Court Opinion

ID: 8629934
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:36:00.020699+00
Date Added: 2024-06-11T16:55:44.045712
License: Public Domain

BROWN. District Judge.
The assignee having sold the property without an order of court directing a sale free of encumbrances, conveyed simply the interest of the bankrupt, subject to the lien of the mortgage. Kelly v. Strange [Case No. 7,676]; In re Mebane [Id. 9,380]; In re McClellan [Id. 8,694]; Second Nat. Bank v. State Nat. Bank [10 Bush (73 Ky.1 367]; Ray v. Brigham [23 Wall. (90 U. S.) 128]; Wicks v. Perkins [Case No. 17,615]. If the assignee had desired to test the validity of the mortgage, he should have petitioned the court, upon notice to the mortgagee, for an order to sell the property free from encumbrance. Ray v. Brigham [supra]; Meeks v. Whatley [48 Miss. 337]. So long as the property remained in the hands of the assignee, the regular practice for the mortgagees was undoubtedly to prove their debt, and ask leave to sell the property themselves, or require the assignee to sell it, and pay the amount justly due them from the proceeds.
But, the assignee having, sold the property subject to the mortgage.- and having thereby released the possession he held on bobaK of the court, I see no impropriety in the mort*470gagees bringing suit in the state court to enforce their security. Indeed, I can hardly see what other remedy they would have had except upon the theory that the property was sold free of encumbrance; but, as no notice was given them of the sale, it would be obviously inequitable to hold that the property had been discharged of the lien. As matter of law, I see no objection to their proceeding in a state court. King v. Bowman, 24 La. Ann. 506; Douglas v. St. Louis Zinc Co., 56 Mo. 388; In re Clark [Case No. 2,801]; In re McGilton [Id. 8,798]; Whitridge. v. Taylor, 66 N. C. 273; 58 Ill. 176. It is well settled, too, that if the proceeding is instituted without the authority of this court, it will not be void; nor will this court interfere where no injury can result to the bankrupt estate. In re Iron Mountain Co. [Case No. 7,065]; In re Bowie [Id. 1,728]; In re Brinkmann [Id. 1,883]. The property having been sold by the assignee, and the action of trover being brought against the purchaser, it seems to me doubtful -whether this court has any power to interfere. But, viewing it simply as a matter of discretion, I see no objection to the mortgagees proceeding to determine the amount of their lien in the state court. The mortgage was given more than three months before the commencement of proceedings in bankruptcy, so that any peculiar de-fence based upon the provisions of the bankrupt act [of 1867 (14 Stat 517)] has' been barred,by lapse of time. In any event, they will not be allowed to recover more than.the amount of their lien. The suit is prosecuted in a county where the parties, the assignee and the witnesses, all reside. I cannot assume that complete justice will not be done all parties, and no reasons seem to me to exist for interfering with the action of the state court. The petition must be denied.