Strickland v. Darsey

Hill, J.

(After stating the foregoing facts.) The controlling question in the case is whether a State court, which has appointed a receiver and granted an injunction against one who is subsequently adjudicated a bankrupt, more than four months before such bankruptcy proceedings, can enjoin one from prosecuting his claim in the bankruptcy court as a secured claim on the property in the hands of the receiver of the State court. It is insisted that the court below erred in enjoining A. J. Strickland from prosecuting his claim in the bankruptcy court. In Marshall v. Lockett, 76 Ga. 289, this court held: “It is the duty of the court to protect from interference the property in its possession through its receiver. Where a receiver was appointed, and no exception was taken thereto, but only to the grant of an injunction restraining interference with the property, and where it appeared that the title to certain land was in dispute, which was in the hands of a receiver, and one of the litigants made an effort to distrain for rent against another, this was an interference with the property, which was properly enjoined.” And in Woodburn v. Smith, 96 Ga. 241 (22 S. E. 964), it was held: “Where under an order granted upon an equitable petition a receiver takes possession and makes a sale of property, subject to final confirmation by the court, to which property there is an ■ adverse claim by a person not a party to such proceedings, such property, until confirmation in accordance with the order directing the sale, though delivered to the actual possession of the purchaser, is nevertheless, in contemplation of law, still in the hands of and subject to the control of the receiver; and if his possession by or through such purchaser is interfered with or disturbed by the adverse claimant of such property, the receiver, as against such person, may file a petition for injunction. If such a petition is filed, an order of dismissal, upon general demurrer thereto, is erroneous.” See also Lang v. Macon Construction Co., 101 Ga. 343 (28 S. E. 860); Lubroline Oil Co. v. Athens Savings Bank, 104 Ga. 376 (30 S. E. 409); High on Rec. §§ 37, 51, 52. In that work (§ 51) it is stated: “And when the State court has been the first to acquire control over the' subjeet-matter, and has appointed its receiver, who has taken charge of the property in controversy, a receiver subsequently appointed by the United States court may be punished for contempt if he interferes with the receiver previously appointed by the State court. So, when a receiver is appointed in a State court, and after such order, but before the filing of the receiver’s bond, the property in controversy, consisting of boats, is libeled under process, from a U. S. district court, upon filing his bond the receiver’s title relates back to the date of his appointment. And the court may, in such ease, enjoin the creditors from proceeding with their action in the United States court.”

In the recent case of Blair v. Brailey, 221 Fed. 1 (136 C. C. A. 524), the Circuit Court of Appeals for the Fifth Circuit, held: “ Taking possession of the property of a corporation by a court through its receivers in a creditors’ suit constitutes a ‘ levy ’ within the meaning of the bankruptcy act, July 1, 1898, ch. 541, sec. 67 f, 30 Stat. 565 (Comp. Stat. 1913, § 9651), and is rendered void by said section in case the defendant is adjudged a bankrupt within four months, but not otherwise; and where receivers were appointed more than six months prior to the institution of bankruptcy proceedings against the corporation in another district, the jurisdiction of the court over the property is not affected by such proceedings, and it may refuse to surrender the same to the trustee appointed therein, and apply it to the payment of the claims of the complainants or other creditors proved in the suit.” See the same case in the 238 U. S. 634, where a writ of certiorari was denied by the Supreme Court of the U. S. The above case is very similar to the instant one, except that in the Brailey ease the contest was between the jurisdiction of two Federal courts instead of between a State court and a bankruptcy court. In delivering the opinion of the court in the Brailey case, Judge Walker, among other things, said: “The general rule prevails’to prevent any interference even by a court of bankruptcy with another court’s control over property which originally has been subjected to its jurisdiction, if that jurisdiction attached more than- four months before the petition in bankruptcy was filed;” citing Pickens v. Roy, 187 U. S. 177 (23 Sup. Ct. 78, 47 L. ed. 128). Where it was held: “Where a judgment creditor files a bill in a State court to set aside a conveyance made by a person who, during the pendency of the action and after its commencement, is adjudged a bankrupt, and to apply the proceeds of the property affected towards the payment of the debt, the State court acquires such complete jurisdiction and control over the bankrupt and his property that jurisdiction is not divested by proceedings in bankruptcy; and it is the duty of the State court to proceed to final decree notwithstanding the adjudication in bankruptcy, under the rule that the court which first acquires rightful jurisdiction over the subject-matter should not be interfered with; and the district court of the U. S. in which the bankruptcy proceedings are pending has no jurisdiction to restrain complainants in the State court from executing their decree obtained in that court. Nor does the mere fact that the complainant in such an action in a State court proved up her judgment as a preferred debt in bankruptcy, ‘without waivher preference,’ operate to deprive the State court of jurisdiction or amount to a consent to the exercise of jurisdiction by the district court to restrain her from executing the judgment.” See also Metcalf v. Barker, 187 U. S. 165, 23 Sup. Ct. 67, 47 L. ed. 122; 1 Collier on Bankruptcy (12th ed.) 51, 71, 528. In Collier on Bankruptcy, 528, it is said: “ A receiver appointed by a State court in an action brought more than four months prior to bankruptcy, to set aside a fraudulent conveyance, may not be compelled to submit his claim in the bankruptcy proceedings; his claim must be treated as adverse.” And see Re United Wireless Tel. Co., 27 Am. Bankr. R. 1; Re Norman Williams, 38 Am. Bankr. R. 762: Gaspar Pietri v. Wells, 36 Am. Bankr. R. 105; Russell & Burket, 3 Am. Bankr. R. 658; Frazier v. Southern Loan & Trust Co., 3 Am. Bankr. R. 710.

