Opposition Brief — Connors v. Town of Agawam

INDEX

page

Alleged Conflict of Decisions 33

Appendix 38

Bankrupt’s Alleged Right to Stay of Proceedings

in Land Court 30

Certiorari Denied in Similar Cases 34

Forfeiture Claim 35

Gardner v. State of New Jersey Inapplicable 18

2-25

25

1

27

2

4

1

9

Jurisdiction

Land Court’s Constructive Jurisdiction

Opinions Below

Prior 77B Reorganization Proceedings

Consummated

Questions Presented

Statement

Statutes Involved

Summary of Argument

CITATIONS

Cases

Agawam v. Connors, Trustee, 65 F. Supp. 755 1

Ambassador Hotel Corp., In Re, 124 F. (2d) 485 28

Argyle-Lake Shore Building Corp., In Re,

78 F. (2d) 491 33, 34

Angel v. Bullington, 15 L. W. 4247 32

Baker’s Share Corp. v. London Terrace,

130 F. (2d) 157 29

Baldwin v. Traveling Men’s Ass’n., 283 U.S. 522 27

Bell v. Eames, 310 Mass. 642 25, 32

Bell v. Roberts 112 F. (2d) 585 29

Bryan v. Speakman, 53 F. (2d) 463.

Certiorari denied 285 U. 8. 539 14, 24, 35

*

Ci CNIS: Si RR Ne RE CTR

ii AUTHORITIES CITED

page

Butrick, petitioner, 185 Mass. 107 32

Central Railroad Co. of N. J., In Re,

152 F. (2d) 408 18

Chandler v. Perry, 74 F. (2d) 371 26

Clinton Trust Co. v. John H. Elliott Leather Co.,

132 F. (2d) 299 29

Continental Bank and Trust Co. v. Scotch Presby-

terian Church, 57 N. Y. S. (2d) 128 29

Cooper v. Reynolds, 10 Wall 308 25

Dannel v. Wilson-Weesner-Wilkinson Co.,

109 F. (2d) 364 14, 24, 26

Davis v. Friedlander, 104 U. S. 570 27

Donovan v. Haverhill, 247 Mass. 69 : 25

Drusilla Carr Land Corp., In Re, “eee

107 F. (2d) 565 14,24

Emil v. Hanley, 318 U. S. 515 14,17

Fischer v. Pauline Oil Co., 309 U. S. 294 27

Flatbush Avenue-Nevins St. Corp., In Re,

133 F. (2d) 760 29

Gardner v. New Jersey, 91 Law Ed. 410 10, 18, 19

Greenlie-Halliday Co., In Re, 57 F. (2d) 173 = 14, 24

Gross v. Irving Trust Co., 289 U.S. 342 15, 20, 21, 24

Heffron v. Western Loan and Building Co.,

84 F. (2d) 301. Certiorari denied,

299 U. S. 597 21, 28, 34

Heiser v. Woodruff, 66 Sup. Ct. Rep. 853 26, 27, 32

Hotel Charles case, 12 F. Supp. 19,

12 F. Supp. 734, 84 F. (2d) 589 34, 35

Isaacs v. Hobbs Tie and Timber Co.,

282 U. S. 734 15, 20, 21, 24

Kentucky Union Company v. Commonwealth of

Kentucky, 219 U.S. 140 37

Maier Brewing Co. Inc., In Re, 65 F. (2d) 673.

Certiorari denied 290 U. S. 695 14, 24, 26, 35

aaa

AUTHORITIES CITED iii

page

30

Meyer v. Kenmore Hotel Co., 297 U.S. 160

Meyer v. Fleming, 99 Law Ed. 423 20, 23

Muffler v. Petticrew Real Estate Co., 132 F. (2d)

479. Certiorari denied 319 U. S. 766 14, 24, 34

Nicol v. Ames, 173 U. S. 509 36

North American Car Corp. v. Peerless Weighing :

and Vending Machine Corp., 143 F. (2d) 938 28

Pickens v. Roy, 187 U.S. 177 14, 15

Reese v. Beacon Hotel Corporation, 149 F. (2d) 610 29

Salem v. Eastern Railroad, 98 Mass. 431 . 32

Security Trust and Safety Vault Co. v. Lexington,

203 U. S. 323 37

Sheehan Construction Co. v. Dudley, 299 Mass.51 32

Steelman v. All Continent Corp., 301 U.S. 278 20, 22

Straton v. New, 283 U. 8S. 318

11, 14, 16, 17, 19, 21, 24, 34, 35

Taubel-Scott-Kitzmiller Co. v. Fox, 264 U. 8. 426 22

Taylor v. Sternberg, 293 U.S. 470 15, 21

Tinkoff, In Re, 141 F. (2d) 731 14, 24

Towers Hotel Corp. v. Lafayette National Bank,

148 F. (2d) 145 29

Van Huffel v. Harkelrode, Treasurer,

284 U.S. 225 20, 23

Constitutional Provision

Article 1, Section 8 : 4, 21, 38

Statutes

Bankruptcy Act, 11 U.S. C.

Section 2a (15) 4, 8, 38

Section 11 e 4, 11, 30, 31, 38

Section 67a-1 4, 10, 22, 39

Section 76 (N) 22

iv AUTHOgITIEs CITED

page

old Section 77B (Act of June 7, 1934)

subsection a 4, 10, 40

subsection h 4, 40

Internal Revenue Act, 26 U.S. C. ss. 3670 to 3726 36

Massachusetts General Laws (Ter. Ed.)

Chapter 58A, section 13 36

Chapter 60, section 37 4, 25, 41

section 53 4,5, 41

section 54 4, 5, 12, 42

section 58 36

sections 60 and 61 6

section 64 4, 5, 13, 25, 43

section 65 4, 5, 6, 35, 43

section 66 4, 43

section 68 4, 35, 44

section 69 4, 45

Chapter 185, section 1(b) 4, 5, 25, 45

Chapter 231, section 113 32, 36

section 135 4,8, 45

Miscellaneous

Collier on Bankruptcy,

14th Ed., Vol, 1, sec. 11,13 31

In the Supreme Court of the United States

| OCTOBER TERM, 1946

No. 1050

CHARLES F. CONNORS, TRUSTEE IN BANKRUPTCY

OF THE AGAWAM RACING AND BREEDERS’ ASSOCIA-

TION, INC., Petitioner,

Vv.

TOWN OF AGAWAM,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES CIRCUIT COURT OF

APPEALS FOR THE FIRST CIRCUIT.

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the United States District Court for

the District of Massachusetts is reported in 65 F. Supp.

755. The opinion of the United States Circuit Court of

=

2

Appeals for the First Circuit, filed January 7, 1947, is

not as yet reported but appears on pages 88 to 97 of

the Record.

JURISDICTION

The judgment of the Circuit Court of Appeals was

entered on January 7, 1947. (R. p. 98.) The petition

for a writ of certiorari was filed on February 24, 1947.

Petitioner invokes the jurisdiction of this Court under

Section 240 (a) of the Judicial Code, as amended by

the Act of February 13, 1925.

QUESTIONS PRESENTED

The petitioner presented questions as set forth on

pages 6 and 7 of its petition.

Not for the purpose of alleging any errors in the

decisions of the Circuit Court of Appeals, but to clarify

the real issues in the case, the respondent says that

the issues are:—

1. Where petitions to foreclose tax liens on real

estate have been brought in the Land Court of the

Commonwealth of Massachusetts, a court of record

and competent jurisdiction, against the equity owner

of such real estate two and one-half years before the

owner’s adjudication in bankruptcy, and at the be-

ginning of said Land Court proceedings notice of the

filing of such Land Court proceedings was properly

recorded in the Registry of Deeds according to state

law and said owner was duly served, appeared,

answered, and- actively took part in the Land Court

proceedings and hearings—is the Land Court deprived

of jurisdiction to enter final decrees foreclosing the

y

3

tax liens when the owner is adjudicated a bankrupt

two hours and ten minutes before the Land Court

hearing at which motions to obtain final foreclosure

decrees were allowed by that Court? Or can the Bank-

ruptey Court “snatch a res” from the Land Court’s

mouth by a mere adjudication in bankruptcy of a

real estate owner who for more than two years un-

successfully fought its case in the state court?

2. Where a debtor filed a petition for reorganization

under Section 77B of the Bankruptcy Act on December

23, 1935, an order confirming the debtor’s plan of

reorganization was entered on December 27, 1937,

said reorganization plan was fully consummated be-

fore July 1, 1938 (R. pp. 91 and 92), although no

final decree was ever entered in the reorganization

proceedings, does the reorganization court retain juris-

diction over the debtor’s property sufficient to prevent

a state court six years after the consummation of the

plan from foreclosing a real estate tax lien acquired

for taxes that accrued after the approval of and the

consummation of the plan of reorganization?

3. A third issue arises from the respondent’s motion

to dissolve a restraining order issued by the Referee

in Bankruptcy forbidding the Town to sell or transfer

the real estate involved. Its outcome is dependent upon

the issues of jurisdiction. As the owner of the lands by

decrees of the Land Court, the Town asks that the

restraining order be removed.

