In re Federal Facilities Realty Trust

• Decision Date: 14 June 1955
• Docket Number: 12274.,No. 11273,11273
• Citation: 227 F.2d 651
• Parties: In the Matter of FEDERAL FACILITIES REALTY TRUST, etc., Debtor, and National Realty Trust, etc., Debtor. Paul E. DARROW, etc., Appellant, v. Jacob KULP and Myrtle Johnson, etc., Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

227 F.2d 651 (1955)

In the Matter of FEDERAL FACILITIES REALTY TRUST, etc., Debtor, and

National Realty Trust, etc., Debtor.

Paul E. DARROW, etc., Appellant, v. Jacob KULP and Myrtle Johnson, etc., Appellees.

Nos. 11273, 12274.

United States Court of Appeals Seventh Circuit.

June 14, 1955.

Urban A. Lavery, Francis Heisler, Chicago, Ill., for appellant.

Walter P. Murphy, Walter Wm. Pearson, Livingston E. Osborne, Stanley A. Kaplan, Chicago, Ill., for appellee.

Before DUFFY, Chief Judge, and MAJOR and LINDLEY, Circuit Judges.

LINDLEY, Circuit Judge.

This matter is before us on Darrow's petition for contempt citations and for other relief. Since the facts involved in the controversy are fully related in our prior opinion in the two appeals 7 Cir., 220 F.2d 495, a brief summary only is necessary.

Darrow appealed from an order of the District Court, sitting in bankruptcy in the reorganization of Federal Facilities Realty Trust and National Realty Trust, denying him the right to file a petition in the bankruptcy cause to have the court subject a part of the sum of money theretofore ordered paid to Kulp and Johnson to his claim of some $43,000 paid and expenses incurred in satisfying certain surcharge demands resulting from the unfaithfulness of Kulp and Johnson, employees of Darrow at the time he was acting as trustee for the two debtor estates. This is cause No. 11273.

After the appeal had been perfected, a supersedeas was allowed by Judge Perry on July 15, 1954, and the bond tendered duly approved. Thereafter, on July 23, 1954, on the motion of Kulp and Johnson, Judge Campbell entered an order vacating the stay order previously entered by Judge Perry. On July 29, Darrow filed a petition in this court for leave to file a petition for a writ of mandamus to compel Judge Campbell to vacate the order of July 23, for a stay and for other relief. On August 3 the petition was denied. Darrow then prosecuted an appeal from Judge Campbell's order vacating the stay order. (Cause No. 11274).

We reversed both decisions. In No. 11273 we held that Darrow was entitled to be heard on his petition seeking to reach a part of the fund which was in the custody and control of the court and earmarked for distribution to Kulp and Johnson. In No. 11274 we held that he was entitled to a stay to preserve the status quo pending his appeal. We remanded the cause to the District Court with directions to consider Darrow's petition and to grant a stay.

In the present petition, Darrow shows that, while these appeals were pending, the fund was distributed, on August 23, 1954, by the co-trustees of the reorganized debtors to Kulp, Edythe Johnson as Administratrix of Myrtle Johnson's Estate and Walter P. Murphy, the attorney for Kulp. He suggests that this dissipation of the fund in the custody of the court while the appeals were pending is an act in contempt of the authority of this court. He prays that Kulp, Johnson and Murphy be compelled to restore to the District Court the amount of money which each of them has received from the said fund and that, in default of such repayment Murphy, Schwartz and Whiston, and the sureties on the bonds of Schwartz and Whiston as cotrustees of the debtor estates, be required to pay any judgment which ultimately may be entered in Darrow's favor against Kulp and Johnson. He also seeks to recover costs, expenses and attorneys' fees incurred in the prosecution of this petition, and such other and further relief as the court may deem just.

Although not clearly spelled out in the pleadings and accompanying suggestions, the petition is based on the theory that the order vacating the prior order granting a supersedeas was void from the outset because exclusive jurisdiction over the cause had vested in this court; that the order allowing a stay remained in full force and effect throughout the pendency of the appeals and that, therefore, the removal of the funds from the custody of the court below while the appeals were pending was an act in derogation of this court's authority and contemptuous.

