KOONTZ V. NORTHERN BANK, 83 U. S. 196 (1872)

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U.S. Supreme Court

Koontz v. Northern Bank, 83 U.S. 16 Wall. 196 196 (1872)

Koontz v. Northern Bank

83 U.S. (16 Wall.) 196


l. A purchaser under a deed from a receiver is not bound to examine all the proceedings in the case in which the receiver is appointed. It is sufficient for him to see that there is a suit in equity, or was one, in which the court appointed a receiver of property; that such receiver was authorized by the court to sell the property; that a sale was made under such authority; that the sale was confirmed by the court, and that the deed accurately recites the property or interest thus sold. If the title of the property was vested in the receiver by order of the court, it in that case passes to the purchaser. He is not bound to inquire whether any errors intervened in the action of the court or irregularities were committed by the receiver in the sale.

2. If the court is deceived by the report of a receiver, or master, as to the conditions upon which property is sold under its order, and the purchaser participates in the deception, the court can, at any time before the rights of third parties have intervened, set the whole proceedings, including the deed, aside. But after the rights of such third parties have intervened, its authority in that respect can only be exercised consistently with protection to those rights.

3. If the receiver omit to perform his whole duty, by which the parties are injured, or commit any fraud upon the court, and the rights of third parties have so far intervened as to prevent the court from setting the proceedings aside, the injured parties must seek their remedy personally against that officer or on his official bond.

The Commercial Bank of Natchez owning certain property, and among it a dwelling attached to its banking house, its property was placed, on an application for a forfeiture of its charter, in the hands of one Robertson as trustee. Several of the stockholders, represented by a certain Bacon, being dissatisfied with what was thus done, filed a bill in the court below against this Robertson, and all the property was taken from him and put into the hands of one Ferguson, as receiver. Hereupon, in November, 1857, the receiver was authorized by the court to sell the lands or any part of them upon such terms as he may deem best for the interest of all parties, provided that he shall not sell any of said lands upon a longer credit than one, two, and three years from the time of sale.

The order authorizing the sale adding:

Page 83 U. S. 197

"In all cases he is to retain a lien or take a deed of trust on the lands sold."

On the 12th of March, 1860, the receiver sold the dwelling attached to the bank to one Gustavus Calhoun, and on the same day executed to him a conveyance of the premises sold, reciting in the conveyance that he executed it as receiver, and

"for and in consideration of the sum of nine thousand and five hundred dollars, to him in hand paid by the said Gustavus Calhoun, the receipt whereof is hereby acknowledged."

It contained a covenant of warranty against all persons claiming through the receiver. The deed was duly recorded within five days after the sale, and Calhoun entered into and kept possession under it.

After the receiver had thus executed his conveyance -- that is to say, on the 19th of May, 1860 -- the receiver reported that he had "sold the dwelling attached to the banking house in Natchez for $9,500, and prayed that the same may be confirmed." He also referred to certain sales of land in Bolivar County, in 1858, in which the purchasers had allowed the lands to be sold for taxes. The court ordered that this report, and a report made by a commissioner in the case, be referred to the master in chancery "to examine into and report upon the sufficiency and correctness of said reports."

The master, in conformity to this order, made his report on 29th May, 1860. He stated that he had had the reports under consideration and found them correct, and recommended their confirmation. The last portion of the report of Ferguson, the receiver, respecting the redemption of lands in Bolivar County, he referred to the court for consideration.

At the same term, 1860, the court ordered that the report of the master in chancery be in all things confirmed, reserving for consideration until the next term the matter referring to the lands in Bolivar County.

The reader will have observed that neither in the master's report of sale nor anywhere else in these proceedings is the name of the person mentioned to whom the sale was made,

Page 83 U. S. 198

nor the terms on which it was made, as whether for cash or on credit. And, in point of fact, Calhoun did not pay any cash, but, on the contrary, gave his promissory note to the receiver, Ferguson, for the price.

In this state of things, and Calhoun being in possession of the property thus bought by him, and occupying it as his dwelling, his son-in-law, one Blackburn, was desirous of raising money to carry on the business of planting, in which he was engaged on a plantation owned by Calhoun, his father-in-law. A firm in New Orleans, Given, Watts & Co., agreed to furnish it to him upon his own notes, provided these were secured by a mortgage of real estate of Calhoun. Accordingly, on the 22d of January, 1867, Blackburn gave the firm his notes (three notes for $4,000 each, falling due respectively in October, November, and December, 1867), and Calhoun and wife executed, on the same day, a mortgage of the property bought, and occupied at the time as above mentioned. Prior to its execution, Given, Watts & Co., to assure themselves of the validity of Calhoun's title, caused an inquiry to be instituted, and received from the clerk of the court a certificate that there were no encumbrances. Given, Watts & Co. sold one of these notes to the Northern Bank of Kentucky, and, becoming bankrupt, the other two passed to their assignees in bankruptcy.

Calhoun became insolvent, and one Koontz, who had succeeded Ferguson as receiver of the Commercial Bank of Natchez, finding that Calhoun had never paid his note for $9,500, now proposed to him to cancel the conveyance that had been made to him. Calhoun agreed to do this, and thereupon made a deed of the premises to Koontz, after which Koontz applied to the court on an ex parte proceeding and obtained an order reciting the invalidity of the sale by Ferguson to Calhoun and cancelling the same.

In this state of things the Northern Bank of Kentucky and the assignees of Given, Watts & Co. filed a bill of foreclosure in the court below, against Koontz and also against Calhoun and wife, praying a foreclosure of the mortgage and payment of the three notes, or of what was due on them.

Page 83 U. S. 199

The court, finding the amounts due the complainants respectively, decreed a foreclosure nisi, and ordered Koontz to hold the property subject to payment of the amounts thus found, and enjoined him from setting up any title under the conveyance made to Koontz adverse to the rights of the complainants under the mortgage. From this decree Koontz appealed.

Page 83 U. S. 200

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