47 A.2d 281 | Pa. | 1946
Argued April 10, 1946.
The point for decision is whether a mortgagor's right of redemption must be exercised before the sheriff's hammer falls, or whether the right may be exercised after *125
such sale but before acknowledgment and delivery of the sheriff's deed following the sale. The point has not heretofore been expressly passed on by this court. The court below held that the right to redeem could be exercised after the sale but before the acknowledgment and delivery of the sheriff's deed. The correct decision is of considerable importance in the conduct of such sales and the effect to be given to them. It happens that the Court of Common Pleas of Berks County recently reached the opposite conclusion: Federal Farm MortgageCorporation v. Howard, 47 Pa. D. C. 64, and denied redemption after the property had been knocked down to the sheriff's vendee. It is elementary that "all judicial sales must be open to free and fair competition" (Slingluff v. Eckel,
The defendant, Broad Street Hospital, made two mortgages to the Pennsylvania Company for Insurances on Lives and Granting Annuities, the first one dated May 2, 1927, and the second one, dated January 10, 1938, and defaulted on both. On November 5, 1945, judgment for $73,946.671 was entered on the bond accompanying the second mortgage. On November 8, 1945, Pennsylvania Company issued a writ of fieri facias, returnable on the first Monday of December, 1945. On November 27, 1945, after the writ was issued but before the return day, the suit was marked to the use of the appellant, The Jefferson Medical College of Philadelphia. On December 3, 1945, at the sheriff's sale on the fi. fa., the mortgaged property was sold to the appellant for $124,500. On December 11, 1945, on defendant's motion, the court granted a rule to show cause why the sheriff's sale to appellant should not be set aside on the ground that after *126 the sale, defendant had tendered the amount of the judgment with interest and costs. Appellant answered responsively but the court made the rule absolute.2 This appeal then followed.
The reason given by the learned court for setting aside the sale was that the "owner of mortgaged real estate has the right to redeem it until the acknowledgment and delivery of the Sheriff's deed, and that he is not finally foreclosed by the Sheriff's hammer alone." The court stated that there were no "equities" "sufficient to warrant setting aside the Sheriff's sale," no gross inadequacy of price, "no misleading or fraud, and there are no technical defects."
The fact, then, is that the record disclosed no defect that would justify the order appealed from. If there is no defect in the record, we must sustain the appeal and reverse the order unless the right to redeem remained after the sale of defendant's equity.
The appellant contends that the mortgagor's right to redeem ended when the property was knocked down to appellant; that the only right then left in the mortgagor was to have possession during the period between the sale and the delivery of the deed: compare Hardenburg v. Beecher,
The mortgagor's equity of redemption is the title remaining in him subject to the mortgage, and the right of redemption is the right to require the holder of the mortgage to receive payment of the matured debt and to satisfy the lien. We have no statutes regulating the exercise of this right of redemption. No statute authorizes *127
redemption after the sale. The court was therefore without power to make the order allowing redemption after the sale. InParker v. Dacres,
Our statutes authorize the taking of land in execution and provide that the purchaser at sheriff's sale shall take the land (as provided in the Act of 1705, 1 Sm. L. 57, section 6,
The sheriff's sale was conducted in the usual way. The accepted view of a sale by auction is stated by Williston, Contracts, sec. 29, vol. 1, p. 68. "The auctioneer may more accurately be said to invite offers than himself to be an offeror, and the law has adopted this doctrine. Since the bargain is incomplete until the hammer falls, a bidder may therefore retract his bid until that time. The same point is involved in decisions turning on *128
the right of the auctioneer to withdraw an article offered for sale; and for the same reason, until the hammer falls, the auctioneer may withdraw, unless it has been advertised or announced that the sale shall be without reserve . . ." See Restatement, Contracts, section 27, vol. 1; Stover v. Rice, 3 Whart. 21; Fisher v. Seltzer,
For many years it has been the general understanding in this Commonwealth that the sheriff's sale takes place when the hammer falls. Recently in St. Louis B. L. Ass'n v. Hamilton,
As the learned court below declined to rule that the sale took place when the hammer fell (and, in view of the opposite conclusion reached by the Court of Common Pleas of Berks County, referred to above) we may consider the cases at some length.
