Kalb v. Feuerstein
1940 U.S. LEXIS 1189, 60 S. Ct. 343, 308 U.S. 433 (1940)
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Rule of Law:
When Congress, through its plenary power over bankruptcy, explicitly grants exclusive jurisdiction to federal bankruptcy courts over a debtor's property, state courts are automatically divested of jurisdiction, and any state court actions taken thereafter concerning that property without the bankruptcy court's consent are void and subject to collateral attack.
Facts:
- Ernest Newton Kalb and his wife owned a farm in Walworth County, Wisconsin, which was subject to a mortgage held by Feuerstein et ux.
- On October 2, 1934, Ernest Newton Kalb sought protection under federal law by filing a petition for composition and extension of time to pay his debts under Section 75 of the Bankruptcy Act (Frazier-Lemke Act) in bankruptcy court, which was reinstated on September 6, 1935, and remained pending.
- On July 20, 1935, a sheriff sold the Kalbs' farm.
- On March 12, 1936, the sheriff physically ejected Ernest Newton Kalb, his wife, and their family from their mortgaged farm.
Procedural Posture:
- Feuerstein et ux. initiated foreclosure proceedings against the Kalbs in the Walworth County Court, Wisconsin (state trial court).
- On April 21, 1933, the Walworth County Court entered a judgment of foreclosure against the Kalbs.
- On September 16, 1935, while Kalb's bankruptcy petition was pending, the Walworth County Court granted the mortgagees' motion for confirmation of the sheriff's sale of the Kalbs' farm.
- On December 16, 1935, the mortgagees obtained a writ of assistance from the Walworth County Court to remove the Kalbs from the farm.
- After being ejected from their farm, the Kalbs brought an action in equity in the Circuit Court of Walworth County, Wisconsin (state trial court), against the mortgagees seeking restoration of possession, cancellation of the sheriff's deed, and removal of the mortgagees from the farm.
- The Circuit Court sustained a demurrer (motion to dismiss for failure to state a legal claim) and dismissed the Kalbs' complaint.
- The Supreme Court of Wisconsin (state highest court) affirmed the Circuit Court's dismissal.
- Ernest Newton Kalb also filed a separate suit at law in a state court against the mortgagees, the sheriff, and the County Court judge, seeking damages for conspiracy, assault and battery, and false imprisonment.
- A demurrer was sustained in this second state court case, and the Supreme Court of Wisconsin affirmed its dismissal.
- The Kalbs appealed both judgments from the Supreme Court of Wisconsin to the Supreme Court of the United States.
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Issue:
Does the filing of a farmer-debtor's petition under Section 75 of the Bankruptcy Act automatically divest a state court of jurisdiction to continue foreclosure proceedings, confirm a sale, or order dispossession of the debtor's property without the bankruptcy court's consent, rendering any such state court actions void and subject to collateral attack?
Opinions:
Majority - Justice Black
Yes, the filing of a farmer-debtor's petition under Section 75 of the Bankruptcy Act automatically divests a state court of jurisdiction to continue foreclosure proceedings, confirm a sale, or order dispossession of the debtor's property without the bankruptcy court's consent, rendering any such state court actions void and subject to collateral attack. The Court found that Congress, in exercising its supreme and plenary power over bankruptcy, clearly intended to grant exclusive jurisdiction to the federal bankruptcy courts over farmer-debtors and their property through the Frazier-Lemke Act. The Act explicitly states that the filing of a petition "shall immediately subject the farmer and all his property...to the exclusive jurisdiction of the court" and that proceedings like foreclosure "shall not be instituted, or if instituted...shall not be maintained, in any court or otherwise" without the bankruptcy court's consent. This strong statutory language and its legislative history demonstrate that Congress sought to provide an automatic, self-executing stay of all proceedings against the debtor and their property in other courts. Consequently, the Walworth County Court, having been deprived of all jurisdiction by the federal statute, lacked the power to confirm the sale, issue a writ of assistance, or order the Kalbs' ejection. These actions were therefore without authority of law, void, and susceptible to collateral attack, irrespective of whether the jurisdictional issue was raised or contested in the state court.
Analysis:
This case is a landmark decision affirming the supremacy of federal bankruptcy law over state court jurisdiction, particularly concerning agricultural debtors during the Great Depression. It established that congressional power to regulate bankruptcy is plenary, meaning it can automatically divest state courts of jurisdiction, rendering their subsequent actions void, not merely erroneous. This ruling provides strong protection for debtors under federal bankruptcy schemes and highlights that a void judgment, due to lack of jurisdiction, can be collaterally attacked even if not directly appealed. It reinforces the principle that state courts cannot unilaterally maintain jurisdiction when federal law dictates otherwise.
