Rogers & Baldwin Hardware Co. v. Cleveland Building Co.

31 L.R.A. 335, 34 S.W. 57, 132 Mo. 442, 1896 Mo. LEXIS 42

• Court: Supreme Court of Missouri
• Decided: February 5, 1896
• Status: Published

Opinions

Burgess, J.

This case was transferred to the court in banc, after an opinion reversing the judgment had been rendered. 32 S. W. Rep. 1. We adopt the statement of facts therein made, as well, also, as the first paragraph of the opinion of our. learned brother, Barclay, J. They are as follows:

“The questions to be determined on this appeal arose upon a motion in the circuit court to set aside a sheriff’s sale, which motion the court sustained. The plaintiffs appealed, after having taken proper steps to give the trial court opportunity to review its ruling, and saving the evidence and all exceptions, in the usual way. The original cause in which the motion appears is entitled: {W. C. Eogers and A. A. Baldwin, composing the firm of Eogers and Baldwin Hardware Co., plaintiffs, v. The Cleveland Building Co., A. B. Crawford, John D. Porter, Seth Tuttle, Marion Davis, W. H. Keyser, owners, and Jarvis-Conklin Mortgage Trust Co., mortgagees, and Samuel M. Jarvis, trustee, W. W. Baldwin, mortgagee, B. U. Massey, trustee, defendants.’ Stated first in the shortest form the case is this:

“Plaintiffs obtained a judgment against the owners of the Baldwin theater or opera house property for a small amount, and a lien against the- property under the mechanic’s lien law. A special execution issued on that judgment, and the property was sold by the sheriff. Mr. McAfee became the purchaser, as trustee, on behalf of plaintiffs and other holders of liens against the building for work and materials furnished toward its construction. Before the sale, but after the judgment of lien, Judge Philips, at chambers, as judge of the United States circuit court for the western district of Missouri, appointed a receiver of the theater property, in the suit of Lubbock et al., plaintiffs, v. Marion Davis, Ellen Davis, and .A. B. Crawford, defendants, to foreclose a mortgage upon the same property. The order of appointment was of wide reach, and is said to be a barrier to the execution of the mechanic’s lien judgment, pending the receivership. The plaintiffs in this case are not named as parties to the proceeding in the federal court. After the. sale under the execution on the mechanic’s lien judgment, the Járvis-Conklin Mortgage Trust Company and Samuel M. Jarvis'filed in the state court the motion which is the basis of jffiis appeal. The principal grounds of the motion are that the sale was an interference with the receivership of the property established by the federal court, and was hence void. There are other reasons assigned in the motion which will be mentioned further on.

“Passing now to some of the necessary particulars of the case, it will be convenient to keep the following dates in view:

“September 9, 1891, date of mortgage sought to be foreclosed in the Lubbock case in the federal court.

“December 5, 1891, beginning of plaintiffs’ lien account.

“March 5, 1892, close of lien account.

“May 1, 1892, notice of lien.

“May 31, 1892, lien filed in circuit clerk’s office.

“August 17, 1892, plaintiffs mechanics lien suit begun.

“September 20,1892, judgment in mechanics lien suit for $37.36, and of lien.

“March 13, 1893, transcript of the judgment filed in circuit clerk’s office. '

“March 16, 1894, petition for receiver in federal court.

“March 17, 1894, receiver appointed by Judge Philips.

“March 19, 1894, receiver took possession of the property.

“October, 1894, special execution issued from circuit court on mechanics lien judgment, returnable to January term, 1895.

“November 23, 1894, sale on special execution. Property bought by Mr. McAfee.

“December 15, 1894, sheriff’s deed recorded.

“January 14, 1895, motion filed to set aside sale.

“January 23, 1895, motion sustained; sale set aside.

“Although the mortgage first above mentioned ostensibly antedates the opening of the lien account, it seems that the bonds (for $49,000) secured by it were placed later. When that mortgage was recorded does not appear. The investigation of the facts in regard to that instrument was cut short at the hearing by an admission by one of the attorneys for the motion, who conceded that the ‘lien part’ of the judgment (under which the sale took place) was a prior lien.

“The proceeding to enforce plaintiffs’ mechanics lien was begun before a local justice of the peace, after the filing of the lien in the circuit clerk’s office, according to law. R. S. 1889, sec. 6161. The defendants in that original cause were the parties named as such at the outset of this opinion. The moving parties in the present motion are the trust company and the trustee, Mr. Jarvis, both defendants in that case. Five of the defendants were personally served; the others (including the trust company and Mr. Jarvis) were ultimately brought in by posting advertisements, as prescribed in such eases. R. S. 1889, sec. 6163.

