First Savings Bank & Trust Co. of Albuquerque, N. M. v. Butler

• Decision Date: 15 June 1922
• Docket Number: 5943.
• Parties: FIRST SAVINGS BANK & TRUST CO. OF ALBUQUERQUE, N.M., et al. v. BUTLER.
• Court: U.S. Court of Appeals — Eighth Circuit

282 F. 866

FIRST SAVINGS BANK & TRUST CO. OF ALBUQUERQUE, N.M., et al. v. BUTLER.

No. 5943.

United States Court of Appeals, Eighth Circuit.

June 15, 1922

Alonzo B. McMillen, of Albuquerque, N.M. (Laurence F. Lee, of Albuquerque, N.M., on the brief), for appellants.

Herman Mohr, of Albuquerque, N.M., for appellee.

Before CARLAND, Circuit Judge, and TRIEBER and POLLOCK, District judges.

POLLOCK District Judge.

This appeal concerns itself with the power and duty of a court of bankruptcy to draw to itself the complete and exclusive administration of the property and effects of a bankrupt, and in the protection of its jurisdiction to restrain proceedings in a court of the state wherein there is involved property of the bankrupt estate, the title to which passed to the trustee under the provisions of the Bankruptcy Act (Comp. St. Secs 9585-9656) as of date of the adjudication. The facts necessary to present the question involved are as follows:

At the date the proceeding in bankruptcy was instituted there was pending in the court of the state a suit to foreclose a mortgage given by the bankrupt and his wife to appellant herein, called the Bank & Trust Company, to secure the payment of a debt of $30,000, of which debt there remained unpaid about the sum of $20,000. Others claiming liens upon or rights in the mortgaged property were interpleaded in said suit. On application therefor the state court, on the 15th of April, 1921, appointed a receiver to take possession of the mortgaged premises. However, during the pendency of said foreclosure suit in the state court, the bankrupt mortgagor on the 2d day of April, 1921, filed his voluntary petition in bankruptcy, was adjudicated a bankrupt April 5th, and on April 18th, three days after the appointment of a receiver in the state court, a trustee in bankruptcy was appointed and duly qualified. Thereafter, and on the day of his appointment, the trustee filed what is termed a plea in abatement in the foreclosure suit pending in the state court bringing to the attention of that court in that cause the pendency of the bankruptcy proceedings, and applied to the state court to surrender jurisdiction of the mortgaged premises that the same might be administered in the bankruptcy court. This plea in abatement was stricken out the motion to surrender the property to the bankruptcy court denied, and a final decree of foreclosure and order of sale entered in the state court. Thereupon this suit was brought by the trustee for the purpose of restraining the parties from further proceeding in the foreclosure suit in the state court. From a decree granting such injunctive relief, the parties attempting to press the suit in the state court to final conclusion appealed.

There is an equity in the property involved in the foreclosure suit in the state court of a very substantial sum over and above enough to discharge the fixed liens thereon. The jurisdiction and power of the District Court to entertain this suit and restrain the parties litigant in the state court from carrying the suit pending therein to final disposition of the mortgaged premises is the only question insisted upon by appellants.

We are of the opinion appellants misconceive the purpose and scope of this suit as...