17 Haw. 96 | Haw. | 1905
OPINION OF THE COURT BY
■'This is an appeal from an order setting aside a sale and directing a new sale in foreclosure proceedings.
The suit was brought by the trustee for the bondholders of the Pacific Heights Railway Company, most of the stock of which was owned by the defendant Desky. It is claimed that the property cost $78,000 exclusive of the right of way only four years before. It was bonded for $50,000. A decree of foreclosure was entered and a sale ordered to be made through a commissioner appointed for the purpose. The property, consisting of lands, right of way, cars, electrical equipment, power house, rails, etc., was sold as a whole for $1100, excepting a cer
The principal question is one of law — as to the rule by which a court should be governed in determining whether a judicial sale should be confirmed or set aside, and more particularly what weight should be given to inadequacy of price when relied on as a ground for setting aside a sale. The appellants contend that a sale, whether judicial or nonjudicial, cannot be set aside, even before confirmation, upon the ground of inadequacy of price, however gross that may be, but that inadequacy if relied on must, in order to justify a resale, be accompanied by other circumstances such as fraud, 'accident, mistake, etc. The appellees contend that judicial sales before confirmation, unlike such sales after confirmation or non judicial sales which do not require confirmation, may be set aside as a matter of sound discretion for mere inadequacy of price, even though the inade
There is, no doubt, as contended by the appellees, a distinction between strictly judicial sales, such as sales in partition, guardianship, administration, receivership, foreclosure, admiralty, etc., proceedings on the one hand, and strictly legal sales, whether founded upon judgments or decrees, as in the case of ordinary executions, or on contract, as in the case of foreclosure under a power of sale, on the other hand. There is perhaps also a third and intermediate class of sales under special statutory provisions in which this distinction is more or less obliterated. Judicial sales are in theory made by the court itself, though acting through an officer appointed for the purpose, who reports his doings to the court, and are not complete until confirmed by the court. Non judicial sales are usually made by a public officer acting ministerially under statutory, not judicial, authority or by a person acting under contract authority and are complete as soon as made. They require no confirmation. There are other distinctions between these classes of sales that need not be referred to at this time. It may at first impression seem to follow from the distinction mentioned that the confirmation or setting aside of a judicial sale is a matter purely within the discretion of the court and that such sale might properly be dis-affirmed for mere inadequacy of price even though slight, — and discretion almost as wide as that was exercised in early English practice and is exercised still in at least one American state, but, as a result of the pernicious consequences of that practice shown by experience, that is not the rule now either in England,
The law upon this subject has been presented by counsel at great length but it will not be of any advantage to. review the numerous cases cited. Counsel on each side endeavor to show that the decisions relied upon by counsel on the other side are some of them inapplicable and others erroneous. They also quote different passages from the same authors in support of their respective positions. The inadvisability of discussing extensively the cases and text books cited may be shown by a single illustration, which will at the same time throw some light upon the state of the law upon this subject. In Graffam v. Burgess, 117 U. S. 180, the Supreme Court of the United States, referring to strictly judicial sales before confirmation, after stating the early English rule that biddings would be opened upon a mere offer to advance the price ten per centum and Lord Eldon’s expressed dissatisfaction with that practice and the change of the rule in England by statute, said: “In this country Lord Eldon’s views were adopted at an early day by the courts, and the rule has become almost universal, that a sale will not be set aside for inadequacy of price, unless the inadequacy be so great as to shock the conscience, or unless there be additional circumstances against its fairness; being very much the rule that always prevailed in England as to setting aside sales after the master’s report had been confirmed,” and, after citing in support of that statement a list of cases covering half a page, added: “Erom the cases here cited we may draw the general conclusion that, if the inadequacy of price is so gross as to shock the conscience, or if, in addition to gross inadequacy,
