McClintic-Marshall Co. v. Scandinavian-American Bldg. Co.

RUDKIN, Circuit Judge (after stating the facts as above). [1,2] This was not a suit to set aside a consummated sale, or a sale after confirmation by the court, for mere inadequacy of price, and for that reason many of the authorities cited by the appellants have little or no application. Here the property was ordered sold subject to confirmation, and the court reserved the right to reject any and all bids for inadequacy of price. In the exercise of this reserved power the court was vested with a wide discretion, and the exercise of that discretion will seldom be reviewed by an appellate court. The situation confronting the court below was a difficult one at best. The value of the property involved depended largely upon a common ownership. The building was under construction upon, three lots, and no doubt the three lots were more valuable in a common ownership than in a divided one. Aside from this, the terra cotta and millwork, fashioned and manufactured for this particular building and costing upwards of $100,000, were of little or no value to any person other than the owner of the building. The sale of the two lots without reference to the third lot, and without reference to the materials in question, will therefore greatly impair the value of the third lot, and will practically destroy the commercial value of the materials; in other words, little or nothing is left for the other lien claimants, and it goes without saying that such a sale should not be approved, unless absolutely required by the necessities of the case. Furthermore, it is very questionable whether the mortgaged iots were in fact sold at public auction to the highest bidder as required by law. The property was ordered sold as an entirety, and [604] bidders were therefore required to bid upon it as an entirety. True, they were required to segregate their bids as between the mortgaged lots and the other lot; "but there is nothing in the decree expressly authorizing or permitting outsiders to bid on the mortgaged lots only, without reference to the other property. If no bids were offered for the property in its entirety, it would seem to be the duty of the special master to strike the mortgaged property off to the mortgagee or his assignees, without other bids, and without competition. The decree may admit of a different construction, but it likewise admits of the construction we have suggested, and for that reason outsiders may well have been deterred from bidding separately for the mortgaged lots alone. For these reasons it is clear to us that the court did not abuse its discretion in refusing to confirm the sale. The last supplemental decree provides that the entire property shall not be sold for less than $300,000, and that the mortgaged portion shall not be sold for less than the amount of the mortgage debt, with accrued interest, costs, attorney’s fees, the amount of certain receiver’s-certificates, and increased costs. No provision is made for a separate sale of the mortgaged part, in the event that the property cannot otherwise be sold under the terms of the decree, and it is because of the absence of any such provision that this part of the appeal is prosecuted. As a general rule, no doubt, the mortgagee has the right, upon condition broken, to foreclose his mortgage and have the. mortgaged property sold at public auction to the highest bidder, and the proceeds of the sale applied in satisfaction of the mortgage debt; and in order to obtain a satisfaction of his mortgage he cannot be compelled to bid in either the mortgaged property, or the mortgaged property and other property, at a price fixed by the court. Dane v. Daniel, 23 Wash. 379, 387, 63 Pac. 268; Bailey v. Hendrickson, 25 N. D. 500, 143 N. W. 134, Ann. Cas. 1915C, 739; Bronson v. Kinzie, 1 How. 311, 11 L. Ed. 143. But this rule is not absolute, or without qualification. Thus in Shepherd v. Pepper, 133 U. S. 626, 10 Sup. Ct. 438, 33 L. Ed. 706, one party held two liens by deeds of trust on a part of an indivisible tract, and a second party held a like lien on the remainder. The decree of foreclosure directed a sale of the entire tract as one parcel, authorized the auditor of the court to ascertain the relative values of the two parcels, and provided that the proceeds of the sale should be applied on the debts secured by the different deeds of trust in accordance with the values thus ascertained. This decree was affirmed by the Supreme Court. Mr. Justice Miller dissented, saying: “I dissent from so much of the .iudgment of the court in this case as requires the entire property to be sold together and make provision afterwards ' for dividing the proceeds according to the valuation that may he made to-ascertain how much of the money should go to appellant, Maria Gray. I am of opinion that she has a right to have the" piece of ground, on which her mortgage is declared to be the first lien, sold separately, so that she can bid whatever sum she may see proper in satisfaction of her mortgage.” This shows very clearly that the broad claim now made by the appellants was there asserted and denied. The facts in this case fully war [605] rant the application of the rule there announced, and a ¡court of equity should exert its authority to tire utmost to prevent a sacrifice of the property. Under the terms of the decree as entered, the appellants will receive the full amount of their mortgage debt, if a sale is made in accordance .therewith, and to more than this they are not entitled. If the property cannot be sold, we cannot anticipate the changes that may be made necessary in the form of the decree or the terms of sale. The order denying confirmation of sale and modifying the decree is affirmed.