Case Name: UNITED BRICK & TILE CO. v. McKISSICK et al.
Court: United States Court of Appeals for the Eighth Circuit
Jurisdiction: United States
Decision Date: 1931-05-25
Citations: 51 F.2d 67
Docket Number: No. 8923
Parties: UNITED BRICK & TILE CO. v. McKISSICK et al.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 51
Pages: 67–73

Head Matter:
UNITED BRICK & TILE CO. v. McKISSICK et al.
No. 8923.
Circuit Court of Appeals, Eighth Circuit.
May 25, 1931.
STONE, Circuit Judge, dissenting.
H. M. Havner, of Des Moines, Iowa, and Elavel Robertson, of Kansas City, Mo. (B. J. Flick and Havner, Flick, Huebner & Powers, all of Des Moines, Iowa, and Baker, Botts, Parker & Garwood, of Kansas City, Mo., on the brief), for appellant.
W. B. Sloan, of Des Moines, Iowa (Paul H. Cunningham, of Des Moines, Iowa, on the brief), for appellees.
Before STONE and GARDNER, Circuit Judges, and WOODROUGH, District Judge.
For opinion denying rehearing, see 52 F.(2d) 426.

Opinion:
WOODROUGH, District Judge.
This appeal is taken from a decree upon foreclosure of a conditional sale contract, in which decree the appellant is found to be personally liable for the debt established by the decree to be a lien upon the property covered. The appellant was not originally a party to the contract, but the court finds in the decree that the appellant became the purchaser of it through mesne conveyances and assumed to perform and to pay the balance of the unpaid purchase price. Appellant denies that it ever became personally liable on the contract, and the question is for review.
The contract is called the MeKissiek contract throughout the record, and bears date February 26, 1926. By its terms MeKissiek and others, owners of a brick and tile manufacturing plant including real and personal property, agreed to sell, and one La Fountain and others agreed to buy, the property upon installment payments specified. The vendors agreed to give conveyance upon receipt of the full purchase price. On December 23, 1927, the contract was assigned with the vendors' consent, and the assignee assumed and agreed to discharge all the obligations of the original purchasers. On the same day the vendors and the assignee entered into an amendatory agreement changing the forfeiture clause from a strict foreclosure to an Iowa statutory clause, and in the amendatory agreement the assignee repeated its assumption of all obligations. The assignee went into possession, and thereafter, on February 27, 1929, before default on the contract, involuntary petition in bankruptcy was filed against the assignee, and a receiver was appointed.
The receiver considered the property worth much more than the unpaid balance of the purchase price, and applied to the court for authority to enter into a proposed contract with the vendors and to make certain of the payments specified in the proposed contract, "in order to preserve the benefits of said contract for the estate in bankruptcy, without, however, adopting or assuming on behalf of the estate the covenants and obligations contained in said contract of sale dated February 26,1926, as modified."
The court granted authority to the receiver as prayed, including in its order the proviso: "Provided, however, that the receiver shall not adopt or assume said contract on behalf of the estate, nor assume any of the obligations or covenants contained in the contract of sale dated February 26, 1926."
By the terms of the contract so authorized and afterwards executed between the receiver and the vendors, additional time was given to pay certain installments then in default and other installments, and the contract was continued in force so long as the payments were duly made. It was also recited that the MeKissiek contract might be sold as part of the assets of the bankrupt estate, but without prejudice to vendors' rights "created or existing under and pursuant to said contract, except as herein or heretofore amended and modified."
While various defaults were made in the payments by the receiver and by the trustee who succeeded him after adjudication in bankruptcy, these were all waived. On October 27, 1928, the referee in bankruptcy ordered the trustee to sell at public sale all the properties of the bankrupt estate, including the MeKissiek contract. The incumbered property was ordered to be sold free of liens, but this contract was listed as a free asset, and the trustee was ordered to sell:
"M. All of the right, title and interest of the trustee in bankruptcy and the bankrupt corporation in and to: (1) A certain contract'of sale for property known as the Mc-Kissick plant or plant No. 33, Carlisle, Warren County, Iowa, all as more fully described in Group I, Division E, of Part One of Paragraph (A) of this order containing the description of the property to be sold hereunder. The purchaser of said MeKissiek contract shall assume and indemnify the estate against all liability arising out of said contract as the court may determine."
