Delray Incorporated v. Reddick

1. Where property was sold at public outcry under a power of sale in a security deed, and an individual who was president of a corporation appeared at the sale and submitted bids, but in doing so did not act as agent for the corporation, this without more would not give the corporation such standing as a bidder as would entitle it to complain that a deed made to the purchaser at such sale is invalid because of irregularities whereby the property was knocked off to one who had no right to have his bid accepted, and as a result the property brought less than its fair market value. The first count of the petition, based upon the theory that the plaintiff, a corporation, had become a bidder by reason of a bid that was submitted by a named person who was the plaintiff's president, did not contain sufficient allegations to show that such person was acting in the plaintiff's behalf, or that it otherwise became or sought to become a bidder. Accordingly, the court did not err in sustaining a general demurrer to the first count.

2. "Powers of sale in deeds of trust, mortgages, and other instruments shall be strictly construed and shall be fairly exercised." In the second count of the petition, in which the plaintiff, as a subsequent purchaser of the equity of redemption, sought to annual the sale under the power, for alleged irregularity and unfairness, as against the holder of the security deed, who, acting through others, conducted the sale and himself became the purchaser, it appearing from the allegations that after the defendant had begun to offer the property through an auctioneer, and after a member of the public had submitted what was then the highest and best bid, another agent of the defendant interrupted the auctioneer by a question as to whether he had read the entire advertisement, and the auctioneer replied in the negative, and stated that he would return to his office, study the advertisement, and sell the property at a later time, and, after thus causing the above-mentioned bidder to believe that the sale had been called off, resumed the sale and accepted a higher bid from an agent of the defendant, without affording the other bidder an opportunity to bid further, when he was willing to do so and to offer a greater sum than the amount of the bid that was accepted, the sale under these circumstances was unfairly conducted, and was subject to annulment in equity at the instance of a proper party.

3. Where, after such sale under the power, the sole heir at law of the grantor, who had died intestate before the sale, leaving no debts except that secured by the loan deed, sold and conveyed all of her right, title, and interest in the real estate conveyed by the loan deed, together with all her right, title, and interest in any funds derived from the purported sale under the power, such sale and conveyance by the heir at law did not amount to a ratification or affirmance of the irregularity and unfairness in the sale under the power, but had the effect of conveying to the grantee whatever right the grantor may have had either to affirm or disaffirm the alleged unlawful sale as made by the defendant under the power of sale.

4. Under the facts stated in the preceding note, the sole heir at law of the grantor in the security deed, being the owner by inheritance of the equity of redemption at the time of the sale under the power, was entitled to have the sale properly conducted, and as such owner could have complained of irregularity and unfairness in its conduct, just as the grantor in the security deed might have done if in life; and since the right to disaffirm on such ground involved an interest in property, it was one that could be assigned and transferred to another. Accordingly, under the sale and conveyance to the plaintiff by such heir at law, only two days after the sale under the power, the plaintiff acquired the same right to attack the sale on such ground; and the suit afterward brought by it for that purpose stated a cause of action, the plaintiff having duly offered to do equity, and it not appearing that either party was barred by laches. The court erred in sustaining the general demurrer as to the second count.

No. 14186. OCTOBER 12, 1942. On November 22, 1941, Delray Inc. filed in Muscogee superior court a petition naming as defendants S. A. Reddick of Muscogee County, Ruth Floyd of Fulton County, "who is temporary administrator of the estate of Laurah Ramsey, deceased," and J. M. George as marshal of the civil court of Fulton County.

