Unless it is directed that the property be sold divested of liens, the purchaser takes title subject to all existing liens, and must pay such liens or otherwise arrange with the lien creditors in order to retain the property." 587 587a Under the pro (3) PRACTICE ON SALE OF INCUMBERED PROPERTY." visions of § 58, ante, an application by the trustee for the sale of the property of the bankrupt in his custody, free from the liens of creditors, is authorized to be made on not less than 10 days' notice to the creditors of such bankrupt, including the creditors having such liens, given by mail to the respective addresses of such creditors as they appear on the schedule of the bankrupt.588 The record should disclose affirmatively that every creditor whose lien will be discharged by the sale has received due notice of the application for an order of sale.589 It is proper for the court to bring in a creditor claiming a lien on the property by a rule to show cause." The order of sale should provide that a lienor, if the purchaser at the sale, may give a receipt to the amount of his lien in lieu of cash.591 Where the property is sold subject to liens, persons holding the liens are not entitled to have the sale vacated because they were not given notice of the sale or its confirmation, or because the order of sale was not correct in form.592 It has been held that where real property of the bankrupt. is sold under a mortgage foreclosure in a State court, such court has jurisdiction to appoint an auditor to distribute the fund realized. upon the sale. 593 590 d. Setting sales aside; resale.-After the confirmation of a judicial sale neither mere inadequacy of price, nor offers of better prices, nor 587. Matter of Reading Hat Mfg. Co. (D. C., Pa.), 34 Am. B. R. 884, 224 Fed. 786; Application of Bickel (Ill. Sup. Ct.), 48 Am. B. R. 8, 134 N. E. 76. Where assets, in the hands of the bankruptcy court, are claimed by a third person, the court may, without deciding the question of title, sell the interest of the bankrupt in such property, and leave the question of title to be contested and settled by the purchaser and the adverse claimant. Schmidt v. Ryan (C. C. A., 3d Cir.), 49 Am. B. R. 28, 281 Fed. 790. 587a. Forms for sale of encumbered property, see Supplementary Forms, Nos. 291-297, Vol. III, post. 588. McRaney v. Riley (Miss. Sup. Ct.), 48 Am. B. R. 232, 91 So. 399. 589. In re Saxton Furnace Co. (D. C., Pa.), 14 Am. B. R. 483, 136 Fed. 697; In re Platteville Foundry & Machine Co. (D. C., Wis.), 17 Am. B. R. 291, 147 Fed. 828. 590. Matter of American Architects' Tube Co. (C. C. A., 6th Cir.), 25 Am. B. R. 651, 184 Fed. 694. 591. Clark Hardware Co. v. Sauve (C. C. A., 8th Cir.), 33 Am. B. R. 674, 220 Fed. 102. 592. Matter of Burr Mfg. Co. (C. C. A., 2d Cir.), 32 Am. B. R. 708, 217 Fed. 16. 593. Furth v. Stahl (Pa. Sup. Ct.), 10 Am. B. R. 442, 205 Fed. 439. anything but fraud, accident, mistake or some other cause for which equity would void a like sale between private parties will warrant a court in avoiding the confirmation of the sale, or in opening the latter and receiving subsequent bids.594 However where the inadequacy is so great as in itself to raise a presumption of fraud or to shock the conscience of the court the sale may be set aside.595 An error as to the basis of value, made in the trustee's circular inviting bids, will not warrant a resale, where the purchaser had opportunity to ascertain the value, independently of the circular.596 Where a sale of a lease was made by a trustee and the purchaser knew that a question had arisen as to the validity of the title and the right of the trustee to sell, and the trustee stated at the sale that he assumed no personal responsibility and did not warrant the