The appellant through unquestioned agency made the high bid of $1,000 at the trustee's sale, the property was knocked down on that bid, the sale confirmed by the court, and transfer ordered. The conveyance was executed direct to appellant, and stipulates that the appellant "will pay and discharge in accordance with the provisions of said order of sale, the purchase price not heretofore paid of all the property sold in execution of said order of sale including all amounts which under any provisions of said order of sale and order confirming sale are to be paid by the purchasers in addition to the amount of the accepted bid for said property, as part of the purchase price thereof."
The appellant then went into possession of the property, and for a time fulfilled the obligations of the MeKissiek contract as to taxes, insurance, monthly installments, and interest payments; its remittances to the vendors specifying that they were "to apply on the purchase price of the plant" covered by the MeKissiek contract. In June of 1929, however, it wrote to the vendors declining to perform further, and shortly afterwards it tendered the keys of' the plant back to the vendors. Whereupon the foreclosure suit was brought resulting in the decree for personal liability of which the appellant now complains.
The bankruptcy sale at which appellant bought was a judicial sale, and appellant was clearly bound by the conditions of the order of sale and confirmation and the conveyance made pursuant thereto. The language of the order of sale, "The purchaser of the MeKissiek contract shall assume and indemnify the estate against all liability arising out of said contract as the court may determine," permits of no doubt of the intention of the court to require the purchaser to assume the obligations of the contract. There is nothing to which the requirement upon the purchaser that he "shall assume" could apply except those obligations. The requirement as to indemnity to be given by the purchaser is perhaps rendered somewhat ambiguous by the words "as the court may determine." It is not perfectly clear whether the court intended to leave open the question of kind and amount of indemnity or the whole question whether indemnity should be exacted. By the bankruptcy sale the trustee was passing over to the appellant for the sum of $1,000 a contract for the purchase of property on which contract the bankrupt owed some $93,000. That is the obligation which the purchaser at the bankruptcy sale was required to assume. It would be a very large amount to some purchasers, not as to others. There was no impropriety in leaving the matter of indemnifying the estate in regard to it for subsequent determination by the court. But the phraseology of the whole clause in the order of sale could not have deceived any purchaser into the belief that the trustee was offering the contract and possession of the plant with the whole matter of paying the $93,000 left open. The words "the purchaser shall assume" precluded any such contention. But, even if it should be considered that the appellant became, by the proceedings, a mere assignee of the contract, it does not follow that it could not impliedly undertake to assume the obligations imposed upon the purchaser by the original contract. While a simple assignment of a contract for the purchase of land or other property creates no personal liability in the assignee, by virtue of the assignment alone [Urban v. Phy (C. C. A. 9th) 24 F.(2d) 494; Potts v. Burkett (Tex. Civ. App.) 278 S. W. 471; Adron v. Evans, 52 S. D. 292, 217 N. W. 397, 59 A. L. R. 947 and note], yet the assignee may so act with reference to the other party or to the property, the subject-matter of the assigned contract, as to make himself personally liable for performance of the ex-ecutory covenants thereof, which otherwise could be enforced only against his assignors. Senninger v. Rowley, 138 Iowa, 617, 116 N. W. 695, 697, 18 L. R. A. (N. S.) 223; Wightman v. Spofford, 56 Iowa, 145, 8 N. W. 680, 681; Union Pacific Ry. Co. v. Douglas County Bank, 42 Neb. 469, 60 N. W. 886; Oregon & Western Colonization Co. v. Strang, 123 Or. 377, 260 F. 1002; Kirby Lbr. Co. v. R. L. Lbr. Co. (Tex. Civ. App.) 279 S. W. 546.
