Dudley v. Odom

The opinion of the Court was delivered by Moses, C. J. The respondent held a second lien by judgment recovered in 1866 on the land of one John Odom, who, in 1868, was adjudged a bankrupt. His land having been advertised for sale by his assignee, on the day appointed therefor, Noah Odom (the appellant,) the son of said John, agreed with C. W. Dudley, (respondent,) that if he would desist from bidding on it, and allow him (the appellant,) to bid it off without opposition from the respondent, he would pay him the sum of seven hundred dollars whenever the Supreme Court of the United States should decide that obligations given for the purchase money of slaves were valid debts. The land, which was proved to be worth six thousand dollars at the time of sale, was bought by the appellant at fifteen hun [136] dred dollars — the only bid made. All knowledge of the agreement was confined to the parties and a third person, who was called as a witness to it. It was not denied that the validity of contracts for the purchase of slaves was sustained by the Supreme Court of the United States in May, 1872. The action was brought for the recovery of the amount alleged ' to be due under the agreement. On the part of the defense it was insisted “ that the agreement or contract sued upon and set up in the testimony for the plaintiff, is one that contravenes established principles of public policy, was, hence, illegal and void, and cannot be enforced in a Court of justice.” The Circuit Court overruled the proposition of law thus submitted, and a verdict was rendered for the sum demanded, with interest thereon from the first day of May, 1872. The question which we have now to consider is, whether there was in this error of law on the part of the Court ? It is not to be denied that contracts which are in violation of a positive statute, or of long established and recognized principles of public policy, cannot be enforced in Courts of justice. The former speaks the will of the community through the Legislative power, and demands a direct obedience, by the observance of all the obligations which it imposes. It is the expression of the public, in the most authoritative mode that it can use, to assert its opinion upon the subject-matter to which it relates. It is not essential to its validity that it should attach any penal provision for its violation. It may prohibit certain acts, and declare that all agreements made through their intervention shall be without force or effect. Upon analogous principles,' and in the absence of all statutory regulations, considerations of public policy, long established, may operate to the full extent, as if enjoined by legislative enactment, to prevent the enforcement of contracts which are in contravention of them. They, too, in another form, speak the public will, not through the law-making power, but because the continued acquiescence of the community gives to 'the judicial decisions which announce it the force of law. Precedent following precedent, without interference on the part of the Legislature, at last ripens into a common law, with all its consequences and sanction. It is scarcely necessary to enquire whether the sale made here was an official one, for the rules which govern and regulate bidding [137] at such sales apply to all public actions. It is true that they are more carefully watched and jealously regarded where the sale is under judicial process. We must hold the sale here to have been one made by the order of a competent Court, for without it the assignee in bankruptcy could not lawfully sell the effects of the bankrupt. Does an agreement at such a sale between two or more not to bid against each other contravene established principles of public policy? It was the sale of the land of a bankrupt. The purpose was to obtain the largest possible price for the creditors by the competition through unrestrained bidding. Whatever was calculated to prevent the result which might thus be realized prejudiced the object which the Court proposed by its order. Justice, not only to the owner of the property, but a sense of respect to the Court, which, in fact, is the seller, require that when it orders a sale to the highest bidder no combination shall be made which may prevent a full and open competition among those who may be disposed to buy. Official sales without these safeguards would not reach the end contemplated by the orders which direct them. It is needless, however, to enlarge upon the views which look to the policy of the rule that demands a free and open field for all who propose to bid at such sales, for they are now comprehended in a principle which obtains not only in the Court of Equity, but that of law, and no where carried to a greater extent than by the decisions in our own State. In Jones vs. Creswell, 3 John. Cas., 29, the action was on a note given for forbearance to bid at a sale by the Sheriff, and it was held “a consideration which ought not to be sanctioned in a Court of justice.” The Judge delivering the opinion of the Court says: “A combination to prevent fair competition is contrary to morality and sound policy. It operates as a fraud upon the debtor and .his remaining creditors by depriving the former of the opportunity which he ought to possess of obtaining a full equivalent for the property which is devoted to the payment of his debts, and opens the door for oppressive speculation.” The same principle