Pittsburgh Plate Glass Company v. Forbes , 258 N.C. 426 ( 1963 )

128 S.E.2d 875 (1963) 258 N.C. 426

PITTSBURGH PLATE GLASS COMPANY
v.
Thomas C. FORBES and wife Evelyn B. Forbes, Tr. as Town House Motel.

No. 535.

Supreme Court of North Carolina.

January 11, 1963.

Booth, Osteen, Upchurch & Fish, Greensboro, and W. D. Sabiston, Jr., by W. D. Sabiston, Jr., Carthage, for movant Love.

Smith, Moore, Smith, Schell & Hunter, by McNeill Smith and Richmond G. Bernhardt, Jr., Greensboro, for respondent appellees.

RODMAN, Justice.

The fact that defendants were adjudged bankrupts within four months from the date the amount owing and the liens securing payment were judicially declared did not impair plaintiff's lien. Sec. 67, sub. b of the National Bankruptcy Act, 11 U.S. C.A. § 107, sub. b. What effect, if any, the actual possession of the property by the receiver appointed by the bankruptcy court had on the right of the sheriff to make a valid offer of sale on 20 October 1961 need not be determined since we think the judgment should be affirmed for the reasons hereafter stated.

A sheriff, acting pursuant to an execution, can only sell the rights and estate of the judgment debtor as they existed when the lien pursuant to which he acts became effective. G.S. § 1-339.68(b). Our statutes regulating such sales, G.S. § 1-339.51 et seq. contemplate a sale at which the thing sold will bring its fair value. The high bidder at the auction acquires no right until his bid is accepted and the sale confirmed. G.S. § 1-339.67. If competitive bidding is stifled, resulting in a bid less than the fair value of the property sold, the clerk may decline to confirm the sale. Federated Textiles v. Mooresville Shirt Corp., 206 N.C. 471, 174 S.E. 290; Beckwith v. Kings Mountain Mining Co., 87 N.C. 155.

Courts are as diligent in protecting purchasers from imposition because of fraud or mistake as they are in protecting judgment debtors in similar situations. While the doctrine of caveat emptor applies to purchasers at execution sales, it does not tie the hands of a court to prevent a manifest injustice not due to the fault or neglect of the purchaser. The limitation on the rule is well illustrated in Clayton v. Glover, 56 N.C. 371. There a slave was sold under execution. Defendant Glover bid $1,000 for the slave but refused to comply with his bid. The slave had defective vision. His fair value was only $500. The sheriff, in reporting the sale, said: "At the time of the sale, and in the hearing of all persons present, the undersigned made known that there was a defect in each of said slave's eyes, and called up the said slave so near the stand that all persons present could see the said defect, which was patent." Glover testified that he was not present when the announcement was made by the sheriff and had no knowledge of the defect. He sought to withdraw his bid. His motion was denied for the reason there was no warranty of soundness. This Court reversed the lower court. Battle, J., said: "The court of equity has, undoubtedly, the power to set aside a judicial sale made in pursuance of its order whenever the owner of the property, or those who act for him, can show that the price bid is inadequate, and it would seem that in fairness, the court ought to have the corresponding power to relieve a purchaser whenever from fraud and mistake he has bid too much for the property; and such, from the authorities, we find to be the case. (Citing authorities) The sale being made under its authority, the Court will see that justice shall be done to both vendor and purchaser upon the fairest principles of equity and good conscience."

Webster v. Haworth, 8 Cal. 21, 68 Am. Dec. 287, is factually similar to the case under consideration. There plaintiff, sheriff, brought suit to recover the amount bid by defendant for land sold under execution. There one Ryer, judgment creditor at whose instance the sale was made, informed defendant that his judgment was the first lien on the property. That statement was not correct. Defendant bid for the property, relying upon the statement so made. Murray, C. J., said: "In this view of the case, it is immaterial whether Ryer made such representations, knowing them to be false, or whether he was ignorant of the facts altogether: 1 Story's Eq.Jur., sec. 193. It is sufficient if they were untrue, and at the same time a material inducement to the purchase, and that the defendant acted on the faith of them, which is indubitably true. It is said that the maxim caveat emptor applies to judicial sales, and that the defendant cannot avail himself of the misrepresentations of the plaintiff, as he had access to the records of the county, and might have informed himself on the subject. Grant that the maxim caveat emptor applies to sheriffs' sales, it has never been carried to the extent that such a sale could not be impeached on the ground of fraud or misrepresentation. The maxim only applies thus far, that the purchaser is supposed to know what he is buying, and does so at his own risk. But this presumption may be overcome by actual evidence of fraud, or it may be shown that in fact the party did not know the condition of the thing purchased, and was induced to buy upon the faith of the representations made by those who by their peculiar relations to the subject, were supposed to be thoroughly acquainted with it. The fact that the defendant might have examined the public records does not alter the case."

The principles announced in those cases have been applied to many different factual situations. Nash v. Elizabeth City Hospital Co., 180 N.C. 59, 104 S.E. 33; Davis v. Keen, 142 N.C. 496, 55 S.E. 359; McDowell v. Simms, 41 N.C. 278; Woods v. Hall, 16 N.C. 411; Smith v. Greenlee, 13 N.C. 126; Hayes v. Stiger, 29 N.J.Eq. 196; Paulett v. Peabody, 3 Neb. 196; Fisher v. Hershey, 17 Hun. 370 (N.Y.); Masson v. Bovet, 1 Denio 69 (N.Y.), 43 Am.Dec. 651; Veazie v. Williams, 8 Howard 134, 148, 12 L. Ed. 1018; Hayward v. Wemple, 152 A.D. 195, 136 N.Y.S. 625; Lane v. Chantilly Corp., 251 N.Y. 435, 167 N.E. 578, 68 A.L.R. 653. The general subject of the doctrine of caveat emptor as applied to purchasers at judicial sales is the subject of an annotation in 68 A.L.R. 659.

Respondents' bid represents the fair value of the property rights which Meares was told he would acquire if the high bidder. It is now insisted that he must increase his bid by 65% ($80,000) to get what he was led to believe he would acquire. He was induced to make this bid by statements by counsel for and with the knowledge of the judgment debtor. When informed the amount bid would not be applied to pay prior liens, he was diligent in seeking relief. He acquired the judgment under which the sale was made. He then directed the sheriff to return the execution with the notation that it had been withdrawn at his request as assignee of the judgment creditor. This was done. All of these steps were taken before the court confirmed the sale. Meares then sought a refund of the deposit which he had made. The court was informed of the reasons which prompted respondents to act. The clerk, dubious of his authority, referred the matter to the judge of the Superior Court. It is unnecessary to inquire whether the clerk lacked authority to act. Unquestionably the judge of the Superior Court did have such authority, when the clerk referred the matter to him. The order directing a refund of the deposit to obtain a resale discharged respondents of any obligation to purchase the property at that price.

Until the sale was confirmed, neither the judgment debtor nor those claiming under him acquired any rights by virtue of the auction. It is not now necessary to determine whether a judgment creditor who has made an upset bid causing a resale may, without the consent of the court, relieve himself of his obligation by ordering the execution returned "unsatisfied." The admitted facts justified the court in relieving respondents of the obligation assumed when they sought a resale. The judgment is

Affirmed.