Flagler Finance Corp. v. Therrell

Ellis, J. This is the third time this case has been before the Supreme Court. See Sammons v. Trust Co. of Florida, 102 Fla. 711, 136 South. Rep. 442; same case, 105 Fla. 547, 141 South. Rep. 743. On the 4th day of August, 1932, notice of a master’s sale of the property pursuant to the final decree of fore *598 closure was filed. The notice stated that the sale would be made on September 5th.following. On the 3rd day of September another notice was filed that the sale would be made on October 3, 1932. The first notice was entitled Trust Company of Florida, as Trustee, v. A. L. Sammons, et al.; the second notice was entitled J. H. Therrell, as Liquidator of Trust Company of Florida, as Trustee, v. A. L. Sammons, et al. Proof of publication of the first notice appears in the transcript. That notice was dated August 6th, but seems to have been filed on the 4th. It appears a second time in the transcript immediately following proof of its publication. The Master made a report of the sale on September 6th, in which it was stated that pursuant to the “final decree” and as set forth in the advertisement of sale he offered for sale “at public outcry” the property mentioned in the decree. The notice of sale stated that the sale would be made “at public outcry to the highest and best bidder for cash.” The report of the sale does not state that the property was sold to the “highest and best bidder for cash,” but it states that the property was sold to J. H. Therrell, as Liquidator of the Trust Company of Florida, “for the sum of $12,000.00, the same being the highest bid therefor.” The Flagler Finance Corporation and North American Realty Company, the former being one of the appellants in the first two appeals, objected to the Master’s report of the sale on the ground that it stated that the Master had sold the property “Together with * * * all fixtures, furnishings and furniture located in the building or buildings situated on said land”; that he should have reported that he “did not sell any of the property located in said building except such as already belonged to A. L. Sammons and *599 wife at the time of the execution of the mortgage and/or that was purchased thereafter by them and placed in said building; that the Master did not report that he received cash for the sale or in what manner the plaintiff purchaser intends to pay for the property; that the North American Realty Company is the owner of seven of the bonds secured by the mortgage foreclosed of the par value of Thirty-seven Hundred Dollars, and “demands the right to have its pro rata share of the proceeds arising from the said sale distributed to it in cash before the sale is confirmed”; that the North American Realty Company bid the sum of $11,000.00 in cash for the property which bid was the highest and best cash offer made for the property unless the plaintiff purchaser intends to pay for its bid for said property in cash. There is an affidavit by J. W. Bullock, President of Flagler Finance Corporation, in support of the facts alleged in the objections, but also states that the solicitor for the plaintiff announced at the sale that the mortgage did not constitute a lien on any personal property located in the building upon the land described except such as had been owned by A. L. Sammons and wife, the mortgagors, at the time of the mortgage and personal property that had been purchased and installed by them in the building. There was a motion to strike the objections, one ground being that the objector was not a party to the cause and if it is a benficiary it is represented by the complainant who was Trustee for the bondholders. That motion was followed two days later by one for confirmation of the sale. An' order was made on motion by complainant that J. H. Therrell as Liquidator of the Trust Company of Florida be substituted as complainant in place of the Company. The Chancellor sustained the motion, to strike the ob *600 jections to the Master’s report of sale. The Master’s report of sale was then amended by him to show that at the sale only the fixtures, furnishings and furniture located in the building purchased by the mortgagor and placed therein were sold. The North American Realty Company then interposed an objection to the confirmation of the sale supported by the affidavit of J. W. Bullock, President of the Corporation, in which he affirmed that prior to the sale J. Warren Smith, agent for Therrell as Liquidator, said to Bullock that Therrell had no money with which to pay the costs or expenses of the suit or to pay the bondholders their pro rata share of any bids made by him at the sale and that if it became necessary to “raise money for said purpose” the Liquidator would have to ask the court to offer the property for sale to other parties for cash; that the property was in need of repairs; that the Liquidator had no money with which to make repairs and unless the property was repaired it would rapidly deteriorate and become of less value; that the insurance against loss by fire and wind storm would be cancelled on confirmation of the sale and the Liquidator has no money with which to pay the insurance premiums; that as the mortgage does not encumber the personal property and furnishings in the hotel the owner of it will remove the furniture if the sale is confirmed. It was alleged that in such case the hotel could not be operated as there was no money available in the hands of the Liquidator to refurnish the hotel nor did he have authority to do so; that the State, County and City taxes on the property had not been paid for the year 1931 and the Liquidator was without means to pay the same; that if the sale is confirmed the North American Realty Company will not be paid in cash for the bonds held by it, its pro rata of the *601 amount for which the property was sold, but would be required to take its pro rata