Files v. Brown

• Decision Date: 14 July 1903
• Docket Number: 1,870.
• Citation: 124 F. 133
• Parties: FILES v. BROWN (two cases).
• Court: U.S. Court of Appeals — Eighth Circuit

124 F. 133

FILES v. BROWN (two cases).

No. 1,870.

United States Court of Appeals, Eighth Circuit.

July 14, 1903

Syllabus by the Court.

In the national courts final decrees and orders in equity cannot be reviewed by writs of error, nor can final judgments or orders at law be successfully challenged by appeals.

A petition to set aside an order of court for the sale of the property of an insolvent bank by a receiver under the national banking act, and to rescind the sale effected under the order, and an order which grants the relief sought by such a petition, constitute proceedings in equity, and they are reviewable by appeal only.

In a sale by a master of receiver under an order or decree in equity which contemplates a subsequent report and an order of confirmation, a bidder becomes a purchaser when the officer announces the sale to him. Thereafter he is liable to be compelled to complete his purchase, and such a sale will not before confirmation, be opened for bidders in the absence of fraud or of misconduct in the sale. It will not be set aside for inadequacy of price unless the inadequacy is so great as to shock the conscience.

When the bid of the proposing purchaser is reported to the court by the master or receiver in the first instance, and the price to be paid and the purchaser who is to pay it are specified in the order which empowers the officer to accept the bid, to make the sale and to convey the property, the sale is final, when the officer has exercised the power granted him by the order, received the price, and conveyed the property.

In the absence of fiduciary relations or extraordinary circumstances, courts and their officers are as firmly bound by their executed sales, both in morals and in law, as private citizens, and they ordinarily have no right or privilege to rescind them upon any ground which is not equally available to a private party.

The complainant must establish the essential facts of his cause of action for rescission of a contract with clearness and certainty.

The fact that $3,200 will probably be paid out of an insolvent estate upon certain collaterals pledged to secure a judgment which was sold by a receiver to a purchaser for $25, pursuant to an order of the court, does not so severely shock the conscience of a chancellor as to warrant a rescission of the sale, under this state of facts:

No duty is imposed upon a purchaser, by the mere relation of vendee and vendor, to communicate to his seller information of which the latter is ignorant, relative to the character or value of the property the purchaser is buying; and the failure to do so furnishes no ground for rescinding a sale, or for canceling an order of court which authorizes it.

After a demurrer to a petition to rescind a sale and to cancel the order which authorized it is overruled, the vendee has a right to answer the petition.

A. W Files, in pro per.

W. F Hill, H. F. Auten, J. M. Moore, and W. B. Smith, for appellee and defendant in error.

Appeal from the Circuit Court of the United States for the Eastern District of Arkansas.

In Error to the Circuit Court of the United States for the Eastern District of Arkansas.

On October 18, 1902, Edwin F. Brown, the receiver of the First National Bank of Little Rock, Ark., under the national banking act, filed his petition in the Circuit Court for the Eastern District of Arkansas, in which he prayed for an order of that court directing him to accept a bid of $25 made by A. W. Files, the appellant, for a judgment of $9,230.09 against J. G. Kelso, which was one of the assets of the bank, and commanding him to make the sale of and to assign the judgment to Files. On the same day the court authorized this receiver, by an order in the usual form, to accept the $25 bid by Files and to sell and assign the judgment to him, and the receiver complied with the order. Afterwards, and on November 8, 1902, the receiver of the bank filed a petition in the same court to rescind this sale, which had been consummated on October 18, 1902. On the same day that this petition was filed, Files, the purchaser, demurred to the petition. His demurrer was overruled, he prayed leave to answer the petition, his prayer was denied, and the court entered an order which was, in legal effect, a decree that its order of October 18, 1902, was revoked, set aside, and held for naught, and that the $25 obtained by the receiver for the sale of the judgment should be returned to Files. In other words, it rendered a complete decree of rescission of an executed sale. This order or decree is assailed by the appellant on the ground that the court erred (1) in overruling the demurrer to the petition upon which it is based; and (2) in refusing the appellant permission to answer the petition after his demurrer was overruled.

