Opinion
No. 33360.
January 2, 1939.
1. BANKRUPTCY.
The provision of Bankruptcy Act that creditors should have at least 10 days' notice by mail of all proposed sales of property required a notice and an opportunity to be heard as to all proposed sales on matter of whether sale should take place (Bankr. Act, sec. 58, 11 U.S.C.A., sec. 94).
2. BANKRUPTCY.
The purchaser of bankrupt's property purchased at sale ordered by bankruptcy court to be made free of all liens did not acquire the property free from tax lien, where sheriff who levied on property under distress warrant for collection of taxes received notice of sale after it was ordered, but did not receive notice of petition and hearing for the sale, notwithstanding that he was a party to the bankruptcy proceeding (Bankr. Act, sec. 58, 11 U.S.C.A., sec. 94).
APPEAL from the circuit court of Coahoma county; HON. WM. A. ALCORN, JR., Judge.
W.W. Venable, of Clarksdale, for appellant.
The order of the bankruptcy court having provided that the sale should be free from tax liens, the only way a tax lien could exist against the property in the hands of the purchaser would be because the order was void and of no effect. The bankruptcy court had jurisdiction to make the order because: first, the bankruptcy court had jurisdiction of the persons and of the subject matter; and second, because the act adjudicating Dixie Stores, Inc., to be a bankrupt was in itself an adjudication that such a corporation existed.
The adjudication of Dixie Stores, Inc., as a corporation and as bankrupt was within the jurisdiction of the bankruptcy court and hence the sale under such order in the administration of the bankrupt estate, prior to the time that the adjudication in bankruptcy was held to be erroneous and was set aside, was a sale under an order and adjudication that the bankrupt court had the jurisdiction to make.
1 Freeman on Judgments, page 718, sec. 350; Hines v. Morse, 218 U.S. 493, 54 L.Ed. 1223; Cutler v. Huston, 158 U.S. 423, 39 L.Ed. 1040; Melon v. St. Louis Union Traction Co., 240 Fed. 359; Feltz v. St. Louis Union Traction Co., 60 Fed. 316; Postal v. Postal, 143 N.E. 883; Stanley v. Safety Deposit Co., 87 Md. 450, 40 A. 53; Lieber v. Lieber, 239 Mo. 1, 143 S.W. 458; Stewart v. Dickerson, 290 Mo. 516, 235 S.W. 446; Bowling v. Merry, 91 Okla. 176, 217 P. 44.
Where the right of a court to assume jurisdiction depends on the ascertainment of facts in pais, the fact that the court retains jurisdiction impliedly adjudges that it has jurisdiction and its decision in this respect, whether erroneous or not, can not be questioned in a collateral proceeding.
Magruder v. Drury, 235 U.S. 106, 59 L.Ed. 151; Hines v. Morse, 218 U.S. 493, 54 L.Ed. 1223; In re Columbia Real Estate Co., 101 Fed. 965.
The adjudication of bankruptcy, not being void but erroneous only, and the court pursuant to such adjudication having ordered the sale to be made free from lien for taxes, it is submitted that the purchaser obtained good title, free from taxes, even though the order under which the sale was made was afterwards set aside.
Gibson v. Lion, 115 U.S. 439, 29 L.Ed. 440; Freeman on Judgments, sec. 1174, note 2.
It is said that the sale was an absolute nullity because ten days notice that the property was to be sold free from liens was not given to the sheriff. If this omission by the receiver and the bankruptcy court affected the title of the purchaser, it would not render the sale void but would only result in having the property sold subject to the lien of the creditor.
Ray v. Norseworthy, 23 Wall. 128, 23 L.Ed. 116.
However, it is our contention that the sheriff, appellee, is estopped to attack the sale as being free from his lien. The sheriff duly filed his claim for the taxes now claimed as due and thus made himself a party to the case for all purposes. He was in court and thus entered his appearance.
Gratiot County State Bank v. Johnson, 249 U.S. 246, 63 L.Ed. 587.