4

CONSTITUTION AND STATUTES INVOLVED

The applicable provisions of the Constitution and

the federal acts and Statutes of the Commonwealth

of Massachusetts are:

Article I, Section 8 of The Constitution; Sections

2(a) (15), 1le and 67a of the Bankruptcy Act, sub-

sections a and h of old Section 77B of the corporate

reorganization Act of June 7, 1934; Massachusetts

General Laws (Ter. Ed.) Chapter 60, sections 37, 53,

54, 64, 65, 66, 68, and 69; Chapter 185, section 1(b),

and Chapter 231, section 135. _ are set forth in

see arenes

STATEMENT

The Agawam. Racing and Breeders’ Association,

Inc. prior to 1935 owned and operated a race track.

in the Town of Agawam, Massachusetts, on a tract of

land that was formerly known as the Bowles-Agawam

Airport and which is described in three parcels on an

exhibit (R. p. 3). On December 27, 1935, (R. p. 91)

it filed a petition for corporate reorganization and the

petition was approved and the debtor continued in pos-

session. A plan of reorganization was approved on

December 27, 1937. A trust indenture and a mortgage

trust deed were executed in conformity with the plan

and the court entered an order on the approval of

their form. (R. pp. 87 and 92.) These particular trust

indenture and mortgage trust deeds and orders thereon

were omitted from the Record sent up with this case

with the petition for certiorari—very likely because

of their extreme length, each about fifty pages. But

the Circuit Court of Appeals found from an examina-

tion of this evidence that the approved plan of re-

organization had been consummated before July 1,

5

1938. (R. p. 92.) Despite this no final decree has ever

been entered in that proceeding.

The Town admits that taxes due before 1937 have

been paid. But though the Agawam Racing and Breed-

ers’ Association, Inc. owned and operated the race

track in 1938, the taxes for the year 1938 were not

paid nor has any payment of taxes been made on

any taxes assessed for subsequent years (R. p. 15).

Because of the failure of the Agawam Racing and

Breeders’ Association, Inc. to pay the 1938 taxes, the

Town of Agawam, under the provisions of Massachu-

setts General Laws (Ter. Ed.) c. 60, sections 53 and

54, acquired title to these lands by three instruments

of taking dated August 23, 1939, which were duly

recorded in the Hampden County Registry of Deeds

on August 29, 1939,—approximately five years before

the adjudication in bankruptcy. (R. pp. 50 and 51.)

By virtue of General Laws (Ter. Ed.) c. 60, s. 54,

“title to the land so taken shall thereupon vest in the

town, subject to the right of redemption.”

The state law, General Laws (Ter. Ed.) c. 60, s. 65,

requires that two years must elapse from the date of the

taking before the holder of such a title may petition

the Land Court of the Commonwealth to foreclose all

rights of redemption.

The Land Court has exclusive jurisdiction of the

foreclosure of all rights of redemption from tax taking.

General Laws (Ter. Ed.) c. 60, s. 64; ce. 185, s. 1.

The Town of Agawam duly awaited the lapse of

two years and on November 26, 1941, filed its petitions

to foreclose the rights of redemption under the tax

taking titles it held. (R. pp. 51 and 52.) And in like

conformity with the state law, notices were recorded

in the Hampden County Registry of Deeds that peti-

6

tions to foreclose the tax liens were filed in the Land

Court. (R. p. 51.)

These tax takings in addition to vesting title in the

Town are also held under the provisions of General

Laws (Ter. Ed.) ¢. 60, ss. 60 and 61, as security for

the repayment of taxes with all intervening costs,

charges, and interest, and subsequent taxes assessed

thereon until redemption or until foreclosure of the

rights of redemption in the Land Court as provided

in Chapter 60.

After the petitions to foreclose were filed in the Land

Court, the title was referred to a Land Court examiner

and upon the receipt of his report, the Land Court

issued a citation to all parties, returnable January 12,

1942, all in conformity with General Laws (Ter. Ed.)

c. 60, s. 65. The Agawam Racing and Breeders’ Asso-

ciation, Inc. appeared and answered to that petition on

January 9, 1942. (R. p. 52.) In its answer, the Agawam

Racing and Breeders’ Association, Inc. did not deny the

validity of the Town of Agawam’s title but simply

prayed for further time to redeem (Exhibit, R. p. 81).

Thereafter there were a series of hearings before

the Land Court on May 28, 1942, November 14, 1942,

March 8, 19438, June 29, 1943, January 5, 1944, June

14, 1944, and July 14, 1944. (R. pp. 52, 53, 54.) The

Land Court gave the Agawam Racing and Breeders’

Association, Inc. opportunity to redeem by continuing

the cases from time to time for that purpose over a

period of two years. On January 6, 1944, the Land

Court extended the time to redeem to April 20, 1944,

and on April 18, 1944, again extended the time to

redeem to June 19, 1944. On the latter date the Town

of Agawam, because of the bankrupt’s failure to re-

deem, filed its motions for final decrees to foreclose.

a

These motions were continued for hearing until July

14, 1944, at twelve noon. (R. p. 53.)

It is to be particularly noted that the hearings on

the motions for final decrees foreclosing the rights of

redemption were assigned for twelve o’clock noon on

July 14, 1944, (R. p. 53) and the hearing assignment

was made on June 19, 1944.

In these circumstances, the evidence discloses that

at 9:50 A.M. on the morning of July 19, 1944,—two

hours and ten minutes before the assigned hearing in

the Land Court—the bankrupt filed its voluntary peti-

tion to be adjudicated a bankrupt in the United States

District Court, obtained an immediate adjudication,

and an immediate referral of the case to Arthur Black,

Referee in Bankruptcy. (R. p. 55.) Then counsel for

the Agawam Racing and Breeders’ Association, Inc.

in the Land Court, who was afterward appointed

counsel for the Receiver, secured a letter from the

Referee addressed to the Town of Agawam’s counsel

and a copy of the same letter directed to Judge Fenton

of the Land Court, in which a request was made to

the Land Court to hold up proceedings in that court

because of the bankruptcy. (R. p. 16.) Counsel for the

bankrupt went to the Land Court and testified that

he notified Judge Fenton of the bankrupt’s adjudica-

tion and delivered a copy of the Referee’s letter to him.

(R. p. 55.) (The record of the Land Court shows that

notice of the adjudication in bankruptcy was not filed

in that court until July 19, 1944. [R. p. 53.])

Judge Fenton proceeded to a hearing and after the

hearing allowed on that day—July 14, 1944—the Town

of Agawam’s motions for final decrees, as appears by

the record of that court.

. Thereafter the Referee in Bankruptcy appointed

Daniel W. Gurnett, receiver, and upon his application

issued, on July 19, 1944, a temporary restraining order

designed to restrain the Town of Agawam and its

officials “from proceeding, dealing with or in any way

impairing the right to redeem presently in the bank-

rupt estate” and “from conveying, transferring or in

any way dealing with or encumbering any property”

of the bankrupt.

At the time this restraining order was issued, the

motions to foreclose the rights of redemption had been

allowed by the Land Court, which the bankrupt and

the Receiver knew or should have known, and all that

remained was the mechanics necessary for the drawing

up of the final decrees and their entries on the official

records of the Land Court. And in effect the applica-

tion by the Receiver for the restraining order and its

issuance by the Referee in Bankruptcy was an indirect

way of attempting to stay the proceedings of a state

court—a power which the Referee in B tey does

not have under the Bankruptcy Act (section 2 fa] 15).

On July 19, 1944, the Receiver appeared in the Land

Court by counsel with a petition to stay the entry of

the final decrees foreclosing the right of redemption

in that court. The court assigned that petition for hear-

ing on July 21 at 11 A.M. and, after hearing, the

petition for stay of proceedings was denied on July 21

and the final decrees foreclosing the rights of redemp-

tion were formally entered on the same day. (R. p. 53.)

Thereafter the Receiver appealed from the Land

Court decrees, but he failed to perfect his appeals in

accordance with General Laws (Ter. Ed.) c. 231, s.

135, and consequently the appeals were ineffective and

the Land Court final decrees stand.

But it is to be noted, in view of the reference in the

9.

comment of the Circuit Court of Appeals that “the trus-

tee was entitled to a stay of the Land Court proceed-

ings for sixty days after adjudication in order to decide

whether redemption was advisable and if so to act ac-

cordingly,” that the trustee in bankruptcy did act by

filing a petition in the Land Court to stay (R. p. 53) ;

and that although this petition was denied, he appealed

and kept the case open on appeal to October 13, 1944

(R. p. 54)—a period of three months after the bank-

ruptcy adjudication. It was on and after October 13,

1944, that the trustee failed to perfect his appeal to the

Supreme Judicial Court.

In the present proceedings, the Trustee in Bank-

ruptcy seeks an order from the bankruptcy court to

sell these same properties “free and clear” of liens

(R. pp. 1 and 12). Without submitting to the jurisdic-

tion of the bankruptcy court, (R. pp. 8 and 12) the

Town of Agawam came in and answered by stating

that the bankrupt estate does not own the properties

and that by the final decrees in the Land Court, the full

title, and not simply a lien, of these properties is in the

Town of Agawam, and that the Trustee has no right

to sell them. And in a separate petition the Town of

Agawam prays that the restraining order of July 19,

1944, be vacated.