Young's Appeal, 2 P. W. 380 (1831) appears to be the earliest reported case in which this court considered the subject. Property had been knocked down to Young but before a deed was delivered the court set aside the sale on the sole ground that the debtor had tendered payment after the sale but before delivery of a deed. Young appealed. In support of its ruling, the court below *129 said: "The purchaser undoubtedly has his rights. The sale, in this case, was fairly made; but on the return-day . . . and before the deed is acknowledged, the debtor comes into court, offers to pay the debt, and asks to retain his lands. The creditors do not object; the purchaser alone says he has acquired a right to the land. There does not appear to be any peculiar hardship in the case of the purchaser who pays his money and is disappointed in getting his deed, by reason of the sale being set aside by the court. The sale is not complete until the deed is acknowledged in court. Until the acknowledgment of the deed the debtor is not divested of his estate, and it seems to me that if the debtor pays the debt before the purchaser has acquired a legal right to the land, the equity of the debtor to retain is stronger than that of the purchaser, who insists upon the forfeiture." On appeal, this was disapproved. Ross, J., in specifying the error of the court below, stated: "The opinion delivered by the court below is predicated upon false principles and arrives at erroneous conclusions. It is not supported by law, equity or expediency. The bona fide purchaser, at a public sale of land, the moment it is knocked off to him, if he complies in all respects with the conditions of sale, instantly acquires a vested right to the property sold. Such a purchaser would be bound by his bargain thus made, although his bid greatly exceeded its value. And if he purchase at a bona fide sale, greatly below the value, the vendor would be bound by the sale. Equality in this case at least is equity. The vendee certainly should have the advantage of a purchase at a price below the value, when he is bound by a purchase at a price greatly exceeding the true value: . . . In order to set aside a sheriff's sale, there must be satisfactory evidence of fraud or abuse of power in the sheriff: . . . These general observations are made with the hope that any practice in opposition to these principles, which may have arisen in some of the courts, as to sheriffs' sales, may be corrected. It is not a sound exercise of the discretionary power of a *130 court to destroy the vested rights of a fair purchaser, either from feelings of sympathy for the defendant in the execution, or because the court may not see any peculiar hardship in thebona fide purchaser being arbitrarily deprived of his just and equitable right. The practice, if any such exist, as well as the principle laid down in the opinion of the court below, are highly inexpedient; and if there were no other reason, this alone should be sufficient to prevent such a practice being recognized as law. It is indeed calculated to affect sheriffs' sales very injuriously. Who would become bidders on such terms? Who would purchase and pay his money at sheriff's sale, if the defendant in the execution could at any time before the acknowledgement of the deed upon payment of the debt retain the property and rescind the sale? The purchaser, under such circumstances, would not only lose the opportunity of purchasing other property but in some cases would be compelled to pay interest on money borrowed, for the purpose of paying for the property purchased at sheriff's sale. The practice would indeed be pregnant with ruin and injustice. Is there any cause either in law or equity, in which any court has thought proper to rescind a contract, on the application of the party in default? Or, can any case be produced (except the decision in question) where a bargain made in good faith has been rescinded against the will and consent of the party who has performed everything required of him, and who insists on a specific execution of the terms on which he bought? Individually I do not entertain a doubt that the practice authorized by the opinion of the court below, cannot be supported upon any principle, either of law, equity or expediency. Although this point has not been argued, I have nevertheless felt myself bound to express a decided opinion on the subject, before I proceeded to consider the motion to dismiss the appeal." Chief Justice GIBSON concurred. The other three justices declined to express an opinion because the point had not been argued. While *131 the opinion expressed was not necessary to the dismissal of the appeal, it was not a chance expression of view but one deliberately made for the guidance of future sheriffs' sales.
Between the date of Young's Appeal (1831) and the decision inB. L. Ass'n v. Hamilton, in
Hoyt v. Koons,
In Stroup v. Raymond,
As the opinion in that case was written by Justice DEAN, and as he declared that the rule of Young's Appeal *134
"has ever since been followed by this court as the law,"5 we may at this point refer to an earlier case, relied on by the defendant, in which Justice DEAN also wrote the opinion:Collins v. London Assurance Corp.,
The record shows that the appellant acquired the same rights that any other bona fide purchaser at the sheriff's sale would have acquired. In measuring the extent of those rights, it is of no consequence that after the fi. fa. was placed in the hands of the sheriff by the mortgagee, the proceeding was marked to appellant's use. There is evidence that during the period when the mortgages were in default, the Pennsylvania Company, mortgagee, sought6 a purchaser for the property "conditioned *135 upon our [the Pennsylvania Company] obtaining title." The Pennsylvania Company agreed on September 25, 1945, to sell to the appellant if, as Mr. Sayre testified, his Company obtained title by foreclosure. Instead of carrying out that plan, which was begun by the issuance of the fi. fa., they consummated their arrangement by marking the execution to the purchaser's use. The purchaser's position as a sheriff's vendee is therefore no different from what it would have been if appellant had purchased at the execution without taking an assignment of the judgment. The bidding was actively competitive, the competing bidder being Mr. Lieberman. Mr. Jacoby, vice president of defendant's Board of Trustees, testified that defendant had not authorized anyone to bid on its behalf. The competitive bidding was recognized by the court below in saying, "When Mr. Lieberman bid at the sale, he had no authority from the defendant's Board of Directors: he was bidding on authority from Dr. Wolffe and the staff of defendant's doctors." Dr. Wolffe was not a member of defendant's staff; the court added that after the sale, the Board of Directors "ratified the arrangement suggested by Dr. Wolffe, . . ."
