247 F. 607 | S.D. Fla. | 1917
The Evansville Brewing Association is a creditor of the bankrupt, having held a mortgage to itself and two other mortgages acquired from others covering real estate of said bankrupt. These mortgages were foreclosed, and the property covered by them purchased by it, without competition, at the foreclosure sales, for some $2,000, which the trustee claims is merely nominal. After the master reported the sales to the state court, such sales were confirmed, and deficiency decrees amounting to over $38,000 entered against the bankrupt, after crediting the amounts bid on the. decrees. The trustee seeks by his petition to the referee to have the value of the property sold under foreclosure proceedings and bought by the creditor at such
The foreclosure proceedings were commenced after bankruptcy, and the trustee was duly made a party to such proceeding in the state court. The attorneys for the creditor claim that the order of the referee is erroneous, because the proof of claim submitted to the referee for allowance is a judgment of a court of competent jurisdiction and entitled to full faith and credit in the bankruptcy court, and therefore the referee erred in ordering the value of the property to be ascertained, and amount of such value applied to the reduction of the deficiency decree.
In the instant case the trustee was a party defendant, and no attack is made upon the regularity of the proceedings; but the consideration for which the mortgaged property was bid in by the creditor is claimed to have been grossly inadequate. No charge of fraud or collusion is made. Has the court of bankruptcy any power to go behind the face of the judgment, and reduce it by the true value of the mortgaged property obtained by the creditor at the public sale under the foreclosure proceedings? If the judgment is binding upon the parties and the creditors, and full faith and credit be accorded it, then the bankruptcy court is without this power.
For these reasons I am of opinion that the referee erred in his order providing for the ascertainment of the value of the mortgaged property and a reduction pro tanto of the creditors’ claim.
The petition to revise will be granted.