Benas v. Maher

• Decision Date: 10 June 1942
• Docket Number: No. 12192.,12192.
• Citation: 128 F.2d 247
• Parties: BENAS v. MAHER.
• Court: U.S. Court of Appeals — Eighth Circuit

128 F.2d 247 (1942)

BENAS v. MAHER.

No. 12192.

Circuit Court of Appeals, Eighth Circuit.

May 19, 1942.

Rehearing Denied June 10, 1942.

Joseph Boxerman, of St. Louis, Mo. (William H. Allen, of St. Louis, Mo., on the brief), for appellant.

Harry C. Barker, of St. Louis, Mo. (George O. Durham and Barker, Durham & Drury, all of St. Louis, Mo., on the brief), for appellee.

Before SANBORN, WOODROUGH, and VAN VALKENBURGH, Circuit Judges.

VAN VALKENBURGH, Circuit Judge.

The plant of the bankrupt, Mississippi Valley Iron Company, lying between Broadway and the Mississippi River in the City of St. Louis, Missouri, consists of four parcels of real estate, together with buildings, machinery and equipment thereon. These four parcels of real estate contain somewhat more than three acres, and, together with the machinery and equipment thereon, constituted the smelting and refining plant of the bankrupt company. The machinery and equipment annexed to the land consisted of iron smelters, conveyors, carriers, cranes, railroad switches, motors, generators, engines, boilers, etc., essential to a large ore reduction and pigiron plant constructed during the First World War.

In 1921 bonds of the company were authorized in the total amount of $1,250,000.00; by 1922, $995,000.00 had been issued and were outstanding. The plant had been reconstructed in 1919, during World War I, but, like many other large industrial plants, similarly erected and enlarged, it had proved unprofitable during peace time and had accordingly been out of operation, apparently since about 1926. It had not been abandoned however and watchmen were kept in charge. It appears that through years of non-use and neglect some deterioration had resulted to the machinery and equipment.

April 15, 1932, the Collector of the City of St. Louis obtained against the Mississippi Valley Iron Company a judgment for delinquent taxes for the years 1926 to 1929 inclusive, in the sum of $24,677.45, which amount included penalties and interest, together with $288.16 representing court costs. The bond holders were not made parties to this suit. The clerk of the Comptroller's office of the City testifies that delinquent taxes for the years 1926 to 1939 without penalties or interest amounted to $51,495.22; and that such taxes plus interest and costs amounted to $85,080.89, as of November 30, 1940.

Sometime in 1940 one Frank Lucas obtained a judgment against the Mississippi Valley Iron Company in the amount of about $3,600.00. The witness Ben Berger, for a period of ten years prior to the hearing before the referee, beginning March 19, 1941, was engaged in the business of buying and selling scrap iron, consisting largely of old machinery, metal equipment, etc. In the spring of 1940 he purchased the said Lucas judgment for $1,553.00. The money for this purchase was furnished by appellant George Benas. Berger, who gave an unsecured note for the amount of this loan, had been introduced to Benas a short time before. At that time Mr. Joseph Boxerman represented Berger, and later acted as attorney for Benas. Upon securing the Lucas judgment Berger caused execution to issue, and sought to levy upon the property of the Mississippi Valley Iron Company in order to remove scrap iron. He was stopped, as he says, by other parties filing claims with the sheriff, who refused to proceed with the execution unless Berger furnished bond, which he refused to do. Later, in October, 1940, or before, Berger talked with Boxerman about this tax judgment entered April 15, 1932. The substance of that conversation was that if this property were sold Berger felt he "might be able to come in with a new judgment and get some money out for my judgment". Berger employed Boxerman to take up with the city the matter of this tax sale, agreeing to pay the expenses in case of default. The sale took place November 12, 1940. Mr. Boxerman made the bid of $1,500.00, as the agent for Robert I. Pelton. Appellant Benas paid the amount of the bid to the sheriff, who executed an official deed to Pelton, the agent and personal representative of Benas. November 15, 1940, Benas, Pelton and Berger went to the plant of the Mississippi Valley Iron Company, as Benas says, "to take possession". He turned the property over to Berger "to start dismantling the stuff". The arrangement Berger says he had with appellant relative to the scrap-iron he was to take out was, "I got to pay him market price whatever it is going to be". He started at once to loading the dismantled scrap-iron on a railroad car.

