Richard Jungbecker v. Adelhaid Huber

Adelhaid L. Huber sued Richard Jungbecker on a promissory note for $1,000 and to enforce a lien on a lot in the city of San Antonio. The note was dated September 23, 1904, and was payable four years after date. Since the lot upon which the lien was sought to be foreclosed was claimed as the homestead of defendant his wife was made a party.

As a reason for bringing suit upon the note before it fell due, it is alleged that Jungbecker had become a bankrupt and that in order for plaintiff to prove up her claim against his estate (which must be done in twelve months under the bankrupt law), it was necessary to determine the value of the security, to the end that it may be deducted from the debt; and that a foreclosure of the lion was indispensable for this purpose. The Court of Civil Appeals took this view of the case and sustained the contention that the suit could under the circumstances be maintained before the note fell due according to its terms. The argument is plausible and would probably be sound if there was no other way by which the value of the security could be legally determined. The provision of the Bankrupt Act, which bears upon this subject, reads as follows:

"h (Securities held by secured creditors). The value of securities held by secured creditors shall be determined by converting the same into money according to the terms of the agreement pursuant to which such securities were delivered to such creditors or by such creditors and the trustee, by agreement, arbitration, compromise, or litigation, as the court may direct, and the amount of such value shall be credited upon such claims, and a dividend shall be paid only on the unpaid balance. (30 Stat. L., 560.)"

So that if the security be a mortgage or a pledge with a power of sale and a sale can be effected under the terms of the contract it is a simple method to require the creditor to sell the security, and to credit the proceeds upon the indebtedness. You can not compel an agreement, an arbitration or a compromise, but you may compel a litigation and that without resort to the State courts. Why can not the court direct that an issue be made up between the creditor and the trustee to be tried before the referee. In re Meredith (144 Fed. Rep., 230), it is said: "If this is not done, the value to the creditors holding the waiver notes of their right against the homestead estate — that is to say, the percentage which they will realize from it on their debts — should be ascertained by the referee in accordance with section 57th of the bankruptcy act. A method should be readily found to reach the proper percent to be deducted, in view of the latitude allowed by subsection h for ascertaining it." Since the court may direct any form of litigation appropriate to ascertain the value of the security, we see no reason why it should not direct the very question to be tried before the referee; but can it direct a proceeding in the State court which can only be made effectual by giving a judgment upon a debt and ordering sale of property to pay it before the debt is due? We think not.

It results that in our opinion so much of the judgment as forecloses the mortgage upon the note should be reversed and the cause dismissed. But in their cross-action the plaintiffs in error allege the invalidity of the mortgage by reason of the property being their homestead at the time of its execution and pray that it be annulled. This is in effect a cross-action to remove a cloud from their title, which depends not at all upon the maturity of the debt. We see no reason therefore why so much of the judgment should not be affirmed.

It is accordingly ordered that so much of the decree as gives judgment upon the note and directs a foreclosure upon the property be reversed and the cause dismissed: and that the judgment in favor of the plaintiff upon the cross-action of the defendants against her be affirmed.

Reversed and dismissed in part, and affirmed in part.