Respondents Brief — Stoll v. Gottlieb

Supreme Court brief1938

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INDEX

yee 7 nS ope TAS PAGE

Opinions Below *.......... saueots GREE Pe Teer ee 1

Jurisdiction, of IE TIRING, os ca cp cc oSewenseess coon oe

Statement of the Case ated ecuaca Vileategsees¢wes tt

=” Questions Presented Fe ey cain, cn eae 2

Summary of. Argument.................. becivets oa

meget:

Fee Supreme Court of Minois did not re:. °

fuse and ‘did not fail to give that degree of

full faith and. credit to the judgment and -

decree of the Federal ‘Court to which it was.

GE ibicslh caciScsa budeshaccrmcces: SD

II, “The pochendhage in the Federal: Court and

the decree therein do not constitute an”

° — by: verdict nor is the dauakaes

UB NN op ences s reci ev caweenccesiess 3

I. The Bankruptcy Act prohibits the innsilih.

tion of the guaranty and there i is ‘no author-

giving: the Federal Court power and juris-

-« dietion to cancel the guaranty........... : 22 4

IV. , That part of the tisien of the District Court ©

' which attempts -to cancel the guaranty is an

absolute nullity and subject to. collateral

MbHAOK oe ee eee eee eee eee e eee -

Conclusion ...... eOEsSm eae eseesanepecysaocecensesd 29

Appendix: © * | a -< —- :

a from cases a oa ease seemed jeceesu «31 |

Tasue. OF Giazs Creo.

2 os ie PAGE .

‘dens. Terrell, 4 Fed: 796; 800, 801........6, 9, 18, 250

- Aldridge v. Matthews, .257. Ill. ae 28

Armstrong v. Obueino, ‘306 Tl. 440.../...0.: 0006.0. 25

Ashilock -v.. Ashlock, 360 Til. 115,.122............... 28

' Bardes v. ee ee ee 20 Sup. Ct.

ER A pin bhise Skike aie Wie katie ine Micawice ee Peas o's © Sed 14, 15

Brougham ve Oveanie Steam Navigation Co., 205 Fed. -

TO, RO SN oko rast sedis bce Spay oben ke Amie och ince 0b 0g cab: ae

Brumley v. Jones, 141 F. 818...;... ae SAW Get 2h

~ Burton Coal Co.'v. Franklin Coal Co. “GTP. (2d) 796. 19

~ Bush v. Elliott, 202 U. & 479, 26 up.- Os. 670...... 15

Central Fibre Products Co. v. Bacher, 112 hy W. (2d)

372, 376 (Mo.) (Appendix, p. 15... Skee aie ae

“Chamblin v. Chamblin, 362 I. ecg te x

‘Chauncey, et al, v. ‘bykes Bros. et al. (C..¢ C. A. 8), H9

We i en 0 Ea Ridin ch 0 vids shia us Wipes Kjee-d Deas bea So 23

Bet Bank of Commerce v. Carter, 61 F oO. *% i

Christma Russell, 5 Wall. (U: 09 OO 5 cass. 5

Estate Co. v. Realty Const. Corp.,.3 N. y.’.

SSS ae 3s FS

| Continental: Bak v. Rock Island ay. BE U- S. 648, —

Maite sce GA Bs A asa ce havo ishe diviandig's. éun'n:0 0 sian 14, 15

_ Cutler v. Rae, 7 How. (U. 8.) SS Sa SES 29 *

~ D'Arcy v, Ketchum, 11 How. (U. 8.) 1B5.° PERE ee Ie mi

Deke v. Huenkemeier, 289 Th. 148, 154..... ears PN

Delaware: Tribe of Indians v. United States, 84 Ct. |

I see ik pci dyn cess oon 14

Demilly v. Grosrenaud, 201 Ti. 979, oi eee beara’ 28

Dupasseur v. Rochereau, 88 U. S. OA SUB isc... y.

Ex parte Wisner, m6 TW. B. 460:.........:. Yebeis aeeine se, | ae

Finn v. Carolina Portland Cerhent Co.,. 232 F. 815.. 17

, Frost v. Wenie, 157 U: 8. 46,.58.....0.......00.005. 14

* General Motors, ete., Corp. v United States, 286 U.

eM MERE cp ee ec Nets Fm rn, 14

a :

ea. :

. _ ‘PAGE

Ginsberg & Sons Popkin, 285 U: 8. 204... oat ete

Goldstone v. Payne, 94 F. (2d). 855.............. oe

Goudy v. We, SE. OOD; GO ac sss < cay ses cases i

“Great Western Tel. Co. v. Barker, 56 Ill. App. ene.. Mo.

Guaranty. Trust Co, v. Green Cove R. B., 139 U. 8.

Pee re

Hartington v. People, 6 Barbour (N. F,) OO... 62.00: 6.

Harris v: Hardeman, 14 How. | (GB) B8b.. ..5<c oi S-

Henrie v- Henderson, 145 F.: $46, S19....... aaa * ie

‘Hermandez v. Drake, 81 Ill. 34.......... auicet usenet >

Hoim v. _Jamies@n, 173 Ill. 295, 200... Sis Niewudekabines 71 p

_ Hovey®y. Elliott, 167 U. S; 409, 444................ = oe

In re Commonwealth Bond ioc Debtor, .77 Fed. -

| (2d) 308 . de dudes sth ba cael des sion neta Nac 16, 17

a, - anvense Eibugh & Co., Inc, ot! F. (2d) 368, ms

‘In re Diversey Building Corporation, 86 F: bees 456,

Se. BL MO on Ee se chee eaWRsiwinas secede

In ‘re ‘Hageman, 10 F. Supp. 716... NAS aaa eh :

- In re Hollins, 229 F. 349.7.............0% fo AGED Cah EDN 17

In re Hygrade Dye. Works, Inc., C. C. H. Dec., Sec, -

WE Siar d tdge e+ Oeadin bs Sadie Uae 4h wale asad 13

= Judith Gap Commercial Co., 5. F. i ade 307,

In re Madison Witieiee Corp. ., 22 ¥. ag "EES ' 2

‘In re Nine North Church St., Inc., 82 F. (2d) 186, .

SE an Soh ate iee eieta ad GN think neh octbnbok a eats. oaae 6 19, 21

In re Prudence Bonds Corp.,. 79 F. (2d) 212, 215... 21 -

In re Pyrocolor Corp., | A a ee ra 83

In re‘ Sagyer,: 124 U. S. ee 25, . 27

In.re 1775 Broadway Corp., 79.F. (2d) 108, 130. . od, 23

re Smith, 7 F. Supp. 863, 864...:...:...,.:.... 15

In Ye Southérn States Finance Co.,- 19 F. (2a) 9.. W°.

In re Stearns, 295 F. 833..:.%.......0...0.. tieatde . ew

In the Matter of Utilities Power and Light Corp. * , ’ a

es 91 PF. (2d) nid bh wes animes jaeaea pbb bate ow

, av

PAGE

‘Seana , ins 14 BN. E. ‘(bay 240 240 (Ill. App.).:.. -24

Johnson v. Norris, 199 F. 450, L. RB. A. 1915; 13, 884 14

Jones v. Kansas ‘City, ete. Co. 1 F. (24) 49. SV ee ie

Kennéy‘v. Greer, 13 Tl. 432....0.. 000.600.020.058. a ie

Kepner v. United States, 195°U. 8. 100, 125 Viduasuwes ' 19

"Louisville, ete. Bank v. Radford, 295° U. 8. 555, 580, "

stupa: Dreyfus ‘Co., 174.8. W: 549 (Ark.).. cinnpes 15

Miller v. Rowan, 251 Ill. 344, 348...... Bae auicehins abi 8

Mills v. Brown, 16 Pet. (U. 8.) 525....... anaenne ae

Munroe v. People, 102 Til. 406, 409, 410............ 7, 18

Nelgon y: Sven, etc.,.178 F. 136, 140............... 17

Nierman’ v. Industria? Commission, 329 Tl. 623, 627.. 18

Nixon v. Michaels, 38 -F. (2d) 420, Dn tities epee oc 17, 29:

Norris Case, 18 F. SR. DOO, Thao ppc nce weary 16

‘Novak v. Kruse, 211 Il. App. DN iedibcaup aes one ae

Oakman v. Small, 262 Ill. 360, 363............-...45 aes

. O'Connor v: Board of* Trustees, 247 Il). 54, 57.. ..18, 29

Okon v. Kaenas, et al., 222 Ill. App. 45, 48.......... 2

Pennoyer. y. Neff, 95 U. 8. 714, 727, 729. 01... adie 5, 7, 9

~People v. Brewer, 328 Ill. 472, __, SERRE RE Tee

People v. Leavens, 288 Tll.-447,-448....... Seiniineesoes 28

Pepple v. Seelye, 146 Ill. 189, 221............ CAREER 18, 28 -

Rabbit v. Weber & Co., 297 IIL. 491, A96U.. oes 28, 29

“Risley x: lanai ae ive York, 83 N.Y. 318,

_. 837 (Appendix, p., DM) o.oo nig ne ee piaceie's's ong eve 0s 25, 28

— v. Sayers, 100 Fed. 520, 582 ae p. oa

Rose v. Himely, 4 Cranch (U. 8.) 260. pi sien ent ae

Sessler v. Nemcof, 183 F. 656....... Riddind ooneds nceo¥ie 15

Sharon v. Terry, 36 F..337, EE chp o cen ocarunie ats mee ae

‘Sheahan v. Madigan, 275 Ill. 373, REC RES igor mes

eet 5 ee Rohe e !

| ¢ | sue ‘PAGE

| Sheldon v. Newton, 3 Ohio St. 494............... eB

Southern Bell 3 & Tel. Co. v, ayes, al ) -

C. A..8); 67 F. (2d) 802........ PARSONS caine 14

Standard Oil Co. v. Miseouri,, 24 U. 8. 270, 281 (Ap-

A le SR es Aire Cn do eipiin bean 1-00 Bild cig -eiaiaie 19,

' Swiggart v. ber, 4 Scam. (Tll.) 364........6...4. _—

The Confiscation Cases, 20 Wall. (U. 8.) 92......... 27

a asic v. Whitman, 85 U, S. 457 agpantin, '®

eeoeaeweeoeaeevrereeeoeeeeeeneeeereeeeeeeeaaeeeeeeree eiaeee

z Town of Kingston v. Anderson, 300 Tl. 577, 562. .... 39

” United States v. Chase; 135 U. S. 255, 260........2.. 19

United States v. Jefferson Electric Mfg. Co., 291 3 i

OR | NERO RRR SORE PC 14.

United States v. Walker, 109 U. 8. —. 5

“Union. Trust Co. of Rochester v. Willsea, 275, N. ‘Ys

~. 164, 9. N. EB. (2d) 82B............ Diodes oce9 beers

- Westall v. Avery, 171 F. 626......... i eee

Wheeling Structural Steel : Oo. Vv Moss, 62 F. (2d)

ae ae ha ae aa Fh od uate aie pieliugwi's vo->-0-8 17 .

° Williamson v. Desi, 8 shia: w. S.) 495, 540. (Ap-

. pendix, p. 31)...2...-. see ee cece es eeees cindeage

. Windsor v. McVeigh, 63 U. 8. 274, 282,......:.5.- 19, 25

ee prey Ine. v. socio Court, 63 P- on 1184 14

3 e . & ry

_ Cases DistinguisHEn.

Seo PAGE

Chicago Title ill Trust Co, v. Storage Go. MH.

keke hws On Onan siamese he vdal-osewhwaens 11

Contincal Baa ‘Rock’ Isiand’ By. Oo., 294 U. 8.

U. SO Gwe she Sie A Ce el iid dive barman hee es we ew ba 15

posal a: ‘Applegate, 152 U. 8. 32%...... Rabas oa

. Ex Parte Harding, 219 U. 8. 363..).\.......0...6... 10

- | Forsyth v. Hammond, 166 J. 8. 506.............. SUR: : ae

_’,. Hancock National Bank v. Farnham, 176 U. Ss. 640.. 6 :

In re Central Funding Corp., 75 F.2d) 256 fendi n bi YA. -

‘ In re 1775 Bradway Corp., 79 F- (2d) Ps vit iead ae

_ Knights of Pythias v. Meyer, 265 U.S. 30........... 6

oe ee ete. Ry. Co. v. Louisville Trust Co., 174 U.

Pech hh chee a et ano a PUane le neesbidece ce 15

Rew v. School District, 1 NR os ce ciéckseecs “1.

Sharon v.- -Terry, 36 F. gS eee Smeal mo.» 16

eeoeapeen \v. — District, 227 Fed. 560.....:. 15

Texr Destin CITED

: 103 American State Reports, 307, 309 ( Appendix, p

1 Collier on. Haakraptey, 13th Ed., p Ghani ee 18

Collier Supp. Sea 77B; Am. B. R. Digest, Sec. 1279-0 Ba

n on, Bankruptcy, 3rd. Ed. TY. ..< eaaeokas a

15 Ruling Law, 929-932, Sec. 408 (quoted in

- Appendix, p/32)...... Giiaeeans cued ickedikKet oped 4, 5

15 Raling Case Law, 990, See. 463. pitetukes reaper et Ene 5, 6 -

Srarvres Crrep.

U. 8.C.-A, Title 11: TGR Lt gel men a

— * Section 34 (Section 16 (a), a isatins Act). 9, 12,18 -

Section 207 (a), . (Section. 77-B (a), - Bankruptey _

NB Bic Saoinsi a Cone Se Uc wn as nctdiek cae sos 12 18

gd 207 (b), (Section 777B (ie Benkruptey.

ERS es) kil Cb as bac c bts Ween es «bal Oe meee wens

Section 207 (h), (Section 77- B (h), ‘Bankrup y.

MSs ae esa Gok Sue ceceh dace: : oe

sy 207 (k), (Section 77-B (k), Bankruptcy. os

SR Ocha aia ta SERGE, TI RSET eg MOS ei 1

Section 207 (0), pennies salt ns Bankruptcy

IAT. 95s Heong sted eon eer aceuearuiaden, 13

Soe Ct tie ied Sate

renee Tama, A. D. 1938.

—

”

‘

; N 20 oe

o. : .

. ,

J. 0. STOLL,’ oe

F ee Petitioner,

vs. . are

WELLIAM GOTTLIEB,

“Respondent -

fos 5

ON WRIT ° CERTIORARI TO THE SUPREME COURT OF THE

: ATE OF SLAEOES.

" Fig

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¢ RIEF FOR RESPONDENT. =

rena ee

To the Mecnedbte Chief Justice and Associate °°

Justices of the | Supreme Court aes ane

of the United. States: ere :

"3° OPINIONS BELOW.

The. opinion of the Supreme Court’ of Iinois is re-

po: ted in 368 Ill. 88, and appears in full beginning at

= the Record filed herein. abe ie

‘ ~ . >

_ —_— stg

‘The <opliton it of the Appellate Court of Illinois, “First is

Distriet, is reported in 289 Ill. App. 595, and appears in

full ‘beginning at page 41 of the Record filed herein.

Both opinions contain: a statement of. the facts and

i Se decided by the ‘Tespective . a. .

JURISDICTION OF THIS COURT.

‘Respondent concedes without argument that this eee

_orable Court has ‘jurisdiction of this cause and gladly.

submits all questions appertaiming thereto for decision.

ny : : |

co STATEMENT OF THE CASE.

The facts i in this case are set out in the opinign of the

. Supreme’ Court of filinois (368 Il 88; R. 63) and. the

__ - Appellate Court of Illinofs; First ot agit. .(289 TL. App.

.« - 695; BR. 41). : a

3 Questions Presented: , iz -

According to respondent’s theory of this case, the ques-

tions presented are: TRE

+ what degree of faith, credit and effect in a

State Court. is the judgment.or decree of a United State?

District Court, sitting, in bankruptcy under , Section 77B

of the Bankruptey “Act for the reotganization of a debtor —

corporation entitled, if entered without jurisdiction and

. power and in‘violation of the said Actt |

2. Can the question. of jurisdiction and power of such |

_—-eourt--be- inquired - into..in..a collateral _action. in a State

Court under the ‘‘full faith and credit’? clause “oF the Con-—

stitution of the United States? .

aad

oo: ne : a

. 1 | B. - ® = ‘ ee _ «

1. Isa deeree. conlieming a jin of sennniigiediion: of

a corporation in proceedings under Section 77B - of the

‘ Bankruptcy Act, which, amongst other things cancels a

guaranty’: absolutely void in whole or in aie and there-

fore: — to eclintoral attack?

SUMMARY OFr ARGUMENT. ra

L The ‘Supreme Court of Tlinois did not refuse and

did ‘not fail to give that degree of full faith and credit

go the judgment of the Federal Court to which it was’

~ entitled. .

