Bruschke v. Wright
46 N.E. 813
Ill.
1897
Check Treatment
Mr. Chief Justice Magruder

delivered the opinion of the court:

When the sale was made by the master, there was some arrangement or understanding between Gehr- and the guardian of the minors, that Gehr, acting for Cameron, was to pay §10,000.00 for the property in contros versy. Under this arrangement or understanding, the minors were to receive the benefit of the difference between §10,000.00 and what was necessary to pay off the amount due upon the mortgage upon the property and the costs and expenses of foreclosing that mortgage. It is the duty of a court of equity to secure for said minors, if possible, the benefit so to be derived from the arrangement made in their favor. In determining whether such a result can be accomplished, it will be necessary to consider in their order some of the contentions made by counsel.

First—It is claimed by counsel for plaintiffs in error, that the property was actually bid off for the sum of §10,000.00. We do not think that this claim is sustained by the proofs. The master and G-ehr both swear that it was struck off for §4918.43. The report of sale of the master recites that it was struck off and sold for that amount. Said report of sale was confirmed by the court, after the guardian ad litem, of the minors, and the attorney of the guardian ad litem, and the attorney of the guardian of the minors, had all endorsed upon the report that it was “all right.” The master had no power to sell the property, the sale being subject to redemption, upon any other terms than for cash. The decree required him to sell for cash. The arrangement, by which the amount due under the decree of foreclosure was to be paid in cash and the balance of the purchase money on or before the expiration of the time of redemption, was one which the master had no power to make. The talk among the parties at the foreclosure sale, that §10,000.00 was to be paid for the property, is erroneously interpreted by some of the witnesses, as amounting to a bid of §10,000.00 made at the sale. But the arrangement for the purchase of the property at the sum of §10,000.00 was entered into in writing between the guardian and Gehr, acting for Cameron, after the sale took place.

Second—It is further claimed by counsel for plaintiffs in error, that, as Gehr agreed to pay §10,000.00 for the property in the manner stated in the contract between him and the guardian, it would be inequitable to allow him to take from the master a deed of the property upon the certificate of sale after having paid only §4918.43; and that Wright, being the assignee from Gehr of the certificate of sale, stands in no better position with reference to the rights of the plaintiffs in error than that occupied by Gehr, his assignor; and that Wright, when the certificate was assigned to him by Gehr, took it subject to all the equities, which existed in favor of the plaintiffs in error while Gehr was the holder of the certificate. There is much force in this contention.

