1. The effect of the filing of a petition for a composition or
extension of time under § 75 of the Bankruptcy Act upon a
state court's jurisdiction of a pending proceeding to foreclose a
mortgage on the petitioner's property, is a federal question. P.
308 U. S.
438.
2. The filing of a petition by a farmer under § 75 of the
Bankruptcy Act for a composition or extension of time to pay his
debts, operates
ipso facto as a stay on the power of a
state court, in a pending proceeding to foreclose a mortgage on his
property, to proceed with
Page 308 U. S. 434
foreclosure, to confirm the foreclosure sale, and to dispossess
under it. Pp.
308 U. S. 438,
308 U. S.
440.
3. The action of the state court in this case in proceeding
contrariwise, without the consent of the bankruptcy court, was not
merely erroneous, but was in excess of its authority, void, and
subject to collateral attack. And whether the jurisdiction of the
state court to proceed thus was contested in the foreclosure
proceeding, or could have been contested, is immaterial. Pp.
308 U. S. 438,
308 U. S.
440.
4. The language and the broad policy of the federal Act, as well
as its legislative history, support this construction, and, as so
construed, the Act was within the plenary power of Congress in
respect of the subject of bankruptcy. Pp.
308 U. S.
439-441.
5. The liability in tort of the state court judge, the sheriff
who executed the writ of assistance, and the mortgagees, for such
action as was taken against the farmer debtor without the authority
of law, is to be determined according to the state law. P.
308 U. S.
443.
231 Wis. 185, 186, 285 N.W. 431, reversed.
Appeal from affirmances of judgments dismissing the complaints
in two cases. For earlier opinions of the state supreme court,
see 228 Wis. 519, 525; 279 N.W. 685, 687;
also
280 N.W. 725, 726.
Page 308 U. S. 435
MR. JUSTICE BLACK delivered the opinion of the Court.
Appellants are farmers. Two of appellees, as mortgagees, began
foreclosure on appellants' farm [
Footnote 1] March 7, 1933, in the Walworth (Wisconsin)
County Court; judgment of foreclosure was entered April 21, 1933;
July 20, 1935, the sheriff sold the property under the judgment;
September 16, 1935, while appellant Ernest Newton Kalb had duly
pending [
Footnote 2] in the
bankruptcy court a petition for
Page 308 U. S. 436
composition and extension of time to pay his debts under §
75 of the Bankruptcy Act (Frazier-Lemke Act), [
Footnote 3] the Walworth County Court granted the
mortgagees' motion for confirmation of the sheriff's sale; no stay
of the foreclosure or of the subsequent action to enforce it was
ever sought or granted in the State or bankruptcy court; December
16, 1935, the mortgagees, who had purchased at the sheriff's sale,
obtained a writ of assistance from the State court, and March 12,
1936, the sheriff executed the writ by ejecting appellants and
their family from the mortgaged farm.
The questions in both No. 120 and No. 121 are whether the
Wisconsin, County Court had jurisdiction, while the petition under
the Frazier-Lemke Act was pending in the bankruptcy court, to
confirm the sheriff's sale and order appellants dispossessed, and,
if it did not, whether its action in the absence of direct appeal
is subject to collateral attack.
No. 120. After ejection from their farm, appellants brought an
action in equity in the Circuit Court of Walworth County,
Wisconsin, against the mortgagees who had purchased at the
sheriff's sale, for restoration of possession, for cancellation of
the sheriff's deed, and for removal of the mortgagees from the
farm. Demurrer was sustained for failure to state a cause of action
and the complaint was dismissed. The Supreme Court of Wisconsin
affirmed. [
Footnote 4]
No. 121, is a suit at law in the State court by appellant Ernest
Newton Kalb against the mortgagees, the sheriff and the County
Court judge who confirmed the foreclosure sale and issued the writ
of assistance. Damages are sought for conspiracy to deprive
appellant of possession,
Page 308 U. S. 437
for assault and battery, and for false imprisonment. As in No.
120, demurrer was sustained, and the Supreme Court of Wisconsin
affirmed. [
Footnote 5]
In its first opinion, the Supreme Court of Wisconsin said:
"It is the contention of the plaintiff [mortgagor] that this
statute is self-executing -- that is, that it requires no
application to the state or federal court in which foreclosure
proceedings are pending for a stay; in other words, that it
provides for a statutory, and not for a judicial, stay. Plaintiff's
claims under the Bankruptcy Act present a question which clearly
arises under the laws of the United States, and therefore present a
federal question upon which determination of the federal courts is
controlling."