A. Under the “fall: faith and credit’’ clause of the

” Constitution of the United States, the question of juris-

. diction and power was rightfully and property - inquired

‘ihto by the Supreme Court of Iinois. ©

IL The Supreme Court of -Ilinois rightfully, declared

a that the Federal Court did not have jurisdiction of the

subject matter of the guaranty and rightfully held that -

that part of the-plan of reorganization and decree con-

firming it which cancelled the guaranty was void sub- *

‘ | Jest | to seen attack. ©

The Supreme Gourt of Minois did not reso and did not

fail to give that degree of full faith and credit to the a

Falgmant:end deuce of the Federal Oowrt to which it

| was entitled. Bees > pry :

fe de: Gene: Ghat thie. comrt hes. valid. that, jadiel pro-

ceedings of a federal court must be accorded same

fall faith an sedi ha-tdada-ceadte am evel bo: veutdned

in respect of the fpdicial@proceedings of another state.

“ However, it cannot be. denied that if the judicial pro-

ecvedings of another state are void because the- court

exceeded .its jurisdiction and power, then the courts of.

Ilinois could and should refuse to give credit to game.

See , This refusal would ‘he’ just and proper even if thay court

ee did determine that it had jurisdiction and power and pro-

wrongfully. It is hardly believabje-that the ‘‘full «°

faith and credit” clause would impose an absolute duty

on a state court to abide by the judicial proceedings of a

SE ere eae ee ee ie SR, Sy I cee

| gardiess of the consequences. “*

. Sess} 15 B.C: L. 999.992, See. 408 (Appendix, p. 32)

A In approving « state court’s- inquiry on a judgment

. of .a federal court, this court held in Dupasseur v._

Rochereau, 88 U. S. 130, on page 135, that the state court |

did not refuse to accord due force and effect to the judg- mio

ment of the federal court by-ignoring it; that the judg- —

ment could not have any greater foree or. effect than —

. y

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_ jadgments, in the state courts rendered ee like cir-

‘3 ay

A. si dienes ieemacadenaane clanse of the Con-

stitution, the question of jurisdiction and power of

thé Federal Court to cancel the guaranty was right-

SS a

‘Court of Hlinois. Gil es

Section 1 of Article IV of | the Federal Constitution con- .

- cerning ‘‘full faith and credit’? does not forbid inquiry

as to the federal court’s power to cancel the guaranty

‘or as to the jurisdiction of that court over the person

or in respect to the subject matter.

Reynolds v. Stockton, 140 U: 8. 254. °

Pennoyer v. Neff, 95 U. S. 714, 727, 729.

> Thompson v. Whitman, 85 U. 8. 457.

Harris v. Hardeman, 14 How. (U. 8.) 334.

D’Arcy v. Ketchum, 11 How. (U. S.)-165.

.* = Williamson v. Berry, 8 How. (U..S.) 495, .540.

; Christmas v. Russell, 5 Wall. (T..S.) 290.

- Rose v: Himely, 4 Cranch (U. S.) 969.0 © \«:

©-15 B. C.L. 929-932, Sec: 408. |

15 B,C. L, 990, See. 463. | ‘

In Thompson vv. ne, supra, on page 469, this

court said, | ‘

‘Son the whole, we think it clear that the jurisdiction’

€ of the court. by which a judgment i is rendered in any -

state may be questioned in-a collateral proceeding in

another state, notwithstanding the provisions. of the

Fourth Article of the Constitution and. the law of

1790, and notwithstanding the averments contained

in the record of the judgment itself.”” :

Petitioner tites mic cases ‘and one text on. page we

his brief To support the’ — to which‘ ne

e -

‘

8. o : ¥

a. o%

AS ASNT pideeit: colantscenesanitinia

to the dame full faith, credit and effect in the state courts

as the judgments of the’ courts of a sister state under

Article IV of: the Constitution. However, in Knights of

_ Pythias v. Meyer, 365 U.S: 30, it was held that'a decree 3

of a federal court in Indianatwas not binding in the

' , state court of Nebraska. This ease supports respondent’s’

* -gontention that a judgment of a féederal court: is never

| absolute but cay always be inquired into ‘and disregarded.

" | Hancock. National, Bank -v. Farnham, 176.U. 8. 640,

also. limits the meaning. of the. “faith and credit’’ clause.,

- On page 644; this court. stated in referring. to an-at- 7

tack on the decree of the federal court of Kansas that —

' “the only defences which he can make against it are

those which he could make in the courts of Kangas.’’ It,

cannot. ‘be denied therefore that respondent had the right

toyu n the jurisdiction and power of the federal court.

or the guaranty because under, no circumstance’ |

could this) particular guaranty’ be cancelled in any court

in view of the provisions of the Bankruptcy Act.

_ In 15 B.C. L. 989, See. ONE y einer, it is

stated on. page 990 that, §

“proceedings of the United States Courts may be

‘inquired into by the state courts for the purpose of

‘seeing whether the federal courts had jurisdiction or

authorit; to render such judgment or decree,’’ (cit-

2 or

/ ae : : ‘several ~eases),—‘‘and also whether the execytory

aaa proceedings under it have been conformabl® to law.”” ~

(Ttalies ours.) =f

* To the. same ‘effect—Adams v. Terrell, 4 Fed. 796, 800, |

801...

>In Marviaaton ¥. People, 6 Barbour (N. Y.) 607, the

court held (1) that the jurisdiction of a court, whether

of a general or limited jurisdiction, may be inquired into,

e, |

dihongh the’ record of the judameat states facts giving’

it jurisdiction ; (2) that no court com acquire: jurisdiction

, ‘by the-mere assertion of it. ts

‘a

_ Tin poeading in th Usite Bay Dist Soe snd

A “in estoppel. li, Sis elt nit Na “ete

__. decree or. set up as an estoppel must have ©

ne gk the power and jurisdiction to so enter the order de-

SERS RRS SRE De eeagcen the:par-

' ties in subsequent litigation. soe

+ Miller v. Rowan, 951 Til. 344" 348,

Munroe v. People, 102 Ill. 406, 409, 410. .

- Okon v. Kaenas; et al., 222 Ti App. 4s, 4

The reasoning “of the court, as’ to its ‘powers is less.

regarded tham-the judgment and decree ‘itself and the

_ premises which it neéessarily affirms. This’-court must

“therefore look into the federal. court’s decree and orders

' for the prdper decision.of this cause.

: Dekexy. Huenkemeier, 289 Tl. 148, 154.

_ Pemmoyer v. Nef, 95 U.S. 714, 727, .

lige Bg

ite Te Olen: Kaenas, et al., supra, where a court -in

foreclosure proceedings entered a money decree and gave

erédit to the defendant for money paid to the original

holder of the note and upon suit by the same plaintiff

| against the same deféndant to recover the money credited

in the foreclosure suit, it was held: the plea of res judicata

“2~ bad for the reason that the suit upon the note was an

: sattion m pereceem, while the foreclosure

* .

“Swis-a suit in rem, that the court had no power to, enter

a money decree and credit defendant for monvy paid to

o ‘holder. of the -note.. ‘Cited case and ‘the -one ‘at

are quite ‘analogous, ‘Tlie’ proceedings in the Dis- —

. ‘trict Court in this case was one’ im rem for the purpose

of,reorganizing the ‘‘debtor’”’ corporation and. for this

alone ‘did the court ‘have jurisdiction and power. ;

ot $eehcathtine wederst Dour to vue

decree and orders cancelling the guaranty. en; en-

( almost two years prior thereto for the

court had no power and jurisdiction in that

‘proceeding under Section 77B of the -

‘Ban Act to. so cancel the guarayity, did not —

ostter validity pan thst part of the Geeree otherwise

The opinion of ‘the majority of the Tustions ‘of the

Appellate Court of-Ilinois which petitipner seeks to affirm

cite fie case of Chamblin v.. bin, 362 Tl. 588, to

support, the proposition that ot now com-

‘plain ‘because’ the question of the power of the District

‘Court to cancel the guaranty was once put in issue by ©

this motion and the order of the District Court bars

him foreyer.. However, the case cited and, misapplied, ‘is

one invoiving the law pertaining to jurisdiction over the i

. person and not jurisdiction over the subject matter as

in the case at bar. The facts'in the Chamblin case and

the distinction between it and the -case at bar are set

forth in the em of the pa Court of Illinois:

(R. 67.)*

3 The doctrine of res adjudicata can always be applied :

to a former adjudication if there: is a finding that the

court has jurisdiqtion over the person and in fact does

have jurisdiction over the _, matter and —_ is the -

cater e ae 3 |

: cited. ‘The “question of . jurisdiction over the subject

- matter was never questioned in the Chamblin case but it

"is questioned in the case at bar and that question must

be settled in this proceeding. It is absolutely necessary

_ to go into the question of the power of the Federal Court

to cancel the guaranty because if no power can be shown,

, then there is no estoppel.nor res adjudicata. | The Ap

| pellate Court’s opinion was in substance an avoidance —

of the real issue in’ this case Which is not necessarily

the issue of estoppel and res adjudicata but one of juris-

diction over the subject matter of the guaranty. This.

issue the Supreme Court of Illinois recognized and right- .

fully ruled that thé federal court had no such. jurisdiction.

