206 Ky. 796 | Ky. Ct. App. | 1925
Affirming.
■On and prior to October 1,1919, appellees and plaintiffs below, J. R., S. G. and J. S. Haselden, were the joint owners of a tract of land in Garrard county containing about 80% acres. For the purpose of dividing it among the owners, they advertised its sale at public auction on the premises to be held on the date mentioned, and at that sale the appellants and defendants below, J. T. Manuel and wife, Fannie Manuel, became the purchasers at the price of $240.00 per acre. On the next day they executed a written contract to purchase the land on the terms stated therein, which wei*e the payment of $6,-400.00 in cash, the assumption of the balance of a prior mortgage amounting to about $3,500.00, and the execution of three notes for one-third of the balance payable in one, two and three years from and after January 1, 1920, at which time the vendors agreed to and did execute a deed. A lien was retained to secure the deferred payments and each note as well as the deed contained a precipitory clause whereby the entire indebtedness would become due upon the failure to pay any note or interest when due. The second and third notes were pledged to different banks, and after the first one matured and neither it nor the interest was paid, plaintiffs filed suit to collect it and also to declare the other two notes due and made the holders thereof parties. The petition also sought to foreclose the lien on the land in payment of whatever judgment was rendered. The holders of the other notes answered and by way of cross-petition sought the same relief.
The answer defended upon two grounds, (1), that the vendors on the day of the sale and on the next day when the contract was executed falsely and fraudulently represented that the title to the land was perfect and that it subsequently developed not to be so, and if not so then the purchaser would have the right to demand and receive a rescission; and (2), that the vendors procured a by-bidder at the sale who actually bid upon the land and ran it up on the defendants, which it was alleged rendered the sale at least voidable at the option of defendants, which option they sought to exercise. Those defenses were put in issue and after quite extensive preparation the cause was submitted to the court, who rendered judgment sustaining the prayer of the petition and those of the cross-petitioners and subjected the land
1. It is admitted, hut if not so it is true, that defendants cannot rely on the alleged defective title under the warranty contained in the deed, since there has been no eviction and for that reason they alleged in their petition an express false representation or agreement between them and the vendors that, if the title should turn out to be imperfect, they should have the right to rescind. The husband testified somewhat positively to such an agreement both on the day of the sale, as well as on the following one on which the contract was signed. The wife was not so positive in her testimony as to that fact; but however that may be, it is proven by plaintiffs and by a number of other witnesses that when the question of title was raised on the day of the sale and before the purchase of the land at that sale, one of the plaintiffs, who was the auctioneer, and another of them who was present publicly announced the exact condition of the title and the facts creating the alleged defect,- and that the alleged defect under the facts was an extremely remote one, and that the event upon which an adverse claim could be asserted was so improbable that it was almost certain that it would never occur, but that the vendors were worth at least $100,000.00' and would warrant the title and stand behind anyone who might purchase the land should the title turn out to be defective followed by any interference from any contingent adverse claimant. The court found the issue as to the agreement for the right to rescind and as to the alleged false and fraudulent representations by the vendors against defendants, and that the finding is not only supported by the evidence, but is sustained by the great preponderance of it.
It is also insisted under this ground that the vendors announced at the auction sale as a fact sustaining the title that one of the cross-petitioners, the Commonwealth Life Insurance Company of Louisville, Kentucky, held a mortgage on the land which was the one defendants agreed to assume, and said in substance that insurance companies did not take liens upon land affected with a doubtful title when, as alleged, the truth was that the mortgage referred to was taken, not by that insurance company but by a bank and which later transferred the
2. In the very recent case of Burdon v. Seitz, 206 Ky. 336, the law in this and other jurisdictions as to the effects, of by-bidding at auction sales was gone into and it was there held, under the authorities cited in the opinion, that where the vendor, or some, one authorized to speak for and bind him on the subject matter, employed a strictly by-bidder who made bids at the sale, the purchaser could avoid it either by rescission, or in defense to collect deferred payments, or by refusing to perform his contract, provided of course that his subsequent actions were not such as to bar him from doing so because of laches, waiver or other recognized' legal ground. Waiving the question of the existence of any such barring facts in this case and treating it as if defendants’ right of avoidance was in full force and effect, the question then is, was there such by-bidding in this case as to create that right on the part of the vendees Í
The undisputed facts are, that there was quite a crowd in attendance upon the sale. One of the plaintiffs acted as auctioneer, and there was in attendance one Mack Morgan, who was approached by S. Gr. Haselden, another plaintiff, and inquired of as to why he did not bid on the land. His answer, in substance, was that he was apprehensive of his ability to pay the probable price and using this language: “I said it was more than I felt I could take at the time, that I did not have the money and I finally said to Sam, ‘If you will go half, go fifty-fifty with me, we might buy it.’ He said he would, and we agreed upon the price,” which was to pay as much as $235.00 per acre, and they subsequently agreed to extend that price to not exceeling $240,.00i per acre. S. Gr. Haselden corroborates in every particular that statement. He and his brothers each testified that
The authorities cited in the Burdon case and others referred to therein are quite unanimous upon the point that the owner of the property sold at auction may not bid at the sale without notice given, either by the advertisement or at the sale, that the right to do so by him is reserved, and if he bids without such reservation, it constitutes by-bidding within the rule authorizing an avoidance of the contract therefor. Such bidding by the vendor is placed upon the same footing as that of a stranger who does so with the understanding and agreement that he will not be required to take the property if it should be knocked off to him, since in each case there would be no bona fide sale and that the bidding by both the vendor and the employed stranger would not be genuine but in the nature of a counterfeit bid and made only to deceive and stimulate the subsequent purchaser in making his offer, which constitutes the fraud lying at the basis of the rule permitting an avoidance of the contract at the instance of the purchaser.