had been announced in Doolin vs. Ward, 6 John., 194; in Wilbur vs. How, 8 John., 444; and in Thompson vs. Davies, 13 John., 112. Chancellor Kent, in Troup vs. Ward, 4 J. C. R., 254, re-affirms the doctrine laid down in Jones vs. Creswell, by a Court of which he was then a member. [138] In this State the point was fully and at large considered by the Court of Errors, in Hamilton vs. Hamilton, and Martin and Walter vs. Evans, 2 Rich. Eq., 355, 368, in which it was held “ that the principle which'governs all sales at auction, and especially judicial sales, is that there should be full and fair competition. Any agreement or combination, therefore, the object and effect of which are to chill the sale and stifle competition, is illegal, and no party to the agreement or combination can derive benefit from the sale.” Ch. Duncan, closing the opinion of the Court, says, “the current of decisions is so uniform, and the general principle so clearly announced, that it is not deemed necessary further to consider its validity, or the importance of preserving it.” Ch. Harper who delivered the dissenting opinion of the Court, p. 389, says “ that the matter seems to have been put upon the proper footing in Massachusetts, in Phippen vs. Stickney, 3 Met., 384.” There the rule, as laid down in the cases then before him, appears to have been narrowed, by requiring it to depend upon circumstances, showing an innocent intention, or a design to prevent competition and depress the price. Let the principle declared in Phippen vs. Stiehney be tested by the circumstances of the case now under review. The purpose of the sale was to obtain the highest price which might be offered. The agreement of the parties prevented this, for while the appellant obtained the land at his bid of fifteen hundred dollars, the agreement sued upon required that he should pay the additional sum of seven hundred dollars, not for the benefit of the seller, but for that of. the respondent. Was the consideration which induced the agreement on the part of the appellant anything but the forberance of the respondent? In fact, his complaint avers “that the defendant, Noah Odom, knowing that a sufficient amount of money would be realized from the sale of his said father’s real estate to satisfy the plaintiff’s said confession of judgment, and fearing competition in the bidding when the said land should be offered for sale, applied to and induced the plaintiff to desist from bidding on the same, agreeing to and with the plaintiff, and promising, that he, the said defendant, would pay the plaintiff the said sum of $700, &c.; that, in consideration of said agreement, and confiding in the promise and undertaking of the said defendant, supposing that he intended fairly and faithfully to carry out his promises made as aforesaid, he (the plaintiff) made no bid for the said land, which was sold at Bennettsville, on the 1st Novem [139] ber, 1868, and was bought by the defendant at a nominal price, the sum of $1,500, much less than the real value.” Does not this allegation amount to a clear admission by the respondent of a combination or confederation for the purpose of preventing competition, and depressing the price of the property below its fair market value ? Who but the plaintiff (below) had an interest in the bidding, after the bid which was stipulated to be made under the agreement? It was, by the understanding of the parties, to satisfy the senior judgment, and the creditor next in interest was the respondent himself, who preferred the seven hundred dollars rather than risk the purchase of the land ata price beyond the fifteen hundred dollars, which last sum he would have been obliged to advance if the-land had been knocked off to him ; for that amount was obliged to be paid before any of the purchase money could be applied to his judgment. It appears idle to pursue the facts further, to show that they bring the case even within the rule contended for by the dissenting members of the Court of Errors in Hamilton vs. Hamilton, and Martin & Walter vs. Evans. We.have no idea that the respondent intended to violate any moral rule, but his agreement cannot be sustained, because it is in disregard of law; nor have we anything to do with the want of faith on the part of the appellant. An English Judge has properly said, “ the law encourages no man to be unfaithful to his promise, but legal obligations are, from their nature, more circumscribed than moral duties.” The'allegation that “the defendant, by his pleading, having put his defense upon a general denial of the contract sued on, cannot take advantage of any illegality in the contract,” cannot prevail. No such exception was taken in the Circuit Court. On the contrary, the brief shows that the counsel for the appellant submitted to the Court his proposition of law, which impugned the validity of the agreement sued upon. “ The plaintiff’s counsel, in replying, first combatted the said legal proposition, and then addressing the jury upon the facts of the case rested.” The exception not having been made in the Court below, it cannot be interposed here. The view which the Court takes in regard to the principal question made in the cause renders unnecessary any consideration of the point submitted in regard to the interest allowed in the vez’dict. The motion for a new trial is granted, and the case remanded to the Circuit Court. Wright, A. J., and Willard, A. J., concurred.