193 F. 791 | E.D. La. | 1912
In this matter it appears that the bankrupt surrendered among his assets certain real estate, burdened with a mortgage of $11,000, represented by five promissory notes, each for $2,200, payable respectively in one to five years. The act of mortgage contains the pactum de non alienando and all the clauses usual to mortgages in Louisiana, including the stipulation- that default on one of the notes shall mature the others remaining unpaid. The first note fell due, and remained unpaid, at the time of the adjudication in bankruptcy.
It appears the trustee was directed by the first meeting of creditors to sell all of the real estate of the bankrupt, and the piece in question was duly appraised and is now being advertised for sale by an auctioneer. John T. Whittaker, holder of the mortgage notes, was sent the usual notice, but did not attend the first meeting of creditors. It also appears by the testimony before me that the mortgaged property will probably not sell for more than the amount of the mortgage.
It may be considered well settled that the trustee is not bound to administer any property of the bankrupt on which there is a lien, and that he is bound to carry out the valid contracts of the bankrupt made in good faith*793 and not in fraud of his general creditors. Tn this case the ownership of the property passed to the trustee, lrat lie necessarily has no greater rights than the original owner. The bankrupt could not have sold the property to the prejudice of the mortgage, and prior to the adjudication the holder of the notes might have foreclosed in the state court.
One of the chief objects of the bankruptcj law is to secure the prompt and economical distribution of the bankrupt's estate, and it is clear that if this is to be accomplished all of the creditors should co-operate. The mortgage creditor should have attended the lirst meeting of creditors and there presented his objections to the sale of the mortgaged property. Had he done so, the trustee might not have been directed to sell it. And so, too, the trustee should have cited, the mortgage holder and given .him his day in court before attemitting to sell the property free of his lien. By mutual co-operation the advertisement of the property that has been made might have been avoided; lmt. as the matter has gout' so far, I am not disposed to interfere with the sale, hut, of course, no adjudication of the property can be made unless it brings enough to cover the amount due the holder of the mortgage notes under his contract.
The custody of the property is undoubtedly in this court; but I can see no good reason, and indeed comity would require It, why consent should not he given to permit the foreclosure of the mortgage in the state-court, if the trustee is unable to sell.
The rule will be dismissed, reserving to the plaintiff the right to renew his application, and the trustee will he directed to make no adjudication unless the property brings enough to pay to the mortgage holder all that is due him under his contract, without deduction for any costs of administration in bankruptcy.
It appears, however, that after the decision with regard to the former rule the trustee and mortgage holder entered into an agreement as to the sale of the property, by the terms of which the mortgage creditor agreed to bid on the property up to the amount of liis mortgage, and, if adjudicated to him, to deposit an amount to cover the cost of making the sale; and the trustee agreed to waive the fees of himself and the referee. In due course the property was sold and adjudicated to the mortgage holder for the sum of $10,500, and he thereupon deposited the sum of $258 to cover the auctioneer’s charges at 2 per cent, and the cost of advertisement. Thereafter, by order of,the referee, the trustee declined to transfer the property until an additional amount to cover the fees of the referee and appraisers and charges for a keeper should be deposited. The mortgage holder has therefore made application for an order on the trustee to compel him to transfer the property to him, and, in the alternative, for a refund of the amount deposited and leave to foreclose his mortgage in the state court.
Some difference of opinion having arisen between the parties and their counsel as to the actual facts concerning the agreement made, the matter was referred to a special master to hear the evidence and report his conclusions of fact and law thereon. The matter is now before me on exceptions to his report.
The master found that the above-mentioned agreement was entered into, but that the referee was not a party, and it was the act of the trustee without the authority of court; that the mortgage creditor had availed himself of the bankruptcy court; and that he should pay the commission of the referee and the fees of the appraisers and the charges of the keeper.