1. The writ of mandamus will not be issued by this Court at the
instance of a trustee in bankruptcy to compel the District Court to
accept jurisdiction on removal of a suit in a state court, brought
against him as such trustee and affecting the title and possession
of property of which he has taken possession as part of the
bankrupt estate. There is an adequate remedy by application to the
court of bankruptcy to enjoin the prosecution of the suit. P.
291 U. S.
614.
2. All property in the possession of a bankrupt of which he
claims the ownership passes, upon the filing of the petition in
bankruptcy, into the custody of the court of bankruptcy. P.
291 U. S.
615.
3. Where a court of competent jurisdiction has, through its
officers, taken property into its possession, the property is
thereby withdrawn from the jurisdiction of other courts, and the
court having possession may not only issue all writs necessary to
protect its possession from physical interference, but is entitled
to determine all questions respecting the same. P.
291 U. S.
615.
4. The jurisdiction in such cases is exclusive of the
jurisdiction of other courts, although otherwise the controversy
would be cognizable by them. P.
291 U. S.
615.
Page 291 U. S. 611
5. In bankruptcy, this rule applies regardless of whether the
property is located in the district in which the bankruptcy
jurisdiction originated, and an injunction to protect its
possession may issue either from the federal court of original
jurisdiction, or from the federal court of the district in which
the state court suit is brought or in which the plaintiff in that
suit resides. P.
291 U. S.
615.
6. The exclusive jurisdiction acquired by a court of bankruptcy
through taking possession of land as part of the bankrupt's estate
is not limited to prevention of interference with use of the land
but extends also to the adjudication of questions respecting the
title. P.
291 U. S.
616.
7. The inherent power of a bankruptcy court to protect its
jurisdiction over property of which it has taken possession from
interference by suit against the trustee thereafter begun in a
state court, is expressly reserved in § 265, Jud.Code, and is not
abridged by § 23(a) of the Bankruptcy Act, relating to suits over
property brought by trustees in bankruptcy against adverse
claimants, nor by § 66, Jud.Code, which provides that every
receiver or manager of any property appointed by any court of the
United States, may be sued without previous leave of that court, in
respect of any act or transaction of his in carrying on the
business connected with such property, subject, however, to the
equity jurisdiction of the appointing court so far as may be
necessary to the ends of justice. P.
291 U. S.
616.
8. A suit brought in a state court against trustees in
bankruptcy to forfeit to the plaintiffs a railroad right of way in
the trustees' possession, upon the ground that the bankrupt railway
company broke an agreement requiring it to maintain train service,
held subject to the jurisdiction of the bankruptcy court
notwithstanding that, as a mere incident, damages also were prayed
against the trustees because of their failure to maintain the
service after they took over the railway. P.
291 U. S.
618.
9. Nonfeasance of the trustees in bankruptcy in not reviving
train service which the bankrupt wholly ceased to maintain before
they took possession was not an " act or transaction " of the
trustees, within the meaning of § 66, Jud.Code.
Id.
Rule discharged.
Upon the return of the District Court for the Southern District
of Texas, and of Thomas M. Kennerly, Judge thereof, to a rule to
show cause why a writ of mandamus
Page 291 U. S. 612
should not issue commanding that jurisdiction be taken of a
petition for the removal to that court of a suit pending in a court
of Texas against the petitioners Baldwin and Thompson, trustees in
bankruptcy, the Beaumont, Sour Lake Western Railway Company, and
the Houston North Shore Railway Co.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
This petition for a writ of mandamus, filed in this Court by
leave, prays that the federal court for Southern Texas and Thomas
M. Kennerly, judge thereof, be commanded to take jurisdiction, on a
petition for removal, of a suit instituted in a state court of
Texas by Tyrrell-Garth Investment Company. The petitioners are the
defendants in that suit. [
Footnote
1] Two of them, Baldwin and Thompson, are the trustees in
bankruptcy of the Missouri Pacific Railroad system, and are
operating it. They were appointed by orders of the federal court
for Eastern Missouri entered in proceedings for reorganization
under § 77 of the Bankruptcy Act as amended March 3, 1933, c. 204,
§ 1, 47 Stat. 1474. The other two petitioners are Texas
corporations -- Houston North Shore Railway Company and Beaumont,
Sour Lake & Western Railway Company -- and are parts of the
Missouri Pacific system. [
Footnote
2]
Page 291 U. S. 613
The federal court entered an order denying the petition for
removed and returned the papers to the petitioners, on the ground
that it appears from the petition for removal that the suit is not
one in which it is sought to hold the trustees "responsible in
their own person and/or property, but only in their representative
capacity."
