Fishburne v. Smith

The opinion of the court was delivered by Mr. Justice McIver. The defendant Smith, as attorney of Mrs. Lowndes, Mrs. Minott, and Mrs. Elliott, sold and,conveyed to the plaintiff herein a certain tract of land in Colleton, known as “Hoats,” belonging to the three ladies named, for the sum of thirty-six thousand dollars, a portion of which was paid in cash, and the balance secured by several bonds, payable at different dates, together with a mortgage, which bonds were payable to Smith' as trustee of the ladies above named. Default having been made in the payment of the bond first maturing, Smith commenced an action to foreclose the. mortgage, to which Fishburne appeared by his attorneys, Smythe & Lee. While this action was pending, an agreement was entered into on the 6th of November, 1889, by Fishburne, Smith, and the defendant, A. M. Lee, a member of the firm of Smythe & Lee, containing the following stipulations: '■‘■First. The present proceedings to be withdrawn, Mr. Fish [338] burne paying all costs. Second. Mr. Fishburne to execute and deliver to A. M. Lee and H. A. M. Smith a deed of conveyance of the property. This deed not to be recorded before the seventeenth day of February, eighteen hundred and ninety, unless some proceedings or liens are threatened against Mr. Fishburne. Third. If Mr. Fishburne does not settle, on the 17th of February, eighteen hundred and ninety, all amounts then due, the property to be advertised and sold at Charleston on the first Monday in April by Messrs. Lee and Smith on terms, one-third cash, balance in one and two years, with annual interest, secured by mortgages. Messrs. Lee and Smith to adopt such measures as they may think proper to secure sale to a responsible bidder. Fourth. Proceeds to be applied to all costs and expenses provided for in this mortgage and of the sale, and then to the mortgage debt, and balance to Julian Fishburne.” The amount due not having been settled on the day appointed by this agreement, the property was advertised for sale by Lee and Smith on the 7th of April, 1890, on the following “terms : one-third {1¿) cash, viz., one thousand dollars when the property is knocked down, and the rest in twenty days from the day of sale; balance in one and two years, with interest at 7 per cent, per annum, payable annually, secured by bond of the purchaser and mortgage of the purchased premises.” It appears that within a very short time before the sale — perhaps an hour — Fishburne had spoken to a broker, .Hyde, to attend the sale and bid on the property for him up to a specified amount, and finding that there was some doubt whether Hyde would be able to attend the sale, he made a similar arrangement with another broker, Marshall, but it turned out that both of these gentlemen attended, neither knowing that the other had been employed by Fishburne. When the property was first offered for sale, Marshall being the highest and last bidder, at the sum of $44,000, the property was knocked down, when he gave the name of Fishburne as purchaser, and a paper signed by Fishburne acknowledging the receipt by him from Smith and Lee of the sum of one thousand dollars, on account of the surplus proceeds of sale coming to him, was tendered to the auctioneer as the cash payment required by the advertisement to be made [339] when the property was knocked down. This receipt was referred to Smith, who was directing the sale, Lee being then absent from the State, and he declined to receive it and directed the auctioneer to proceed with the sale. When the property was offered the second time it was run up by the defendant Elliott, who claims to have been acting as the agent of the ladies to whom the debt was really due, to the sum of $39,950, when that bid was withdrawn by Elliott, at the suggestion of Smith, and the property was finally knocked down to Hyde, at the sum of $36,-000, who gave the name of Fishburne as the purchaser, when the same receipt was again offered and refused, and the auctioneer was again directed to proceed. The property was then offered a third time and bid off by Elliott for the sum of $30,000, but no cash or receipt was offered by him, in compliance with the requirement that one thousand dollars should be paid ; Mr. Smith saying, in response to the demand of Mr. Fishburne that this requirement should be complied with, that he knew Elliott to be the representative of the parties really entitled to the proceeds of the sale, and this bid was therefore practically a cash bid, and that he would be personally responsible for the credit on Fishburne’s bond of the one thousand dollars. A few days after the property was thus offered for sale, Fishburne addressed a note to Smith, asking for a statement “showing amount of costs and expenses provided for in mortgage and of the sale and amount of the mortgage debt,” saying he wished to provide for a prompt settlement of his bid of $44,000. To this Smith replied, saying that the property “was sold on 7th April, 1890, to Mr. Henry D. Elliott at public auction. To him as the purchaser will the title be made.” Thereupon this action was commenced, in which the plaintiff demands judgment that the sale made on the 7th of April, 1890, together with all proceedings thereunder be declared null and void, and that a resale may be made under the direction of the court, for the purpose of carrying out the true intent and meaning of the agreement of 6th of November, 1889, and requiring that the proceedings therein mentioned be withdrawn as covenanted therein. And as alternative relief, that plaintiff have a decree for the specific performance of the contract of sale made with him on the 7th of April, [340] 1890, at the sum of forty-four thousand dollars; that the proceedings referred to in the agreement of 6th of November, 1889, be withdrawn; that the defendants, Smith and Lee, may account to him for any surplus that may remain after providing for the payment of all costs and expenses provided for in the mortgage and of the sale, as well as the mortgage debt; and that the alleged sale to Elliott be declared null and void. The case was heard by his honor, Judge Fraser, who held that there was no necessity for any formal discontinuance of the proceedings commenced by Smith as trustee against Fishburne for the foreclosure of