Court Opinion

ID: 9601104
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:36:34.504802+00
Date Added: 2024-06-11T09:49:43.822825
License: Public Domain

IRWIN, Justice
(dissenting).
In the instant action we are concerned with the force and effect of a bankruptcy proceeding pending in the U. S. District Court of the Eastern District of Oklahoma against a mortgage foreclosure in Roger Mills County where there was nothing filed of record in Roger Mills County disclosing or suggesting that the bankruptcy proceedings were pending against one of the record owners of the minerals foreclosed in the foreclosure proceedings.
In my opinion, the Journal Entry of Judgment and Decree of Foreclosure entered by the District Court of Roger Mills County on July 25, 1936, was valid and binding against Cal-Cul Oil Company, a bankrupt, its Trustee in Bankruptcy and assigns. My opinion is premised upon the following reasons.
When the foreclosure proceedings were* filed and the Decree of Foreclosure entered,, the records of Roger Mills County disclosed that Cal-Cul Oil Company was the owner of the minerals. There was nothing on record in Roger Mills County which would disclose or even suggest that bankruptcy proceedings were pending against Cal-Cul in the U. S. District Court of the Eastern District of Oklahoma. Therefore, the foreclosure proceedings were valid and binding in every respect unless the Bankruptcy Act superseded our recording statutes and the bankrupt proceedings, in and of itself, operated to give constructive notice that title to the minerals was vested in the Trustee in Bankruptcy, by operation of law, and not in Cal-Cul, the bankrupt.
In 1938, Congress enacted the Chandler Act, which, inter alia, amended the Bankruptcy Act by adding a certain section, hereinafter referred to as Sec. 21(g). This section gives protection to a person dealing with real property of the bankrupt on the strength of his record title, without notice of the bankruptcy proceedings, unless certified copies of the petition, order of adjudication, and the order approving the trustees bond are recorded in the county where conveyances would be recorded. I am cognizant of the fact that this section can not be relied on in the instant action for the reason the foreclosure proceedings and bankruptcy proceedings all transpired prior to the 1938 amendment. However, in my opinion, the bankruptcy laws in force and effect when these proceedings transpired, gave protection to a person dealing with real property of the bankrupt on the strength of the record title in the county, who had no notice of pending bankruptcy proceedings.
Remington on Bankruptcy, Volume 3, Sec. 1381.1, at page 268, in discussing the Chandler Act of 1938 states: “Sec. 21(g) is fundamentally a codification of existing law, under which it was held that the filing of a bankruptcy petition could not, in and *140of itself, supersede recording and title registration legislation of the various states.” As authority for this statement, Remington cites sec. 1393, of the same volume, at page 286, wherein it is stated:
“* * * In essence, § 21(g) leaves local recording acts, requiring the recording of instruments affecting title to realty in order that the transaction shall be of force as against a subsequent bona fide purchaser or encum-brancer on the strength of title appearing of record, in full effect, notwithstanding the filing of a bankruptcy petition with the clerk of a federal district court and unless and until certified copies of the petition, order of adjudication, and order approving the trustee’s bond are recorded in the proper office in the county where the land is situate. The statute was introduced by 1938 amendment, but it accords ivith the theory of earlier decision that the Bankruptcy Act was not intended to, and and did not, upset state recording and title registration laws.” (emphasis added)
The case of Vombrack v. Wavra, 331 Ill. 508, 163 N.E. 340, promulgated by the Supreme Court of Illinois in 1928, is cited by Remington as authority for the above statement. In that case the Court said:
“By section 70 of the Bankruptcy Act (9 U.S.Comp.Stat.1916 Ann. p. 11719; 11 USCA §§ 110) the title of the trustee in bankruptcy to the property of the bankrupt not exempt takes effect, by relation, from the date of the adjudication of bankruptcy. The title vests in the trustee by operation of law, and without any conveyance. Provision has, however, been made both for official evidence of the trustee’s title and for imparting notice thereof by public record. Black on Bankruptcy, (4th Ed.) § 753, p. 918. Section 21, sub. (e), of the act (9 U.S.Comp.Stat. 1916 Ann. p. 11299; 11 USCA § 44), declares that ‘a certified copy of the order approving the bond of a trustee shall constitute conclusive evidence of the vesting in him of the title to the property of the bankrupt, and if recorded shall impart the same notice that a deed from the bankrupt to the trustee if recorded would have imparted had not bankruptcy proceedings intervened.’ Section 47, subd. (c), of the act (9 U.S.Comp.Stat.1916 Ann. p. 11459; 11 USCA § 75), provides that the trustee shall, within 30 days after the adjudication, file a certified copy of the decree of adjudication in the office where conveyances of real estate are recorded, in every county where the bankrupt owns real estate not exempt from execution.
* * *
“The petition in bankruptcy was filed in the United States District Court for the Northern District of Illinois. Madison county, in which the property in question is situated, is not within the territorial jurisdiction of that court. 2 U.S.Comp.Stat.1916 Ann. p. 1237; 28 USCA § 152. Neither a certified copy of the order approving the bond of the trustee in bankruptcy nor of the decree of adjudication was filed for record in Madison county, as required by the Bankruptcy Act. Wavra purchased and paid for the property relying upon the public records of that county, which showed the title to be in Max L. Goldberg and Phoebe Goldberg, his wife, as joint tenants, subject only to the mortgage to the Alton Building & Loan Association. He had the right to rely upon those records, unless he had notice of the bankruptcy proceeding, or there was something to lead a reasonable person to inquire whether there was an infirmity in the title. There is no pretense that he had such notice, or that any fact or circumstance imposed upon him the duty to make such inquiry. To charge him in the instant case with constructive notice of the pendency of the bankruptcy proceeding and of the appointment of the trus*141tee would be inconsistent with the purpose of the recording laws and with the settled principles of equity jurisprudence. Williams v. Jackson, 107 U.S. 478, 2 S.Ct. 814, 27 L.Ed. 529.”