See Ruff v. Gay, 3 F. Supp. 264; 67 F.2d
684.
The trustees claim that they are entitled to a writ of mandamus
because the suit in the state court is removable under § 33 of the
Judicial Code as amended by Act of August 23, 1916, c. 399, 39
Stat. 532, being an action against officers of a court "of the
United States on account of acts done under color of their office
and in performance of their duties as such officers." [
Footnote 3]
The petition for mandamus alleges that among the properties of
which the trustees took possession is an interurban railway in
Texas, owned by the Houston North Shore Railway and leased to the
Beaumont, Sour Lake & Western Railway; that they had taken
possession of this property prior to the institution of the suit in
the state court, and that the necessary effect of the institution
and prosecution of the suit in the state court "is and will be to
materially interfere with and obstruct the jurisdiction and powers
of the federal court for eastern Missouri, with respect to the
properties and assets of said debtors, the Beaumont, Sour Lake
& Western Railway Company and Houston North Shore Railway
Company, and each of them."
The petition for mandamus shows further, by reference to the
complaint of the investment company, that a part
Page 291 U. S. 614
of the interurban railway's right of way had been acquired by
mesne conveyance from the predecessor in title of the investment
company; that, after the trustees took possession of this
interurban railway, the investment company brought the suit in the
state court in which it claims that it is the owner of the fee of a
part of the land over which the railway extends, and that the
easement of right of way has been forfeited by failure of the Texas
corporations and the trustees to operate trains thereon in
accordance with the conditions contained in a contract which
accompanied the grant of the right of way, [
Footnote 4] and prayed as follows: that the deeds
conveying the right of way be cancelled; that they be "annulled and
held for naught as an existing cloud upon plaintiff's title to the
lands and properties therein conveyed;" that the two railways and
the trustees be enjoined from making further use of the lands for
the operation of the interurban railway or otherwise, and that the
complainant recover from Houston North Shore Railway and the
trustees "in their capacity as trustees" damages in the sum of
$150,000.
We are of opinion that the trustees may be entitled to have
their controversy with the investment company adjudicated in the
federal court, but are not entitled to the remedy of mandamus,
because, to secure adjudication in the federal court of their
rights and duties, they could have applied, and still can apply so
far as now appears, either in the original bankruptcy proceeding or
by an ancillary bill in Texas, for an injunction to restrain the
investment company from prosecuting its suit in the state
court.
Page 291 U. S. 615
First. All property in the possession of a bankrupt of
which he claims the ownership passes, upon the filing of a petition
in bankruptcy, into the custody of the court of bankruptcy. To
protect its jurisdiction from interference, that court may issue an
injunction. The power is not peculiar to bankruptcy or to the
federal courts. It is an application of the general principle that,
where a court of competent jurisdiction has, through its officers,
taken property into its possession, the property is thereby
withdrawn from the jurisdiction of other courts. Having possession,
the court may not only issue all writs necessary to protect its
possession from physical interference, but is entitled to determine
all questions respecting the same.
Julian v. Central Trust
Co., 193 U. S. 93,
193 U. S. 112;
compare Riehle v. Margolies, 279 U.
S. 218,
279 U. S. 223;
Straton v. New, 283 U. S. 318. The
jurisdiction in such cases is exclusive of the jurisdiction of
other courts, although otherwise the controversy would be
cognizable in them.
Murphy v. John Hofman Co.,
211 U. S. 562,
211 U. S. 569.
In bankruptcy, this rule applies regardless of whether the property
is located in the district in which the bankruptcy proceeding
originated. The injunction to protect its possession may issue
either from the court of original jurisdiction or from the federal
court for the district in which the state court suit is brought or
in which the plaintiff in that suit resides.
Isaacs v. Hobbs
Tie & Timber Co., 282 U. S. 734,
282 U. S.
737-738. [
Footnote
5]
Second. It is immaterial that the investment company,
after the petition for removal had been presented to the federal
court, amended its complaint in the state court by striking
therefrom so much of the prayer as sought to enjoin the two
railways and the trustees from
Page 291 U. S. 616
making further use of the lands for operation of the interurban
railway or otherwise. [
Footnote
6] The purpose of the amendment was evidently to confine the
litigation in the state court to the issue of the right and title
to the property, as distinguished from its use during the pendency
of the bankruptcy proceedings, in the hope of thereby removing the
obvious interference with the jurisdiction of the bankruptcy court.
