Criswell v. Criswell , 230 Iowa 27 ( 1941 )

I. The first question for determination is whether the trial court erred in refusing to approve the referee's report of sale to Carl Criswell for $5,800 because of the upset bid of $25 made by Ralph Criswell. The sale to appellant as the highest bidder at the public sale was subject to approval and confirmation by the court. Sections 12344 and 12345, 1939 Code.

It is well established that in sales in partition suits or other chancery sales the sale is not final and complete until confirmed and ratified by the court and in passing on the sale the court must exercise its sound judicial discretion with due regard for the stability of judicial sales and cannot arbitrarily and without cause refuse confirmation of the sale.

In Criswell v. Criswell, 227 Iowa 212, 220, 288 N.W. 130, 134, the court, speaking through Bliss, J., states:

"We have held that the trial court has a large discretion in the approval or disapproval of the sale, but that, as in all instances where official discretion is vested, this power of the court or officer is not arbitrary, but it is a legal or judicial discretion, for which sound and proper reasons can be given."

I am of the opinion the court abused its discretion in refusing to approve and confirm the sale of the property by the referee to appellant at public sale for the sum of $5,800. Only 90 acres of the 170 acres were capable of cultivation; the buildings were old and in poor condition. As stated, appellant's bid was $1,174 more than the appraised value and there is nothing in the record to suggest that this bid was inadequate. The record justifies the conclusion that it was more than the actual value of the land. At the first public sale, at which appellee was a bidder, the high bid was $4,600 and the upset bid was $5,600, a substantial advance bid. Criswell v. Criswell, 227 Iowa 212, 288 N.W. 130.

The public sale in this case was regular in every respect, the court rejecting the high bid solely because of the upset bid of $25 made by appellee.

For the several rules on the effect of a higher bid after property has been sold at judicial sale, see 31 Am. Jur. 452. While this court adheres to the principle that the confirmation of a sale in chancery cases is left to the court to be confirmed or not confirmed in the exercise of its legal discretion, the court in the exercise of this discretion must give due regard for the stability of judicial sales. Although there is no fixed rule as to the amount of the upset bid which will justify the court in setting aside a sale, it must be a substantial and material one and if it is only nominal it should be rejected and the sale approved. Loyd v. Loyd, 61 Iowa 243, 16 N.W. 117; Damrow v. Iowa O.S.L. Ry., 190 Iowa 996, 181 N.W. 271; Harney v. Crowley,184 Iowa 1101, 169 N.W. 370; 31 Am. Jur. 455, section 105. Appellee's advance bid was in a nominal amount and was not a sound, proper reason for refusing to confirm the sale to appellant.

In Moore v. Triplett, 96 Va. 603, 612, 32 S.E. 50, 52, 70 Am. St. Rep. 882, the opinion states:

"Great care should be observed that the practice of the court in acting upon a report of sale should not be such as to deter or discourage bidders, but such as to induce possible purchasers to attend such sales, to encourage fair, open and competitive bidding in order that the highest possible price be obtained, and to inspire confidence in the stability of judicial sales."

As stated in Reece v. Cartwright, 209 Iowa 706, 708,228 N.W. 641, 642:

"The court may not, therefore, treat the transaction as a mere farce."

The fact that the courtroom auction resulted in an increased bid of $1,700 does not, under the circumstances, deprive appellant of his right to a referee's deed as the high bidder at the public sale. The upset bid should have been rejected and the referee's report approved and the referee directed to issue a deed to the land to appellant.

Furthermore, appellee was one of the bidders at the public sale and was not entitled to submit an advance bid. 31 Am. Jur. 454, section 104; Everett v. Forst, 269 F. 867, 50 App. D.C. 215, 15 A.L.R. 789; Moore v. Triplett, 96 Va. 603, 610, 32 S.E. 50, 52, 70 Am. St. Rep. 882. In Moore v. Triplett, supra, the general rule is stated as follows:

"The main upset bid was put in by one who had an agent at the sale, who bid for him. It has been generally understood by the profession, and enforced by the courts, that one who was a bidder at the sale, by himself or by an agent, which is the same thing, or was present and had the opportunity to bid, would not, as a general rule, be permitted to put in an upset bid. He must bid at the sale in open competition with all others what he is willing to give for the property. A different rule would have a pernicious effect upon judicial sales of property."

In Everett v. Forst, 269 F. 867, 870, 50 App. D.C. 215, 218, 15 A.L.R. 789, the advance bid which induced the court to reopen the sale was in a negligible amount but a substantial increase in the original bid was finally obtained at a resale by the court. The opinion states:

"Coming to the present case, had we before us only the offer of $39,000, we would have no hesitancy in holding, in the light of the decisions above quoted, that the court below abused its discretion in reopening the sale. The increased offer was only 4 per cent. above the one made by appellant, an advance less than one-half that required by the old English rule, which has been condemned ``as tending to diminish confidence' in judicial sales. * * *

"But in this case, however, the result of the reopening of the bidding was an offer of an advance of $8,100 from one who, so far as the record discloses, had not had an opportunity to bid before. Considering, as we must, not only the question of public policy involved, but the rights of the infant, we feel that the order ratifying the sale to Tashof should be sustained."

However, in the instant case, appellee was a bidder at the original sale and the rights of infants are not involved.

In Kiebel v. Leick, 216 Ill. 474, 476, 75 N.E. 187, 188, the court states:

"On an application to vacate a judicial sale the court should also take into consideration the fact, if shown, that the parties interested are under disabilities. Adults are able to bid for themselves or have others do so, and thus protect their rights and obtain the full value of their interests in premises sold; but not so as to infants. They are by their disability prevented from protecting themselves against loss."

The setting aside of judicial sales for trivial reasons discourages bidding and undermines the stability of judicial sales which should be final and set aside with caution and for sound and substantial reasons. The court should sustain the sale of its officer unless material reasons are presented for setting it aside. As stated in Dickey v. Heron, 1 Ch. Cham., Ont., 149, a purchaser is bidding for the property and not for a chance to buy the property.

The growing practice of refusing to bid at a referee's or other judicial sale and then submitting a private upset bid to the court should be discouraged. Such a procedure seeks to deprive a purchaser of the property if the bidder making the advance bid thinks the purchase an advantageous one but leaves it to the buyer if he thinks the purchase unwise. In Whitely v. Whitely,117 Md. 538, 544, 84 A. 68, 71, the court states:

"The Court should no more in this case, than in that supposed, depart from the policy of encouraging purchasers at judicial sales by sustaining those fairly made in all respects, and for a full price, whether at public sale, or that failing, at private sale, and by refusing to strip a purchaser of a right fairly acquired, for a full consideration, merely because one who has had his day for free competition, demands that he be given a second opportunity."

I would hold appellant, Carl Criswell, is entitled to a referee's deed to the premises pursuant to his high bid at the public sale.