The obligee in a bond which supersedes an order confirming a
sale of real estate, and directs the immediate execution of a deed
and delivery of possession thereof to the purchaser, is entitled,
after that order has been affirmed on appeal, to recover as damages
for the breach of the obligation of the bond the value of the use
and possession -- that is to say in this case, the rents and
profits of the real estate during the time the purchaser is kept
out of the possession and use of the real estate by the supersedeas
bond, and the appeal in which it was allowed.
The question arising for decision in this cause is embodied in
the following certificate from the United States Circuit Court of
Appeals for the Eighth Circuit:
"The United States Circuit Court of Appeals for the Eighth
Circuit, sitting at the City of St. Louis, Missouri, on this 27th
day of December, 1900, hereby certifies that, upon the record on
file in said court in the above-entitled causes, wherein Lucian
Woodworth, Frank D. Brown, and George N. Clayton are plaintiffs in
error, and the Northwestern Mutual Life Insurance Company is
defendant in error, and Lucian Woodworth, Frank D. Brown, and
George N. Clayton are appellants, and the Northwestern Mutual Life
Insurance Company is appellee, and which
Page 185 U. S. 355
causes are now pending before this Court on writ of error to and
appeal from the Circuit Court of the United States for the District
of Nebraska, the following facts appear, namely:"
"On August 26, 1896, the Northwestern Mutual Life Insurance
Company filed its bill of complaint in the Circuit Court of the
United States for the District of Nebraska against Lucian Woodworth
and others to foreclose a mortgage given by Woodworth and his wife
to said company, upon certain real estate situated in the State of
Nebraska. A decree on said bill was entered on December 3, 1896, in
said circuit court foreclosing the mortgage, directing that a
master in chancery of the court sell the premises, and, upon
confirmation of the sale by the court, execute a deed to the
purchaser, and ordering that the purchaser of the premised at said
sale be put in possession thereof, and that any of the parties to
said cause who might be in possession of said premises, or any
person claiming under them or either of them, should deliver
possession to the purchaser on production of the master's deed of
said premises and a certified copy of the order confirming the
report of said sale after such order had become absolute. On
February 14, 1898, said real estate was sold by the master under
said decree, and was purchased at said sale by the Northwestern
Mutual Life Insurance Company for $39,152, a sum less than the
amount of the debt secured by the mortgage and the costs in the
suit. The master made his report of sale to the court on February
15, 1898. On March 15, 1898, said circuit court confirmed said
report of sale, directed that the master convey said real estate to
the purchaser at said sale, awarded a writ of possession to put
said purchaser in possession thereof, and rendered a deficiency
judgment for the sum of $2,696.90 and interest in favor of the
Northwestern Mutual Life Insurance Company and against said
Woodworth. On March 30, 1898, said Woodworth was allowed an appeal
from this order of confirmation to the United States Circuit Court
of Appeals for the Eighth Circuit, and thereafter, on April 8,
1898, he filed his appeal bond in the sum of $5,500 with Frank D.
Brown and George N. Clayton as sureties thereon, which bond was
conditioned for the payment of 'all damages and costs which it (the
Northwestern Mutual Life Insurance Company)
Page 185 U. S. 356
may incur by reason or on account of said appeal,' and worked a
supersedeas of the order of confirmation. The United
States circuit court of appeals on January 24, 1899, affirmed said
order of confirmation of sale, and on March 29, 1899, its mandate
was duly issued to, and filed in, said circuit court. On June 19,
1899, the deficient judgment and the costs taxed in said cause in
the United States circuit court of appeals were fully paid and
satisfied. On September 16, 1899, the defendant in error, the
Northwestern Mutual Life Insurance Company, filed its petition in
said circuit court against Lucian Woodworth, and the sureties on
said appeal bond, Frank D. Brown and George N. Clayton, alleging,
among other things, that the possession and use of said real estate
was withheld from said company by reason of the superseding of the
order of March 15, 1898, during the pendency of the appeal
therefrom, that the value of such use and possession during the
pendency of said appeal amounted to $3,750, and praying that
Woodworth and the sureties Brown and Clayton be cited to appear and
show cause why judgment should not be summarily entered against
them for said $3,750 and interests and costs. On September 16,
1899, an order to show cause against said Woodworth, Brown, and
Clayton was made on said petition as prayed for therein, and on
October 2, 1899, they filed their showing in resistance to said
petition, alleging that"
"damages for the rents and profits of the premises, or use and
detention thereof pending appeal, are not recoverable on a
supersedeas bond, and that the bond in question was not
given as security, or for the payment of rents and profits, or the
use or detention of the property pending appeal,"
and praying for the dismissal of said petition. On December 9,
1899, said circuit court entered a judgment and decree against the
plaintiffs in error, Woodworth, Brown, and Clayton, as prayed for
in said petition. Afterwards, in due season, to-wit, on January 31,
1900, said last-named judgment and decree having been rendered on
December 9, 1899, the record in the proceedings on said petition
was removed by writ of error and also by appeal to the United
States Circuit Court of Appeals for the Eighth Circuit, where it
still remains, the cause being as yet undecided.
