Hammond v. Cailleaud

Haynes, C. This action was brought by plaintiff as referee in the partition suit of Finnerty et al. v. Pennie et al., to recover the sum of seventeen hundred and fifty dollars from the defendant. The action of Finnerty et al. v. Pennie et al., was for a partition of a certain lot situate on the corner of Natoma and Mary streets in the city of Ban Francisco, in which a decree was entered determining the interests of the several parties, the amount and priority of several liens thereon, and adjudging that said lot was incapable of partition, and ordering a sale thereof by Hammond, the plaintiff herein, who was duly appointed sole referee for that purpose, the sale to be subject to confirmation by the court. The referee offered said property for sale at public auction, and at such sale the defendant herein became the purchaser upon his bid of seven thousand five hundred dollars, and thereupon deposited with the referee seven hundred and fifty dollars, that being ten per cent of the amount bid. The purchaser opposed the confirmation of the sale upon grounds hereinafter stated, but the conrt confirmed the sale, and the referee executed and tendered a deed in due form, and demanded payment of the remainder of the sum bid, but the defendant refused to pay said balance or accept the deed. These facts were reported to the court, and afterward an order was made for a resale of the premises, and directing the referee, in case such resale should not realize said sum of seven thousand five hundred dollars and the costs and expenses of the resale, to collect from defendant, by some proper proceeding, such deficiency. To these facts, alleged in the complaint, the defendant answered, and also filed a cross-complaint and counterclaim. The answer, after denying the allegations of the complaint, alleged that said property was — 212 — offered for sale at public auction on the following terms and conditions, namely: “ The property to be sold to the highest bidder, the purchaser to receive a perfect and valid title, free from imperfections, otherwise there to be no sale; the bidder upon acceptance of his bid, to deposit with plaintiff ten per cent of the sum bid, to secure the bid and sale to him, and the balance of the bid to be paid, if the title should prove perfect and valid, upon conveyance to the bidder of said property with a. valid and perfect title thereto, and after examination of said title by the bidder; and if the title should not prove to be perfect and valid and free from imperfections, nor made so within thirty days after notice by the bidder to plaintiff of defects therein, the said deposit of ten per cent to be returned by plaintiff to bidder on demand ”; and that he bid for said property said sum of seven thousand five hundred dollars, with the express agreement that if the title to said land should prove imperfect, invalid, and not free from all imperfections, there should be no sale, and that said deposit should be returned to him upon demand. He further alleged that the title to said lot was invalid and not free from imperfections, that he notified plaintiff thereof, that plaintiff refused to make said title perfect, and that he thereupon demanded the return of his deposit. He admitted th’at said sale was reported to the court for confirmation, but denied that the terms and conditions thereof were reported; that he filed objections thereto, stating the terms under which his purchase was made and specifying certain defects in the title, but that the court decided that he would not be bound by the decision of the court thereon, nor by such confirmation, and refused to hear or consider his objections thereto. He admitted the tender of the deed, but denied that such tender was in pursuance of the terms of the sale, or that it would have conveyed a valid title, and averred his readiness and willingness to comply with the terms of the sale. — 213 — He further alleged that the terms and conditions under which the property was resold were different from the terms and conditions of the first sale; that at the second sale it was expressly stated that the purchaser should take the title as it stood without any agreement that it was perfect or should be made so upon notice of defects, and that by reason of such change in the terms and conditions of sale the selling value of the property was greatly depreciated. At the second sale one Denigan became the purchaser at the sum of five thousand dollars. The cross-complaint and counterclaim were interposed for the purpose of recovering the deposit of seven hundred and fifty dollars. The cause was tried by the court, and findings and judgment were for the plaintiff for said sum of seventeen hundred and fifty dollars, with interest, and from said judgment and from an order denying his motion for a new trial the defendant appeals. Appellant’s defense to said action is based upon two distinct propositions: 1. That his purchase was conditional upon his obtaining a good title, and that the title was not good; and, 2. That he is not liable for the deficiency or loss upon resale, because the terms and conditions of the two sales were materially different. To these propositions respondent replies, in effect: 1. That the sale to appellant was confirmed by the court, and that order not having been appealed from, appellant is concluded as to all questions involved in the confirmation; and 2. As the referee had no power to give or impose any conditions of sale not contained in the decree or authorized by law, and as the rule of caveat empior applies to judicial sales, and as he is conclusively presumed to know the law, that he therefore purchased under the conditions imposed by the law, and not under different conditions alleged .to have been made by the referee without authority, and if so, the two sales were made under the same conditions. 