Moreover, the validity of every judgment depénds upon .

the jurisdiction of the court before it is rendered and

not upon what may occur subsequently.

~Pennoyer v. Neff, 95 U. S. 714, 727. |

ry Goialy ve Hall, 30 ‘Th. 109, the Supreme Court says —

on p. 116,

- “But. upon the aie of the right of the court ;

to act upon the persons. or rights of parties, we- '

\ think there is great propriety in holding. that the

, finding a the court is not conclusive.”

Po the same effect is Adams v. Terrell, 4 Fed. 796,

800, 801. . Even if an attack upon thie jarisdiction of the

federal court were made therein, it still can bé. proved

at any time and. at any place by reference to the laws

_ of the United States that the federal court did not have

jurisdiction of the subject matter of the guaranty “and -

did not compl; with Section 16(a) of the Bankruptcy

Act. |

ae Fe | ee

se trogham v. Oceanic Steam Navigation Co,, 2065 Fed. -

SEA prmeliinan tid shed ‘ebay nil gs’ jute.

-“Gistion ‘to determine its own jurisdiction. A court

te, decide 2 the-merits of its

- deéision. Sikes ta ait iodine ax ttle inh cores

- over Which it has no jurisdiction, it is a nullity.

‘Similarly, if:a court have jurisdiction of a cause ‘and -

yet. make'an order in it beyond its power, the order

as..void. In ee en ee eet

| rity; in the other, action in excess of ity. =

“In both.cases, ‘the order is a ‘nullity. Ez Parte

‘113 U. 8. oom; Inve. nana, 124 U. §. 200.’ /Ctalied—

: ours ; Pair, ; :

- Petitione> on pages 13-and 15 of his brief cites several

| cases to support the doctrine that a court which has

; general jurisdiction over the subject matter is competent

‘to decide ‘questions as to its jurisdiction, and therefore

_ _ such decisions are not open ‘to collateral attack. Tiis

doctrine begs the very issue in: question, the issue as— -

to the federal court’s jurisdiction and. ‘power over: the |

* subject matter of this guaranty. In Ex Parte ‘Harding, .

219 U. 8. 363, the question was whether the judgment

of a federal court declining to remand a case to a State

Court from which it was removed was reviewable by

. tnandamus; in other-words, that that writ may be used to -

* subserve the purpose of an appeal. This court held that —

jurisdiction has beer given to the federal court to deter:

mine whether the cause is one for (rence and therefore

zs dented | the writ. There was no pain involved tH. ereim

‘pertaining to. oollateral attack . or juriadition over fe.

subject matter but the-only question, the exercise of

_ judicial discretion. “However, this court did distinguish

therein the case of Virginia v. Rives, 100 U.S: 313, where-

in a ‘writ.of mantiamus ‘did issue Because ‘the ‘federal - -

court: abused its discretion disclosed by the power at-.

tempted to be exerted and impliedly held that : no mppeal

_ would be necessary. eee,

“In Dowell v. Applegate, 152 U. 8. 327, tits coputt bala ae

that in removing'the cause from the state court; the fed-

eral court rightf — jurisdi¢tion: and did ‘have ‘

Jurisdiction over and the subject matter of the.

deeds.-in question. case and the Harding case in-

_ volve findings of jurisdictional facts for removal. and not

. questions of jurisdiction over the subject matter.

In. Forsyth v.. Hammond, 166 U. 8. 506, this court held

. invalid an attack in a Federal Circuit Court of Appeals

upon .a decision of the Indiana Supreme Court in a

"matter that was peculiarly within the domain of state

control, to be finally and absolutely determined by that

- Supreme Court. Indiana Supreme Court ‘lield that the _

lower court in that,- instance had jurisdiction over the —

. ‘subject matter pertaining to territorial boundaries of a

; municipal ‘corporation. Likewise, state courts cannot deny. q

the correctness of a ruling of thig, Honorable Court in ©

construing Section 77B of the Bankruptcy Act but what.

is there to prevent a state court from ignoring a decree

. or order'of a,lower federal court in construing this |

_ section when sail state court is, aided. and guided by

_ decisions of Federal Circuit oe of sppedt and which

at follows. |

Rew v. Bchool. District, 125 time: 28 and Chicago Title - .

‘and. Trust Co. v. Storage Co., 260 Til. 485 involve the

doctrine of estoppel by veriijet where the issues’ decided

“12

- were the identi in toth oourts siti where the cout

‘, had jurisdiction over the subject matter. :

: Se shic SadhnrsSl apni ddadd en igus ‘4B “60 spetitiomar’s

brief, the federal courts havé jurisdiction over the subject | |

matters and: the only questions involved pertain ‘to the

legal effect of the facts for removal and the diséretion |

_ of the court in permitting or refusing removal. | !

tay aud there is no authority in Section: 77B of that act

as amended or elsewhere giving the Federal Court, while

sitting iri bankruptcy under Section 77B for reorganizing _

a ‘‘debtor’’ a ee camel i

@& guaranty. |

hs ‘ths Pertinent Statutes and cases in point,

Section 16(a) of the Bankruptcy Act prohibits and

_ Section 77B does not authorize, alteration of rights against

third party guarantors. Section 16(a) provides that:

. . “The liability of.a. person who is\a co-debtor with,

* vel cess ere ager Mier preag eer ty for, a bank-

apt shall not be altered by the discharge of such

"Section 77B(b) provides that : ‘3

‘CA plan of ‘reorganization within the 1 meaning of’

section (1) shall include provisions. modifying

or~altering the ‘rights of creditors generally, or of

any class of them, secured or tinsecured, (10) may.

deal with’ all or any part of the property of the -

, debtor, ,and may include any other appropriate pro- _

visions not inconsistent with this section.’’

The rights of creditors here referred to are rights

againet the debtor m reorgamication, not — agaist

oatlies other diel such debtor. | The sda to. be. dealt :

with is the properfy of the debtor in reorganization, ‘not

property of parties other than such debtors. Section 77B

(bh) provides that ‘the final-deeree shall discharge the

debtor from its debts and liabilities * * *.’’ Clearly the

only debts that may be discharged are debts of the debtor

in reorganization, not debts of parties other than such

debtor. Section 77B (k) provides that all. other provisions

of the Bankruptey Act not ineonsistent. with Section

77B shall apply. thereto, and Section 77B (0) provides

1 ee aren haa altars be the same as that

which results from a v tary ns and <e eauaaag -

in Wankruptcy. ij >

It thus appears that Section 77B bias not contain any

provisions that might authorize alteration. of - rights

against third party guarantors, which rights, are expressly

preserved in Section 16(a). Indeed, Section 77B, which

relates to corporate debtors exclusively, does not : even

contain provisions analogous to’ Section 76, which, in

‘relation to individual debtors, extends the obligation of

the guarantor to correspond to the extension granted to an

the individual debtor liable for the debt guaranteed.

Section 76 merely extends the guaranty but does not ©

cancel it which the District Court had no power to do in,

the case at bar. Section 76 of the Bankruptey Act relative - |

to the extension oftthe guaranty does not apply to Section ...

77B proceedings . and has no relation to any situation

that may be created under them. In re Hygrade Dye

Works, Inc., C. C. H. Dec., Sec. 3083.

Nor -is Section 77B inconsistent with Section 16(a).

The additional jurisdiction ‘‘for the relief of debtors’’

to be exercised under Section .77B, and. conferred by Sec-

tion 77A, is limited to the relief: of debtors in reorganiza-

tion. It does not extend to the relief of a guarantor of

chligations of such a debtor, or to the relief of a guaranty

of obligations ‘upon ‘he is primarily and’ personally

‘liable. Accordingly, Section 77B, which does rot-purport

ne Sidhe agube“thirdprty jpumeasioes wt in

reotgunization, cannot ‘be inconsistent with Section 16(a).

which preserves ‘such rights. Both sections cfn and should

be ‘given - ‘full effect. magpela by ees: are not :

favored.

“ Consinesital Bank». Rock Island Ry., 294 U. s.

