Camp v. Bruce , 43 L.R.A. 146 ( 1898 )

Buchanan, J.,

delivered the opinion of the court.

The record shows that on the 11th day of June, 1894, at a judicial sale in the case of Ranstead v. Ranstead, &c., the appellee purchased a tract of land containing 2,900 acres at the price of $2,100; that he complied with the terms of sale by paying the cash required and executing his bonds for the deferred payments; that the sale was reported to the court, but pending confirmation he entered into a written agreement with the appellants by which, in consideration of their assuming payment of the purchase money bonds held by the commissioner, and the payment of $1.565, to the appellee (which was $500 profit on his bid) he sold and conveyed all his right, title, and interest in the land, and in the sale and purchase thereof to the appellants, and agreed that he and his wife would unite with the commissioner in his conveyance of the land which he was directed to ask the court to have made to the appellants. An upset bid having been put in, the sale to the appellee was set aside, and a resale ordered. After the land had been resold several times, upset bids having been put in from time to time, the appellee finally became the purchaser at the price of $4,850, at a sale which was confirmed.

Some months after the confirmation of that sale, the appellants filed this bill to compel the appellee to specifically execute his agreement with them, upon the ground that he, in violation of its provisions and in fraud of their rights, had improperly and fraudulently procured the upset bid to be put in which prevented the confirmation of the first sale made to him.

The appellee answered the bill, and, among other things, admitted the execution of the agreement, and alleged that he would have complied with its provisions if the sale had been confirmed, but denied that he procured the upset bid to be put in which prevented its confirmation.

The first question to be determined is whether that agreement is one which a court of equity will enforce. If it be an illegal contract, as claimed in argument,'this suit cannot be maintained, although that defence was not raised by the pleadings, nor relied upon in the Circuit Court. The law refuses to enforce illegal contracts, as a rule, not out of regard for the party objecting, nor from any wish to protect his interests, but from reasons of public policy. Whenever, therefore, the illegality of the contract appears, whether alleged in the pleadings or made known for the first time in the evidence, it is fatal to the case. That defect cannot be gotten rid of either by failure to plead it, or by agreeing to waive it in the most solemn manner. The law will not enforce contracts founded in its violation. Fry on Spec. Per., see. 309; 1 Story’s Eq. 261; Pomeroy’s Contracts, sec. 286 (2d Ed.); Coppell v. Hall, 7 Wall. 542.

We have no statute declaring that contracts like the one under consideration are unlawful, yet under the principles of the common law any contract that is made for the purpose of, or whose necessary effect or tendency is to lessen competition and restrain bidding at judicial sales, is held to be illegal because opposed to public policy. The object in all such sales is to get the best price that can be fairly had for the property. The policy of the law, therefore, is to secure such sale from every kind of improper influence. To allow one bidder to buy off another, which is but a species of bribery, and thus prevent the property -from bringing the best price, is condemned by the law, and the courts will not enforce contracts founded in such practices. Underwood v. McVeigh, 23 Gratt, 409, 428-9; Cocks v. Izard, 7 Wall. 559, 562; Fry on Spec. Per., sec. 308; Pomeroy’s Contracts, sec. 283; Greenhood on Public Policy, pages 183 to 189.

Tested by these principles the agreement in question was clearly illegal.

If the parties had succeeded in having the sale confirmed by the court and the appellants substituted as purchasers, in lieu of the appellee, at his bid of $2,100, the agreement would have operated as a fraud upon the court and the parties whose lands were being sold for purposes of partition. It would have enabled the appellee to put $500 in his pocket for which he furnished no valuable consideration, would have taken from the co-owners that much of their inheritance and enabled the appellants to get the property by buying off the court’s bidder instead of putting in an upset bid, and taking the chances of having to pay a higher price for it at a resale. Neither in this case nor in the case in which the land was sold could such an agreement be enforced. If the commissioner who made the sale in the case of Ranstead v. Ranstead, had reported to the court that since the sale made by him the appellee had sold his bid to the appellants at a profit of $500, to be paid when the sale was confirmed (as he ought to have done, for he wrote the agreement, and knew all the facts, and the court, whose agent he was, had the right to know all that he knew about the appellants’ dealings with its bidder that could affect the confirmation of the sale), instead of merely reporting that the appellee desired the conveyance for the land to be made to the appellants, the court would not have'confirmed the sale at the appellee’s bid of $2,100, although no upset bid had been put in.

A court will never, where the facts are known to it, confirm a sale where the bidder has sold his bid at an .advance, unless the advance paid or to be paid inures to the benefit of the parties to the suit. It does not allow bidders to trade behind its back, and speculate in that way on property which it is selling. 2 Dan. Chy. Pl. & Pr. 1285 (2d Ed.); Hodder v. Ruffin, 1 Tamlyn, 341.

In order to prevent this, it became the practice of the English chancery courts, in the time of Lord Elden it is said, to require the bidder who desired the court to substitute another in his stead, to file an affidavit that there was “ no underhand bargain between them.” Rigby v. McNamara, 6 Vesey, 515; Vale v. Davenport, 6 Vesey, 615; Holroyd v. Wyatt, 9 Jurist, 1072; 2 Collyer, 327.

The rule of the English chancery courts upon this subject is thus' stated in 2 Daniel’s Chancery Pleading & Practice, 1285 (5th Ed.): “ If after becoming the bidder for an estate, the purchaser is desirous of being discharged-from his contract, and of substituting-another person in his stead, the court will, on motion, make an order to that effect; he must, however, support the motion by an affidavit that there is no underbargain, for the new purchaser may give the other a sum of money to stand in his place, and so deceive the court; and the rule appears to be, that if a purchaser resell behind the back of the court before the purchase is confirmed, the second purchaser is considered as a substituted purchaser, and must pay the additional price into court for the benefit of the estate. When the highest bidder at an auction induced the auctioneer to accept another person in his place, concealing the fact that he had sold his bargain at an advance, which he received and absconded, the property was ordered to be resold, reserving all questions of liability of the original or sub-purchaser.”

The English rule of requiring affidavits, where one purchaser is asked to be substituted for another, is a wise one, and the agreement sought to be enforced shows the necessity for some such safeguard in our practice. It might be well for our courts in all such cases, unless the parties consent to the substitution. to adopt the English practice. It is of the utmost consequence that -judicial sales, and especially sales for partition where infants are generally interested, should be protected from practices and influences which may prevent the lands from bringing the best price.

The bill was properly dismissed by the Circuit. Court, and its decree must be afñrmed.

Affirmed.