A
bona fide purchaser for value of perishable property
held under attachment at a sale made by order of the local court
gets a good title notwithstanding bankruptcy proceedings had been
instituted within four months after the attachment and had
proceeded to adjudication before the sale.
Page 226 U. S. 149
An order to sell attached property on the ground that it is
perishable is not one to enforce the lien of the attachment, but
one incidental to the preservation of the property, and the court
having the custody has the jurisdiction to sell.
A proceeding to sell perishable property is one
in rem,
and the purchaser gets title against all the world.
A local court having the custody under attachment of perishable
goods may order a sale if necessary to protect, and it is not
necessary that such sale be made under General Order XVIII, 3, in
order to validate it.
An order for sale of perishable property held under attachment,
made by the local court within the terms of the local act, will not
be set aside by this Court.
Even if the local statute permitting sales of perishable
property held
in custodia legis be broader than General
Order XVIII, 3, this Court will not for that reason only set aside
a sale made by the local court if within the terms of the local
act.
As to whether property is perishable or not, this Court will
follow the rulings of a territorial court in the absence of a
strong reason to the contrary.
15 N.M. 98 affirmed.
The facts are stated in the opinion.
Page 226 U. S. 153
MR. JUSTICE HOLMES delivered the opinion of the Court.
This case comes here upon appeal from a judgment denying the
title of the appellant, as trustee in bankruptcy, to property
formerly belonging to the bankrupt and sold in this suit by order
of the local court. The facts are these. The property in question
is a mining dredge. It was attached on February 27, 1906, and a
receiver was appointed on March 19. On May 1, a petition was filed
for an order directing the dredge to be sold on the ground that it
was "of a perishable nature, and liable to be lost or diminished in
value before the final adjudication of the
Page 226 U. S. 154
case" within the Compiled Laws of New Mexico, 1897, § 2716, and
an order to that effect was made on the same day. The ground of the
finding on which the sale was ordered was that the dredge was
anchored in an embanked pond fed by a mountain stream subject to
heavy floods, and was liable to damage from that source. The sale
took place on June 26, and the dredge was bought in good faith and
without notice of the defendant's insolvency at a price of $5,000,
paid into court by the appellee, Springer. The sale was confirmed
on July 17. But on March 12, 1906, a petition in bankruptcy had
been filed in the Northern District of Illinois against the Oro
Dredging Company, the defendant in this suit. On April 23, the
company was adjudged a bankrupt. On July 9, the appellant was
appointed trustee, and on July 19 qualified. On August 2, he first
appeared in this cause, that being the first notice of the
adjudication received by the parties concerned or the court. He
filed an intervening petition praying that the order of sale be set
aside, the attachment dissolved, and the property turned over to
him. The petition, so far as it affects the dredge, was denied, the
judgment was affirmed by the supreme court of the territory, and
the trustee appealed.
The main ground of the appeal is that, by § 70 of the Bankruptcy
Act, the title of the trustee related back to the date of the
adjudication of bankruptcy, and that, as matter of law, Springer
could not be a
bona fide purchaser within the proviso of §
67f, saving the title of a
bona fide purchaser for value
who shall have acquired the property by the attachment without
notice or reasonable cause for inquiry. It is argued that filing
the petition in bankruptcy was a caveat to all the world,
Mueller v. Nugent, 184 U. S. 1, and
that the above proviso can have effect only when the judgment and
sale took place before the petition was filed.
We have no occasion to consider the last proposition in order to
decide this case, or what effect, if any, the proviso
Page 226 U. S. 155
has upon some language in
Conner v. Long, 104 U.
S. 228, relied upon by the appellant (
see Clarke v.
Larremore, 188 U. S. 486,
188 U. S.
488), the proceeding not having been one to enforce the
lien of the attachment, but simply an order made on a finding that,
in the language of the New Mexico statute, "the interests of both
plaintiff and defendant will be promoted by the sale of the
property." But the proposition quoted from
Mueller v.
Nugent must be taken with reference to the facts then before
the Court, and not as applicable to all intents and purposes.
York Mfg. Co. v. Cassell, 201 U.
S. 344,
201 U. S. 353;
Hiscock v. Varick Bank, 206 U. S. 28,
206 U. S. 41;
In re Rathman, 183 F. 913, 924-925. It is true that the
estate is regarded as
in custodia legis from the date of
the petition, as against a subsequent attachment.
