Opinion
07-30-1878
BARR, assignee, v. WHITE & als.
Daniel Trigg and White & Buchanan, for the appellant. Campbell & Trigg, for the appellee.
C files his bill in the circuit court of R, to subject the real estate of D to satisfy a judgment for $199.80, with interest from the 20th of April, 1860, and costs ($6.96), which C had recovered against D. The bill charges that the rents and profits will not discharge the debt in five years. The bill is taken for confessed, and there is a decree that A, appointed a commissioner, sell the land or so much as may be necessary to satisfy the judgment and the costs of this suit, upon credits stated. A sells the whole tract for $2,000 to W, who complies with the terms of the sale; and A reports the sale to the court, and it is confirmed. After the sale, but before it is confirmed, D is declared a bankrupt; and without taking any step in the state court he applies to the United States district court, and there obtains a decree setting aside the sale, which decree is reversed by the United States circuit court, and the assignee in bankruptcy of D directed to proceed in the case in the state court to obtain such relief as he may be entitled to--HELD:
1. The state court having possession of the case, and having made a decree therein before the bankruptcy of D, he or his assignee can only proceed in that court to maintain their rights. Citing Eysler v. Gaff & als., 1 Otto 521.
2. The assignee of D, who knew of the proceedings in the state court, not having made himself a party in that court, and it not appearing that court even knew of the bankruptcy of D, the decree of the court confirming the report in the absence of the assignee was a valid decree.
3. W being a bona fide purchaser of the land, and his purchase confirmed by the court, it is for D or his assignee, if they would set aside the sale, to show that the price was inadequate, or that only a part of the land should have been sold to pay the plaintiff's debt; and this they failed to do.
4. The assignee is only entitled to have what D, the bankrupt, would have been entitled to if he had not been declared a bankrupt, viz: the surplus of the purchase money, after satisfying the plaintiff's judgment and the costs of this suit.
5. The bill having charged that the rents and profits of the land would not pay the debt in five years, and the bill having been taken for confessed, it was not error to decree a sale of the land without directing an enquiry whether the rents and profits would pay the debt in five years.
6. Under the statute, Code of 1873, ch. 182, § 9, it is not necessary that an execution of fieri facias should have been returned nulla bona, before the plaintiff in the judgment may sue in equity to subject the lands of his debtor to satisfy the judgment.
In January, 1872, Samuel W. Cecil, suing for the benefit of James S. Witten, instituted a suit in equity in the county court of Russell county, to subject the land of John G. Duff to satisfy a judgment for $199.80, with interest from the 20th of April, 1860, and $6.96 costs, which said Cecil had recovered against said Duff in the county court of Tazewell county in August, 1860. The bill, after setting out the judgment, stated that an execution of fieri facias had been sued out upon it, which went into the hands of the sheriff and was levied on certain property, and upon which the sheriff returned, " Barred from collection by homestead exemptions, December 1, 1871."
The bill further states that Duff owned certain lands in the county, upon which plaintiff's judgment is a lien; that the rents and profits of the land will not discharge his judgment in five years; and he prays that the land may be decreed to be sold for the satisfaction thereof. To this suit Duff was made a party defendant.
Duff did not appear or file an answer in the cause, and the bill was taken for confessed at the March rules, 1872. On the 2d of July, the cause came on to be heard upon the bill taken for confessed and the exhibits of the judgment, execution and return, which were filed with the bill, when the court made a decree that the plaintiff recover against the defendant, Duff, $199.80, with interest and costs, and unless he paid the same on or before the 4th of August, 1872, H. C. Alderson, who was appointed a commissioner for the purpose, should, after giving four weeks previous notice of the time and place of sale, as directed in the decree, sell to the highest bidder at public auction, at the front door of Russell courthouse, on some court day, the land of the defendant in the bill mentioned, or so much thereof as may be necessary to discharge said lien, on a credit of one, two and three years, (except costs of suit and sale which was to be paid in cash), taking bonds and good security from the purchaser, payable to himself, bearing interest from the day of sale, and report, & c.
On the 12th of September, 1872, Alderson, the commissioner, returned his report, in which he stated that after giving notice, & c., he sold the lands in the manner required by the said decree, and one Robert A. White became the purchaser at the sum of $2,000, and had executed his bonds with a surety named, which he said he returned with his report as a part thereof.
The cause came on again to be heard on the 5th of February, 1873, and there being no exception to the report, it was confirmed. At the August term of the court the cause was sent to the circuit court. And in March, 1874, it appearing that Duff still retained possession of the land and refused to deliver possession thereof to the purchaser, it was ordered that a writ of possession should issue, & c. And the cause was continued on the docket until the November term, 1876.
