91 So. 399 | Miss. | 1922
delivered the opinion of the court.
Appellant, O. C. McRaney, filed his bill in the chancery court of Covington county against appellee J. H. Riley, in which he alleged that he was the true owner of lot 12,’ in block 5, in the city of Collins in said county, and that ap-pellee held a pretended deed of trust against said property which was of no validity, and seeking to cancel the same as a cloud upon his title. Appellee answered the bill, denying its material allegations,, and there was a trial on bill, answer, and proofs, and a decree dismissing appellant’s bill from which he prosecutes this appeal.
Both appellant and appellee claimed title through a common source, A. V. Easterling. In 1916 A. Y. Easterling was adjudged a bankrupt by the federal district court for the southern district of this state. At that time he owned the property here in question, and it therefore constituted part of his assets as a bankrupt. Shortly before his bankruptcy said Easterling executed the deed of trust sought to be canceled to secure an indebtedness to appellee of three thousand dollars on the land in question, which is a lot and storehouse thereon in the city of Collins where said Easterling was doing a mercantile business at the time of his failure.
In the progress of the administration of the estate of said bankrupt said lot was by decree of the referee in said bankruptcy matter sold by the trustee therein, and purchased by one Welch at one thousand and fifty dollars, through whom appellant claims title by mesne conveyances.
It is contended on behalf of the appellee that the referee in bankruptcy had no authority under the law to order a sale of the property in question free from the lien of the deed of trust to appellee; that such a power is vested alone in the federal district judges sitting as courts of bankruptcy, and is not a power that can be exercised by referees in bankruptcy.
The Bankrupt Law of 1867 (14 Stat. 517) expressly conferred the power on referees to sell the property of a bankrupt free from incumbrances; and it is true that the present bankrupt law contains no such provision, and for this reason, in the early administration of the law there was doubt as to the referees having such' authority. The supreme court of the United States has not decided the question. The lower federal courts, however, seem to be unanimous in holding that referees have such power. 2 Collier on Bankruptcy (12 Ed.), p. 1171; Black on Bankruptcy (3 Ed.), section 471. The authorities on this question will be found collected in the notes of the references to Collier and Black, supra.
It is contended that, even though the referee had authority to order the sale in question, still the proceedings and sale are void because the bankrupt court by such proceedings never acquired jurisdiction of the appellee, Riley, for the reason notice thereof ivas only given him through the mails, and not served on him personally, as it should have been.
The determination of this question depends in a measure at least on the question whether or not by the bankruptcy
Section 70 of the Bankrupt Act (U. S. Comp. St., section 9654) in express terms provides that on his appointment the trustee in bankruptcy gets the title and the possession of all of the assets of the bankrupt subject to his debts for the purpose of administration. It is hardly necessary to discuss this question further. One of the fundamental requirements of the bankrupt law is that the entire assets of every kind of the bankrupt, subject to his debts, shall be taken into the custody of the bankrupt court for administration, where all conflicting rights, claims, and liens thereto shall be adjudicated by the bankrupt court, in a summary way. This does not apply, however, to property of the bankrupt in the possession of adverse claimants. In such cases it seems that in order to settle the conflicting rights of the trustee representing the estate of the bankrupt, and the adverse claimant, a formal adversary proceeding is necessary in the proper court. However, we have nothing to do with that question here. The property here involved was not in the possession of an adverse claimant, but of thé bankrupt. Appellee Riley only had a deed of trust on it to secure an indebtedness. He claimed no title to the land. Therefore it seems clear that this lot at the time of its sale by order of the referee free from liens, was in the custody of the bankrupt court. The res was in court, and the creditors of the bankrupt under the law knew that the bankrupt court, and that alone, was the forum to which they must resort to
Appellee contends that, notwithstanding the bankrupt court had jurisdiction of the property in question, still that the proceeding to sell it free from liens was in the nature of an adversary proceeding, and that the referee had no power to decree a sale except upon a petition or bill by the trustee for that purpose, making the appellee a party thereto, setting out the facts and the reasons for the proposed sale; and that it was necessary.that appellee be notified by summons or rule to appear at a given time and contest such bill or petition; and that this was not done in the proceedings in question; the only notice of such proceeding being a general notice to creditors, including the appellee, given by mail, of the pendency of the petition by the trustee, and the time and place for its hearing; and that this was insufficient; and that the condemnation and sale of the property on such a proceeding and notice amounted to depriving appellee of a property right without due process of law, in violation ,of the due process clause of the Constitution of the United States.
The petition of the trustee praying for the sale of the property in question free from liens, after the formal caption stating the court in which the proceeding was pending, contained the style of the bankruptcy proceedings, viz., “In the Matter of A. Y. Easterling, Bankrupt,” and was addressed to the referee before whom said bankruptcy matter was pending, and set out in substance that the lot and storehouse thereon here in question constituted part of the assets of the bankrupt in the possession of the trustee, and described the deed of trust thereon by the bankrupt to the appellee, and the amount of indebtedness it was given to secure, including its date, and alleged that it was to the best interest of the estate and the creditors and all parties concerned that said property be sold free from said lien, and said lien be transferred to the proceeds of said sale. The petition also averred that for certain reasons said deed of trust was void, and at the proper time
The said sale by the' trustee was afterwards confirmed by the decree of the referee after ten days’ notice by mail to all the creditors of the estate, including appellee.