1„ That the order confirming the sale to Oailleaud, the — 214 — first purchaser, was appealable, and became conclusive upon his failure to appeal, I think is clear. In Boggs v. Fowler, 16 Cal. 560, 76 Am. Dec. 561, it was held, in a foreclosure case, that the purchaser by his act of purchase submitted himself to the jurisdiction of the court in that suit as to all matters connected with the sale, and was entitled to apply for such relief as the facts of the case might justify, and that upon his application the sale could be set aside and the satisfaction canceled. In Hickson v. Rucker, 77 Va. 135, it was said: “By buying at such sale the purchaser selects his forum, comes into the case, and submits himself to the court as to all questions concerning the sale and his purchase.” That in sales under a decree in equity the purchaser becomes a quasi party to the suit, see note to Mount v„ Brown, 69 Am. Dec. 368, and cases there cited, and Jones on Mortgages, sec. 1642. The confirmation of a sale often involves rights of vast importance. A purchaser at a judicial sale may thereby be deprived of a purchase of great advantage to him, or have improperly imposed upon him a burden he should not bear. But it is urged by appellant that there is no provision of the statute under which he could have appealed from that order; that the decree in partition was interlocutory, that he was not a party and could not appeal therefrom. But the decree in this case was not interlocutory but final. It not only determined the several interests of the cotenants and the amounts and priorities of the several liens, but also adjudged the property incapable of partition, and decreed that it be sold, and directed the distribution of the proceeds, which distribution is to be made by the referee when the decree so directs (Code Civ. Proc., sec. 773), so that the sale and confirmation were simply steps to be taken in the execution of the decree, and the order of confirmation was an order made after final judgment. The appeal from an interlocutory judgment in partition provided for in section 963, subdivision 2, of the Code of — 215 — Civil Procedure, is only “ from such interlocutory judgment in actions for partition as determines the rights and interests of the respective parties, and, directs partition to be made." But if the decree did not become final until the sale was confirmed, it then became final, and the purchaser, being then a party to that which made the decree final, had the right to appeal from that part of the decree as to which he was a “ party aggrieved.” The defendant was therefore concluded, by the order of confirmation, as to all objections made to the confirmation of the sale, and became legally bound to complete the purchase. There are three modes of proceeding in a court of equity when a purchaser, after confirmation, fails or refuses to complete his purchase: 1. Set aside the sale, release the purchaser, and order a resale; or, 2. Decree a specfic performance of the contract; or 3. Order a resale, holding the purchaser responsible for any deficiency. (See Jones on Mortgages, sec. 1642, and cases there cited.) The third of the above modes of procedure is the one pursued in this case. Upon the trial the defendant, in order to prove that he never became liable as a purchaser, offered in evidence the following written terms and conditions of said sale (omitting the description): “San Francisco, December 14, 1891. “We have this day sold to H. Cailleaud, at the price of $7,500 in gold coin, the following described property : “ Seven hundred and fifty dollars, cash in hand paid, the receipt of which is hereby aekhowledged; $6.750, payable ten days after date, or upon completion of the examination of title and the other papers connected therewith, as hereinafter specified; ten days (from date hereof) are allowed for the examination of the title. If the title is not found valid, nor made so in thirty days after notice to us of defect therein, the deposit, for which this is a receipt, is to be returned on demand. If the — 216 — title is found or made valid, within the time herein specified, and the sale is not closed in accordance with the above terms, the sum of $750, for which this is a receipt, is to be forfeited. The owner hereof binds himself upon receipt of the purchase money to deliver to H. Cailleaud a valid title to said property, unincumbered, unless it is specified above that certain liens are assumed. Time is of the essence of this contract. Subject