In June, 1876, John W. Barr, assignee in bankruptcy of John G. Duff, filed his petition, which was afterwards agreed to be taken as a bill of review. After setting out the proceedings in the case he states that on the 29th of August, 1872, Duff was duly adjudged a bankrupt, and received his certificate of protection as such; that on the 14th of September, 1872, Commissioner Alderson filed his report; that on the 4th of October, 1872, the said H. C. Alderson was elected assignee of said bankrupt, and on the 5th of February, 1873, the said report of sale was confirmed. He refers to the writ of possession which had been ordered by the circuit court, which he states was returned by the officers charged with the execution by reason of a restraining order issued out of the district court of the United States; that in 1876, H. C. Alderson was removed as the assignee of said bankrupt, and himself appointed in his stead, and that in May, 1876, an alias writ of possession was issued returnable to June rules.
He further insists that upon said Duff's becoming a bankrupt, the said suit of Cecil against him abated, and that no further proceedings could be lawfully had therein affecting his rights or the rights of his creditors until the same was by proper process revived against his assignee; that upon the said Duff's being adjudged a bankrupt, all his property and rights of whatever kind passed to and became the property of his assignee, and the said suit could only proceed against the assignee; that the former assignee, Alderson, was the attorney of the plaintiff in said suit, and was thus apprised of the bankruptcy of Duff.
He further insists that the report of the sale of the land is defective, and that it shows upon its face that the commissioner did not follow the requirements of the decree of sale entered by the county court, which only directed the sale of so much of said land as might be necessary to pay the debt of $199.80, with interest and costs, whilst the commissioner sold land to the amount of $2,000 in value. He says the report does not state when the sale was made, nor are the purchaser's notes filed, as stated in the report. And making Cecil, Duff, the sheriff, Witten and White defendants, he prays that the sheriff may be restrained from executing the writ of possession, and that the proceedings had in the case after the bankruptcy of Duff, be reviewed and set aside. The injunction to restrain the sheriff from executing the writ of possession was granted.
White demurred to and and answered the bill of review. He refers to the proceedings in the county court, and insists that the decrees of the court ordering and confirming the sale are conclusive and binding upon the parties, no appeal having been taken therefrom. And he avers that this proceeding by the assignee is at the instance, for the benefit, and at the costs of Duff, and if he has lost his right of appeal, or his right to have a review of the proceedings, it is his fault. He states that Duff, instead of appearing in the county court of Russell and making his defence, invoked the aid of the district court of the United States at Abingdon; and that court did reverse the decrees of the county court of Russell, but upon appeal to the circuit court at Lynchburg, that court, on the 30th of March, 1876, reversed the decree of the district court, held that the circuit court of Russell had complete and exclusive jurisdiction in the premises, and directed Duff and his assignee to proceed in the state court to collect any portion of the purchase money of the land to which he may be entitled after satisfying the liens. And he filed a copy of the proceedings in the United States courts.
He further says that the land sold for a full price, for more than three times enough to pay every debt Duff owes according to his own sworn statement in his schedule in bankruptcy, and for nearly $1,000 more than Duff swore it was worth when he sought to avoid the sale and have it set apart to him in the bankrupt court, in order to defraud his creditors. The fact that Duff filed or can file an upset bid for said land does not indicate that it was not fairly sold for an adequate price, for after the payment of his debts he would be entitled to the surplus. Respondent purchased the land nearly four years ago; he made the cash payment of $71.47, and executed his notes for the balance. He has been kept out of possession by Duff, and claims he is entitled to have an account of the rents and profits, and the amount credited on his bonds. He insists the commissioner had a right to sell the whole of the land, and that the report was a proper report, and there being no exceptions it was proper to confirm it.