And, with one exception to be discussed subsequently, the objections of the several respondents are premised on an assumption that the District Court retained jurisdiction over the supersedeas to vacate or modify its prior order, i. e., each of the several contemnors asserts his good-faith reliance on Judge Campbell's order of July 23 and on our order denying petitioner leave to file his petition for a writ of mandamus.

These pleadings point up the crucial issue which is presented for disposition. It is well settled that filing a notice of appeal from a district court's judgment vests jurisdiction over the cause appealed in the court of appeals. Thereafter, the trial court has no power to modify its judgment or take other action affecting the cause without permission of the appellate tribunal, except insofar as jurisdiction is expressly reserved in the district court by statute or the Federal Rules of Civil Procedure, 28 U.S. C.A., to act in aid of the appeal. Miller v. United States, 7 Cir., 114 F.2d 267, certiorari denied 313 U.S. 591, 61 S.Ct. 1114, 85 L.Ed. 1545; Smith v. Pollin, 90 U.S.App.D.C. 178, 194 F.2d 349; Willoughby v. Sinclair Oil & Gas Co., 10 Cir., 188 F.2d 902; Jordan v. Federal Farm Mortgage Corp., 8 Cir., 152 F.2d 642, certiorari denied 328 U.S. 852, 66 S. Ct. 1339, 90 L.Ed. 1624; J. J. Theatres, Inc., v. Twentieth Century-Fox Film Corp., D.C., 112 F.Supp. 674, reversed on other grounds, 2 Cir., 212 F.2d 840; Republic of China v. Pang-Tsu Mow, D.C., 12 F.R.D. 359; Daniels v. Goldberg, D.C., 8 F.R.D. 580, affirmed 2 Cir., 173 F.2d 911.

Rule 62(d) reserves power in the district courts to grant a supersedeas on a proper application, but the question of the scope of that power, — whether it extends only to a ruling on the application of the stay or whether it is a continuing power to revoke a stay previously granted, — has never before been considered. But numerous cases decided prior to the adoption of the Federal Rules are of valuable assistance in placing the question in its proper perspective.

Supersedeas practice in the federal court system is a creature of statutory origin. From the inception of the federal judiciary, a judgment could be executed while an appeal therefrom was pending unless timely application was made by the appellant to the trial court or to a judge or justice of the appellate tribunal for a stay. The stay became effective when a bond or other sufficient security was approved by the court to secure faithful prosecution of the appeal and payment of the judgment if the appeal proved unsuccessful. For a discussion of the historic basis for the procedure see Hovey v. McDonald, 109 U.S. 150, 3 S.Ct. 136, 27 L.Ed. 888.

It has long been established that an order granting a supersedeas may be vacated or modified on an application and sufficient showing to the proper court. Florida Central Railroad Co. v. Schutte, 100 U.S. 644, 25 L.Ed. 605; Patterson v. Hoa's Executrix, 131 U.S. Append. lxxxviii, 18 L.Ed. 884; Knox County v. United States, ex rel. Harshman, 131 U.S.Append. clxvi, 25 L.Ed. 191; Hudgins v. Kemp, 18 How. 530, 535, 15 L.Ed. 511. It is pertinent to note, however, one distinction between each of these cases and the question presented for our determination. Each case was an appeal to the Supreme Court; a stay of the judgment in each was ordered by a Supreme Court justice, and the application in each case to modify or vacate the order was addressed to that Court.

The Supreme Court held, under the supersedeas statute then in force, that a trial court did not have jurisdiction to modify or vacate a previously approved supersedeas after jurisdiction of the cause had been transferred to an appellate court. In Draper v. Davis, 102 U.S. 370, 26 L.Ed. 121, a final decree was entered on April 30, 1878. The trial court entered an order allowing an appeal to the Supreme Court and approved a bond in the penal sum of $1,000 conditioned according to law for a supersedeas. Thereafter, on his conclusion that the bond was insufficient, the same justice who approved the $1,000 bond ordered appellant to file an additional bond in the penal sum of $3,000. Appellant then applied to the Supreme Court for a writ of supersedeas to stay execution of the decree pending the appeal. The motion was denied, without prejudice to its renewal should the need arise, the court holding that the purported modification of the supersedeas was void for want of jurisdiction in the trial court to enter the order. The Court said, 102 U.S. at page 371, 26 L.Ed. 121: "When the original bond of $1,000 was accepted by the justice and the citation signed, an appeal was allowed and security...