Allen v. Watkins, 15896.
| Citation | 234 F.2d 925 |
| Decision Date | 23 August 1956 |
| Docket Number | No. 15896.,15896. |
| Parties | R. M. ALLEN, Trustee of the Estate of Marvin P. Lovorn, Bankrupt, Appellant, v. R. A. WATKINS, Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Forrest G. Cooper, Indianola, Miss., for appellant.
Oscar B. Townsend, Arthur B. Clark, Jr., Indianola, Miss., for appellee.
Before TUTTLE, CAMERON and JONES, Circuit Judges.
This is an appeal by R. M. Allen, Trustee of the Estate of Marvin P. Lovorn, Bankrupt, from an order of the District Court reversing an order of the Referee in Bankruptcy which required the appellee, Watkins, to turn over to the Trustee the proceeds of a subsequent sale of mortgaged land of the Bankrupt, bought in by Watkins at the foreclosure sale. Appellant contends that the order of the Referee authorizing Watkins to proceed with the foreclosure sale was procured through fraud and that the Court should not permit a secured creditor, under such circumstances, to retain the proceeds of a subsequent private sale in excess of his own debt. The only question presented here is whether the representations of Watkins to the Referee to the effect that it was doubtful that there was any equity in the mortgaged lands of the bankrupt over and above the indebtedness, fraudulently induced the Referee to authorize the foreclosure sale.
The bankrupt purchased part of the land in question from Watkins in 1952 for $45,000. Adjoining acreage thereafter acquired enlarged the tract at the cost of $11,500, making the total purchase price $56,500 for the entire tract. There was a first lien on this land securing $35,000 in favor of The Mutual Benefit Life Insurance Company. A second lien, represented by a deed of trust in favor of Watkins, secured a $2,000 note to Watkins due December 1, 1954. On November 30, 1954, Lovorn was adjudicated a bankrupt and on December 11th, Allen was appointed Trustee, qualifying on December 14th.
A foreclosure of Watkins' deed of trust was commenced December 7th and, while this was proceeding, Watkins filed a petition with the Referee on December 14th alleging that it was doubtful whether there was any equity in said lands of the bankrupt over and above the indebtednesses. Petitioner requested an order disclaiming for the Trustee any equity in the security or an order authorizing the foreclosure sale which was pending.1 The Referee entered an order dated December 22nd treating the petition as one requesting authority to foreclose a lien and granting authority to Watkins to proceed with the foreclosure sale under his mortgage. The order stated that any proceeds from the sale above the indebtedness were to be paid to R. M. Allen, Trustee.2
The foreclosure was legally concluded on January 4, 1955 at a public sale attended by numerous prospective purchasers. Watkins made the only bid and became the purchaser for the amount of his indebtedness. On January 13th Watkins entered into a contract to sell the land thus purchased at and for the sum of $55,000, this being $18,000 more than the total of the first and second liens. The sale was consummated through Harrison, a real estate agent who had, for a period before the bankruptcy, been advertising the place for sale and trying to sell it for the bankrupt.
On April 12th the Trustee petitioned the Referee to require a turn-over by Watkins of the $18,000 in purchase money notes to be applied by him to payment of the claims of unsecured creditors. The petition alleged actual fraud on the part of Watkins in his petition for authority to foreclose, wherein he stated that there probably was no equity in the property above the indebtedness thereon. Upon the hearing of the Trustee's petition an opinion was rendered in which the Referee explicitly found that the charges of actual fraud on the part of Watkins were unfounded.3 Notwithstanding this finding, the order of the Referee required the turn-over by Watkins of the purchase money notes to the Trustee, the opinion of the Referee being that, in equity and good conscience Watkins would not be allowed to retain this profit while the unsecured creditors got nothing. The District Court reversed the order of the Referee, finding that there was no fraud on the part of Watkins in his representations to the Referee.4
It is well established that, upon adjudication of...
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In re Tyne
...is no evidence of fraud on the part of the appellees and the referee so concluded.4 A very similar case on its facts is Allen v. Watkins, 5 Cir., 1956, 234 F.2d 925, in which certain land was, as here, released by the bankruptcy court for foreclosure in the state court. The evidence in that......
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First Baptist Church, Inc., Matter of
...Coral Gables First Nat'l Bank v. Constructors of Florida, Inc., 299 F.2d 736 (5th Cir. 1962) (reorganization); Allen v. Watkins, 234 F.2d 925 (5th Cir. 1956) (ordinary The court having permitted the foreclosure sale to proceed in state court, the question is whether notice to creditors of t......