The evidence shows, that Wright purchased the certificate in good faith, and without any actual notice of the equities of plaintiffs in error. He bought it as an investment, and paid his money for it; and the money, which he so paid for it, went to pay off the Troost mortgage, which was a valid incumbrance upon the property of the plaintiffs in error. But the doctrine is, that an innocent purchaser is one who has the legal title to the property, and has paid therefor a valuable consideration without notice of defects in the title. The purchaser of a certificate of sale does not take the legal title to the property, but has only an equitable title. His interest has been said to be “an incipient interest that may or may not ripen into an absolute estate.” Inasmuch as the purchaser has not the legal title to the property bought, he of course assigns no legal title when he assigns the certificate. The assignee of such certificate is not regarded as being entitled to protection as an innocent purchaser, until he has obtained the legal title by a deed. Hence, we have held, that the assignee of a certificate of sale, issued to a purchaser under a judicial judgment or decree, is chargeable with notice of all irregularities that may invalidate the sale; he acquires no greater equities under the certificate than the purchaser, who is his assignor, has therein. He takes the certificate charged with all defenses which could be interposed against his assignor. The statute, which makes a certificate of sale assignable, provides, that “every person to whom the same shall be so assigned shall be entitled to the same benefits therefrom in every respect that the person therein named would have been if the same had not been assigned.” (2 Starr & Curtis’ Stat. chap. 77, sec. 29, p. 1403). We have held, in construing this statute, that an assignment of a certificate of sale places the assignee in the place of the assignor as respects the rights by virtue of the certificate, and that whatever equitable defenses could have been interposed against the certificate in the hands of the original purchaser can be yiterposed against an assignee from such purchaser. (Chytraus v. Smith, 141 Ill. 231; Roberts v. Clelland, 82 id. 538; 16 Am. & Eng. Ency. of Law, 833, and cases cited). What then is the equity, which can be enforced against Wright, as assignee of the certificate, in favor of the plaintiffs in error? It cannot be said, that Wright can be required to carry out the agreement made between Gehr and the guardian by paying the difference between $10,000.00 and what he paid for the purchase of the certificate of sale. He was not a party to that contract, nor could it be enforced against him. Indeed, the petition does not ask for an enforcement or specific performance of the contract, but it asks that the sale, made by the master, be set aside, and that the property be re-sold. The plaintiffs in error are entitled to enforce against Wright the equity, which they would have been entitled to enforce against Gehr if he had remained the owner of the certificate, of having a re-sale of the property. This is true, because, if it had not been for the agreement of Gehr to purchase the property for $10,000.00, they may have looked elsewhere for a purchaser for more than the amount due upon the mortgage. Again, the expectation of receiving the balance of the $10,000.00, not bid at the sale by the master,' from Gehr at the expiration of the time of redemption undoubtedly lulled them to sleep, and prevented their making any efforts to redeem the property from the master’s sale. The proper relief to be awarded in such a case is a re-sale of the property. (Imboden v. Hunter, 23 Ark. 622; Mason v. Martin, 4 Md. 124; Davoue v. Fanning, 2 Johns. Ch. 252; Campbell v. Johnston, 1 Sandf. Ch. 148).

Third—The question then arises as to the terms, upon which a re-sale should be made when the court orders the property to be re-advertised and sold again. It is contended by counsel for plaintiffs in error, and the circuit court so ordered in its decree, that the defendants, Cameron, Gehr and Wright, or some one or more of them, should pay, within a time to be fixed, to said guardian, or the clerk of the court for the benefit of the minors, the remainder of said sum of $10,000.00 after taking out what was bid at the master’s sale, and after taking out the deductions provided for in said contract between the guardian and Gehr, to-wit: $5081.57, or thereabouts; and that, in default of such payment, the property should be re-sold. The decree of the circuit court further orders, that the master shall receive no bid for said premises of a less amount than said sum of $5000.00, or thereabouts, with interest and costs; and that, out of said proceeds of sale, after paying costs, so much of the amount bid as is equal to the sum last mentioned should be paid to the guardian and that the surplus should be brought into court. In other words, the decree of the circuit court makes no provision for refunding to Wright the $4918.43 which he paid for the certificate of sale; but the effect of the decree is to compel him to lose that amount,, as the decree makes provision for a sale of the property to realize the balance of the $10,000.00 over that amount, and no provision for realizing any part of the amount paid by Gehr at the sale, or paid by Wright for the assignment of the certificate. Such a result as this is wholly unjust, and opposed to tke'principles of equity which are applicable to such cases.

It is one of the maxims of the court of chancery, that those, who seek equity, must do equity. (Bennitt v. Star Mining Co. 119 Ill. 9). The plaintiffs in error come into a court of equity and invoke the aid of that court to set aside a master’s sale, which, as they claim, has realized to them less than they are entitled to receive; and, before they can secure such aid, they must offer to do what is equitable in the premises. To refuse to refund the amount paid at the sale, which was used for the purpose of discharging a mortgage upon their property and relieving it from the lien of such mortgage, or to make any provision in the decree of sale for the payment of the amount so advanced by the purchaser out of the proceeds of said sale, would be inequitable.