“The justice’s judgment refers to the mortgage or deed of trust in which Mr. Jarvis was trustee for the Jarvis-Conklin Mortgage Trust Company, and finds plaintiffs’ demand (for- the amount of judgment rendered against the owners) to be paramount to the mortgage, and adjudges that it is a lien on the property described, including the. estate and interest of these defendants. A transcript of that judgment was duly filed in the circuit clerk’s office, and the execution sale now in question took place upon process issued from the circuit court upon that judgment. No appeal from the latter was ever taken, and the judgment became final in due time.

“The order made by Judge Philips in the foreclosure suit is quite long, and need not be fully recited now. Its substance is that, upon a hearing before the judge at chambers, Mr. Jewell was appointed receiver for the United States circuit court for the western district of Missouri, and directed to take immediate possession of the property (which was described), and to ‘carry on the business connected with said opera house, ’ * * * and ‘carry out contracts already made by the respondent A. B. Crawford in connection with said opera house business and the procurement of amuse ment enterprises therefor, to make new contracts in that respect, ’ etc. The usual directions in regard to funds and accounts were included. The receiver was authorized, among other things, to pay ‘any sums necessary for the payment of taxes, or which from time to time may be required to save from sale or sacrifice the said real property.’ The order further declared ‘that the respondent A. B. Crawford, his agents, employes, and all other persons, whether claiming through or under him, or otherwise, are hereby enjoined and restrained from attaching, seizing, levying upon, or otherwise taking or interfering with any of the property above described, or with the said receiver in his possession, control, and management of the said property.’

“Other facts will be stated in the course of the opinion, in connection with some subordinate points on which they bear.

“1. The chief issue concerns the relation of the original lien case to the receivership in the federal court. It will be seen that, by the terms of the order appointing the receiver, ‘all persons,’ whether claiming through the defendant Crawford ‘or otherwise,’ were enjoined from ‘attaching, seizing, levying upon, or otherwise taking or interfering with any of the property,’ etc. This language might reach the proceedings under the lien execution in the state court, against this property. But if the property, at the time that order was made, had been already subjected to the judicial control of the state courts, which had not yet concluded their action upon the property, then the federal order might be disregarded by 'all persons’ (not parties to the foreclosure suit, at least) who were entitled to demand the exercise of the state court’s jurisdiction upon said property.

"The question is whether or not the mechanics lien proceedings subjected the theater property to the judicial power of the state courts until that jurisdiction was exhausted, so that no other court might meanwhile remove the property from the control necessary to make the use of that jurisdiction effective. The comity which should govern the actions of courts of concurrent jurisdiction in such circumstances has passed into a rule of law, now generally recognized in the United States, and which has been thus stated by the highest federal tribunal:

" 'When the object of the action requires the control and dominion of the property involved in the litigation, that court which first acquires possession, or that dominion which is equivalent, draws to itself the exclusive right to dispose of it, for the purposes of its jurisdiction.’ Heidritter v. Oilcloth Co. (1884) 112 U. S. 305, 5 Sup. Ct. Rep. 135.

"The proper application of this rule to the facts in judgment depends somewhat on the nature of the mechanics lien suit. Such suits in this stateare regulated by positive law, which clearly indicates their nature. An action to enforce such a lien deals with certain described property, against which the lien is claimed, and, upon establishment of the claim, judgment goes first against the principal debtor on the account. The amount ascertained to be due is then adjudged a lien on the specific property, and a special execution thereafter issues, directing a sale of the identical property to satisfy the demand. Whether such an action (so far as it concerns the realty) should be regarded as in rem, or be placed in the class which some jurists have described as 1 quasi in rem,’ we do not stop to inquire. The true inquiry is whether the action deals with the property it seeks to affect in such a specific and definite manner as necessarily to withdraw the property from the exclusive control of other courts while the action is pending. We think it does, and that such is the plain effect of the Missouri statutes governing that action. R. S. 1889, secs. 6159-6167, 6705-6729.

“The jurisdiction of the state courts (having attached to the property a long time before the suit in the federal court began) was not exhausted by the rendition of the judgment of lien. The ultimate process (in this instance, of special execution) needed to make the judgment fruitful is, under our law, an essential part of the mea,ns provided for the exercise of power comprehended in the term ‘jurisdiction.’ A grant of power is considered to include the use of all incidental powers necessary to make the principal grant effective. Broom, Leg. Max. [8 Am. Ed.], *pp. 479, 486; State v. Ryno (1887) 49 N. J. Law, 603, 10 Atl. 189. In a leading federal case it was said that, ‘process subsequent to judgment is as essential to jurisdiction as process antecedent to judgment, else the judicial power would be incomplete and entirely inadequate to the purposes for which it was conferred.’ Riggs v. Johnson Co. (1867) 6 Wall. 187.

