Blossom v. Railroad Company

THE Milwaukee and Chicago Railorad having mortgaged their railroad, and suit having been brought in the Federal court for Wisconsin, to foreclose the mortgage, a decree was obtained that the mortgaged premises should be sold at public auction, under the direction of the marshal, unless the mortgagors, previously to such sole, should pay to the complainants the sum of $254,175-the amount of the decree. The marshal, accordingly, offered the premises for sale on the 6th of June, 1862, but no bids being received, he adjourned it 'by direction of the complainant's solicitor,' to the 19th of the same month, at the same hour and place. At the time and place of adjournment he put up the premises again, and one Blossom bid $250,000 for them; this being the highest and best bid received at that time. Fearing that the property would be sacrificed, if the sale should be completed, the agent of the stockholders applied to the solicitors of the complainants, requesting that the sale might be postponed for a short time to enable the respondents to make some arrangements to pay the amount of the decree without a sale of the property. The solicitors gave such directions, and the marshal again adjourned the sale; the adjournment being to the 21st June-two days-and the marshal giving notice that at the expiration of this time the sale would be opened at the same hour and place, and with the bid of $250,000 already made by Blossom. During these two days the mortgagors made arrangements to pay the mortgage, but had not been able by the 21st to have the money actually in hand. The sale, after being opened, and after Blossom had increased his bid to the full amount of the mortgage debt-but no other bids being received-was again adjourned by direction of the complainant's solicitor; this adjournment being to the 1st October, 1862, and being also the second adjourn ment made by direction of the solicitor aforesaid, after the bid of $250,000 had been made. On this 1st October the sale was again opened, and by the same direction further adjourned till the 15th January, 1863; this being, of course, the third adjournment made by the same direction, and after Blossem's bid. Previous to this 15th January, however, the company had paid the amount of the decree, and the marshal by order of the complainant's solicitor discontinued the sale altogether.

On the 9th October, 1862, Blossom, by petition to the court below-sworn to and stating that 'he made both bids in good faith, and has been ever since and now is ready to comply with his said bid, and hereby offers to bring that amount into court' applied to have the sale confirmed to him on his bid as increased to the full amount of the decree of foreclosure and sale, but the court denied the petition, and he appealed here.

It having been lately decided in this court, on a motion to dismiss his appeal, that he was entitled to be heard here, his case now came on upon its merits.

Messrs. Cushing and Carpenter, for the appellant Blossom.

I. As to the effect of the bid: When this case was here before, the court said: 'A purchaser or a bidder at a master's sale in chancery subjects himself quoad hoc to the jurisdiction of the court, and can be compelled to perform his agreement specifically. It would seem that he must acquire a corresponding right to appear and claim at the hands of the court, such relief as the rules of equity proceedings entitle him to.'

What then are the rights which a purchaser, a stranger to the suit, acquires, by making a bon a fide bid, which he offers to give effect to by payment to the marshal?

In foreclosures under decree in chancery, the mortgagee asks the court to take to itself the mortgaged premises, and hold or dispose of them for his benefit. This the court does by ordering the property to be sold to raise the amount due. 'A decree for a sale to effect a partition, or to pay debts, virtually,' says one case, 'takes possession of the estate and vests it in the court for the purpose of distribution.' The rights of all parties are in fact merged in the decree of foreclosure, and possession is vested by the decree of sale in the court, for the purpose of enabling it to sell the property and give possession. In one New York case, the chancellor says: 'Both parties appear to have fallen into the very common error of supposing that the owner of the decree had the right to control the action of the master, and to direct which parcel should first be sold;'-an error which the chancellor repels. In another, it was held, that the complainant in whose favor a decree had been rendered in a foreclosure case, could not control its execution to the prejudice of other parties interested; and that defendants might apply to the court to have the execution of the decree committed to them, if the complainant unreasonably neglected to proceed to a sale. In a third, Nelson, J., speaking of sales by the master in foreclosure causes, says: 'I am aware that these officers usually follow the direction of the plaintiff, or his solicitor, in this respect, and their interest perhaps may lead them to do so, as they are usually selected by the parties, but there is nothing in the nature of the office, or the duties belonging to it, which puts them under the control of the parties. The interposition of an officer to sell the property of defendants at auction would be a useless ceremony if the officer was to be under the direction of the plaintiff. If the master is not only independent of the party, but bound to execute the functions of his office, I should like to know upon what principle the bid of a party or his solicitor can be at all sustained. The party would be substantially both auctioneer and bidder.'

In sales under decrees, according to the English practice, there is no such thing as striking off or knocking down the property. The bids are received, and the best bid is reported to the court. The form of a report is as follows: 'George Ansley attended the sale,' &c., and offered to give for the purchase of, &c., 'and no person having offered to give more for the said,' & c., 'I do allow the said George Ansley to be the best purchaser thereof,' & c., &c. In all the English cases the language is, 'A. R. having been reported the best bidder or purchaser.'

