Opinion — Ex Parte Baldwin

SUPREME COURT OF THE UNITED STATES.

No. 19, Original—Ocroser Trem, 1933.

Ex parte: In the Matter of L. W.

Baldwin and Guy A. Thompson,

Trustees, et al., Petitioners.

[March 19, 1934.]

Mr. Justice Branpgis delivered the opinion of the Court.

This petition for a writ of mandamus, filed in this Court by

leave, prays that the federal court for southern Texas and Thomas

M. Kennerly, judge thereof, be commanded to take jurisdiction, on

a petition for removal, of a suit instituted in a state court of Texas

by Tyrrell-Garth Investment Company. The petitioners are the

defendants in that suit... Two of them, Baldwin and Thompson,

are the trustees in bankruptcy of the Missouri Pacifie Railroad

system and are operating it. They were appointed by orders of

the federal court for eastern Missouri entered in proceedings for

reorganization under §77 of the Bankruptey Act as amended

March 3, 1933, ec. 204, § 1, 47 Stat. 1474. The other two petitioners

are Texas corporations—Houston North Shore Railway Company

and Beaumont, Sour Lake & Western Railway sce iaaallatis are

parts of the Missouri Pacific system.”

The federal court entered an order denying the petition for re-

moval and returned the papers to the petitioners, on the ground that

it appears from the petition for removal that the suit is not one

in which it is sought to hold the trustees ‘‘responsible in their own

person and/or property but only in their representative capacity.

See Ruff v. Gay, 3 Fed. Supp. 264; 67 F. (2d) 684.’ The

Trustees claim that they are entitled to a writ of mandamus, be-

cause the suit in the state court is removable under § 33 of the

Judicial Code as amended by Act of August 23, 1916, ¢. 399, 39

Stat. 532, being an action against officers of a court ‘‘of the United

‘There is another defendant in the state court suit (Johnson) who did

not join in the petition for removal. The allegations concerning him are not

here material.

2All the stock of these corporations is owned by New Orleans, Texas &

Mexico Railway Company; and nearly all of the latter’s voting stock i»

owned by the Missouri Pacific.

2 Ex parte Baldwin and Thompson, Trustees, et al,

States on account of acts done under color of their office and in

performance of their duties as such officers.’”*

The petition for mandamus alleges that among the properties

of which the Trustees took possession is an interurban railway in

Texas, owned by the Houston North Shore Railway and leased to

the Beaument, Sour Lake & Western Railway ; that they had taken

possession of this property prior to the institution of the suit in

the state court; and that the necessary effect of the institution and

prosecution of the suit in the state co **is and will be to ma-

terially interfere with and obstruct the jurisdiction and powers

of the federal court for eastern Missouri, with respect to the prop-

erties and assets of said debtors, the Beaumont, Sour Lake & Weat-

ern Railway Company and Houston North Shore Railway Com-

pany, and each of them.”’ ?

The petition for mandamus shows further, by reference to the

complaint of the Investment Company, that a part of the interar-

ban railway’s right of way had been acquired by mesne convey-

ance from the predecessor in title of the Investment Company;

that, after the Trustees took possession of this interurban railway,

the Investment Company brought the suit in the state court in

which it claims that it is the owner of the fee of a part of the land

over which the railway extends and that the easement of right of

way has been forfeited by failure of the Texas corporations and

the Trustees to operate trains thereon in accordance with the con-

ditions contained in a contract which accompanied the grant of

the right of way,‘ and prayed as follows: That the deeds convey-

ing the right of way be cancelled ; that they be ‘‘annulled and held

for naught as an existing cloud upon plaintiff’s title to the lands

sJudicial Code, § 33 as amended provides: ‘‘When any civil suit . . . is

commenced in any court of a State . . . against any officer of the courts of the

United States for or on account of any act done under color of his office or is

the performance of his duties as such officer . . . the said suit . . . may,

at any time before the trial or final hearing thereof be removed for trial inte

the district court . . . im the district where the same is pending.’’

‘The contract provided for an easement subject to forfeiture for non-use

for the purpose of an interurban railroad. ‘*Non-user’’ is defined as failure

to operate the railroad for 30 successive days; and ‘‘operation’’ as involving

@ passenger schedule over which first-class coaches must run over the entire

line by electric or gas engines on a regular schedule of at least one train not

less than every two hours of each day from six o’clock a. m. until twelve

o’clock midnight.