Addressing itself solely to this federal question of construing
the Frazier-Lemke Act, the Wisconsin court decided that the federal
Act did not itself, as an automatic statutory stay, terminate the
State court's jurisdiction when the farmer filed his petition in
the bankruptcy court. Since there had been no judicial stay, it
held that the confirmation of sale and writ of assistance were not
in violation of the Act.
Appellees insist, however, that the Wisconsin court, on
rehearing, rested its judgment on an adequate nonfederal ground. If
that were the fact, we would not, under accepted practice, reach
the State court's construction of the Federal statute. [
Footnote 6] The statement on rehearing
relied
Page 308 U. S. 438
on as constituting the nonfederal ground was:
"We need not consider nor discuss the question whether the
congress has power to divest the jurisdiction of a state court
which has once attached. That question is not presented by this
record. It would seem from a consideration of § 75 as amended,
that the filing of the petition automatically operated to extend
the period of redemption. It is possible that that state of facts
if made to appear would make the order of the trial court
erroneous, but the order would be within the power of the court to
make. No appeal having been taken, no showing having been made in
the state court, an order of sale having been confirmed and the
purchaser put in possession, the plaintiff is in no position to
claim that the order of the circuit court is void."
But, if appellants are right in their contention that the
Federal Act, of itself, from the moment the petition was filed and
so long as it remained pending, operated, in the absence of the
bankruptcy court's consent, to oust the jurisdiction of the State
court so as to stay its power to proceed with foreclosure, to
confirm a sale, and to issue an order ejecting appellants from
their farm, the action of the Walworth County Court was not merely
erroneous, but was beyond its power, void, and subject to
collateral attack. And the determination whether the Act did so
operate is a construction of that Act, and a federal question.
It is generally true that a judgment by a court of competent
jurisdiction bears a presumption of regularity, and is not
thereafter subject to collateral attack. [
Footnote 7] But Congress, because its power over the
subject of bankruptcy
Page 308 U. S. 439
is plenary, may, by specific bankruptcy legislation, create an
exception to that principle and render judicial acts taken with
respect to the person or property of a debtor whom the bankruptcy
law protects nullities, and vulnerable collaterally. [
Footnote 8] Although the Walworth County
Court had general jurisdiction over foreclosures under the law of
Wisconsin, [
Footnote 9] a
peremptory prohibition by Congress in the exercise of its supreme
power over bankruptcy that no State court have jurisdiction over a
petitioning farmer debtor or his property would have rendered the
confirmation of sale and its enforcement beyond the County Court's
power, and nullities subject to collateral attack. [
Footnote 10] The States cannot, in the
exercise of control over local laws and practice, vest State courts
with power to violate the supreme law of the land. [
Footnote 11] The Constitution grants
Congress exclusive power to regulate bankruptcy, and, under this
power, Congress can limit that jurisdiction which courts, State or
Federal, can exercise over the person and property of a debtor who
duly invokes the bankruptcy law. If Congress has vested in the
bankruptcy courts exclusive jurisdiction over farmer debtors and
their property, and has by its Act withdrawn from all other courts
all power under any circumstances to maintain and enforce
foreclosure proceedings against them, its Act is the supreme law of
the land which all courts -- State and Federal -- must observe. The
wisdom and desirability of an automatic statutory ouster of
jurisdiction of all except bankruptcy courts over farmer debtors
and their property were considerations for Congress alone.
Page 308 U. S. 440
We think the language and broad policy of the Frazier-Lemke Act
conclusively demonstrate that Congress intended to and did deprive
the Wisconsin County Court of the power and jurisdiction to
continue or maintain in any manner the foreclosure proceedings
against appellants without the consent after hearing of the
bankruptcy court in which the farmer's petition was then pending.
[
Footnote 12]
The Act expressly provided:
"(n) The filing of a petition . . . shall immediately subject
the farmer and all his property, wherever located, . . . to the
exclusive jurisdiction of the court, including . . . the right or
the equity of redemption where the period of redemption has not or
had not expired, . . . or where the sale has not or had not been
confirmed,"
and
"In all cases where, at the time of filing the petition, the
period of redemption has not or had not expired, . . . or where the
sale has not or had not been confirmed, . . . the period of
redemption shall be extended or the confirmation of sale withheld
for the period necessary for the purpose of carrying out the
provisions of this section;"
and
"(o) Except upon petition made to and granted by the judge after
hearing and report by the conciliation commissioner, the following
proceedings
shall not be instituted, or, if instituted at
any time prior to the filing of a petition under this section,
shall not be maintained, in any court or otherwise,
against the farmer or his property
at any time after the
filing of the petition under this section, and
prior to
the confirmation or other disposition of the composition or
extension proposal by the court:"
"
* * * *
Page 308 U. S.
