourned into this court by the District Court for the said district, it is ordered that the following answers be certified to the District Court in bankruptcy, as the opinion of the court thereupon:

'First. That the said District Court has, under the statute of bankruptcy, full and ample jurisdiction of all questions arising under the petition of William Christy, assignee of Walden, to try, adjudge, decree, and determine the same between the parties thereto.

'Secondly. That the sale made of the mortgaged property, under the seizure and sale ordered by the District Court of the state of Louisiana, is void, and that District Court of the United States should by its decree declare it void in the suit; and that said last-mentioned court has full power and authority to try and determine the validity of said mortgages, and if proved upon the trial void according to the laws of Louisiana, to make a decree accordingly, and order a sale of the property therein contained for the benefit of the several creditors of the bankrupt; but if upon proof said mortgages shall be sustained and adjudged valid, a decree should be rendered in favor of the mortgagees, condemning to sale all their interests, rights, all title therein, and all the interest, right, and title of the bankrupt and all the general creditors, in the hands of the assignee, and the rights and title of the assignee also; and by the order of sale the marshal be directed to pay over to the mortgagees, after deducting the per cent. for his commissions and all the legal costs of the suit, the amount of their claim, if the proceeds of the sale amount to so much, and the balance, if any, to pay over to the assignee; and that by such decree the assignee be ordered to make proper title and conveyance to the purchaser or purchasers, upon the full payment of the purchase money and a reasonable compensation to the assignee for making such conveyance, to be determined and settled by the judge of the District Court, should the purchaser or purchasers and the assignee disagree as to the amount.

'Thirdly. The second and alternative prayer in the petition of the assignee, asking the payment to him of the whole amount of the proceeds of the former sale of the mortgaged property, being inconsistent with the opinion of the court in the second point, will therefore be disregarded on the trial by the District Court.

J. McKINLEY,

'Associate Justice of the Supreme Court U. S.'

Afterwards, in 1843, an amended petition was filed by Christy, alleging, amongst other things, that the bank claimed to be a creditor of Walden, and 'in that capacity had become a party to the said proceedings in bankruptcy,' &c., & c.

In December, 1843, the bank prayed oyer of the time, place manner, and form, where, how and when it became a party to the proceedings in bankruptcy.

The court having granted the prayer for oyer, Christy, on the 23d of January, 1844, filed the following:

'That the said City Bank became parties to the proceedings in bankruptcy of the said Walden, first, by the operation of law, they being at the time of his bankruptcy mortgage creditors of the said Walden, and placed upon his schedule as such; second, by their own act, having filed a petition in this honorable court on the 5th September, 1842, praying that the demand of the assignee for the postponement of the sale of certain properties be disregarded, that their privileges be recognised, and that said properties be sold under an order of this court for cash; third, that an attempt was made by the said bank to withdraw said petition and prayer of 5th September, 1842, but a discontinuance of the same was opposed by M. W. Hoffman and L. C. Duncan, creditors of said bankrupt, and parties interested, by reason of which said opposition the legal effects of said application, made by the City Bank as aforesaid, to this honorable court remain in full force.

'In consideration of all which and the documents herewith filed, your petitioner prays, that said City Bank be compelled to answer to the merits of the original and supplemental petition in this case filed, without further delay.'

On the 10th of February, 1844, the bank filed its answer, denying that it had ever proved its debt, or otherwise subjected itself in any manner to the summary jurisdiction of the District Court sitting as a court of bankruptcy; but on the contrary, that it had prosecuted its remedy in the state courts of Louisiana, and adding the following:

'And so these respondents and defendants say and insist, that this honorable court, sitting as a bankrupt court, and holding summary jurisdiction in matters of bankruptcy under and by virtue of said...