Smith v. Harrigan

The motion for an order directing a re-sale of the premises to foreclose a mortgage on which the above action was brought, has already been disposed of, leaving still for determination the question whether the plaintiff is entitled to an order adjudging the purchaser at the sale liable for any deficiency which may arise on such re-sale. The purchaser objects to taking title, and asks for a return of the money paid upon his bid, alleging as a reason that the auctioneer who sold the property was a defendant in the suit and interested in the property sold. There is no claim made of bad faith or actual fraud upon the part of the auctioneer, and although there is a suggestion that other than bona fide bids were made, this, in the absence of any proof, must be disregarded. The naked legal question is thus presented whether or not a sale conducted by an auctioneer who is interested in the property to be sold, and who fails to disclose this fact, can be availed of as an objection by a purchaser. Upon grounds of public policy it is important that the utmost fairness should be observed in judicial sales, and the law, as shown by the decisions, has been ever ■ vigilant to protect the public, who, as intended purchasers, attend such sales.

In Randall v. Lautenberger (16 R.

The auctioneer being, therefore, the agent for one or both of the parties at the same or difierent times during the sale, and the falling of his hammer fixing the rights of the buyer and seller, and his memorandum signed by him being a sufficient written contract in law to bind both parties under the Statute of Frauds, it seems but right that, as between the parties, he should be indiflerent. This, of course, does not mean

The cases on this subject are ably and exhaustively collated and discussed in the case of The Metropolitan Elevated Railroad Company v. The Manhattan Elevated Railway Co. ( 14 Abb. N. C. 252 ), wherein the principle is thus stated: “ It will not be denied, I imagine, that as between natural persons, where an agent or trustee has a personal interest opposed to that of the principal, or where one acts as agent of both parties to the contract, although he may have no personal interest on either side, that the principal, or cestui que trust may avoid the contract at will even if there be no actual fraud or damage.” In that case the following language used in the case of Davone v. Fanning (2 Johnson Ch. R. 260), was quoted with approval. “ However innocent the purchaser may be in the given case, it is poisonous in its consequences. The cestui que trust is not bound to prove, nor is the court bound to adjudge, that the trustee has made a bargain advantageous to himself. The fact may be so, and yet the party not have it in his power, distinctly and clearly, to show it. There may be fraud, as Lord Hardwick observes, and the party not able to prove it. It is to guard against this

In Tausig v. Hart ( 58 N. Y. 425 ), the court says: “ It is no answer that the intention was honest and that the brokers did better for their principal by selling him their own stock than they could have done by going into the open market. The rule is inflexible, and although its violation in this particular case caused no damage to the principal, he cannot be compelled to adopt the purchase.” In the New York Central Insurance Co. v. The National Protective Insurance Co. ( 14 N. Y. 85 ), it was said: “ It is not necessary [for a party seeking to avoid a contract on this ground to show that an improper advantage had been gained over him ; it is his option to repudiate or to affirm the contract, irrespective of any proof of actual fraud.” To quote again from the case of the Metropolitan Elevated Railroad v. The Manhattan Elevated Railway Co. (supra), in the language of the learned Judge, who, after, reviewing the above and many other cases, says: “It was intimated that although this rule was so stringent as to purchases and sales, yet that it was not applied with the same rigor to other contracts. I have failed to find any foundation for this distinction either upon principle or authority. It may be true that most of the adjudicated cases have arisen in reference to purchases and sales, but no distinction has been made by any court between contracts of this nature and any others which were tainted with the same infirmity.

There is no reason for any such limitation, and I do not find that it has ever been attempted to be enforced.”

The principal underlying these decisions is equally

A distinction, however, is to be observed between a case where the auctioneer is and where he is not interested in the property itself. In the former, the temptation may be present to impose on bona fide bidders by increasing the price beyond the actual bids received. The fact that the auctioneer’s fees are fixed by law, and are the same whether the parcel sold brings a large or small price, may be urged to support the view that this was intended to put the auctioneer in a position of entire indifference, so that he might perform his legal function of acting honestly between buyer and seller, thus removing any inducement to get more than the price honestly bid. As said in ex parte James (8 Vesey, 337): “ This doctrine as to purchases by trustees, assignees or persons having a confidential character, stands much more upon general principles than upon the circumstances of any individual case. It rests upon this, that the purchase is not permitted in any case, however honest the circumstances; the general interests of justice requiring it to be destroyed in every instance, as no court is equal to the examination and ascertainment of the truth in much the greater number of cases.” And I take it, therefore, it is not necessary that it should be shown affirmatively that a fraud or imposition was practised, or that the amount bid was in excess of the value of the property. If the principles referred to in the cases cited are applicable to an auctioneer who was interested in the

It has been urged, however, that the interest of the auctioneer in the property was remote, he holding an estate as tenant by courtesy. This is a definite, fixed interest in property under the law. In Davoe v. Fanning (2 Johnson’s Chancery Reports, cited •above) it was held “ that if a trustee or person acting .for others sells a trust estate and becomes himself interested in the purchase, the cestui que trust is entitled .as of course to have the purchase set aside^ and the property re-exposed to sale. And it makes no difference in the application of the rule that the sale was at public auction, bona Jide, for a fair price, and that the excutor did not purchase for himself, but a third party by a previous arrangement becoming the purchaser to hold in trust for the separate use and benefit of the wife of the executor who was one of the cestui que trusts and had an interest in the land under the will of the testator.”

This and many other cases that might be cited would be authority for the position that it is the principle that one is interested in the property, and not the •extent of his interest, or that one has a confidential relation towards others, be that relation greater or less, that should determine the conclusion to be arrived at. As already stated, the doctrine stands much more upon general principle than upon the circumstances of any individual case. My conclusion, therefore, is that the auctioneer, having been a party to the foreclosure suit, and his entire family, including himself, having an interest in the property sold, that his failure to disclose this fact to the bidders at the sale rendered the same voidable and subject to be set aside at the instance of the purchaser thereat."

The motion to hold such purchaser liable for any