In Kinney v. Knoebel, 51 Ill. 112, there was a sheriff’s sale which was void and unauthorized, and the purchaser had notice of that fact; but the money he paid for the land went to pay the creditors of the estate, and left a surplus in the hands of the executor; we there held, that, as the purchase money which such purchaser paid at the sheriff’s sale, relieved the estate from all its indebtedness and gave a surplus to the executor for the benefit of the heirs, such heirs were bound to refund the money with interest as a condition to their redeeming the land.

In Chambers v. Jones, 72 Ill. 275, it was held, that, where infant defendants to a partition suit sought to set aside a sale of their land made under a decree in such suit by a court having no jurisdiction of their persons, they should be required, as a condition to granting them the relief sought, to refund to such purchaser whatever of the purchase money paid b;r him may have come into their hands.

In Wickiser v. Cook, 85 Ill. 68, where a sale was set aside as being one which a court of equity could not sanction, it was held, that the complainant, having come into a court of equity and asked to have the sale set aside, equity would require a return of the amount of money received upon the sale; and it was there said (p. 72): “When she seeks equity she must do equity. It would not be equitable to restore to her the property and at the same time allow her to retain the consideration money which she received for the land. * * * This amount should have been returned, or the land ordered sold to satisfy the same, as a condition upon which the sale should be canceled.” In Brandon v. Brown, 106 Ill. 519, we said (p. 526): “We have repeatedly decided, that, when a minor disaffirms a judicial sale by bill in equity, he must return, or offer to return, what he has received, if it be in his power.” (See, also, Smith v. Knoebel, 82 Ill. 400; Hamilton v. Wright, 9 C. & F. 123; Pearson v. Benson, 28 Beav. 598; Duncan v. Dodd, 2 Paige’s Ch. 99; 12 Am. & Eng. Ency. of Law, 235).

We regard the doctrine of subrogation as applicable to such a case as is here presented. Inasmuch as the money advanced by Wright was used for the purpose of paying off" the mortgage upon the property, a court of equity will subrogate Wright to the rights of Troost, the original mortgagee, and regard the decree, which was in fact paid off by the proceeds of the master’s sale, as subsisting for the purpose of being enforced for the benefit of Wright. The general doctrine is, that a purchaser at a foreclosure sale will be subrogated to the rights of the holder of the mortgage, which has been discharged with the purchase money, in the event that the sale is ineffectual to convey title to the property sold.

In Brobst v. Brock, 10 Wall. 519, it was held, that an irregular judicial sale, made at the suit of the mortgagee, even though.no bar to the equity of redemption, passes to the purchaser at such sale the rights of the mortgagee as such.

In Johnson v. Robertson, 34 Md. 165, where a foreclosure decree was reversed on appeal and the property ordered to be sold again for the payment of the mortgage debt, it was held that the original purchaser, having paid the money which was applied to the payment of the mortgage debt, was entitled to be subrogated to the rights of the mortgagee, and to have the mortgage treated as assigned to him.

So, where a purchaser at a sheriff’s sale paid money on his bid which discharges the judgment, and the sheriff’s deed turns out to be defective, he may be subrogated to the lien of the original judgment. (Jones v. Smith, 55 Tex. 383; Short v. Sears, 93 Ind. 505; Davis v. Gaines, 104 U. S. 386).

So, also, in Bonner v. Lessley, 61 Miss. 392, it was held, that a purchaser under a void trustee’s sale, if the money paid -by him is applied to the extinguishment of the trust debt, becomes the equitable assignee of the debt, and is subrogated to the rights of the original cestui que trust, and, as such, entitled to charge the land in equity with the debt.

The doctrine of subrogation, which is thus applied in behalf of the purchaser at a foreclosure sale, exists also in favor of the grantee of such purchaser. (Rogers v. Benton, 39 Minn. 39; Richards v. Morton, 18 Mich. 255; Jordan v. Sayre, 29 Fla. 100; Bonner v. Lessley, supra).