, 620; 672, (holding that Section 77B is

4 a jaw on bankruptcy). ,

| Asie States v. cing Electric Mfg. Co., 291

JU. 8.386, 396.

us ~ General “Motors, etc., ‘Corp. v. United States,

“ U.:8. 49,61.

: | Frost.v. Wenie, 157.U. 8. 46, 58.: “ay

‘Delaware Tribe of. Eapions v. ‘United States, 84 4

“Ct. Cl. 585.

tt may’ be said that. sadiranten proceedings are equitable :

.in their nate but they are to be administered in, accord-

ance with the Bankruptgy Act. and general orders and:

not under any broad unlimited equity power.

1 44 L, Ed. 1175.

Bord Bank, 178 U. 8. 524, 535, -20 Sup. Ct. as

in re Judith Cop Commercial Co.; 5 RF (24) 307;

309,

Johnson “v. Morrie, 190 F. 459, L. R. A. 1915—

18,884. |

Westall v. Avery, 171 F- 626.

Woods-Drury, Tac. v. Superior. Court, 63 P. (2d)

“1184.

City Real yg Co: v. tails Const. Corp.,

3B.N. Y. & (2d) 312.

They are_confined to controversies iii to a a bankrupt :

estate and within this limited area.

aa Southern Bell cae & Tel. Co. v. Caldwell,

| et al., (C. C. A. - 8): 67 F. (2d) 802.

~ ° .

by uc Z a.

° Seaslor +. Wemoof, 188 F. 636. hn ies

Central Fibre. Products Co. v.: Bacher, 12 8. Ww.

(2d) 372, 376 (Mo.) Nov. 15, ‘1937. : :

-In ‘has been held that bankruptcy courts under the “act

have no jurisdiction, of independent. suits at law or in

“equity. Moryman v. 8. G. Dreyfus Co., 174-8. W. 549

(Ark.). In Bush v. Eliott, 202 U. S. 479, 26 Sup. Ct.

670, 50 L. Ed.. 1114, it was held that it was the evident

purpose of Congress to limit the jarisdiction of the fed-

eral courts sitting in bankruptcy in respect to’ contro-

versies which did not even come simply within the jpris-

diction’ of those courts.- To. the F's effect are Bardes.

. ¥. Bank, supra; In re. Smith, 7 ¥F. Supp. 863, 864 apd

In re Hageman, 10 F. Supp. 716.

Petitioner’ on page, 18 of his brief cites Continental

~~ Bank v. Rock Island Ry. Co., 294 U. 8, 648, to support

the proposition that proceedings under Section 77 of the

Bankruptcy Act are proceedings in equity. The question

therein was gvhether the bankruptcy coprt in Teorganiz-

'. ing a debtor railroad had the power to enjoin the sales,

' . of bonds held by five banks as security for collateral

See _ Motes of the railway company; if such sales would so

> Hindef, obstruct and delay the consummation of 2 plan.

of reorganization as probably to prevent it. This court

found that the bankruptcy court had statutory authority

to issue.the ifrjunction and the injunction goes no further

than to delay the enforcement of the gontract. Would it

then follow from. the case that the b ptey court had

the further equitable power, if it so desired to act, to :

cancel the contract as’ it has attempted to do in this

case -Lefote the bar? Surely. seuipntionst limitations

eae pose this!’ ;

Petitioner cites btiacibe ie Radway Co. v. oes

Trust Co., 174 U. 8. 552, to — his éontention that

Sa rman Sete

Fo Sarma e 7

e .

YO eek RIN RET APRN ARNT TESS ns

teal!

cutnnntinacetiniam Naga

a guaranty'may be cancelled in equity.. There was no_

question involved as to the power of the federal court :

in equity to cancel the guaranty. Furthermoré this court

_ stated on! page 577 ‘that it ‘had the power to cancel the

guaranty only as to purchasers with notice. ‘It. is there-

fore apparent’ that even a court of equity with plenary

F powers'cannot cancel a guaranty, which cancellation would |

| affect: those without notice of the defect as well as those

-- with notice. ‘Furthermore the cases are not analogous,

inasmuch ‘as the case at bar. does not involve-a general

ee en ane

table powers. - :

In Sharon v. ‘Terry ad Pholiipoon’ v. Irvigétion District,

petitioner’ s briéf, page 18, the federal court as a court

- of equity | had the power to cancel a forged marriage

_ contract ard to remove a cloud. upon the. title of personal

_- property. The case. at bar involves a bankruptcy court — |

- and not: an equity court: so the eited cases are not appli-

cable. There is nothing in the record to show that the -

A District Court did indicate any provision in Section 77B_ -

- upon swhich its jurisdiction and power to cancel the

3 guaranty might be based. There ts none. The District

_ Oourt has no power to enter the decree cancelling the

'. guaranty which did nullify Seétion 16(a). Ginsberg ¢-

Sons v. Popkin, 285 U: 8. 204. “Congress did not give .

the. power and this is apparent by its silence. It is

. even true,that Section 77B does not even give jurisdiction

- to the Distriet, Court over property of the bankrupt which

. it holds in trust for a third party. In re Commonwealth

_ Bond Corp., Debtor, 77 Fed. ga) 308. That court when

sitting in bankruptey is none the less a separate and -

distinct court,*and exercising powers and jurisdiction — -

separate and distinct from its powers and jurisdiction —

as a district court. Norris ease, 18 F. Cas. No. 10,304. |

r* .

B. Tho Constitutional Question. ihe BS ee Ma

The Constitutional ccitthtn Maribel in the: sitiiiten

of Section 77B jurisdiction beyond property of the debtor

has‘ been noted by the court in In.re Commonwealth Bond

Corporation, 77 Fed.) (2d) 308, 309. If Section 77B may

be so. construed as to empower tlie District Court to.

cancel ‘the Guarantygit would ‘violate the Fifth Amend-

ment which provides: ‘‘* * * nor shall any person * * °

be deprived ann” property without: due provess of

= «RR 2

. Louisville, ete, Bank v. Radford, 296 U. 8. 55,

589, 601. - Bh ae

oC. “The Distelet ours sitting tn bunting ‘uniter ‘Bes

| ‘tion 77B of the Bankruptcy, Act for reorganizing a :

| “*debtor’’ corporation was a court of limited juris-

' ”. diction and power, that is, limited in respect to the

_ tion. . ;

pe Waging Mipestantl Steel Co. v. Moss, 62 F. (24)

werd “0 “9 page .

Chicago Bank of Commerce v. Carter, 61 F. (2d)

986, 988. . ;

" Nixon v. Michaels, 38 F. (2d) 420, 423.

es In re Stearns, 295 F. 833. oS es

| Finn v. Carolina Portland Cement o, 232 F.

“SES C0. O. A).

In ré Hollins, 229 F. 349.

Nelson v. Sven,etc., 178 F. 136, 140.

Henrie v. Hendéréon; 145 F. 316, 319.

Remington on ‘Bankruptcy, 3rd Ed. ( Til).

1. A Federal Court cannot have the power to entér

a decree or order except when authority is found in. the |

Subject matter over which it may exercise jurisdic ae

18 “ 2

Constiation of the United States and statutes made pur- .

‘suant thereto.. The People v. Seelye, 146 Til. 189, 221;

State of Rhode Island v, Massachusetts, 12 Pet. (U. 8.)

657, 720; Munroe v. People, 102 Tl. 406, 409; Jones. v.

. ‘City, etc.; Co., iF. (2d) 649, (C.-C. A:); Gollier .

- on Bankruptcy, 13th Ed. Vol. 1, p. 42. The District

_ Court’s powers are limited by the of the Bank-

ruptey Chicago Bank of Commerce v. Carter, supra;

: ive nvretonh @ Iuc., 27 F. (2d) 368, 369;

Nie Industrial Commission, 329 Ill. 623, 627. Power

--not conferred by that act it does not possess. Adams ve

_ . Pervell, 4 F. 796, 801. (holding proceedings of a bank.

| “‘ruptey. court subject to’ collateral attack) and- see cases

‘cited therein.

“The test in iin whether the District Court

had the power ‘to cancel ‘the. guaranty is whether that — ,

court, under the circumstances, would have authority to:

enter such decrees. and orders cancelling the guaranty. -

O'Connor v. Board of Trustees, 247 “Tl. 54, 57.- It is

obvious that under Section 16(a) of the Bankruptcy Act,

it had no such authority: there is no authority in Section .