lease or its salability, such sale will not be set aside after it appears that the value was less than the purchaser supposed.597 Where a trustee himself is 594. Matter of Burr Mfg. Co. (C. C. A., 2d Cir.), 32 Am. B. R. 708, 217 Fed. 16; Jacobsohn v. Larkey (C. C. A., 3d Cir.), 40 Am. B. R. 563, 245 Fed. 538; In re Thompson (Ref., Pa.), 2 Am. B. R. 216; In re Groves, 2 N. B. N. Rep. 30; In re Ethier (D. C., Wis.), 9 Am. B. R. 160, 118 Fed. 107; Sturgis v. Corbin (C. C. A., 4th Cir.), 15 Am. B. R. 543, 141 Fed. 1, 72 C. C. A. 179; Matter of Irvine (D. C., S. Car.), 43 Am. B. R. 155, 255 Fed. 168. Compare In re Finday Bros. (D. C., N. Y.), 4 Am. B. R. 745, 104 Fed. 675, for case where application was made to set aside unfair sale made by a general assignee before bankruptcy. 595. Matter of Reinstein (D. C., Mass.), 39 Am. B. R. 856, 247 Fed. 126; Jacobson v. Larkey (C. C. A., 3d Cir.), 40 Am. B. R. 563, 245 Fed. 538; Matter of Burr Mfg. Co. (C. C. A., 2d Cir.), 32 Am. B. R. 708, 217 Fed. 16; In re Shapiro (D. C., Pa.), 19 Am. B. R. 125, 154 Fed. 673, holding that where $3,400 has been realized upon the sale of a stock of goods appraised at $5,000, an offer to pay $3,800 is not enough to warrant setting aside the sale and ordering a resale. As to the construction of an order of resale, see In re Wylie (C. C. A., 3d Cir.), 18 Am. B. R. 503, 153 Fed. 281, affg. 17 Am. 596. Owens v. Bruce (C. C. A., 4th See 597. Matter of Frazin and Oppenheim (C. C. A., 2d Cir.), 29 Am. B. R. 212, 201 Fed. 343. Where it appears that the receiver made no claim of interest in a lease which was sold, an order requiring the purchaser to pay the sum bid therefor was reversed, but without prejudice. Matter of Milestones, Inc. (C. C. A., 2d Cir.), 48 Am. B. R. 343, 279 Fed. 105. Refusal of bid; right of resale.-A bidder at a public sale of bankrupt's real estate who, upon being told that his bid in a representative capacity would not be accepted, announces that he will thereafter bid for himself upon his own responsibility, is entitled to have a bid made in his own behalf accepted; and where the trustee directs the bidding to be closed upon the receipt of the bid of a third person, after a purchaser, and the land subsequent to the sale increases in value, the sale should be set aside and resold, compensation to be made to the trustee for the price paid by him for the land and for the cost of improvements made thereon." A sale of property may be set aside where it appears that there were irregularities which prejudiced the rights of interested parties.599 A sale which has been confirmed, the purchaser having been permitted to take possession of the goods and sell part of them, should not be summarily set aside for inadequacy or alleged collusion; the creditors' remedy in such case, if any, is by suit against the purchaser and the guilty parties for an accounting.600 In ordering a resale the court may impose the condition that the creditors secure a higher bid which they claim the property will bring. A sale of the bankrupt's equity of redemption in certain real estate was set aside where the trustee failed to give notice of the sale to an intending bidder, according to promise, and the petitioner filed an agreement to bid three times the amount bid at the first sale.602 In proceedings to set aside a sale on the ground of fraud, where all the charges of fraud are met with sworn denials, 601 the refusal of a bid made by such bidder in his own behalf, which is twentyfive dollars higher than the bid of such third person, the referee has no right to impose as a condition precedent to reopening the bidding that such bidder make an upset bid" greater by three thousand dollars than the amount at which the bidding was closed, but a resale should be ordered, starting the bidding at the amount of the rejected bid. Coal City House Furnishing Co. v. Hogue (C. C. A., 4th Cir.), 28 Am. B. R. 258, 197 Fed. 1; Matter of Ohio Copper Mining Co. (D. C., N. Y.), 38 Am. B. R. 548, 237 Fed. 490. 