Hogan v. CarterHogan v. Carter
Johnny L. Carter (appellee) purchased certain property which was sold by the sheriff in an execution sale to satisfy a judgment enforcing a materialmen‘s lien. Approximately one year later, when other judgment creditors and materialmen‘s lienholders sought to execute on the same property, appellee Carter filed this action against the sheriff and the other judgment creditors (appellants) to enjoin the execution sale sought by appellants. The trial court granted the injunction requested by Carter. Hogan and the creditors appealed this action; we reverse and remand.
FACTS
In December 1977 Hubert and Frances McLemore acquired the disputed property with the intentiоn of building a restaurant. They purchased building materials from Collins Supply, Inc. (Collins), Anderson Supply Company, Inc. (Anderson), and Julian Coffman d/b/a C & R Sheet Metal (C & R). On January 23, 1978, about six weeks after acquiring the property, the McLemores executed a mortgage for $21,500 to the First Alabama Bank of Athens (which is not a party to the instant case). On February 28, 1978, Collins filed a verified statement of materialmen‘s lien and an action against the MсLemores to recover some $11,000 claimed to be owed for materials furnished, and “to have the mortgage of First Alabama Bank of Athens subrogated to plaintiff‘s lien.” On September 25, 1978, Collins took by default a judgment for $12,090,
Appellants, other than Sheriff Hogan, as creditors of the McLemores, filed verified statements of materialmen‘s liens and actions to reduce their respective claims to judgment and to enforce their materialmen‘s liens. Anderson received a judgment against the McLemores on June 26, 1978, for $3,641.84; C & R received its judgment against the McLemores on Sеptember 5, 1978, for $3,000.00; Carmen Southard received a judgment against Frances McLemore on September 18, 1978, for $500.00; Arnold Institutional Foods, a corporation, received on October 3, 1978, a default judgment against Frances McLemore for $2,807.55; and Garth Insurance Company, Inc., apparently received a judgment based upon a lien arising out of a writ of attachment, but the trial court found it to be subordinate to the other materialmen‘s liens against the McLemores.
On April 15, 1980, appellants C & R, Anderson, and Southard commenced execution proceedings to cause the subject property to be sold in satisfaction of their judgments and materialmen‘s liens.
The suit of appellee Carter seeking to enjoin the sale was heard and submitted upon written stipulations of fact, oral testimony, and arguments of counsel. The trial court found that the first execution sale was not rendered void by any defects in the sale, and found that appellee Carter took the property in question free and clear of all other liens other than the mortgage to the First Alabama Bank of Athens. As to the question of whether the holders of the other materialmen‘s liens (appellants) have equal standing to enforce their liеns on the property, the trial court found that there had been no consolidation as to all of the lien claimants in the Collins suit. Therefore, the failure to consolidate the cases defeated the claim of the other lienholders under
Finally, the trial court granted the relief prayed for by appellee Carter, thus granting an injunction against appellants as to the proceеdings to cause a subsequent execution sale by the sheriff.
Evidence was adduced in the trial of this case, which was not controverted, that the fair market value of the property at the time of the first execution sale was between $40,000 and $50,000. In December 1978, the McLemores attempted to sell their property by auction. The highest bid was $45,000, but no sale was made because this amount was insufficient tо clear the outstanding liens against the property.
THE DECISION
Appellants ask this Court to overturn the injunction Carter obtained against the second sale. By way of cross-claim, appellants claimed that the first execution sale was invalid due to the irregularities in the conduct of the sale, and asked that the subject property be sold again by the sheriff at execution sale so that they can share in the proceeds of the sale.
The statutory requirements for a sale of levied on property were not followed in several respects. Notice of Collins‘s sale was posted for less than 30 days, in violation of
Appellants maintain that these irregularities, in combination with the insufficient purchase price (Carter paid about onefourth of the market value of the property), require that the sale be declared invalid. Courts have the power to set aside “a sale made under any legal process [when] infected with fraud, oppression, irregularity or error to the injury of either party,”
This Court has held that procedural irregularities alone are not enough to invalidate the sale. Dean v. Lusk, 241 Ala. 519, 3 So.2d 310 (1941); Bonner v. Lockhart, 236 Ala. 171, 181 So. 767 (1938). Nor is inadequacy оf price enough unless it is so extreme, or so related to procedural irregularities, as to create a presumption of fraud. Madison v. Ware, 277 Ala. 408, 171 So.2d 117 (1965); Martin v. Jones, 268 Ala. 286, 105 So.2d 860 (1958). In addition, the terms of our statute appear to allow the setting aside of sales for reasons not limited to fraud, and in practice most courts seem to take a common-sense approach to all the circumstances, including the price, the likely effect of procedural irregularities, inequitable conduct, evidence of mistake or misapprehension, and problems with title. See generally Annot., 5 A.L.R. 4th 794 (1981). Under
However, while each of the general rules, taken individually, is correct, the various irregularities involved in this sale, taken tоgether with the inadequacy of the sales price, compel this Court to order that this sale on execution be set aside.