77B, nor is there authority in equity to cancel the guar- —

- Congress, by enacting Section 16(a) of the Bankruptcy

Act, providing that thé discharge in bankruptcy of a prin-

cipal debtor shall not release the guarantor, and by re-.

muining silent as to that point in Section 77B, appears to. -

have clearly manifested its intention that ocontroversies. ©

not strictly or properly ‘part of the proceedings in bank-

ruptcy, ‘but independent suits upon the guaranty, should

‘not come within the power of the District Court. rs

_ 2. The District Court in decreeing the Cancellation of

the Guaranty*did not comply with the Bankruptcy Act

and that part of the decree is a nullity.

= : ,

‘The District Court aid not act jadicially in all things.

before it. It ‘transcended the power conferred by the

Bankruptcy Act. It could not be conceded that if the

action were upon a money, demand, the court notwith- |

standing its complete jurisdiction over the subject and

the parties, has power to pass jndgment of imprisonment

spon the defendant, Sionderd Od Co. +. Missouri, 224

U. 8. 270, 281; Windsor v. McVeigh, 93 U. 8. 274, 382.

So much of the deoree-of the District Court as was in

excess of its powers is void.

The general language of Section 77B of the Bankruptcy

Act, although broad, cannot be held to apply to the

guaranty because the question pertaining to the cancella- —

tion of the guaranty is specifically dealt with-in Section. -

. 16 (a) of the Bankruptcy Act. United States v. Chase,

135:U. S. 255, 260. The specific terms of Section 16 (a) _

prevail over the general terms in Section 77B. Kepner

v. United States, 195 U. 8. 100, 125. The plain mandate

of Section 16 (a). cannot he set aside because of con- ~

sideration which may appeal to the referee or judge as

falling within “general principles of equity jurisprudence.

- Burton Coal Co. v. Franklin Coal Co., 67 F. (2d) 796..

D. Daher thee deshilend Sh Ba so Biveiony Bediting Ose.

poration, 86 Fed. (2d) 456, wherein this court denfed

- petition for certiorari, 300 U. 8. 662, No, 636, and’

_ In re Nine North Church 8t., Inc., 82 Fed. (2d) 186,

188, and other cases cited herein, the Federal Court

- was wholly without ‘jurisdiction of the subject mat-

ter of this guaranty, and its orders and decree per-

taining to the cancellation of the guaranty are abso-

- lutely void and subject to collateral attack. ,

| The leading cases on this point, those cited above, state :

‘ point blank and without equivocation, or reservation, that

;

: 9: Paidesesh Comat ide wittnonit iit caeimeiih oe sees :

: ‘anty while it'is sitting in Bankruptey-under Sestion 775

for ‘the reorganization of a ‘‘debtor’» corporation. -

‘The ‘facts in ‘the ‘Diversey Bldg. Corp. case are as fol-

lows: ‘On June 28, 1935, the District Court of the United _

‘States, entered a decree consummating the reorganization —

‘of the Diversey Bldg. Gorporation. The plan contem- .

plated ‘the release ‘of. Becklenberg from his guarantee of

_ othe ‘bond issue. “On October 16, 1935, the debtor ‘filed its

petition fora. restraining order in the District Court'to

restrain: and enjoin on Weber and other ‘creditors from -

prosecuting their suits at law or in equity against Beck-

Jenberg on his guaranty.. ‘Weber, in his answer to the

petition, dlleged a denial of. the Court’s Jurisdiction to.

-restrain him from against Begklenberg. The

Lot court, however, ente a’ perpétual restraining , order:

: enjoining Weber and sitees creditors from. prosecuting

; their lawsuits against Becklenberg from which order ae

. Weber ‘and others appealed. The appellants did not

accept the plan and from the decree of June 28, 1935,

' there was no appeal.

The Circuit Court of Appeals of the same sieetit vihere-

in this:case at bar was decided states in its opinion:

/ “The question ‘here presented. is wheiher the Dis-

triet Court had the power to. release Becklenberg

_.from his guaranty of the old bond :i issue in considera-

\tion of his guaranty of the new bond issue, pursuant

_ te the reorganization. plan which had been, approved ©

? by\: the court after its aceeptance by two-thirds in

amount of the allowed and effected claims of each

- - ¢lass:of creditors, but which had not been accepted

a appellants, who were bondholders of the original ae

: a bait 7 .

uestion must be siacaeininal in the negative

Pig ha ouble here is that the court exceeded ~

‘its jurisdiction with — to the subject - matter

hefore it,’’

The court further states in. ite opinion 2 that it is in _

acéord with the’ conclusions : expressed in the Mine North |

_Chyrch Street case where the facts are very similar. =

The Circuit Court of Appeals in the Nine North: Church

Street case held specifically that. the obligation alising by

. virtue of the gdaranty | are not affected by the reorganiza-

tion of ‘the dabtor; that any modification of the guaranty

can only be justified by ‘the bankruptcy power which

extends only -to the relief of insolvent and hard pressed

debtors; ‘that the guarantor cannot modify its obligations: —

by the ‘reorganization of other insolvents; that Section

°36 (a) of the Bankruptcy Act expressly reserving a

creditor’s rights against the guarantor of a discharged

- bankrupt’s debts, shows that an alteration of the guar-—

- antor’s liability is not conceived to be essential tu the: —

debtor’ ’8 Feorganization; that the | District Court had no

jurisdiction’ to. enjoin suit on the guaranty and was with-

. out jurisdiction “as to. claims apejeie the ne

“- In the Matter of Utilities Power and Light Cont i

Debtor, 91 F. (2d) 598.

In.re. Prudence “Bonds Corp., 79 Fed. (2d) 212,

215. ee

"In re 1775 Broadway Corporation, 79 — (2d)

108, 110.

Brumley v. Jones, 141 F. 318.

Collier Supp. See. 77B; Am. B. R. Digest, Sec. |

279-a

‘es

, The Supreme Court of Illinois hes iiss very far in

‘ upholding the principles for which a guaranty stands. ©

In the case of Holm vy. Jamieson, 173 Ill. 295, 300, a cor-"

porate note was declared by a court of equity void for

want of authority of the treasurer of 1 the corporation to |

* execute the same. ‘The holder sued the § guarantor — this

(Perbior :

e \

court held that' the action of the court of. equity holding

_ note void does not release the absolute guarantor and the

plea setting up the decree is‘bad. This was a: collateral

attack on the judgment of another court which ete;

‘did have jurisdiction of the subject matter.

The New York Court of Appeals on. July 13, 1937, meant

- .even farther than the cases cited above. In Union Trust

‘C6. of ‘Rochester v. Willsea, 275 N. Y. 164,.9 N. E. (2a) :

*820,.'there was un action on a guaranty. of payment

executed and delivered by appellant to respondent of the

. indébtedness of the Willsea Works, a corporation which

filed its petition for reorganization under Section 77B.

‘In the proceeding in the federal court, respondent creditor

filed its claim against the principal debtor which repre- |

sented the same indebtedness as set up in the complaint

against appellant-guarantor ‘and actively partidipated in -

stock under the confirmed plan of reorganization.

It was urged by the guarantor that the acceptance of

‘that stock and the participation by the creditor in the

proceedings constituted full payment of the guaranty.

The court however held that no matter what actions the

creditor did take, stili there could be no payment. by

virtue of the reorganization proceedings and the federal

court has no jurisdiction’ to adjudge that the claim was.

by the proceedings paid and discharged; that the proceed-

ings under Section 77B involved the debtor. and its cagdi-

tors and did notin any way affect the. independent guar-

- anty agreement; that such pfoceeding is subject to all

other applicable provisions of the Bankruptcy Act. The

court points ont that no provisions, of the act are referred

to it whereby a. guarantor of a debt of the bankrupt is

relieved of liability as the result of a proceeding under

Section 77B, unless such guarantor has himself been

23 | Raa

siljeilicated not liable in a silat instituted by or.

‘against him as a result of his own insolvency.

& ‘In a very recent case decided August 28,. 1937 in the

_-District Court, S. D. of New York, it was held that a

_ :bankruptey court in reorganization of a corporatioh

no power to issue injunctions against suits’ in other

courts involving an insurance company in which -the

_ debtor owns stock, even though the institution of stich —

* - gnits or proceedings may have an adverse effect on assets -

‘of the debtor, the court reasoned therein that the insur-

ance company was not in reorganization. _In re Madison

Mortgage Corporation, 22 F. Supp. 99. - > ,

See Chauncey, et al. v. ’ Dokes Bfos., et al., (C. C. é. 8)

119 F. 7 3, wherein it was held that the bankruptcy act, .

confers no such authority on the court to. assume juris-

diction of a controversy between third parties, merely

_ because the claimants happened to be creditors of the

bankrupt estate. In re.Pyrocolor Corp., 46 F. (2d) 554,

In In re 1775 Broadway . Corporation, supra, which

petitioner inadvertently - misquoted on page 19 of his

brief, the Circuit Court of Appeals held that provisions

of a plan releasing trustee of tort claims against it were

_ .properly disapproved by the district court especially since

_ that court did not have jurisdiction of non-assenting note- |

holders to release tort claims and since claims: were not eed |

against debtor or its assets or such as were required

_ to be settled in order to bring the property into the

reorganized company.

