Jameson v. Kimbrough

354 S.W.2d 458, 209 Tenn. 519, 13 McCanless 519, 1962 Tenn. LEXIS 385

• Court: Tennessee Supreme Court
• Decided: February 8, 1962
• Status: Published

Opinions

Mb. Justice Buenett

delivered the opinion, of the Court.

To the original bill and a cross-bill filed herein the ap-pellees filed a demurrer which was sustained by the Chancellor and in the sustaining of which the bill and cross-bill were dismissed.

Jameson filed the original bill herein against Kim-brough, Crump, Trustee and individually, Class and the two Lowrances and others in which he sought to have set aside and declared null and void a foreclosure sale of certain real estate in the City of Memphis, and for other related relief. An answer and cross-bill were filed by Class and the Lowrances seeking similar relief against the defendants, Kimbrough and Crump. The demurrer, by agreement, of the defendants, Kimbrough and Crump, was treated as directed to both the original and cross-bill.

The cross-complainants, Class and the Lowrences, had purchased from the defendant, Kimbrough, a parcel of land in the City of Memphis for $156,000.00 upon a complicated financing arrangment which included the securing of $66,000.00 of the purchase money by a first mortgage on the east portion of the tract (the tract involved in this lawsuit). The mortgagors (Class and the Low-rances) had employed Jameson as a contractor to construct a building on the western portion of the tract for purposes not necessary to herein mention, and as a result of his constructing these buildings they were unable to pay Jameson in excess of $30,000.00 that they owed him for this construction work, whereupon Jameson agreed to accept a second mortgage for the amount due him on the east portion of the land originally purchased, being the land involved in the present litigation.

The mortgagors (Glass and the Lowrences) defaulted on the $66,000.00 obligation when they owed approximately $35,000.00 of the principal. Upon this default being made, Kimbrough, the holder of this mortgage, requested the Trustee under the deed of trust to foreclose the trust deed. This foreclosure was advertised in accordance with the terms of the trust deed for a sale at the courthouse in Shelby County, Tennessee.

Meantime Jameson, the holder of the second mortgage, and the mortgagors (Glass and the Lowrences) made arrangements with another person in Memphis to bid this foreclosure sale up to $50,000.00 so as to fully cover the amount owed on the first mortgage and to pay to Jame-son, the holder of the second mortgage, the amount which he had agreed to accept in satisfaction of his second mortgage. On the morning before this foreclosure was to take place the person who had agreed to bid $50,000.00 for the property for sale discovered that due to a Private Act applying to Shelby County a trustee’s deed to him for the property could not be registered because the property did not face on any street. All of these parties attended the sale at the advertised time and these facts were made known to the Trustee and those present and it was requested by the second mortgagee that the sale be postponed pending a straightening out of the defect due to this Private Act. When arrangements could not be made the sale was then conducted as advertised.

The bill alleges that:

“At the sale which was then held, Kimbrough first bid $36,078.00 which was the amount of his principal indebtedness plus accumulated interest and foreclosure expenses. Jameson then entered a bid of $37,000.00 and there were no more bids. The Trustee struck off the property to the Complainant and then announced that he would prepare a deed by 2 p.m. of that day, at which time the consideration should be paid at the Trustee’s law office, and if it was not paid, the property would be struck off to Kimbrough at his bid.”

At 2 p.m. Jameson had not appeared to comply with his bid. Some 12 or 14 minutes after 2 p.m., he called the Trustee to see whether or not he should have the cash or a certified check, etc. The Trustee told him at that time that it was too late because he had already conveyed the property to Kimbrough according to his announced plans at the sale, that if Jameson had not appeared by 2 p.m. to comply with his bid he would then sell the property to Kimbrough. At 2:45 p.m., or thereabout, Jameson appeared with a certified check which was refused. The property was conveyed to Kimbrough at his bid of $36,078.00. There was between the time the bidding closed at the courthouse and 2 o ’clock something like an hour and a half given to Jameson to comply with the bid that he had made at the foreclosure sale.