in the form of an interest in the property as a “joint tenant,” or otherwise, with other bondholders and it will be deprived of its property by the sale of it for taxes, as the Company had no way of compelling other bondholders to contribute money to the payment of taxes or the upkeep of the property. The North American Realty Company prayed that the court would set aside the sale and order another to be made to the “highest bidder for cash, with permission to any of the holders of the bonds secured by said mortgage, to bid thereat, and to credit on their said bonds the pro rata value of the bonds held by them, paying the balance of their said bids in cash.” The Chancellor confirmed the Master’s report of the sale on September 20, 1932. Then Roscoe Martin was by order of the court made a party plaintiff in the cause as substitute Trustee. The Flagler Finance Corporation and North American Realty Company took their appeal from the order of September 16th striking their objections to the confirmation of the Master’s sale and from the order of September 20th confirming the Master’s report of the sale. The above lengthy statement is made to show as well as may be the circumstances in which the sale was made and the interest of the parties and the manner in which the point presented here for determination is made. The mortgage upon which foreclosure proceedings were brought was given to secure certain bonds of which one hundred and thirty-nine were issued and disposed of and nine were paid. The complainant Trustee has one hundred and eight of the bonds. See Sammons v. Trust Co. of Florida, first case, supra. The Flagler Finance Corpora *602 tion has seven of the bonds which leaves fifteen of the bonds, denominations unknown, unaccounted for. The Trustee which was the Trust Company of Florida has become bankrupt and a Liquidator, an officer of the Comptroller’s Department, took possession of the assets and charge of the trust properties committed to it. See Power v. Amos, 94 Fla. 411, 114 South. Rep. 364; Power v. Chillingworth, 93 Fla. 1030, 113 South. Rep. 280; Campbell v. Vining, 101 Fla. 939, 133 South. Rep. 555; Wasson Bond & Mortgage Co. v. Therrell, 113 Fla. 140, 151 South. Rep. 497. A successor Trustee was named by the court so the administration of the Trust devolves now upon an officer of the court and not upon the representative from the Comptroller’s office. At the sale which was ordered to be made at public outcry to the highest and best bidder for cash the Liquidator bid twelve thousand dollars for the property, but he has no money in his hands to pay the price bid, nor has he any money with which to pay the costs of the proceedings and solicitor’s fees and expenses of sale. No authority exists in the trust deed for an assessment by the Trustees upon the bondholders to pay the costs and expenses of the sale. The mortgage was given to secure an indebtedness aggregating $60,000.00. Nine bonds have been paid and twenty-two are outstanding in the hands of investors including the seven owned by the Flagler Finance Company. The Master’s report states that “out of the amount so bid for said property, if and when this report shall be confirmed, I will disburse and pay the sum specified in said decree.” The decree allowed the sum of four hundred dollars as compensation for the Trustee. See Sammons v. Trust Co. of Florida, first case, supra. There are court *603 costs to be paid and expenses of sale including Master’s fees and in all likelihood a solicitor’s fee allowed in the foreclosure proceeding. Although this Court stated in the first opinion that “bonds are the equivalent of cash” in cases like this, the statement is not accurate insofar as they are available for the payment of solicitor’s fees, court costs and expenses of the litigation. In the case of Scott v. Kirtley, decided December, 1933, 113 Fla. 637, 152 So. 721, this Court held that a solicitor may maintain a bill in chancery to establish a lien upon lands which were procured by him to be set off to his client. Under the authority of that case the solicitor employed to foreclose the mortgage in this case may resort to that remedy to enforce his lien upon the lands so purchased at the sale by his client for the bondholders. A debt would exist against the Trustee for the costs and expenses incurred in the foreclosure which would have to be satisfied if at all out of the assets.in his hands belonging to the cestuis que trustent. Thus more litigation and court costs and attorney’s fees would be incurred than would be in some cases, and possibly in this case, compensated for by the difference between a sum bidden to be paid in bonds and the cash bidden for the property. The court may exercise discretion in approving a sale of land under its decree and may considering the circumstances determine that as between two bids made for property the smaller is the better bid. The officer may reject the highest bid for substantial reasons. 3 Jones on Mortgages (8th Ed.) Sec. 2099; 16 R. C. L. 67. The court may confirm or not in its sound discretion. See 16 R. C. L. 81-86. As a general rule the Master making a sale of property *604 lias no right to refuse to accept a bid except the bidder will not give the bond with good security required by an order of sale. The Master generally is bound to accept all bids and to knock the property off to the highest bidder. Morton v. Moore, 4 Ky. L. Rep. 717. The appellants in this case have their standing in court as objectors to the confirmation of the sale on the ground that one of them, the Florida Finance. Company, was a party to the suit and the other, the North American Realty Company, was a bidder at the sale whose bid was rejected. The general rule as above stated that the Master is bound to accept all bids and to knock the property off to the highest bidder is subject to some exceptions, one of them is that where the person