Hagan v. Gardner

• Decision Date: 02 November 1960
• Docket Number: No. 16669.,16669.
• Citation: 283 F.2d 643
• Parties: Everet L. HAGAN, Appellant, v. George L. GARDNER, Trustee in Bankruptcy of the Estate of Flintridge Heights, Inc., a Bankrupt Corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

283 F.2d 643 (1960)

Everet L. HAGAN, Appellant, v. George L. GARDNER, Trustee in Bankruptcy of the Estate of Flintridge Heights, Inc., a Bankrupt Corporation, Appellee.

No. 16669.

United States Court of Appeals Ninth Circuit.

November 2, 1960.

Evert L. Hagan, in pro. per.

Joseph W. Fairfield, Los Angeles, Cal., for appellee.

Before STEPHENS and BARNES, Circuit Judges, and KILKENNY, District Judge.

KILKENNY, District Judge.

Proceeding in bankruptcy to "reclaim" the sum of $8,100.00 from the trustee.

On April 1, 1955, a former trustee in bankruptcy sold a tract of real property, an asset of the bankrupt estate, to Naylor, Byers & King¹ for the sum of $128,000.00, receiving in payment therefor $40,000.00 in cash and a note for $98,000.00. This note was secured by a deed of trust on a portion of said real property. The purchasers having defaulted in payment of their note, foreclosure proceedings were instituted in November 1955, and on January 10, 1956, a decree of foreclosure was entered. On February 9, 1956, the property was sold at execution sale, pursuant to said foreclosure decree, at which time the property was bid in by the trustee for the sum of $25,000.00. A deficiency judgment was entered against Naylor in favor of the trustee for the sum of $77,296.50. Prior to the institution of the foreclosure proceedings, Naylor, by way of grant deed, conveyed such real property to a corporation known as Flintridge Highlands, Inc. (not to be confused with bankrupt, Flintridge Heights, Inc.). Flintridge Highlands was not a party to the foreclosure proceedings. Said property was subject to statutory redemption within one year, the time within which to redeem expiring on February 9, 1957. No redemption was made.

In December 1956, the appellant obtained judgment against Flintridge Highlands, Inc. and levied execution on the land in question and obtained a Marshal's deed under execution, which deed passed the legal title to said real property to appellant. On June 27, 1957, appellant filed with the Referee a "tender" dated June 24, 1957, accompanied by a check in the sum of $27,400.00. It will be noted that this tender was made and submitted to the Referee more than four months after the expiration of the said period of redemption. Appellant participated in all of the hearings on the sale of such property and submitted a bid for the purchase thereof. At a later date the trustee sold his right, title and interest in such property to one Lenz for the sum of $35,500.00, and an order confirming the sale of said interest was made by the Referee on May 28, 1958. Appellant was in court at the time of such confirmation and, before signing the order, the Referee specifically inquired of appellant if the sale was satisfactory and received an affirmative reply from appellant's counsel. On May 20, 1958, the appellant entered into a written contract with the purchaser Lenz regarding appellant's claim against the estate, which said agreement recited that Lenz had purchased appellant's claim against said property for the sum of $29,000.00. On December 8, 1959, appellant filed in bankruptcy court the petition on which his claim is based.

The Referee in Bankruptcy found the foregoing facts and entered an order denying appellant's petition in reclamation. On review by the District Court, the order of the Referee was in all respects approved and confirmed.

Although appellant is a man of considerable financial means, he concluded to personally prosecute this appeal and as a result, the assignments of error lack that degree of clarity which would ordinarily define the issues. Appellant's assignments of error, ten in number, are very repetitious and do not pinpoint the principal issue on this appeal. In the final analysis, that issue is whether aplant has any title to or right to possession of $8,100.00, the difference between his tender of $27,400.00 and the sales price to Lenz of $35,500.00. In order for appellant to prevail in a reclamation proceeding, it is necessary for him to show that he was the owner of the $8,100.00 in question and was entitled to the immediate possession thereof. Collier on Bankruptcy, 14th Ed., Vol. II, § 23.11, § 70.39. The burden of proof is at all times on the appellant. Collier on Bankruptcy, 14th Ed., Vol. II, § 70.39(3). At one point appellant makes the broad statement that he is claiming the fund under a common law right of redemption. His statutory right of redemption expired some four months prior to filing of this proceeding.

Both parties concede that the foreclosure proceedings were ineffectual as to Flintridge Highlands, Inc., the grantee of the original mortgagors. The Supreme Court of California has consistently held that the title of the purchaser from a mortgagor is not affected by foreclosure proceedings to which the purchaser is not a party. Burns v. Hiatt, 149 Cal. 617, 87 P. 196; District Bond Co. v. Pollock, 19 Cal.2d 304, 121 P.2d 7; Tutt v. VanVoast, 36 Cal.App.2d 282, 97 P.2d 869; Elbert, Ltd. v. Clare, 40 Cal.2d 498, 254 P.2d 20. These decisions make it obvious that appellant, the successor in interest to Flintridge Highlands, Inc., is not affected by the foreclosure proceedings and is still the owner of the property.

The rights of the appellant, as successor in interest to the original mortgagor, are controlled by the original transaction between the mortgagors and the trustee. The appellant is still faced with the lien of the original mortgage or deed of trust in the sum of $98,000.00. That this is the law of California is made clear in Burns v. Hiatt, supra 149 Cal. 617, 87 P. 197, from which we quote:

"* * * The proceeding to enforce such lien, although ineffectual against plaintiff by reason

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