Barron v. Newberry

McLEAN, Circuit Justice.

Many points have been raised and’ most elaborately discussed by the various counsel who have filed briefs in this cause, but in the view taken by the court the decision of one or two points is conclusive upon the rights of the parties, and it will not, therefore, be necessary to intimate an opinion upon such other points as in the judgment of the court are not necessarily involved in settling the rights of the parties. Neither is it the intention of the court at this time to discuss at length the points about to be decided, but merely to indicate the opinion to which we have come, as briefly as possible.

The first and principal question to be settled is whetner the defendant, "Walter L. Newberry, by virtue Of the foreclosure proceedings in the court of common pleas of Cook county, Illinois, extinguished the equity of redemption in the mortgaged premises, as to any and all parties who had a legal claim thereto. In order to determine this question it is necessary to ascertain, first, in whom the equity of redemption was at the time of the foreclosure suit, and second, whether those proceedings were sufficient to extinguish the right of that party to redeem.

The suit to foreclose was commenced March 1st, 1848, by Newberry. In whom was the equity of redemption vested at that date?

On the 4th day of March, 1S43, five years prior to the commencement of the suit to foreclose by Newberry, Haskins, the mortgagor, was decreed a bankrupt by the district court of the United States, for the southern district of New York, and W. C. H. Waddell was by order of that court made his assignee.

At the time, therefore, of this decree of bankruptcy, Haskins, the mortgagor, was the owner and possessed of the equity of redemption, for no foreclosure had either been made or attempted at that date.

Section 3 of the bankrupt law of 1S41 provides: “That all the property and rights of property of every name and ñatee, and whether real, personal or mixed of every bankrupt, shall by mere operation of law, ipso facto from the time of such decree be deemed to be divested out of such bankrupt without any other .act, assignment, or other conveyance whatsoever, and the same shall be vested by force of the same decree in such assignee as from time to time shall be appointed, &c. And the assignee so appointed shall be vested with all the rights, titles, powers and authorities to sell, manage and dispose of the same, to sue for and defend the same, subject to the orders and directions of the court as fully to all intents and purposes as if the same were vested in, or might be exercised by, such bankrupt, before or at the time of his bankruptcy.”

The words of this law are too clear to admit of any misconstruction. By the rendition of the decree, all the property and rights of property of the bankrupt, “of every name and nature,” pass by operation of law to the assignee, and this too, in whatever district it may be situated. This construction has been sanctioned by repeated judicial decisions in the courts of the United States, and were it a question involved in any doubt, it would now be too late to discuss its correctness.

The bankrupt from the time of the rendition of the decree of bankruptcy is civiliter mortuus, so far as any of his property is concerned. No act of his can in any manner affect it. He is thenceforth an entire stranger so far as ownership is concerned. His release cannot cancel a debt or obligation due his estate, any more than his deed can convey title to land which he formerly owned. This equity of redemption then which Has-kins before his bankruptcy owned, passed by the decree and became vested in Waddell, his assignee, and this some five years before the proceedings of foreclosure instituted by the defendant Newberry. What steps then has Newberry taken to extinguish this equity of redemption in Waddell, the assignee, or his grantees? Have any proper legal steps ever been taken to accomplish this end?

The defendant, Newberry, insists that the suit instituted by him in March, 1848, did extinguish this equity of redemption so far as Haskins was concerned, and that it was also an extinguishment of the title of his assignee and his grantees. But how was this done? Newberry brought suit against Haskins and Marcus Wilbur, and in that suit obtained a decree of foreclosure and' sale against Haskins. These were the only parties defendant in that suit. But the court has already decided that the equity of redemption had already passed out of Haskins into Wad-dell, his assignee, and that no power existed in Haskins by any act either voluntary or by order of the state court, to affect the title of his assignee to this property. That as to that he was civiliter mortuus. How then can any decree against Haskins affect the right of the legal owner? The mere fact that the title came through Haskins, and that he once had the power to dispose of this property does not give him the power always to do so. His power of disposition ceased with the decree of bankruptcy, and the decree of the Cook county court of common pleas could not reinvest him with the title so as to pass it to the purchaser under that decree. The decree then was powerless so far as Haskins was concerned in regard to the property, and we are at a loss to understand how under these circumstances this decree of foreclosure could possibly affect the rights of third parties, strangers to the record. It is a familiar and well settled principle that no judgment can operate as a bar or foreclosure, excepting between the parties to the judgment and those who claim subsequently to them. As to all other parties it is res inter alios acta.

NOTE, [from original report.] By comparing the 14th section of the bankrupt act of 1867 [14 Stat. p. 517, c. 176] with this section of the act of 1841, [5 Stat. p. 440, c. S2,] it will be seen that the rights, powers, and duties of the assignee are essentially the same under both acts, and it is believed that the principle of this decision applies equally to the present bankrupt act. That an assignee appointedé'pendente lite is not a necessary party. See Cleveland v. Boerum, 7 Amer. Law Reg. 144. The purchaser, under a deed from the assignee of a bankrupt, can hold the title against a prior unrecorded deed from the bankrupt. Holbrook v. Dick-enson, 56 Ill. 497.

Applying this principle to the present case, it will be seen that the rights of Waddell, the assignee, and his grantees, Burnham and the complainant herein, were not affected in any degree by the suit instituted by Newberry against Haskins, to foreclose his mortgage. They were not parties to the suit, and their rights could not be determined thereby. As to them it was res inter alios acta.

The decision of these points settles this controversy, and it is not therefore necessary to indicate any opinion upon the other points discussed by counsel. The complainant being the owner of the equity of redemption unéxtinguished has the right to redeem the property, unless there are circumstances in the case which estop him from asserting his right. The court has been unable to see any thing in the conduct of the complainant or his grantors which would lead to such a result. Lapse of time, such as appears here, is not sufficient to estop the assertion of their right to redeem. The defendant has sold his land at his own price, and he will in the redemption receive his purchase money and interest. If he had taken steps to make the proper parties to his suit against Haskins, the result might have been the same, and he might have obtained his decree and sale in due legal form, but this can only be conjecture. The court cannot look at what might have been, but at the facts as they actually are, and in so looking at these facts we feel compelled to grant the prayer of the complainant to redeem. All parties are chargeable with notice of the proceedings in bankruptcy, in the absence of fraud, and hence the defendant cannot claim a want of notice. Neither do we consider the claim of title under the seven-year law of the state as affording any defense under the facts as proved. An order may be entered in proper legal form to this effect, and appointing a master to state an account, &c., as prayed by the complainant in his bill.