In Blount v. Blount, Lord Hardwicke, says: 'Where estates for lives have dropped in between a person's being reported the best purchaser by the master, and his taking possession,' &c.;-showing that the master does not pretend to strike off the property, but simply reports the facts to the court. It is the court then that enters into contract relations with strangers to the suit, whom it invites by its advertisement to become purchasers of the property; and it is of no consequence whether the marshal strike off the property or not. He cannot thereby complete the sale: It must be confirmed by the court. In sales on execution the officer completes the sale, and therefore it is the striking off of the property that evidences its consummation. But in a sale under decree, the officer need only report to the court who is the highest and best bidder.

In the New York case of Brown v. Frost, it was asserted at the bar to be a rule of chancery that the right of redemption remains after the biddings until the sale was confirmed by the court. But the chancellor says: 'If such a rule exists it is one which I never heard of before; and no such right has ever been claimed by the owner of mortgaged premises, in any suit or proceedings before me, during the fifteen years in which I have presided in this court. . . . The former owner of the equity of redemption cannot prevent the completion of the sale, and the confirmation of the report, by tendering or offering to pay the amount of the decree, with interest and costs.'

If Blossom had refused to perform his part of the contract, or had been unable to do so, the court might have ordered the property to be resold at his risk, holding him liable for any deficiency. The bid compelled him to keep this large sum at command to meet it. Good faith and public policy require that he should be protected in the corresponding rights acquired by him as a purchaser.

II. As to the adjournments. Here are no less than four different adjournment-running over a term of seven months-for the mere purpose of enabling a delinquent debtor to redeem. Blossom, on the 19th June,-the day when the sale was adjourned for the second time,-having bid nearly the whole amount of the debt due, the large sum of $250,000. If this court shall hold that he acquired no rights by so doing; that the complainants had the right to control the marshal, and continue the sale from time to time, at their pleasure, until the purchaser should be ruined by keeping his money at command, what bon a fide bidder will ever again incur the hazard and inequality of such a rule, by bidding for property hereafter offered for sale by a Federal court? Certainly the right claimed by the complainants would put every mortgaged railway corporation in the power of its mortgagors, and would enable them to acquire its property at their own price. For if they have the power to adjourn the sale three times, they may a hundred, and until every competent bidder is ruined, or consents to withdraw from the biddings. The complainants can then buy for what they will.

Messrs. Cary, Buckley, and Brown, contra.

I. What was the effect of the bid? By appearing at the sale and bidding for the property, Blossom simply made a proposition, which, if it had been accepted, would have bound him to its performance; but until it was accepted, and the sale was consummated by the property, on that bid, being struck off, he was not bound, and he was at liberty to withdraw his bid at any time he chose before such acceptance.

The American practice of judicial sales is to sell at auction, and in all cases the officer making the sale designates the purchaser by accepting his bid, and formally striking off the property to him, in presence of the spectators. In this case the order of the decree was express that the property should be sold at public auction, and the well-settled rule that a bidder may at any time retract, of course applies.

Again, the officer does in all cases report that he has sold the property, naming the person purchasing; also, stating the amount for which the sale was made, and that it was the highest and best bid. It is true that all such sales are within the power of the court, either to confirm or to set aside. But the court never confirms or sets aside a sale until it has been made and reported by its officer; and probably the case at bar is the first instance of an attempt in this country to have an unaccepted bid, at a judicial sale, declared a valid and binding sale, and confirmed as such. Under our practice, there is no difference whether the sale is on execution or under a decree, so far as striking off the property to the highest bidder is concerned, in order to consummate a sale.

We are aware that the English practice is somewhat different; but their practice, in this respect, is not in force in this country. If, however, the practice of the English courts of chancery is to govern, then no bid was ever made. In England, the officer has a book in which each person writes out his proposition and signs it. No other form of bids is considered; here there was no written offer, and no memorandum made by the marshal or signed by them. And even after the biddings are closed and the purchase-money paid, the bidder in England acquired no interest in the land until after confirmation. And if the premises are destroyed by fire, the bidder is not bound by his bid.

II. As to the adjournments. The decree itself gives the defendant the right to pay off the mortgage at any time before the sale; not before the day of sale, or the hour of sale, or before the first bid, but before the sale itself. But when has a sale taken place? It is when the biddings are completed as required by the rules and practice of the court; when the marshal has ascertained by actual experiment (crying the property, and awaiting a reasonable time) that higher bids than those already made cannot be obtained; and has by public declaration so determined, that the sale has taken place.

That a defendant cannot, at any time before a sale of his property is consummated, prevent such a sale by the payment of the judgment or decree, to satisfy which alone the sale is made, is a doctrine not to be entertained. The object of courts of chancery is not to punish the mortgagor or sell his property, but to protect the ultimate rights of the mortgagee. It will, therefore, allow the defendant every indulgence consistent with those rights. Even at law the officer is bound to protect the property against sacrifice, and may postpone the sale in the exercise of a sound discretion, after bids.

The case does not at all show that Blossom was compelled, as argued on the other side, to keep a large sum of money on hand to meet his bid, or that he ever could have raised it. He made no tender of money, and this alone would be conclusive against him.

Mr. Justice CLIFFORD delivered the opinion of the court.