In addition to the notice by mail of the application of the trustee to sell the property in question free of liens which the appellee received, the bankruptcy proceedings, which are a part of the record in this case, show that appellee probated an unsecured claim against the estate of said bankrupt, Easterling, for the sum of seventy-five dollars for wages as a clerk in the store of said bankrupt, for which he claimed a preference, and that the court allowed
In considering the proposition whether by the proceedings and notice in question the bankrupt court acquired jurisdiction of the appellee, or, stating it differently, whether the condemnation and sale of said property through said proceedings and notice amounted to depriving the appellee of a property right (the lien of his deed of trust), without due process of law, it will be well to have in. mind a general view of the bankrupt law from a standpoint of the Constitution. Although what will be said in this respect will not be decision, still it will probably serve the purpose of clearing the field of undergrowth, and thereby aid in obtaining a better view of the main question.
Paragraph 4, section 8, article 1, of the federal Constitution, among other things, confers on Congress the power to establish “uniform law on the subject of bankruptcies throughout the United States.” In pursuance of that provision of the Constitution the present bankrupt law was enacted. By the enactment of this statute Congress occupied the entire field. All state laws, as well as state constitutional provisions, on the subject were superseded. In other words, the Bankrupt Act in its scope and purpose, under the Constitution, is the supreme law of the land on that subject. The power of Congress under this clause of the Constitution is broad enough to authorize not only a uniform system of bankruptcy, but rules and modes of procedure for its administration, and if such rules and .procedure should differ from that in ordinary suits, still they would be obligatory upon the bankrupt courts, for the reason that Congress under the Constitution has plenary authority on the subject. Black on Bankruptcy (3 Ed.), section 2, and authorities cited in note. The Bankrupt Act does not deprive creditors of their property without due process of law, because it does not provide for notice to creditors of the filing of a voluntary petition in bankruptcy; or because it does not require personal serv
The supreme court of the United States held, in Hanover National Bank v. Moyses, 186 U. S. 181, 22 Sup. Ct. 857, 46 L. Ed. 1113, 8 Am. Bankr. Rep. 1, that Congress had the power to prescribe any regulations concerning the discharge of bankrupts from their debts that are not so grossly unreasonable as to be incompatible with fundamental law; and in that case the court held that the Bankrupt Act did not require personal service of notice on creditors of the application of the bankrupt for his discharge; that such notice was not required under the due process clause of the Constitution. Although the Bankrupt Act in its administration annuls vested rights and impairs or destroys the obligation of contracts by releasing debtors from their debts upon partial payment, or without any payment at all, and making its provisions compulsory upon all creditors, still for that reason it is not unconstitutional. Black on Bankruptcy (3 Ed.), section 2.
The inhibition in the federal Constitution against impairing the obligation of contracts is a limitation alone upon state authority, and does not affect the authority of Congress. There is nothing in the federal Constitution which forbids Congress to pass laws impairing the obligation of contracts, provided, of course, such legislation is enacted in pursuance of constitutional authority. Therefore it has been held under the Bankrupt Act that debtors may be entirely discharged from the obligation of their contracts. Black on Bankruptcy (8 Ed.), section 2. Nor is there anything in the federal Constitution which prohibits the Bankrupt Act in its administration from destroying the liens upon the property of the bankrupt if it shall be deemed necessary for the effective administration of the law, whether such lien be created by contract, judgment, or statute. Black on Bankruptcy (3 Ed.), section 2.
It seems to us the question in this case resolves itself into whether that provision of the Bankrupt Act is vio-lative of the due process clause of the Constitution, for it was complied with in the giving of the notice in question to appellee. We have reached the conclusion that it does not, for these reasons: As we have seen, the entire estate of the bankrupt, subject to his debts, was in the custody of, and being administered by, the bankrupt court. The bankrupt court thereby had acquired jurisdiction of the res. All creditors, including lien creditors, under the law knew this to be true. They were affected by law with notice of it. The bankruptcy proceeding was a pending cause, which had brought into the bankrupt court all the assets of the bankrupt over which the court had jurisdiction to settle all conflicting claims to and liens thereon. If the notice given to the appellee be treated only as constructive notice, we see no constitutional objection thereto. It is unnecessary to cite authorities to establish the principle that where property has been brought into the custody of the court, either by foreign attachment, or otherwise, the court has the power to condemn such property to the payment of the debt of the owner upon publication of notice in a newspaper, which is only constructive notice. We believe it will be found that the courts of this country, both state and federal, are practically unanimous in so holding, and that such notice by publication does not violate due process of law.
Counsel for appellee cite as sustaining their contention that appellee by the proceedings in question was deprived
Reversed, and decree here for appellant.
Reversed.