HORSE SPRINGS CATTLE CO. V. SCHOFIELD, 1897-NMSC-017, 9 N.M. 136, 49 P. 954 (S. Ct. 1897)
HORSE SPRINGS CATTLE COMPANY, Appellant,
vs.
JOHN W. SCHOFIELD, Appellee
No. 738
SUPREME COURT OF NEW MEXICO
1897-NMSC-017, 9 N.M. 136, 49 P. 954
August 25, 1897
Appeal, from an order denying a motion to set aside an order authorizing the receiver of defendant company to sell certain property of defendant, from the Second Judicial District Court, Bernalillo County.
The facts are stated in the opinion of the court.
COUNSEL
Warren, Fergusson & Gillett for appellant.
If this court is satisfied, from the uncontradicted evidence in this cause that the form, manner or terms of the sale of January 16, 1896, were such in consequence of there not being required any public notice or competition, or any opportunity given to any one but Hayes to purchase the cattle, then the court should reverse this cause, wholly independent of any question of fraud, express or implied. Schroeder v. Young, 161 U.S. 334; Graffan v. Burgess, 117 Id. 180. See, also, Smith on Receivers 89; High on Receivers, sec. 191, et seq.; Brittin v. Handy, 73 Am. Dec. 491, note.
Childers & Dobson for appellees.
JUDGES
Bantz, J. Smith, C. J., and Laughlin, J., concur.
OPINION
{*137} {1} In a proceeding to foreclose a mortgage upon certain cattle and real estate of the Horse Springs Cattle Company one George Smith, its president, was appointed receiver, on the stipulation of the parties. This stipulation, which was signed by Smith for the company, authorized the receiver to round up such cattle as could be marketed, and dispose of them at public or private sale; the contract for the sale of such cattle to be first submitted to the court for approval, or to receive the written assent of Schofield, representing the mortgagee. Under that stipulation, an order of court was made March 28, 1894, authorizing Smith, as receiver to gather the cattle, and contract for the sale of the mortgaged property "to the best advantage;" such contracts to be submitted to the court for approval, unless assented to in writing by Schofield. Acting under this order, a number of cattle were gathered from time to time, and sold by the receiver. On January 16, 1896, the receiver, Smith, made an application for leave to sell the remainder of the cattle then on the range for $ 7,000, range delivery. In this application the receiver represented that it would be to the interest of all parties to accept the offer of $ 7,000 which he had received; that it was impossible to state how many cattle there were, but he did not believe there were one thousand head; that a sale upon the range would save considerable expense; and that he had submitted the proposition to complainant, Schofield, who was willing it should be accepted. On the same day an order of court was made reciting that the cause came on to be heard on this petition of the receiver, and that complainant, by his solicitor, appeared, and consented to it. The receiver was authorized to accept the offer, and report his doings to the court. On April 4, 1896, a motion was filed by the Horse Springs Cattle Company, praying the court to set aside the order authorizing Smith to make the sale for $ 7,000, upon the following grounds: 1. Said order was improvidently made, and without notice to or knowledge of the defendant, the Horse Springs {*138} Cattle Company, or the attorneys, solicitors, officers, directors, or stockholders thereof. 2. There was at the date of said petition and order a much greater number than one thousand head of cattle belonging to defendant, the Horse Springs Cattle Company, and branded "Z. P.," in the charge of said receiver, upon the lands or ranches of said defendant company. 3. The amount of $ 7,000, alleged to have been offered to said receiver for said Z. P. cattle, is a wholly inadequate and insufficient price for the same, and said cattle could have been, and can now be, readily sold for a much greater sum in cash than $ 7,000.
{2} At the time this motion was filed, no report had been made by the receiver as to his action under the order, but in a report which appears to have been sworn to on April 20, 1896, the receiver reports that on January 17 he sold the cattle to one H. A. Hayes for $ 7,000, cash, had received payment therefor, and had paid over the purchase money to Schofield on the mortgage debt.
