Jones v. Portsmouth & Concord Railroad

Bell, J. The principle we think is clear, that the officer who would make a sale of personal property of a debtor on execution, must have it so far in his possession and control, that he can designate and exhibit the articles of property which he proposes to sell, where they are of a visible character ; and on similar rea — 552 — sons, where the property does not admit of actual possession, the officer must obtain such knowledge of the' state of the property that he may be able to describe to the purchasers, precisely and definitely, the property he offers for sale. In the case of Warring v. Loomis, 4 Barb. 484, it was held that on a sale of personal property by a constable on execution, the property must be pointed out to the bidders, and specifically designated. It must not he left to any future act to ascertain what property is sold. Accordingly, where a constable levied upon thirteen sheep generally, and on the day of the sale the sheep of the debtor, numbering twenty or twenty-one, being present, the constable offered for sale thirteen of the sheep, without designating which, and on being asked by a bidder Which sheep he sold, he replied, the best, the fattest; it was held that he had no power to sell in such a manner as to authorize the purchaser to select thirteen sheep from the flock, and that the purchaser acquired no title to the sheep thus selected by him. In the earlier case of Sheldon v. Soper, 14 Johns. 852, the court lay down the general rule, that nothing ought to pass at a public sale but what was then known and promulgated ; that it was a general and salutary principle ; one necessary in order to guard against fraud, and to preserve fairness in auctions; that no property should pass at a sheriff’s sale but what was at the time ascertained and declared. So it was held in Bostick v. Keizer, 4 J. J. Marsh. 597, and in Eazzard v. Benton, 4 Harr. (Del.) 62, that the property in a slave will not pass unless the slave be shown at the time of the sale ; that is, unless the officer shows to the purchasers precisely what the property is that he offers for sale. The cases cited by the plaintiff’s counsel, Smith v. Fritt, Gift v. Anderson, McNeeley v. Hart, Blount v. Mitchell, and Banks v. Evans, (see ante,) and Ainsworth v. Greenlee, 3 Murph. 407, support the same position. In the present case, it appears that at the time of the attachment three hundred and forty-six shares stood in the names of Hale and Jones, of which fifty-five were released, and one hun — 553 — dred and fifty sold before the adjournment, leaving apparently one hundred and forty-one shares; but eighty-six shares only were in fact conveyed, and no explanation is given of the difference, while Jones by his notice denied that Hale and Jones owned more than one hundred and thirty-seven shares. These differences are unimportant, except as they show that there was an uncertainty as to the amount of the shares to be sold. It then clearly appears that the officer stated to the company assembled at the sale, that by reason of the false and fraudulent notice of Jones it was impossible for the officer or Mr. Hatch to know or declare accurately how many shares were owned by Hale and Jones ; and he, therefore, after stating the number of shares on the books, and the number released and sold, offered for sale all the remaining right, title and interest which the debtors had in and to all shares and stock in said corporation, and the right, &c., thus offered, was sold without any further description or designation. No person could know for what he was bidding or what was its value, and it was not reasonable to expect any one to bid in such a case ; and for this cause we think the sale must be held illegal and void. It is said that this uncertainty was caused by the acts of the debtor himself, and he ought not to be permitted to take advantage of a defect he had himself caused. It is by no means clear that the uncertainty grew out of the notice given by Jones, since there was an uncertainty growing out of the loose manner in which the corporate records were kept, as we shall have occasion to notice. But if it were so, the duty of the officer was plain. He was authorized to sell only such property as he could distinctly designate and describe, and he ought to have put up for sale a certain and definite number of shares, such as, upon the information he had, or could obtain, he believed were owned by the debtor, and have sold those and nothing more. The rule which forbids an officer to sell any property of the debtor but such as he can show to the purchasers, if visible, or describe definitely, if it is not, is founded upon considerations of public policy, and of justice to the debtor, since the effect of any — 554 — loose practice in this respect must be to destroy all competition at the sale. The principle is also clear, that if the purchaser at a sheriff’s sale, either alone or by concert with the officer, does any act in relation to the sale which is calculated to prevent a full and free competition in bidding, by reason of which the property sells at an undervalue, the sale will be set aside as fraudulent. Cases of this class are somewhat numerous. Thus, where an agreement was made to prevent competition at a sale of lands taken in execution, and the land sold at an undervalue, it was held a fraud; and the land being of greater value than the amount due on the execution, it was held satisfied. Troup v. Woods, 4 Johns. Ch. 228. So where the assignee of a mortgage struck off the property at an undervalue, on seeing a purchaser under the mortgagor coming, the sale was held fraudulent. Jackson v. Crofts, 18 Johns. 