Ex Parte Cooley , 69 S.C. 143 ( 1904 )

May 10, 1904. The opinion of the Court was delivered by In the case of Brown, Osborne Co. against A.T. Newell and others, judgment was rendered foreclosing the junior mortgage of the plaintiff, Brown, Osborne Co., and the senior mortgage of the defendant, J. Matt Cooley, against certain real estate of A.T. Newell, in Anderson County, S.C. and on salesday in November, 1902, the mortgaged lands were sold in several parcels, and Brown, Osborne Co. became purchasers of one of these parcels, the "home tract" No. 2 — 323 acres.

This proceeding was instituted by J. Matt Cooley to set aside the sale to Brown, Osborne Co. The petition, as ground therefor, alleged as succinctly stated by appellant's counsel:

"(a) That for the purpose of preventing free competition at the sale, A.T. Newell, with the knowledge and consent of Brown, Osborne Co., circulated false reports injuriously affecting the titles to the land, by which persons were prevented from bidding for said lands.

"(b) That in order to carry out said alleged fraudulent scheme, A.T. Newell procured the officer making the sale to change the order of sale from that in which it had been advertised.

"(c) That in furtherance of their scheme, A.T. and W. S. Newell `kited' the bidding on certain tracts, with a view to deceive petitioner's counsel and agent at the sale and to induce him to think that his client's debt was covered and that he need not make the `home tract,' which was sold, bring its full value.

"(d) That Brown, Osborne Co. had agreed with Newell prior to the sale that he should continue in possession of the land if they purchased."

Return was made to the rule to show cause granted upon said petition, denying the charges made, and by consent all issues of law and fact were referred to Walter H. Hunt, Esq., as special referee, who, after taking the testimony and hearing counsel, made report confirming the sale and dismissing the petition. The following is the finding of facts by the special referee.

"1. That A.T. Newell and Brown, Osborne Co. did not circulate a report that minor children had an interest in said lands, and there would be further trouble; but, on the other hand, A.T. Newell protested whenever occasion required that the titles to said lands were perfectly good.

"2. That said lands were not sold in the order in which they were advertised, and that the referee did not sell in that order at the request of A.T. Newell; but before changing the order of sale, the referee publicly announced that if any person objected to the change, he would sell in the order in which the lands were advertised, and no person objected, and petitioner's attorney was present, heard the announcement and did not object.

"3. That at the sale in November, 1902, W.S. Newell bid in tracts numbers 1 and 4 at very full prices, and that he was unable to comply, and that said tracts were duly offered for sale on salesday in December, 1902, and brought $3,275 less than the amount bid in by W.S. Newell.

"4. That at the sale in November, 1902, A.T. Newell bid in tract number 3 for $5,000, which was a fair price; but he was unable to comply, and that said tract was duly offered for sale on salesday in December, 1902, and brought $325.60 less than the amount bid by A.T. Newell.

"5. That after due advertisement the said lands were publicly and fairly offered for sale on salesday in November, 1902, and no person was prevented from bidding on any of said lands.

"6. That Brown, Osborne Co. bid in tract number 2 at $3,120, and have complied with their bid, and that said tract was reasonably worth twice the sum at which it was sold.

"7. That neither Brown, Osborne Co. nor the Newells did anything to chill the bidding on any of the tracts, and, so far as the testimony discloses, nothing was done by any person to prevent a fair and honest sale.

"8. There was no collusion between Brown, Osborne and Co. and the Newells, or either of them, to do anything to enable Brown, Osborne Co. to purchase tract number 2 at less than its value.

"9. That at the sale in November, 1902, B.F. Martin, Esq., who is a careful, prudent and capable attorney, representing the petitioner, bid $3,100 on tract number 2, and permitted it to be knocked down to Brown, Osborne Co. at $3,120, when he knew said tract to be worth at least twice that sum; but in allowing this, he was carrying out the instructions given him by petitioner.

"10. That A.T. Newell is occupying the said home tract, but he is there as a tenant of Brown, Osborne Co., under a contract to rent said place, which contract was entered into after the sale to Brown, Osborne Co."