In Bishop v. O’Conner, 69 Ill. 431, we held, that a purchaser of land at an administrator’s sale is not entitled in equity to be subrogated to the claims of the creditors which have been paid by the purchase money, where the title fails for want of jurisdiction in the court, ordering the same, over the person of the heir; but that was mainly on the ground that such claims against the estate are not regarded as a charge upon the real estate. In the Bishop case, a distinction was drawn between a purchase at an administrator’s sale, as shown by the facts therein, and those cases, in which it is held that, where the purchase money at such a sale has been applied in removing an incumbrance upon the land of an estate, and the title fails, the purchaser may be subrogated to the lien so discharged by his payment. In Chambers v. Jones, supra, the doctrine of Bishop v. O’Conner, supra, was endorsed; and, while it was there held that the doctrine of caveat emptor applies to purchasers at judicial sales, so that on the failure of title such a purchaser has no right to relief as against the heirs, and cannot have a decree against the land itself for the purchase money, yet it was there said, that, when the heirs are seeking relief against the purchaser, they will be decreed to refund the purchase money, upon the principle that he who seeks equity must do equity.

So in Harts v. Brown, 77 Ill. 226, where the directors of an incorporated company purchased the property of the company at a sale under a deed of trust, and the sale was held to be void in part, yet, on bill by the original stockholders against the directors, and a new company formed by them, to set aside the sale, it was held, that the directors, having paid the debts of the old company, were entitled in equity to be subrogated to the rights of the creditors whose debts they paid. Again, in McHany v. Schenk, 88 Ill. 357, it was held that a person, purchasing land at a sheriff’s sale under execution and thus satisfying the judgment, is entitled in equity either to the land or to realize the money so paid, with interest, from the sale; and if such sale is set aside for an informality, as selling the land en masse, he will be subrogated to the lien of the judgment and the rights of the judgment creditor under the same. (See, also, Mining Co. v. Mining Co. 116 Ill. 170; Lagger v. Mutual Union Loan Ass. 146 id. 283).

Hence, we are of the opinion, that the decree of the circuit court was erroneous in not providing, that the amount paid by Wright for the certificate of sale should be repaid to him out of the proceeds of the re-sale of the property. We agree in the main with the judgment of the Appellate Court, which directs that, upon a re-sale, the defendant in error, Wright, should be refunded the amount paid by him, but we regard the judgment of that court as erroneous in ordering the re-sale to be made without redemption. The statute provides that, “when any real estate is sold by virtue of an execution, judgment or decree of foreclosure of mortgage, or enforcement of mechanic’s lien, or vendor’s lien, or for the payment of money, it shall be the duty of the sheriff, master in chancery, or other officer, instead of executing a deed for the premises sold, to give to the purchaser a certificate describing the premises purchased by him, showing the amount paid therefor, or, if purchased by the person in whose favor the execution or decree is, the amount of his bid, the time when the purchaser will be entitled to a deed unless the premises shall be redeemed as provided in this act.” (2 Starr & Curtis’ Stat. p. 1395). Here, the sale, which is ordered to be made, is to be made by an officer of the court, and is to be made “for the payment of money;” it, therefore, comes within the requirement of the statute, which makes the sale subject to the right of redemption. Such was the view taken by-this court in the case of Locey Coal Mines v. Coal Co. 131 Ill. 9.

The judgment of the Appellate Court, and the decree of the circuit court, are accordingly reversed, and the cause is remanded to the circuit court, with directions that, unless the defendant in error, Wright, be paid the amount paid by him for the certificate of purchase, with lawful interest from the time of such purchase, within a short time to be fixed by the court, a decree be entered, requiring a re-sale of the premises by the master for cash; and that, out of the proceeds of the sale, there be paid, first, the expenses, second, the amount which the defendant in error, Wright, should receive as above stated, and, third, that the residue be paid to the guardian of said minors; and that, at such sale, the master receive no bid for an amount less than the sum to be paid defendant in error, together with the costs of such sale, including the master’s fees and commissions.

Reversed and remanded.