110. And in Groff v. Jones, 6 Wend. 522, a sale on execution was set aside as fraudulent, where real estate worth $10,000 was sold to satisfy an execution of $100, when a portion sufficient to satisfy the debt might have been sold separately. Where a plaintiff prevented bidding, by offering to buy the property and to sell parts of it to others, the sale was set aside. Mills v. Rogers, 2 Litt. 217. A sale was held void in Inskeep v. Secony, Coxe 39, where the sheriff and purchaser acted fraudulently in the disposal of the property. And so in Nesbitt v. Dallam, 7 G. & J. 494, where town lots in a place of business were sold at an undervalue, and no notice of the sale was posted up within eighteen miles of the property. And in Dougherty v. Linthicum, 8 Dana 199, where an execution for less than $100 -was levied on eighty acres of land, and the debtor’s interest, subject to a mortgage, in five hundred and forty-six acres, both valued at upwards of $2100, and the right of the debtor in both was sold at once to the creditor for five dollars, the sale was set aside as fraudulent. So if a bidder prevent others from bidding at a sheriff’s sale, by representations respecting the object of his bid, and then buy the property at an undervalue, the sale is void, as against public policy and as a — 555 — fraud on the debtor and creditors. Bunts v. Cole, 7 Blackf. 265. The cases of Carson v. Law, 2 Rich. Eq. 296 ; Martin v. Ranlett, 5 Rich. Eq. 541; Fuller v. Abrahams, 3 B. & B. 116; S. C., 6 Moore 316 ; Wells v. Pleiffer, 4 Yeates 203; Reed v. Carter, 2 Blackf. 410, and Brodie v. Seagraves, 1 Taylor 144, support the same principle. All that was said and done by the purchaser to prevent others from bidding, may be given in evidence to show fraud. Hoffman v. Strohecker, 9 Watts 183. The question is not as to the existence of moral fraud; that is, the deliberate design to do a wrong. It is none the less a fraud in the eye of the law, if what was done has the effect to produce a sale at a great undervalue, that the parties have had no such purpose directly in view, or may have had a purpose, laudable in itself, for their object. As where one offered at a sheriff’s sale to purchase negroes, and give them to the wife of the bankrupt owner, and it appeared that this offer prevented any bidding against him, the sale was held fraudulent, and was set aside, as against public policy. 2 Rich. Eq. 296. Upon comparing the course pursued at the sale here in question, with these principles, it is apparent the sale cannot be sustained. If the notice given by Jones to the railroad company was calculated to prevent bidding and destroy competition, it was the duty of the creditor, officer and purchaser, to do nothing on their part in the least degree calculated to aggravate the mischiefs arising from his acts to all parties. No publicity should have been given to his notice, since it was not addressed to them, but inquiries should have been made to make the facts certain, and those facts should have been stated to those who attended the sale. Certain shares should have been offered for sale in reasonable amounts, and specificially sold, and others successively so long as they found shares belonging to him. Instead of this the officer who acted by direction of the creditors’ attorney, announced and read to all assembled the notice of Jones, which he, so far as appears, had simply delivered to the president of the railroad, and had not in any way made public. The — 556 — officers in general terms declared their disbelief of its truth, but at the sale they gave it the strongest support, and threw the greatest discredit upon his title to any shares, by declaring that in consequence of Jones’ course they were unable to state definitely how many shares he owned, and could not offer any definite number of shares for sale, and the sale was made of all Hale and Jones’ right, &c., to any shares. It is impossible to doubt that this course must have destroyed all competition at the sale. And it can make no difference, if their conduct tended to produce a sale at a great undervalue, that Jones’ course led to the same result. The sale must be set aside as fraudulent and against public policy; for no court can undertake to distinguish how much of the result was attributable to one or the other. If Jones chose, from fraud or folly, himself to interfere with the sale of his property, by publicly denying his title, contrary to the fact, he has no ground of complaint against any one, if his property from that cause should sell at a very low rate. But we do not understand from the answers or the evidence that Jones did any thing to interfere with the sale, except to deliver his notice to the officers of the railroad, till this notice had been announced by the officer. It is assumed in the argument for the defendants that Jones’ notice was both false and fraudulent, and designed to injure the sale of the property; but this design seems not very credible, because such injury to the sale, however injurious to the creditors, was most destructive to his own interest. But upon that supposition, though he would be obliged to submit to the consequences of his own acts, he did not thereby become an outlaw, nor an object of attack beyond the limits of self defence. The officer had still his duties to perform, both to the creditor and to the debtor, imposed upon him by law from public policy, and for the security of all parties, and neither the creditor nor the purchaser at the sale will be justified in allowing himself to become a party to any violation of official duty on the officers’ part. Though the notice of Jones, upon the facts before us, is not entirely correct, yet it is by no means clear that it was designedly — 557 — false or fraudulent. Three hundred and forty-six shares are said to have stood on the corporate records in the name of Hale and Jones. Of fifty-five of these no account appears in the case; and of the eighty-six shares here in question, the record was by no means correct, as we shall have occasion to consider. Of these, sixty-eight were the subject of a special agreement with the corporation, and the residue were in the hands of a trustee for Mr. Jenness, and it would seem probable these were excluded by Jones, as not being shares belonging to him, or to Hale