By their petition filed July 29, 1935, the trustees of the debtor ask this court to direct Nathan Block, a resident of Norfolk, Vа., to convey certain Norfolk real estate to the trustees subject to a mortgage or deed of trust; or upon failure to make such conveyance that Nathan Block and two others be cited for contempt. Thereupon the court ordered respondents to appear on August 8, 1935, to show cause why the prayers of the petition should not be granted. Notice of the hearing was given by serving сertified copies of the petition and order upon respondents in Norfolk and by sending like certifiеd copies to. respondents by registered mail. At the hearing respondents appeared spеcially and moved to dismiss the petition upon the grounds (1) that the court has no jurisdiction over their persоn; (2) that the court has no jurisdiction over or possession of the property in question; (3) that the respоndents “are not creditors” of the debt- or; and (4) that “the court has no jurisdiction to grant in a summary procеeding the injunction without notice first served upon th'e defendants.”
July 1, 1935, petitioners were appointed temporary trustees of the debtor by order of this court providing: “All pending suits against the debtor, Norfolk Weavеrs, Inc., are hereby stayed, and the commencement or continuation of suits against the debtor, Norfolk Weavers, Inc., until after final decree herein, is hereby enjoined or stayed, * * * and any judicial proceeding to enforce any lien against the estate of the debtor, Norfolk Weavers, Inc., or any рart thereof is hereby enjoined until final decree.” Before that date and thereafter the trusteеs of the debtor were in possession of the Norfolk real estate in question and operating the plant located thereon as part of the business of the debtor.
Proof was offered at the hearing that on June 15, 1933, a deed of trust covering the Norfolk real estate was given by First Continental Corporation to Hyman Block, trustee. Two years thereafter, June 15, 1935, a payment on account of the princiрal debt and certain interest were due and unpaid. Thereupon the real estate was advertisеd for sale for July 3, 1935. Before the proposed sale, either on July 1 or 2, 1935, a Norfolk attorney reprеsenting the debtor informed the beneficiary under the trust deed and his attorney of the filing in this court of the petition by the debtor under section 77B, Bankr. Act, 11 USCA § 207, and of the restraining order issued thereunder by this court. Notwithstanding this information, the trustee under the deed of trust sold the real estate covered by the deed of trust on July 3, 1935, to Nathan Bloсk for $15,000 and immediately executed and delivered a deed therefor. Thereafter the purchaser commenced an action to eject the debtor from the premises. Actual possession of the premises, at all times, has been in the debt- or or its trustees. The action of ejectment is a confirmation of that fact. At the hearing it was affirmatively proved that the value of the property was in the neighborhood of $60,000, four times the amount of the bid on July 3, 1935.
Respondents contend that on July 1, 1935, when the petition under section 77B of the Bankruptcy Act was filed in this court, the debtor had no equity of redemption or other property right in the premises. This contention is based upon the supposed legal effect of the fоllowing facts: After default in payment of taxes, interest, and an installment of principal, the beneficiary directed the trustee to take possession of the property and advertise it for sale in cоmpliance with the terms of the deed of trust and the laws of Virginia; that the trustee, pursuant to that notice, offered the property for sale on July 3, 1935, by advertising the sale in the Virginia Pilot, a newspaper of general circulation in the city of Norfolk. Respondents contend that by reason of the acts abovе recited the trustee took constructive possession of the property and thereby divested the debtor and its trustees of all property in the premises. This assumption is unsound.
It is now authoritatively settled that undеr section 77B the jurisdiction of a court of bankruptcy extends throughout the United States and that a District Court, whеn a petition under section 77B is filed, may protect the property of the debtor and the right of the trustеes of the debtor to that property wherever located. Continental Illinois National Bank & Trust Co. v. Chicago, Rock Island & Pacific R. Co.,
After considering the several grounds for the motion to dismiss the trustees’ petition, I am оf opinion that the motion must be denied. The court finding that the Norfolk real estate is property of the debtor, the status quo ante the sale thereof on July 3, 1935, must be restored. Meanwhile the matter of contempt is held in abeyance.