_ Petitioner is now attempting to convince this Honorab $3

Court that the decision of the Appellate Court of Illinois

_° for the First District, First Division was correct and

a the decision of the Supreme Court of Illinois was

jurisdiction and this we are unable to say.’ (Italies. -

" ‘Howover, this doabfreterred to’ no longer ‘exists, be

cause in-the case of Johnson 'v. Finn, 14,N. E. (2d) 240,

. decided April 25, 1938, the. same ‘Appellate Court held: - |

, ’ “A guaranty ‘of payment of the issue of corpora. .

-tion’s bonds was not in any way affected, discharged,

or abrogated by procevdings in the federal court for

the reorganization of the corporation under the Bank-

ruptey Act, wherein new bonds weré issued and holder

_ ‘was compelled fo accept new bonds unger penalty for

gg contempt, since ‘the court was: without jurisdiction .

to impair. the guaranty.’’ Har Aegis Fie, 3

pas : es

eh Petitioner’ states on page 20 of his brief that in the —

| ease of In re Central’ Funding Corporation, the plan of

reorganization released the guarantor and the approval

of ‘this plan indicates that: the fedpta} court’ has the .

power to modify an existing guaranty. Petitioner’ fails’

Rs . to point out to this Honorable Court that the guarantdr

=. therein was the debtor being. reorganized. The. Cireult

Court of Appeals on p: 258 states that, “the plan is’

‘part of the general -plan for the reorganization of the

surety company.’’ No question could ‘arise if petitioner

went through bankruptcy to relieve himself of the guar-

anty liability but he cannot do’ it in the reorganization

proceedings: of the principal obligor. |

Re ISEB de

Ce Te, Oe, re

en Sere aa ee

_ subject to collateral attack. —

+ Ths Distt Court erin powers to which Bee

tion 77B of the Bankruptcy Act had no

and exoeeded the powers given it by that section.

It is contended that where a court has jurisdiction of ~

the’ parties and the subject matter, its decree, however

erroneous, can only be attacked on appeal or error; how-

ever this rule is subject to ‘an exception equally well. |

settled—that a decree may be void because the court

,enceeded its jurisdiction. In Armstrong v. Obucino, 306

Ill. 140, the bill prayed for: the enforcement of the lien

| by a‘ sale beyond and contrary. to the powers given by

the statute. for enforcing Mechanic’s Liens and the court

held that because: the court had ‘acquired jurisdiction of

the parties.and subject-matter, it does not follow it could

maké such a decree as was prayed’ for; that tf. courts

transcend their Lawful powers, their decrees are void and

may be coltaterally impeached wherever rights, claimed

under them are brought in question. To the same effect

are Standard Oi Co..v. Missouri, 224 U. 8. 270, 281;‘In re

Sawyer, 124 WU. S. 200, 220; U0. °S8. v. ‘Walker, 109 U. 8.

258; Windsor v. McVeigh, 93 U. S. 274; Adams v. Terrellg

4 Fed. 796, 800; Novak v. Kruse, 211 Ill. App. 274; Great

Western Tel. Co. v. Barker, 56 Ill. App. 402; Risley v.

Phenic Bank of New York, 83 N. ¥. 318, 337. 7

, This Honorable-Court, in issuing a writ of mandamus

in Ex Parte Wisner, 203 U. S. 449, where the federal

court had already determined it had and gid assume

jurisdiction ever the parties ane the cause, Sound that

. there was an absolute want of authority of the federal

court over the case. Even in view of the fact fhat the

parties had the ri ht to appeal, this court issued the writ

of mandamus which is analogous to a collateral attack -

upon. the judgment of a federal ana entered without

Juriediction | or power.

In Hovey -v. Eliott, 167 U. 8. 409, wherein the

_. Supreme Court of the District of Columbia ordered the

answer of the defendant in a chancery suit pending in

that court stricken: from the files and entered a decree .

that the bill be taken pro confesso becanse he was held ~

to be guilty of contempt, this’ ‘court held that that court

did not possess’ the power to disregard an answer and

_ the judgment based: upon the exeycise of stich an assumed —~ -

power is void for want of jurisdiction and may therefore

be collaterally’ attacked. Thi».,case is strongly in this

respondent’s favor because there is no doubt that the

Supreme Court of the District of, Columbia had jurisdic-

tion over the subject matter 4 the first instance but

exceededs its jurisdiction when it-ordered the answer of

the defendart stricken from the files. | p

‘- "To the same effect is Reynolds v. Stockton, 140 U. 8S.

254, wherein this court held that a decree which passes

upon questions not at issue in the cause and rendered

_ against a ‘party who had taken no actual part in the

pig subsequent to the filing of his answer, is void

and subject to collateral attack. Respondent here took. |

no actual part in the bankruptcy proceedings and the

decree which eancels the guatanty is void igasmuch as

the guaranty was not legally in issue.

‘In Guaranty Trust Co. v. Green Cove R. z., 139 U. 8:

137, this court held that a decree for foreclosure against

an absent defendant brought in by publication that was |

(ee

27 «

‘short of the fall peried required by law, is a nullity and

- sabject to collateral attack. This ease is even stronger

than the one at bar inasmuch as the court did have juris-

diction to enter the decree but entered same erroneously ~

and irregularly and did not comply with the exact wording

of the statute.

In In re Southern States Finance Co, 19 F. -(2d) 959, -

there was. collateral attack by &) federal court upon ts

another federal court’s order of adjudication. There an

_ adjudication of bankruptey was made by a district Gourt’

" of’ Delaware and a trustee was qualified? Another peti- °

tion for adjudication was filed in a district court’ of

North Carolina for the same corporation. A petition

was filed-in the district court of Delaware to transfer

“ease to the North Carolina district for .consofdation

. which petition was opposed upon the ground that a prior

petition had been filed in the Delaware court and thé

court of North Carolina was. without. jurisdiction to

entertain petition or to make the, adjudication: that it

did make. It was held in the Delaware court that the:

- power essential to the existeng$ and exercise of original

jurisdiction was wholly wanting in *the - Carolina ‘court, .

- that courts of have no jurisdiction other than

.,expressly or by necessary implication conferred ‘upon

" them by the Constitution and the Statutes.

However, in the.case at bar, the District Court did |

not even have the power to cancel the guaranty and not ~

only) exceeded its powers given by Section 77B but

usurped another power that.was never given to*it. It

. cannot- be controverted that such a decree would be: sub-

” ject to collateral attack and there : are numerous cases to

» support the statement.

In re Sawyer, 124 U, 8. 200, 200,

The Confiscation Cases, 20 Wall. sat 8.) 92.

Sharon-x. Terry, 36 ¥ od. .337, 346. —-

‘Rabbit :v. Weber & Co., 297 TH.491, 495.

emily -v. Grosrenaud, 201 T1272, 273.

Kenney v. Greer, 13 Iil.-432. be

- . Ashlock -v. “Ashlock, 360 Ti ‘145, 122. -

% Risley v. Bank, 83 N. Y. 318, 337,

‘And’ since the ‘District Court proceeded without juftis-

‘iction and power to cancel the guaranty, it matters not ‘

how technically correct and precise the form of the record

appears. Ite decree in’ part is void and mmst be so de-

' @lared; the authority was wholly usurped and the decree

was ‘the -exnrolee “of “attltzary ‘power ‘wndér ‘the ‘forms,

“but without sanction of law. re

Ritchie v. Sayers,'100 Fed.’520, 582.

_ People v. Seelye, 146 Tl. 189, 221. |

\Hermandez v.. Drake, 81 Til. 34. —"

Swiggart v. Harber, 4 Sean. (TL) 364.

mee. 8 Bepanse the ‘District Court had no power to cancel

the guaranty, it was unnecessary to appeal from its

eutters ‘or ‘decrees ‘because they are subject to o9l-

lateral attack. ~.

“People v. Léavens,,288 Til. 447; 448,

- Oakman v.. Small, 282 Tl. 360,.363.

