Strong v. Catton

— 489 — By the Court, Crawford J. — This is an appeal from a decretal order, setting’ aside a sale in a foreclosure proceeding, made Tby the judge of the first circuit, sitting as a Court of Chancery in the county of Walworth. The question presented to us is, whether the case made by the petition of the appelle and the affidavits filed, as well Tby the petitioner as respondent, who is the appellant here, warranted the Circuit Court in setting the sale aside. It appears, that in a certain proceeding in chancery, for the foreclosure of a mortgage, pending in the Circuit Court of Walworth county, in which cause one Martin was complainant, against Wells, Adams and Stevens, defendants, a decree and order of sale was made on the 7th day of October, 1851, to satisfy an instalment of the mortgage debt, namely : $500, and interest on $1,500, for one year. In pursuance of this decree, the sheriff of Walworth county, after the usual advertisement of the time and place of sale, disposed of the whole of the mortgaged premises at public auction, to the appellant, Marshall M. Strong, for the sum of $1,716.86, and thereupon executed and delivered to said Marshall M. Strong, a deed in the ordinary form used on such occasions. This sale took place on the 10th day of July, 1852, and on the first day of the next succeeding term of the Circuit Court of Walworth county, the sheriff’s report having been filed in due form, Mr. Strong, the purchaser, filed his motion for a confirmation of the report, and at the same time the appellee, James Catton, filed his petition for a resale of the premises, and that the sale made to Mr. Strong, might be set aside. Various affidavits were filed on the part, as — 490 — well of Mr. Catton as of Mr. Strong. To some of these, filed "by Mr. Catton, an objection for want of notice was urged, but inasmuch as the petition for resale and the motion for confirmation of the former sale were heard simultaneously, we think all of the affidavits were properly before the court. From the petition and affidavits presented on both sides, we find that after the execution of the mortgage to Martin, by Wells, Adams and Stevens, the latter sold and conveyed the premises, subject to that ■mortgage, to the petitioner, James Catton. These premises consist of “ certain land and a mill privilege,” a grist mill and mill-dam, with about thirty acres of land, and are estimated to be worth from $3,500 to $6,000. Before the day of sale the petitioner had different conversations with the complainant upon the subject of postponing the sale, so as to enable the petitioner to procure the amount of money due upon the decree, and make payment in order to prevent a sale, and in all of these conversations, Martin assured the petitioner “ that he would consult the interest” of Catton “ as to the time of sale? The petitioner swears, that from the assurances thus given to him by Mr. Martin, “ he was led to believe, and did believe, that said sale would be postponed,” and in consequence thereof, ceased his efforts to obtain the money necessary to pay the amount due upon the decree. The affidavits filed by the petitioner, taken in connection with those of Mr. Martin, and his agent, Mr. Cole, satisfy us that the petitioner did, up to the very day of sale, rely upon a postponement thereof. It is true that Mr. Martin denies that he ever promised to postpone the sale, and Mr. Cole states that Mar — 491 — tin “uniformly denied” the request for a postponement, but we think that the expressions of Mr. Martin were, to some extent, calculated to induce the petitioner to rely upon a postponement. If, as the petitioner swears, he was assured by Mr. Martin that his interests would be consulted as to the time of sale, he may have too confidently depended upon the kindness of Mr. Martin. We cannot find that any intention to throw Catton off his guard, existed on the part of Mr. Martin ; but his expressions of regard for the interests of Mr. Catton were worse than meaningless, if we deny to them all influence on the mind and conduct of the latter. We are not to determine, at this time, whether caution and distrust of Mr. Martin’s sincerity and friendship might not have required the petitioner to obtain the money and pay the amount due upon the decree, in order to make himself secure before the day of sale; it is enough, that in the exercise of ordinary discretion, the assurances made and conveyed to him induced him to expect an indulgence ; and we cannot say that, under all the circumstances of the case, this expectation was unreasonable. At all events, it is apparent that he continued to believe that Mr. Martin would postpone the sale in furtherance of his interests; and it is noticeable, that neither on the morning of the day of sale, nor on the evening preceding, did Mr. Martin inform the petitioner that the sale must take place. We admit that the grounds upon which we assume that this is a case of surprise, are barely tenable; but when we reflect that the relation which Mr. Catton bore to the proceeding, his having purchased the premises subject to Mr. Martin’s mortgage, and his anxiety to obtain the money and pay off the amount due upon — 492 — the decree, were known to Mr. Martin and to Mr. Strong, and when we find it stated in the affidavit of the petitioner (and we "believe it is not denied) that he had before the sale paid to Martin on account of this mortgage debt, the sum of $1,150, besides having expended about $1,500 in repairing the property, we feel justified in pushing this case “ to the utmost verge of an admissible interference,” as was done by Chan-, cell or Kent in Williamson vs. Dale, (3 John. Ch. R 290.) Certainly, in this case, as in the one referred to, the surprise is not of the most striking kind. The importunity of the petitioner for indulgence, was not confined to Mr. Martin, for it seems that Cat-ton and his agent, on more than one occasion, had conversed