Howell v. . Mills

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The grounds for setting aside judicial sales are more limited here than in England. Mere inadequacy of price, unattended by other circumstances, is not sufficient. A resale will be ordered when there has been fraud or misconduct in the purchaser, or of some person connected with the sale, or for surprise created by the purchaser or other interested person, and inadequacy of price is of greater or less weight, depending upon the other circumstances of the case. (13 Wend., 227; 26 id., 143.)

Where the property rights of infants are concerned, courts will exercise the most vigilant care in protecting their interests, and will hold guardians and all who are engaged in managing or disposing of their property to a rigid adherence to principles of good faith not only, but to a strict performance of every duty. (49 N.Y., 227; 22 Barb., 227; 2 Story Eq. Jur., § 1334.) The defendant, William Mills Hurtin, owned, by virtue of the will of his grandfather, a vested remainder in one-half of the farm, and contingently in the whole, dependent upon the prior death of his brother without issue. He was, therefore, interested in having the premises sold for the largest price which they would bring. He had appeared in the partition suit by a guardian ad litem, and the judgment, which we must assume was legal and regular, was as binding upon him as upon the adult parties. The sale would, therefore, cut off his interest in the farm. The farm was worth, and would have brought upon a fair sale, open to competition, from $15,000 to $18,000. It is undisputed in the case, and conceded by the plaintiff, that by his advice, and with the consent and assistance of the father and brother, the sale was purposely arranged to prevent competition, and the premises were bid off by the brother at the nominal sum of $3,000. That this was done without any corrupt intent is undoubtedly true. The good faith of the plaintiff may be conceded, and that he acted from motives of friendship to the family, believing that the interests of the minor, as well as the other members of the family, would in the end be subserved. He states that the object of the partition was to secure a good title, so that the farm might be mortgaged to raise money to pay the claims of the defendant Mills, who had, by a foreclosure, become the owner of the father's life estate, and other liens and debts made and incurred by the father and brother, and to furnish an amount sufficient to stock the farm and put it in a proper state of cultivation; and that it was represented to him, and he believed that the father and brother could and would pay the interest, and eventually the principal of the mortgages, and then secure by a trust deed the interest of the minor defendant in the land; and that he undertook the business only after the most urgent solicitation on the part of these parties. These facts, while they may relieve the plaintiff from the charge of a wrong intent, do not relieve the sale from the charge of illegality. The direct effect of the transaction was to deprive the minor of four-fifths of his property. Neither he nor his interest was in any manner holden for the debts or incumbrances. His share was unincumbered, and neither the guardian ad litem (who was not present at the sale and did not consent), nor the father or brother, or the plaintiff, or all together, had any right or power thus to sacrifice his property, and rely upon the uncertain, and, from the amount of incumbrances put upon the farm, visionary success in carrying it on, and the verbal promise of irresponsible parties to protect him. The transaction was a fraud, in law, upon the infant, which cannot for a moment be tolerated by any court. It was the duty of the plaintiff, and those concerned with him, to have secured to him the full value of his interest. The idea of benefiting the family is very persuasive as a sentiment, but is too unreal to serve as a justification for doing an illegal act. I agree with the learned judge who delivered the opinion below, in saying: "The infant William Mills Hurtin has not been treated justly. He has been substantially deprived of his inheritance." The learned judge then proceeds with the reasons for denying the motion for a re-sale, upon the ground that the plaintiff, as the purchaser upon the foreclosure of the mortgages given by the brother, after the sale in question, had superior rights to those of the defendant. In this view I cannot concur. The plaintiff was the agent and attorney for both parties in procuring the loans. He acted for the mortgagees as well as the mortgagor. He was cognizant of the facts which in law rendered the sale invalid, and influentially participated in producing them. The judgment and sale to procure the title and the loans and mortgages were so connected together and dependent upon each other as to constitute one transaction on the part of the plaintiff. The mortgagees were, therefore, chargeable with his knowledge of the legal defect in the sale, and could acquire no rights superior to those which he might acquire. The plaintiff was their agent, and it is well settled that notice of facts to an agent is constructive notice thereof to the principal when it is connected with the subject-matter of the agency. (Story on Agency, § 140; Griffith v. Griffith, 9 Paige, 315.) Giving the plaintiffs, therefore, the benefit of the mortgagees' rights, and assuming that good faith, without notice of the defect in loaning the money upon the apparent title, would be a protection to them and also to the plaintiff, yet his title is subject to the rights of the minor defendant by reason of the constructive notice to them of the facts which invalidated the sale.