We will quote from several text books relied on in part by counsel on each side, and refer to several decisions in the federal courts. In addition to the quotations already made from Freeman, the following is from section 304d: “It is, perhaps, not correct to say that any of our courts have either absolutely adopted or absolutely rejected the English rule respecting the opening of the biddings on an offer of an increased bid. Whether they shall be opened is a question addressed to the sound discretion of the court making the sale, to be determined from all the circumstances, and such determination will rarely be reviewed upon appeal.” Rorer (Judicial Sales, Sec. 28) says: “The view that confirmation may not be refused for mere inadequacy of price is clearly against the current of authorities in regard to judicial sales, and as a doctrine, is applicable only to execution sales at law, which will not be set aside for mere inadequacy of price,” and (Sec. 106), “the chancellor has a broad discretion in the approval or disapproval of such sales,” and (Sec. 549) “if there be no fact or circumstance relied on to set a sale aside but inadequacy of price, then the inadequacy must be such as in itself to raise the presumption of fraud, or else the sale will not be disturbed. But if in addition to such inadequacy there be any appearance of unfairness, or any circumstance, accident, or occurrence in relation to the sale of a character tending to cause such inadequacy, then the sale will be set aside; but inadequacy of price is still the main ground
Referring to the cases in the federal courts, — it is true that the Graffam case above mentioned was an independent suit in equity to set aside an execution sale, but the remarks of the court above quoted were made with reference to setting aside or confirming judicial sales proper. The court was not misled into applying to judicial sales, the rule applicable to execution sales. On the contrary it tended rather to apply even to execution sales the rule applicable to judicial sales. The conclusions of the court in regard to judicial sales were evidently
This is the view that was taken in Smith v. S. S. City of Columbia 11 Haw. 709, in which this court says: “There is but little doubt that the general rule governing the confirmation of a judicial sale is that the sale, if regular, will be confirmed unless the price obtained is so grossly inadequate to the value of the property sold as to shock the conscience of the court and be presumptive evidence of fraud. We find that there was no irregularity in the sale and the only ground upon which the sale is attacked is that of gross inadequacy,” and, after reviewing the evidence, “We feel obliged, in view of the evidence adduced, to hold that the value that the vessel would produce to the purchaser is not so grossly inadequate as to authorize a resale.” In view of what has been said it is evident that appellees’ contention that the court in the case just referred to was misled through inadvertance or otherwise into applying to a judicial sale a rule applicable only to execution sales, is without foundation and, on the other hand, that appellants’ contention that the court was of the opinion that there must be not only such gross inadequacy as to shock the conscience, but also other evidence of fraud, is equally untenable. It is true the court used the expressions “shock the conscience” and “be presumptive evidence of fraud” in the conjunctive, although similar expressions when coupled in other cases and in the text books are generally stated in the disjunctive, and yet it is clear that the court did not intend these as being two different or unconnected things which must unite in order to warrant setting aside a sale. Not only is the word “fraud” used in expressions of this kind in a general sense as including surprise, accident, mistake, irregularity, etc., as well as fraud, misrepresentation, misconduct, etc., but it is the grossness of the inadequacy which implies the fraud or unfairness, and it is sufficient if the inadequacy is so great as to imply that, even though it does not suggest the nature of the fraud and there is nothing else to
No inflexible rule can be laid down for ail cases. More would be required for setting aside an execution sale or a judicial sale after confirmation than a judicial sale before confirmation. More might also be required for setting aside certain classes of judicial sales before confirmation, as, for instance, when such sales must be made of necessity or of right and the main object is to obtain the proceeds for the purpose of paying .a debt on foreclosure of mortgage or otherwise, than for setting .aside other judicial sales before confirmation, as,- for instance, when the main object is not to obtain the money for the purpose •of paying an obligation but to sell the property for some purpose, as, for instance, to realize on it before it depreciates in ■value or for the purpose of acquiring means for improving an •estate or making a better investment. The main idea is on the ■one hand to maintain the stability of judicial sales and not •deter bidders by rendering such sales liable to be set aside for trivial reasons and on the other hand to protect interested parties and not unduly sacrifice their property.
In the present case the appellees contend that there are •other circumstancs which would justify setting aside the sale in ■conjunction with the inadequacy of the price even if gross inadequacy alone were not enough or if it were found that there was not gross inadequacy in this case. For instance, it is claimed that the defendant Desky -who, next to the bondholders, was most interested in the property, was excusably misled into supposing that the sale was to occur at a different time or place and so was unable to be present. Another circumstance claimed is that althoiigh the decree directed the commissioner to “sell all and singular the property * * * or so much thereof as shall be necessary,” which, it is contended, meant a sale in parcels, the trustee and the bondholders, intending to bid it in themselves, agreed that it should be sold as a whole, and that the fact