Schmitt v. Franke

Winslow, O. T. There was sufficient evidence to sustain the findings of fact made by the trial court, and the only question which we find it necessary to consider is the question whether the proper legal conclusion was drawn therefrom. The essential facts are these: Franlce agreed to sell the 701 shares of stock to plaintiff and Mathias, joint notes being given therefor by plaintiff, Mathias and G. M. Schmitt, and Walter. The notes not being paid Franlce foreclosed the agreement. Before the foreclosure action was begun G. M. ■Schmitt, Walter, and Franlce agreed between themselves that Franlce should bid in the stock without opposition and thereafter give a new contract to the other two men, thus barring out both the plaintiff and Mathias Schmitt. Before the foreclosure sale G. M. Schmitt and Walter told plaintiff that the arrangement was that Franlce should bid in the stock for the benefit of themselves and the plaintiff jointly, thus depriving Mathias (who was not financially able to bid) of his interest, and plaintiff tacitly consented to the plan and on the faith thereof ceased to prosecute the efforts he had begun to get funds with which to bid. The sale took place; the scheme was carried out, Franlce obtained the stock on his own bid without competition, Mathias was barred out, and then plaintiff discovered that by secret agreement between Franlce, G. M. Schmitt,' and Walter he too was barred of the interest which he had been assured would be preserved to him notwithstanding the foreclosure sale. On these facts it must be held that the judgment was correct. Contracts to prevent competitive bidding at judicial sales whereby a fraud on any third person is worked are invalid because against public policy. The plaintiff here must base his right upon an arrangement to which he consented [352] which involved as an essential part his refraining from -bidding at the sale in order to force Mathias Schmitt out of the business. While there are doubtless eases where agreements between bidders are valid because no third person is injured thereby, this is not one of them. Mathias was entitled to a fair sale of the stock, and as he was not financially able to make a bid himself it is very apparent that the stifling of competition was a fraud upon him. 1 Page, Contracts, § 405 Herndon v. Gibson (38 S. C. 357, 17 S. E. 145) 20 L. R. A. 545 and cases cited in note. A cause of action does not arise out of a contract which violates public morals or public policy. Milwaukee M. & B. Asso. v. Niezerowski, 95 Wis. 129, 70 N. W. 166. This principle is well established and demonstrates the correctness of the judgment. By the Court. — Judgment affirmed.