241 F. 245 | 7th Cir. | 1917
The detérmination of this appeal turns on the construction of an order of sale made in bankruptcy proceedings under circumstances hereinafter more fully stated.
When the matter came on for hearing the court inquired and was advised that the liens aggregated some $30,000. The receiver had reported a guaranteed bid of $38,000 from a firm of auctioneers. Thereupon the order for the sale was entered. After reciting that a certain firm of auctioneers “are willing to guarantee to realize the sum of $38,000 net to the estate, if permitted to sell said assets at public auction, and it further appearing that .said offer is the highest and best made,” the order directed the receiver to proceed “to sell said assets at public auction under said guaranty without further notice to creditors.”
While this order, accepting in this manner the guaranteed bid, was not a present sale of the property to the auctioneers for $38,000, it was an acceptance of the guaranty that the auction, which they were thereby authorized to conduct, would bring at least this amount into the estate. The method of conducting the public auction sale was then discretionary with the auctioneers. They could lawfully have sold in bulk, if in their honest judgment, or after a sale by lots had been attempted, a larger sum would thereby be realized. The court, with full knowledge that the claimed liens would not exhaust the guaranteed proceeds, and without objection by the lienholders, thus authorized a sale which could have been so conducted as to make it impossible to ascertain the proceeds of any specific mortgaged property, to which the lien could attach. As the order of sale is but in furtherance of the earlier order directing the solicitation of bids for the property, free and clear of liens, the latter to attach to the proceeds, the two must be construed together. Concededly, the liens are not entirely lost by the failure of the mortgagees to file petitions before the sale, demanding possession. If, then, the liens are preserved, and if the order is to be construed as preserving them, it can fairly be construed only as shifting all of them to the entire proceeds, guaranteed at not less than $38,000. The alternative is that if, in the judgment of the auctioneer, a sale by lots should be made, the lien would attach to the proceeds of the mortgaged property thus sold, with perhaps an addition of some part or proportion of the money to be paid under the guaranty, should the entire sales proceeds be less than $38,000; if, on the other hand, the auctioneer should sell the business as a whole, then, while the lien is to attach to the entire proceeds or to the entire
The order must be construed as of its date; the fact that the auctioneer subsequently determined to sell in single lots instead of as a going concern -is immaterial. It would be manifestly unjust to subject the mortgagees to this possibility of a bulk sale and thus to deprive them of the opportunity of protecting themselves by bidding in the property in which they were interested, without protecting them, should their liens be established. The alternative construction of the order, necessitating proof of actual value after the property shall have been disposed of, gives- no such protection.
The receiver’s activities brought about this very early sale and this method of conducting it. The trustee, appointed the day before the auction sale, subsequently ratified the receiver’s acts. The mortgagees cannot be charged with fault or negligence in acquiescing therein. They relied upon, and, in our judgment, were justified in relying upon, the orders as giving them full protection, if they subsequently established their liens.
The order of the District Court, reversing that of the referee, and allowing the concededly valid lien claim in full to be paid out of the proceeds of the entire estate, must therefore be affirmed.