Count 1 of the petition alleged substantially: On October 27, 1938, Laurah Ramsey executed and delivered to Hibernia Savings, Building Loan Association a deed conveying described property to secure an indebtedness of $530, a copy of said deed being attached to the petition. Through stated transfers S. A. Reddick acquired said loan deed and the indebtedness thereby secured. On July 12, 1941, Laurah Ramsey died intestate, leaving no indebtedness other than that secured by the said loan deed. Ruth Floyd is the sole heir at law of Laurah Ramsey, and has been appointed temporary administratrix of her estate. In pursuance of a power of sale in said loan deed S. A. Reddick advertised the land therein conveyed, for sale at public outcry on the first Tuesday in October, 1941. Petitioner's president, C. J. Camp, observed the advertisement, and inspected the property with the idea of purchasing it. At the time and place advertised, C. J. Camp appeared for the purpose of bidding on and possibly purchasing said property. A number of persons were congregated near the auctioneer, among whom were George B. Tidwell and Bertram S. Boley, attorneys and agents for S. A. Reddick. The auctioneer proceeded to offer the property for sale. C. J. Camp and George B. Tidwell made successive bids for the property, the price being advanced to $550 by bid of Camp. When Camp's bid was made, B. S. Boley approached the auctioneer and said, "Have you read all of the advertisement? Did you not leave out a paragraph?" The auctioneer replied that he had left out a paragraph. Thereupon Camp requested that the advertisement be re-read in full, and the property sold. This the auctioneer declined to do, and stated that he would return to his office, study the advertisement, and sell the property at a later time. Thereupon Camp informed the auctioneer that he desired to bid further on the property, gave the petitioner his name and address, and received a promise from the auctioneer to be notified of the time and place of the sale. Having been thus led to believe that the sale had been called off, Camp started away. Almost immediately George B. Tidwell said, "I bid $750." Then at once and before Camp had an opportunity to speak, the auctioneer, without the usual announcement or "crying off," said, "Sold to George B. Tidwell." C. J. Camp at once protested, stating that the sale had been suspended, and that if it was proposed to resell the property at that time, he was ready to bid on said property and to offer a greater sum than $750, and requested that the bidding be resumed. The auctioneer declined this request, and refused to entertain any other bid. Petitioner offered to tender, and did tender, and continues to tender the amount of his bid of $550, which tender was refused. Later during the same day the auctioneer reappeared at the courthouse and attempted to resell the property to George B. Tidwell for $750, Tidwell bidding on behalf of S. A. Reddick. Petitioner had no knowledge of such attempted resale until after the property was sold. Following the attempted sale of the property, S. A. Reddick, as attorney in fact for Laurah Ramsey, executed and delivered to himself a deed to the real estate, pursuant to the exercise of the power of sale in said loan deed. Reddick has caused to be issued a dispossessory warrant for the dispossession of the tenant occupying said premises, and J. M. George, as marshal of the civil court of Fulton County, is now about to enforce said warrant. Petitioner was exercising a legal right in appearing at the public sale and bidding on said property, and the defendant was under a legal obligation to sell the property in a fair and open manner, so that petitioner might have an opportunity to bid thereon; but the defendant in the manner hereinbefore alleged, through an artful and fraudulent practice, ignored petitioner's right and refused to give petitioner an opportunity to bid on said property. The property in question has a reasonable market value of $2000, whereas the indebtedness to Reddick does not exceed $230. Petitioner has a right to have the property re-offered for sale, so that it may have an opportunity to continue to bid thereon. It is without an adequate remedy at law.

Count 2 contained substantially the same averments, except those relating to the plaintiff's right to have the property reoffered for sale, instead of which the following allegations were made: "On October 9, 1941, Ruth Floyd sold and conveyed to petitioner all of her right, title, and interest, as the sole heir at law of Laurah Ramsey, in the real estate embraced in said loan deed, together with all her right, title, and interest in any funds derived from a purported sale of said property on the 7th day of October, 1941, by S. A. Reddick, as attorney in fact for Laurah Ramsey, to S. A. Reddick. . . Petitioner alleges that since the attempted sale it has tendered to the defendant the sum of $300 in cash, and continues to tender this amount, with which to pay off and discharge the secured indebtedness, said sum being more than enough to discharge the indebtedness, the exact amount of which being unknown to petitioner. . . The deed under power of sale from S. A. Reddick, as attorney in fact, to himself individually, constitutes a cloud on petitioner's title, and should be canceled, said deed being a part of the fraudulent enterprise herein outlined."

As to both counts the petitioner prayed for process, second original for service on the Fulton County defendants, and injunction against the marshal as to execution of the dispossessory warrant. As to count 1, it was prayed: (a) That the deed under power made by S. A. Reddick, as attorney in fact, to himself individually, be canceled; (b) that S. A. Reddick be directed to reoffer said property for sale at public outcry, and that the bidding thereon may be resumed at the point where the sale was suspended, so that petitioner and any other interested parties may have an opportunity to bid thereon; (c) that S. A. Reddick be enjoined from encumbering said property, pending a final determination of the issues made in this suit; (d) that petitioner have general relief. Count 2 prayed for cancellation of the deed made by Reddick as attorney in fact to himself; and "that the defendant, S. A. Reddick, be required to render a statement of the amount due on said secured indebtedness; and, upon the payment of said amount to him by petitioner, the loan deed and notes be canceled and surrendered;" and for general relief.

