Isaacs v. Hobbs Tie & Timber Co.

• Decision Date: 15 March 1935
• Docket Number: No. 7656.,7656.
• Citation: 76 F.2d 209
• Parties: ISAACS v. HOBBS TIE & TIMBER CO.
• Court: U.S. Court of Appeals — Fifth Circuit

76 F.2d 209 (1935)

ISAACS v. HOBBS TIE & TIMBER CO.^*

No. 7656.

Circuit Court of Appeals, Fifth Circuit.

March 15, 1935.

William R. Watkins, of Fort Worth, Tex., for appellant.

Norman A. Dodge, of Fort Worth, Tex., and W. N. Ivie, John R. Duty, Claude Duty, and Jeff Duty, all of Rogers, Ark., for appellee.

Before BRYAN, HUTCHESON, and WALKER, Circuit Judges.

WALKER, Circuit Judge.

On August 7, 1928, Henrietta E. Cunningham was adjudged bankrupt in the Northern District of Texas. Her estate included lands located in the Western District of Arkansas which were subject to a mortgage given to secure a debt. A short time after the bankruptcy adjudication and an order requiring the sale, by the trustee, of all the bankrupt's property were made, the appellee, Hobbs Tie & Timber Company, bought that mortgage from the then owner thereof, paying $30,000 therefor, and in December, 1928, brought suit in an Arkansas state court for the foreclosure of that mortgage; the bankrupt and the trustee of the bankrupt estate being made parties defendant to the suit. On the petition of the bankrupt and the trustee that suit was removed to the United States District Court for the Western District of Arkansas. In that court the right of the appellee to maintain its foreclosure suit was unsuccessfully resisted, and that court rendered a decree of foreclosure and sale. From that decree an appeal to the United States Circuit Court of Appeals for the Eighth Circuit was taken. That court certified to the Supreme Court the question of appellee's right to maintain the foreclosure suit in the circumstances stated. 282 U. S. 734, 51 S. Ct. 270, 75 L. Ed. 645. The decision of the Supreme Court was to the effect that the Arkansas foreclosure suit was not maintainable save by consent of the bankruptcy court; and the decree of the District Court for the Western District of Arkansas was reversed, and the cause was remanded to that court, for further proceedings in conformity with the opinion. Isaacs v. Hobbs Tie & T. Co., 282 U. S. 734, 51 S. Ct. 270, 75 L. Ed. 645. Following the remandment of the foreclosure suit, the appellee filed in the court below a petition which asserted that it was entitled as of right to proceed with its foreclosure in the suit pending in Arkansas, and prayed the court's consent to do so. The denial of that petition by the court below was affirmed by this court, without prejudice to the right of petitioner (appellee here) to further apply to the bankruptcy court for such relief as it may be advised it can show itself entitled to. Hobbs Tie & Timber Co. v. Isaacs (C. C. A.) 61 F.(2d) 1006. While the last-mentioned proceeding was pending on appeal, the appellee filed in the court below its petition praying that it be permitted to proceed with its foreclosure suit in the Western District of Arkansas, and for all other relief to which petitioner is entitled. That petition contained allegations to the effect that since 1928 the trustee in bankruptcy has failed to pay taxes on the mortgaged lands, that appellee has paid such taxes, amounting to more than $5,000, to prevent the forfeiture and sale of such lands because of nonpayment of taxes, that the value of said lands is far less than the amount of the debt secured by the mortgage thereon, that the trustee in bankruptcy has been in possession of said lands since 1928, has been unable to sell those lands or any part thereof, and is now attempting to sell some of the timber on said lands and some of the land in small parcels and for small prices. To that petition the appellant interposed an "answer, set-off and counterclaim," which, after answering allegations of the petition, set up a counterclaim which charged in effect that appellee's conduct in instituting and prosecuting the foreclosure suit and asserting its claim to the mortgaged property in the possession of the trustee in bankruptcy constituted contempt of court; and the appellant prayed that he "recover, for the use and benefit of the estate herein, the sum of, to-wit, $150,000.00 by way of punishment for its interference with this court and its trustee, and/or as compensation and reimbursement to the estate of the damages sustained by the trustee in the premises." The court appointed a master to hear the facts, and report his findings of fact and conclusions of law in connection with the controversy raised by appellee's petition and appellant's answer and counterclaim. After hearing evidence the master made a report, containing findings of fact and conclusions of law; his conclusions being favorable to the appellant. The appellant filed exceptions to that report. No exceptions were filed to findings and conclusions of the master to the following effect: "That at the present time, the mortgage indebtedness alleged by said petitioner was a valid lien against the property and that if no set-off or counterclaim was allowed as prayed for by the trustee, then there was no equity in the land for the creditors of the bankrupt estate. And further found that except for the wrongful acts of Hobbs Tie & Timber Company as alleged, there was no equity in said lands and property for the creditors of said bankruptcy estate, and that it was the duty of the trustee to disclaim said property as burdensome and concluded that said petitioner's claim in the sum of $55,885.49 with 7% interest from May 21, 1927, was justly due and unpaid, and that the said Hobbs Tie & Timber Company was the legal and equitable owner and holder thereof, and that it had a valid and subsisting lien on the property involved to secure the payment of said indebtedness and the taxes paid by it in the sum of $5,000, and that said note and mortgage was not barred by the statute of limitations."

By its decree the court sustained the appellee's exceptions to the master's report, and adjudged:

"That the petitioner, Hobbs Tie and Timber Company, has a valid subsisting lien debt on the property described in its petition, not barred by limitation, the amount of which is in excess of the value of the land, which lien it is entitled to foreclose, and petitioner be and is hereby granted leave to foreclose its said lien in any court of competent jurisdiction and/or to proceed with its foreclosure suit in the Western Judicial District Court of Arkansas, Fort Smith Division thereof, as it may be advised, and to make B. K. Isaacs as Trustee in Bankruptcy herein a party defendant therein.

"That the estate in bankruptcy has no equity in said property and the said Trustee is directed to relinquish and surrender said property as burdensome to the estate and disclaim interest therein in any foreclosure suit begun or prosecuted by the petitioner. That the order of Court heretofore entered authorizing the Trustee to sell the assets of the estate in bankruptcy insofar as it embraced and/or related to said property be and it hereby is set aside.

"That the petitioner is not guilty of contempt of court; that the acts of petitioner complained of by the Trustee do not constitute grounds, nor does any of them constitute a ground, for imposition of fine or recovery of penalties or damages against petitioner...