with Mr. Strong on the subject'of the sale, and with the hope of making some satisfactory arrangement of the matter. Mr. Strong is not a party really interested in this controversy. We find that he acted as the attorney of a commercial firm in New York, who held a debt against Wells, Adams & Stevens, amounting to about $2,500, upon which Mr. Strong had obtained a judgment in favor of his clients, for whose benefit alone he acted in this matter and purchased the mortgaged premises at the sale by their direction. They furnished the money paid for the premises, with the object of securing their claim against Wells, Adams & Stevens in some manner. At the time of the sale, Mr. Strong must have been aware of the value of the property, for we find, that immediately thereafter, he conversed with Mr. Martin as to the propriety of selling the premises if he could obtain $3,500 to $4,000 for them. There is no charge preferred against the officer who conducted the sale ; so far as his acts are concerned, they — 493 — appear to have been proper ; hut if it he true, as we are told in argument, that Mr. Strong was the only bidder at the sale, it was the duty of the officer to postpone the sale, in order that the property, hy competition in bidding, might bring a fair price. There is no doubt, that for this purpose, it is within' the discretion of the Officer to postpone the sale. It must be conceded, that until the report of the sale is confirmed, the whole matter is subject to the control of the court; and that a purchaser upon a sale upon foreclosure of a mortgage in chancery, buys subject to the action of the court in confirming, or setting aside the sale ; and we see nothing in the statute to which we have been referred, that curtails this power of the court. Indeed, the very words of the decree under which this sale was made (and which is the usual form of a decree of foreclosure) reserves this control to the court. And not only before, but after confirmation, from the nature and constitution of the court, it has a complete control over the parties to tire cause, and the subject matter, and may, in a case requiring its interposition, set aside a sale, and divest any acquired rights of a purchaser ; in doing which? however, it will take care that no injustice shall be done to any of the parties. In England, before the confirmation of the report, the offer of a reasonable advance, and payment of the expenses of the first purchaser, would be sufficient to set aside a sale. 1 Vesey, 453; 4 Vesey, 700; 6 Vesey, 466-513; 8 Vesey, 214; Newb. Pl., 168, and the biddings may be opened more than once, when a sufficient advance on the previous offer is made. (3 Brown C. C., 475; 1 Sudg. on Vend., 66. This practice, however, has not been adopted in the State — 494 — of New York, for reasons which may, perhaps, equally apply with us. The principle which has heen recognized by the English courts in setting aside sales, after confirmation of the report, hears more directly upon the question, and is more applicable in this case. • In the case of Watson vs. Birch, 2 Vesey, 54, it was held, “ as a general principle, biddings are not to be opened after confirmation of the report, unless wider pa/rticular circumstances ; that increase of j)rice alone was not sufficient, but if fraud appeared, it suspended the operation of the general rule,” and it was also held in this case, that fraud was not the only possible exception. And in Maurice vs. The Bishop of Durham, 11 Vesey, 57; Lord Eldon held that “ where there is some fraud or misconduct in the purchaser, or fraudulent negligence in another person as agent, of which it is against conscience that the purchaser should take ád/uantage? the biddings will be opened after confirmation of the report. In the State of New York, the same principle has been acted upon, and a careful examination of the cases of this kind decided in the courts of that State, will show, that whenever it would be inequitable or against good conscience to permit the sale to stand, the court will not hesitate to exercise its discretion by ordering a resale. Vide Lansing vs. McPherson, 3 John. Ch. R. 424; Williamson vs. Dale, id. 290; Collier vs. Whipple, 13 Wend. 226; Tripp vs. Cook, 26 id. 143; Regna vs. Rea, 2 Paige, 339; May & Filkin vs. May et al. 11 id. 201. The rule that “ mere inadequacy of price is not sufficient to induce the court to open a sale,” has been very zealously urged upon us. If the term mere could — 495 — be taken to be synonymous with the term slight there ■would he, we think, more justice and reason in the rule, hut as it is, we admit that the New York courts have avowed, and acted upon it. If a sale he made to a bona fide purchaser, who perhaps has obtained the property for a price not quite adequate, hut still not so much helow the real value as to violate good conscience or induce a suspicion of unfairness in the transaction, here would he a case of mere inadequacy, which ought not to disturb the sale; hut there might he a case where property worth ten thousand dollars, by the neglect of parties to attend at the sale, had been sold at one thousand dollars to some by-stander, who, kuowing of the absence of the parties, availed himself of that circumstance, and with a knowledge of the value of the property, made his hid, and for want of competition, obtained the property for a ruinously low price. This is another case of mere inadequacy. But we must not he told, that in such case as the one last supposed, a court of conscience could he so forgetful of every dictate of. equity and morality as to refuse its interference to stay the hand of plunder. Are we asked how the purchaser in such a case has violated any rule of equity ? We answer that he has sought the property of another without giving a just compensation for it. He knew the property to he worth ten times the amount which he offered, and yet he wishes to take nine-tenths of the property without