the mortgage above referred to, as a condition precedent to the right of Smith and Lee to make the sale, under the agreement of 6th of November, 1889; but that in fact there had been no valid sale; that the alleged sale to Elliott could not be sustained, because he had withdrawn a bid made by him higher than that at which the property was knocked down to him, and this was done “at the suggestion of Mr. Smith,” as well as because he never complied with the terms of the sale by paying or tendering the one thousand dollars cash required to be paid when the property was knocked down; that the alleged sale to the plaintiff could not be sustained, because he did not comply with that requirement; that another sale should be made, and it being understood that the trustees (Smith and Lee), preferred that it should be made by the master, he ordered that officer to make the sale after due advertisement, at a time specified, on the following terms, viz., five thousand dollars cash and the balance on a credit of one and two years. He further ordered that after paying the costs and expenses of the.sale, the balance of the cash payment be applied to the bond held by C. C. Pinckney, jr. (the bond first maturing having, as it seems, been transferred to him), the Circuit Judge being satisfied from the testimony that there is more due on Pinckney’s bond than will be paid out of the cash; but as the precise amount due on the other bonds had not been ascertained, a reference was ordered for that purpose, and in the meantime the master is to hold the bond and mortgage subject to the further orders of the court. This statement of the provisions of the decree "will be sufficient to indicate the questions raised by this appeal; but for a more complete statement, refer [341] enee may be had to the decree as set out in the “Case,” which should be incorporated in the report of this case. From this decree the plaintiff, as well as the defendants Smith and Elliott, appeal upon the several grounds set out in the record. 1 The plaintiff, in his first exception, imputes error to the Circuit Judge “in not striking out and suppressing the deposition of defendant Smith, for his refusal to answer questions on the cross-examination.” In this connection we will also consider' defendants’ second exception, presenting a similar question in regard to the suppression of the plaintiff’s testimony on the same ground. Without entering into any discussion as to the merits of the questions raised by these exceptions, it is sufficient to say that, so far as we can discover, the record does not show that any motion to suppress the testimony of either of these witnesses was ever presented to or passed upon by the Circuit Judge, and there is therefore nothing for this court, as an appellate tribunal, to review. 2 The second exception of plaintiff charges error in not requir. ing a formal discontinuance of the action for foreclosure, instituted by Smith as trustee against the plaintiff herein, before the resale ordered by the decree. This exception is, we think, well taken. While it may be true that, so far as the parties to this record are concerned, no formal discontinuance of that action may be necessary, inasmuch as they have full knowledge of the agreement to that effect, yet as the purpose of the resale is that the property shall bring its full value, any cloud on the title, even though apparent only, arising from the pendency of that action, and the filing of the notice of lis pen-dens therein, should be removed, in order that outsiders who may know nothing of this agreement be not deterred from bidding by this apparent cloud, and that there may be full and free competition. It seems to us, therefore, that the Circuit decree should in this respect be modified by providing for a formal discontinuance to be entered on the record of that action. 3 The third exception in regard to the application of the cash payment to the Pinckney bond before due proof of the amount due thereon, is also well taken. While it may be, and no doubt is, quite true that the testimony was sufficient [342] to show that more was due on this bond than could be paid out of the cash payment of $5,000 required by the decree, yet as we think defendants’ thirteenth exception to this provision of the Circuit decree is well taken, inasmuch as the resale should' be made on the same terms stipulated for in the agreement of 6th of November, 1889, it will be necessary to modify the decree to conform to this view. For until the sale is made, it cannot be ascertained whether the cash payment of one-third, which should be required, will be more or less than sufficient to pay the amount due on the Pinckney bond, and hence such amount must ■first be ascertained before any order as to the application of the cash proceeds, except so far as costs and expenses are concerned, can properly be made. 4 Plaintiff’s fourth exception cannot be sustained, for the reasons stated by the Circuit Judge. The plaintiff was only entitled to any surplus over and above the amount of costs and expenses and the amount due on the mortgage debt, which unquestionably were all entitled to be paid in full before the plaintiff could be entitled to receive a dollar. To allow his receipt for one thousand dollars out of the surplus, if there should prove to be any, to be received as cash, would practically give him the first proceeds of the sale, whereas in fact he was the last to be paid. It is true that the testimony does seem to show that the mortgage debt, together with all costs and expenses, would not exceed the sum of $40,000, which would leave a surplus of about $4,000 out of the bid of $44,000 made by plaintiff; but granting this to be so, he could not be entitled to any portion of the $4,000 until the claims having precedence were fully provided for, and hence his receipt for a portion of a sum which might be coming to him in the future could not be treated as cash. 5 Turning to defendants’ exceptions, we will take up first the third exception, which imputes to the Circuit Judge error in holding “that all testimony as to matters which occurred previous to the execution by plaintiff' of the deed of 6th November, 1889, was incompetent.” Defendants had offered testimony as to the various negotiations and transactions between Smith and