A creditor who files his claim becomes a party to the proceedings with all the rights and obligations that that condition implies.
Wiswall v. Campbell, 93 U.S. 347, 25 L.Ed. 923.
The sheriff had personal knowledge that the sale was going to take place and to be made free from any liens which he might have. It is claimed the sale was void because he did not have this notice for ten days. The fact remains, however, that Mr. Ross did not object to the order providing for the sale of the property in suit and did not object to the confirmation of the sale though he received notice thereof, but in all respects acquiesced therein. In fact, after the sale was made and after the money was paid as he knew and was bound to know, on December 2nd he filed his tax claim with S.P. Clayton, referee. He made no objection though in court to the confirmation of the sale.
The principle that one cannot repudiate a transaction and at the same time seek to benefit thereby is well settled, an illustration of which is the adjudicated proposition that one cannot claim under a sale and at the same time repudiate it.
Woods v. Rappaport, 4 A.B.R. (N.S.) 750, 128 Wn. 140; 21 C.J., sec. 221; Pollitz v. Wabash R.R. Co., 207 N.Y. 113, 100 N.E. 721.
Where a person with actual or constructive knowledge of the facts induces another by his words or conduct to believe that he acquiesces in or ratifies a transaction, or that he will offer no opposition thereto, and that other in reliance on such belief, alters his position, such person is estopped from repudiating the transaction to the other's prejudice.
21 C.J., sec. 221.
One who knowingly permits a thing to be done and who, knowing that it is to be done, has opportunity to object and an interest to object if he desires and does not do so, is afterwards estopped.
Wirtz v. Malloy, 144 Ill. A. 329.
Roberson Luckett and Shed Hill Roberson, all of Clarksdale, for appellee.
There can be no question that the rule is that when an order or judgment is vacated, the previously existing status is restored and the situation is the same as though the order or judgment had never been made.
1 Freeman on Judgments, sec. 302.
If the court was without jurisdiction to adjudicate Dixie Food Stores bankrupt, there can be no question that it was likewise without jurisdiction to make subsequent orders involving property of the Dixie Food Stores, Inc.
Penny Stores v. Mitchell, 59 F.2d 789.
The statute on which our contention as to notice is based is 11 U.S.C.A., sec. 94.
Thus the question to be decided now is whether or not the statute was complied with — did the sheriff, as a creditor, have ten days' notice of all proposed sales of property? It is our contention that the property was sold without compliance with the statute, and thereby was violative of both the bankrupt laws and the due process clause in the constitution, and therefore was not valid as to a creditor who had no notice.
Ray v. Norseworthy, 23 Wall. 128, 28 L.Ed. 116; McRaney v. Riley, 128 Miss. 665, 91 So. 399.
The bankrupt laws, 11 U.S.C.A., sec. 94, set out precisely when notice should be given creditors, and one of these times is to all proposed sales of property. This notice is absolutely necessary, unless waived by writing, to any sale of property of the bankrupt. It cannot be ignored.
Ray v. Norseworthy, 23 Wall. 128, 23 L.Ed. 116.
The necessary ten days' notice of the application was not given to the appellee and therefore to him, at least, the sale was invalid and did nothing to destroy his lien.
It is our contention that the sheriff was in no way estopped from attacking a sale which was invalid as to him.
In re Lake Champlain Pulp Paper Corp., 20 F.2d 425.
In the case at bar, there is nothing in the record or statement of the facts to show that the sheriff was present at the sale, or ever did anything except file a statement of taxes. This he did ten days after the sale.
21 C.J., sec. 222.
The sheriff did nothing which could have misled the appellant in this case. And further it cannot be tenable that it was in any manner the action of the sheriff which caused the appellant to buy the property, but it was the appellant's own will or judgment; therefore, there can be no equitable estoppel.
21 C.J. 1125, 1129, 1166, sec. 131.
That neither the state nor any of its subdivisions could be estopped by the acts of its officers is well recognized.