Page 185 U. S. 357
"And the said United States circuit court of appeals hereby
certifies that, to the end that it may properly decide said case,
it desires the instruction of the Supreme Court of the United
States upon the following question or proposition of law arising
therein which is duly raised and presented by the record in said
case, said question being as follows:"
"Is the obligee in a bond which supersedes an order confirming a
sale of real estate and directing the immediate execution of a deed
and delivery of possession thereof to the purchaser entitled, after
that order has been affirmed on the appeal, to recover as damages
for the breach of the obligation of the bond the value of the use
and possession -- that is to say, in this case, the rents and
profits of the real estate during the time the purchaser is kept
out of the possession and use of the real estate by the
supersedeas bond and the appeal in which it was
allowed?"
MR. JUSTICE WHITE, after making the foregoing statement,
delivered the opinion of the Court.
The question propounded is to be considered in view of the
following facts: the property affected by the sale under
foreclosure was situated in the State of Nebraska, the bond in
question was given in a judicial proceeding in a court of the
United States, and, as stated by counsel for plaintiff in error in
argument, upon the affirmance of the order of confirmation by the
appellate court, a deed was issued to the purchaser at the sale
under foreclosure, and demand was made by him for payment of the
rents, issues, and profits sought to be recovered by the action at
bar.
As said by this Court in
Nalle v. Young, 160 U.
S. 624,
160 U. S. 637,
in an equity foreclosure in a circuit court of the United States,
the requirements of the state law should be complied with and
Page 185 U. S. 358
the forms of proceedings thereby prescribed pursued as nearly as
practicable. This appears to have been done in the foreclosure
proceedings under review, the decree of confirmation of the sale
not purporting to vest title in the purchaser, but containing a
direction for the execution and delivery of a deed. A reference to
the statutes of Nebraska regulating sales under foreclosure, and to
the decisions of the courts of that state, will conduce to an
ascertainment of the nature of the right or title, if any, vested
in a purchaser under a sale thus confirmed.
By section 497
a of the Code of Civil Procedure of
Nebraska, it is provided that the owner of any real estate against
which a decree of foreclosure has been rendered, or upon which an
execution has been levied to satisfy a judgment or decree of any
kind, may redeem the same from the lien of such decree or levy at
any time before the sale of the same shall be finally confirmed.
Section 498 provides for the examination and confirmation of such
sale by the court. Section 499 provides that, upon the confirmation
of a sale made of real estate sold on execution, the sheriff or
other officer who made such sale shall make to the purchaser of
such real estate as good and sufficient a deed of conveyance for
the property or land sold as the person against whom such writ of
execution was issued could have made of the same at the time the
land became liable to the judgment, or at any time thereafter. And
section 500 provides, among other things, that the deed so made
shall vest in the purchaser as good and perfect an estate in the
premises as was vested in the execution debtor at or after the time
when the land became liable for the satisfaction of the
judgment.
Construing these sections of the Code, the Supreme Court of
Nebraska, in
Yeazel v. White, (1894) 40 Neb. 432, held
that the owner of real estate sold on execution retains the legal
title thereto, and is entitled, in his own right, to the
possession, rents, profits, and usufruct of such real estate until
a final confirmation of the sale. In the course of the opinion, the
court said:
"In
State Bank v. Green, 10 Neb. 130, Lake J., speaking
for this court, said:"
"Under our law governing sales of real property on execution,
the title of the purchaser depends entirely upon
Page 185 U. S. 359
the sale's being finally confirmed, and until this is done, the
rights of the execution debtor are not certainly divested."
"And in
Lamb v. Sherman, 19 Neb. 681, Maxwell, C.J.,
speaking for this court, on that subject, said:"
"A purchaser at execution sale of real estate upon the payment
of the purchase money and confirmation of the sale becomes the
equitable owner of the property, and in a proper case may compel
the issuing of a sheriff's deed to himself."