To adopt the view of the learned court below would establish a rule militating against sheriffs' sales by keeping away competitive bidders; they would be deterred *136 by the ease with which an unsuccessful bidder could take the property away from the successful bidder by collusive arrangements with the debtor, made between the time of the sale and the delivery of the sheriff's deed. We think the rule to be adopted should outlaw the possibility of such fraud. Apparently, in this case, the mortgages were long in default; the mortgagor could not pay; the Pennsylvania Company was willing to take less than its debt; its broker interested the appellant as a purchaser. It was only after the property was about to be sold by the sheriff that the arrangement for raising money referred to in the opinion of the court below, was made. We have no doubt that this arrangement was made in good faith by Mr. Lieberman and the physicians who authorized him to bid, but the fact that such an arrangement was possible indicates how easily parties fraudulently inclined might take from a successful bidder the property purchased. The tender made at bar in the court below was, as the court said, of ". . . money coming from another medical group headed by Dr. Wolffe that is interested in making some use of defendant hospital." Defendant was not tendering its own money. In effect, a new purchaser was being substituted for the sheriff's vendee. It also illustrates the value of the warning made in Young'sAppeal against the adoption of rules conducive to wrongful7 interference with sheriffs' sales. If asked what harm there is in allowing full payment to this creditor, the answer is that the court *137 should adopt the rule most likely to keep all sheriffs' sales "open to free and fair competition"; fraudulent collusion should not be made easy.
It is a fact, in some cases, resulting from the provisions of statutes, in others, from established rules of the common law, and in others, depending on contracts (Collins v. LondonAssurance Corp., supra, is an example) that both the mortgagor, whose equity has been sold, and the purchaser, who bought it, have rights and obligations between the date of sale and the acknowledgment and delivery of the deed; these cases do not now require discussion.
We should perhaps add that we have examined the references made in the briefs to decisions and statutes of other states but found they afforded little or no aid in our review of the record before us because of differences in the law in other states. Nor shall we refer to general statements quoted from text books, beyond saying that Vol. 1, Glenn on Mortgages, sec. 100, p. 620; Vol. 3, Wiltsie on Mortgage Foreclosure, sec. 1203, p. 1813; Vol. 36, Am. Jur. sec. 183, p. 784; see also, 35 C. J. Sec. 103, p. 67, cited by appellant, contain statements supporting the rule we have adopted.
Order reversed; record remitted with instructions to discharge the rule; costs to be paid by appellee.
Mr. Justice HORACE STERN and Mr. Justice JONES are of opinion that since there is no prior appellate court decision in Pennsylvania on the question here involved, which is therefore one of first impression, the better rule, in cases where the creditor himself becomes the purchaser of a property sold at sheriff's sale on the creditor's execution, would be to require the sheriff to accept payment of the debt, interest and costs in satisfaction of the writ if tendered to him at any time prior to his acknowledgment of a deed for the property.
"A. I submitted it to a religious order from Reading, I submitted it to the veterans' group, U.S. Navy, the public health service, and to the Osteopathic Hospital. Q. For one reason or another, all of those negotiations fell through? A. That's right. Q. And after they had failed, you then submitted the proposition to Jefferson? A. Yes, sir. Q. Jefferson did not ask you to submit the proposition or did not take the initiative? A. No. Q. You approached Jefferson? A. I approached Mr. Hooper; I had never known him before, but I thought he could use it. Q. When was that? A. In January 1945. Q. What happened? A. After I approached Mr. Hooper he asked me to send him full details. I contacted Mr. Sayre and Mr. Breen, and told them what I had done. They said, 'Supply Jefferson with full details.' Q. And then Jefferson made an offer pursuant to your conferences with representatives of Jefferson? A. Yes, sir."