Court Opinion

ID: 8741301
Source: CourtListenerOpinion
Date Created: 2022-11-26 10:49:32.103133+00
Date Added: 2024-06-11T17:00:25.023764
License: Public Domain

THOMPSON, District Judge.
Oourts of bankruptcy have jurisdiction to sell all real and personal property belonging to the bankrupt's estate. Bankr. Act, § 70, pars, b, c; General Orders in Bankruptcy 13 (32 O. C. A. xvii., 89 Fed. vii.). If the real estate be incumbered by liens, tbe liens may be redeemed, or the property sold subject thereto. Forms in Bankruptcy, 43, 44 (32 O. C. A. Ixxiii., Ixxiv., 89 Fed. xlix., 1.). But if the trustee desires to sell the real estate free of liens, without redemption, he must give the lienholders their day in court, because they are entitled to he heard before the property is discharged from their liens and their liens transferred 1o (lie fund ¡irising from the sale thereof. The lienholders, unless they surrender their securities and prove their claims, are strangers to the bankruptcy proceedings, and are entitled to have their property rights adjudicated by the courts of the state in the county in which the real estate ⅛ situated. Hicks v. Knost (D. C.) 94 Fed. 625.
But in the case at bar the bankrupt court could not order the sale of the real estate in question, because it had already been sold, in e of liens, by the state court, and it was no longer the property of the bankrupt or his trustee. Pruden’s mortgage was made before the passage of the bankrupt act, and he had brought suit in the state court to foreclose it, and had obtained a decree of sale, and the appraisement had been made and the sale advertised, before the petition in bankruptcy-was filed. The state court had jurisdiction of the subject-matter and of the parties, and the control of the property for tire purposes of sale, and it is clear under the authorities that it had power to proceed with the sale and the distribution of the proceeds thereof, notwithstanding the commencement, pending the sale, of the proceedings in bankruptcy *320against Gerdes. Its jurisdiction was not ousted by tbe commence-3nent of the proceedings in bankruptcy, and it has exclusive jurisdiction to determine and enforce the rights of Pruden in the property or its proceeds. Railroad Co. v. Gomila, 132 U. S. 478, 10 Sup. Ct. 155, 38 L. Ed. 400; Moran v. Sturges, 154 U. S. 256-265, 14 Sup. Ct. 1019, 38 L. Ed. 981.
When the trustee was appointed, the title to this real estate, subject to the decree and order of sale of the court of common pleas- of Shelby county, vested in him by operation of law, as of the date when Gerdes was adjudged a bankrupt, and the trustee, therefore, was a proper party to the suit in the court of common pleas of Shelby county, as the only one 'entitled to receive the bankrupt’s share of the proceeds of the sale, and the action of that court in overruling his application to be made a party must have been inadvertent. If there be any balance remaining of the proceeds of the sale, after discharging the liens, the trustee should renew his application to be made a party, and ask to have such balance paid to him.
The petition for an injunction presented to the referee was never filed in the clerk’s office of this court, and therefore was not properly before the referee, and for that reason, and for the further reason that the petition does not make a case entitling the trustee to the relief asked, it is hereby dismissed, and the costs will be paid out of the fund in the hands pf the trustee.