Eastman Oil Mill v. State, 93 So. 484, 130 Miss. 63; Gift v. Love, 144 So. 562, 164 Miss. 442; Cleveland State Bank v. Cotton Exchange Bank, 81 So. 170, 119 Miss. 868; Merchants Bank Trust Co. v. Scott County, 145 So. 908, 165 Miss. 91; Miss. Power Co. v. City of Starkville, 4 F. Supp. 833; Edwards Hotel City Ry. Co. v. City of Jackson, 51 So. 802, 96 Miss. 547; Miss. Power Light Co. v. Pitts, 179 So. 363; Miss. State Hwy. Com. v. West, 179 So. 279.
Argued orally by W.W. Venable, for appellee and by Shed Hill Roberson, for appellee.
Appellee, as sheriff and tax collector of Coahoma County sued out a distress warrant for the collection of the state and county taxes due by Dixie Stores, Inc., a mercantile concern, on its stock of goods, wares, and merchandise, including fixtures. The warrant was levied on certain fixtures which had been purchased by appellant, along with the stock of goods, at a sale which had been ordered by the bankruptcy court to be made free of all liens. The question is whether appellant acquired the property levied on free from the tax lien.
The "Dixie Stores, Inc." had been adjudged a voluntary bankrupt by the bankruptcy court. After such adjudication that court ordered the assets of the bankrupt sold free from all liens. That order was made on petition of some of the creditors, but was not joined in by the sheriff, nor was he given notice of the petition and time and place of the hearing.
After the adjudication of bankruptcy it was discovered that the "Dixie Stores, Inc." was not in fact a corporation but a partnership because it had failed to comply with Sec. 4141 of the Code of 1930, which provides that on such failure all persons doing business under the corporate name shall be deemed and held to be partners and liable as such. Thereupon some of the creditors made a motion to set aside the adjudication of bankruptcy, which motion was sustained. The attempted sale of the assets, however free from all liens, was ordered and took place at a time between the adjudication of bankruptcy and the order setting aside the adjudication. The sheriff was given notice of the sale after it was ordered but was not given notice of the petition and hearing for the sale.
Section 94 of 11 U.S.C.A., provides, among other things, as follows: "(a) Creditors shall have at least ten days' notice by mail, to their respective addresses as they appear in the list of creditors of the bankrupt, or as afterwards filed with the papers in the case by the creditors, unless they waive notice in writing, of (1) all examinations of the bankrupt; (2) all hearings upon applications for the confirmation of compositions; (3) all meetings of creditors; (4) all proposed sales of property; (5) the declaration and time of payment of dividends; (6) the filing of the final accounts of the trustee, and the time when and the place where they will be examined and passed upon; (7) the proposed compromise of any controversy; (8) the proposed dismissal of the proceedings, and (9) there shall be thirty days' notice of all applications for the discharge of bankrupts."
Subdivision 4 of the Statute means that there must be notice and an opportunity to be heard as to "all proposed sales of property." In other words, before the sale ever takes place there must be a hearing as to whether it shall take place. Ray v. Norseworthy, 23 Wall. 128, 23 L.Ed. 116. The fact that the sheriff was a party to the bankruptcy proceedings was not sufficient to bind him. The Supreme Court in the Ray Case used this language: "Beyond all doubt the property of a bankrupt may, in a proper case, be sold by order of the bankrupt court free of incumbrance, but it is equally clear that in order that such a proceeding may be regular and valid the assignee must apply to the bankrupt court for an order to that effect, and must set forth the facts and circumstances which it is supposed justify the application, that the judge may decide whether or not the application shall be granted. Secured creditors in such a proceeding must have due opportunity to defend their interests and consequently must be properly notified and summoned to appear for that purpose. Foster v. Ames, 1 Low. [313], 316. [Fed. Cas. No. 4965]; Willard v. Brigham, 25 La. Ann. [600], 601."
Affirmed.