November 22, 1940, the Mississippi Valley Iron Company was adjudged a bankrupt, and appellee Maher was duly elected and qualified as its trustee. Before any of said scrap-iron, thus loaded in a railroad car, had been removed from the premises, the said trustee stopped further operations and took charge. In due time appellant filed application for orders directing the trustee to surrender forthwith possession of the real estate and to reimburse appellant for certain properties alleged to have been converted.

The trustee in his answer prayed that the tax sale be set aside as invalid and that Pelton be decreed to convey the property back to the bankrupt estate. These petitions of appellant were duly set for hearing before the referee March 19, 1941. The referee filed an exhaustive report holding that the procedure followed by the sheriff in the sale of November 12, 1940, was proper; but that under it appellant acquired no rights which cannot be set aside by return of the purchase money, which the trustee conceded should be done under appropriate order. The referee agreed that, in his opinion, the consideration paid would have been adequate under the state of the title if the transaction had been genuine on the part of Benas; but that the entire substance of that transaction had been, not to secure a valid title by execution sale, but to secure the right to dismantle and dispose of the scrap-iron, of the appraised value of approximately $20,000.00. His conclusion was that appellant, unmindful of the duties and liabilities imposed upon him by law toward other parties in interest, towit, the bondholders and the City of St. Louis, was a party to a scheme to commit destructive waste, which no court of equity would countenance. His conclusion was that appellant was not entitled to the relief prayed for in the two petitions filed, and that he should cause his agent Pelton to convey the property involved to the Trustee in Bankruptcy. Respecting the right of appellant to a refund of the purchase money paid by him at the tax sale the referee made the following order:

"That the sum of $1,500.00 less any portion of such purchase price which may be returned to George Benas by the Sheriff of the City of St. Louis or the City of St. Louis, and less any and all unpaid costs that may be taxed against said George Benas in this proceeding, be paid to him by the trustee out of the assets that come into the hands of the trustee during the course of the administration of the bankruptcy estate, but such payment shall be made only after all costs of administration of the bankruptcy provided for in Section 64 of the Bankruptcy Act 11 U.S.C.A. § 104 have been paid".

Upon petition for review the district court found the issues against appellant upon his petitions for orders on the trustee; that petitioner's alleged title under the tax sale of November 12, 1940, was void in that the sale was not conducted under the provisions of law then applicable to the City of St. Louis, in which the bankrupt estate was situated; concurred in the finding of the referee that the appellant did not come into court with clean hands, and, "ought not to be allowed to avail himself of the jurisdiction, if any, of Courts of Equity to correct defects in, validate, or make effective a title void and ineffective at law, or to extricate himself from the situation in which he finds himself as a result of his inequitable purpose and conduct".

Appellant is ordered to cause his agent Pelton to convey the property involved to the trustee in bankruptcy, and the court retains jurisdiction of the cause for the purpose of enforcing and carrying out of all the terms and provisions of its decree.

The main question involved in this appeal is the legal status of the tax judgment sale under which appellant claims title. This depends upon the proper construction of the statutes of the State of Missouri in force when the sale was made. It is to be remembered that the judgment was rendered April 15, 1932, execution issued October 7, 1940, the levy thereunder was made October 16, 1940, and the sale followed November 12, 1940. When the judgment was rendered Section 9956, R. S.Mo.1929, was in force, providing that the lien of the state should be enforced by the issue of a special fieri facias, under which the real estate, or so much thereof as might be necessary to satisfy such judgment, be sold. Section 9958, R.S.Mo. 1929, prescribed the duties of the sheriff as follows:

"Sheriff to execute deed. — The sheriff shall execute to the purchasers of real estate under this chapter a deed for the property sold, which shall be acknowledged before the circuit court of the county or city, as in ordinary cases, and which shall convey a title in fee to such purchaser of the real estate therein named, and shall be prima facie evidence of title, and that the matter and things therein stated are true".

It was under these sections that the sheriff acted November 12, 1940. April 7, 1933, the Legislature enacted a law commonly known as the "Jones-Munger Law", relating to collection of delinquent and back taxes, and providing for foreclosure, sale, and redemption of delinquent property. Laws of Missouri 1933, pages 425 et seq., Mo.R.S.A. §§ 11117, 11121 et seq. By Section 2, Laws of Mo. 1933, p. 429, Sections 9952 to 9963 of R.S. Mo.1929 (Art. 9, Chapter 59), were expressly repealed. These sections include Sections 9956...