Fowler v. Hart

THIS was an appeal from the Circuit Court of the United States, for the Eastern District of Louisiana.

The facts are stated in the opinion of the court.

It was argued by Mr. Bradley, for the appellant, no counsel appearing for the appellee.

Mr. Bradley thus stated his case and points.

Daniel T. Walden, as indorser of two notes of William Christy, was indebted to Fowler, the complainant, and suit was brought by him upon these two notes, and judgment recovered, as above stated.

At that time, Daniel T. Walden held and owned the premises described in the petition of Fowler, and also at the time when the third judgment was converted into a mortgage. Nor was there then legal mortgage, nor had Fowler any notice of any equitable mortgage on that property. Just prior to that time, Walden, being indebted to the defendant, Hart, had given him a special mortgage, describing with particularity certain other property, nor embracing or touching any part of the premises now claimed by Fowler. In this condition of things, Walden was declared bankrupt. Hart then filed his petition in the Bankrupt Court, setting up, as against the assignee and Walden, that there was a mistake in the description of the property intended to be conveyed by Walden's mortgage to him, and claiming that the said mortgage was intended to convey the premises now claimed by Fowler.

No process was served upon Fowler, or upon the other creditors of Walden. The Bankrupt Court, however, proceeded to take the proofs and adjudicate, and in its judgment affirmed the pretensions of Hart, ordered the mistake to be corrected, set up his special mortgage on these particular premises, and ordered them to be sold to satisfy that special mortgage, and the surplus, if any, to be brought into the general fund. The sale was made in execution of that order, and at that sale Hart became the purchaser, for a sum less than the amount of his mortgage, received a deed, went into possession, and has ever since been in possession, claiming under that proceeding and sale.

The Circuit Court decided, on this state of facts, that the law and the evidence are in favor of the defendant; ordered, adjudged, and decreed, that there be judgment in favor of the defendant, Hart, and that the cause be dismissed by complainant's costs. And Fowler appealed.

In the case of Houston et al. v. The City Bank of New Orleans, 6 How. 505, 506, this court distinctly affirmed the power of the District Court, in bankruptcy, to convene the mortgage creditors, sell the mortgaged property, pay the proceeds to the mortgagees, according to their respective priorities, and order the cancellation of the mortgages. No such order has been made in this case.

The questions arising in this case, and not hitherto decided by this court, are,--

1st. The powers of the District Court to exercise, in a summary proceeding, a jurisdiction heretofore limited to courts of equity, to correct mistakes in deeds, and reform them according to the intent of the parties; and,

2d. To correct a mistake in a deed, as between third parties, creditors, or purchasers, without notice.

3d. To make such correction, without causing such third parties to be convened and made parties to the suit. First.

I. This court has said, in Ex parte Christy, 3 How. 312, that the District Court, sitting in bankruptcy, is clothed with the most ample powers and jurisdiction 'over the rights, interests, and estate of the bankrupt, and over the conflicting claims of creditors; and,

II. Page 317: The District Court has a concurrent jurisdiction, to the same extent and with the same powers as the Circuit Court, over liens, judgments, and securities.

III. But it is submitted, that this jurisdiction must be over liens and securities already created, and not over such as are to be created by the superior power of a court of equity.

IV. A court of law of general jurisdiction has, unquestionably, jurisdiction over the same subjects, to a certain extent; but it has not, and never has been supposed to have, that creative power which has been hitherto confided to courts of equity alone, to compel men to reform their deeds and contracts according to the intent of the parties.

V. The 8th section of the Bankrupt Act gives to the Circuit Court concurrent jurisdiction with the District Court, in bankruptcy; and it may well have been designed for such cases as this, and to prevent that injustice, danger of which might well be apprehended from the exercise of the summary powers given to the District Court in bankruptcy.

VI. It is not essential to the exercise of the summary jurisdiction granted, and intended to be conferred, inasmuch as, by this 8th section, provision is made for the means which may be needed to effect a full settlement of the estate of the bankrupt.

VII. Inasmuch, then, as the power is not given in terms in the Bankrupt Act, and is not essential as a means to accomplish the end sought by that act, it is submitted that it does not exist, and that the court in bankruptcy had no power to correct a mistake, if any such existed, in the description of the property claimed by the defendant, Hart. Second.

I. The recording of the judgment created a mortgage upon the real property of Walden, and that mortgage had priority, according to its date.

II. It was a lien such as was recognized by the law of Louisiana, and protected by the Bankrupt Act. Waller v. Best, 3 How. 111; Peck v. Jenness, 7 Id. 620, 621. 'It is clear, therefore, that, whatever is a valid lien or security upon property, real or personal, by the laws of any State, is exempted by the express language of the act.'

III. The mortgage creditor takes as a purchaser, and, taking as a purchaser, his title can only be affected by notice. It is not pretended there was, prior to the mortgage of Fowler, any notice in this case of the mistake, if any, in the description of the property in Hart's mortgage.

IV. A court of equity would have had no power to order the correction of the mistake, as against him, a multo fortiori, the court in bankruptcy had not power to do so, and to direct the cancellation of his mortgage. Third.

I. Nor is he estopped in any manner by the decree in bankruptcy. Such decree could only be operative upon parties and privies. The record shows that the only parties to the proceeding to correct the alleged mistake were Hart, and Christy the assignee, and Walden. Interrogatories are propounded to Walden, but he never appeared and answered. Christy alone answered, denying the allegations of the petition, and proof was taken, and upon these the decree was made.

II. Hart had notice, at the time of filing his said petition, of the lien of Fowler, because he was returned as a creditor by judicial mortgage, and therefore, having a lien, he was entitled to be convened. The object being to affect his rights, so far as they were superior to those of the general creditors, Hart could only limit those rights by a proceeding in which Fowler could defend them.

III. Nor is he estopped by the notice and order of sale. The property therein described is said to be bounded by New Levee, Commerce, St. Joseph, and Julia streets.

The property in the decree correcting the mistake is described as containing 23 feet 5 inches front upon New Levee street, between Julia and St. Joseph streets, by 125 feet 6 inches deep on the line next to St. Joseph street, and 124 feet 7 inches on the line of lot No. 2, and designated as the house or store No. 110 in said New Levee street; and the description of the property in the petition of the assignee for the sale of the property is still different, and makes it house No. 10. The description in the original mortgage is, a certain lot of ground, No. 2, the house numbered 109, situated. . . between St. Joseph and Julia streets, measuring 18 feet 10 inches front on New Levee street, by 124 feet 7 inches deep on the dividing line of lot numbered 3, and 123 feet 8 1/3 inches on the dividing line of lot No. 1, and about 21 feet 8 inches in the rear of the dividing line of lot No. 5. So that in fact the lot described in the mortgage was alongside of the one which it was pretended was designed to be conveyed, and both were within the description in the said notice to Fowler. He, therefore, was not only neither party nor privy; but he had no notice of such pretended claim to put him on inquiry.

VII. Finally, it does not appear that there ever was any order by the court in bankruptcy to erase and cancel the said mortgage of said Fowler, and the same is now and hath ever been a valid and subsisting lien upon the lot claimed in his petition. In such case the law of Louisiana is clear that he had a right to proceed against the person holding the land, and to a judgment for the sale of the lot, and an account of the rents and profits in the hands of Hart, holding and claiming the same adversely.

Mr. Justice McLEAN delivered the opinion of the court.