“The subject of the mechanic’s lien suit (namely, the opera house property) was thus plainly within the control of the state courts, and neither the appointment of the receiver nor the order then made withdrew the property from that control. The establishment of the receivership did not transfer the title to the property, nor did it divest liens already fixed upon it. To hold that such was the effect of a proceeding to which the lien claimants were not parties would be to deprive them of their rights in the property, without a hearing, which we certainly decline to do. As the learned federal judge had no authority or jurisdiction to take the property out of the judicial control of the state courts in the manner attempted in said order, it follows (if his order is to be construed as having that effect) that it is void and of no force, as to the rights of the lien claimants in process of assertion in the state court.

“In Gates v. Bucki (1893) 12 U. S. App. 69, 4 C. C. A. 116, 53 Fed. 961, the federal court of appeals of this circuit, by Judge Shikas, declared that, ‘this property, being thus in the custody of. the state court in proceedings intended to affect the title and control the disposition of the same, the property was for the time being withdrawn from the jurisdiction of the federal court, and when the foreclosure suit was filed in that court it could not and did not bind or reach the property, because the same was not then within the plane of federal jurisdiction.’

“The above ruling was made in a case wherein the jurisdiction of the federal court was challenged by appropriate moves in that court. But if the principle announced in it is sound, as we believe it to be, it is not essential for the lien claimants to go into the federal court to secure recognition of that principle. It is one of those rules of ‘general jurisprudence’ binding alike on federal and state tribunals. It follows that the ruling of the trial court on the motion to set aside the sale, in so far as it is referable to the pendency of the receivership proceedings, was erroneous.”

2. The next question is as to the correctness of the ruling of the court in setting aside the sheriff’s sale.

That the court had control of its own process, and the power to set aside the sale, if there was gross inadequacy of price, and the interest of the movers was injuriously affected by the sale, if they were by mistake or misapprehension prevented from attending it or preventing it, we think is well settled law. It is equally well settled that inadequacy' of price alone will not justify the setting aside of a judicial sale, and the court so declared; but when the inadequacy of price is very great, as in the case at bar, slight circumstances tending to show that interested parties, such as mortgagees, were misled, or by accident or mistake prevented from attending the sale, or preventing it, will justify its being set aside. While the court declared as a matter of law “that inadequacy of consideration, however gross, is not sufficient ground of itself to set aside the sale,” it did set it aside, and it may reasonably be inferred therefrom that in its opinion there were other facts in evidence which justified it in so doing.

The execution under which the sale was made was a transcript execution issued by the clerk of the circuit court of Greene county on the transcript of a judgment rendered before a justice of the peace of said county enforcing a mechanic’s lien against the property in question in favor of Rogers and Baldwin Hardware Company v. The Cleveland Building Company, A. B. Crawford, J. D. Porter, Seth Tuttle, Marion Davis, and W. H. Keyser, owners. The Jarvis Mortgage Trust Company, mortgagees, Samuel M. Jarvis, trustee, W. W. Baldwin, mortgagee, B. U. Massey, trustee, were also made parties to that suit, but no judgment was rendered against them. The execution could not he found, but must be presumed to have been in accordance with the judgment.

The judgment after describing the tract of land by metes and bounds proceeds as follows, “together with the four story brick building known and designated as the Baldwin opera house, situated thereon, and that said land and building be charged with the payment of said debt. ” In the notice of sale by the sheriff no mention was made of the opera house, other than as the “buildings and improvements” on the land, although the property was generally known as the “Opera House” block.

The sheriff testified that at the time of the sale he did not know that he was selling the opera house property.

The property had been previously advertised for sale by the sheriff under nine executions issued on transcripts of mechanics’ lien judgments in favor of different parties, amounting in the aggregate to about $5,000. The judgment creditors in those cases, as well as in'this, were represented by Capt. McAfee as their attorney, the purchaser of the property at the sale in question. Those judgments were all compromised or paid off by T. J. Elannelly, who represented the Jarvis-Conklin Trust Company.

J. T. White, one of the attorneys for said company, testified that about the time the judgments were paid, Elannelly asked Capt. McAfee if he wouldn’t assign those which he had paid off to him, or to his clients, and Capt. McAfee said he couldn’t for the reason that he had other suits pending, but that if he would pay off the claims he had pending that, “I will sell them to you, but it wouldn’t be fair to assign to you all those I have in judgment and leave out those that are still pending.” Witness further stated that his recollection was that Mr. Flannelly asked the captain if that was all the judgments that he had, and he answered that it was. This conversation, or the chief part of it, Capt. McAfee testified did not occur. White also stated that Mr. McCammon and himself were the attorneys for the mortgage trust company in Springfield and represented it in all the litigation about this property, and the sheriff did not notify them that he had any execution in this matter at all; and that it was his custom to do so in such eases; that the service was had by publication, and the judgment obtained without their knowledge.

