Viersen v. Boettcher

• Decision Date: 19 November 1963
• Docket Number: No. 39788,39788
• Citation: 387 P.2d 133
• Parties: Sam K. VIERSEN, R. W. Viersen, Edith Viersen Terry and The Central National Bank of Okmulgee, Oklahoma, Plaintiffs in Error, v. Henry F. BOETTCHER and Catherine Boettcher Converse, Defendants in Error.
• Court: Oklahoma Supreme Court

Page 133

387 P.2d 133

1963 OK 262

Sam K. VIERSEN, R. W. Viersen, Edith Viersen Terry and The Central National Bank of Okmulgee, Oklahoma Plaintiffs in Error, v. Henry F. BOETTCHER and Catherine Boettcher Converse Defendants in Error.

No. 39788.

Supreme Court of Oklahoma.

Nov. 19, 1963.

Syllabus by the Court

1. In federal court bankruptcy proceedings, the trustee in bankruptcy has no superior rights or greater interest in the property of the bankrupt and occupies no better position with respect thereto than the bankrupt. The trustee takes the property, not as an innocent purchaser for value, without notice, but as the debtor had it at the time of bankruptcy, subject to all valid claims, liens and equities. A purchaser from the trustee takes no better title than the bankrupt or trustee had, absent appropriately conducted proceedings for sale free of liens.

2. In federal court bankruptcy proceedings, title to the assets of the bankrupt vests in the trustee in bankruptcy on the filing of a petition under the bankruptcy law, and that title is not subject to divestiture by judgment in an action against the bankrupt, commenced after bankruptcy, to which the trustee is not a party.

3. An action to quiet title to real property by a cross petitioner claiming ownership therein, who has been in continuous and uninterrupted possession of the property since before the opposing party's claim arose, is not barred by the limitation provisions contained in 12 O.S.1961 § 93(4).

Appeal from the District Court of Roger Mills County; W. P. Keen, Judge.

Action by plaintiffs, Henry Boettcher and Catherine Boettcher Converse, against the defendants, Sam K. Viersen, R. W. Viersen, Edith Viersen Terry and the Central National Bank of Okmulgee, for a judgment quieting their title to the entire interest in the minerals under a quarter section of land. Defendants filed an answer and cross petition in which they claimed an undivided one-half interest in said minerals, and asked that their title thereto be quieted in them. From judgment for plaintiffs, defendants appeal. Affirmed in part and reversed in part with directions.

Smith, Inglish & Gray, Okmulgee, Royse & Meacham, Elk City, for plaintiffs in error.

J. Scott Vincent, Cheyenne, for defendants in error.

JACKSON, Justice.

In the trial court, plaintiffs Henry Boettcher and Catherine Boettcher Converse sued the defendants, Sam K. Viersen, R. W. Viersen, Edith Viersen Terry, the Central National Bank of Okmulgee, Oklahoma, and the Cal-Cul Oil Company, a 'cancelled corporation', in an action to quiet their title to the mineral (royalty) interest under a described quarter section of land in Roger Mills County. The Cal-Cul Oil Company filed no answer and took no part in the proceedings in the trial court and did not appeal; the other defendants filed an answer in the nature of a general denial, and a cross petition in which they claimed an undivided one-half mineral interest in the lands concerned and asked that their title be quieted. Both plaintiffs and defendants pleaded that they were in possession, and based their claims upon separate chains of title to be hereinafter described. We will continue to refer to the parties as they appeared in the trial court, or by name.

Most of the facts were stipulated. In 1922 the then owner of the entire interest in the premises mortgaged the same to the Federal Mortgage Loan Company, and the mortgage was thereafter assigned to William Sharp. In 1930 the then owners of the premises, subject to the mortgage, sold an undivided one-half interest in the minerals (hereinafter referred to as the severed minerals), and such interest descended by mesne conveyances to the Cal-Cul Oil Company. In 1933 the Cal-Cul Oil Company was adjudged a bankrupt in proper proceedings in the United States District Court, and a trustee in bankruptcy was appointed. In the schedules filed by or on behalf of the bankrupt, the severed minerals were listed as an asset of Cal-Cul, but apparently there was no notation that they were subject to a prior mortgage. In 1937 the trustee, after proper proceedings, sold 'all of the assets' of the bankrupt, including the severed minerals, to some of the defendants in this case. The holder of the mortgage was not served with any notice of the bankruptcy proceedings, or of the trustee's sale in connection therewith. The claims of defendants herein rest upon the validity and effect of the trustee's sale, under which they claim.

