Municipality Number 2 v. Hennen

14 La. 559

• Court: Supreme Court of Louisiana
• Decided: March 15, 1840
• Status: Published

Opinion

Bullard, J.,

delivered the opinion of the court.

The facts which led to the present controversy, so far as it is necessary to recapitulate them, are substantially as follow : , J that in August, 1836, the Second Municipality entered into an agreement w¡th the Messrs Frerets and others, the owners of certain cotton presses and the ground on which they were erected, within the limits of that corporation, that they (the proprietors) wmuld sell to the municipality that property, which it is not necessary particularly to describe, on condition that the whole should be divided into lots and sold by the municipality on a long credit, payable in annual installments, with interest at six per cent. They were to receive three hundred and seventy-five thousand dollar's, to be paid as will be hereafter mentioned. The municipality was to be put in possession as early as the 10th September, and within a time limited by the agreement, the plaintiffs were to cause the whole to be sold at public auction, for notes to be endorsed to the satisfaction of the vendors, together with collateral notes for accruing interest. The vendors agree to take the notes thus given in payment, the principal with the interest being considered as cash, and the municipality not to be responsible for their ultimate payment. It was agreed further, that should the proceeds of the sale be less than the aforesaid sum, then the deficiency was to be made up by the municipality. The vendors bound themselves to furnish the purchasers of the lots good and sufficient titles, it being understood that the municipality was not to warrant the titles to the purchasers.

Such is substantially the original agreement between the municipality and the proprietors of the ground, in pursuance of which the sale of the lots took place. The whole amount of sales was five hundred and seventy thousand seven hundred dollars, leaving a profit, after paying the price stipulated, of one hundred and ninety-five thousand seven hundred dollars in favor of the municipality, and it is shown that the original proprietors have been entirely satisfied, independently of the price of the lots now in controversy in this case.

At the sale by public auction, of the lots in question, the defendant became a purchaser for a large amount, and having as is alleged, failed to comply with the conditions of the sale though legally put in default, they were exposed for sale at his risk, and the present action is brought to recover the difference between the first and second adjudication, to wit: forty-one thousand five hundred dollars. At the second sale, the municipality became the highest bidder and purchaser of the lots. We leave out of view an intermediate exposure of the property at which Collens became the nominal purchaser of a part of the lots.

This proceeding took place in virtue of article 2589, of the code, which provides that in all cases of sales by auction, if the person to whom the first adjudication is made does not pay the price at the time required, &c., the seller at the end of ten days, and after the customary notices, may again expose to public sale the thing sold, as if the first adjudication had never been made; and if, at the second crying, the thing is adjudged for a smaller price, than that which had been offered by the person to whom the first adjudication was made, the latter remains a debtor to the vendor for the deficiency, &c. It is further provided, that if the property should sell for a higher price, the first purchaser has no claim for the excess; and that the first purchaser is not permitted to bid either directly or through the intervention of a third person.

The answer of the defendant denies the ownership of the plaintiffs, and their right to maintain the present action. He denies having been put legally in morá. by offering to make him a legal title to the property, or by fulfilling any of the formalities of law. He denies that any of the property was legally sold at his risk, but avows on the contrary that there are manifest errors and irregularities. The defendant finally claims that the adjudication to him of the 1st of February, 1837, be cancelled and annulled.

There was a verdict and judgment in favor of the plaintiffs for the amount claimed in the petition, and the defendant appealed.

In this court the case has been argued with distinguished ability on both sides, and we have had all the aid which professional learning, or acumen could afford us. Little light is derived, it is true, from adjudicated cases under this provision 0f our code or 0f j'rancej which is somewhat analogous, although believed to be restricted to cases of forced sales by judicial authority; and we are left to put a construction upon this part of the code guided by those general principles which govern all contracts, and especially that of sale at public auction, and at the same time those principles which ought to prevail when resort is had to summary and extraordinary remedies.

