Jacksonville Blow Pipe Co. v. Reconstruction Fin. Corp.

• Decision Date: 26 April 1957
• Docket Number: No. 16400.,16400.
• Citation: 244 F.2d 394
• Parties: JACKSONVILLE BLOW PIPE COMPANY, Appellant, v. RECONSTRUCTION FINANCE CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

244 F.2d 394 (1957)

JACKSONVILLE BLOW PIPE COMPANY, Appellant, v. RECONSTRUCTION FINANCE CORPORATION, Appellee.

No. 16400.

United States Court of Appeals Fifth Circuit.

April 26, 1957.

W. J. Oven, Jr., Tallahassee, Fla., for appellant.

Gray C. Ramsaur, Guy W. Botts, Jacksonville, Fla., Botts, Mahoney & Whitehead, Jacksonville, Fla., of counsel, for appellee.

Before TUTTLE and BROWN, Circuit Judges, and SIMPSON, District Judge.

TUTTLE, Circuit Judge.

This is an appeal from a summary judgment enjoining appellant from prosecuting a suit in the state courts of Florida against appellee's transferees of certain property purchased by the appellee at a bankruptcy sale in and approved by the district court, and forbidding appellant from initiating any other suits for the recovery of the property or for damages for its taking. The principal issue is whether such an injunction is prohibited under the circumstances of this case by section 2283 of the Judicial Code, 28 U.S.C.A. § 2283.

On October 31, 1951, appellant entered into a "retain title contract" with the Parker Manufacturing Company, whereby appellant furnished and installed a blow pipe system for that company for a purchase price of $3,724.32, retaining title, however, until the system was "fully paid for in cash." On January 17, 1953, the Parker Manufacturing Company was adjudged a bankrupt and all of its assets were placed in the hands of a trustee; at that time $550.00 was still owing on the above contract and appellant filed a secured claim. The Referee on May 20th directed the trustee to conduct a public sale of the Parker plant and the trustee thereupon advertised the entire plant for sale as a unit, listing the blow pipe system as part of its equipment. On June 5th appellant petitioned the Referee that it be declared the owner of the system and that the trustee be directed either to give them possession of it or to pay them the amount of their claim; thereupon on June 16th the Referee ordered as follows:

"Ordered, Adjudged and Decreed, that the Trustee surrender to the petitioner the described property subject to the retention of title agreement, or that the trustee pay to the petitioner the principal sum of $550.00 plus interest accruing to the date of the filing of the involuntary bankruptcy petition."¹

On the same day the Referee modified his order of sale of May 20th to provide that the property sold should be free of liens and unencumbered. On the following day the trustee sold the entire plant, as advertised, to the appellee for $49,100, on the condition that appellee be permitted to offset against the price so much as necessary of the approximately $70,000 mortgage indebtedness owed to it by the bankrupt; the district court approved the sale on these terms on September 30th. On November 5th the trustee conveyed the plant to the appellee by a Deed and Bill of Sale which expressly covered the blow pipe system.

On December 2nd the trustee, evidently not having realized any cash with which he could pay the $550 plus interest to the appellant, wrote a letter to its attorney:

"* * * I * * * am, by this letter, advising you that we forthwith surrender the property in question subject to the retention title agreement in favor of your client, Jacksonville Blow Pipe Company, the same being located on the premises of Parker Manufacturing Company, Inc.

"You may proceed on the basis that I as Trustee, in accordance with the Referee\'s order entered on the 16th day of June, 1953, have relinquished all rights and claims that I may have in my capacity as Trustee to the pipes in question. This should be sufficient for you to proceed in any manner you deem fit." (Emphasis added.)²

On January 5, 1954, appellant sent a truck to the plant to remove the system, but after some negotiations with representatives of the appellee, appellant was persuaded to leave the system there, marked prominently with a sign:

"Property of and for sale by Jacksonville Blow Pipe Company, P.O.Box 3687, Phone 5-0586, Jacksonville, Florida."

On March 15th appellee sold the entire plant, with warranty of title, to H. Pickett, who thereafter conveyed parts to the Cash Lumber Company and to others. On September 25th appellee offered to pay appellant the amount of its claim and on April 7, 1955, appellee's check for $564.92 was tendered to appellant by the trustee. On June 26th the Referee entered an order approving the accounts and discharging the trustee; no appeal was taken from this order.