In 1935, William Sharp, the holder of the mortgage previously mentioned, instituted mortgage foreclosure proceedings in the district court of Roger Mills County. Mr. Sharp apparently had no actual knowledge of the bankruptcy proceedings, and no service of notice of the mortgage foreclosure proceedings was had upon the trustee, although there was a personal service of notice upon the president of the bankrupt Cal-Cul Oil Company. The sheriff's sale, pursuant to the mortgage foreclosure judgment, was not had until 1938, and the trustee in bankruptcy had no notice of the sale. Plaintiffs herein claim under the sheriff's sale.

Judgment of the trial court was for plaintiffs and defendants appeal. They here argue several propositions, all of which concern the relative effect and validity of the two sales under which the parties claim.

Since the 1937 trustee's sale was first in point of time, we will consider it first, and in that connection we take note of the following well established rules with regard to federal court bankruptcy proceedings and sales:

'The rule 'caveat emptor' prevails in bankruptcy sales, as in all judicial sales, unless special direction otherwise is made in the order of sale. Generally, unless the sale is specifically free from liens, only such rights, title and interests as the bankrupt held and owned at the time of his adjudication in bankruptcy, and as passed on to the trustee, are acquired, subject to any outstanding liens, charges or encumbrances valid and enforceable as against the trustee.' Remington on Bankruptcy, Vol. 6, Sec. 2569.

'If the sale is not expressly ordered to be free and clear of liens, it is a sale subject to liens.' Remington on Bankruptcy, Vol. 6, Sec. 2576.

'* * * the trustee has no superior rights or greater interest in the property and occupies no better position with respect thereto than the bankrupt. * * * the trustee takes the property, not as an innocent purchaser for value, without notice, but as the debtor had it at the time of bankruptcy, subject to all valid claims, liens, and equities.' 8 C.J.S. Bankruptcy § 199.

'A purchaser from the trustee in bankruptcy takes no better title than the bankrupt or trustee had.' Higgs v. Renfrow, 195 Okl. 545, 159 P.2d 749.

'* * * Title to assets vests in the trustee on filing of a petition under the Act, and that title is not subject to divestiture by judgment in an action against the bankrupt, commenced after bankruptcy, to which the trustee is not a party.' Remington on Bankruptcy, Vol. 3, Sec. 1402; Hull v. Burr, 61 Fla. 625, 55 So. 852, 26 ABR 897.

Under the above rules of law and the undisputed facts in this case, it may be said that the trustee's sale had exactly the same effect as if the bankrupt corporation itself had sold the severed minerals prior to the adjudication in bankruptcy. Insofar as the question of title is concerned, the trustee in bankruptcy stood in the shoes of the bankrupt, and took no better title than the bankrupt had. It is conceded that the bankrupt corporation held the severed minerals subject to the prior mortgage; the trustee sold it the same way. It is not alleged, and the record does not show, that the order authorizing the trustee to sell the severed minerals specifically directed him to sell them free of liens or encumbrances, or that the trustee's sale was had with the consent of the mortgage holder.

We therefore hold that the purchasers at the trustee's sale, and those claiming under them, held the severed minerals here concerned subject to the prior mortgage. Such being the case, the mortgage, with the related right to foreclose upon non-payment of the debt it secured, was still valid as to the severed minerals.

We now consider the 1938 sheriff's sale pursuant to the mortgage foreclosure proceedings. At that time, title to the severed minerals had passed from the bankrupt corporation to the trustee in bankruptcy, and from the trustee to the purchasers at the trustee's sale. It is undisputed that no notice of the mortgage foreclosure proceedings, or of the resulting sale, was served upon the trustee in bankruptcy or his successors in interest.

It is well settled that when a real estate mortgage is foreclosed by action, and the owner of an interest in the property is not made a party defendant, the interest of such owner is not foreclosed. Rives v. Stanford, 188 Okl. 108, 106 P.2d 1101. The same rule is applicable where the separate interest consists of a severed mineral interest. Deruy v. Noah, 199 Okl. 230, 185 P.2d 189.

Since defendants herein, claimants under the trustee's sale, were not parties to subsequent mortgage foreclosure proceedings and sheriff's sale, we hold that their severed mineral interest was not foreclosed thereby, and that plaintiffs herein, claimants under the sheriff's sale, acquired no interest therein.

In their answer brief filed herein, plaintiffs in the trial court (defendants in error herein) present counter propositions to the general effect that (1) the foreclosure judgment is not void on the face of the judgment roll and cannot be collaterally attacked in this action, and (2) therefore, the defendants below are barred by the 5 and 15 year statutes of limitation.

While it is generally true that a judgment which is valid on its face may not be 'collaterally attacked', plaintiffs overlook the fact that it was the plaintiffs who put the validity of the mortgage foreclosure proceedings in issue in this case. They asserted the validity of the...