SUMMARY OF ARGUMENT

1. Where a town commences proceedings to fore-

closure rights of redemption of a five year old valid real

estate tax lien in the Land Court of Massachusetts, a

state court of competent jurisdiction, more than two

and a half years before the bankruptcy adjudication of

the equity owner of such real estate, the federal court

10

as a court of bankruptcy is without jurisdiction to en-

join the state court foreclosure action.

2. In the circumstances stated in paragraph 1, it is

the right and duty of the state court to proceed to final

decree notwithstanding adjudication, the rule being

applicable that the court which first obtains rightful

jurisdiction over the subject matter shall not be inter-

fered with—if the lien was acquired four months or

more before bankruptcy.

8. Gardner v. New Jersey, U. S., 91 Law Ed. 410,

15 U. S. Law Week 4171, decided January 20, 1947, is

not applicable to the case at bar for (1) no conflict of

jurisdiction with a state court was involved in the

Gardner case; and (2) the State of New Jersey sub-

mitted to the jurisdiction of the reorganization court in

filing and prosecuting its tax claim, while the Town of

Agawam did not submit to the jurisdiction of the bank-

ruptcy court (R. pp. 8 and 12).

4. Cases cited by the petitioner are not applicable to

the present case for they concern cases where the liens

were acquired within four months of bankruptcy or

where, after bankruptcy proceedings were commenced,

actions to enforce the liens were brought in the state

courts.

5. The _— Court of Massachusetts had construc-

tive possession of the res and jurisdiction of the parties

and the res in the tax lien foreclosure proceedings more

than two years before the bankruptcy adjudication.

6. Reorganization proceedings of the bankrupt un-

der Section 77B of the Bankruptcy Act had no effect on

the Land Court jurisdiction in the tax lien foreclosure

proceeding for the reorganization plan was approved

_

si ihaamiummumia masa aiciiiiia ast Iain

11

and consummated prior to the accrual of taxes involved

in the present case and three years before proceedings

were commenced in the Land Court to foreclose the tax

lien.

7. If the bankrupt was entitled to redeem the prop-

erty from the tax lien within sixty days after the

bankruptcy adjudication under Section lle of the

Bankruptcy Act, it did not do so. In effect, it had

ninety-one days after the Land Court decree to exer-

cise any such right by virtue of appeal taken to the

Supreme Judicial Court and subsequently abandoned ;

during the sixty day period the situation had not been

changed because of an injunction issued by the Referee

in Bankruptcy; and if the bankrupt was aggrieved by

the decree of the Land Court denying its petition for

stay of proceedings, the proper redress was by appeal

to the Supreme Judicial Court. Since the bankrupt did

not redeem within the sixty day period, the question

has become moot. The final decree of the Land Court

became res adjudicata in the case when the bankrupt

abandoned its appeal.

8. There is no conflict of decisions of other Circuit

Courts of Appeals with the decision of the Circuit Court

of Appeals for the First Circuit rendered in this case.

This Court has denied certiorari in similar cases. The

law of this case has been plainly settled in the case of

Straton v. New, 283 U. S. 318, at 331.

9. Respecting the petitioner’s argument concerning

“forfeiture” of its property, forfeiture is a necessary

adjunct to the taxing power of governments—federal,

state and local; and Massachusetts gives every right a

taxpaper has under the Constitution of the United

States to appear and be heard before its administrative

12

taxing boards and its courts, rights which were availed

by the bankrupt.

10. The decision of the Circuit Court of Appeals for

the First Circuit is so clearly correct that no further

review would be warranted.

ARGUMENT

Where local tax lien foreclosure proceedings are com-

menced in a state court of competent jurisdiction more

than two years and a half before the bankruptcy ad-

judication of the equity owner of the real estate in-

volved, the federal court is without jurisdiction to en-

join the state court foreclosure action.

It is to be observed at the outset that:

a. The tax takings the Town of Agawam had

which vested in it title to the lands involved were ac-

quired four years and nine months prior to the bank-

rupt’s adjudication (R. p. 50). Massachusetts General

Laws (Ter. Ed.) c. 60, s. 54, set forth in Appendix.

b. More than two and a half years prior to the

adjudication the Town of Agawam invoked the Land

Court to foreclose the rights of redemption (R. pp. 51

and 52).

ce. From January 9, 1942, (R. p. 52) the Land

Court had jurisdiction over the Agawam Racing and

Breeders’ Association, Inc. (which filed its voluntary

petition for bankruptcy on July 14, 1944), the Town

of Agawam, and the real estate involved.

d. The original tax liens were recorded in the

proper registry of deeds on August 29, 1939 (R. p. 51) ;

13

notices of the petition to foreclose the tax liens in the

Land Court were duly recorded in the registry of deeds

on November 25, 1941 (R. p. 51); the bankrupt ap-

peared and answered in the Land Court proceedings on

January 9, 1942; and the Land Court had complete

jurisdiction of the res involved and of all the parties.

e. The acquisition of the tax titles by the Town

were in conformity with the applicable state statutes

(R. p. 15) and no question was raised by the bankrupt

concerning their validity.

f. The tax title foreclosure proceedings were per-

formed in strict accord with state statutory and Land

Court requirements (R. p. 15).

g. At intervals from May 28, 1942, to July 14,

1944, the Land Court heard all the parties and entered

orders for redemption of tax liens (R. pp. 52 and 53).

h. When it became apparent that the Land Court

would at a hearing scheduled for noon on July 14, 1944,

enter a decree foreclosing the rights of redemption, the

bankrupt (two hours and ten minutes before the sched-

uled hearing) went into voluntary bankruptey—in an

effort to delay further the litigation which the Land

Court had patiently considered over a period of two

years.

i. The Land Court decrees entered July 21, 1944,

gave the Town of Agawam absolute title to the real

estate. Massachusetts General Laws (Ter. Ed.) c. 60,

s. 64, set forth in Appendix—and those decrees not ap-

pealed from, still stand.

It is settled law that if a state court, four months or

more before a petition for adjudication in bankruptcy

is filed, is invoked by the holder of a tax lien to fore-

14

close rights of redemption under the state court’s pow-

ers under applicable state statutes, and if the taxpayer

or lienor appears and answers in the state court four

months or more before the petition in bankruptcy is

filed, the state court has complete jurisdiction over the

bankrupt and the property involved and that jurisdic-

tion is not divested by proceedings in bankruptcy.

Straton v. New, 283 U.S. 318.

Pickens v. Roy, 187 U.S. 177, 180.

Emil v. Hanley, 318 U. S. 515.

Muffler v. Petticrew Real Estate Co., 132 F. (2d)

479 (6th Cir.). Certiorari denied June 7, 1943,

319 U. S. 766.

Drusilla Carr Land Corp., 107 F. (2d) 565, CCA

(7th Cir.).

In Re Tinkoff, 141 F. (2d) 731, CCA (7th Cir.).

Dannel v. Wilson-Weesner-Wilkinson Co., 109 F.

(2d) 364 (6th Cir.).

In Re Greenlie-Halliday Co., 57 F. (2d) 173 (2d

Cir.).

Bryan v. Speakman, 53 F. (2d) 463 (5th Cir.).

In Re Maier Brewing Co. Inc., 65 F (2d) 673 (9th

Cir.).

Straton v. New, 283 U.S. 318, held:

(1) That liens acquired more than four months

before bankruptcy proceedings are instituted, if valid

under state law, are preserved and will be accorded pri-

ority in the distribution of the estate in accordance with

local law; but it also declared

15

(2) That when under liens acquired prior to the

four months’ period, a state court has been invoked and

has acquired jurisdiction of the res for the purpose of

enforcing the lien, the bankruptcy court has no power

to enjoin the continuation of such action.

It is on this latter point that the principal conflict

comes between the petitioner and this respondent. The

petitioner cites Isaacs v. Hobbs Tie and Timber Com-

pany, 282 U. S. 734, and Gross v. Irving Trust Com-

pany, 289 U. S. 342, and similar cases which speak of

the Bankruptcy Court’s paramount and exclusive jur-

isdiction to deal with property of the bankrupt. But in

the Isaacs case, the suit in the state court to foreclose a

mortgage on land was not begun four months before the

bankruptcy; it was begun after the bankruptcy ad-

judication and, of course, the bankruptcy court having

prior jurisdiction had “paramount jurisdiction” over

the state court proceeding. And in the Gross case, as

well as in the case of Taylor v. Sternberg, 293 U.S. 470,

it was held that where receivership proceedings were

brought in a state court within four months prior to

bankruptcy, the bankruptcy court by virtue of the

bankruptcy act ousts the state court of jurisdiction.

But not one case in the petitioner’s brief holds that

a bankruptcy court can oust a state court of jurisdic-

tion where actual proceedings to enforce the lien were

brought in the state court more than four months be-

fore bankruptcy.

In such circumstances this court has held in Pickens

v. Roy, 187 U. S. 177, 180, that it is “the right and

duty” of the (state) court “to proceed to final decree

notwithstanding adjudication, the rule being applicable

that the court which first obtains rightful jurisdiction

over the subject matter shall not be interfered with.”