441
"
"(2)
Proceedings for foreclosure of a mortgage on land,
or for cancellation, rescission, or specific performance of an
agreement for sale of land
or for recovery of possession of
land; . . ."
"
* * * *"
"(6) Seizure, distress, sale, or other proceedings under an
execution or under any lease, lien, chattel mortgage, conditional
sale agreement, crop payment agreement, or mortgage."
"(p)
The prohibitions . . . shall apply to all judicial or
official proceedings in any court or under the direction of any
official, and shall apply to all creditors, public or private, and
to all of the debtor's property, wherever located. All such
property shall be under the sole jurisdiction and control of the
court in bankruptcy, and subject to the payment of the debtor
farmer's creditors, as provided for in section 75 of this Act."
(Italics supplied.)
Thus, Congress repeatedly stated its unequivocal purpose to
prohibit -- in the absence of consent by the bankruptcy court in
which a distressed farmer has a pending petition -- a mortgagee or
any court from instituting, or maintaining if already instituted,
any proceeding against the farmer to sell under mortgage
foreclosure, to confirm such a sale, or to dispossess under it.
This congressional purpose is more apparent in the light of the
Frazier-Lemke Act's legislative history. Clarifying and altering
the sweeping provisions for exclusive Federal jurisdiction in the
original Act, [
Footnote 13]
Congress made several important changes in 1935. [
Footnote 14] It was then that subsection
(p) was amended so that the prohibitions in subsection (o) of any
steps against a farmer debtor or his property once his petition is
filed were made specifically applicable
"to all judicial or official proceedings
Page 308 U. S. 442
in any court or under the direction of any official, and . . .
to all creditors, public or private, and to all of the debtor's
property, wherever located. All such property shall be under the
sole jurisdiction and control of the court in bankruptcy, and
subject to the payment of the debtor farmer's creditors, as
provided for in (this section) Section 75. . . ."
As stated by the Senate Judiciary Committee in reporting these
amendments:
". . . subsection (n) brings all of the bankrupt's property,
wherever located, under the absolute jurisdiction of the bankruptcy
court, where it ought to be. Any farmer who takes advantage of this
act ought to be willing to surrender all his property to the
jurisdiction of the court, for the purpose of paying his debts and
for the sake of uniformity."
"The amendment to subsection (p) further carries out the
amendment to subsection (n), and places the sole jurisdiction of
the bankrupt's estate and of his obligations all in the bankruptcy
court, without exception. [
Footnote 15]"
The Congressional purpose is similarly set out in the House
Judiciary Committee's Report:
"The amendment to subsection (n) in fact construes, interprets,
and clarifies both subsections (n) and (o) of section 75. By
reading subsections (n) and (o) as now amended in this bill, it
becomes clear that it was the intention of Congress when it passed
section 75, that the farmer debtor and all of his property should
come under the jurisdiction of the court of bankruptcy, and that
the benefits of the act should extend to the farmer prior to
confirmation of sale, during the period of redemption, and during a
moratorium, and that no proceedings after the filing of the
petition should be instituted, or, if instituted prior to the
filing of the petition, should not be maintained, in any court or
otherwise. [
Footnote 16]
"
Page 308 U. S. 443
Congress set up in the Act an exclusive and easily accessible
statutory means for rehabilitating distressed farmers who, as
victims of a general economic depression, were without means to
engage in formal court litigation. To this end, a referee or
Conciliation Commissioner was provided for every county in which
fifteen prospective farmer debtors requested an appointment, and
express provision was made that these Commissioners should,
"upon request, assist any farmer in preparing and filing a
petition under this section and in all matters subsequent thereto
arising under this section, and farmers shall not be required to be
represented by an attorney in any proceeding under this section.
[
Footnote 17]"
In harmony with the general plan of giving the farmer an
opportunity for rehabilitation, he was relieved -- after filing a
petition for composition and extension -- of the necessity of
litigation elsewhere, and its consequent expense. This was
accomplished by granting the bankruptcy court exclusive
jurisdiction of the petitioning farmer and all his property with
complete and self-executing statutory exclusion of all other
courts.
The mortgagees who sought to enforce the mortgage after the
petition was duly filed in the bankruptcy court, the Walworth
County Court that attempted to grant the mortgagees relief, and the
sheriff who enforced the court's judgment were all acting in
violation of the controlling Act of Congress. Because that State
court had been deprived of all jurisdiction or power to proceed
with the foreclosure, the confirmation of the sale, the execution
of the sheriff's deed, the writ of assistance, and the ejection of
appellants from their property -- to the extent based upon the
court's actions -- were all without authority of law. Individual
responsibility for such unlawful acts must be decided according to
the law of the State. We therefore express no opinion as to other
contentions based
Page 308 U. S. 444
upon State law and raised by appellees in support of the
judgments of the Supreme Court of Wisconsin.