This approach has gained judicial acceptance. “[V]irtually all courts recognize that inadequacy of price, in some degree, combined with some form of other circumstances, especially those indicative of fraud or unfairness on the part of the purсhaser, or mistake, does justify the setting aside of an execution sale.” (Emphasis added.) Annot., 5 A.L.R. 4th 794, 802 (1981). Mason v. Wilson, 116 Ariz. 255, 568 P.2d 1153 (Ariz. App. 1977), exemplifies this approach:
“A court may order an execution sale set aside on the basis of two grounds: First, the purchase price received at the sheriff‘s sale may be so inadequate as to shock the conscience of the court and justify setting aside the sale, Nussbaumer [v. Superior Court In and For County of Yuma, 107 Ariz. 504, 489 P.2d 843 (1971)], supra; Wiesel v. Ashcraft, 26 Ariz.App. 490, 549 P.2d 585 (1976). Second, where there is an inadequacy of price which in itself might not be grounds for setting aside the sale, slight additional circumstances or matters of equity may so justify.”
While the price received in the case before us may not be so inadequate as to shock the conscience, the accompanying procedural irregularities constitute additional circumstances which, together with the inadequate sales price, justify setting aside the sale. This Court has stated:
“When the property is purchased by a stranger, the sale will not be set aside for mere inadequacy of price, no matter how
gross, unless there is some unfair practice at the sale or unless there is mistake or surprise, without fault on the part of those interested.”
Martin v. Jones, 268 Ala. 286, 288, 105 So.2d 860, 863 (1958). In the case before us, the sales price of $11,000 was clearly inadequate, particularly in light of the December 1978 bid of $45,000. This inadequacy, taken in conjunction with the failure to give notice for 30 days prior to the sale, failure to hold the sale on Monday as required by law, and failure to publish notice of postponement, constitutes the type of “unfair practice at the sale” which mandates that the sale be set aside in this case.
Appellee urges this Court to hold that appellants should be barred by laches from now contesting the validity of the sale, or claiming any portion of the proceeds. We disagree.
The question of laches must be considered in light of
Appellants also present the issue of relative priority of the various claims to the property. Since we hold that the execution sale to Carter is invalid, the trial court, on remand, will have the opportunity of establishing the various priorities among the judgment creditors involved in this proceeding. To aid the trial court in this determination, we call attention to the provisions of
We reverse and remand for further proceedings in accordance with this opinion.
REVERSED AND REMANDED.
MADDOX, FAULKNER, ALMON and SHORES, JJ., concur.
JONES, EMBRY, BEATTY and ADAMS, JJ., concur in part and dissent in part.
BEATTY, Justice (concurring in part and dissenting in part):
The majority opinion errs on two issues: The validity of the sale and the relative priority of the claims to the property. In my view the record is sufficient for us to decide the priorities issue. Proper resolution
With respect to the priorities issues,
Carter thus purchased subject to other claims—but not to all the encumbrances on the property. Instead, Carter is subrogated to the rights of the execution creditor, Collins.2 As stated in Barber v. Beckett, 251 Ala. 569, 39 So.2d 17, 19 (1949), “when a levy and sale are made under execution on the judgment, the title under the sheriff‘s deed relates back to the inception of the lien and so takes precedence over all transfers and incumbrances made subsequently to such inception.”
The inception of Carter‘s title has already been determined in Collins‘s action to be prior to the mortgage, which in turn has priority, by virtue of its earlier recordation, over the liens of the general judgment creditors. Moreover, each of the materialmen‘s lien holders, Carter, Anderson and C & R, have priority “over all other liens, mortgages or incumbrances created subsequent to the commencement of work on the building or improvement.”
It follows that the trial court erred in granting an injunction against the execution sale of Anderson and C & R. Carter‘s title is subject to their right to execution. They could have been joined in Collins‘s original action; in the absence of joinder they are not bound by its results.
Carter argues that, because only Collins‘s lien was adjudicated superior to the mortgage, the other materialmen‘s liens must be inferior to the mortgage and to Carter‘s title, derived from Collins. This conclusion is unfounded. As against each other the three materialmen‘s lien holders are “on an equal footing.” The рriority of Anderson and C & R against the bank has not been decided and would only be considered on remand if the bank becomes a party or purchases the property.
Viewed from this perspective, the trial court‘s approval of the sale should be upheld. The majority has cited no case reversing a trial court for not setting aside the sale. Two factors in the present case make clear that the trial court did not abuse its discretion. First, the рurchaser here was not the only bidder at the sale and was a stranger to the original transaction rather than a creditor. Compare Cox v. Cox and Seiben v. Torrey, supra, where these factors were specifically noted.
The second factor is that proper resolution of the priorities issue reveals the inadequacy of price to be relatively small. The injustice normally sought to be remedied by setting aside an execution sale—a windfall to the purchaser аt the expense of the debtor‘s equity in the property—is largely absent here. This is apparent from the fact that most of the outstanding claims to the property (and the McLemores’ interest in having those claims disposed of) should remain unimpaired by the sale to Carter. Anderson and C & R are free to execute on their liens and the bank‘s mortgage is still effective. The claims of the bank and the thrеe materialmen‘s lien holders total almost $39,000. Thus, the only windfall Carter received was the additional property value of $6,000, which would otherwise have been available to pay most of the remaining creditors. It is true that such loss may constitute “injury” within the meaning of
JONES, EMBRY and ADAMS, JJ., join in the above.