Johnson v. Roper, Harris Dunn

The referee in bankruptcy having ordered the property in controversy to be sold "free of all liens," the trustee having made the sale accordingly, and the sale having been duly confirmed, appellant insists that as the purchaser at the sale he became the owner of the property free of the lien of appellee's mortgage. Appellee concedes that as such purchaser appellant became the owner of the property, but insists his ownership thereof was subject to its mortgage lien; the insistence being on the theory that the sale by the trustee, so far as it was free of liens, was ineffective as to appellee, because it did not appear it had notice thereof. Not questioning the right of appellee in a proper way to have made such a contention in the bankruptcy court, appellant insists, and we agree, it had no right to make it in a suit like this one is, commenced and prosecuted in another court. Crawford v. McDonald,88 Tex. 626, 33 S.W. 325; Newman v. Mackey, 37 Tex. Civ. App. 85,83 S.W. 31; Scudder v. Cox, 35 Tex. Civ. App. 416, 80 S.W. 872; Parsons v. Weis, 144 Cal. 410, 77 P. 1007; O'Neill v. Potvin, 13 Idaho, 721,93 P. 20, 257; Gantt v. Jones (C.C.A.) 272 F. 117; In re Kligerman (D.C.) 219 F. 758.

The testimony was conflicting as to whether appellee had notice of the sale or not; but, if it appeared it did not have such notice, we would think its contention was nevertheless within the rule with reference to collateral attacks on judgments. Keller v. Faickney, 42 Tex. Civ. App. 483,94 S.W. 103; Traube v. Ash (Tex.Civ.App.) 200 S.W. 415; Moore v. Johnson,12 Tex. Civ. App. 694, 34 S.W. 771; Smith v. Olsen, 23 Tex. Civ. App. 458,56 S.W. 568; McRaney v. Riley, 128 Miss. 665, 91 So. 399, 22 A.L.R. 685; In re Hayward (D.C.) 130 F. 720; Robertson v. Howard, 229 U.S. 254.33 S. Ct. 854, 57 L. Ed. 1174; note to Keystone Collieries v. Mudge, 1 A.L.R. 1446. In the case first cited it seems the sale by the trustee was in the absence of an order authorizing him to make it. The court said:

"While the law seems to contemplate that the trustee should procure an order to sell the property of the bankrupt, and it is doubtless the universal practice to do so, we think the regularity of a trustee's sale cannot be collaterally attacked, and that such questions can be raised only in the court in which the proceedings are pending."

Certainly, if a sale by a trustee in bankruptcy without an order authorizing him to make it is voidable only, and therefore not subject to a collateral attack, a sale duly ordered, when made by such trustee and afterward duly confirmed, is not void, and therefore subject to such an attack by a creditor who (as appellee was) was duly notified of the action of the court in adjudicating the debtor to be a bankrupt, and who at the same time was invited (but failed) to prove up his claim against the bankrupt. The fact, urged by appellee, that it was advised in the notice it received of the adjudication that the debtor had not scheduled any assets, we think was immaterial. Appellee must have known that the debtor's failure to schedule assets was not conclusive of the fact that he had no assets. Moreover, as the holder of a mortgage against property owned by the debtor appellee knew he had assets, and could not have been misled by the statement of the referee.

A question as to the right of a party to make a "collateral attack" on a judicial proceeding was not involved in any of the cases cited by appellee as supporting its contention.

The judgment will be so modified as to deny appellee a foreclosure of the lien it claimed on the property in controversy, and, as so modified, will be affirmed.