Texas v. Donoghue
Opinion of the Court
delivered the opinion of the Court.
This writ is limited to the questions raised on the application of Texas to the United States court for the northern district of that State in a proceeding under § 77B of the Bankruptcy Act
Texas statutes
There is before us no question as to validity of the State’s measures to regulate production, or as to when, if ever, the oil in controversy became forfeit.
These are the facts.
Texas sued the Trinity Refining Company in the district court, 126th judicial district, Travis county, to recover fines and penalties for violation of the conservation
Within four months after commencement of the first suit, the company filed its petition in the United States district court, submitting a plan of reorganization. The court found the petition to have been presented in good faith, approved it as properly filed, appointed Donoghue trustee of the debtor, directed him to take possession of its property, ordered that all persons having property of the debtor deliver it to him and issued in usual form a restraining order preventing interference with his possession or control. The trustee took from the receivers property claimed by the debtor including the oil in question, approximately 77,000 barrels. Texas applied to the bankruptcy court for permission to bring suit in a state court to obtain judgment of confiscation against that oil. The court withheld consent and directed the trustee to retain the oil. The Circuit Court of Appeals sustained that ruling, 88 F. (2d) 48, 51, and to review its judgment upon that issue, we brought the case here. 301 U. S. 674.
Possession or control of the oil by the state court is not essential to its jurisdiction to entertain the suit proposed to be brought.
The filing of the petition for reorganization in the bankruptcy court may not be held to deprive the State of opportunity in its own court to establish its claim that through forfeiture it had already become the owner of the oil for that would be to take the State’s property for the benefit of the offending company or its creditors. Nor may the receivers’ voluntary surrender of possession to the debtor’s trustee prevent adjudication of the State’s claim. The bankruptcy court abused its discretion in denying the State’s application for permission to institute proceedings in the state court and, to the extent that the Circuit Court of Appeals sustained that ruling, its judgment must be
Reversed.
11 U. S. C, § 207.
Texas Revised Civil Statutes, 1925, Title 102.
Art. 6049e, § 10.
Art. 6036.
Art. 6066 (a), § 10:
(a) “All unlawful oil . . . [is] hereby declared to be a nuisance and shall be forfeited to the State as hereinafter provided. . . .
(b) “When the Attorney General is advised from any source of the presence and existence of unlawful oil ... it shall be his duty to institute a suit in rem against such unlawful oil . . . and against all persons owning, claiming or in possession thereof, such suit to be brought in the name of the State ... in any court of competent jurisdiction in Travis County or in the county in which such oil . . .
(c) "... If, upon the trial of such suit the oil . . . in controversy is found to be unlawful . . . then the court . . . shall render judgment forfeiting the same to the State . . . and authorizing the issuance of an order of sale directed to the sheriff or any constable of the county where the oil or products are located commanding such officer to seize and sell said property in the same manner as personal property is sold under execution . . . The money realized from the sale . . . shall be applied, first, to the payment of the costs of suit and expenses incident to the sale . . . and all funds then remaining, shall be . . . placed to the credit of the General Revenue Fund of the State. . . .”
United States v. 1960 Bags of Coffee, 8 Cranch 398. See also Clark v. Protection Insurance Co., 1 Story (C. C.) 109, 134; Fed. Cas. No. 2832.
Later, no plan of reorganization having been adopted, the bankruptcy court ordered liquidation of the debtor’s property under subds. (c) (8) and (k) of § 77 B. Donoghue was appointed trustee in bankruptcy. § 44; 11 U. S. C., § 72. This Court substituted him in that capacity as respondent in place of himself as trustee of the debtor.
11 U. S. C. §93 (j).
Art. 6066a, §§ 10 (b) and (e).
Dissenting Opinion
dissenting.
I think the judgment should be affirmed.
Texas was not the owner of the oil in controversy when it came into the possession of the court of bankruptcy. If she had been such an owner, she could be heard in that court pro interesse suo, vindicating her title in reclamation proceedings like any other adverse claimant. By common consent ownership sufficient for such relief was not hers when the court of bankruptcy took the oil into its custody, and is not hers today. “It is not correct to say, that property forfeited is vested in the government
With the oil in the possession of the federal court of bankruptcy — a possession lawfully acquired — leave to sue in the state court for a decree of forfeiture and sale will be an idle and empty form, productive of nothing except delay and vain expense, unless upon the pronouncement of the decree it will be the duty of the court of bankruptcy to surrender the oil to the court of another jurisdiction, and this for the sole purpose of making a forfeiture effective. I deny that any such duty will exist. Cf. Isaacs v. Hobbs Tie & T. Co., supra. I find no intimation of its existence in any case till this one. Certainly there is none in the cases now cited in the opinion of the court. True indeed it is that if possession of the res were to be acquired by the Texas court at the time of the decree of forfeiture or even at the time of a sale pursuant thereto, a title obtained thereunder would be recognized as valid everywhere. Wisconsin v. Pelican Ins. Co., 127 U. S. 265, 291; Rose v. Himely, 4 Cranch 241; Hudson v. Guestier, 4 Cranch 293; Dicey, Conflict of
Reference
- Full Case Name
- TEXAS Et Al. v. DONOGHUE, TRUSTEE
- Cited By
- 27 cases
- Status
- Published