The property was worth from $40,000 to $50,000, and was sold by the sheriff for $250. The purchaser represented a number of lien claimants whose demands not then in judgment amounted to about $11,000, and by an arrangement between himself and them, they were to share the property in proportion to the amount of their respective claims.

While the notice of sale was a technical compliance with the law, it should have given a more particular description of the property, and in failing to do so was to some extent misleading. So much so, in fact, that the sheriff did not know what property he was selling.

Herman, in his work on Executions, page 415, in speaking of sheriff’s sales for inadequate price, says: “A sale of twelve thousand dollars’ worth of property for four hundred dollars, is strong ground for relief, especially where the advertisement contains an imperfect description of the property. The fact that the advertisement was so framed as to mislead, so that no one, not acquainted with the premises, could have conjectured from the advertisement what the property was, that was intended to be sold, in connection with the fact that there were no bidders at the sale but the purchaser, and the property was sold at a very inadequate price, makes a sale constructively fraudulent against a defendant and others having liens on the property, and constitutes a ground for equitable relief, although the advertisement may have been a technical compliance with the statute, so as to vest a valid title in the purchaser.” Hodgson v. Farrell, 15 N. J. Eq. 88.

The imperfect description of the property in the notice of sale should be taken into consideration in connection with other facts in evidence in passing upon the validity of the sale.

The weight of the evidence clearly showed that Elannelly as the agent and attorney of the mortgage company was misled by the supposed statement of Capt. McAfee with respect to the payment by that company of all lien judgments which he represented against the property, for it is fair to presume that he would not have paid all others, and left remaining unpaid the judgment under which the property was sold, amounting to so small a sum as $37.60. His object seems to have been to pay all liens then in judgment, and it is unaccountable why he did not pay that, unless he was misled by what he understood the statements of Capt. McAfee to be with respect thereto. We do not undertake to say that Capt. McAfee was guilty of any intentional wrongdoing, fraud, or unfairness in buying the property, and only speak of matters connected with the sale from a legal standpoint. These facts taken in connection with the evidence of White that the custom of the sheriff was to notify him with respect to intended sales of this property, and his failure to do so on this occasion, the inadequate price that the property sold for, fully justified the court in setting the sale aside. Seaman v. Riggins, 1 Green’s Chy. 214. The purchaser was attorney for plaintiff and was not an innocent purchaser. Harness v. Cravens, 126 Mo. 233.

Moreover, the sheriff in selling the property was the agent of both plaintiff and defendant, owing a like duty to each, and bound to protect the interest of all-parties concerned. It was his duty to see that the property was not sacrificed, and to that end could have returned the execution “no sale for want of bidders.” Conway v. Nolte, 11 Mo. 74; Shaw v. Potter, 50 Mo. 281; Holdsworth v. Shannon, 113 Mo. 508; Cole County v. Madden, 91 Mo. 585; State ex rel. v. Moore, 72 Mo. 285. His failure to do so can only be accounted for on the grounds of his want of knowledge of the property that he was selling, and of its value. His course can not be justified or excused on the ground that the owner of the fee in the property is not here complaining; the mortgagee is. That, however, does not legalize the sale, which in its result is the transfer of defendant’s property to the purchaser, for about one eighteenth of its value; a merely nominal sum.

All the plaintiff company is entitled to is its debts, and that end is not defeated by opening a bid, but will certainly be attained if that be done. The plaintiff suffers no loss if the sale be set aside, while the mortgage company loses a large amount of money. The object of the sale is not to transfer the property of the execution debtor to the execution creditor “but to pay the debt; he can not, therefore, be injured by any proceeding which has that for its object, and does not cause any unnecessary delays or expense.” Littell v. Zuntz, 2 Ala. 256. Justice can be but subserved by a resale of the property, for it can not result in any injury to the purchaser, the purchase money being refunded.

The sale if invalid as against the movers could not in any way be legalized by reason of any private arrangement between the purchaser and his clients as to how the property was to be shared by him with them, to which the company was not a party. The judgment is affirmed.

Brace, 0.- J., Sherwood, Macearlane, and Robinson, JJ., concur. Gantt, J., concurs in second and last paragraphs hut expresses no opinion as to the first. Barclay, J., dissents from last, but concurs in first, paragraph.