Northland Pine Co. v. Northern Insulating Co.

145 Minn. 395 | Minn. | 1920

Lees, C.

Appeal oe J. D. Ekstrum.

. This is an appeal from an order denying a motion to set aside a receiver’s sale.

On January 14, 1918, judgment wa,s entered in favor of a large number of materialmen and laborers in an action to foreclose their liens upon the property here involved. The judgment was reviewed and affirmed by this court in Northland Pine Co. v. Melin Bros. Inc. 142 Minn. 233, 171 N. W. 808. The property, consisting of ten lots, was covered by a mortgage having priority over the liens. It had been foreclosed and the time to redeem was about to expire. A number of the lien claimants redeemed for the benefit of all, although only a few contributed to the redemption fund.

Six apartment houses were in process of construction on the lots. None of them had been completed and only two were under roof. No work had been done on them since the fall of 1916 and they were depreciating in value. A large quantity of building material was lying on or adjacent to the premises and it was being destroyed or carried away by irresponsible people.

The present action was begun by four of the lien claimants, and all the others were made defendants. The court was asked to determine the interest of each in the property and to appoint a receiver to take charge of and sell it. Elijah Barton was appointed receiver and authorized to sell the whole or any part of the property, including the building materials, under the direction of the court and at the best price obtainable. Before selling he was required to make application to the court, describing the property to be sold, and to give such notice of the proposed sale to the parties in interest as the court should direct. During the last week of June, 1919, the receiver gave notice in a trade paper published in Minneapolis that he would receive bids for the property. The notice was published on two days only.

On July 10, 1919, the following proceedings were had in open court: The receiver reported that he had a bid from Patrick J. Gallagher of $25,600 for all the property and that this was the best bid he had received. The presiding judge then took charge of the sale and invited those present in court to submit oral bids for the property. There were two bidders, Gallagher and one Heller. Gallagher was the highest bidder, his final bid being $38,000. '.No one present objected to the’ acceptance ofithe bid; it was accepted, and Gallagher paid $5,000 down and the balance of $33,000 within 30 days, and the sale was confirmed by the court. The'appellant, Ekstrum, was not present in person, or by attorney, and both he and his attorney make affidavit that neither of them received any notice from the receiver, or otherwise, of the proposed sale. The total of the lien claims was over $66,000, and they were held by more than one hundred different persons. Ekstrum was the assignee of one of these claims, amounting to $530. The owners of claims representing between 80 per cent and 90 per cent of the total amount were present at the sale in person or by their attorneys.

On August 9, 1919, Ekstrum applied for the vacation of the sale, attacking it on several grounds now to be considered.

1. The receiver did not observe the directions in the order appointing him before he proceeded to offer the property for sale, but when the sale was made the court took charge of it, and in fact made it. The law did not prescribe the notice to be given. The court originally ordered that such notice be given as it might direct. The receiver, without directions from the court, gave notice by publication and by mail. Nearly all of the parties in interest were present when the bidding took place. The court must have been satisfied that the notice was sufficient, otherwise it is a fair presumption that it would not have proceeded with the sale. 'It had jurisdiction over the proceedings and had the property under its control. The bids were made in open court and the court was the vendor. It was a judicial sale, and, in the absence of a statute regulating it, not only were the time, manner, terms of sale and notice thereof matters to be determined solely by the court, but it also had discretionary power to modify the directions contained in the order appointing the receiver. Clark, Rec. §§ 591, 617, 622; 16 R. C. L. 37.

2. The court was justified in refusing to set the sale aside on the ground that the property was sold en masse, in the absence of any showing of fraud, prejudice or injustice resulting from making the sale in that way. Lamberton v. Merchants Nat. Bank of Waseca, 34 Minn. 381; Willard v. Finnegan, 42 Minn. 476, 44 N. W. 985, 8 L.R.A. 50.

3. At the trial of the action to enforce the liens, testimony was given tending to show that the property was worth approximately $150,000. This testimony is made the basis of a claim that the sale price was grossly inadequate. In behalf of the purchaser, affidavits were presented placing the value of the lots at $13,000 to $13,000, and the buildings and materials at approximately $35,000. The judgment in favor of the lien claimants was for $66,444. This amount represented practically all that was paid, as well as what was unpaid, for all labor and materials entering into thé construction of the buildings, including the materials on the ground. Evidently $150,000 was a grossly excessive value to place upon the property. The buildings, exposed as they were to the elements, had depreciated in value between the date of the trial of the lien action and the date of the sale. It was shown that the partially constructed walls were in such bad condition that they would probably have to be taken down and rebuilt. The completion of the buildings would necessarily require a - considerable time and the expenditure of a large sum of money, and there would be no income until they were completed. If the property was worth much more than $38,000, it seems reasonable to infer that some one would have been produced, able and willing to pay a greater amount. The application to vacate the sale was heard more than three months after it took place and yet there was no showing whatever of even a prospect of a sale at a better price.

