10 Blatchf. 515 | U.S. Circuit Court for the District of Southern New York | 1873
(1) There was no want of jurisdiction in the district court to entertain the application for an order of sale and proceed upon such application. Without conceding that the power of the court to proceed in the settlement of the estate of a bankrupt, and the disposition of the property, can be hindered by the absence, in Europe, of one who has a lien thereon, or that such power to sell free of any lien, or subject to the lien, can be so delayed by reason of such absence, it is sufficient, in this-case, to say, that it appears that the petitioner, claiming an interest in the lands in question, being communicated with on the subject, referred the parties in interest to Messrs. Boardman & Boardman, attorneys and coun-sellors at law, as his agents and attorneys in the premises. The court ordered notice of the application to be served upon them. They appeared for Butterfield, and answered the application for the order to sell the lands, and were fully heard on the subject This was sufficient.
(2) On the merits. There is no doubt of the power of the court to order a sale of lands free of the incumbrances thereon; and the proceeds will stand as a substitute for the lands themselves, for the benefit of those holding liens, to the extent of their interest therein, and, as to the surplus, for the benefit of the general creditors. Bankrupt Act, § 20.
It is, also, clear, that, taking the account given in the answer of Butterfield to be true, his interest in the lands is a lien only. He does not hold the legal title, and his possession of the deeds, under the agreement which he alleges, gives to the bankrupt and his as-signee a right to redeem by paying the sum of $10,000, with interest. At most, he has, therefore, a mortgage, in equity, to secure the payment of that amount.
Had this proceeding been taken for the purpose of contesting the claim of Butterfield to an interest in the property, and had the court assumed, in this summary proceeding, to determine such a contest, there would be force in the objection, that it was not within the summaty jurisdiction conferred upon the court, as a court of bankruptcy. Controversies between the assignee and third persons who claim adverse interests in property of the bankrupt, are provided for in the second section; and a proceeding in denial of Butterfield’s interest as mortgagee, and seeking to bar him of any assertion of his claim thereto, should be prosecuted by formal suit, as contemplated in that section. Now, it is true, the assignee, in his application for a sale, denied the validity of Butterfield’s claim, but the court did not assume to determine summarily whether it was valid or not. That the claim was contested was an important and useful fact to be brought to the attention of the court. Without knowledge of such fact, the court might, with great propriety, have assumed its validity, and directed the assignee to pay it out of the proceeds of sale. What the court did was, to direct a sale of the premises free of all liens, and that the money arising therefrom be brought into court. The right of the claimant is not affected thereby. His lien, if any he has, follows the fund, and must be asserted and, if contested, be settled, in an appropriate proceeding, to be hereafter taken.
(3) As to the manner of sale and the extent of the authority therein conferred on the assignee. The act gives general discretion to