Acme
Harvester Co. v. Beekman Lumber Co., 222 U.
S. 300,
222 U. S.
306-307. But in a case like the present, where, under an
attachment levied before the petition was filed, the property had
been put into the hands of a receiver without notice of the
petition, it is not true that all power and jurisdiction of the
local court were ended before notice of the bankruptcy proceedings.
Eyster v. Gaff, 91 U. S. 521,
91 U. S.
524-525;
Scott v. Ellery, 142 U.
S. 381,
142 U. S. 384;
Jaquith v. Rowley, 188 U. S. 620,
188 U. S. 626;
Frank v. Vollkommer, 205 U. S. 521,
205 U. S. 529;
Revere Copper Co. v. Dimock, 90 N.Y. 33.
The jurisdiction of the territorial court not having been
avoided, and that court having the actual custody of the
res, it had the power to preserve the subject matter of
the controversy that necessarily is incident to such conditions. An
illustration, although not a perfect analogy, is to found in
United States v. Shipp, 203 U. S. 563,
203 U. S. 573.
An appeal had been taken to this Court on a petition for habeas
corpus, where a prisoner was held under sentence of a state court,
and, pending the appeal, this Court had ordered the custody of the
appellant to be retained. Shipp was charged with contempt for
having been party
Page 226 U. S. 156
to a conspiracy that ended in lynching the prisoner. It was
strongly argued that neither the circuit court that refused the
writ nor this Court had any jurisdiction of the case, but it was
held that whether it had jurisdiction or not, until the question
was decided, this Court had authority from the necessity of the
case to preserve the subject of the petition. A similar authority
existed in the territorial court until the trustee saw fit to
intervene, which, so far as would have appeared at the time of the
sale, had anyone known of the bankruptcy proceedings, he might
never do. According to Marshall, C.J.,
"a right to order a sale is for the benefit of all parties, not
because the case is depending in that particular court, but because
the thing may perish while in its custody, and while neither party
can enjoy its use."
Jennings v.
Carson, 4 Cranch 2,
8
U. S. 26. The recognition of a power springing from
necessity is of old standing in English law.
Eyston v.
Studd, Plowd. 459, 466; 2 Inst. 168;
Baker v. Baker,
1 Ventris 313.
See further Young v. Kellar, 94 Mo. 581;
Betterton v. Eppstein, 78 Tex. 443;
In re Le Vay,
125 F. 990, 992.
It is argued that, if a sale was necessary, the court of
bankruptcy could have directed it under General Order 18, 3, and
that its power was exclusive. But such a rule would much impair the
usefulness of the principle. The trustee, if appointed, may not
know the condition of the property, or be prepared to decide. The
court having the actual custody of the
res does not know
of the bankruptcy proceedings. There is a necessity for immediate
action and no one is ready to act. If the local court, in its
ignorance, directs a sale and the purchaser is chargeable with
notice that there may be somewhere a petition filed that will
destroy his title, the doubt affects the price that he will give,
and if the sale turns out effective, the goods have been
sacrificed. The very reason of the rule that permits a good title
to be given by an authority that has
Page 226 U. S. 157
none contradicts the limitation supposed. We are of opinion that
the power of the territorial court remained. "For necessity (which
is excepted out of the law) the sale in that case is good." 2 Inst.
168. The proceeding is
in rem, against all the world, the
sale stands, and the claim of the trustee is transferred to the
proceeds, which ordinarily must be presumed to represent the fair
value of the goods and take their place.
Finally it is argued that the court of bankruptcy must decide
whether the property is perishable or not, and that this property
was not within the power conferred by the statute of New Mexico.
The first proposition is little more than the one last discussed in
another form. But, assuming that for any reason we could go behind
the findings on which the case comes here, we see no reason for
doing so if the sale was within the terms of the local act. On that
question, as usual, we follow the ruling of the supreme court of
the territory unless there are stronger reasons to the contrary
than are shown here.
Fox v. Haarstick, 156 U.
S. 674;
Albright v. Sandoval, 216 U.
S. 331,
216 U. S. 339.
The act as construed, though possibly broader than General Order
18, 3, does not go beyond the principle of necessity, at least as
applied to this case.
Judgment affirmed.