The remedy owner of pro-oute^he°/o/L°en-chore, or purr chaser failing to comply with his iai1ve.1SHemay elect to prosecute the purchaser for a spew?th °thePterms of sale, or for damages, or he may proceed to rísk~Tí duf first purchaser.

It seems to be conceded on all hands, that the remedy given to the owner to prosecute the folie enchbre is cumula-^ve! fhat he may elect either to prosecute the purchaser for a specific compliance with the terms of the sale, or for dama- . ges by the ordinary action, or may proceed to a re-sale, at the risk of the first purchaser, under the restrictions provided by the code. Such re-sale, at which the first purchaser is not . . . 1 permitted to interfere either directly or indirectly, and which may never turn to his profit, fixes the measure of liquidated damages which the delinquent purchaser is bound to pay. ° A 1 r J The remedy, therefore, is certainly summary and severe, and ought to be confined to cases clearly coming within the provisions of the.law, and in which all the previous conditions have been complied with, and the second sale conducted fairly and legally. It is equally clear that the remedy is given to the vendor alone. He only is spoken of in the code he alone is injured by the failure of the first purchaser to comply with the terms of the adjudication. Every suit, therefore, prosecuted for the recovery of the damages thus liquidated, involves a threefold inquiry. 1st. Whether the plaintiff be the party injured, or the vendor. 2d. Whether he has complied with the conditions required of him, by law, by putting the first purchaser in default and thereby entitled himself to-prosecute the folie enchbre; and 3d. Whether the re-sale has been preceded by the requisite notices, and conducted fairly and legally.

In the case now before the court, the first branch of the inquiry leads us to look into the contract between the Messrs. Frerets and others, and the municipality, which has been much discussed during the argument. The first question which presents itself in relation to that contract, is not how it is to be classed, whether as a sale, or a power to sell, coupled with an agency, but whether its object, .was lawful, and the contract itself binding between the parties, and not repro-bated by law; and next, whether it vested in the municipality such an interest and right as to entitle it to maintain the present action. At the time the last sale at public auction took place, the Messrs. Frerets, and others, had been fully paid and satisfied for the price of the whole property; and, consequently, although still bound to execute conveyances, and to warrant towards the purchasers of the lots, yet it was quite immaterial to them for-what price any particular lot might be sold. They had nothing more to receive. The result of the second sale, concerned the municipality alone. The corporation, and none other, could gain or lose by the re-sale of the lots purchased originally by the defendant. The contract, such as it is, was between the original proprietors, and the municipality appears to have accomplished an object of public utility without being obnoxious, so far as we can perceive, to any serious objection. Whether the persons are to be regarded as vendors directly to the municipality of the entire property, or as promising to become such for particular parts of it to such persons as might purchase at a public sale, to be conducted by the municipality at its risk, does not appear to us important to inquire in the present case.

The view we have taken of the last branch of inquiry, to wit: the manner in which the last sale was conducted, and the property adjudicated to the municipality, renders it unnecessary to inquire whether the public notice .was sufficient, and whether the sale was preceded by such steps as the law requires to put the first purchaser in default. Conceding to the plaintiffs the advantage of a substantial compliance with all the legal pre-requisites, upon which we express no positive opinion, we come to what we regard as the principal question in the case: Was the auction conducted legally, and was the municipality competent to become a bidder and a purchaser 1

Even admitting, for the sake of the argument, that the Messrs. Frerets were the real vendors at the auction sale, what was the true position of the municipality 1 The Frerets had nothing more to receive for whatever amount the lots might be sold; and, consequently, whatever amount may have been bid by the municipality, nothing was to be paid. The corporation was manifestly a nominal bidder, not a serious one. It was immaterial so far as its treasury was concerned, whether it bid one dollar or one thousand. If that corporation was not already vested with the legal title, at least it may be said that the original proprietors had nothing more to claim from it on account of the price. If, under these circumstances, the property had been adjudicated to a third person, and it was discovered that the municipality had been permitted to bid, and the purchaser had refused to comply with the terms of the sale, and insisted on treating the sale as null, on the authority of Baham vs. Bach, 13 Louisiana Reports, 287, and the principles therein recognized as governing sales of that kind, how could the cases be distinguished; or upon what principles could he be said to be bound, unless it was previously known that the corporation had reserved the right to bid 1 How can such a bid be distinguished from a false bid, or offer, which is reprobated by the law? If, under such circumstances, the person to whom the property may have been adjudicated, would be entitled to relief U fortiori, should the adjudication not be conclusive upon one against whom it operates like the verdict of a jury in assessing damages for the non-performance of a previous contract ?