16

Straton v. New, 283 U.S. 318, 326, states:

“ _.. the federal courts have with practical una-

nimity held that where a judgment which consti-

tuted a lien on the debtor’s real estate is recov-

ered more than four months prior to the filing of

the petition, the bankruptcy court is without jur-

isdiction to enjoin the prosecution of the creditor’s

action, instituted prior to the filing of a petition

in bankruptcy, to bring about a judicial sale of

real estate.”

And in the same Straton v. New case, the court in

making its decision considered the same arguments

that the petitioner herein makes in his brief—that by

the mere adjudication in bankruptcy, the bankruptcy

court acquires paramount jurisdiction over state

courts. But the court in the Straton v. New case, at page

331, in forceful language said:

“Most of the cases cited by the appellees to the

effect that the initiation of bankruptcy proceed-

ings confers on the district court jurisdiction to

enjoin pending suits in state courts deal with a sit-

uation where the lien was acquired within four

months of the filing of the petition, or where, after

the filing of the petition an action was begun to

enforce a lien valid in bankruptcy. As heretofore

noted, there are a few cases which have held that

the bankruptcy court may enjoin proceedings,

brought prior to the filing of the petition, to en-

force valid liens which are more than four months

old at the date of bankruptcy; but these cases are

contrary to the decisions of this Court and to the

great weight of judicial authority.”

17

This Court and the federal courts strongly maintain

the doctrine enunciated in the Straton v. New case to

preserve comity between the state and federal courts

and prevent conflicts and confusion that would arise if

the doctrine were otherwise. The extent to which this

Court has gone to maintain this doctrine can be ap-

preciated by considering the opinion in Emil, Trustee

in Bankruptcy, v. Hanley, 318 U.S. 515. That case con-

cerned the interpretation of section 2(a) (21) of the

Chandler Act of 1938 that requires receivers and trus-

tees appointed by courts other than bankruptcy courts,

within four months of bankruptcy, to deliver over as-

sets to the bankruptcy receiver or trustee and account

to the bankruptcy court. In that case a receiver in a

mortgage foreclosure proceeding was appointed by a

state court within the four month period to collect rents.

And the United States Supreme Court held, after fre-

quently citing the law in Straton v. New, that this sec-

tion of the Bankruptcy Act was inapplicable to straight

bankruptcy proceedings. And in referring to what

the opposite conclusion would bring about, the Court

said at page 521:

“Moreover such an interpretation would lead

in many cases to a division of authority between

state and federal courts. Thus in this case the

state court would remain in charge of the fore-

closure and the bankruptcy court would have ex-

clusive control over the receiver’s receipts. An in-

terpretation which leads to a division of authority

so fraught with conflict will not be readily im-

plied.”

18

GARDNER V. STATE OF NEW JERSEY IS INAPPLICABLE

TO PRESENT CASE

The petitioner argues at length in his brief that the

case of Gardner v. State of New Jersey, U. S., decided

January 20, 1947, 91 Law Ed. U. S. Advance Opinions,

410; 15 U. S. Law Week 4171, “warrants the granting

of his petition for a writ of certiorari.”

The Gardner case was a 77B railroad reorganization

proceeding. But it is not like the present case in many

respects, the chief difference being that there was no

litigation pending in a state court to enforce whatever

tax liens the State of New Jersey may have had on the

railroad property when the railroad filed its 77B re-

organization petition. True there had been considerable

litigation over the taxes involved as set out in In Re

Central Railroad Company of New Jersey, 152 F. (2d)

408, 408 to 411, and the Circuit Court of Appeals de-

cision in the same case, but each and every prior litiga-

tion case concerned petitions to abate or reduce taxes

or tax valuations. Not one of them concerned an action

or suit in a state court to collect the tax by tax lien fore-

closure or otherwise. As clearly stated in the first para-

graph of the United States Supreme Court opinion, the

railroad corporation “filed its petition for reorganiza-

tion in 1989 shortly after receiving notice from the At-

torney General of New Jersey that he would apply to a

state court for a summary judgment for unpaid taxes

of the debtor and seek to sell its property in satisfaction

of the judgment.” In other words, there was no suit

pending in the state against the property of the rail-

road to enforce a lien. New Jersey was just about to

start one when 77B reorganization intervened. So there

was no conflict of jurisdiction.

19

Secondly, the Gardner v. New Jersey case differs

from this case in another important aspect. After the

77B reorganization, New Jersey “invoked the aid of

the bankruptcy court by offering a proof of claim and

demanding its allowance.” It was the “actor” and as

such had to abide by the judgment of the reorganization

court on its own proof of claim. But in the instant case,

the Town of Agawam never consented or submitted to

the jurisdiction of the bankruptcy court. (R. pp. 8, 12,

91.) It has consistently relied on the Land Court de-

crees.

Thirdly, Gardner v. New Jersey in no way conflicts

with Straton v. New, 283 U. S. 318. It cites the first

part of the Straton v. New decision as outlined in para-

graph 1 on page 14 of this brief in support, but it had

no occasion to refer to the last part of the Straton v.

New decision as outlined in paragraph 2 on said page

15 for the simple reason that there did not appear in

the case a conflict of jurisdiction with a state court

arising out of a tax lien foreclosure commenced in the

state court four months prior to the reorganization pe-

tition.

Gardner v. New Jersey in no way refutes or changes

the well recognized law that when a court of competent

jurisdiction has a res in custodia legis, such res is with-

drawn from the jurisdiction of all other courts, which

though of concurrent jurisdiction, may not disturb that

possession; and that it is the right and duty of the

court originally acquiring jurisdiction to proceed to

final decree and determine all questions relating to title,

possession and control of the property.

Other cases that the petitioner relies upon to ad-

vance its contentions that the bankruptcy court has

20

paramount jurisdiction over state courts and that a

bankruptcy adjudication ipso facto ousts a state court

of jurisdiction and enjoins all state court proceedings

involving the bankrupt are: Jsaacs v. Hobbs Tie and

Timber Co., 282 U. S. 734; Gross v. Irving Trust Co.,

289 U. S. 342; Steelman v. All Continent Corp., 301

U. S. 278; Meyer v. Fleming, decided February. 4,

1946, 90 Law Ed. 423, 66 S. Ct. 382, 14 L.W. 4132;

Van Huffel v. Harkelrode, Treasurer, 284 U.S. 225.

It is true that in the case of Isaacs v. Hobbs Tie and

Timber Co., 282 U. S. 734, at 737, the Court said “Upon

adjudication, title to the bankrupt’s estate vests in the

trustee with actual or constructive possession and is

placed in the bankruptcy court. . . . It follows that the

bankruptcy court has exclusive jurisdiction to deal

with property of the bankrupt estate.”

Every case cited by the court to support that state-

ment concerned cases that were brought in the state

court after bankruptcy adjudication. And continuing

in the same paragraph in the Jsaacs case as the above

quoted statements appear, the Court said (282 U. S.

734, at 737):

“This is but an application of the well recognized

rule that when a court of competent jurisdiction

takes possession of property through its officers,

this withdraws the property from the jurisdiction

of all other courts which, though of concurrent jur-

isdiction, may not disturb that possession; and

that the court originally acquiring jurisdiction is

competent to hear all questions respecting title,

possession and control of the property.”

That is the very principle that the Town of Agawam

contends: that the Land Court having first acquired

21

jurisdiction can not have its jurisdiction disturbed by

the bankruptcy court. And Straton v. New, 283 U. S.

318, very clearly points out that the Isaacs case applies

to cases brought into state courts after the bankruptcy

proceedings are commenced. Heffron v. Western Loan

and Building Co., 84 F. (2d) 301, certiorari denied,

299 U. S. 597. In the Isaacs case, the suit to foreclose

a mortgage on land in a state court was begun after

the owner had been declared bankrupt.

In Gross v. Irving Trust Company, 289 U. S. 342, and

Taylor v. Sternberg, 293 U. S. 470, it was held that

where receivership proceedings are brought in a state

court and within four months thereafter bankruptcy

proceedings are brought in the federal courts, the

bankruptcy court as a court of paramount jurisdiction

ousts the state court of its jurisdiction.

The obvious reason why the bankruptcy court was

declared to have paramount jurisdiction in the Gross

and Taylor cases is that The Constitution (Art. I,

Sec. 8, cl. 4) does vest Congress with paramount au-

thority to make uniform laws concerning bankruptcies ;

that when Congress enacts a bankruptcy act that act is

therefore supreme; and, when the courts exercise juris-

diction conferred upon them by such a statute, they are

exercising a paramount and exclusive jurisdiction. But

it is necessary that the jurisdiction so exercised be with-

in the powers conferred upon the courts and within the

terms of the bankruptcy act. And when liens on prop-

erty are more than four months old and state court

proceedings are commenced four months or more be-

fore bankruptcy in the state courts, no provision of

the ordinary bankruptcy act authorizes the bankruptcy

court to oust the state court of jurisdiction in proceed-

ings to enforce liens valid under the very terms (Sec.