598. In re Hawley (D. C., Iowa), 9 Am. B. R. 61, 117 Fed. 364. 599. Matter of Burr Mfg. Co. (D. C., N. Y.), 32 Am. B. R. 686, 209 Fed. 138. 600. In re Knosher & Co. (C. C. A., 9th Cir.), 28 Am. B. R. 747, 197 Fed. 136. 601. Jacobson v. Larkey (C. C. A., 3d Cir.), 40 Am. B. R. 563, 245 Fed. 538. Larger offer. Where real estate of the appraised value of $100,000 was sold for $41,500 and thereafter an upset bid of $50,000 was made, whereupon the District Court refused to confirm the sale and ordered the property resold, at which sale it was sold for $50,600; it was held that the court below was warranted in refusing to approve the first sale both by exercising the discretion given it in such matters and because the real estate did not bring 75 per cent of the appraised value as required by subdivision b of this section. Bryant v. Stockhausen Co., Inc. (C. C. A., 4th Cir.), 46 Am. B. R. 414, 271 Fed. 921. 602. In re Shea (D. C., Mass.), 10 Am. B. R. 481, 122 Fed. 742, affd. 11 Am. B. R. 207, 123 Fed. 153. Compare In re Belden (D. C., N. Y.), 9 Am. B. R. 679, 120 Fed. 524, where the court refused to set aside a sale of the bankrupt's interest in his father's estate, on the motion of one who has no interest in the matter except a desire to become a bidder and purchaser at a higher figure, especially where all the creditors oppose the motion, and protest in writing against a resale. 604 and no evidence is offered by the petitioner, the charges fall for want of supporting proof.603 If the explanations are adequate and not improbable or inconsistent with honest conduct, they must be accepted as truthful, in the absence of evidence of their falsity. A creditor is estopped to question the validity of a sale where he knew at the time of sale, or had the opportunity of knowing, all the facts, and took no steps for several years to have the sale set aside. 605 e. Transfer of trustee's title to purchaser.- Subsection c, relative to the transfer of title to the purchaser, is expressive of the law. On the report of the sale being confirmed, an order is usually entered directing the trustee to make the transfer on receipt of the consideration. The instrument of transfer should always recite what interest, as, for instance, the bankrupt's or the latter's free of liens, is transferred, and as to covenants, should be adapted to the forms used by the assignee or receivers under State laws.606 Where a business corporation has been adjudged a bankrupt and its assets, including its good will and corporate name, have been sold by order of the court, the purchaser will be protected in the ownership of the property purchased, and the former bankrupt will not be permitted by using the old corporation name to interfere with the good will of the business. A sale by a trustee under order of the court, of a note payable to the bankrupt, passes the legal title to the purchaser, who may sue thereon with all the right the trustee had.608 A trustee's sale is a 607 603. Bray v. U. S. Fidelity, etc., Co. (C. C. A., 4th Cir.), 45 Am. B. R. 395, 267 Fed. 533. 604. Bray v. U. S. Fidelity, etc., Co. (C. C. A., 4th Cir.), 45 Am. B. R. 395, 267 Fed. 533. 605. Bray v. U. S. Fidelity, etc., Co. (C. C. A., 4th Cir.), 45 Am. B. R. 395, 267 Fed. 533. Laches. A creditor who petitions a court to have a sale set aside on the ground of fraud, cannot excuse a long delay by alleging that he did not learn of certain facts until a short time before the petition was presented, where it appears that he would have known of the existence of such facts if he had attended a creditors meeting of which he had due notice. Bray v. U. S. Fidelity, etc., Co. (C. C. A., 4th Cir.), 45 Am. B. R. 395, 267 Fed. 533. 