The court sustained a general demurrer by Reddick, and dismissed the action. The plaintiff excepted. 1. The parties may be referred to herein as plaintiff and defendant, according to their positions in the trial court, the latter term meaning Reddick, who was the principal defendant, although several persons were named as defendants in the petition.

The general demurrer to count 1 was properly sustained. In this count the plaintiff sought relief as a bidder, claiming that it was entitled to have the property reoffered and the sale resumed at a certain point where the bidding was interrupted. If every question of law presented by the plaintiff as to the right of a bidder were resolved in its favor, it still could not prevail on the first count, because it does not appear that it ever became a bidder, as contended. A bid had been made by C. J. Camp, who it appears was president of the plaintiff corporation, but the allegations do not show that he was bidding in its behalf, or otherwise than as an individual. It is true the plaintiff alleged that it "tendered and continues to tender the amount of his bid of $550, which tender has been declined," and that petitioner was exercising a legal right to appear and bid on the property, and "has a right to have the property reoffered for sale, so that it may have an opportunity to continue to bid thereon;" but these averments were, as to any right of the plaintiff, mere conclusions of the pleader, and were insufficient to connect the plaintiff with the bid of Camp. It was nowhere alleged, directly or indirectly, that Camp was acting for the plaintiff; and when the allegations are construed most strongly against the pleader, as must be done on general demurrer, the plaintiff, so far as the first count is concerned, appears to be a mere interloper. See Krueger v. MacDougald, 148 Ga. 429 (96 S.E. 867); Hobbs v. Chemical National Bank, 97 Ga. 524 (25 S.E. 348); Greenfield v. Stout, 122 Ga. 303 (50 S.E. 111); Shingler v. Furst, 176 Ga. 497 (168 S.E. 557).

2. In the second count the plaintiff sought relief, not as a bidder, but as the owner of the equity of redemption which it claimed to have purchased from the sole heir at law of the grantor in the security deed. We are of the opinion that this count stated a cause of action. In reaching this conclusion, several questions have required consideration, the first of which is whether the allegations were sufficient to show an improper exercise of the power of sale, so that it might be avoided at the instance of a proper party. "Powers of sale in deeds of trust, mortgages, and other instruments shall be strictly construed and shall be fairly exercised." Code, § 37-607. In this case it appears that the sale was conducted through an auctioneer, by S. A. Reddick as the holder of the security deed. C. J. Camp appeared for the purpose of bidding. Also present were two named persons who were acting as agents and attorneys for Reddick. Camp and one of these agents made successive bids, after which the bidding was interrupted by the other agent of Reddick. Camp had just made a bid of $550, which was the highest bid at the time of the interruption. One of the agents asked the auctioneer if he had read all of the advertisement, or had he not left out a paragraph. The auctioneer replied that he had left out a paragraph; and though he was then and there requested by Camp to read the advertisement in full and to proceed with the sale, he declined to do so, stating that he would return to his office, study the advertisement, and sell the property at a later time. Camp then started away, requesting that he be notified of the time and place of sale, as he desired to bid further. Almost immediately the property was knocked off to one of the defendant's agents for $750. Camp protested, and stated that he was ready to bid a larger sum; but the auctioneer declined to reopen the bidding, and later during the same day reappeared at the court-house and attempted to resell the property to the defendant's agent at the sum which he had previously bid therefor. Following this, Reddick, as attorney in fact of the grantor in the security deed, executed and delivered to himself a deed to the property in pursuance of the power of sale. Such, in substance, were the allegations as to the manner in which the sale was conducted. In such circumstances the power of sale was not fairly exercised, and therefore the sale thereunder was voidable and subject to annulment in equity, at the instance of a proper party. SeeBond v. Stephens, 161 Ga. 140 (2) (129 S.E. 636);Plainville Brick Co. v. Williams, 170 Ga. 75 (2) (152 S.E. 85); Henderson v. Willis, 160 Ga. 638, 646 (128 S.E. 807).