The bill' does not allege that Crump was guilty of any fraud, nor does it allege that he acted illegally in any maimer except that he did not allow sufficient time for Jameson to comply with his bid and says that Crump in failing to do so was acting under the direction of the holder of the first mortgage and that by his acts he failed to act impartially in making a decision to a forced sale in clear and obvious concert with and under the instructions of his client, Kimbrough, in disregard of the interests of other parties to this litigation. It is likewise alleged, of course, that the property was worth far more than that bid by Kimbrough. The bill prays for damages in the amount of $15,000.00 which Jameson had agreed to accept for his second mortgage, and says in effect that the setting aside of the foreclosure sale would not satisfy Jameson, yet the bill alleges then in the alternative the foreclosure sale was void and should be set aside and the property readvertised for sale. Of course, the cross-complainants, the mortgagors, ask that it be set aside and that their rights be protected by the court in setting aside the sale and having a new sale, if necessary.

The demurrer of the appellees goes to the proposition that under the facts alleged, and particularly the paragraph as quoted from the bill hereinabove, the bill shows on its face that the Trustee has complied with the terms of the trust in conducting the sale as he did and knocking the property off to the next highest bidder when he announced at the time of the sale, when all parties were present, that if Jameson did not comply with his bid by 2 o’clock then the second bid of Kim-brough would be accepted.

It is argued very forcefully in the briefs, supplemental briefs, and it was argued at the bar of this Court that the selling of the property to Kimbrough after the first bid was not complied with at 2 o’clock amounted to a private sale and that the only way that the Trustee could do this upon the failure to comply with the highest bid was to readvertise and resell the property.

Ordinarily, of course, the creditor, that is the holder of the mortgage note under a trust deed requests the Trustee to act after default in the mortgage. The original holder of the indebtedness, the one who takes the mortgage originally, normally appoints the Trustee and insofar as the Trustee is concerned it is his obligation when the holder of this indebtedness requests a foreclosure and informs him that there has been a default in the indebtedness, then to advertise and conduct a sale under the terms of the mortgage. There is no question in the lawsuit but that this was done. The Trustee is given a certain amount of discretion in the conduct of this sale and can only vary the terms of the sale which are conducted according to the instrument, that is, the. trust deed that the parties have signed, when all parties consent thereto.

There is no contention here that this Trustee conducted this sale otherwise than in accordance with the instrument. The sale was had at the time notice had been given for the sale and in the established custom regarding a Trustee’s sale under a trust deed.

It appears, too, that the holder of the first mortgage only bid the amount of his indebtedness with interest, and foreclosure expenses, and did not raise his bid beyond this amount after the holder of the second mortgage had made a bid - of less than a thousand dollars more than this indebtedness. This fact shows that there was no conduct nor intention nor anything else on the part of Kimbrough to obtain the property at a fraction of its value, but was merely bidding to protect his interest.

When the parties came to this sale and requested Crump to postpone the sale for some time to allow the defect due to the Private Act applying to Shelby County in reference to recording an instrument to be remedied, Crump as Trustee under the mortgage had no right to delay the sale until this technicality could be disposed of unless all parties agreed. The holder of the indebtedness under which Crump was selling this property did not consent. Therefore it was Crump’s duty to proceed with the sale. It seems perfectly obvious to us that such a defect could have been disposed of before, if that was the real reason for it, and that this really offers no excuse for others who were interested in purchasing this property not to have sufficient funds within which to protect any bid that they made. The sale was conducted at 12 o’clock and after Jameson made the highest bid he was given until 2 o’clock to comply with his bid, and when he did not do so it was struck off as announced at the sale to the second highest bidder. This did not amount to a private sale but was a sale then and there when all parties were present to the second highest bidder provided the highest bidder did not comply with his bid within what seems to us to amount to a reasonable time under the circumstances.