By consent of the parties, Barr, as assignee of Duff, was made a defendant in the case of Cecil v. Duff, and the two cases came on to be heard together on the 11th of November, 1876, when the court decreed as follows:
" It appears to the court, that at the date of the decree directing the sale of the land in controversy, all necessary and proper parties were before the court; and the court is of opinion, therefore, that by that decree the county court had acquired such control over the title of the defendant, John G. Duff, as to enable that court to consummate any sale made under that decree against any subsequent assignee of the mere legal title, and especially as no assignee had been appointed on the day of sale under said decree, and all parties then in esse and interest were before the court. And the court is further of opinion, that this sale, having been made in a cause properly in court, in which all proper persons were parties, and having been confirmed, and more than six months having elapsed since the sale, the title of the purchaser cannot be defeated for the errors merely which appear in the proceedings. It seems further to the court that the bankrupt, Duff, having been continuously a party to the said suit of Cecil for, & c., against Duff, and having made no appearance, but having suffered all the proceedings to go by default, is bound by said sale and confirmation so far as the title of said White is concerned; and the original assignee in bankruptcy, H. C. Alderson, having had full notice of all these proceedings in the county court, and acquiescing in the same, must be presumed to have been well satisfied therewith, and with the said sale, and being the commissioner to whose hands the proceeds would come, may well be presumed to have been elected assignee in view of that fact; and the court is clearly of opinion that the assignee as such was not only warranted in resisting the remarkable attempt of the bankrupt to defeat the payment of the indebtedness to his creditors of about $700, (as appears by his petition No. 2, filed in the said district court, on the 18th day of May, 1875), by an under-valuation of his property, as he now on oath admits, and shielding it under the exemption laws, but the assignee as such would have violated his trust if he had not resisted it.
The court is further of opinion, that the title of the assignee is merely a trust for the creditors till they are satisfied; and as to the surplus for the bankrupt; and as it appears that the proceeds of the sale made by Commissioner Alderson will pay and satisfy as well the debt of the plaintiff, Cecil, as the debts proved in bankruptcy, (the whole indebtedness of the bankrupt appearing, as aforesaid, to be about $700), and as the right of the bankrupt to interfere with this sale is barred by the proceedings in the said suit of Cecil against Duff, and in the bankrupt court, it seems, therefore, to the court that all the relief the said assignee, Barr, is entitled to here is to be allowed to have the surplus of the proceeds of said sale after the decree in the said case of Cecil for, & c., v. Duff is satisfied. Therefore, it is adjudged, ordered and decreed, that the injunction heretofore awarded upon the petition of the assignee, Barr, be and the same is dissolved, and that after the satisfaction of the decree in favor of Cecil for the benefit of James S. Witten, rendered as aforesaid, in the said case of S.W. Cecil for, & c. v. John G. Duff, in the county court, the surplus proceeds of the sale aforesaid, be paid over to the said assignee, Barr, after deducting therefrom the costs of the defendant, White, incurred in his defence here, which are decreed in his favor against said assignee; and the commissioner, H. C. Alderson, will proceed, pursuant to the provisions of this decree, to collect and pay over the proceeds of the sale of the land in controversy made by him as aforesaid, and he will report to court. But before proceeding to collect said purchase money, he shall execute bond with good security, conditioned for the faithful performance of his duties as commissioner, before the clerk of this court in the penalty of $4,000. And the question raised by the purchaser, R. A. White, in his answer, that he is entitled to rents and profits arising from the land purchased by him for the time the possession of the same has been withheld from him, is reserved for future adjudication."
And thereupon Barr applied to a judge of this court for an appeal; which was allowed.
Daniel Trigg and White & Buchanan, for the appellant.
Campbell & Trigg, for the appellee.
OPINION
STAPLES, J.
The appellee, White, purchased the land in controversy under a decree of the county court of Russell. He complied with the terms of sale by making the cash payment and executing his bonds for the deferred instalments, and there is every reason to believe he would have paid them off at maturity but for the obstacles interposed by third persons. The sale was reported to the court by the commissioner, and was regularly confirmed without objection. The question now arises, whether there was any such irregularity in the sale or in the proceedings of the commissioner, or in the conduct of the parties, as to warrant this court in setting aside the sale and vacating the title of the purchaser. In the first place, it is insisted that the land was sold at a very inadequate price, and that the commissioner, in violation of the terms of the decree, made sale of the whole tract, when the sale of part only was necessary to satisfy the judgment creditor.
There is not in this record, nor in the record of the proceedings of the district court of the United States, any evidence tending to sustain either of these allegations. The upset bid made in the latter court by Duff, the debtor, is not evidence of the value of the land, because, as was said by counsel, Duff being entitled to the surplus proceeds after the payment of all his debts, and these debts being greatly less than two thousand dollars, the amount of the appellee's purchase, he might well afford to bid twice the value of the land. The district court of the United States in setting aside the sale made to the appellee, did not base its decree upon either of the grounds now suggested. The evidence shows that the land was assessed in 1872, the year in which the sale was made, at nine hundred and seventy dollars. Duff, himself, in his deed of homestead filed in 1873, estimates it at eleven hundred and sixty dollars.