{3} On October 27, 1896, the court required the company to give bond in the sum of $ 15,000, conditioned that in the event the sale should be vacated the cattle shall realize on resale such sum in addition to $ 7,000, as will be sufficient to pay costs of resale and costs of receivership from January 16, 1896. The cause was referred to an examiner, to take proofs as to the number and value of the cattle, and all material facts in regard to the sale. The examiner took a large mass of testimony, and on June 7, 1897, the court heard the case on the testimony so taken, and found that defendant had failed to establish any of the grounds set forth in its motion, and the motion was overruled. Final decree has been entered. The question was brought here on appeal.
{4} The testimony upon this
motion was taken by an examiner, so that on appeal this court acts on the same
information possessed by the court below. Oral testimony was not usually delivered
by the witnesses before the chancellor, and hence the rule that on appeal the
whole case on the law and the facts is considered, and, so far as it is
essential to a proper {*139} decision,
an examination of the evidence will be made. 2 Fost. Fed. Prac. 8474; In re
Neagle, 135 U.S. 1, 34 L. Ed. 55, 10 S. Ct. 658. It is undoubtedly true that
weight should be given to the findings of the chancellor, coming, as they do,
on appeal, clothed with the presumption of correctness in their favor, and that
mere differences of opinion upon doubtful questions of preponderance of
evidence would not justify us in overturning them. Loring v. Atterbury (Mo.
Sup.), 138 Mo. 262, 39 S.W. 773; Richardson v. Payne (Ky.) 17 Ky. L. Rep. 222,
30 S.W. 879. We are not required to determine in this case how far an appellate
court will review findings in such cases. In this case the proofs tended to
establish the grounds alleged in motion, or some of them, and no testimony was
produced to the contrary. These proofs the court below was not at liberty to
disregard, except so far as they were discredited in themselves or by other
testimony. The appellant introduced some six witnesses, who were more or less
familiar with the company's cattle upon the range, and who estimated the number
at from one thousand three hundred to two thousand head. The valuation put upon
these cattle was about $ 10.25 on board of cars at Magdalena, at a cost of less
than $ 1 per head. Some of this testimony as to number and value was not
entitled to much weight, but some of it was given by credible witnesses,
qualified to estimate the number and testify to value and such testimony was
not incompetent. It was the best and only way, under the circumstances, by
which the court could ascertain the truth. The receiver, Smith, merely
estimated the number in his report, and says that it was "impossible for
him to state how many cattle remain on said ranch," but did not
"believe" there were more than one thousand head. It was upon that
representation by the receiver, and upon the representation as to the best
price obtainable (about $ 7 per head), that the court authorized the sale. We
think that the evidence shows that the receiver, Smith, unduly underestimated
the number of these cattle, and that to allow this sale to stand for $ 7,000,
would result in a loss to the mortgagor of at least $ 7,000, if not a much
larger {*140} sum. It was argued in
favor of the purchaser that it was the duty of appellant to be vigilant, and,
after vesting discretion in the receiver by the stipulation of March 24, 1894,
to sell at private sale, complaint could not be heard now. But, even though the
parties and the court had given the receiver the widest latitude of discretion,
if the court should become advised that, either from mistake or other cause,
the receiver was disposing of the property at a sacrifice, it would become the
duty to stay his hand. The stipulation, however, directs Smith to "round
up such cattle as can be marketed," and these were the cattle he was
authorized to dispose of at private sale, cattle of a definite number, actually
gathered. It did not authorize him to sell at private sale all of the company's
cattle, unnumbered and scattered over the range; and it may not be unfair to
assume that appellant trusted to the stipulation as the limit of its consent.
We do not, however, regard the stipulation as the material thing, the important
thing being that, if the receiver was abusing his authority, it was the duty of
the court to interpose. This duty did not depend upon proof of corruption or
bad faith, but, even though the receiver acted by mistake of fact, it would be
equally the duty of the court to protect the estate which it was administering.
The receiver was trustee for all parties in interest. It was his duty to see
that the property realized the highest sum, and it was the duty of the court to
see that he did. McGown v. Sandford, 9 Paige 290; Brown v. Frost, 10 Paige 243.