22

67a-1) of the bankruptcy act. The Congress has the

constitutional power to make the federal courts all

paramount over the state courts as it has exercised in

the enactment of the Frazier-Lempke Act providing

that upon the filing of a petition under section 75 of the

Bankruptcy Act, all the property of the farmer becomes

immediately subject to the “exclusive” jurisdiction of

the federal court. Bankruptcy Act, Sec. 75(N) (11

U.S.C. s. 203 N). But no such power is given the federal

courts in the ordinary bankruptcy sections of the act

over state courts enforcing liens more than four months

old by proceedings begun four months before bank-

ruptcy. The Congress has limited the jurisdiction of the

bankruptcy court in the same manner as it has limited

its powers in other bankruptcy matters. Tawbel-Scott-

Kitzmiller Co. v. Fox, 264 U. S. 426.

Steelman v. All Continent Co., 301 U. S. 278, 291,

does not sustain the petitioner’s claim. It is authority

for the contention that the court which first gets juris-

diction retains it. The court held that a bankruptcy

court, having jurisdiction, can issue an injunction di-

rected against a suitor, and not a court, if the “suitor

is misusing a jurisdiction which by hypothesis exists,

and converting it by such misuse into an instrument of

wrong” for “suits as well as transfers may be protective

coverings of fraud.” There is no claim in this case that

the Town of Agawam did not properly invoke two and

a half years or more before the bankruptcy adjudica-

tion the jurisdiction of the Land Court to enforce its

statutory rights—-or that the Land Court had a hypo-

thetical jurisdiction over the res—or that any attempt

was made to misuse the Land Court into an instru-

ment of wrong. The consideration that the Land Court

gave this bankrupt in making the extensions over a

period of more than two years to allow it to ee

shows. 7 the contrary.

Myer v. Fleming, decided on Pebceeais 4, 1946, 90

Law Ed. 423, 66 S. Ct. 382, 14 L.W. 4132, cited by the

petitioner is likewise not applicable to the present case.

It was a stockholder’s derivation suit instituted before

77B reorganization } it did not concern the enforcement

of a lien on particular property of the debtor brought

in a state court before the 77B proceedings. The debtor

was only a nominal party.

Van Huffel v. Harkelrode, idedinen 284 U. s. 225,

cited by the petitioner, is authority for the sale of lands

owned by the bankrupt free and clear of liens, including

tax liens. But in that case it did not appear that the

tax collector had invoked the powers of the state court.

If in the instant case, bankruptcy had intervened in

1941 before the tax lien foreclosure proceedings start-

ed in the Land Court, the bankruptcy court could sell

the assets free and clear of tax liens acquired by the

town in 1989 under the authority of the Van Huffel

case. But when the state court’s powers were invoked

to foreclose the tax lien and that court had jurisdic-

tion of the parties and the res two and a half years be-

fore bankruptcy, the Van Huffel case is not authority

for the ousting of the state court of its jurisdiction and

its power to proceed to final decree.

Decisions of lower courts that support the respond-

ent’s argument above set forth are:

Heffron v. Western Loan and Building Co., (9th

Cir.) 84 F. (2d) 301. Certiorari denied November 16,

1936, 299 U. S. 597. (Mortgage foreclosure one day

——

24

after bankruptcy held valid when mortgage was more

than four months old, following Straton v. New, 283

U.S. 318, and differentiating Gross v. Irving Trust Co.,

289 U. S. 342, and Isaacs v. Hobbs Tie & Timber Co.,

282 U. S. 734.)

Muffler v. Petticrew Real Estate Co., (6th Cir.)

132 F. (2d) 479. Certiorari denied June 7, 1943, 319

U. S. 766. (Mortgage foreclosure proceedings com-

menced in state court more than four months before

bankruptcy, and pending at the time of adjudication,

held valid and bankruptcy court did not have jurisdic-

tion to stay the state court proceedings. )

Bryan v. Speakman, (5th Cir.) 53 F. (2d) 463.

Certiorari denied, 285 U. S. 539.

In Re Greenlie-Halliday Co., (2nd Cir.) 57 F. (2d)

173. This was another foreclosure suit in a state

court which held that the state court having con-

structive possession of the res and having been the

first one to acquire jurisdiction has the power to

hear and determine all controversies relating thereto

and for a time disables other courts of coordinate juris-

diction from exercising like power. The court then

adds: “In bankruptcy, as in equity, one court will not

snatch a res from another’s mouth.”

In Re Maier Brewing Co., Inc., (9th Cir.) 65 F. (2d)

673. Certiorari denied, 290 U. S. 695.

Dannel v. Wilson-W eesner-Wilkinson Co., (6th Cir.)

109 F. (2d) 364.

In Re Tinkoff, (7th Cir.) 141 F. (2d) 731.

In Re Drusilla Carr Land Corp., (7th Cir.) 107 F.

(2d) 565.

25

LAND COURT HAD CONSTRUCTIVE JURISDICTION AND

POSSESSION OF THE RES.

The tax liens in this case were security for the taxes

due. Massachusetts General Laws (Ter. Ed.) c. 60, s.

37 (quoted in Appendix). Donovan v. Haverhill, 247

Mass. 69. The Land Court is the only court under

Massachusetts law with power to enforce tax liens.

Massachusetts General Laws (Ter. Ed.) c. 60, s. 64

(quoted in Appendix). It is a court of record. Massa-

chusetts General Laws (Ter. Ed.) c. 185, s. 1. “It has

exclusive jurisdiction. of the proceedings to foreclose

the rights of redemption from tax titles under c. 60

(see s. 64).” Bell v. Eames, 310 Mass. 642, 645.

The Land Court had not only jurisdiction of the par-

ties but prior constructive jurisdiction of the res. The

petitions to foreclose the tax title rights of redemption

described the particular property. The tax takings

described the particular property (R. p. 50). In accord-

ance with state law notices were recorded in the regis-

try of deeds that petitions had been filed in the Land

Court (R. p. 51). Furthermore, citations were issued

by the Land Court to all persons interested in the land

and the Agawam Racing and Breeders’ Association,

Inc. appeared, answered, and actively participated in

the hearings for over two years. These acts are of

equivalent import to actual seizure and they stand for

and represent the dominion of the Land Court over the

particular properties and subject them to the control

of the Land Court. They gave the Land Court con-

structive possession. Cooper v. Reynolds, 10 Wall 308,

317, where the court said:

“... while the general rule in regard to juris-

diction in rem requires the actual seizure and

26

possession of the res by the officer of the court, such

jurisdiction may be acquired by acts which are

of equivalent import, and which stand for and

represent the dominion of the court over the thing

and in effect subject it to the control of the court.

Among the latter class is the levy of a writ of

attachment or seizure of real estate, which being

incapable of removal, and lying in the territorial

jurisdiction of the court, is for all practical pur-

poses brought under the jurisdiction of the court

by the officer’s levy of the writ and return of that

fact to the court.”

See also In Re Maier Brewing Co., 65 F. (2d) 673 (9th

Cir.) ; Dannel v Wilson-Weesner-Wilkinson Co. et al.,

109 F. (2d) 364 (6th Cir.).

The property was in custodia legis of the Land Court.

And it is “a settled principle that no other court is

allowed to interfere with property thus in custodia

legis.” Chandler v. Perry, 74 F. (2d) 371, 372.

This being so, we conclude this part of the argument

by referring to the recent case of Heiser v. Woodruff,

decided by the United States Supreme Court on April

22, 1946, 66 Sup. Ct. Rep. 853; 90 L. Ed. Adv. Ops.

828; 14 U. S. Law Week 4316. In connection with this

case it is pointed out that the Land Court litigation of

two or more years before adjudication was followed

by the appearance in the Land Court by the receiver of

the bankrupt who filedpleadings for a stay of pro-

ceedings in the Land Court, was fully heard by the

Land Court, and the issue decided against him by

that court. (R. p. 53.) It is pointed out that by the

decision in the Heiser v. Woodruff case, the matter has

become res adjudicata for in the Heiser case, the court

says at 856:

27

“But we are aware of no principle of law and

equity which sanctions the rejection by a federal

court of the salutary principle of res adjudicata,

which is founded upon the generally recognized

public policy that there must be some end to litiga-

tion and that when one appears in court to present

his case, is fully heard, and the contested issue

decided against him, he may not later renew the

litigation in another court. Baldwin v. Traveling

Men’s Association, 283 U. S. 522, 525-526.

“And it is well settled that where the trustee in

bankruptcy unsuccessfully litigates an issue out-

side the bankruptcy court, the decision against

him is binding on the bankruptcy court. Davis v.

Friedlander, 104 U.S. 570; Fischer v. Pauline Oil

Co., 309 U. S. 294, 302-303.”

And on page 858, “But it is quite another matter

to say that the bankruptcy court may reexamine

issues determined by the judgment itself. It has,

from an early date, been held to the contrary.”

The Town of Agawam urges that the principles of

the Heiser case and the other cases cited be adopted by

holding that the federal court has no jurisdiction to

disturb the Land Court decrees or the matter is res

adjudicata.

The prior 77B proceedings had no effect on Land Court pro-

ceedings for reorganization plan was approved and consum-

mated prior to the accrual of taxes, and tax title foreclosure

proceedings in Land Court did not commence until] three

years thereafter.

No question was raised by the petitioner or the dis-

trict court that the Land Court did not have proper

jurisdiction over the tax title foreclosure proceedings.