These considerations might properly lead the court to conclude that Gallagher’s final bid fairly represented the market value of the property and that nothing would be gained by a resale. A judicial sale of property, unless made for such a grossly inadequate price as to raise an inference of unfairness, fraud or mistake, will not be set aside. The inadequacy must be so great as to shock the conscience. Johnson v. Avery, 60 Minn. 262, 62 N. W. 283, 51 Am. St. 529; Oswald v. Johnson, 140 Ga. 62, 78 S. E. 333, Ann. Cas. 1914D 1, and note collecting and reviewing a great number of cases.

It is a matter largely within the sound discretion of the court having control of the property to grant or deny an application to vacate a sale on the ground that the price paid was inadequate. Merchants Bank of Lake City v. Moore, 68 Minn. 468, 71 N. W. 671. It is the purpose of the law that judicial sales should be final. Pewabic Min. Co. v. Mason, 145 U. S. 349, 12 Sup. Ct. 887, 36 L. ed. 732.

4. A number of irregularities in making the sale are alleged to have occurred. They require no special mention. It does not appear that injury to this appellant resulted therefrom. In its absence, he cannot complain. Bottineau v. Aetna Life Ins. Co. 31 Minn. 125, 16 N. W. 849; Stockmeyer v. Tobin, 139 U. S. 176, 11 Sup. Ct. 504, 35 L. ed. 123. We are clearly of the opinion that the court below was justified in denying the application to vacate the sale.

Appeals oe E. Luther Melin.

These are appeals from orders denying: (1) A motion for the modification of the order appointing the receiver; and (2) a motion to vacate the sale of the building materials.

This appellant had filed an intervening complaint in which he asked that he be adjudged the owner of all the building materials not incorporated in the buildings and that the same be excluded from the possession of the receiver. He had been the owner of the lots and buildings, subject to the mortgage and liens already referred to. He was present at the sale and before it was confirmed announced that he claimed the building materials. He does not question the sale of the lots and buildings.

His appeals present the same question in different forms. He contends that the judgment in favor of the lien claimants was paid by the redemption from the mortgage foreclosure sale. He takes the position that by the redemption the claimants became the owners in fee of the property to which the lien of the mortgage extended; - that such lien did not extend to materials not incorporated in the buildings, and that the judgment lien was merged in the fee title acquired by virtue of the redemption, and any lien which the claimants may have had on the materials has been extinguished. This contention cannot be sustained.

In Lowry v. Akers, 50 Minn. 508, 52 N. W. 922, it was held that a lien on which redemption is made is not thereby merged and extinguished, but survives so far as may be necessary to the protection of the party redeeming.

In Sprague v. Martin, 29 Minn. 226, 13 N. W. 34, it was held that a redemption is a satisfaction of the debt due the creditor redeeming to the extent only of the value of the property redeemed, less the sum paid to effect redemption.

The lien extended to all materials furnished in good faith for the buildings, although they had not been used therein. 2 Dunnell, Minn. Dig. § 6048; Johnson v. Starrett, 127 Minn. 138, 149 N. W. 6, L.R.A. 1915B, 708; Thompson-McDonald Lumber Co. v. Morawetz, 127 Minn. 277, 149 N. W. 300, L.R.A. 1915E, 302; Minneapolis Sash & Door Co. v. Hedden, 131 Minn. 31, 154 N. W. 511. Hnder the meehanic’s lien law of this state, snch materials aré in effect part of the realty. Appellant asserts that they are personal property to which he is entitled because they were sold to him, despite the fact that he did not pay for them, and the further fact that they were covered by the lien claims filed by the sellers. As against the lien claimants whom the receiver represents, this contention cannot be sustained.

The value of the property redeemed, less the sum paid to effect redemption, proved to be less than the amount of the liens-, for it brought at public sale only $38,000. If redemption had not been made, the mortgagee would have acquired title in fee to all the property except the unused building materials, and these the lien claimants might have appropriated to the partial satisfaction of their claims. As to this appellant, the redemption did not extinguish the liens on any of the property.

No question of election of remedies is presented by the facts in the case. It would be a manifest perversion of legal principles to permit appellant to take materials for which he has not paid, discharged from the liens in favor of the persons by whom they were furnished. We are not to be understood as holding that the order from which, his first appeal was taken is appealable.

The order appealed from by J. D. Ekstrum is affirmed. The orders appealed from by E. Luther Melin are also affirmed.