Conro v. Crane (110 U.S. 403)/Opinion of the Court

It is contended by the appellants that the circuit court had no jurisdiction of this suit because the assignee was a citizen of the same state with the plaintiffs. But no relief was granted against him by the final decree, and, although the suit was not formally dismissed as to him, it is evident that he was treated throughout as only a formal party. There was jurisdiction by citizenship as to the other parties, and the real controversy was between them. The record does not show that the appellants raised this question in the circuit court. Under these circumstances, it is not proper to allow the jurisdiction between the real parties to be now challenged on this ground.

It is also contended that the remedy of the appellees was at law and not in equity. Waiving the consideration of this question, we prefer to dispose of the case on its merits. We are unable to perceive any relation of trust between the appellants and the appellees. The former were clother with no fiduciary character as respects the latter, by reason of any relation existing between them prior to the making by the appellants of their bid, nor did the holding of the property by the appellants create such relation. The appellants received the property and paid their $40,500 under the sanction of an order of the court, which not only authorized the sale to them, but set aside the order of sale to Hodgkins and annulled such sale. They purchased at a judicial sale, and received the property from the hands of the court. The court made the second order of sale without notice to Hodgkins or Crane. That was held to be erroneous. On a hearing, the district court maintained the propriety of the order. On review, the decision was reversed, and the circuit court, being of opinion that, on the payment by Hodgkins of the purchase money, the original order of sale to him vested in him, from July 9, 1875, all the right, title, and interest of the bankrupts in the property, directed that the district court order the assignee to deliver to Hodgkins the necessary title papers of the property, and cause the assignee to deliver the property to Hodgkins or Crane. It also directed the district court to return to Conro & Carkin their $40,500, the order saying, 'the sale to them being hereby annulled and set aside.' The order did not conclude or determine anything as to any liability of the appellants to any one for profits or rent or value of use of the property. On the contrary, it gave to all parties, the appellants or the appellees or the assignee, the right to institute legal proceedings in any competent court to determine the rights or equities of the parties growing out of the possession of the property by the appellants, and out of their having paid moneys for claims, expenses, improvements, and repairs thereon, and out of the profits, as to all of which matters it stated a question was raised. The declaration in the order of the circuit court, that Hodgkins, having paid his $40,000, was vested, by the order of July 9, 1875, from that date, with the title of the bankrupts to the property, did not confer on Hodgkins or the appellees the right to collect rent, or value or profits of use, from the appellants, for the time they had the property. Nor did the provision of the order in regard to the retention by the district court of part of the money paid by the appellants, or the giving of security by them, have that effect. The question of their liability depended on many other considerations.

There was no privity of contract between the appellees and the appellants. The latter held the property adversely to the former for 8 months and 29 days, and all the time under the authority of an order of the district court. The appellees recovered possession of nearly all of the property 25 days after the order of the circuit court was made. The appellants were deprived of the use of their $40,500 from July 12, 1875, to May 24, 1877, a period extending beyond the time during which they held any of the property, and the money was returned to them only on their giving a bond with three sureties. The appellees succeeded to the title of the bankrupts and the assignee to the property from July 9, 1875, according to the order of the circuit court, but they could have no greater rights in respect to recovering from the appellants for the use of the property after that date than the assignee could have, because they held under him and derived all their rights from him; and he could have none so long as he withheld the $40,500 from the appellants. He could not keep the money and still have rent for the property. That would be to keep the money and virtually the property too, by recovering for the use of the latter. The legal presumption is that the appellants could, by the use of the money, have procured like property, and made out of it the profits decreed against them.

The rights in question which the appellants acquired by the judicial sale are to be protected so long as the order of sale was in force. Moreover, during the entire period, after the order was reversed as well as before, the court and the assignee retained the money of the appellants. The title of the appellants to the property, and their right to keep it was purchasers, were, undoubtedly, subject to the result of the litigation had. But a rescission of the sale and the destruction of their title involved, as a necessary element, the return to them of their money, so far certainly as any claim for rent or profits was concerned.

We do not think it necessary to refer to the voluminous testimony adduced on the question of bad faith and fraud. We see no sufficient evidence to impeach the good faith of the appellants, nor do we understand, from the opinion of the circuit court on the review in bankruptcy, that the court questioned their good faith or fair dealing, whatever views it expressed as to the conduct of the assignee.

The present case has no resemblance to one in which a purchaser has been held entitled to a rebate or allowance from the purchase money of land for occupation or rent while kept out of possession by a plaintiff, on a sale made by the court in the suit, and for expenses of obtaining possession. Thomas v. Buxton, L. R. 8 Eq. 120. If the appellees might have been entitled to a deduction from the amount of their bid because of the action of the assignee, the bankrupt estate could not reimburse itself for its loss from such action by making the appellants responsible for it. Nor does the doctrine applied to a purchaser who duys land with notice of a prior equitable estate apply to the appellants. The district court vacated the prior sale by the same order which accepted the bid of the appellants, and the order referred to the petition of the assignee, which set forth that Hodgkins had not paid his bid; and there was annexed to the petition a copy of the bid of the appellants, which stated that they made it understanding that Hodgkins had not complied with his proposition. As to the appellants there was, at the time they paid their money, no outstanding contract with or sale to Hodgkins by the assignee. Nor is there any analogy between this case and one of liability by a grantee in a voluntary conveyance held void as made in fraud of creditors, for rents and profits from the property.

The appellees cite the case of Raun v. Reynolds, 15 Cal. 460. The history of the case gathered from the above report, and from 11 Cal. 14, and 18 Cal. 275, and Reynolds v. Harris, 14 Cal. 667, shows that a decree foreclosing two mortagages on land had directed that two different parcels, one covered by one of the mortgages and the other by the other, should be sold together, although one parcel was owned by one mortgagor, and the other by him and another person jointly, as mortgagors, such other person being merely a surety. The property was sold under the decree, at auction, by the sheriff, the two parcels being sold together to the plaintiff. He then sold and assigned the decree, and his rights as purchaser, and the sheriff's certificate of sale, to one Harris. After that the defendants appealed from the decree. The decree was reversed for error in the above directions as to the sale. The time for redemption from the sale having expired without any redemption, Harris obtained possession of the property by a writ of assistance. On an application by the defendants to have the sale set aside and to be restored to possession, it was held that the plaintiff could obtain no advantage by a purchase under his own erroneous judgment; that Harris was not within the protection of an innocent purchaser without notice; and that he took the plaintiff's claim subject to the defendant's right of appeal and reversal, and occupied the plaintiff's position, with all his rights as well in the decree and the debt as in the purchase, the decree being unaffected by any payment resulting from the sale. The application of the defendants was granted, and they were restored to possession. A question then arose as to the rents and profits while they were out of possession. Under the foregoing views, and as the mortgage still remained valid, to be enforced by Harris, under the decree, the court held that Harris must be treated as a mortgagee in possession, and was bound to credit on the mortgage the amount he had received out of the property. This case is wholly unlike the one before us, and affords no support to the claim of the appellees. If anything, it goes to show that the appellees might properly have claimed that the assignee should credit on their purchase money the rents and profits of the property during the time they were kept out of its possession by the action of the assignee, which was in the end held to have been unlawful.

The case of Lupton v. Almy, 4 Wis. 242, was a similar one, of a purchaser who owned the decree at the time of the sale, and took possession of the property after the sale had been set aside, and was treated as a mortgagee in possession, and held liable for rents and profits.

The decree of the circuit court must be reversed, and the case be remanded to that court, with direction to dismiss the bill.