606. Section 15, act of 1841, required the insertion in the deed of a copy of the adjudication and order appointing trustee. The dates of these steps in the proceedings should be inserted now. Compare also section 47-c, added by the amendatory act of 1903. Olitsky v. Estersohn (N. J. Ct. of Ch.), 44 Am. B. R. 350, 108 Atl. 88. Form of trustee deed.-See Supplementary Form No. 199, post. Release by mortgagee.- Where a mortgagee consents to a sale of property by a trustee in bankruptcy free from incumbrances, he waives all right to his mortgage lien, and a purchaser is not entitled to a release. Toler v. Crowder (Ark. Sup. Ct.), 39 Am. B. R. 215, 192 S. W. 905. 607. Myers Co. v. Tuttle (C. C., N. Y.), 26 Am. B. R. 541, 188 Fed. 532. 608. Bailey v. Anderson (Ga. Sup. Ct.), 32 Am. B. R. 863, 82 £. E. 290. 609 judicial sale and the rule of caveat emptor applies so that the sale passes only such interest as the trustee possesses. In an action on a note sold by the trustee the maker has the right to the same defenses against the purchaser as he would have if the trustee were the plaintiff.6 610 IX. TITLE OF TRUSTEE WHERE COMPOSITION IS SET ASIDE OR DISCHARGE' REVOKED Subsection d, relative to vesting title of bankrupt's property in the trustee upon a composition being set aside or a discharge being revoked, has been considered in appropriate places, ante. It constitutes the single exception to the American doctrine that the cleavage day as to a bankrupt's property shall be the day the petition is filed by or against him. When a composition is set aside or a discharge revoked, property of the bankrupt which would otherwise be "after-acquired, vests in the trustee as of the date of the decree so setting aside or revoking. Thus far there are no cases construing this subsection.612 611 X. TRANSFERS FRAUDULENT UNDER STATE LAWS MAY BE AVOIDED BY TRUSTEE 613 a. In general. Subsection e, relative to the powers of the trustee in respect to fraudulent transfers, has been referred to elsewhere.614 It is the corollary of § 67-b, and means simply that if a creditor could have avoided any transfer (not merely a lien) under the laws of the State, the trustee can do the same," 609. American Bottle Co. v. Finney (Ala. Sup. Ct.), 43 Am. B. R. 685, 82 So. 106. 610. Phillips v. Matthews (Ala. Sup. Ct.), 47 Am. B. R. 34, 88 So. 641. 611. See under this section, ante, subtitle "After acquired property." 612. See discussion under sections 13 and 15 of this work. 613. Additional authorities.- In addition to the cases cited under this title the practitioner should consult general works on fraudulent conveyances, such as Moore on Fraudulent Conveyances. 614. See discussion under Sections Sixty and Sixty-seven of this work. Compare also in this section, subtitle "Property Fraudulently Transferred." 615 although made more than four 615. Mueller v. Bruss, & Am. B. R. 443, 112 Wis. 406; McMahon v. Pithan (Iowa Sup. Ct.), 33 Am. B. R. 125, 147 N. W. 920; Woodman v. Butterfield (Me. Sup. Ct.), 40 Am. B. R. 40, 101 Atl. 25; Baldwin v. Kingston (D. C., N. J.), 40 Am. B. R. 641, 247 Fed. 163; Stellwagen v. Clum (U. S. Sup. Ct.), 41 Am. B. R. 1, 245 U. S. 605, citing Collier on Bankruptcy (11th ed.), 1178; McCabe v. Guido (Miss. Sup. Ct.), 41 Am. B. R. 178, 77 So. 801; Irwin v. Maple (C. C. A., 6th Cir.), 41 Am. B. R. 532, 252 Fed. 10; Williams v. Davidson (Wash. Sup. Ct.), 42 Am. B. R. 595, 176 Pac. 334; Kimbrough v. Alred (Ala. Sup. Ct.), 43 Am. B. R. 116, 80 So. 617; Googins v. Skillings (Me. Sup. Jud. Ct.), 44 Am. B. R. 378, 108 Atl. |