_ » Sheahan y. Madigan, 275 Tl. 373, 377. =~

' . | Aldridge y.' Matthews, 257- Til. 202, 206. :

The iest of jarisdiction and power is not: whether a

court of ‘review would reyerse the decree.rendered. An

_ ‘Appellate Court would reverse e decree on the ground

«that it was rendered without jurisdiction, but it is

begging the question to. say that because a reviewing

ms *%

°F ,

7A 5 *.,

P Y y

5 o

ee us

court on appeal ould reverse the dere, therefore if ean

. be attacked in no-manner. —.

ay People v, Brewer, 3281. 472, 482,

| O’Connor v. Board: of Trustees, 247 Ih. 54, 57.

If. a ‘court Gs without jurisdiction over the subject

ae matter, it is not material how the question of jurisiliction

is brought to a court’s attention.

er ng " Commérce v. Carter, 61 F. (2a).

‘ 986, 989.

#9 Mang 74

Jurisdiction and | power | to ‘sijeaiinie and “to, enter. :

_. -jdidgment cannot be. conferred. by consent or by failure

to raise the question of power in‘a court of review.

- Niwon v. Michaels, 38 F. (2a) 420, 423. 2

Town of Kingston v. Anderson, 300 Til. 577, 582.

| Rabbitt v. Weber & Go., 297 Ill. 491, 495. hes

_ Consent’ of the parties to the suit cannot give jurisdic. :

tion to the ‘courts of the United: States where it has not —

been conferred by the Constitution and laws. aoe et

Cutler v.. Wiliam A. Rae, 7.How. (U. 8.) 730.

Mills v. Brown, 16 Pet. (U. 8.) 525.

—— 1." -* 1: GONCLUBION.

Respondent contends that regardless of the fact that

the Federal Court. did assume jurisdiction-and construed

the Bankruptcy Act to give it jurisdiction to cancel the

. guaranty, yet if n th jurisdiction existed, there could —

never be former adjudication. The question before this

Honorable Court is whether or not the Federal Court |

had the jurisdiction and power, while sitting in bank-

ruptcy under Section 77B of the Bankruptcy Act for the.

reorganization of a.‘‘debtor’’ corporation, the principal

obligor in ie case, to discharge and release the guar-

pentir: Lit cemalileenrondih:delibtion Stee! thabo A

"gould never be a former adjudioationof petitioner's rights ag

against the guarantor iand: the judgment of the Supreme a4

Court of Hlinois:should’therefore:be affirmed.

be Considerations’ of hardship ean. play no part in the de-

ace "Eililetine.. ‘Payne, 94°F: (2d) 856. Moreover,

_ owhat hardship can’ befall: petitioner when all he gave up

"for the release of the guarantjgewas.one (1) share of

stock in the debtor corporation? .(B. 34.) ecg

_ . "We subihit that the decision of the Supreme’ Court of

Illinois is in accord with’ the decisions of this court and

that it’ rightfully followed the decisions of the United

States Circuit Courts of Appeals for the Second and ~

. Seventh Cirewits' in the cases of In re Diversey Bldg.

Corp., 86 Fed. (2d) 456; and In re Nine North Church

St., Inc., 82 Fed. (2d) 186 and rightfully applied. the facts

_and law of the Chomblin ease to the tacts in the caso at

bar.

We farther submit that the Supreme Court of Ilinois

did- give that fall faith, credit and effect’ to the decree ;

? of the Federal Court to which it was entitled and the.

| judgment of the Supreme Court of Illinois is in acoord-

eg asco pain ame

and ishould therefore ‘be affirmed. Loe

es Seay ge. " ‘Aeeay' for ‘Respondent.

: Davi Srirman and . ipmtiaeens ‘

Leo Seas, _ : erga HG

se Of Cowneel. He

ane

PTI .

“het

“Tt is an well-séttled rale in jarispradence,

that the oy set ae tops te

ity over a subject matter may be. into: in

Central Fibre Products Co. v. Bacher, 112 8. W. (24)

(372, 376 (Mo.) Nov. 15,1987, =

j i di tio

it.is confined to such rules and les as are con-

ferred by the act, Further, the jurisdiction does -

not extend beyond controversies properly incidental |

to the administration of bankrupt estates. Smith, et.

al. v. Chase National Bank, 84 F. (2d) 608; Nizon

vy, Michaels, 38 ¥. (2d) 420.”” As

- 103 A: 8. B. 307, 309. | | | OE

“Of course, if the court did not have jurisdiction

over the subject matter, this could be vroved by

reference constitution and laws of the state

and the i in the action, even if: the attack

wpon it werd made therem.””* ***S + 2 |

; ‘<The of a judgment of a sister state may be

_ avoided by proving that,it did not have jurisdiction

. over the subject matter, or authority to pronounce

the ‘judgment, or to give the. relief which it pro-

nounced or gave. * * * Whether the conzi nad Juris

- diction’ over the subject matter of the action or

pronounce the judgment or give the relief. in ques-

nanataaniemammngieamuats " some

"aap EH as Sy OES ERTL ve : -

. aca) . ~ :

~ Spree

: every

courts only so far as ‘

courts of one state are not required to regard as

conclusive any judgment of the court of another state

which had no jurisdiction of the subject or of the

parties.”” (See many. cases cited too numerous to

regent **It follows, fee tae —s jarisdi —

a coart 1 a jadgment or de is ys

; _ epeatenl airy aoe proper averments, where its

| oonelusiveness is questioned in a court of another

credit in other states as a judicial pro-

ceeding. Folger v. Columbian Ins. Co,, 99 Mass. 267, /

. 96 Am,- Dec. 747. Similarly it has been held that 4

if state laws ‘authorizing garnishment proceedings’ —

enanneesl Voll ba ehiker -clake without deptiving

- ‘void m ayother s without depriving ~

it of that ‘faith ard credit’. to which under the’con-_ .

stitution of the United States, it is entitled in the

- gourts of the latter state. Tourville v. Wabash R.

.Co., 148 Mo. 614, 50 8S. W. 300,71. A. 8S. RB. 650." °

BB onl,

evento: Whitman, 85 U. @, 467, 400;

: {On the Ghole,. w wo ‘think ti low that ths jarie- :

diction of eourt’ by. which a judgment is ren-

: hay Syme Aoay sans erontinclenitien te ;

_ pretesiling. in ers pro-

vision of the Fourth Article of the ‘Constitution and

- the law of 1790, and notwithstanding the averments.

“contained in the record of the judgment itself.” at,

Ritohie v. Sayers, 100 Ped. 520, 532.

- “Tt is well-settled principle = -qpaaseadil

may have jurisdiction of a case

from the record that it did not cae eh ik

‘enter the decree the particular judgment thereon.

_ that it did enter, that decree and reais may be

collaterally impeached.” - ee

| Standard Oil Co. v. Missouri, 224 U. 8. 270, 281.

“For even if a court has original general

diction, criminal and -civil, at law and. an oni it

cannot enter a judgment which is beyond :

asserted, or which, in its essential character, is not .

oS, responsive to the cause of action on which the pro-

was based.’’ * * *-

“*Though the court may . possess jurisdiction of a

- . cause, of the subject matter, and of the parties, it

is still limited in its modes of procedure, and in the.

pe and character of its,judgments. It must act

judicially in all things, and cannot then transcend

the power conferred by the law. If, for instance, |

’ the -action be upon a money ‘demand; the court -

notwithstanding its. complete jurisdiction over

the subject and parties, has no power to pass

" judgment of imprisonment in the penitentiary upon

__the defendant. If the action: be for 4 libel or per-

~ “sonal. tort, the court cannot-order in the case a speci- .

fic performance of a contract. If the action be for

_ ° the possession of real property, the court is power-

less to: admit in the case the probate of a will. The.

would not be merely erroneous, they would be. -ab-

i oo

: | solutely. void; because the

ae _ would transcend the. limits of its authority in t

fe Ridley v. Phan Ba of City of Wow Yor, 83K.

y 316, wt. rs ; ‘ BS a

| q pes “But ‘a. inanint authovinsd iy ohaitstn to antertain:

Bt jurisdiction ‘ina particular ease only, if it undertakes’

g ‘to exercise the power and jurisdiction niece aa

=e). ' case. to which the.statute has no application, ‘acquires ”

nt. no jurisdiction, and its judgment is a nullity, « Ti

gi ° a will ‘oo Ibe ‘fronted when it comee ‘in-question, ‘ithe |

iis _ tivedty, or csc acca del a

5 3 nine: is

it . 7

J ‘ 0

Legere amare:

Ee,

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