It may be said that A. J. Strickland can not be enjoined from proving his claim as a secured claim in the bankruptcy court, thereby fastening a lien on the property. It was said by Sanborn, Judge, in the ease of Western Union Tel. Co. v. U. S. & Mexican Trust Co., 221 Fed. 545 (137 C. C. A. 113), that “The court which first lawfully acquires dominion over and the power to dispose of specific property may lawfully retain exclusive jurisdiction to adjudicate claims for liens upon, or trusts and interest in it, until its decree of disposition of it is carried into effect, and it may by injunction protect the property, its decree, and the title under that decree from suits or other proceedings in other courts.” In support of the above proposition the following eases were cited: Lang v. Choctaw &c. R. Co., 160 Fed. 355, 360, 361 (87 C. C. A. 307, 312, 313); Chicot County v. Sherwood, 148 U. S. 529, 533, 534 (13 Sup. Ct. 695, 37 L. ed. 546); Julian v. Central Trust Co., 193 U. S. 93, 112 (24 Sup. Ct. 399, 48 L. ed. 629); Wabash R. Co. v. Adelbert College, 208 U. S. 38, 53 (28 Sup. Ct. 182, 52 L. ed. 379); Barber Asphalt Paving Co. v. Morris, 132 Fed. 945, 949 (66 C. C. A. 55, 59, 67, 67 L. R. A. 761); Brun v. Mann, 80 C. C. A. 513 (151 Fed. 145). And see also Harris v. Luxury Fruit Co., 142 Ga. 67 (82 S. E. 447), where the above principle was recognized, and where, under somewhat similar proceedings, the application of the receiver appointed by the bankruptcy court for the assets in the hands of the receiver appointed by the State court was denied. In the case of Lion Bonding & Surety Co. v. Karatz, 262 U. S. 77 (43 Sup. Ct. 480, 485), the Supreme Court of the IT. S. stated the rule as follows: “Where a court of competent jurisdiction has by appropriate proceedings taken property into its possession through its officers, the property is thereby withdrawn from the jurisdiction of all other courts, and the first court has the right, while continuing to exercise its prior jurisdiction, to determine for itself how far it will permit any other court to interfere.” It was further said: “But the judgment of the State Court, which had possession of the res, could not be set aside by a collateral attack in the Federal courts.” And see Mutual Reserve Fund Life Asso. v. Phelps, 190 U. S. 147, 159, 160 , (23 Sup. Ct. 707, 47 L. ed. 987).

From the foregoing authorities we reach the conclusion that where the State court had appointed a receiver who seized the property in controversy more than four months prior to the bankruptcy proceedings in which J. B. Strickland was adjudged a bankrupt, it was its duty to protect the property in the possession of the receiver appointed by the court; and it was not error for the court to enjoin A. J. Strickland from proving his claim as a secured .claim in the bankruptcy court and thereby creating a lien on the property in the hands of the receiver.'

Judgment affirmed.

All the Justices concur.