Congress manifested its intention that the issue of jurisdiction
in the foreclosing court need not be contested, or even raised, by
the distressed farmer debtor. The protection of the farmers was
left to the farmers themselves or to the Commissioners who might be
laymen, and considerations as to whether the issue of jurisdiction
was actually contested in the County Court, [
Footnote 18] or whether it could have been
contested, [
Footnote 19] are
not applicable where the plenary power of Congress over bankruptcy
has been exercised as in this Act.
The judgments in both cases are reversed, and the causes are
remanded to the Supreme Court of Wisconsin for further proceedings
not inconsistent with this opinion.
Reversed.
* Together with No. 121,
Kalb v. Luce et al., also on
appeal from the Supreme Court of Wisconsin.
[
Footnote 1]
In both No. 120 and No. 121, the complaints alleged that
appellant Kalb and his wife executed the mortgage. In No. 120, both
Kalb and his wife were alleged to be owners of the farm; while in
No. 121, appellant Kalb was alleged to be the owner.
[
Footnote 2]
October 2, 1934, the petition was filed and approved. June 27,
1935, the petition was dismissed, but September 6, 1935, it was
reinstated and the order of dismissal was vacated pursuant to the
second Frazier-Lemke Act, 11 U.S.C. § 203(s)(5).
[
Footnote 3]
11 U.S.C. § 203.
[
Footnote 4]
231 Wis. 185, 285 N.W. 431.
[
Footnote 5]
Demurrer to one count against the sheriff for assault and
battery was overruled, but the Supreme Court of Wisconsin reversed
as to this count. The opinion of the court upholding the demurrer
appears in
Kalb v. Luce, 228 Wis. 519, 279 N.W. 685, 686,
280 N.W. 725, 726. Appeal to this Court was dismissed because no
final judgment had been entered. 305 U.S. 566. Upon remand, the
State Circuit Court dismissed, the Supreme Court of Wisconsin
affirmed, 231 Wis. 186, 285 N.W. 431, "for the reasons . . .
stated" in its opinion in
Kalb v. Luce, supra, and the
appeals here are from the judgments of dismissal.
[
Footnote 6]
Honeyman v. Hanan, 300 U. S. 14,
300 U. S. 18;
Lynch v. New York ex rel. Pierson, 293 U. S.
52,
293 U. S. 54;
Enterprise Irrigation District v. Farmers' Mutual Canal
Co., 243 U. S. 157,
243 U. S. 164;
Hammond v. Johnston, 142 U. S. 73.
[
Footnote 7]
Chicot County Drainage District v. Baxter State Bank,
ante, p.
308 U. S. 371;
Stoll v. Gottlieb, 305 U. S. 165,
305 U. S.
171-172;
Dowell v. Applegate, 152 U.
S. 327,
152 U. S.
340.
[
Footnote 8]
Vallely v. Northern Fire Ins. Co., 254 U.
S. 348,
254 U. S.
353-354,
and compare 26 U. S. Lessee of
Piersol, 1 Pet. 328,
26 U. S. 340;
Williamson v.
Berry, 8 How. 495,
49 U. S.
540-542.
[
Footnote 9]
Laws of Wisconsin, 1907, Chap. 234.
[
Footnote 10]
Vallely v. Northern Fire Ins. Co., supra, 254 U. S. 355;
cf. Taylor v. Sternberg, 293 U. S. 470,
293 U. S.
473.
[
Footnote 11]
Hines v. Lowrey, 305 U. S. 85,
305 U. S. 90-91;
Davis v. Wechsler, 263 U. S. 22,
263 U. S.
24.
[
Footnote 12]
That a State court before which a proceeding is competently
initiated may -- by operation of supreme federal law -- lose
jurisdiction to proceed to a judgment unassailable on collateral
attack is not a concept unknown to our federal system.
See
Moore v. Dempsey, 261 U. S. 86.
Cf. Johnson v. Zerbst, 304 U. S. 458.
[
Footnote 13]
47 Stat. 1470, § 75.
[
Footnote 14]
49 Stat. 942, 943.
[
Footnote 15]
Senate Report No. 985, 74th Cong., 1st Sess.
[
Footnote 16]
House Report No. 1808, 74th Cong., 1st Sess.
[
Footnote 17]
47 Stat. 1473, § 75(q).
[
Footnote 18]
Stoll v. Gottlieb, supra.
[
Footnote 19]
Chicot County Drainage District v. The Baxter State Bank,
supra.