Fishburne as tq the original sale of the land, and the reasons which prompted it, as well as to what passed between [343] these parties on the failure of Fishburne to meet the first payment, and as to Fishburne’s course in defending the action for foreclosure brought against him by Smith as trustee, with a view to show that Fishburne had not acted in good faith, and was resorting to all practicable means to obstruct Smith in collecting the debt due to him as trustee. It appears, however, that all these matters culminated in the execution of the agreement of 6th November, 1889, and when Fishburne, in pursuance of one of the terms of that agreement, conveyed the land to Smith and Lee, they assumed the duty of selling the land to the best advantage of all parties concerned, and the only question here, or rather the primary inquiry here, is, whether that duty has been properly performed, and if not, whether the court shall now require its proper performance. We do not see, therefore, what these prior negotiations and transactions have to do with our present inquiry; and we do not think that there was any error on the part of the Circuit Judge in holding that all the testimony as to matters which occurred prior to the execution of the agreement of 6th November, 1889, was incompetent. 6 The first, fourth, fifth, sixth, seventh, and eighth exceptions, relating to the ruling of the Circuit Judge that the alleged sale to Elliott was invalid and could not be sustained, may be considered together. It.seems to us that the reasons given by his honor are amply sufficient to vindicate his conclusion. Under the agreement of 6th November, 1889, there can be no doubt that it became the duty of Smith and Lee, as trustees to that extent at least, to sell the property to the best advantage, and Lee being absent from the State at the time of the sale, that duty was devolved upon Smith, and there is as little doubt that the property could have been sold to Elliott for a sum much larger than that at which it is now claimed that he bought it; for Elliott himself testifies that he went to the sale with the intention of bidding in good faith as high as $40,000, and the undisputed fact is that he did actually bid $39,950. When, therefore, a sale at those figures was prevented by the suggestion of Smith to withdraw that bid, upon which suggestion Elliott acted, we do not see how a Court of Equity can sustain a sale for a much less sum to the same person who had publicly [344] proclaimed his willingness to bid a much larger sum, and had been deterred therefrom by the trustee, whose duty it was to obtain, the highest'price for the property. It may be and doubtless was the fact that Mr. Smith acted in entire good faith, and honestly believed that Elliott was induced to raise his bid as high as the amount above stated by puffing bids, which were not made in good faith. But such suspicion, or even belief, would not, in our judgment, justify his course (occupying the position of trustee, as he did), in defeating a sale at the higher price, even though he was also in the position of attorney for the bidder. His proper course, as it seems to us, was to allow the sale to proceed, and when the property was knocked down to Elliott, let him make the question, if he so desired, whether he could be relieved upon the ground of the alleged puffing bids made at the sale. 7 But, in addition to this, when the property was offered a third time and was bid off by Elliott for $30,000, he never complied with the terms of the sale by either paying or tendering the one thousand dollars in cash as required. Even assuming that Elliott was bidding as the agent of the bondholders, though there might be a question whether he had any sufficient legal authority to do so, this would not relieve him from the necessity of making the cash payment required; for although it may be true that one who is entitled to the proceeds of a sale may not be required to comply with that term of the sale providing for the payment of so much cash, as his receipt may be taken as such, yet the proceeds of this sale were first to be applied to the payment of certain costs and expenses, and therefore even if the holder or holders of the bond had in person bid off the property, the cash payment would have had to be made, or at least so much thereof as would be necessary to pay such costs and expenses; and in this case it is not pretended that Elliott either paid or tendered any cash at all. It is clear, therefore, that in no view of the case can the alleged sale to Elliott be supported. [344] The ninth and tenth exceptions, alleging in general terms that the plaintiff by his improper conduct caused the alleged failure of the sale, and therefore has no right to complain of the [345] same, or to demand any relief on account thereof, cannot be sustained. These exceptions do not specify any particular instances of alleged misconduct on the part of the plaintiff, and we find nothing in the Circuit decree upon which they can be based; nor do we think that they can be sustained by the testimony. 9 The eleventh and twelfth exceptions may be considered together, as they both are based upon the ground that the Circuit Judge erred in not requiring the plaintiff to comply with his bid of $44,000, the former insisting that upon his failure to do so, that he should “lose all right to the property,” and in the latter that upon the failure of the plaintiff to comply, the defendant Elliott should be entitled to take the property at his bid of $30,000. From what has been already said, it is clear that neither of these exceptions can be sustained. Even assuming that the plaintiff could have been required to comply with his bid in this form of proceeding, the defendants, by their course in ignoring plaintiff’s bid, have precluded themselves from demanding that relief, and, as we have seen, the other alternative suggested cannot be adopted, because Elliott never complied with his bid. Under these circumstances there was no other alternative except to order a resale of the property. The judgment of this court is, that the judgment of the Circuit Court as modified herein be affirmed, and that the case be remanded to that court for the purpose of such further proceedings as may be necessary to carry out the views herein announced.