This objection has been very ingeniously answered by the counsel for the plaintiffs. We give his own words. “ What then is the decision in the case of Baham vs. Bach 1 That the owner of a property offered for sale at public auction has no right to bid at the sale, unless he has publicly reserved to himself that right. Why 1 Because his conduct is such as to raise in the minds of the bystanders, false impressions as to the. real value of the property ; because it is a fraudulent artifice, inducing them to make higher bids; because the seller thereby profits at the expense of the purchaser, to the full amount of the enhanced bid elicited by this fraudulent artifice. Compare with this decision, and the reasons on which it is based, the situation of the vendor who exposes-property at the folie enchbre; a proceeding, the true nature of which is merely, as we have already shown, the fixing a measure of liquidated damages to be paid by the first pur- ■ chaser for his breach of contract. Does the vendor, by bidding at this second sale, and giving more for it than any one else, profit at the expense of the purchaser, or does he not, on the contrary, assist him in diminishing the measure of damages 1 If this were a question between third persons who came to bid at the sale, they might, with some appearance of justice, invoke in their support the decision of Babam vs. Bach, but when the defendant, in the folie enchbre, complains that the vendors were the highest bidders, he complains that a lower bid was not taken, or, in other words, that the damages charged against him were not heavy enough.”

This is certainly specious and imposing; but the fallacy, we think, consists in overlooking the important consideration, that if any fictitious bid be permitted, there is not a fair competition, and the person to be affected by such sale has a right to insist upon all the bidders standing on the same footing; all equally liable to pay, and that every bid should be aserious one. The objection is, that it would discourage bidders, and, therefore, not fair. The party so to be affected might well ask, who would bid against a person who, in consequence of previous arrangements with the vendor, is in no event to pay any thing, even if the property should be nominally adjudicated to him 1 But the argument at the same time proves too much ; it would.prove that the first purchaser would have a right to complain that even the owner himself purchased at the folie enchbre, and that a sale null in itself for want of competent contracting parties, is yet valid so far as it goes to fix the measure of damages against a party who had no right to interfere for his own protection. To such a proposition we are by no means prepared to assent. On the contrary, this court after much consideration, and two arguments, sanctioned a very different doctrine in relation to the sale a la folie enchbre, in the case of Scott’s Executrix vs. Gorton’s executor, and held that the plaintiff could not recover the difference between the prices at the two adjudications, because the last sale was void for want of competent contracting parties, the executrix who had provoked the sale, being the last purchaser. 14 Louisiana Reports, 116.

The owner of property, in prosecuting the, folie enchére, cannot recover the difference between the ñrst and last sale, if he bids in his own property. So, the legal owner, or mandatory of the owner, who is alone interested in a sale at aúction, is equally incompetent to' purchase property at such sale; and, so far as the folie en-chére is concerned, the sale is null and void.

In the case now before us the corporation finds itself in a dilemma ; if it was not the vendor it has no right to maintain this action; and if it was, then it could not become the purchaser of its own property. It is difficult to imagine what new title the municipality acquired by the adjudication. It was already in possession ; the whole price had been paid, and the original proprietors were bound to warrant the title. But whether we consider the municipality as the legal owner in a strict sense of the word or not, it is certain that, that corporation alone was interested in the result of the sale at auction, and whether owner, or sole mandatory of the owner, was equally incompetent to purchase, and that the sale so far as the defendant is concerned is void.

It is, therefore, adjudged and decreed, that the judgment of the District Court be avoided and reversed, and that ours be for the defendant as in case of a non-suit, with costs in both courts.