Appeal from the Circuit Court for Montgomery County; Shure, J.
Brune, C. J., and Prescott, Horney, Marbury and Sybert, JJ. Horney, J., delivered the opinion of the Court.
This is an appeal from an order of court overruling the exceptions to a foreclosure sale of real estate situated in the Forest Knolls Subdivision*fn1 in Montgomery County. The sale was made by Caesar L. Aiello (substituted trustee) under a deed of trust from Forest Knolls, Inc. (debtor), to Suburban Trust Company (original trustee) to secure the payment of a debt due Home Federal Savings and Loan Association (creditor). The exceptions were filed by Frank Blaustein (exceptant).
The corporate debtor, which was engaged in the business of developing real estate for residential purposes, executed the deed of trust on the properties in question in September of 1958. But, when an involuntary petition for the reorganization of the debtor corporation was filed in April of 1960, the encumbered property became a part of the estate of the bankrupt corporation.
Subsequently, in June of 1961, the trustee in the bankruptcy proceeding to reorganize the debtor corporation "was authorized and directed to sell subject to all liens [emphasis supplied], all right, title and interest" of the trustee and the estate in bankruptcy in the encumbered property (and certain other properties) by delivering to the exceptant a quitclaim deed for such property. The transaction was completed and the deed was delivered in due course. The record shows that the creditor had knowledge of the transaction because it had subsequently inquired of the exceptant (through his attorney) what disposition of the "first trust lien" he proposed, but apparently the exceptant did not reply.
In August of 1961, the creditor, by a duly executed and recorded deed of appointment, substituted Caesar L. Aiello as trustee in the place and stead of the original trustee, and, on the ex parte petition of the creditor, the Circuit Court for Montgomery County ratified and confirmed the substitution. And, while the record is silent as to whether the exceptant had actual notice of the substitution of trustee, it is not controverted that notice of the sale of the encumbered property was duly advertised pursuant to Maryland Rule 1391 e 1 (b), now codified as Rule w74 a 2. The foreclosure sale was held on September 22, 1961.
The exceptant contends: (i) that the foreclosure proceeding, absent an order of the District Court of the United States for the District of Maryland authorizing it, violated § 148 of the Bankruptcy Act and that the sale is therefore null and void; and (ii) that the appointment of a substitute trustee without notice to the exceptant violated his constitutional right to due process.
In citing § 148 of the Bankruptcy Act (11 U. S. C. A. § 548) -- providing in pertinent part that "[u]ntil otherwise ordered * * * an order approving a petition [for reorganization] shall operate as a stay * * * of any act or other proceeding to enforce a lien against the debtor's property" -- the claim here, on the theory that the stay provided is self-executing, is that the approval of the reorganization proceeding
had the effect of placing all of the property of the bankrupt debtor under the exclusive jurisdiction of the bankruptcy court and of effectively preventing the enforcement of a lien on such property in a state court unless and until the bankruptcy court passed an order authorizing such action.
While we do not disagree with the correctness of the claim as an abstract proposition of law, we think it is devoid of substance under the circumstances in this case. For here, the property with which we are concerned was clearly not that of the debtor at the time the foreclosure proceeding was instituted by the substituted trustee. This is so because once a sale made by a trustee in bankruptcy is confirmed by an order of the bankruptcy court, the sale becomes complete and whatever interest or estate the bankrupt debtor formerly had in the property passes from the trustee and the estate of the bankrupt to the purchaser. See Coulter v. Blieden, 104 F. 2d 29 (8th Cir. 1939), cert. den. 308 U.S. 583 (1939). And see In Re Strunks Lane & Jellico Mountain Coal & Coke Co., 64 F. Supp. 731 (D. C. Ky. 1946). Cf. Crane v. Crane, 173 N. E. 353 (Ill. 1930). The ...