US SUPREME COURT DECISIONS

Property was sold to H by order of a court of bankruptcy. He not paying for it, the court, without notice to him, vacated the order of sale, and made an order selling it to C, who paid for it, and went into possession of it. Afterwards, on review, the sale to C was set aside, and the sale to H reinstated. H, having paid for the property, received possession of it, and afterwards the money paid by C was repaid to him. Held that C was not liable to pay to H the profits derived by him from the use of the property while he had it. chanrobles.com-redchanrobles.com-red

Page 110 U. S. 404

On the 5th of June, 1875, Harry Fox and William B. Howard, co-partners as Fox & Howard, were adjudged bankrupts, on the petition of their creditors, by the District Court of the United States for the Northern District of Illinois. On the sixteenth of June, Bradford Hancock was appointed by that court provisional assignee. He took possession of the property hereinafter mentioned, and on his petition the court made an order, on June 19, directing him to advertise for sealed bids for the purchase of the property, either as a whole or in parcels, the bids to be opened by the judge of the court on July 1. The property consisted of tug boats, dredges, pile drivers, and scows, and articles used in connection therewith. On July 2, the assignee reported to the court a bid of $40,000 by Jefferson Hodgkins, for certain of the property, and recommended its acceptance. On July 9, the court made an order approving of and confirming the sale, and directing the assignee, on the receipt of the $40,000, to execute to Hodgkins all transfers necessary to vest in him the title of the bankrupts to the property, and to deliver to him the immediate possession thereof, and to pay the $40,000 into court. On the 12th of July the assignee

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presented to the court a sworn petition, setting forth that he had repeatedly called on Hodgkins to pay over to him the purchase money, and had on July 10 presented to Hodgkins a certified copy of the order confirming the sale, and demanded payment of the $40,000, or a deposit on account thereof, and offered delivery of the property on payment; that Hodgkins had neither paid nor deposited anything; that Conro & Carkin (a firm composed of Albert Conro and Willard S. Carkin) had made a bid of $40,500 for the same property, agreeing to assume certain charges, and that he believed it to be for the best interest of the estate that the order confirming the sale to Hodgkins should be set aside, and that the property be sold to Conro & Carkin. On the same day, the court made an order ex parte setting aside the order of sale to Hodgkins, annulling such sale, accepting the bid of Conro & Carkin, and directing that the property included in the bid of Hodgkins be sold to Conro & Carkin for $40,500 on the terms of their bid, and that the assignee deliver the property to them, with proper bills of sale, on their paying to him the $40,500. On the same day, Conro & Carkin paid to the assignee the $40,500, and he delivered to them a bill of chanrobles.com-redchanrobles.com-red

Page 110 U. S. 405

sale of the property, and put the property into their possession.

On the 10th of August, Hodgkins filed in the Circuit Court of the United States for the Northern District of Illinois a petition for the review of the order made by the district court on July 12. That petition alleged that Charles S. Crane was the principal in the Hodgkins bid. On the 13th of August, the circuit court, on a hearing on the petition of review, made an order stating that it was of opinion that the district court should not have made the order of July 12 without giving Hodgkins or Crane an opportunity to be heard, and directing the district court to open and set aside that order, and give Hodgkins or Crane an opportunity to be heard on the application to set aside or vacate the order of July 9, and that in the meantime, and until the action of the district court thereon, nothing should be done in relation to the property, by any of the parties, prejudicial to the rights of Hodgkins or Crane.

On the 18th of August, Hodgkins and Crane filed their joint petition in the district court, praying that the order of July 12 be set aside; that the property be delivered to them, and that Conro & Carkin, the bankrupts, and the assignee, pay to them the value of the use of the property from July 12. The petition alleged that the bid of Hodgkins was made on behalf of and by the direction of Crane, and that the assignee and Conro & Carkin had acted in bad faith. Hancock had been duly appointed assignee in bankruptcy, and he and Conro & Carkin and the bankrupts were made parties to the proceedings by a rule to show cause. The assignee answered the petition on the 27th of August. Under an order of the district judge, the petitioners paid into the district court, on the 6th of September, the sum of $40,000. On the 13th of September, Conro & Carkin filed a joint answer to the petition. Testimony was taken before a register on the issues raised. The matter was heard by the district court on the 4th of November, and on the 6th of March, 1876, it made an order dismissing the petition on the merits. On the same day, chanrobles.com-redchanrobles.com-red

Page 110 U. S. 406

Crane and Hodgkins filed in the circuit court a petition of review, praying for a reversal of the action of the district court. On the 10th of April, the circuit court made an order reversing and setting aside the orders made by the district court, July 12, 1875, and March 6, 1876, and confirming its own order of August 13, 1875. On the 24th of April, the circuit court made a further order vacating the order made by the district court, July 12, 1875, and decreeing that the order made by the district court, July 9, 1875, remain in full force and effect as originally made, and then proceeding as follows:

"And it appearing that the sum of forty thousand dollars has been paid into the district court on the sale confirmed to the said Hodgkins on the ninth day of July, A.D. eighteen hundred and seventy-five, and this Court being of opinion that, upon the payment of the purchase money by the said Hodgkins, the order of the ninth day of July aforesaid vested in him from that date all the right, title, and interest of the bankrupts in the property, the district court is hereby directed to order the assignee to execute and deliver to the said Hodgkins the necessary papers to show the title in the said property, and to cause the assignee to deliver the said property to the said Hodgkins or to the said Crane. And the district court is hereby directed and required to make all needful rules and orders, summary or otherwise, to carry into effect the said confirmatory order of July 9, A.D. eighteen hundred and seventy-five. And the district court is directed to return, subject to the conditions hereinafter stated, to the said Conro & Carkin, the sum of forth thousand five hundred dollars, the amount of purchase money paid by them, the sale to them being hereby annulled and set aside. . . . And there being a question raised as to the rights of the parties growing out of the possession for a time of the property by Conro & Carkin, and of certain moneys paid by them for claims thereon, expenses, improvements, and repairs, as well as the profits, it is ordered that the said Conro & Carkin, or the assignee, or the said Crane and Hodgkins, or either of them, may have the right to file a bill or to commence other legal proceedings in any court having jurisdiction thereof, as they may be advised, to determine the rights or equities of the parties. And the district court may, on

Page 110 U. S. 407

the application for that purpose, retain any part of the money now in the district court and belonging to Conro & Carkin, or require security, before the said money is paid to them, from the said Conro & Carkin, to answer for any claim due from them, growing out of the possession and use of the property, to any party or parties entitled thereto."

Conro & Carkin and the assignee took an appeal, May 3, 1876, to this Court from that order. On the 5th of May, 1876, Crane and Hodgkins obtained possession of nearly all the property in question by means of a writ of replevin issued from a court of the State of Illinois, and on the 9th of May, 1877, they obtained possession of a piledriver, part of the property. The case in this Court was docketed here, but was, on motion of the appellees, dismissed for want of jurisdiction, on March 19, 1877. Conro v. Crane, 94 U. S. 441. On the 24th of May, 1877, the district court made an order that Conro & Carkin have leave to withdraw the $40,500 on their giving a bond in the penalty of $30,000, which they gave, with three sureties, conditioned that they would appear without delay to any suit or bill which might be brought against them, by any person concerned, touching the premises, and would pay all claims due from them to any parties entitled thereto, growing out of the use of the property in question. On the same day the $40,500 was paid back to them, and the bill in this suit was filed by Crane and Hodgkins, in the Circuit Court of the United States for the Northern District of Illinois, against Conro & Carkin and the assignee.

The bill sets forth the foregoing matters, and charges fraud and conspiracy, and alleges that Conro & Carkin derived profits from the use of the property and were the constructive trustees of the plaintiffs in using it, and prays for an account of such profits, and of the expenses incurred in using the property, and of the fair rental value of the property, and of the value of its use, and of the expenses of the plaintiffs in defending their title and obtaining possession of the property, and for a decree against the defendants therefor. The defendants answered the bill, and there were replications to the answers. chanrobles.com-redchanrobles.com-red

Page 110 U. S. 408

The proofs so taken before the register in bankruptcy were used in evidence, and further proofs were taken on both sides. An order of reference to a master was made in June, 1879, under which, after taking further evidence, he reported as to the rental value of the property from July 12, 1875, during the time Conro & Carkin had it, and as to the amount of profits they derived from it while they had it, and also as to what they paid for repairs on it, and as to what Crane and Hodgkins had paid for fees and expenses in recovering or defending the title to the property in the previous litigations. The appellants and the appellees excepted to the report, and the court made a final decree which contained the following provisions:

"That the said defendants Albert Conro and Willard S. Carkin be held to account for the reasonable value of the use of said property in the pleadings described, while the same was withheld from the possession of the said complainants by the defendants Conro & Carkin, which value, in the judgment of the court, is, in this case, equal to the net profits realized by them from the use of said property other than piledriver No. 6, from July 12, 1875, to May 5, 1876, being, as the master reports, the sum of fourteen thousand six hundred and ninety-three dollars and seventy-nine cents ($14,693.79), the report of the said master in that behalf being hereby confirmed, and that the said complainants ought to have and recover of the said Albert Conro and Willard S. Carkin the said last-mentioned sum, with interest thereon at the rate of six percent per annum from May 5, 1876, and also that the said complainants are entitled to a decree against the said Albert Conro and Willard S. Carkin for the further sum of three hundred dollars ($300) for the use of piledriver No. 6, with like interest from the 9th day of May, 1877, and that the said complainants ought to have and recover of the said Albert Conro and Willard S. Carkin the said last-mentioned sum, with interest as aforesaid. And it further appearing to the court that the said two sums of money and interest thereon as aforesaid amount at the date of the entry of this decree, to the sum of eighteen thousand and seventy dollars ($18.070.00), it is thereupon further ordered, adjudged, and decreed by the court that the said complainants

Page 110 U. S. 409

do have and recover of the said defendants Albert Conro and Willard S. Carkin the last-mentioned sum of eighteen thousand and seventy dollars, besides the costs of this suit, to be taxed."

From this decree Conro & Carkin have appealed to this Court.