Ross v. Carey

• Decision Date: 06 July 1949
• Docket Number: No. 12577.,12577.
• Citation: 174 F.2d 872
• Parties: ROSS v. CAREY. In re BROOME.
• Court: U.S. Court of Appeals — Fifth Circuit

174 F.2d 872 (1949)

ROSS v. CAREY. In re BROOME.

No. 12577.

United States Court of Appeals Fifth Circuit.

June 3, 1949.

Rehearing Denied July 6, 1949.

Ray M. Watson, Irving E. Lewis, Miami, Fla., for appellant.

B. E. Carey, Wm. Clinton Green, Miami, Fla., for appellee.

Before HUTCHESON, SIBLEY, and HOLMES, Circuit Judges.

SIBLEY, Circuit Judge.

On January 22nd, 1948, on his voluntary petition William Franklin Broome was adjudged a bankrupt, a receiver was appointed, and a stay order was granted ex parte to stop the Sheriff from executing a writ of possession against the bankrupt which issued from a State Court of Florida to enforce a sale under a decree foreclosing a mortgage on the bankrupt's home. On January 27, 1948, appellant Ross, the purchaser at the sale, petitioned the bankruptcy court to modify the stay order so as to permit the process of the State Court to be executed. The receiver, now trustee in bankruptcy, resisted, claiming there had been no bona fide sale of the property, but that it was had contrary to an arrangement made with one Watson by Broome, and confirmed by the State Court without notice to Broome. After a hearing the referee decided Ross was not a bona fide purchaser without notice, and that the arrangement made between Broome and Watson amounted to a loan by Watson of about $2,231 to be secured, along with $1,000 due Watson for old attorney's fees, by the mortgage in course of foreclosure; and that Watson should be protected for the $2,231 new money, but as to the old fees there was a preference which was avoided by the bankruptcy within four months; and that the stay order should be continued, and the trustee required to repay to Watson the $2,231 within twenty days. The Judge affirmed the referee and Ross appeals.

The facts plainly appearing are these: Broome's house was under a mortgage, the validity of which is not questioned. A decree of foreclosure in the State Court was rendered pro confesso Nov. 14, 1947, for $2,204.35 then due, and sale advertised for December 1, 1947. On that date Broome telephoned Watson, who was an old friend and had been Broome's lawyer in other matters, and asked him to get the sale postponed, saying he could raise the money to pay the mortgage in a few days. Watson at first refused, but finally agreed to arrange a postponement if Broome would also raise $1,000 owing Watson for back fees. Watson then made an arrangement in writing with the attorney for the mortgage creditor, whereby Watson deposited in escrow $2,231 in cash on the condition that if within three weeks the mortgage creditor should deliver to Watson a duly executed transfer to him of the note and mortgage in suit and on assignment of the decree, without recourse, and an authority for Watson or his nominee to be substituted as plaintiff, the cash should be paid over to the creditor; but if the transfer was not received within three weeks the cash to be returned to Watson. A week later, on December 8, 1947, Broome had not raised the money as promised, and Watson wrote him this letter:

"Pursuant to our telephone conference one day last week and in order that there may be no misunderstanding, I may say that on Monday, December 1, 1947, at your urgent request I placed in escrow with Mr. William Muir the sum of $2,231 to prevent the sale of your property in Miami Springs, against which foreclosure proceedings were pending and on that date the property had been scheduled for sale. It was our understanding before I advanced this sum of money that within a very short time you would be able to raise the money to reimburse me the sum which I had advanced and in addition thereto would pay me the money which you owe by reason of legal services heretofore rendered in your behalf. Although you indicated that you would raise the money within a few days, I am writing to state that if you will raise this money within one month from the time I advanced it the same will be...