Lee v. Edmunds, 6909.
| Decision Date | 19 July 1933 |
| Docket Number | No. 6909.,6909. |
| Citation | 66 F.2d 122 |
| Parties | LEE, Comptroller of Florida, et al. v. EDMUNDS et al. HOWELL v. SAME. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Chester Gourley, Richard H. Hunt, and Edward E. Fleming, all of Miami, Fla., for appellants.
Bart A. Riley, Henry K. Gibson, S. P. Robineau, and B. R. Cisco, all of Miami, Fla., for appellees.
Before BRYAN, FOSTER, and SIBLEY, Circuit Judges.
These are two separate appeals arising upon the same record, one by H. R. Howell, a receiver appointed by a Florida state court, from an order refusing to require federal receivers to deliver to him the Patricia Hotel, a mortgage on which was in course of foreclosure in the state court; and the other by J. M. Lee, as comptroller of the state of Florida, and his appointee M. A. Smith, as liquidator of Trust Company of Florida, from an order refusing to require federal receivers to turn over to them certain other properties claimed to be assets of the Trust Company of Florida. These properties had each been under separate trust mortgages on which separate series of bonds had issued and which on default had been foreclosed, and the properties bought in and title taken by Trust Company of Florida for the benefit of the several groups of bondholders, to each of whom it had issued a "beneficial certificate" showing his interest in the property against which he had held a bond. The Trust Company of Florida failed, and its affairs passed into the hands of the state comptroller to be liquidated, and he was held entitled to possess and administer these properties as assets of the Trust Company to the exclusion of receivers appointed by the federal courts. Amos, Comptroller, v. Trust Co. of Fla. (C. C. A.) 54 F.(2d) 286. Thereafter on October 12, 1932, J. H. Therrell, a liquidator appointed by the comptroller, filed in the state court six bills, in each of which he sought to be relieved of several of these trusts on the general ground that they were burdensome to the liquidation of the Trust Company of Florida, but set up that each trust was indebted to the Trust Company for services and advances, and prayed the appointment of a successor trustee to take over the title and management of the several properties and to make an account with Trust Company of Florida. These bills were removed to the federal court and consolidated, and, after amendment so praying, receivers were appointed for the properties involved with powers of successor trustees.
The proceedings with reference to Howell, receiver, were these: On August 2, 1932, a bill to foreclose a mortgage on the Patricia Hotel was filed in the state (court by State Life Insurance Company against Therrell, as liquidator of Trust Company of Florida, who was in possession of the hotel, and against Marion Mortgage Company which made the mortgage, and a receiver was prayed to conserve the rents and profits which were additional security under the mortgage. Howell was appointed receiver October 11, 1932. An appeal was at once taken by Therrell, on which the Supreme Court held that the mortgagee might be entitled to a receivership to conserve the rents and the court had jurisdiction to appoint one notwithstanding the Trust Company of Florida, which held the property subject to the mortgage, was in a liquidator's hands; but suggested that the liquidator might be appointed such receiver, or an order might be made requiring him to segregate the rents which would render a receiver unnecessary; and that the liquidator should not lightly be displaced by a receiver. With the law thus announced, the appointment was set aside, but with leave to the trial court to reconsider it in the light of the opinion and reappoint a receiver if it saw fit. Therrell v. State Life Ins. Co. (Fla.) 145 So. 220. Howell was thereupon reappointed receiver on January 27, 1933. In the meantime the federal receivers were appointed on December 17, 1932. By an amendment the receivership was extended to include the Patricia Hotel on December 23, 1932, two days after the rendition of the opinion last above cited. The federal receivers applied to the state court for permission to intervene and to defend the mortgage foreclosure, but were denied, and instead were ordered to turn over the hotel to Howell, receiver. The ground taken by the state court was that Therrell as liquidator had no authority to resign the trusts en masse, and that the appointments at his instance of a successor trustee by the state court and of the receivers by the federal court were void, and that Therrell and not the receivers was the proper party to defend the mortgage foreclosure. The federal receivers sought advice of their court and were ordered not to deliver the property to the state court. Howell, receiver, then made orderly application to the federal court to require its receivers to turn over to him the Patricia Hotel. The refusal then made is under review. It was based on the grounds that the state receiver was not intervening, but was attacking the jurisdiction to appoint the federal receivers, and that the state court was refusing to allow the federal receivers to defend the mortgage foreclosure. We think that the state court receiver was not bound to intervene and become a party, but might, as he did, petition summarily for possession of the property. Shields v. Coleman, 157 U. S. 168, 15 S. Ct. 570, 39 L. Ed. 660; Harkin v. Brundage, 276 U. S. 36, 48 S. Ct. 268, 72 L. Ed. 457; Interstate Ry. Co. v. Philadelphia Ry. Co. (C. C.) 164 F. 770. The validity of the federal receivership is the point of difference between the two courts, but we do not think it is the question on which this petition ought to be decided. If it be assumed that the federal receivership is valid, still under well-established principles of comity it ought to yield possession because granted on proceedings junior to those in the state court for receivership of the Patricia Hotel. The bills which were removed to the federal court were filed over two months later than the mortgage foreclosure and did not until December 17 seek a receiver; and the Patricia Hotel was never brought within their scope until December 23, 1932. The mortgage foreclosure filed August 2 was duly served, and the state court had undoubted jurisdiction over the property involved, both to sell it and to grant a receivership for it. Its first appointment of a receiver was set aside but with leave to reconsider it, which left the matter as though no action had been taken on that prayer of the petition. The reappointment was promptly made. No question of the superior federal jurisdiction in bankruptcy is involved. Both the state and the federal court are exercising ordinary chancery jurisdiction to finally administer the same property. Priority in the assumption of jurisdiction by entertaining proceedings which will require possession of the res and not priority in the appointment of a receiver or in securing possession of the property determines precedence. Harkin v. Brundage, 276 U. S. 36, 48 S. Ct. 268, 72 L. Ed. 457; Palmer v. Texas, 212 U. S. 118, 29 S. Ct. 230, 53 L. Ed. 435; Farmers' Loan & Trust Co. v. Lake Street R. R. Co., 177 U. S. 51, 20 S. Ct. 564, 44 L. Ed. 667. The prior right is with the state court. If that court in the exercise of its jurisdiction improperly refuses to allow a defense to the foreclosure, the remedy is orderly appeal from its decision. The Patricia Hotel ought to be surrendered by the federal receivers, and we so direct.
The demand by the comptroller and his liquidator for repossession of the other properties requires a consideration of their rights and duties. The evident purpose of the Florida statute, Comp. Gen. Stats. of 1927, § 6102 and following, as amended in 1929 (chapter 13576), is to withdraw the liquidation of banks and trust companies from the expense and complication of court receiverships and to vest it in the comptroller and his liquidator. Therrell v. Rinaman (Fla.) 144 So. 327. The liquidator, though confirmed by a court, is not a court officer, but the representative of the comptroller, who has complete authority over him. Florida Bank & Trust Co. v. Yaffey, 102 Fla. 723, 136 So. 399; Amos v. Powell (Fla.) 146 So. 195. But the title to the assets which the corporation owns or holds in trust devolves on the liquidator, who may execute the trusts which the defunct trust company was bound to...
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