The objection is made and strenuously insisted upon that the order denying the motion for a re-sale is not appealable to this court. This point is not without difficulty. Subdivision 3 of section 11 of the Code confers upon this court the power to review an order affecting a substantial right, made upon a summary application in an action after judgment. That the order is final upon the question, and made upon a summary application after judgment, cannot be disputed, and I think it equally clear that it affects a substantial right. It has been held by this court that an order which charges a party with the payment of a sum of money by way of extra allowance for costs, although by statute made discretionary, is appealable to the General Term, under the statute, to review an order affecting a substantial right. (People v. N.Y.C.R.R. Co., 29 N.Y., 418.) There was a difference of opinion as to whether it was appealable to this court. Four of the judges held that it was appealable to the General Term, but not to this court; one that it was appealable both to the General Term and this court; one that it was appealable to neither court, and two took no part. One only of the judges expressed the opinion that such an order did not affect a substantial right, and he defined such a right as follows: "A substantial right is something to which, upon proved or conceded facts, a party may lay claim as matter of law, which a court may not legally refuse, and to which it can be seen that the party is entitled within well-settled rules of law." The prevailing opinions held that the order affected a substantial right because it charged a party with the payment of money. Within this definition an order would affect a substantial right which seriously charged or affected the property of an individual, and in either view the order in question affects a substantial right. Its effect is seriously to interfere with the property of the minor defendant, and it deprives him of a remedy to which he is entitled by established rules of law.

The authorities relied upon by the plaintiff, where this court has refused to entertain an appeal from such an order, do not put it upon the ground that it does not affect a substantial right, but upon the ground that it is discretionary with the court below. DENIO, J. (in 23 N.Y., 160), after conceding that the order affected a substantial right, said: "Nevertheless, it was not an order from which an appeal will lie to this court; it rested purely in the discretion of the court to grant or refuse it." This and some other similar decisions, although entirely correct, have tended, I think, to produce some misapprehension upon this question. That was a case where the owners of the equity of redemption had failed to attend the sale through forgetfulness of the day, and the court below had made an order for a re-sale. The remark of Judge DENIO was, therefore, eminently proper, that such an application upon such grounds rested purely in the discretion of the court below, and was not, therefore, reviewable in this court. In Wakeman v. Price (3 N Y, 334), the court dismissed an appeal from a like order for the same reason. The court say: "But such relief, where the proceedings have been regular, cannot be claimed as a matter of right, but simply as a matter of favor. It must, therefore, rest in the discretion of the court to grant or refuse it." The court also say that the same principle was finally settled in the late Court for the Correction of Errors (in 16 Wend., 372; 18 id., 350); but these were discretionary orders relating to practice. 16 Wend., 372, decided that an appeal would not lie from an order of the Chancellor refusing to vacate an order that a bill be taken pro confesso, because it rested in discretion, and the 18th Wend., 350, merely held that where the granting or withholding of costs rests entirely in the discretion of the Chancellor, an appeal will not lie from a decree in respect to such costs. In 2 N.Y., 269, it was held that a motion in chancery for an issue to be tried by a jury is addressed to the discretion of the court, and therefore not appealable. In 3 How. Pr., 357, the appeal from an order of re-sale was dismissed upon the ground that it was discretionary, but the grounds of making the order do not appear. In 28 N.Y., 122, an appeal from an order setting aside a mortgage sale and ordering a reference to ascertain the interest of some of the parties, was dismissed. The court say: "The granting of such an order, when it involves no question of strict legal right, is within the discretionary powers of the court below, and not appealable." The court also held that it did not come within the third subdivision of section 11, because the order was not final, it being a reference to ascertain certain facts to be afterward reported to the court.

These decisions establish only that orders for a re-sale, made upon grounds which are discretionary, will not be reviewed by this court; but I have found no decision that such orders, when they involve matters of legal right, based upon fixed legal principles, are not appealable.