In the face of these facts, without a scintilla of proof to the contrary, it is impossible, with any show of reason, to say that two thousand dollars was an inadequate price. The presumption is precisely the reverse. The decree directed the commissioner to sell the land in the bill and proceedings mentioned, or so much thereof as was necessary, to discharge the plaintiff's debt. The commissioner sold the whole ninety-seven acres. It may be that a sale of part would have been sufficient, and could have been made without detriment to any one. This depended upon the nature, quality and condition of the property. It may be that the land was not susceptible of partition, and that its chief value consisted of buildings and other appurtenances which could not be conveniently sold in parcels. Upon these points the record furnishes no information, and we are now dealing with the rights of a bona fide purchaser, after a confirmation of the sale without objection, and after the lapse of more than three years before the bill of review was filed. The district court of the United States, when it undertook to set aside the sale made to the appellee under the decree of the county court of Russell, at the instance of Duff himself, certainly with his consent, entered a decree for the sale of the entire tract. Surely the county court could do substantially the same thing, by confirming a sale at an adequate price, made in the interests of all the creditors.
When the decree of the district court just alluded to was reversed by the circuit court of the United States at Lynchburg, upon the ground that the whole matter properly belonged to the state court, which alone had jurisdiction, the circuit court made the following provision in its decree of reversal: " The district court is advised to direct the assignee of said Duff to take such proper proceedings in the circuit court of Russell county as may be necessary to secure the surplus of the proceeds of sale of said lands for the benefit of the bankrupt's estate, if any there be." It is very true the same decree contains a reservation of the right to Duff, the bankrupt, also to institute in the state court any proceedings he may deem necessary to the protection of his interests. He, however, has instituted no proceedings of any kind; he is not a party in this record except as a defendant in the original suit. The appellant, the assignee in bankruptcy, in filing this bill to set aside the sale, seems therefore to have gone beyond the instructions given him in the bankrupt court. His duty was not to ask for a vacation of the sale, but to secure the surplus of the proceeds for the benefit of the bankrupt's estate. It is worthy of observation that in his bill of review he neither avers that the land was sold for an inadequate price, nor that the commissioner had violated his duty in selling the whole tract instead of a part. If the purpose was to impeach the sale on these grounds, the matter ought to have been put in issue by proper averments in the bill, and thus afford the appellee an opportunity of meeting the points by his answer and his proofs. Under all these circumstances the proposition cannot for a moment be entertained to set aside the sale to the appellee upon the ground of inadequacy of price, of irregularity in the sale, or in the conduct of the commissioner who made it.
The ground mainly relied on in the bill of review for vacating the sale, is that upon Duff's becoming a bankrupt the suit of Cecil, the creditor, abated, and no further proceedings could be lawfully had therein affecting his rights or the rights of his creditors, until the suit was properly revived against the assignee in bankruptcy. Now it will be seen that the bill does not charge that White, the purchaser, either at the time of the sale or of its confirmation, had any notice of the bankruptcy. He is not charged with fraud or improper conduct in any respect, and there is no reason for attributing to him anything of the kind. The decree for the sale was rendered before the adjudication in bankruptcy, and the sale was made before the assignee was appointed. No suggestion of the bankruptcy was made on the record, nor was the matter brought in any manner to the attention of the court, although there was ample time to do so before the sale was confirmed. If the assignee failed in his duty in this particular the purchaser cannot be affected by his neglect or misconduct in the absence of all proof showing that injustice was done. The mere fact of the bankruptcy of the debtor could not of itself prevent the sale or its confirmation. It might render proper the introduction of a new party on the record, when properly suggested to the court, but it could not prevent or in any manner interfere with the execution of a valid decree. Upon this point the case of Eyster v. Graff et als., decided by the supreme court of the United States (1 Otto, U. S. R. 521) is a direct authority. In that case, Mr. Justice Miller, delivering the opinion of the court, said: " At the time the suit was commenced the mortgagor, McClure, was vested with the title, and was the proper and necessary defendant. But for the bankruptcy of McClure there can be no doubt that the sale under the foreclosure decree and the deed of the master would have vested the title in the purchaser, and that this would have related back to the date of the mortgage. Nor can there be any question that the suit having been commenced against McClure when the title or equity of redemption was in him, any person who bought of him or took his title or any interest he had, pending the suit, would have been bound by the proceedings and their rights foreclosed by the decree and sale. These are elementary principles. Is there anything in the bankrupt law, or in the nature of proceedings in bankruptcy, which takes the interest in the mortgaged property acquired by the assignee out of this rule?"