who has made the highest bid is unable or refuses to give security for the amount of his bid when lawfully requested so to do, or who having no ostensible means of paying the purchase money, may yet be tempted to bid over everyone else from an idle hope of being able to pay. 16 R. C. L. 67. A bona fide bidder at a judicial sale who is able to comply with his bid is entitled to appropriate redress where his bid is arbitrarily disregarded by the officer conducting the sale. He may not be entitled to have the property even though his bid is the highest, but he may come into equity and compel a resale to be started at the point of his bid, and in case no higher bid is made he is entitled to have the property knocked off to him. See 16 R. C. L. 67. Now if the Trustee who made the higher bid is confessedly unable to comply with it by producing the requisite amount'of money to pay'his bid, then the North American Realty Company which bid the next highest amount and is able to comply with its bid by producing the money necessary to pay it is entitled to a resale of the property to begin *605 at the price bid by it and if there is no higher bid then to have the property knocked off to it. If a biddef at a judicial sale purports to act as the agent for another but cannot produce satisfactory evidence of such agency his bid may be rejected. See Gray v. Viers, 33 Md. 18. If the bid is accepted but the agent is unable to produce confirmation of his action in bidding more than his principal authorized him to bid for the property it follows that the court may refuse to confirm the sale. Now it affirmatively appears from the record by the affidavit of Mr. Bullock that the Liquidator in place of the defunct Trust Company of Florida, Trustee, had no money with which to pay costs and expenses of the suit or to pay the bondholders their pro rata share of the bid made, that he had no money for repairs in which the property, a hotel, stood greatly in need, or to renew insurance upon it, nor any money to furnish the hotel to be used for the purposes for which it was designed, nor with which to pay taxes, and the property will have to be sold to satisfy the lien. There is nothing in the record to show that the Trustee was empowered by the terms of the trust deed to foreclose the deed to satisfy the lien of the bondholders, to appear for them at the foreclosure sale and use their bonds in whosesoever hands they may be to pay the price bid and apportion the amount pro rata among the bondholders and demand of them a sufficient sum in proportion to their holdings to pay the costs and expenses of the foreclosure proceedings; but on the contrary it affirmatively appears that the North American Realty Company, the holder of seven bonds of the par value of thirty-five hundred dollars *606 expressly refuses to allow and give to the Trustee any such power. It is very doubtful whether in certain cases like the one at bar such a provision in the trust deed would enhance the saleability of the bonds. It would be more likely to seriously impair the sale of the bonds, because while a purchaser of such securities willing to invest upon his belief in the security pledged and earning, capacity of the enterprise behind it, might be unwilling in lieu of his bond to take an undivided proportional interest in the real estate and become a tenant in common with possibly several hundred others and have to pay out more money to secure such interest. It follows therefore that the Trustee purporting to act as agent for the bondholders in bidding for the property had no power of agency to do so, that his bid for them was without authority and he had no power to call upon the bondholders for the payment by them of their pro rata share of the costs and expenses of the foreclosure proceedings and had no power as their agent or representative to subject the property purchased to the payment of such expense unless those powers may be inferred from the terms of the trust deed in which the Trustee was named. The contract rights of the bondholders are fixed by the terms of their bonds and the deed by which payment of them is secured. The bonds in this case are payable in money and when the mortgage was foreclosed the holders of these bonds were entitled to be paid their pro rata of the proceeds of sale after the payment of expenses and costs of the proceedings. Any purchaser at the sale may use so many of his bonds as may be necessary to pay on the price bid but in such case the value of the bonds turned in by him as the equivalent *607 of cash is determined by that proportion of the net proceeds of the sale which such amount bears to the indebtedness due, the balance must be supplied by him in cash. We think that the rule announced in Warner, Harris & Buck v. Equitable Trust Co., 35 Fed. Rep. (2nd) 513, is the correct one which should be applied in a case like the one at bar. In the case of Sage v. The Central Railroad Company, 9 Otto. 334, 25 L. Ed. 394, Mr. Justice Strong, of the Supreme Court of the United States, speaking for ’ the court in a case where the trust deed contained a covenant to the effect that in case of a judicial foreclosure sale or other sale of the premises embraced in the mortgage the holders of a majority of the outstanding bonds secured by the mortgage may in writing request the trustee to purchase the premises embraced in the mortgage for the use and benefit of the holders of the then outstanding bonds secured by the mortgage, said: “the several bondholders claiming under the mortgage held their interests subject to this controlling power given to the majority of all the holders(Italics substituted.) It does not appear that any such controlling power to the trustee exists in the trust deed in this case. The orders appealed from are reversed. Davis, C. J., and Terrell, J., concur. Whitfield, P. J., and Buford, J., concur in the opinion and judgment.