and Jones. If that was so, it was not improper nor wrong for him, as soon as he was aware that the officer was about to sell this large number of shares, as belonging to Hale and Jones, because they appeared on the records of the corporation to belong to them, to give notice to the corporation to prevent their being prejudiced. It was perhaps necessary for the protection of his own rights, since the corporation might well allege that if he stood by and suffered these shares to be sold as his property in that form, he ought not afterwards to claim that he was entitled to have bonds instead of the shares. If the records were wrong, it was no injustice to any party to give such notice as would enable those interested to take the proper measures for their own security. It would not be just for the court to assume that this notice was false and fraudulent, when they find that, as to the shares here in question, the notice might well be regarded by Jones as both true and proper. The railroad corporation are responsible for the acts of their agents, and if the injury of which the plaintiff complains is attributable to the conduct of their treasurer, they must answer for it. The shares here in question were borne upon the records as the property of Hale and Jones. We think they ought not to have been so entered. The shares were pledged to the railroad as an indemnity against their liability in certain trustee suits against Hale and Jones. By this pledge the special property passed to the railroad ; the right of Hale and Jones became reduced to a mere condition — a right to redeem by the discharge of the claim for which they were pledged. Their interest was — 558 — not one liable to attachment, and ought not to be so represented upon the records. If their interest was liable to be attached at all, by reason of their appearing by the records to be the owners, they must be liable absolutely, without regard to any claim of the railroad. It was, therefore, indispensable to the safety of the corporation that the shares should be placed upon the record as shares of the pledgees, and it was the duty of the treasurer so to record them, agreeably to the facts. But without reference to the pledge, these shares were not the property of Hale and Jones. Though certificates had been issued to them, yet it is evident, upon an examination of all the writings upon the subject, which are to be construed together as parts of one contract, that these certificates were given up and surrendered to the corporation upon a special contract that the railroad should pay to Hale and Jones the sum of $6,800, either in these shares, or in bonds which both parties contemplated the corporation would be authorized to issue, at the election of Hale and Jones. By this special agreement the shares ceased to exist as such, and Hale and Jones became the holders, not of shares, nor of a right to redeem shares, but of a right to demand either bonds or shares, at their election. These shares should not, then, have been placed upon their records as shares of Hale and Jones, since they owned only a special contract, which was not liable to attachment. If at the time of the sale the shares were to be regarded as still in existence, and subject to the conditional right of Hale and Jones, yet that right was wholly dependent upon the election of Hale and Jones. If they elected to take bonds, their right to the shares was clearly at an end, and the corporation had clearly no right to deprive them of an election, by issuing certificates of shares before they had made their choice, or by issuing certificates of shares to others, when they had elected to take bonds. It is said in argument, that the contract of the railroad company to issue bonds instead of shares was an incident of the stock, and passed with it to the purchaser, but we think this idea — 559 — entirely groundless. The contract relative to the stock and bonds was a mere personal contract, independent of them, and having no one character of an incident. Such a contract could not by any law of this State be seized or sold on execution, either alone or with the stock. By losing his interest in the shares, Jones might lose the benefit of his contract, but the purchaser would not acquire any interest in the special contract, unless it was specially assigned to him, which could not be done by a sale on execution. On the contrary, such a contract, giving Jones an election to demand stock or bonds of the company, necessarily reduced his claim to a mere contract, and destroyed all pretence that he was the owner of the shares, until he had made his election of shares and they were issued. Eighteen of the shares here in question were, at the time of the attachment and sale, standing in the name of the defendant Vennard as trustee for Jenness. They ought not to have been allowed to remain upon the records in the name of Hale and Jones, and they were not liable to be sold for their debts, even if they had some contingent equitable interest, unless the transfer to Vennard was fraudulent, which is not pretended. The officers of the corporation consequently cannot be justified in issuing certificates of these shares to Mr. Hatch. The relief prayed for is, 1. — That the railroad, its officers, &e. may be enjoined from selling the bonds necessary to discharge their contract with Hale and Jones, and the temporary injunction issued for this purpose must be made perpetual. 2. The bill prays that the railroad, its officers, &c., may be decreed specifically to perform their contract, by converting the sum of §6823.14 into a corresponding amount of bonds to be issued to the plaintiff. 3. That Mr. Hatch may be decreed to surrender the certificates of shares sold and wrongfully conveyed to him; and, 4, that the railroad may issue certificates of eighteen shares in the railroad to the plaintiff. And these decrees are proper to be made, with costs. The bill prays for other and further relief, the necessity for which we have not considered.