Appellant then filed a suit against H. Pickett and the Cash Lumber Company in the Circuit Court of the Second Judicial Circuit of Florida, demanding a return of the blow pipe system or its value plus $4,500 damages for its retention. Appellee thereupon filed this suit in the district court, in which the bankruptcy proceedings had transpired, praying for a declaratory judgment determining appellee's and appellant's rights to the system and for a permanent injunction prohibiting appellant from prosecuting any suits for the repossession, or damages for the retention of the system. After both parties had submitted affidavits, admissions, and answers to interrogatories and had moved for summary judgment the district court granted the injunction prayed for on the condition that appellee would deposit $550 plus the requisite interest with the court.³

The principal issue is created by appellant's contention that because of the provisions of 28 U.S.C.A. § 2283 the district court was without jurisdiction to enter such an injunction. Reliance is placed principally on Sargent v. Helton, 115 U.S. 348, 6 S.Ct. 78, 29 L.Ed. 412, followed in Piedmont Coal Co. v. Hustead, 3 Cir., 294 F. 247, 32 A.L.R. 556, certiorari denied, 264 U.S. 582, 44 S.Ct. 331, 68 L.Ed. 860, and on Toucey v. New York Life Insurance Co., 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100, and Amalgamated Clothing Workers v. Richman Brothers Co., 348 U.S. 511, 75 S.Ct. 452, 99 L.Ed. 600. It is thus necessary for us to examine this somewhat troubled jurisdictional area in which the effect of several crucial and divided Supreme Court decisions and of the 1948 revision of the Judicial Code have as of yet been insufficiently explored.

Though the federal courts have ever since 1793 been forbidden by the various Judiciary Acts and Codes to enjoin the proceedings of any state court,⁴ over the years a number of judicial exceptions to the rigid application of the prohibition had developed. In Julian v. Central Trust Company, 193 U.S. 93, 24 S.Ct. 399, 48 L.Ed. 629, the Supreme Court held that in spite of R.S. § 720 a federal court that had approved a foreclosure sale of mortgaged property free of all except specified liens could, at the instance of the purchaser, protect its own continuing jurisdiction over the property by enjoining the prosecution of an action in the state courts which sought to enforce a lien against the property created by a judgment in the state court against the former owner based on an accident that had occurred after the foreclosure sale. In Riverdale Cotton Mills v. Alabama & Georgia Manufacturing Co., 198 U.S. 188, 25 S.Ct. 629, 49 L.Ed. 1008, the Court held that a federal court that had after much litigation settled the title to certain property in a foreclosure action could enjoin a state suit in which the defeated parties sought to attack the title approved by the federal court on the ground that that court never had had proper diversity jurisdiction; Julian and many other cases were cited for the proposition that an equity court had power to protect its jurisdiction and to effectuate its decrees by issuing such an injunction. Cf. also Lang v. Choctaw, Oklahoma & Gulf R. R., 8 Cir., 160 F. 355, and Bethke v. Grayburg Oil Co., 5 Cir., 89 F.2d 536, certiorari denied, 302 U.S. 730, 58 S.Ct. 54, 82 L.Ed. 564, in which this Court held that even after the termination of a receivership a federal court had jurisdiction to issue an injunction in an ancillary action against an in personam suit in a state court which sought to enforce a debt that had been settled and the lien for which had been discharged in the earlier proceeding.

Soon after followed Toucey v. New York Life Insurance Co., supra. In an elaborate and lengthy opinion Mr. Justice Frankfurter analyzed the history of the statutory prohibition, with special reference to its purpose of reducing the occasions for friction between the federal and the state courts, and pointed out that it appeared that two types of exceptions had grown up to reduce the scope of the statute: (1) certain exceptions based on particular statutes that explicitly or implicitly overrode the general prohibition; (2) certain court created exceptions, including especially the following: (a) in in rem proceedings in which both a federal and a state court seek to adjudicate rights to the same property and in which the federal court first obtains custody of the property its injunction against other proceedings will reduce rather than create friction; while several cases were cited directly in support of this proposition, which the opinion did not criticize, the Julian and Riverdale cases were mentioned in a separate footnote, 314 U.S. at page 135, fn. 6, 62 S.Ct. at page 145 to show "the extent to which a federal court's exclusive control over the res may require the use of the injunction to effectuate its decrees in rem * * *"; (b) injunctions against the enforcement of fraudulently obtained state court judgments — of these the opinion is somewhat more critical; (c) injunctions against the relitigation in a state court of an in personam cause previously determined in the federal court; for this exception the Court found insufficient support in the cases and no authority in the statute, and its holding was that no such injunction may issue. A vigorous dissent by Mr. Justice Reed challenged the majority's conclusion that injunctions against relitigation would be more productive of federal-state court...