Ez parte Baldwin and Thompson, Trustees, et al. 3

and properties therein conveyed’’; that the two railways and the

trustees be enjoined from. making further use of the lands for the

operation of the interurban railway or otherwise; and that the

complainant recover from Houston North Shore Railway and the

trustees ‘‘in their capacity as trustees’’ damages in the sum of

$150,000. ;

We are of opinioz that the Trustees may be entitled to have their

controversy with the Investment Company adjudicated in the fed-

eral court, but are not entitled to the remedy of mandamus, be-

cause to secure adjudication in the federal court of their rights and

duties, they ould have applied, and still can apply so far as now

appears, either in the original bankruptcy proceeding, or by an

ancillary bill in Texas, for an injunction to restrain the Invest-

ment Company from prosecuting its suit in the state court.

First. All property in the possession of a bankrupt of which he

claims the ownership passes, upon the filing of a petition in bank-

ruptey, into the custody of the court of bankruptcy. To protect

its jurisdiction from interference, that court may issue an injune-

tion. The power is not peculiar to bankruptcy or to the federal

courts. It is an application of the general principle that where a

court of competent jurisdiction has, through its officers, taken

property into its possession the property is thereby withdrawn from

the jurisdiction of other courts. Having possession, the court may

not only issue all writs necessary to protect its possession from

physical interference, but is entitled to determine all questions re-

specting the same. Julian v. Central Trust Co., 193 U. S. 98, 112;

compare Riehle v. Margolies, 279 U. S. 218, 223; Straton v. New,

283 U. 8. 319. The jurisdiction in such cases is exclusive of the

jurisdiction of other courts, although otherwise the controversy

would be cognizable in them. Murphy v. John Hoffman Co., 211

U. S. 562, 569. In bankruptcy, this rule applies regardless of

whether the property is located in the district in which the bank-

ruptey proceeding originated. The injunction to protect its

possession may issue either from the court of original jurisdiction,

or from the federal court for the district in which the state court

suit is brought or in which the plaintiff in that suit resides.

Isaacs v. Hobbs Tie and Timber Company, 282 U. 8. 734, 737-8.*

‘See In re Patterson Lumber Co., 228 Fed. 916; 247 Fed. 578; In re

Lookout Mountain Co., 50 F. (24) 421. As to railroads, see § 77 added to

the Bankruptey Act by Act of March 3, 1933, ¢. 204, § 1, 47 Stat. 1467, 1474.

Ez parte Baldwin and Thompson, Trustees, e¢ al.

Second. It is immaterial that the Investment Company, after

the petition for removal had been presented to the federal court,

amended its complaint in the state court by striking therefrom go

much of the prayer as sought to enjoin the two railways and the

Trustees from making further use of the lands for operation of the

interurban railway or otherwise. The purpose of the amendment

was evidently to confine the litigation in the state court to the

issue of the right and title to the property, as distinguished from

its use during the pendency of the bankruptcy proceedings, in

the hope of thereby removing the obvious interference with the

jurisdiction of the bankruptcy court. But the exclusive jurisdic.

tion acquired by the bankruptcy court through taking possession

of the interurban railway under claim of title, was not limited to

the prevention of interference with the use of the land. Com-

pare Chicago Board of Trade v. Johnson, 264 U. 8. 1, 11;

Taubel-Scott-Kitzmiller Co. v. Fox, 264 U. 8. 426, 438. The

jurisdiction extends also to the adjudication of questions re-

specting the title. White v. Schloerb, 178 U. S. 542; In re Epp-

stein, 156 Fed. 42. Compare Wabash Railroad vy. Adelbert Col-

lege, 208 U. 8. 38, 54; Security Mortgage Co. v. Powers, 278 U. 8.

149, 153."

Third. The inherent power of the bankruptcy court to pro-

tect its jurisdiction, over property of which it has taken possession,

from interference by suit thereafter begun in a state court has

not been abridged by any legislation of Congress. The power is

expressly reserved to the bankruptcy court in Judicial Code § 265,

which contains the general prohibition against staying proceedings

in state courts. Nor is this power of the bankruptcy court af-

*From the answer to the petition for removal filed by the Investment Company

in the federal court it appears that, after the filing of the petition for re

moval, and before action thereon by the federal court, the Investment Oom-

pany had moved in the state court to dismiss so much of the prayer in its

suit as seeks an injunction against the Trustees in their official capacity and

the two railway companies; and that the state court granted the motion

‘*without prejudice to the plaintiff hereafter to seek such injunction against

said defendant railway companies when and if they shall be discharged from

jurisdiction and control of’’ the federal court for eastern Missouri. We have

no occasion to consider the effect of the amendment so far as concerns the

right of removal.

TWhitney v. Wenman, 198 U. 8. 539. In re Rochford, 124 Fed. 182, 186;

In re Moody, 131 Fed. 525; Fidelity Trust v. Gaskell, 195 Fed. 865; In re

Dialogue, 241 Fed. 290; cases in Note 8, infra.