There yet exists, however, the still further question in this case, i. e., whether one joint owner of property offered for sale at auction may himself or in conjunction with a stranger bid at the auction sale with the bona fide intention of taking the property if he should be the successful bidder, and at the same time not be a by-bidder within the meaning of the law so as to entitle the subsequent purchaser to avoid the sale. In other words, does
In answering that question, it might first be considered, that the reason for the rule characterizing a bid by the owner as one made by a bydfidder does not exist where one or two or more joint owners bid with the expectation of himself paying the other joint owners for the property if his bid should be accepted, since in that case he incurs a liability and will be compelled to account to his joint owners for their proportionate part of the accepted bid. He is thereby placed upon the same footing as any other bona fide bidder, and since the reason for the rule would not exist in that case, it would seem to follow that the rule itself would not apply. Nor do we think that the other nonconsenting joint owners would be bound by such an arrangement upon the ground of agency, since the act of the purchasing joint owner in bidding upon the property was neither intended nor purported to be for and on behalf of all, but only for and on behalf of himself. Therefore the partnership as such or the cotenants in the aggregate, who are the owners of the whole title to the property, were not bound by the action of one of them under the circumstances named, because he was neither authorized nor purported to act for the owners of the entire title; and his bid, we repeat, was not within the reason for holding the owner a by-bidder within the rule above stated.
In defining what is a by-bidder, the text in 2 K. C. L. 1128, says: “A puffer (or by-bidder), in the strictest meaning of the word, is a person who, without having any intention to purchase, is employed by the vendor at an auction to raise the price by fictitious bids, thereby increasing competition among the bidders, while he himself is secured from risk by a secret understanding with the vendor that he shall not be bound by his bids.” In a subsequent part of the text on the same page, it is stated in substance that the mere fact that a person interested in the property (and who necessarily does not own or control the entire title) procures another to bid for him with the understanding that the actual bidder will not himself be required to take the property, but that the procurer will, “does not constitute such bidder
In the case of McMillan v. Harris, 110 Ga. 72, 78 Am. St. Rep. 93, in a very learned opinion rendered by the court a detailed statement of what constitutes a by-bidder is made, including the circumstances under which the owner or one interested in the property may bid without subjecting himself to the consequences of by-bidding; and the right of an interested person to make a bona fide bid for himself, without incurring such liabilities either upon himself or that of other joint owners or interested parties, is thus stated: “On the other hand, the mere fact that the person is interested in the property to be sold or in the proceeds of the sale will not preclude him from either bidding himself or from procuring another to bid, either openly or secretly, in his behalf, without regard to what the agreement may be with such bidder, if the one employing such bidder has not himself such control of the sale that he could absolutely release the bidder from all responsibility growing out of his having participated in the sale in that capacity.”
Mr. Freeman, in his annotation to the ease of Anderson v. Wisconsin Central Ry. Co., 107 Minn. 296, 120 N. W. 39, 131 Am. St. Rep. 462, on page 489 of the latter reference quotes with approval that statement from the Georgia opinion, and our investigation has convinced us that it embodies the universally .prevalent rule upon the subject.
In this case, under-the proven facts, the rights of the other two joint owners of the property could not be affected by the arrangement made between Sam Haselden and Morgan. Besides, as we have seen, the very basis of the rule forbidding the vendor to purchase is wanting in this case, since the bid by Morgan, representing himself and Sam Heselden, was a genuine one and made under such circumstances, as the law may not characterize it as otherwise, but which is untrue where the owner of the entire title makes the bid or procures .some authorized person to do so for him.
Wherefore, the judgment is affirmed.