In the petition for rescission which conditions the answers to the objections of the appellant to the proceedings below, the receiver alleged the existence of these facts: The First National Bank of Little Rock became insolvent and went into the hands of a receiver, under the act for the establishment of national banks, in the year 1893. For some time prior to July 1, 1899, when he resigned his position, S. R. Cockrill was the receiver of the property of this bank. He died in the year 1901. When Cockrill resigned, H. F. Auten succeeded him. Auten resigned in August, 1901, and the appellee, Edwin F. Brown, was appointed, and has served in his place since that date. At some time while Cockrill was receiver he held the judgment for $9,230.09 against J. G. Kelso which is in controversy here. The debt evidenced by this judgment was partially secured by the pledge of certain collateral promissory notes made by Thomas H. Allen & Co., who were insolvent, and whose assets were also in the hands of a receiver. Cockrill proved these notes in the receivership of Allen & Co., and received certificates of their allowance as claims against the estate of Allen & Co., from M. B. Trezevant, the receiver of that estate. But when Cockrill resigned he did not deliver these certificates to his successors in office, and they did not know of the existence of these collaterals until after the judgment was sold and assigned to the appellant. On December 11, 1899, the receiver of the bank offered this judgment and all the remaining property of the insolvent bank for sale at public auction pursuant to a proper order of the Circuit Court, but the judgment was not sold, because it was so worthless that no one made a bid for it. In October, 1902, the appellant, A. W. Files, offered the receiver of the bank $25 for this judgment. The receiver reported this bid to the Comptroller of the Currency, and the latter referred it back to the receiver, with instructions to him to use his own judgment in the matter, and to sell the judgment against Kelso for the amount offered by Files, if, in his opinion, that was the best disposition that could be made of it. Thereupon, on October 18, 1902, the receiver presented his petition to the court for an order to accept this bid of Files and to consummate the sale. In this petition he set forth the fact that this judgment was not sold, for want of bidders, at the auction sale of the other assets of the bank in 1899; that Files now offered him $25 for it; that he had reported this bid to the Comptroller, and the latter had instructed him to accept it, if, in his opinion, this was the best that could be done in the premises; and that it was his opinion that it was for the best interests of the creditors of his trust that this offer of Files should be accepted. He prayed for an order authorizing him to sell the judgment to Files for $25. On the same day the court ordered that the receiver be authorized to sell, assign, and set over the judgment to Files upon the payment by him of the sum of $25; and the receiver thereupon duly assigned the judgment to the appellant, and accepted from him the $25 he offered in full payment for the assignment of the judgment. After this sale was completely executed the receiver of the bank learned of the pledge of the promissory notes of Allen & Co. to secure the debt evidenced by the judgment, but, according to his petition, he has been and is unable to learn or to state the exact value of these notes, or the probable amounts which will be distributed thereon; but he has been 'led to believe that there are now funds to be distributed amounting to about $1,200, and that there will be further funds distributed to the probable amount of $2,000. ' He alleges that in this state of the case he offered to return the $25 to Files, and the latter refused to receive it. He also alleges in this petition for rescission that, before and at the time of the sale of the judgment to him, Files knew of the existence of the collateral notes, of the existence of the certificates of allowance, and of their probable value, and that he failed to disclose these facts to the receiver before the sale was effected. He also alleges that 'the said certificates, having been received as assets, could not be sold or assigned except by authority of the Comptroller of the Currency, and under a proper order of a court of competent jurisdiction, and that, so far as plaintiff can learn, no such order or authority was had or received.'

Before SANBORN, THAYER, and VAN DEVANTER, Circuit Judges.

SANBORN Circuit Judge, after stating the case as above, .

The main questions in this case are: Did the facts set forth in the petition for avoidance of the order and for rescission of the sale entitle the appellee to that relief? And had the appellant the right to answer the petition after his demurrer to it was overruled? There are, however, one or two preliminary issues, the disposition of which will...