3. The grantor in the security deed, as the owner of the equity of redemption, if she had remained in life, would have been the proper party to seek such relief. The plaintiff claims under a deed from the sole heir at law of the grantor, executed two days after the sale as made under the power of sale. Since the plaintiff is thus standing in the shoes of the sole heir at law, and has no other claim, the question arises as to whether the alleged irregularity and unfairness in the sale under the power appears to have been ratified or affirmed by such heir at law on or before her sale and conveyance to the plaintiff. This question is raised by the defendant, in view of the terms of the deed under which the plaintiff claims, as shown by the following allegations: "On October 9, 1941, Ruth Floyd sold and conveyed to petitioner all of her right, title, and interest, as the sole heir at law of Laurah Ramsey, in the real estate embraced in said loan deed, together with all her right, title, and interest in any funds derived from a purported sale of said property on the 7th of October, 1941, by S. A. Reddick, as attorney in fact for Laurah Ramsey, to S. A. Reddick." It is insisted that since Ruth Floyd, the sole heir at law, thus conveyed "all her right, title, and interest in any funds derived from" the alleged unlawful sale under the power, she thereby ratified and affirmed the sale; so that the plaintiff, as her vendee, was merely entitled to any excess in the proceeds over the amount of the debt, and could not complain of any irregularity or unfairness in the manner in which the sale was conducted. We can not sustain this contention. Under the terms of the deed as stated, Ruth Floyd, the sole heir at law, conveyed all of her interest in the land, together with all of her right, title, and interest in any funds derived from the purported sale. The deed was not a communication to the defendant or to any one for him, and on proper construction it amounted to a conveyance of whatever right Ruth Floyd, as the sole heir at law, had either to affirm or disaffirm the alleged unlawful sale as made by the defendant under the power of sale. Had the grantor intended to ratify the sale, and to transfer or convey to the plaintiff only a right to claim the excess in the proceeds over the indebtedness secured by the loan deed, the words "all of her right, title, and interest . . in the real estate embraced in said loan deed" would have been entirely superfluous. They were evidently intended as a conveyance of land; and under this deed the plaintiff acquired the right either to affirm the sale and claim the excess in the proceeds, or to disaffirm and seek to recover the land, provided such right had been inherited by the heir at law, and was such a right that she could sell and convey by a deed to the land.

4. As shown in divisions 2 and 3 above, under the allegations of fact the sale and conveyance made by the defendant Reddick, in pursuance of the power of sale, could have been avoided by the grantor in the security deed, as the owner of the equity of redemption, if she had remained in life. While in one sense such right to disaffirm might have been personal to the grantor, yet under the facts alleged it would have amounted to an equitable interest in real estate; and since the grantor in the security deed had died intestate before the date of the sale, the equity of redemption descended by inheritance to the sole heir at law, with the same right to affirm or disaffirm an unlawful sale thereafter made which the grantor herself would have had if she had not died. Code, § 113-901; Egan v. Conway, 115 Ga. 130 (3) (41 S.E. 493); Dunson v. Lewis, 156 Ga. 692 (119 S.E. 846); Stonecypher v. Coleman, 161 Ga. 403, 409 (131 S.E. 75); Weems v. Kidd, 37 Ga. App. 8 (138 S.E. 863). The plaintiff is asserting the right to disaffirm as a purchaser from such heir at law under a deed executed only two days after the sale under the power. While the right to disaffirm, by whomsoever claimed, must be exercised within a reasonable time, such right was not lost merely by lapse of time when the period was only two days. Nor can it be said that the right was not seasonably exercised by the filing of the instant suit about six weeks afterward, where, so far as appears, nothing happened in the meantime, except the passage of time, in reference to the matter. It is insisted, however, that the right to disaffirm, if it existed at all in the sole heir at law, was one of such nature that it could be exercised only by her in person as the owner of the equity of redemption, and that it could not be sold and conveyed to another. On this question, various authorities have been cited by counsel. Among other decisions relied on by counsel for the defendant are Williams v. Williams, 122 Ga. 178 (50 S.E. 52, 106 Am. St. R. 100); and Payton v. McPhaul, 128 Ga. 510 (58 S.E. 50, 11 Ann. Cas. 163). In the Williams case, it appeared that the holder of a judgment rendered on April 5, 1899, sought to disaffirm a sale made on January 10, 1899, under a power of sale in a mortgage executed in 1897. It was held that the creditor, whose judgment was junior both to the mortgage and to the sale made thereunder, could not disaffirm the sale, although it might have been avoided by the mortgagor on the ground that the mortgagee had purchased at his own sale under power, without authority. It was said broadly that the right to disaffirm such a voidable sale is personal to the mortgagor; but on the facts of the case this statement was unnecessary to the conclusion reached, and the same is true of other language there employed.