By the fourth subdivision of the eleventh section of the Code, this court is authorized to review an order affecting a substantial right upon questions of practice which do not involveany question of discretion. There is no such prohibition in the third subdivision, nor is there in the 349th section, authorizing appeals from orders to the General Term, and yet it has always been held that that court has power to review orders, although discretionary. (29 N.Y., supra.) We are to presume that the Code makers and the legislature, in using the same words in different parts of the Code, meant the same thing. The qualification in third subdivision by the words "affecting a substantial right," does not necessarily operate to prohibit this court from entertaining appeals from orders involving discretion. Otherwise, the prohibition in the fourth subdivision, and the uniform meaning given to the same words in the 349th section, would produce an incongruity which should, if possible, be avoided. The true reason for not entertaining such appeals is based, I apprehend, not upon the restrictions of the Code, but upon the character of the court, and its limited jurisdiction as an appellate tribunal to review questions of law only, except when specially authorized. There is eminent propriety in refraining from the exercise of such a jurisdiction, if not an implied prohibition against it in the Constitution and general powers of the court. This court has acted upon this view in the cases referred to. DENIO, Ch. J., in 29 N.Y. (supra), in speaking of the distinction between the General Term and this court, in respect to reviewing discretionary orders, said: "When the case is removed to another court whose province it is to review determinations in matters of law of the subordinate tribunals, the matter is presented in a different aspect, and it seems to me that we cannot review the discretion of the Supreme Court." Although an order may affect a substantial right, this court will not review it if it is a matter resting in the discretion of the court to refuse or grant it.

The question is whether this is such an order. I think not. It was the legal right of the defendant to have this sale set aside, and this right is apparent from fixed and established rules of law. There was nothing discretionary about it in the proper sense of that term. It was not an application to the favor of the court, nor was it in any just sense modal, nor did it depend upon the credibility of witnesses or the weight of evidence. The sale was irregular. It was conducted contrary to law. The court held that the mortgagees had a superior equity, because they had loaned money upon an apparent title. This, as we have seen, was an error. If the motion had been denied because the defendant had some other ample remedy, the decision would not have been reviewable. Having two remedies, it would have been discretionary to turn him over to either. It is not claimed that he has any other remedy, and the decision was not put upon that ground. The late Court for the Correction of Errors had power to "reverse, affirm or alter any order" brought up on appeal, but it was the settled rule of that court not to review orders resting in the discretion of the subordinate court. The question of what should be deemed discretionary orders was considered by that court inTripp v. Cook (26 Wend. 143), upon an appeal from an order refusing to open a sale of mortgaged premises, a case similar to this. The court adopted the opinion of VERPLANCK, Senator, that the order was not discretionary, and was, therefore, reviewable by that court. He adopted and elaborated the definition of that discretion which was not subject to appeal, given by SUTHERLAND, J., in 5 Wend., 125, viz.: "It is that discretion which cannot be governed by any fixed principles or rules." He maintained that the appellate court would not consider questions of practice, nor those of legitimate judicial discretion, and refers to various instances of such discretion; but he held that the rules and principles of relief, where property has been sacrificed at judicial sales through fraud or misconduct, had been settled and established by the courts, and had become fixed principles of equity which no court was at liberty to disregard. From the nature of the question it is not easy to draw the line between what is a legitimate exercise of discretion and what is a reviewable error, nor is it necessary, in this case, to refine on that subject. A collusive arrangement to prevent competition at a judicial sale, and a sale in pursuance of such arrangement, to the injury of a party, especially of an infant, is a fraud in law as well established as any other principle of equity jurisprudence, and that subsequent mortgagees or purchasers, with a knowledge of the fraud, can gain no advantage therefrom, is equally well settled, and these questions, when involved in an order, are as much entitled to review as if presented upon exceptions.

This court, in 37 N.Y., 155, entertained an appeal and reversed a like order, and this was subsequent to all the cases in which the orders were held to be discretionary, and, although able and experienced counsel were engaged, the question of jurisdiction was not raised. McCotter v. Jay (30 N.Y., 80) was an action to set aside a mortgage sale for want of knowledge of the time and place of sale, but no fraud was shown. HOGEBOOM, J., in delivering the opinion of the court, recognized the distinction between orders which are and are not discretionary. He said, "he shows no fraud, and cannot, therefore, ask to set aside the sale as a matter of right," and held that his remedy was a motion addressed to the favor and discretion of the court. The infancy of the defendant, and the fact that no superior legal rights have intervened, are an answer to the objection as to delay in making the motion. Both upon principle and authority, the minor defendant is entitled to relief, but such equities of the plaintiff as can be preserved consistently with his rights should be protected.

The order, as to the defendant, William Mills Hurtin, must be reversed.