In
Clark & Leonard Investment Co. v. Way, (1897) 52
Neb. 204, the following among other facts were presented for the
consideration of the court: a junior mortgagee, one of the
defendants in a foreclosure suit instituted by a prior mortgagee to
foreclose such prior mortgage as respected unpaid interest and the
amount of certain taxes which had been paid by the prior mortgagee,
became the purchaser at the sale made under the decree of
foreclosure. The sale was confirmed by the court. Thereupon the
mortgagor defendants appealed from the order of confirmation of
sale, but, after the case was pending in the appellate court for
about a year, the appeal was voluntarily dismissed. Thereafter,
upon the hearing of a motion to require the purchaser to complete
his bid, it was held -- and the decision in this particular was
affirmed by the Supreme Court of Nebraska -- that, on the dismissal
of the appeal from the order confirming the sale, the "title" of
the purchaser related back for all purposes at least to the time of
such confirmation, and the purchaser from that time was the owner
of the property and liable for subsequent taxes and interest on the
prior mortgage encumbrance. Further, it was said by the court:
"Undoubtedly the purchaser is entitled to an accounting for rents
in such a case from the time of confirmation."
The authorities just reviewed seem to be decisive of the
proposition that, by the local law of Nebraska, in a case like that
at bar, where, upon confirmation of a sale under a decree of
foreclosure, the sale is treated as perfected, credit is given to
the purchaser mortgagee upon the mortgage indebtedness then due,
and judgment passes for a deficiency, but the delivery of a deed is
prevented by the prosecution of an unfounded appeal from the order
confirming the sale, the affirmance by the
Page 185 U. S. 360
appellate court of the order of confirmation of the sale and the
deed subsequently executed vest in the purchaser, by relation, as
of the time of the confirmation of the sale, as well the legal as
the equitable title to the land, with the right to the rents,
issues, and profits which accrued after the confirmation of the
sale. The cases of
Orr v. Broad, 52 Neb. 490;
Clark v.
Missouri, Kansas & Texas Trust Co., 59 Neb. 53, and
Huston v. Canfield, 57 Neb. 345, are, however, cited as
sustaining a contrary doctrine to that just announced, but, on
careful examination, they will be found not to do so. In each case,
the right of a mortgagor to the possession of the land and the
rents and profits thereof was declared to continue
until the
confirmation of a sale on foreclosure. True, in the first two
cases, the right of a purchaser at a sale under execution of a
debtor's interest in land, encumbered by mortgage, to the
possession of the land and the rents and profits, as against a
mortgage, was in effect declared to be dependent upon the
acquisition of the legal title, by the delivery to the purchaser of
a deed of the premises, following the confirmation of the sale. In
each of the cases, however, a deed had regularly issued, and there
was no claim that the mortgagor or debtor had wrongfully interfered
with the passing of the legal title. There was consequently no
occasion for considering or applying the doctrine of relation.
It is, however, strenuously insisted that in
Philadelphia
Mortgage & Trust Co. v. Gustus, 55 Neb. 436, broad
expressions were used in the opinion announced by the court which
do not harmonize with the reasoning contained in the opinion in
Clark v. Way. But we do not need to pass on this
contention. The point for decision in the
Gustus case was
whether, under the statutes of Nebraska, the judgment debtor
possessed the right to redeem from a foreclosure sale during the
pendency of an appeal from the order of confirmation of the sale,
and the Nebraska court, in holding that the right to redeem might
be exercised during the pendency of the appeal, said:
"The appeal and bond, if they did not vacate the order of the
district court, superseded, suspended, or rendered it inoperative.
The purchaser acquired no rights, and the applicant was
Page 185 U. S. 361
not divested of his title to and rights in the land.
Tootle
v. White, 4 Neb. 401;
State Bank v. Green, 8 Neb.
297;
State Bank v. Green, 10 Neb. 133. All things remained
as before the sale and subsequent order of the district court, and
will so remain and exist until a decision in and by this Court of
the matter appealed. The order of the district court, by the
perfection of the appeal, became ineffectual as to all other
purposes for which it was made, and it certainly does not seem
unfair to say that it was not of force or effect as against the
right to redeem, nor does it appear unwarranted to construe the
section of the Code in its reference to time to have indicated the
date when the order shall become forceful and of full operation,
which it cannot until this Court has so decreed."