The Circuit Court, by decree herewith reported, reversed the report of the special referee, and directed a resale of the tract purchased by Brown, Osborne Co. We will not undertake to discuss in detail the numerous exceptions to the decree of the Circuit Court, but will go directly to the point, which, under our view, must control this case and cause a reversal of the judgment. After a careful consideration of the testimony, we agree with the special referee in his finding of fact with reference to the conduct of Brown, Osborne Co. There is not the slightest evidence that they did anything to prevent fair and full competition in the sale, or that they in any way colluded with the Newells, or either of them, in any design they may have had to cause Cooley's agent to let the "home tract" go at less than its value. There was no evidence that any one was deterred from bidding who wished to do so; and, so far as Cooley is concerned, he was represented by a very intelligent agent, who bid on the tract in question as a competitor with Brown, Osborne Co., and voluntarily refrained from further bidding, under the belief that Brown, Osborne Co.'s bid, together with the prices at which the other tracts were bid off, would be sufficient to pay Cooley's mortgage debt. The failure of the Newells to comply with their bids upset the calculation; but, even if their purpose was to bring about this result, we see no reason for depriving the junior mortgagees of the benefits of their purchase, made in fair, open competition with the senior mortgagee and all others, and without any improper conduct on their part. The decree for sale contemplated that a bidder might fail to comply with his bid, and directed procedure in that event, and it seems to us that Cooley's agent assumed the risk, so far as Brown, Osborne Co are concerned, in permitting them to become purchasers of the home tract at less than its value, when he had it in his power to amply protect himself by preventing any sacrifice of the property. The loss to Cooley resulted from the mistake of his own agent, to which Brown, Osborne Co. in no wise contributed. It is not a sufficient ground for setting aside a judicial sale, that one of the parties interested intended to bid higher, but neglected to do so, or was prevented by a mistake at the time of the sale, if neither the officer making the sale nor the purchaser contributed to the mistake, and the sale was fair and regularly conducted. Young v. Teage, Bailey's Eq., 13.

Where unfair means have not been employed to prevent competition at a judicial sale, mere inadequacy of price is no ground for setting it aside. Coleman v. Bank, 2 Strob. Eq., 285; Ex parte Alexander, 35 S.C. 416, 14 S.E., 854; 17 Ency. Law, 2 ed., 1001. If the inadequacy of price is so gross as to shock the conscience, a court of equity would doubtless seize upon other circumstances impeaching the fairness of the transaction as a cause for vacating it. Robinson v. Association, 14 S.C. 148; Schroeder v. Young,161 U.S. 334; 17 Ency. Law, 2 ed., 1003. But the circumstances impeaching the fairness of the transaction should relate to the conduct of the officer making the sale, as in Farr v.Simms, Rich. Eq. Cases, 122, or to the conduct of the purchaser participating in the attempt to stifle competition or affected with notice thereof, as in Carson v. Law, 2 Rich. Eq., 296; Hamilton v. Hamilton, 2 Rich. Eq., 355; Barrett v. Bath Paper Co., 13 S.C. 158; Herndon v. Gibson, 38 S.C. 360;17 S.E., 145, with annotations in 20 L.R.A., 545; Toole v. Johnson, 61 S.C. 40, 39 S.E., 254.

A judicial sale may also be set aside in case of a mutual mistake, as in Ex parte Howlett, 50 S.C. 1, 27 S.E., 533, but the case made does not involve these principles. The only complaint made against the officer conducting the sale is that at the request of A.T. Newell, he offered the several tracts for sale in a different order from that in which they were described in the advertisement. The tracts were sold in the order of their size, the smallest first, thereby selling the "home tract" last. Neither the decree nor the advertisement positively prescribed any particular order in which the several tracts should be sold, and in the absence of any such requirement, the officer charged with the conduct of the sale had a discretion as to the particular order in which the several tracts should be sold and could properly consult the wishes of the parties interested. In this case, according to the finding of the special referee, which is clearly supported by the evidence, the officer inquired if there was any objection to a sale in the order proposed by him at Newell's request, and no one made objection, including the agent of Cooley, who was present. As already stated, there was no testimony impeaching the fairness or propriety of the conduct of Brown, Osborne Co. The fact that A.T. Newell occupied the "home tract" after the sale amounts to nothing, in view of the correct finding of fact by the special referee, that he occupied as tenant of Brown, Osborne Co., under a contract made after the sale.

The judgment of the Circuit Court is reversed, and the petition dismissed.