to confirmation by the superior court of the city and county of San Francisco. “Richard P. Hammond, Jr., Referee.” “ I hereby agree to buy the property above described upon the terms and conditions hereinabove expressed. “Henry Cailleaud.” An objection to its introduction in evidence for that purpose was properly sustained, the validity of defendant’s purchase having been conclusively adjudicated by the order confirming the sale. The defendant afterward offered to prove that at the second sale it was expressly stated that the purchaser would take the title as it was, that one sale had been confirmed and the purchaser had refused to take it; and, in that connection, for the purpose of proving that the terms of the two sales were different, also again offered the writing above quoted. We have held that the order confirming the first sale was appealable,. and that having failed to appeal the purchaser was bound by the order of confirmation, and could not relitigate the questions arising upon the. motion to confirm. But conceding for the moment that his objections to the title were groundless, and that therefore the terms and conditions of his purchase were fully complied with, and that without cause or excuse he refused to take the property, and deliberately intended to suffer all the legal consequences of such refusal, the resale could not be either a just or legal mode of ascertaining his liability unless made upon the same terms and conditions as those under which he pur — 217 — chased. (Riggs v. Pursell, 74 N. Y. 870; Shinn v. Roberts, 20 N. J. L; 435; 43 Am. Dec. 636.) The court refused to permit the defendant to prove what the terms of the second sale were, as announced by the auctioneer, the court holding that the terms of the second sale were definitely fixed by the order of sale and the published notice, and that the defendant would not be allowed to ■contradict these; and also refused to permit proof of the terms and conditions of the first sale for the purpose of showing that the conditions of the two sales were different. Conceding that the rule of caveat emptor applies to judicial sales generally, and that the order of sale was silent as to any conditions delating to the validity or invalidity of the title to be acquired by the purchaser thereunder; and further conceding, for the purposes of this opinion, that the referee derived no power from the statute or the order of sale to stipulate with the purchaser that the title should be good and free from imperfections, or the sale be void, it does not follow that the purchaser was bound to accept an imperfect title, if it be true that the referee sold the property under the conditions alleged and offered to be proved by the defendant. If it be true that purchasers are conclusively bound to know the limits of the powers of the officer making the sale, it must follow that, as matter of law, they are not affected or influenced by any representation made by the officer, or by any terms or conditions given or imposed by him, and therefore the sale must, for the purposes of confirmation, as well as for all other purposes, be deemed to have been regular and valid; and not only so, upon that theory it would be impossible that two sales, made by the same officer, of the same property, under the same order of sale, could be made on different terms; and if so there could be no foundation for the established rule, that in order to hold the first purchaser liable for the loss upon a resale the terms and conditions of the two sales must not be different. — 218 — But that courts do not hold purchasers to such presumptive knowledge, in confirming sales, is well settled. In Woodward v. Bullock, 27 N. J. Eq. 507, bidders were misled as to the amount of the encumbrances to which the sale was made subject, both by the sheriff and the successful bidder. The sale was set aside. In Hayes v. Stiger, 29 N. J. Eq. 196, the court said: “Where surprise or misapprehension is occasioned by the conduct of the purchaser or the officer making the sale, to the injury of a person interested, the court will interfere.” In Black v. Walton, 32 Ark. 321, the syllabus is as follows: “A sale by a guardian of his ward’s land under an order of the probate court, is a judicial sale, and the rule caveat emptor applies; but if the land is purchased upon the representation of the guardian that the purchaser would acquire a good title, which turns out to-be untrue, the purchaser will not be held at law or in equity, although the guardian may not have known the falsity of his representations.” In Veeder v. Fonda, 3 Paige, 94, the chancellor said: “As property to a vast extent is sold under the orders and decrees of this court, much of which belongs to infants and others who are not able to protect their own rights, it has always been an important object with the court to encourage a fair competition at master’s sales. For this purpose it is necessary that purchasers at such sales should understand that no deception whatever will be permitted to be practiced upon them; that in a contract between' them and the court they will not be compelled to carry the contract into effect under circumstances