28

After the hearing in the Circuit Court of Appeals, at

the request of the court, the parties submitted memo-

randa and further briefs and the Circuit Court of

Appeals found (R. pp. 91 and 92) that the plan of

reorganization of the debtor had been approved on

December 27, 1937, and consummated before July 1,

1988,—three years before the Land Court proceedings

were started. And yet though all the reorganization

acts were performed, the formality of entering a final

decree never was made. The Circuit Court of Appeals

found that the Land Court was unfettered by any

prior jurisdiction as the result of the 77B reorganiza-

tion proceedings (R. p. 92) because “the confirmation

and consummation of the plan of reorganization suffice

to effect a release of the reorganized corporation’s prop-

erty from the jurisdiction of the bankruptcy court.”

This conclusion of law is sustained by seven deci-

sions of the Circuit Court of Appeals for the Second

Circuit and by one of the Circuit Court of Appeals for

the Third Circuit.

North American Car Corporation v. Peerless Weigh-

ing and Vending Machine Corporation, (2nd Cir.) 143

F. (2d) 938, at 940, holds that “it is the confirmation

and consummation of the plan which is the culminating

point of the entire proceedings; and it is unnatural,

as well as inequitable, to deny finality to a fully con-

summated plan until the court chooses to write ‘finis’

in some formal legal language for the clerk to copy

into the court records... .” Debtors can not be held

“in tutelage indefinitely.”

In Re Ambassador Hotel Corporation, (2nd Cir.)

124 F. (2d) 435.

29

Baker’s Share Corporation v. London Terrace, (2nd

Cir.) 180 F. (2d) 157, holding that the reorganization

court can not reserve to itself power to adjudicate con-

troversies between the reorganized debtor and future

creditors.

Reese v. Beacon Hotel Corporation, (2nd Cir.) 149 F.

(2d) 610, holding that any reservation of jurisdiction

beyond what is requisite to effectuate a plan of re-

organization is beyond the power of the reorganization

court.

Towers Hotel Corporation v. Lafayette National

Bank, (2nd Cir.) 148 F. (2d) 145.

In Re Flatbush Avenue-Nevins St. Corporation,

(2nd Cir.) 133 F. (2d) 760.

See also Continental Bank and Trust Company of

New York v. Scotch Presbyterian Church, 57 N. Y. S.

(2d) 128.

Bell v. Roberts, (3rd Cir.) 112 F. (2d) 585, holding

that “when the reorganization was consummated the

protecting hand of the bankruptcy court was with-

drawn from the new company and its assets”—and it

directed a creditor of the reorganized debtor to go into

the state court to enforce his claim for the federal

court did not have jurisdiction.

Clinton Trust Co. v. John H. Elliott Leather Co.,

(2nd Cir.) 182 F. (2d) 299, holding that upon con-

firmation and consummation of the plan the debtor is

a “reorganized debtor” and not a “debtor in possession”

and the reorganization court is not authorized to exer-

30

cise control over the management of the reorganized

debtor’s business.

The case of Meyer v. Kenmore Hotel Co., 297 U. S.

160, cited by the petitioner, is not in conflict with the

eight Circuit Courts of Appeals decisions above cited.

The issue in that case involved a right to appeal to a

Circuit Court of Appeals from a District Court order

confirming a 77B plan of reorganization. The court

held that the confirmation of a plan was but a step in

the administration of the debtor’s estate. On page 165

the Court said: “The release of the debtor in a re-

organization proceeding is contingent upon the per-

formance of its part of the reorganization plan.”

If the debtor wanted to obtain a discharge of its old

debts and liabilities, he should obtain a final decree.

But when the reorganization plan is consummated,

title of the debtor’s property passes to new mortgagees,

trust indenture holders, or whatever persons are em-

ployed to carry out the plan. To hold that nothing

passes until the final decree is entered would invalidate

the claims of the new mortgagee and trust indenture

holders. And as a practical matter, when property

passes from a “debtor in reorganization” to a “re-

organized debtor” upon consummation of the plan,

jurisdiction of the reorganization court over the res

so transferred ceases because of the variety of reasons

given in the eight Circuit Cou:ts of Appeals decisions.

CONCERNING THE BANKRUPT’S RIGHTS TO A STAY OF

PROCEEDINGS IN THE LAND COURT

The petitioner on page 20 of his brief states that

under Section 1le (11 U.S. C. Sec. 29e), 1940 of the

es eee

a

Bankruptcy Act, the bankruptcy estate was entitled to

a stay of proceedings of not less than sixty days. How-

ever, in his brief he.does not argue that the denial of

the petition to stay would invalidate the subsequent

foreclosure decree of the Land Court although in the

petition for the writ of certiorari (page 7, paragraph

5) he poses the question. The Circuit Court of Appeals

(R. p. 96) said that a section of said section 29e “would

seem to indicate that if the period of redemption was

still open after June 19, 1944, the trustee was entitled

to a stay of the Land Court proceedings for sixty days

after adjudication of bankruptcy in order to decide

whether redemption was advisable and if so to act

accordingly.”

By Sec. 11(e) of the Bankruptcy Act the trustee is

given sixty days after the adjudication to act in a state

court proceeding or by applicable federal or state law,

for taking any action, filing any claim or pleading, or

| doing any act, and where in any such case such period

| had not expired at the date of the filing of the petition

| in bankruptcy... .”

This is a new provision of the Bankruptcy Act. Col-

lier on Bankruptcy, 14th Edition, Volume 1, s. 11.13,

pages 1185, 1189, says it marks an entirely new de-

parture in bankruptcy and is designed to cover certain

special situations so as to give the trustee sixty days’

time to decide whether to do or not to do a certain act.

It appears in this case that four days after adjudica-

tion the receiver determined to apply for a stay of

proceedings (R. p. 53) and went to a hearing on his

petition seven days after adjudication, and his petition

for a stay was denied (R. p. 53). Now if the Land

Court erred, his rights were to appeal by way of ex-

ceptions to the Supreme Judicial Court of Massachu-

31

32

setts (Massachusetts General Laws [Ter. Ed.] ¢. 231,

s. 118), and an appeal was so taken on August 8, 1944,

(R. p. 58) and the petitioner had until October 13,

1944 (R. p. 54)—ninety-one days after the adjudica-

tion—to effect his appeal. The trustee failed to perfect

his appeal in the ninety-one day period and the decree

of the Land Court, consequently, was a final decree and

made the matter “res adjudicata.” “Its (the Land

Court’s) decisions and decrees in subject matters

within its jurisdiction can not be attacked collaterally.”

Bell v. Eames, 310 Mass. 642, 645. See also Angel v.

Bullington,—U.S.—decided February 17, 1947, 16 L.

W. 4247; Heiser v. Woodruff,—U.S.—decided April

22, 1946, 66 Sup. Ct. Rep. 853; 90 L. Ed. Adv. Ops.

828; 14 U. S. Law Week 4316. And in Massachusetts

a judgment in rem is binding on all the world, and

such an “adjudication is held to be conclusive upon

the facts which are made the ground of the judgment,

when those facts are again brought in question in

ulterior or collateral proceedings.” Salem v. Eastern.

Railroad, 98 Mass. 431, 449. Butrick, petitioner, 185

Mass. 107, 113. Sheehan Construction Co. v. Dudley,

299 Mass. 51.

Furthermore it appears in evidence that on July 19,

1944, the Referee in Bankruptcy enjoined the Town of

Agawam from selling or in any way disposing of the

property. (R. pp. 9, 17, 44, 57.) That injunction stil!

stands and is one of the subjccts of this petition. Its

effect was that the res remains in status quo.

So by the attempted appeal to the Supreme Judicial

Court and by the injunction, the trustee in bankruptcy

had far more than sixty days to decide whether or not

to redeem the tax title. The section of the Bankruptcy

Act above quoted does not direct a state court to stay

33

proceedings; rather it gives a federal statutory right

to the trustee to redeem the tax title in sixty days.

Under the circumstances of this case, the trustee could

have done so within the sixty day period, but he did

not. The question has become moot. The trustee had

every opportunity to redeem within the. sixty day

period, if he had decided to do so. Even if this issue

were properly here, in a proceeding reviewing alleged

errors of the Land Court, it would be harmless error.

ALLEGED CONFLICT OF DECISIONS

The petitioner claims that the decision of the Seventh

Circuit Court of Appeals in In Re Argyle-Lake Shore

Building Corp., 78 F. (2d) 491, is in conflict with the

decision made in this case by the Circuit Court of Ap-

peals for the First Circuit.

Judge Mahoney in the Circuit Court of Appeals pro-

ceeding in this case (R. p. 95) very carefully pointed

out that the Argyle-Lake Shore case is not in conflict.

The Illinois statute on Revenue provided for the sale

of the property on which there were delinquent taxes

and further provided that real property so sold might

be redeemed within two years after such sale, or after

the expiration of two years at any time up to the date

a tax deed was issued. It was necessary to apply to the

State Superior Court after the expiration of the two

year period or to the purchaser at the tax sale to obtain

his deed. In the Argyle-Lake Shore case the two year

period after the tax sale expired on September 7, 1934.

On September 25, 1934, creditors filed in the federal

court a petition for the reorganization of the debtor

and it was not until November 13, 1934, that Cook

County filed its petition in the State Superior Court

for its tax deed. The reorganization court then enjoined

34

the proceeding in the state court, which as stated above

was started subsequent to reorganization proceeding.