In the Vombrack case the Court held:
"Though, under Bankruptcy Act, § 70 <11 USCA § 110), title to bankrupt’s property vests in trustee by operation of law, and does not depend on recording of certified copies of order approving trustee’s bond or of adjudication under sections 21 e, 47 c (11 USCA §§ 44(e), 75(c), requiring disclosure of vesting of title to bankrupt’s realty in trustee by public records of county in which property is situated, in absence of recording of such certificates, purchaser, in good faith and without notice relying on record title to realty in bankrupt, acquired good title under State Conveyancing Act, §§ 28, 30 (Smith-Hurd Rev.St.1927, c. 30, §§ 27, 29).”
In Derryberry v. Matterson, 193 La. 624 192 So. 78, the Supreme Court of Louisiana in 1939, said that under the Bankruptcy Law registration of the decree of adjudication and order approving the trustee’s bond must be recorded in the county in which the real estate is situated in order to impart notice or affect title of a bona fide purchaser. In so holding, the Louisiana Court construed sec. 75(c) supra, and Title 11 of U.S.C.A. § 44, and cited with approval Beach v. Faust, 2 Cal.2d 290, 40 P.2d 822; and Vombrack v. Wavra, 331 Ill. 508, 163 N.E. 340.
In the Beach case, supra, the Supreme Court of California, in 1935, held:
“Transferee of grantee under quit claim deed who paid valuable consideration without notice that grantor at time of conveyance had been adjudicated a bankrupt HELD ‘bona fide purchaser’ •of realty, and was protected by recording laws as against bankruptcy trustee’s grantee, where no certified copy of decree of adjudication was filed in county where realty was located, and bankrupt did not include realty in schedule of assets (Civ.Code §§ 1213, 1214, 1217; Banks Act § 47 c, 11 USCA Sec. 75(c).”
The fact that the bankrupt did not include the realty in the schedule of his assets was not controlling but the fact that the trustee failed to file the necessary certifications was controlling.
In Harper v. Dothan Nat. Bank, 223 Ala. 26, 134 So. 623, the Alabama Supreme Court said:
“The act of Congress was not intended as in extension of ‘the operation of the registration laws of the states beyond the effect given to them in the states.’ ”
The above cases, in my opinion, are based upon sound reasoning and support the general proposition that the Bankruptcy Act, in force and effect during the time involved herein, did not supersede our state’s recording laws and the bankruptcy proceedings, in and of itself, did not operate as to give constructive notice that title to the minerals was vested in the Trustee in Bankruptcy by operation of law.
In the Vombrack case, supra, the Supreme Court of Illinois said:
“Rules concerning the transfer of property are primarily a matter of state regulation. Etheridge v. Sperry, 139 U.S. 266, 11 S.Ct. 565, 35 L.Ed. 171. In the absence of specific or particular provisions of the Bankruptcy Act, the law of the state determines the efficiency of acts and transactions to effect the transfer of the title to property, the time of passing of the title, and whether the recording or filing of an instrument is required, and, if so, as to whom it will be void for the failure to record it. 2 Ed. Remington on Bankruptcy (2d Ed.) §§ 1140, 1141.”
The case then cites the Illinois statutory provisions concerning the necessity of filing instruments of record. I find it unnecessary to discuss our recording statutes *142and the construction that we have placed upon them in this dissent as the necessity of filing is too well established.
Based on the above authorities, I am of the opinion that the Journal Entry of Judgment and Decree of Foreclosure entered by the District Court on July 25, 1936, was valid and binding against Cal-Cul, the bankrupt, its Trustee in Bankruptcy and its assigns.
I am also of the opinion that the purchaser of the mineral interest at the Trustee in Bankruptcy sale, was a purchaser pen-dente lite and has no greater rights than any other purchaser would have who purchased property after the same had been foreclosed in a mortgage foreclosure proceeding. The purchaser could receive no greater rights then the Trustee in Bankruptcy possessed and whatever rights the Trustee in Bankruptcy, had, in my opinion, were foreclosed in the mortgage foreclosure proceeding.
In State ex rel. Commissioners of Land Office v. Keller, et al., Okl., 264 P.2d 742, we held:
“In an action to foreclose a real estate mortgage, where one of the judgment debtors died after entry of final judgment and decree of foreclosure, a valid order of sale may be issued without making the heirs and representatives of said deceased defendant parties to said judgment, as provided by Section 589, O.S.1931, 12 O.S.A. § 1077; Ray v. Elson, 190 Okl. 245, 123 P.2d 245.”
In Hart v. Pharaoh, Okl., 359 P.2d 1074, we held:
“A purchaser of real property from a party to a pending action is bound by the judgment rendered in such action against, his grantor and acquires no greater right than his grantor. This rule applies without regard to the form of the action or whether the decree is erroneous.”
For the foregoing reasons I am of the opinion the judgment of the trial court should be affirmed and I respectfully dissent to the opinion promulgated by a majority of my associates.
I am authorized to state that Mr. Justice WILLIAMS and Mr. Justice BERRY concur in the views herein expressed.