where it would not be perfectly just and conscientious in an individual to insist upon the performance of the contract against the purchaser, if the sale had been made by such an individual or his agent. It is, therefore, a principle of the court that the master who sells the property shall not, in the description of the same, add any particular which may unduly enhance the value of the property or mislead the purchaser.” — 219 — These authorities clearly show that for any error, irregularity, or misrepresentation of the officer, whether intentional or otherwise, whereby the purchaser has been misled to his prejudice to such extent as to make it unconscionable that his contract of purchase should be enforced against him, the sale will not be confirmed. But in this case, as here presented, it is not necessary to go further than to hold that if, by the alleged terms and conditions of the sale to appellant, he was led to bid more for the property—to any material extent, at least— than he would if he had been informed, as the purchaser was at the second sale, that he must take the title as it was, whether defective or not, it is obvious that the resale did not furnish any just measure of damages. Ho fact or circumstance is disclosed by the record other than the different conditions under which these sales were made, which tends, in any degree, to account for the difference between the final bids at these two sales; and, under such circumstances, we must conclude that all above the amount of the second sale which was bid at the first, was induced by the condition that the purchaser took no risk as to the title. The owners are es-topped from saying that the price obtained upon the second sale was inadequate, since they are not shown to have opposed confirmation upon that ground, and, therefore, the presumption is strengthened that the higher price obtained at the first sale was secured by the more favorable conditions given to appellant. If the referee had entirely omitted to publish notice of the sale, and had made a private contract for the sale of the property, and the owners (creditors not being affected) had been satisfied with the terms of sale and the price obtained, and with knowledge of the facts had obtained its confirmation, the sale so confirmed would have been valid, and they could not thereafter have objected that they were not bound by the acts of the referee, though made without authority. Here the owners were informed before confirmation of the terms — 220 — of the written contract, and should be held to have ratified that contract as to all its terms and provisions. But whether that be true or not, this action is brought by the referee, who alone is authorized to maintain the action, unless by assignment he confers that right upon another. (Mayer v. Wick, 15 Ohio St. 548.) In Galpin v. Lamb, 29 Ohio St. 529, 534, it was said: “The contract of purchase is made with the officer as representing all the interests involved in the suit in which the judgment or decree of sale is rendered. He and the purchaser are the only parties to the contract of purchase; and he alone can maintain an action against the purchaser to recover the purchase money”; and in commenting upon the case of Mayer v. Wicks, supra, it was said: “In that case the sale had been confirmed, and the officer had thus become responsible for the purchase money. He had tendered the deed to the purchaser, and assigned his right of action to the plaintiff in the decree under which the property was sold, and the latter was allowed to maintain the action for the purchase money.” (See, also, Michener v. Lloyd, 16 N. J. Eq. 38.) If therefore the right of the referee to prosecute this action is based upon the contract he made with the purchaser, it would appear to be clear that he should not be permitted to say, “I am not bound by the written contract I made with you, because I had no power to make it, and therefore it did not constitute any part of the terms and conditions of the sale, and you cannot use it for the purpose of showing that the terms of the second sale were different.” If without a resale the referee had brought suit against the defendant to recover the unpaid purchase money, the action could properly have been sustained, because the order confirming the sale, not having been appealed from, absolutely fixed the defendant's liability as a purchaser; but he was not concluded by his failure to appeal from showing the terms of his purchase to have been different from those of the second sale. — 221 — As to the order of resale at appellant’s risk, made April 7th, I think appellant is bound thereby. It recites that the purchaser had notice, and was represented by counsel. If that were untrue, he should have moved to vacate or modify the order, and upon a denial of his motion have taken an appeal. No other questions require notice. The judgment and order appealed from should be reversed and the cause remanded. Searls, 0., and Belcher, 0., concurred. For the reasons given in the foregoing opinion the judgment and order appealed from are reversed, and the cause remanded. Harrison, J., Van Fleet, J., G-aroutte, J. Hearing in Bank denied.