Nowhere, however, in the opinion was any allusion made to the
prior decision in
Clark v. Way, which we are constrained
to think would have been done if the grounds for the decision in
the latter case and the reasoning of the opinion in that case were
deemed to be destructive of the ruling made in the earlier case.
The court in the
Gustus case was dealing with a judgment
debtor who was seeking the benefit of a remedial statute. We
entertain no doubt that, if the Supreme Court of Nebraska was
called upon to determine whether or not a judgment debtor who had
taken an unfounded appeal might rightfully retain the rents and
profits which he had collected while in possession of the property
during the pendency of such appeal, it would, in order to prevent
injustice, apply the doctrine of relation, as was done in
Clark
Way, and hold that the affirmance of the order of confirmation
of the sale related back and gave efficacy to the original order of
confirmation, as of its date, and vested in the purchaser, from
that time at least, the equitable title to the land sold and an
equitable right to the thereafter accruing rents and profits.
The claim in the case at bar is for the rents and profits of the
land which accrued and were collected by the mortgagor after the
entry of the order of confirmation of the sale. Upon general
principles, independent of the decisions of the courts of Nebraska,
we would be constrained to hold that, under the circumstances
present in the case at bar, as we have heretofore
Page 185 U. S. 362
detailed, the purchaser acquired, as against the mortgagor, by
relation, both the legal and equitable title to the land purchased
-- at least as of the date of the order of confirmation of the
sale. This being the case, we come to consider the question as to
whether recovery may be had, upon a
supersedeas bond given
in a judicial foreclosure proceeding pending in a court of the
United States, of the rents and profits which accrued and were
collected by the judgment debtor after the confirmation of the sale
of the mortgaged property.
It has been strenuously urged that a negative answer to the
question just stated is rendered necessary by the decision of this
Court in
Kountze v. Omaha Hotel Co., 107 U.
S. 378. This contention is based upon the following
grounds: (1) that no distinction can logically be made between an
appeal from an order confirming a sale had under a decree in
foreclosure, as in the case at bar, and an appeal from a decree
ordering a sale, as in the
Kountze case; and, (2) that the
mortgagor, after the sale of the land under a decree in
foreclosure, is the owner of the rents and profits of such land
until final approval by the court of the sale and the execution and
delivery of a deed by the master. Of course, if the assumption
existing in the second ground be correct -- that is, that the
mortgagor, despite the confirmation of the sale, is entitled in his
own right to the rents and profits subsequently accruing, there
would be plausibility in the claim that there was no logical
distinction between an appeal from a decree of sale and an appeal
from an order of confirmation of the sale. But the assumption in
question, as we have shown, is not well founded, and, this being
the case, it results that there is a substantial distinction in the
character of the two classes of decrees. In the one case, the title
to the land, both legal and equitable, continues in the mortgagor;
in the other, at least the equitable title to the land and its
rents, issues, and profits vested in the purchaser by the sale
under the decree at the time of the confirmation of such sale. In
this aspect, following the reasoning in the
Kountze case,
the appropriation by the mortgagor, during the pendency of a
wrongful appeal by such mortgagor from the order confirming the
sale, of the rents, issues, and profits of the land, which
equitably
Page 185 U. S. 363
belonged to the purchaser, was "damage" within the meaning of
the statute and the condition of the bond. True, in the
Kountze case, the mortgagee purchaser was denied the right
to recover the rents and profits which had been collected by the
mortgagor intermediate the decree of sale and the actual sale of
the property. But this was because the appeal was from a decree
ordering a sale, and it was held the mortgagor was not divested of
the right to collect and retain the rents and profits of the land
before a final determination of a right to sell and a sale made
accordingly. The taking by the mortgagor of that which belonged to
him, and not to the mortgagee, it was decided did not constitute an
injury to the latter. The court, however, in its reasoning, made
plain the fact that, where, as in the case at bar, the real owner
of the rents and profits of real estate, in whom the legal as well
as equitable title had become vested before action brought upon the
bond, was the party for whose benefit the bond on appeal was given,
and the effect of the giving of such bond was to enable the
mortgagor, the principal in such bond, to appropriate rents,
issues, and profits of the land during the pendency of the appeal,
which equitably belonged to the purchaser, that appropriation
constituted "damage" to the obligee in the bond within the meaning
of the condition for payment of "all damages and costs which it may
incur by reason or on account of said appeal."
The question certified must be answered in the affirmative,
and it is so ordered.
MR. JUSTICE HARLAN and MR. JUSTICE BREWER took no part in the
decision of this cause.