Ez parte Baldwin and Thompson, Trustees, et al. 5

fected by § 23 (a) of the Bankruptcy Act of 1898, o. 541, 30 Stat.

552, which declares: .

‘‘The United States District Courts shall have jurisdiction of

all controversies at law and in equity, as distinguished from pro-

versies had been between the bankrupts and such adverse claim-

ants.’’

That section relates only to suits in which the Trustees are plain-

tiffs. It has no restrictive effect on the right of trustees or re-

ceivers to protect their possession or title through proceedings in

the bankruptcy court.*

Nor is the inherent power of the bankruptsy court to protect its

jurisdiction in respect to property of which it has taken possession

abridged by Judicial Code § 66, which declares:

‘*Every receiver or manager of any property appointed by any

court of the United States may be sued in respect of any act or

transaction of his in carrying on the business connected with such

property, without the previous leave of the court in which such re-

ceiver or manager was appointed; but such suit shall be subject

to the genezal ecuity jurisdiction of the court in which such man-

ager or receiver wes appointed so far as the same may be necessary

to the ands of justice.’’

Thet section does not abridge the exclusive jurisdiction of the

ecurt over property of which it has taken possession. In re Tyler,

149 U. 8. 165, 182-4.*

Fourth. It is true that the Investment Company seeks, in addi-

tion to the adjudication of the forfeiture of the right of way,

damages ‘‘in the sum of $150,000’’ from the two railways and

‘*from the trustees in their said capacity as trustees’’ for failure

to maintain the daily schedule of passenger trains set forth in

the contract. This prayer of the complaint is no bar to staying

the suit in the state court. The exclusive jurisdiction of the

bankruptcy court is determined by the main purpose of the sv .,

which is to have the forfeiture declared and the alleged cloud

*J, I. Case Plow Works v. Finks, 81 Fed. 529; In re McCallum, 113 Fed.

393; In re Lipman, 201 Fed. 169; In re Williams, 53 F. (24) 486.

See also New River Coal Co. v. Baffmer Bros., 165 Fed. 881; Dickinsca ev.

Willis, 239 Fed. 171.

6 Ez parte Baldwin and Thompson, Trustees, et al.

upon title removed. The claim for damages is merely an inei-

dent. Moreover, the breach of contract for which damages are

claimed is not ‘‘an act or transaction of the ‘trustees’ in carrying

on the business connected with such property’’. The breach al-

leged is that of ‘‘wholly’’ ceasing to maintain the passenger train

schedule. It is alleged that this breach had occurred months before

the commencement of the bankruptcy proceeding. The only wrong

with which the Trustees are charged is in not ‘‘now maintaining”’

the service. Such non-feasance is not an ‘‘act or transaction’’

within the meaning of § 66.'°

We have no occasion to determine otherwise the scope of Judi-

cial Code §33. Nor need we consider whether the federal

court, if it had entertained the petition for removal, would have

been obliged to dismiss the suit on the ground that the state court

was without jurisdiction because the bankruptey court had posses-

sion of the res. Compare Isaacs v. Hobbs Timber & Tie Co.,

282 U. 8. 734, 738-9; Lambert Run Coal Co. v. Baltimore & Ohio

R. R. Co., 258 U. 8. 377, 382.1% It is sufficient that the extraordi-

nary remedy of mandamus should be denied, because the Trustees

may by the common remedy of injunction prevent any interference

with the jurisdiction of the bankruptcy court. Compare Ez parte

Park Square Automobile Station, 244 U. S. 412, 414; Ez parte

Riddle, 255 U. 8. 450; Ez parte Kreutler-Arnold Hinge Last Co.,

286 U. 8. 533. Moreover, the bankruptcy court might, in the exer-

cise of its discretion, conclude that it is desirable to have the

litigation proceed in the state court.’? ,

Rule discharged.

10Compare Buckhannon & W. R. Co. v. Davis, 135 Fed. 707, 711; Love v.

Louisville R. Co., 178 Fed. 507; Dickinson v. Willis, 239 Fed. 171; Field v.

Kansas City Refining Co., 296 Fed. 800; 9 F. (2d) 213.

11Compare In re Zehner, 193 Fed. 787; First Trust Co. v. Baylor, 1 F. (24)

24, 27. See note 12, infra.

13MecHenry v. La Société Francaise, 95 U. 8. 58; In re Johnson, 127 Fed.

618; In re Zehner, 193 Fed. 787; First Trust Co. v. Baylor, 1 F. (24) 2%,

27; In re Schulte-United, 50 F. (2d) 243; In re Gas Products Oo., 57 F. (24)

342; compare In re Schermerhorn, 145 Fed. 341; In re Locust Bldg., 272 Fed.

988; Field v. Kansas City Refining Co., 296 Fed. 800; 9 F. (2d) 218.