But the exclusive jurisdiction acquired by the bankruptcy court
through taking possession of the interurban railway under claim of
title was not limited to the prevention of interference with the
use of the land.
Compare Board of Trade v. Johnson,
264 U. S. 1,
264 U. S. 11;
Taubel-Scott-Kitzmiller Co. v. Fox, 264 U.
S. 426,
264 U. S. 433.
The jurisdiction extends also to the adjudication of questions
respecting the title.
White v. Schloerb, 178 U.
S. 542;
In re Eppstein, 156 F. 42.
Compare
Wabash R. v. Adelbert College, 208 U. S.
38,
208 U. S. 54;
Security Mortgage Co. v. Powers, 278 U.
S. 149,
278 U. S. 153.
[
Footnote 7]
Third. The inherent power of the bankruptcy court to
protect its jurisdiction, over property of which it has taken
possession, from interference by suit thereafter begun in a state
court, has not been abridged by any legislation
Page 291 U. S. 617
of Congress. The power is expressly reserved to the bankruptcy
court in Judicial Code § 265, which contains the general
prohibition against staying proceedings in state courts. Nor is
this power of the bankruptcy court affected by § 23(a) of the
Bankruptcy Act of 1898, c. 541, 30 Stat. 552, which declares:
"The United States district courts shall have jurisdiction of
all controversies at law and in equity, as distinguished from
proceedings in bankruptcy, between trustees as such and adverse
claimants concerning the property acquired or claimed by the
trustees, in the same manner and to the same extent only as though
bankruptcy proceedings had not been instituted and such
controversies had been between the bankrupts and such adverse
claimants."
That section relates only to suits in which the trustees are
plaintiffs. It has no restrictive effect on the right of trustees
or receivers to protect their possession or title through
proceedings in the bankruptcy court. [
Footnote 8]
Nor is the inherent power of the bankruptcy court to protect its
jurisdiction in respect to property of which it has taken
possession abridged by Judicial Code § 66, which declares:
"Every receiver or manager of any property appointed by any
court of the United States may be sued in respect of any act or
transaction of his in carrying on the business connected with such
property, without the previous leave of the court in which such
receiver or manager was appointed; but such suit shall be subject
to the general equity jurisdiction of the court in which such
manager or receiver was appointed so far as the same may be
necessary to the ends of justice. "
Page 291 U. S. 618
That section does not abridge the exclusive jurisdiction of the
court over property of which it has taken possession.
In re
Tyler, 149 U. S. 165,
149 U. S.
182-184. [
Footnote
9]
Fourth. It is true that the investment company seeks,
in addition to the adjudication of the forfeiture of the right of
way, damages "in the sum of $150,000" from the two railways and
"from the trustees in their said capacity as trustees" for failure
to maintain the daily schedule of passenger trains set forth in the
contract. This prayer of the complaint is no bar to staying the
suit in the state court. The exclusive jurisdiction of the
bankruptcy court is determined by the main purpose of the suit,
which is to have the forfeiture declared and the alleged cloud upon
title removed. The claim for damages is merely an incident.
Moreover, the breach of contract for which damages are claimed is
not "an act or transaction of the
trustees' in carrying on the
business connected with such property." The breach alleged is that
of "wholly" ceasing to maintain the passenger train schedule. It is
alleged that this breach had occurred months before the
commencement of the bankruptcy proceeding. The only wrong with
which the trustees are charged is in not "now maintaining" the
service. Such nonfeasance is not an "act or transaction" within the
meaning of § 66. [Footnote
10]
We have no occasion to determine otherwise the scope of Judicial
Code § 33. Nor need we consider whether the federal court, if it
had entertained the petition for removal, would have been obliged
to dismiss the suit on the ground that the state court was without
jurisdiction because the bankruptcy court had possession of the
res.
Page 291 U. S. 619
Compare Isaacs v. Hobbs Timber & Tie Co.,
282 U. S. 734,
282 U. S.
738-739;
Lambert Run Coal Co. v. Baltimore &
Ohio R. Co., 258 U. S. 377,
258 U. S. 382.
[
Footnote 11] It is
sufficient that the extraordinary remedy of mandamus should be
denied, because the trustees may by the common remedy of injunction
prevent any interference with the jurisdiction of the bankruptcy
court.