In Payton v. McPhaul, supra, it was held that "A purchaser at an execution sale subsequently to the sale under the power, the execution being based on a judgment rendered after the execution and record of the mortgage, will not be allowed to impeach the purchase by the mortgagee at his own sale." Neither does that decision cover the facts here under consideration. It was further stated in that case that the sale under the power was voidable at the instance of the mortgagor or the owner of the equity of redemption at the time of the sale; and so under that decision we would still have the question as to whether "the owner of the equity of redemption at the time of the sale" could sell and assign his right to disaffirm, after the sale had taken place; this being the question that is now presented.

Counsel for the defendant cited also McCall v. Mash, 89 Ala. 487 (7 So. 770, 18 Am. St. R. 145), which on the surface appears to support the negative view. In that case it was held that a sale of land under a power contained in a mortgage, at which the mortgagee himself becomes the purchaser, is not void as to the mortgagor, but only voidable; and that until the latter disaffirms the sale he has no interest in the land which he can convey. That decision was rendered in 1890. The reasoning is strong, and it might perhaps have been applicable in this State before the Code of 1895, § 3079, in which the following provision was inserted: "A right of action is not assignable if it does not involve, directly or indirectly, a right of property; hence a right of action for personal torts or injuries arising from fraud to the assignor can not be assigned." Compare Code of 1933, § 85-1805. In Sullivan v. Curling, 149 Ga. 96 (99 S.E. 533, 5 A.L.R. 124), it was held that a change in the law was thus effectuated; and that in view of it, a chose in action arising from a tort is assignable where it involves, directly or indirectly, a property right. The decision in the Sullivan case is also authority for the proposition that the deed from the sole heir at law to the present plaintiff, conveying all of her right, title, and interest in the land, was sufficient in its wording as an assignment of the right to disaffirm. See also Code, §§ 29-107, 29-301, 85-1803; Reed v. Janes, 84 Ga. 380 (11 S.E. 401); Tucker v. McArthur, 103 Ga. 409 (30 S.E. 283).

Decisions in other jurisdictions as to such right of assignment appear to be in conflict. For general statements and citations, see 35 C. J. 108, § 180; 41 C. J. 981, 1006, 1023, 1031, §§ 1431, 1461, 1488, 1493; 42 C. J. 359-360, § 2093; 37 Am.Jur. 124, 408-9, §§ 673, 1150. As opposed to the Alabama case of McCall v. Mash, supra, we would especially mention Houston v. National Mutual Building Loan Association, 80 Miss. 31 (3) (31 So. 540, 92 Am. St. R. 565), where it was held that the grantee in a quitclaim deed executed to mortgaged premises by the mortgagor after a foreclosure sale thereof under a power in the mortgage, and the illegal purchase of the property by the mortgagee, may maintain a suit to redeem; the right of redemption not being limited to the mortgagor and those claiming under him at the date of the alleged illegal sale. In that case the Supreme Court of Mississippi took direct issue with the Alabama decision, and declined to follow it. The court also discussed certain statutes and principles which accord in a general way with the present law of this State, as enunciated in Sullivan v.Curling, supra. The case is not altered by the fact that the court had appointed a mere temporary administrator of the estate of the deceased grantor in the security deed. Code, § 113-907;Doris v. Story, 122 Ga. 611 (50 S.E. 348); Babson v.McEachin, 147 Ga. 143 (93 S.E. 292).

On the facts alleged, the plaintiff, as a purchaser from the person who owned the equity of redemption at the time of the alleged sale under the power, was entitled to have the sale annulled for irregularity and unfairness, and to the relief of cancellation as prayed, having duly offered to do equity, and the disaffirmance being seasonable, so far as appears. The court erred in sustaining the general demurrer as to the second count.

Whether the decision in Bond v. Stephens, 161 Ga. 540 (supra), would sustain the right of the plaintiff in this case, and whether that decision is consistent with Payton v.McPhaul, 128 Ga. 510 (supra), need not be determined; nor is it necessary to discuss other decisions, whether cited by the plaintiff or the defendant, as the conclusion reached is deemed to accord with all of such decisions.

Judgment reversed. Reid, C. J., and Jenkins and Duckworth,JJ., concur.