This sale to Jameson as the highest bidder was not an absolute sale, but was a sale to him pending his compliance with the bid that he had made. He was given a reasonable time within which to comply with this bid. What the sale amounted to was a conditional sale, conditioned upon Ms complying with the bid within a reasonable time, and it was announced there with all parties present and assenting thereto that if this was not complied with by that time the sale would be to the next highest bidder.

The Supreme Court of Nevada in Dazet v. Landry, 21 Nev. 291, 30 P. 1064, 1066, says:

“ ‘The highest bidder acquires no title to the thing purchased but by payment of the purchase money, and, if he fails to do this within a reasonable time, a resale may lawfully be made.’ * # * The sheriff, as referee, is vested with discretionary powers in the sale of property in partition. If he had reason to believe that Landry was an irresponsible bidder, he could and should have refused to entertain any offer made by him; but, having conditionally accepted the bid, it was nothing but justice to all parties that Landry be granted the time he asked for to give him an opportunity to make his bid good; and, he not having returned within the 30 minutes, it was the duty of the sheriff to consider Landry an irresponsible bidder, and proceed as he did, and resell the premises without unnecessary delay and the additional expense of re-advertising.”

We approve this language and to a large extent it is applicable herein.

In Stone v. Stone, 176 S.W.2d 464 (Mo.), that court held that if the Trustee elects not to hold the highest bidder to the performance of the terms of his bid, where the bidder refuses to pay the amount of his bid, but elects to sell the property, the Trustee has the alternative of declaring a sale to the next highest bidder, promptly reselling, or readvertising the sale for another day. The Missouri court in this case cites two or three other Supreme Court of Missouri cases as authority for this holding.

As we see it, clearly when a Trustee announces at a legally advertised and conducted sale that if the highest bidder does not comply with the sale within a reasonable time, and a reasonable time depends, of course, upon the circumstances, that the second bidder will be declared the highest bidder then this amounts to a sale to the second bidder when the first bidder has not complied with his bid, and it is not a private sale. As long as the announcement was made, as it was, as shown by the quotation from the bill, it would not be necessary for the Trustee to again cry or readvertise the property and ask for bids when he has made this statement to all those present.

The Court of Chancery Appeals of this State in 1899 in the case of Cockrill v. Whitworth, reached a related conclusion though on much weaker facts than those as shown herein. This case was reported in 52 S.W. 524.

Under the facts alleged in this bill we certainly cannot say as a matter of law that the time allowed the high bidder, Jameson, to comply with his bid was unreasonable. As said above, they had known for some days that this sale was to be conducted; they at least were presumed to know the law as to this Private Act applying to Shelby County as all parties were represented by counsel and had ample opportunity to straighten out this matter of the recordation of the Trustee’s deed; and they likewise knew if they were going to bid for the property they should be in a position to pay for it when they bid on it. Thus it is that we think there was ample opportunity for them to have complied and that the time given to comply was reasonable under the circumstances.

There has been no showing of fraud or undue advantage taken of anyone that can be corrected or set aside by the Court. We are unable to see how the defendant, Kimbrough, was in any way to blame for the misfortunes of Jameson or the mortgagors. Kimbrough may have derived a benefit from their not complying with their legal obligations, but insofar as we can see Kimbrough has obtained no undue advantage and has had no advantage other than such as lawfully comes to him under the circumstances. In the Cockrill case, supra, the Court made this very apt observation:

“The man who is in debt, with his property incumbered, and unable to meet his obligations, in the nature of things is compelled to undergo sacrifices and meet losses for which there is no legal redress in such times, and a man of means is enabled to obtain benefits by good bargains, when others are forced to sell. The complainant’s loss or misfortune resulted from his being in debt, having his property mortgaged, and unable to meet his obligations, resulting in the foreclosure sale. The defendant’s advantage resulted from his having means to buy property so forced on the market. While we believe that Christian ethics underlie, and in a large measure constitute the living principles of, the common law, still, as a matter of practical application, the courts have never yet been able to compel parties to come up to the full measure of the golden rule.”

For the reasons expressed herein, the decree of the Chancellor must be affirmed.