In Senninger v. Rowley, supra, the Supreme Court of Iowa said: "True, there is no such assumption by the terms of the deed, but we see no good reason why it may not be established by evidence other than the conveyance. It is also true that no witness testifies to such an agreement by appellant. But he did buy the land incumbered by the mortgage; paid interest thereon from year to year; secured a reduction in the rate of interest; paid a part of the principal and later gave a check for the computed remainder, and, although this paper was returned to him, its significance is none the less marked. In short, his entire conduct for a period of some fifteen years was consistent with the theory that he was and considered himself to be the debtor of the appellee and inconsistent with the attitude which he now assumes."
Again, in Wightman v. Spofford, supra, the Supreme Court of Iowa said: "The contract is assignable, and was assigned to Spof-ford by Townsend. It is not denied that Spofford accepted the assignment and claimed an interest under the contract. On the ground of his being the assignee he procured the quitclaim deed from Cassady. When Spofford accepted the contract as an as-signee, and became clothed with all the rights conferred by it, he assumed all the obligations of his assignor." That the appellant did as a matter of fact understand it was taking over the MeKissiek contract with the obli gations therein specified is clearly demonstrated by its conduct. It took possession of the property, mortgaged it, insured it, paid taxes on it, removed some machinery and equipment from the plant, and made payments to the vendors which it specified were to "apply on the purchase price." These were all acts of ownership of the property evidencing an intention to pay in full — its determination not to pay for it is obviously an afterthought merely.
On the trial of the issue of personal liability, oral evidence consisting of a shorthand report of proceedings at the sale was received. It shows that, when the crier of the sale offered the MeKissick contract, he made - it clear that the purchaser would have to pay the balance of the purchase price called for by the contract. The appellant insists that the oral evidence, though a correct report, was not admissible, because the order of sale was the best and only - evidence of the terms and conditions of the sale. As we find that the orders of sale and confirmation and the conveyance and the conduct of appellant fix upon it as purchaser the obligation to pay and perform according to the contract, we do not deem it necessary to pass upon the abstract question whether oral testimony should be received to explain the conditions of a bankruptcy sale. The appellant's agent at the sale did, however, participate in the colloquy with the crier at the sale, and the statements there made do corroborate the proof of appellant's understanding that it assumed the obligations of the contract.
Appellant also contends that the transactions between the bankruptcy receiver and the vendors worked such a change in the Mc-Kissick contract that it ceased to be a contract to pay the purchase price obligatory upon the purchasers named in it, or their assignees, or upon the appellant who bought it. We have carefully examined the record of the transactions, the letters, receiver's application for directions and authority, the court order and the contract, but do not find that the absolute obligation to pay the purchase price or to fulfill the other usual requirements specified in the contract were impaired.
It is true that, when the bankruptcy court ordered the MeKissick contract to be sold, and when it was sold, and when the sale was confirmed, the description of the MeKissick contract always included the words "as amended by the contract" made between the receiver in bankruptcy and the McKissieks. Appellant contends that, inasmuch as the contract with the receiver in bankruptcy relieved the receiver from obligation to pay for the property, there was an amendment of the MeKissick contract that took the promise to pay for the property out of the contract entirely. But there was no such purpose or intent of the receiver or of the McKissieks to so change the essential nature of the contract. The purpose of the deal with the receiver was simply to preserve the chance to sell the MeKissick contract for the benefit of the trust without making the receiver himself a party to the contract, and obliged to buy and pay for the property. As the receiver was unwilling to and would not be the "party of the second part" in the MeKissick contract himself, the identification of "the party of second part" (the buyer of the property) had to be and was .suspended until the receiver or the trustee could find the purchaser at his sale. But, when the trustee made the sale, the purchaser immediately became identified as the party of the second part to the contract. The sense in which the contract was "amended" was that there was some postponement of due dates. But there was no amendment of the essential of the contract that the party of the first part promised to sell and convey, and the party of the second part promised to buy and pay for, the property. The receiver was permitted to preserve the contract, upon which the bankrupt and its assignor had expended large sums, as an asset of his trust without himself as receiver assuming the obligations. But it was to be sold, and was sold, without prejudice to the main right of the vendors to compel the buyer to pay for the property.
The appellant is liable on the contract, and, after the sale under the foreclosure, must respond to the deficiency, if any is found.
Affirmed.