The learned judge then proceeds to show there is not, and that no reason existed why the same principle should not apply to the transfer made by a bankruptcy proceeding. He lays down the proposition that where an assignee in bankruptcy is appointed during the pendency of proceedings in a state court for the sale of mortgaged property, he stands as any other purchaser would stand on whom the title had fallen after the commencement of the suit, a purchaser pendente lite, and if there be any reason for interposing, the assignee should have himself substituted for the bankrupt, or be made a defendant on petition. But if he fail to do so, it does not invalidate the proceedings. And further, that a state court cannot take judicial notice of the proceedings in bankruptcy, and it is its duty to proceed as between the parties before it, until by some proper pleadings in the case it is informed of the changed relations of the parties to the subject matter. These citations are given because they are directly in point, and because they are conclusive of the question, if the decisions of the supreme court of the United States are authority in such cases.
In the present case, if the assignee did not choose to object to the sale, there was nothing to prevent the debtor himself from doing so. He was interested in the question of homestead, and he was interested in the surplus remaining after the claims of creditors were satisfied. He had the right, notwithstanding his bankruptcy, to go forward and object to the confirmation of the sale, or to suggest his bankruptcy, and require his assignee to be brought before the court and to take care of his interests. Instead of this, he filed his petition in the United States court some eight or ten months after the sale was confirmed, with a view to oust the jurisdiction of the state court, to set aside the sale and to have his entire estate set apart as a homestead. This petition was dismissed, and he was again remitted to his remedies in the state courts. But instead of pursuing them, after the lapse of nearly two years, he again applies to the United States courts to interpose in his behalf. He at last succeeds in July, 1875, in obtaining a decree vacating the sale made to the appellee, not upon any of the grounds now suggested, but because, in the opinion of the district judge, it did not appear the rents and profits of the land would not pay off the judgment lien within five years, and because there was no return of nulla bona upon the execution before the land was decreed to be sold. This decree practically assumed for the district court of the United States appellate jurisdiction to revise the proceedings and decrees of a state court. As already stated, it was afterwards reversed by the circuit court of the United States. And now, after all this delay, contention and expense, the state courts are asked to set aside a sale made in 1872, and regularly confirmed in February, 1873, without a particle of evidence impeaching its fairness, or the good faith of the purchaser.
It must not be forgotten that while a purchaser at a judicial sale acquires by his bid and its acceptance no independent right to have his purchase completed, but is merely a preferred proposer until confirmation, after confirmation by the court, his condition is very materially changed. His contract is then executed, and he is regarded as a complete purchaser, with all the rights incident to that position. Against him the courts are never disposed to interfere, unless for very grave and substantial errors in the decrees and proceedings upon which his title is founded. See Zirkle v. McCue, 26 Gratt. 517, and cases there cited.
With respect to the objection that no decree for a sale of the land ought to have been entered without an enquiry to ascertain whether the rents and profits would pay off the debt within five years, it is sufficient to say that the bill contains a direct averment that the rents and profits are not sufficient for that purpose.
No answer being filed by the defendant, the bill was taken for confessed, and a decree for the sale entered before the adjudication in bankruptcy. And even now the record contains no evidence upon the subject, nor is the matter put in issue by the pleadings. Even though it appeared that the county court of Russell plainly erred upon this point, this court would not for that cause now set aside a sale fairly made for an adequate price, when it is manifest a sale is rendered necessary by the bankruptcy of the debtor, and when this court, if it should set aside the sale already made, would be compelled immediately to order a resale in the interest of all parties concerned.
One other objection remains to be considered, which might more properly have been noticed in the beginning, and that is, that the county court of Russell was not authorized to decree a sale of the land until it appeared that the debtor had no personal estate upon which an execution could be levied. It appears that an execution was issued and levied upon certain effects of the debtor which were claimed by him under a homestead exemption. The creditor was under no obligation to contest this claim. He might, if he pleased, acquiesce in it and apply at once to a court of equity to enforce the lien of his judgment. It does not lie in the mouth of the debtor now to assert that his claim was unfounded; that the creditor ought to have disregarded it and insisted upon a sale of the property under the execution. This is a sufficient answer to the objection that the land was not liable. Another is found in the circumstances already mentioned, that the sale was made under a pro confesso decree, confirmed without exception, and no objection ever made until the bill of review was filed in this case.
But even though no execution had ever issued, the court had power to decree a sale under the statute. Upon this point it is only necessary to refer to the opinion of this court delivered by Judge Burks, in the case of Price v. Thrash, supra, p. 521.
Upon the whole, there is no error in the decree of the circuit court, and the same must be affirmed.
DECREE AFFIRMED.