paying to, or for the use of the owner, any equivalent whatever. In no proper sense of the word, could a transaction of this kind he called a fair sale. To permit such an act of injustice to he perpetrated under the sanction of a court of equity, would he a reproach to our laws and — 496 — to their administration; and with all the profound veneration which we entertain for the eminent jurists w-k° ha'v'e "by their approbation indurated the rule of which we have been speating, we must nevei’theless, insist that inadequacy of price when it is so gross as to attract the attention of the court, or to induce a presumption of fraud or unfairness, or to do violence to a wholesome sense of justice, might be a sufficient reason to induce a court to set aside a sale. Nor do we think that any consideration of policy in establishing a character of certainty and stability for such sales as these on foreclosure, ought to outweigh the pre-eminent duty of the court to frown upon and thwart whatever is opposed- to justice and right. It is the settled practice of the Courts of Equity-, in this country, however, to refuse a resale for mere inadequacy of price, and we would not be at liberty to depart from it in this case, if no other cause existed; but, taken in connection with the surprise generated by the conversation of the complainant in the foreclosure suit, we think it our duty to order a resale. The appellant purchased the property in question for a sum less than one-half the medium value which has been placed upon it by the affidavits read, while he must have known that the price which he offered was not a fair or post one ; and can we hesitate to set aside this sale when we have before us, in one of the affidavits, (that of Thomas W. Miller, who swears to the value of the premises, and also, to his own ability to pay the amount) an offer to bid and pay for the premises, on a resale, the sum of three thousand five hundred dollars. We cannot sustain this sale without doing injustice — 497 — 'to the parties interested in the mortgaged premises; and by setting it aside and awarding a resale, we are ° , T , -,, o, not aware that injustice will be done to Mr. btrong, or those for whom he acts. It is for the interest of the petitioner, Mr. Catton, who purchased this property subject to the moi'tgage debt, that it shall be sold for a fair price, and it is the duty of the court to protect the interests of all parties. If it was the object of the appellant, to obtain this property for such a price as would secure to his clients in the greater value of the property, something by way of indemnity for their unpaid demand against the original mortgagors, (Wells, Adams & Co.,) we cannot countenance such an object at the expense of another party in interest, who has .already paid a large, sum on account of the mortgage debt. To confirm this sale, would be to secure to the creditors of Wells, Adams & Co., “ an unconscientious advantage” over the petitioner. The fact that Mr. Strong has conveyed the premises, by quit-claim, to one of his clients, can make no difference in the case, for before confirmation of the report, the deed is always given subject to the jurisdiction of the court over the sale. 12 John. 526; 2 Paige, 341; 13 Wend., 228. In the control which a court of equity exercise over the distribution of the assets of insolvents, or of the estates of deceased persons, there can be no doubt that it would refuse its sanction to, and set aside a sale in a case where the price bid was entirely below the reasonable value of the property ; and in cases of unreasonable or “ unconscionable” agreements, where the price to be given for property is either grossly — 498 — excessive, or grossly inadequate, a court of equity has either rescinded the contract on the ground of fraud, or refused to enforce a specific performance. Vide, Osgood vs. Franklin, 2 Johns. Ch. R. 23. Clarkson vs. Hanway et. al., 2 P. Wms. 203. May not the principle of equity, upon which the court acts in such cases, be equally applicable here ? It will not consummate a contract or sale in any respect iniquitous or “ unconscionable” where, for any other cause it 'is authorized to interfere. We are conscious that in this case we go farther than some of the cases warrant, but we are not conscious that we have gone farther than the plainest principles of equity lead us. A sale, under the direction of a court of equity, should not be converted into a field for speculation, but should be conducted by all parties thereto in such a manner as to bear the scrutiny of an unbiased judgment. Let the following order be entered : “This cause having been fully heard and understood by the court, in consideration thereof, it is ordered', adjudged amd decreed, that the same be remanded to the Circuit Court for Walworth county, and that said Circuit Court do set aside the former sale, and order a resale of the mortgaged premises, on the condition that before such former sale be set aside, and such resale made, the petitioner, James Catton, do pay or cause to be paid to said Mai shall M. Strong, the sum of one thousand seven hundred and seventy-six dollars and eighty-six cents, (being the amount bid by said Strong on the former sale of the mortgaged premises described in the petition and affidavits herein,) and interest on that sum at the rate of seven per — 499 — centum per annum, from the tenth day of July, A. D. 1852, until the time of such payment, together with the reasonable costs and expenses of said Marshall M. Strong, incurred in and about the former sale of said mortgaged premises, which costs and expenses shall be ascertained and determined in such manner as may be directed by said Circuit Court; and said Circuit Court shall make such other and further order in the cause as may be deemed necessary to carry this de-cretal order into effect. “ Each of the parties shall pay the costs of this court by him respectively incurred.”