Compare Ex parte Park Square Automobile Station,
244 U. S. 412,
244 U. S. 414;
Ex parte Riddle, 255 U. S. 450;
Ex parte Krentler-Arnold Hinge Last Co., 286 U.S. 533.
Moreover, the bankruptcy court might, in the exercise of its
discretion, conclude that it is desirable to have the litigation
proceed in the state court. [
Footnote 12]
Rule discharged.
[
Footnote 1]
There is another defendant in the state court suit (Johnson) who
did not join in the petition for removal. The allegations
concerning him are not here material.
[
Footnote 2]
All the stock of these corporations is owned by New Orleans,
Texas & Mexico Railway Company, and nearly all of the latter's
voting stock is owned by the Missouri Pacific.
[
Footnote 3]
Judicial Code § 33 as amended provides:
"When any civil suit . . . is commenced in any court of a state
. . . against any officer of the courts of the United States for or
on account of any act done under color of his office or in the
performance of his duties as such officer . . . , the said suit . .
. may, at any time before the trial or final hearing thereof, be
removed for trial into the district court . . . in the district
where the same is pending."
[
Footnote 4]
The contract provided for an easement subject to forfeiture for
nonuser for the purpose of an interurban railroad. "Nonuser" is
defined as failure to operate the railroad for 30 successive days,
and "operation" as involving a passenger schedule over which
first-class coaches must run over the entire line by electric or
gas engines on a regular schedule of at least one train not less
than every two hours of each day from 6 o'clock a.m. until 12
o'clock midnight.
[
Footnote 5]
See In re Patterson Lumber Co., 228 F. 916; 247 F. 578;
In re Lookout Mountain Co., 50 F.2d 421. As to railroads,
see § 77, added to the Bankruptcy Act by Act of March 3,
1933, c. 204, § 1, 47 Stat. 1467, 1474.
[
Footnote 6]
From the answer to the petition for removal filed by the
investment company in the federal court it appears that, after the
filing of the petition for removal, and before action thereon by
the federal court, the investment company had moved in the state
court to dismiss so much of the prayer in its suit as seeks an
injunction against the trustees in their official capacity and the
two railway companies, and that the state court granted the
motion
"without prejudice to the plaintiff hereafter to seek such
injunction against said defendant railway companies when and if
they shall be discharged from jurisdiction and control of"
the federal court for Eastern Missouri. We have no occasion to
consider the effect of the amendment so far as concerns the right
of removal.
[
Footnote 7]
Whitney v. Wenman, 198 U. S. 539;
In re Rochford, 124 F. 182, 186;
In re Moody, 131
F. 525;
Fidelity Trust v. Gaskell, 195 F. 865;
In re
Dialogue, 241 F. 290; cases in
note 8 infra.
[
Footnote 8]
J.I. case Plow Works v. Finks, 81 F. 529;
In re
McCallum, 113 F. 393;
In re Lipman, 201 F. 169;
In re Williams, 53 F.2d 486.
[
Footnote 9]
See also New River Coal Co. v. Ruffner Bros., 165 F.
881;
Dickinson v. Willis, 239 F. 171.
[
Footnote 10]
Compare Buckhannon & W. R. Co. v. Davis, 135 F.
707, 711;
Love v. Louisville R. Co., 178 F. 507;
Dickinson v. Willis, 239 F. 171;
Field v. Kansas City
Refining Co., 296 F. 800; 9 F.2d 213.
[
Footnote 11]
Compare In re Zehner, 193 F. 787;
First Trust Co.
v. Baylor, 1 F.2d 24, 27.
See note 12 infra.
[
Footnote 12]
McHenry v. La Societe Francaise, 95 U. S.
58;
In re Johnson, 127 F. 618;
In re
Zehner, 193 F. 787;
First Trust Co. v. Baylor, 1 F.2d
24, 27;
In re Schulte-United, 50 F.2d
243;
In re Gas Products Co., 57 F.2d 342;
compare
In re Schermerhorn, 145 F. 341;
In re Locust Bldg.,
272 F. 988;
Field v. Kansas City Refining Co., 296 F. 800;
9 F.2d 213.