Consequently, the Argyle-Lake Shore case is not in

conflict.

The petitioner also cites as a case in conflict a Dis-

trict Court case, the Hotel Charles case, 12 F. Supp. 19

(D. Mass. 1935). (See subsequent proceedings at 12 F.

Supp. 734 [D. Mass. 1935] and 84 F. [2d] 589 [C.C.A.

1st] 1986.) No state court proceeding existed a.

the reorganization proceeding in the Hotel C. 8

case. The city petitioned the reorganization court for

leave to go into the Land Court to foreclose its tax lien,

but the reorganization court, as the court that first

obtained jurisdiction, retained it.

CERTIORARI DENIED IN SIMILAR CASES—LAW IS SET-

TLED BY DECISION OF STRATON v. NEW, 283 U. S. 318.

There is but slight difference between a proceeding

to foreclose a statutory right of redemption and one

to foreclose a mortgagor’s interest in property. As the

Circuit Court of Appeals held (R. p. 93), both come

within the doctrine of Straton v. New, 283 U. S. 318.

And this Court has denied certiorari in cases concern-

ing real estate mortgage or other lien foreclosures

where the issue was the same as the issue in this case,

to wit, that prior jurisdiction by a state court over the

res is not divested by subsequent bankruptcy proceed-

ings. Those cases are:

Muffler v. Petticrew Real Estate Co., (6th Cir.) 182

F. (2d) 479. Certiorari denied June 7, 1943, 319 U.S.

766.

Heffron v. Western Loan and Building Co., (9th

Cir.) 84 F. (2d) 301. Certiorari denied November 16,

1936, 299 U.S. 597.

35

Bryan v. Speakman, 53 F. (2d) 463 (5th Cir.).

Certiorari denied February 23, 1932, 285 U.S. 539.

In Re Maier Brewing Co. Inc., 65 F. (2d)- 673 (9th

Cir.). Certiorari denied November 20, 19338, 290 U. 8

695.

The other cases cited on page 24 of this brief show

that the Circuit Courts of Appeals apply the law in-

volved with unanimity. And this Court in the clear

and forceful language appearing in the last paragraph

of Straton v. New, 283 U.S. 318, at 331, ~~. has

settled the law involved.

THE MATTER OF FORFEITURE

Throughout the petition for a writ of certiorari and

the petitioner’s brief, he appeals that a forfeiture is

involved. In addition to what Judge Mahoney wrote in

the Circuit Court of Appeals decision (R. pp. 96 and

97), the respondent would like to point out (1) that

nowhere in the record is it contended that the taxes

were not legally assessed and levied; (2) that under

the law of Massachusetts the taxpayer is given every

opportunity to appeal to the Appellate Tax Board

(City of Springfield v. Hotel Charles, 84 F. [2d] 589,

591) for abatement of taxes if he considers the valua-

tion too high; (3) that if he fails to pay a real estate

tax for one year, the collector’s sale or taking does not

take place until the following year and.then two years

must elapse before the town can proceed in the Land

Court to foreclose the property (Massachusetts Gen-

eral Laws [Ter. Ed.] c. 60, s. 65, quoted in Appendix)

and then the Land Court is empowered (General Laws

[Ter. Ed.] c. 60, s. 68, quoted in Appendix), after

hearing the parties, to extend the time allowing the

party to redeem. From the decree of the Land Court,

i

36

appeal may now be taken by way of exceptions to the

Supreme Judicial Court (General Laws [Ter. Ed.] c.

231, s. 113) and from decisions of the Appellate Tax

Board to the highest court (General Laws [Ter. Ed.]

c. 58A, s. 18). The record discloses that the bankrupt

never filed petitions for abatement of taxes with the

assessors nor filed appeals with the Appellate Tax

Board questioning the amount of the taxes levied.

The bankrupt had from October 1, 1938, until June

14, 1944,—five years and seven months—to pay its

taxes and redeem its property. The holders of the

$108,000 mortgage (R. p. 69) could also have redeemed

in that period (General Laws [Ter. Ed.] c. 60, s. 58).

The fact that the Land Court judge (sometimes by

stipulation) gave the taxpayer two years to redeem

after the case was ripe for decree in the Land Court

demonstrates the fairness of the judge and of the Town

in dealing with the taxpayer.

True the taking of a taxpayer’s property is a for-

feiture. But the federal government as well as state

and local governments have to employ lien, distraint

and forfeiture measures to collect their taxes. (26

U.S.C. s. 3670 to 3726, inclusive.) The power of the

state to tax and raise revenue is essential to its political

existence and the essence of the prosperity of the state.

(Nicol v. Ames, 173 U. S. 509, 515.) The state is left

to choose its own methods of taxation and the form and

manner of enforcing paymen: of the public revenues

subject, so far as the federal power is concerned, to

the restricting regulations of the Constitution of the

United States; and state laws permitting the taxpayer

to appear and be heard at some stage of the proceedings

have been held to satisfy the requirements of due

process of law. Kentucky Union Company v. Common-

37

wealth of Kentudy, 219 U. S..140; Security Trust and

Safety Vault Co y. Lexington, 203 U. S. 323.

Massachusettsgives its taxpayers ample opportunity

to be heard befre its administrative boards and its

courts not only mn questions relating to the tax itself

but the means ofcollection. The bankrupt availed itself

of the oppertunijes offered concerning redemption of

its lands from tle tax title, and was given patient and

thoughtful consileration by the Land Court. and the

Town.

CONCLUSION |

The decision ¢ the Circuit Court of Appeals is so

clearly correct tat no further review would be war-

ranted. The pettion for a writ of certiorari should

therefore be dened.

Respectfully submitted,

TOWN OF AGAWAM

3y DONALD M. MACAULAY

Its Attorney.

March, 1947 J

38

APPENDIX

UNITED STATES CONSTITUTION

Article 1, Section 8. “The Congress shall have power

. .. to lay and collect taxes, duties, imposts and ex-

cises . . . to establish an uniform rule of naturaliza-

tion, and uniform laws on the subject of bankruptcies

throughout the United States.” :

BANKRUPTCY ACT

Section 2 (a) (15)—U. S. Code, Title 11, Chapter

2, Section 11. “The courts of the United States herein-

before defined as courts of bankruptcy are hereby

created courts of bankruptcy and are hereby invested,

within their respective territorial limits as now estab-

lished or as they may be hereafter changed, with such

jurisdiction at law and in equity as will enable them

to exercise original jurisdiction in proceedings under

this Act, in vacation, in chambers, and during their

respective terms, as they are now or may be hereafter

held, to—.”

“Make such orders, issue such process, and enter such

judgments, in addition to those specifically provided

for, as may be necessary for the enforcement of the

provisions of this Act: Provided, however, That an

injunction to restrain a court may be issued by the

judge only ;—.”

Section 1le—U. S. Code, Title 11, Section 29e. “A

receiver or trustee may within two years subsequent

to the date of adjudication or within such further

period of time as the Federal or State law may permit,

institute proceedings in behalf of the estate upon any

39

claim against which the period of limitation fixed by

Federal or State law had not expired at the time of the

filing of the petition in bankruptcy. Where, by any

agreement, a period of limitation is fixed for instituting

a suit or proceeding on any claim, or presenting or

filing any claim, proof of claim, proof of loss, demand,

notice, or the like, or where in any proceeding, judicial

or otherwise, a period of limitation is fixed, either in

such proceeding or by applicable Federal or State law,

for taking any action, filing any claim or pleading, or

doing any act, and where in any such case such period

has not expired at the date of the filing of the petition

in bankruptcy, the receiver or the trustee of the bank-

rupt may, for the benefit of the estate, take any such

action or do any such act, required of or permitted to

the bankrupt, within a period of sixty days subsequent

to the date of adjudication or within such further

period as may be permitted by the agreement, or in the

proceeding or by applicable Federal or State law, as

the case may be.”

Section 67 (a-1)—U. S. Code, Title 11, Chapter 7 7,

section 107 (a-1). “Every lien against the property of

a person obtained by attachment, judgment, levy, or

other legal or equitable process or proceedings within

four months before the filing of a petition in bank-

ruptcy or of an original petition under chapter X, XI,

XII, or XIII of this Act by or against such person shall

be deemed null and void (a) if at the time when such

lien was obtained such person was insolvent or (b)

if such lien was sought and permitted in fraud of the

provisions of this Act. Provided, however, That if such

person is not finally adjudged a bankrupt in any pro-

ceeding under this Act and if no arrangement or plan

is proposed and confirmed, such lien shall be deemed

40

reinstated with the same effect as if it had not been

nullified and voided.”

Since the decree of confirmation of the reorganiza-

tion plan and the consummation of the plan were before

June 22, 1938, the effective date of the Chandler Act,

the old Section 77B (Act of June 7, 1934) applied.

Subsection “a” of old section 77B provided that the

court “shall, during the pendency of the proceedings

under this section, have exclusive jurisdiction of the

debtor and its property wherever located for the pur-

poses of this section, and shall and may exercise all the

powers, not inconsistent with this section, which 2

Federal Court would have had it (a) appointed a re-

ceiver in equity of property of the debtor by reason

of its inability to pay its debts as they mature.” (See

U.S. C. A., Title 11, s. 511.)

Subsection h of old Section 77B (now under Chandler

Act, U.S. C. A., Title 11, Sections 624, 626, 627, 628)

reads as follows:

“(h) Upon final confirmation of the plan, the debtor

and other corporation or corporations organized or to

be organized for the purpose of carrying out the plan,

shall have full power and authority to, and shall put

into effect and carry out the plan and the orders of the

judge relative thereto, under and subject to the super-

vision and control of the judge, and the property dealt

with by the plan, when tranc‘erred and conveyed by

the trustee or trustees to the debtor or the other cor-

poration or corporations provided for by the plan, or,

if no trustee has been appointed, when retained by the

debtor pursuant to the plan or transferred by it to the

other corporation or corporations provided for by the

plan, shall be free and clear of all claims of the debtor,

41

its stockholders and creditors, except such as may

consistently with the provisions of the plan be reserved

in the order confirming the plan or directing such trans-

fer and conveyance or retention, and the court may

direct the trustee or trustees, or if there be no trustee,

the debtor and any mortgagee, the trustee of any

obligation of the debtor, and all other proper and

necessary parties, to make any such transfer or con-

veyance, and may direct the debtor to join in any such

transfer or conveyance made by the trustee or trustees.

Upon the termination of the proceedings a final decree

shall be entered dischar. ging the. trustee or trustees, if

any, making such provisions as may be equitable, by

way of injunction or otherwise, and closing the case.

Such final decree shall discharge the debtor from its

debts and liabilities, and shall terminate and end all

rights and interests of. its stockholders, except as pro-

vided in the plan or as may be reserved as aforesaid.”

GENERAL LAWS OF MASSACHUSETTS TERCENTENARY

EDITION CHAPTER 60 ;

Section 37. Lien of Tax upon Real Estate, Levy by

Sale, Validity of Title—Taxes assessed upon land, in-

cluding those assessed under sections twelve, thirteen

and fourteen of chapter fifty-nine, shall with all inci-

dental charges and fees be.a lien thereon from January

first in the year of assessment. Said taxes, if unpaid

for fourteen days after demand therefor, may, with

said charges and fees, be levied by sale or taking of

the real estate, if the lien or liens thereon have not

terminated.

Section 53. Taking for Taxes; Notice—If a tax on

land is not paid. within fourteen days after demand

—$_$__— a

42

therefor and remains unpaid at the date of taking, the

collector may take such land for the town, first giving

fourteen days’ notice of his intention to exercise such

power of taking, which notice may be served in the

manner required by law for the service of subpoenas |

on witnesses in civil cases or may be published, and (

shall conform to the requirements of section forty. He

shall also, fourteen days before the taking, post a no-

tice so conforming in two or more convenient and pub-

lic places.

Section 54. Instrument of Taking, Form, Contents,

Effect.—The instrument of taking shall be under the

hand and seal of the collector and shall contain a state-

ment of the cause of taking, a substantially accurate

description of each parcel of land taken, the name of

the person to whom the same was assessed, the amount

of tax*thereon, and the incidental expenses and costs

to the date of taking. Such an instrument of taking

shall not be valid unless recorded within sixty days of

the date of taking. If so recorded it shall be prima

facie evidence of all facts essential to the validity of

the title so taken, whether the taking was made on or

before as well as since July first, nineteen hundred and

fifteen. Title to the land so taken shall thereupon vest

in the town, subject to the right of redemption. Such

title shall, until redemption or until the right of re-

demption is foreclosed as hereinafter provided, be

held as security for the repayment of said taxes with

all intervening costs, terms imposed for redemption

and charges, with interest thereon, and the premises

so taken, both before and after either redemption or

foreclosure, shall also be subject to and have the bene-

fit of all easements and restrictions lawfully existing

in, upon or over said land or appurtenant thereto, and,

mm ee TE, TTL TT, TT TM LOTT Te

———

43

except as provided in section seventy-seven, all cove-

nants and agreements running with said premises

either at law or in equity, when so taken.

Section 64. Tax Title to Be Absolute after Fore-

closure.—The title conveyed by a tax collector’s deed

or by a taking of land for taxes shall be absolute after

foreclosure of the right of redemption by decree of

the land court as provided in this chapter. The land

court shall have exclusive jurisdiction of the fore-

closure of all rights of redemption from titles con-

veyed by a tax collector’s deed or a taking of land for

taxes, in a proceeding provided for in sections sixty-

five to seventy-five, inclusive.

Section 65. Petition for Foreclosure of Rights of Re-

demption under Tax Title—After two years from a

sale or taking of land for taxes, except as provided in

section sixty-two, whoever then holds the title thereby

acquired may bring a petition in the land court for the

foreclosure of all rights of redemption thereunder.

Such petition shall be made in the form to be prescribed

by said court and shall set forth a description of the

land to which it applies, with its assessed valuation, the

petitioner’s source of title, giving a reference to the

place, book and page of record, and such other facts as

may be necessary for the information of the court.

Two or more parcels of land may be included in any

petition brought by a town, whether under a taking or

as purchaser of such title or titles, if such parcels are

in the same record ownership at the time of bringing

such petition.

Section 66. Examination of Title, Notice, etc—Upon

the filing of such a petition the court shall forthwith

cause to be made by one of its official examiners an

— a

44

examination of the title sufficient only to determine the |

persons who may be interested in the same, and shall

upon the filing of the examiner’s report notify all per-

sons appearing to be interested, whether as equity

owners, mortgagees, lienors, attaching creditors or |

otherwise, of the pendency of the petition, the notice |

to be sent to each by registered mail and return of re-

ceipt required, the addresses of respondents, so far as

may be ascertained, being furnished by the petitioner.

Such other and further notice by publication or other- |

wise shall be given as the court may at any time order. |

The notice, to be addressed “To all whom it, may con-

cern,” shall contain the name of the petitioner, the

names of all known respondents, a description of the

land and a statement of the nature of the petition,

shall fix the time within which appearance may be en-

tered and answer filed, and shall contain a statement |

that unless the party notified shall appear and answer

within the time fixed a default will be recorded, the |

petition taken as confessed, and the right of redemp-

tion forever barred.

Section 68. Answer, Offer to Redeem, Finding of

Court for Redemption.—Any person claiming an inter-

est, on or before the return day or within such further

time as may on motion be allowed by the court, shall,

if he desires to redeem, file an answer setting forth his

right in the land, and an offer to redeem upon such

terms as may be fixed by the court. Thereupon the court

shall hear the parties, and may in any case in its dis-

cretion make a finding allowing the party to redeem,

within a time fixed by the court, upon payment to the

petitioner of an amount sufficient to cover the original

sum, costs, interest at the rate of six and one half per

cent per annum, and all subsequent taxes, costs and

ee

r

— w” ey EAST a eg Te SR, ferme

45

interest te which the petitioner may be entitled under

section sixty-one or sixty-two, together with the costs

of the proceeding and such counsel fee as the court

deems reasonable. The court may impose such other

terms as justice and the circumstances warrant.

Section 69. Decree Barring Redemption, When.—If

a default is entered under section sixty-seven, or if

redemption is not made within the time and upon the

terms fixed by the court under the preceding section,

or if at the time fixed for the hearing the person claim-

ing the right to redeem does not appear to urge his

claim, or if upon hearing the court determines that the

facts shown do not entitle him to redeem, a decree

shall be entered which shall forever bar all rights of

redemption.

CHAPTER 185

Section 1. The land court shall be a court of record.

It shall have exclusive original jurisdiction of the fol-

lowing matters:

(b) Proceedings to foreclose tax titles, under chapter

sixty.

CHAPTER 231

Section 135. Preparation and Transmission of Neces-

sary Papers to Full Court of Supreme Judicial Court;

Entry of Case. ..... In order to carry any question of

law from the supreme judicial court when held by a

single justice or from any other court to the full court

of the supreme judicial court upon appeal, exception,

reservation, report or otherwise as authorized by law,

the party having the obligation to cause the necessary

papers hereinbefore specified to be prepared shall give

46

to the clerk, recorder, register or other appropriate

official of the court in which the case is pending, within

ten days after the case becomes ripe for final prepara-

tion and printing of the record for the full court, an

order in writing for the preparation of such papers

and copies of papers of transmission to the full court

of the supreme judicial court. As soon as may be after

receiving such written order, the clerk or other official

shall make an estimate of the expense of the prepara-

tion and transmission of the necessary papers and

copies of papers aforesaid and shall give such party

notice in writing of the amount of such estimate. Such

party, within twenty days after the date of such no-

tice from the clerk or other official, shall pay to him the

amount of such estimate and such further amount be-

yond such estimate as the clerk or other official may

find to be then due for such preparation. The clerk or

other official then without delay shall prepare the pa-

pers and copies of papers aforesaid for transmission

and when they are ready shall give notice in writing

of such fact to the party ordering them, who, within

five days after the date of such notice, shall pay to the

clerk or other official any balance then due therefor and

shall enter the case in the supreme judicial court for

the commonwealth, or for the proper county. The court

in which the case is pending, or any justice or judge

thereof, may, for cause shown after hearing, extend

the time for doing any of the acts required by this

paragraph. The entry of the case shall not, except as

otherwise provided by law, transfer the case, but only

the question to be determined.