Guardian Title Co., Inc. v. Irving Sulmeyer, Receiver in the Matter of Moral Investments, Inc., a California Corporation

Appellant Guardian Title Co., Inc. (“Guardian”), appeals from a District Court order modifying and affirming the Referee’s order in favor of Sulmeyer, the receiver for Moral Investments, Inc., the debtor in Chapter XI proceedings, awarding damages against Guardian for conversion of the debtor’s assets. Guardian contends that the order is invalid because the bankruptcy court did not have personal jurisdiction of Guardian and because the court did not have subject matter jurisdiction of a conversion action.

At the time the Chapter XI petition was filed in the Southern District of California, the debtor’s principal asset was its interest in a parcel of undeveloped California land. Notes secured by two deeds of trust were in default, and the holders of the trust deeds had begun foreclosure proceedings. The court restrained the foreclosure proceedings after it decided that the property was worth substantially more than the encumbrances. A refinancing plan was arranged whereby the receiver deposited into escrow $17,000 from the debtor’s estate. The fund was to be divided equally between Irving Reamer and North-brook Mortgage & Investment Co. (“Northbrook”) upon the happening of certain…