J. Henry Schroeder Banking Corp. v. Blumenthal

Decision Date11 October 1977
Docket NumberNo. 74-2586,74-2586
PartiesJ. HENRY SCHROEDER BANKING CORP., Plaintiff-Appellee, v. W. Michael BLUMENTHAL, Secretary of the Treasury of the United States, et al., Defendants-Appellees-Cross-Appellants. BEN R. HENDRIX TRADING CO., INC., Plaintiff-Appellant-Cross-Appellee, v. J. HENRY SCHROEDER BANKING CORP. et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Benjamin S. Hardy, Brownsville, Tex., Glenn L. Morgan, New Orleans, La., for plaintiff-appellant.

Asa V. Bland, Jr., Charles C. Murray, McAllen, Tex., Russell R. Barron, for Schroeder Banking Corp. et al.

James R. Clopton, McAllen, Tex., for V. Guerra.

Ralph L. Alexander, Edinburg, Tex., for Alamo Express, Inc., et al.

Edward B. McDonough, Jr., U. S. Atty., William L. Bowers, Jr., James R. Gough, Jr., Asst. U. S. Attys., Houston, Tex., for Secy. of Treasury.

Appeals from the United States District Court for the Southern District of Texas.

Before BROWN, Chief Judge, HILL and FAY, Circuit Judges.

JOHN R. BROWN, Chief Judge:

This lawsuit involves goods, principally liquor, in Customs' bond which were seized from the bonded warehouses in two Texas counties. Due to the voluntary filing of an arrangement under Chapter XI of the Bankruptcy Act, followed by a judicial sale to which all parties consented, we hold that the issue of an earlier-challenged seizure of the liquor is now moot.

Simon Says "No"

This dispute arose from a claim by the Henry J. Schroeder Banking Corporation (Schroeder), against Ben R. Hendrix Trading Co., Inc. (Hendrix), an import/export dealer. Since 1968 Schroeder had made loans to Hendrix to finance his inventory. The loans were secured by a lien on the assets. In 1973 when Hendrix was behind on the payment of a loan, Schroeder filed for foreclosure of the lien and a money judgment for the outstanding loan. The state court ordered sequestration of all the assets located either in Hendrix's own warehouse or in the warehouse under Customs' bond.

Subsequently a now controversial compromise agreement was entered into by Schroeder and Hendrix. 1 Under the agreement Hendrix admitted the amount of the debt and agreed to a judgment being entered against him. A sale of the assets was arranged by Schroeder. Hendrix, however, could sell the goods if he could find a buyer willing to pay more than Schroeder's buyer. An option clause gave Schroeder the right to sell the goods if Hendrix attempted to otherwise dispose of the property. Contending that Hendrix did just that, Schroeder obtained orders for a public sale of the liquor by the sheriff. Customs, speaking through Secretary of the Treasury, William Simon, objected and asked for reformed orders of sale. Although two sheriff's sales were attempted, Customs refused to release the goods either to the sheriff or to Hendrix. This federal suit ensued.

Federal Prohibition Revisited

Two lawsuits were filed by the parties in federal court on the same day. Both sought declaratory judgments. Hendrix sued Schroeder, the Customs officials, and the Secretary of the Treasury, seeking to have the attempted sheriff's sale and the underlying state court order declared void. 2 Schroeder sued Hendrix and essentially the same other officials contending that the attempted seizure and sale were not in violation of federal law. Schroeder also sought mandamus to compel Customs to release the liquor and an injunction to prevent Hendrix from taking the goods from the warehouses. Customs counterclaimed by filing a bill in the nature of an interpleader, asking that if the federal court entertained the case, they be released from liability upon compliance with either the state or federal process, as found appropriate by the federal court.

The Federal District Court held that the state court could adjudicate the ownership of the goods in question. The Court held that while the state court could direct compliance with Customs' regulations to effect a transfer of the title documents in question, its attempt to do so was void due to its failure to include the warehousemen in its order. The case was dismissed without prejudice to further pursue these matters in the state court or under Customs' laws and regulations. A supplemental order issued by the District Court held that Customs would be discharged from further liability upon compliance with properly executed warehouse receipts, whether done voluntarily or in response to orders of the state court.

Mootness In The Moonshine

Hendrix appealed from these orders, but after the instant appeal was filed Hendrix filed a Bankruptcy Chapter XI reorganization proceeding to work out an arrangement whereby control of the assets was maintained by him as a debtor in possession. During the course of the Chapter XI proceedings, all parties moved to sell the liquor. Hendrix sought privately to sell it as a debtor in possession and the creditors sought to have a trustee handle the transaction. The Bankruptcy Judge appointed a trustee who sold the merchandise and now holds the proceeds subject to the orders of the Bankruptcy Court. The appropriate Customs and title documents were executed, Customs officials acted in accordance with these instruments, and the goods which were the subject of the controversy were delivered to the buyers.

Both Customs...

To continue reading

Request your trial
2 cases
  • J. Henry Schroeder Banking Corp. v. Blumenthal
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • December 13, 1977
    ...565 F.2d 1215 J. Henry Schroeder Banking Corp. v. Blumenthal No. 74-2586 United States Court of Appeals, Fifth Circuit 12/13/77 S.D.Tex., 560 F.2d 1192 ...
  • Ben R. Hendrix Trading Co., Inc. v. J. Henry Schroeder Banking Corp.
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • December 13, 1977
    ...Trading Co., Inc. v. J. Henry Schroeder Banking Corp. No. 74-2586 United States Court of Appeals, Fifth Circuit 12/13/77 S.D.Tex., 560 F.2d 1192 ...

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT