Compañia Azucarera de la Carolina v. Gonzalez , 11 P.R. Fed. 566 ( 1920 )

Hamilton, Judge,

delivered the following opinion':'

This bill was filed March 11, 1920, alleging that at a chancery sale ordered by this court bids were offered for the-property by defendant and one Riera, and thereupon defendant requested the adjournment of the sale and entered into agreement with Riera for valuable consideration, by which Riera withdrew from the sale and allowed defendant to purchase at $330,000, when the property was worth and assessed for taxation at over $1,000,000, which agreement constituted a fraud upon the court, orator, and bondholders and creditors of orator; “that said agreement was made with, tbe fraudulent purpose and intent of eliminating all competition between tbe only bidders at tbe said sale, and witb tbe fraudulent purpose on tbe part of tbe defendant of purchasing tbe property of your orators for a fractional part of their true value,” wbicb agreement was unknown to orator at tbe time of sale and confirmation, and bas only recently come to bis knowledge.

Motion to dismiss was filed, argued, and submitted on tbe ground that “tbe bill herein filed does not state any matter of equity entitling plaintiff to tbe relief prayed for, nor are tbe facts as stated sufficient to entitle plaintiff to any relief against this defendant.”

1. There seems to be no doubt that an agreement not to bid at a public sale, 'which results in “chilling” tbe sale, is fraudulent and avoids tbe sale. Herndon v. Gibson (1893) 38 S. C. 357, 20 L.R.A. 545, 37 Am. St. REep. 765, 17 S. E. 145; Smith v. Greenlee, 13 N. C. (2 Dev. L.) 126, 18 Am. Dec. 564; 1 Story, Eq. Jur. 292, 293. Tbe motive may be a perfectly proper one on moral grounds, but if it results in destroying competition it is illegal. A striking case was Carson v. Law, 19 S. C. Eq. (2 Rich.), 296, where a bidder offered a thousand dollars for a lot of nine slaves, announcing that it was bis purpose to send them as a gift to tbe wife and children of tbe defendant. No one bid against him; be was therefore the best bidder, and accordingly sent tbe slaves to tbe wife and children. His motives were of tbe best; and yet bis action deterred bidders from sympathy and destroyed tbe competition aimed at by tbe law. Tbe sale was set aside.

2. On tbe other band,, it is equally trae that not every combination malees a sale fraudulent. Thus if two or more persons are unable to purchase the property except in partnership, there is no reason why one should not bid on behalf of all. This does not destroy competition; for no one could bid alone. It secures rather than prevents what the law aims at. Joint adventures are allowed when avowed'. Atcheson v. Mallon, 43 N. Y. 147, 3 Am. Rep. 678; Kearney v. Taylor, 15 How. 494, 14 L. ed. 787; 2 R. C. L. 1133; 6 C. J. 831. This does not injure the sale the object of which is to secure the best possible competitive price for the defendant, who has ím control over the sale, cannot refuse a bid, adjourn the sale, or'fix a minimum. The sale is entirety adverse to him, and therefore the law seeks to protect him by preventing improper combinations. Dudley v. Little, 2 Ohio, 504, 15 Am. Dec. 575; Blackwell, Tax Titles, 5th ed. 560. This dtfes not prevent a combination of creditors to bid off the property so as to protect their existing rights. Thames v. Miller, 2 Woods, 564, Fed. Cas. No. 13,860; Smith v. Ullman, 58 Md. 183, 42 Am. Rep. 331.

"What may be proved upon the facts of the case cannot at: present be foreseen. The allegations of the bill might possibly be fuller, but they would seem to be sufficient if proved, according to the usual meaning of the words employed, to allege a fraudulent combination to prevent competitive bidding, which was carried out and had the result aimed at, so that the defendant obtained the property at one third its value to the disadvantage of the plaintiff and its creditors. It would secan that the motion to dismiss upon the pleadings is not well taken-

It is accordingly denied, and it is so ordered.