There is a clear distinction between sales made under execution and sales in a
proper sense called "judicial," made under decrees in chancery. In
the latter case the court, in a measure, is the vendor. Anderson v. Foulke, 2
H. & G. 346. In such cases the court decreeing the sale has greater power
over it, and the grounds of interference are not so strict. Daniel, Ch. Prac.
1285. This was carried so far that formerly in England the court would open the
bidding upon a ten per cent increase over the bid of the purchaser. This
practice has not, however, been approved in this country, and it is perhaps
well settled that {*141} mere inadequacy
in price at public sales where the parties are adults will not be sufficient to
deprive the purchaser of the fruits of his bargain. In Blackburn v. Railroad
Co., 3 F. 689, the court say: "The best solution of the subject seems to
be to hold closely to the public policy which protects the sales against
instability, by refusing to set them aside unless the price offered in advance
is so great in proportion to the bid already made that it affords substantial
evidence that for some perhaps unknown reason the property has been greatly
undersold; so much so that the purchaser has not simply a bargain with a fair
margin of profit, but an unconscionable advantage of the parties for whose
benefit the sale has been made." In Williamson v. Dale, 3 Johns. Ch. 292,
where the mortgagor had been innocently misled by the mortgagee as to the time
of sale, Chancellor Kent ordered a resale, observing: "There is no
imputation of any unfair intention of the plaintiff or his solicitor, or of any
unfair conduct at the sale (public); but I think that, under the circumstances,
the defendants were innocently misled, without any culpable negligence to
them." See, also, McGown v. Sandford, 9 Paige 290; Brown v. Frost, 10
Paige 243. In Anderson v. Foulke, 2 H. & G. 346, Chancellor Bland, after
alluding to the
English rule in holding that it did not obtain in Maryland, says: "But in
this state, as well as in England, if there should be made to appear, either
before or after the sale has been ratified, any injurious mistake,
misrepresentation or fraud, the bidding will be opened, the reported sale will
be rejected, or the order of ratification will be rescinded, and
the property again sent into the market and resold." In Deford v. Macwatty
(Md.) 82 Md. 168, 33 A. 488, the court says: "The mistake or surprise or
omission of duty or misconduct or fraud, such as will justify the interference
of the court, will depend upon the particular circumstances, and, in dealing
with all such questions, it must be borne in mind that sales of this kind are
made by the court, through the receiver, as its agent, and made in behalf of
the interests of all parties concerned;" and where, through some mistake,
the {*142} sale would, if consummated,
result in serious sacrifice of the property, it will set the sale aside and
order the property resold. Graffam v. Burgess, 117 U.S. 180, 29 L. Ed. 839, 6
S. Ct. 686, and Schroeder v. Young, 161 U.S. 334, 40 L. Ed. 721, 16 S. Ct. 512,
were cases where the property had been sold at public sale on execution, and
the question arose in new and distinct proceedings. In Graffam v. Burgess the
general proposition is laid down that if, in addition to inadequacy of price,
there be other circumstances throwing a shadow upon the fairness of the transaction,
the courts will seize upon them to declare the sale invalid. In Schroeder v.
Young, the court say: "While mere inadequacy of price has rarely been held
sufficient, in itself, to justify setting aside a judicial sale of property,
courts are not slow to seize upon other circumstances impeaching the fairness
of the transaction as a cause for vacating it, especially if the inadequacy is
so gross as to shock the conscience."
{5} We are of the opinion that the evidence shows that the order authorizing the receiver to sell these cattle was based upon great and material errors as to the number of cattle and to the reasonable value thereof, and that to refuse to set the sale aside would result in permitting the purchaser to enjoy "an unconscionable advantage" by the sacrifice of the property through such mistake. When Mr. Hayes bid upon this property, he submitted himself to the jurisdiction of the court as to all matters connected with the sale, and relating to him in the character of purchaser. Requa v. Rea, 2 Paige 339; Kneeland v. Trust Co., 136 U.S. 89, 34 L. Ed. 379, 10 S. Ct. 950. A resale should be granted, but out of the purchase money received from the sale the former purchaser, Hayes, shall be repaid the purchase price heretofore paid by him and interest thereon at six per cent per annum from the seventeenth day of January, 1896, and also his reasonable costs and expenses of defending the sale heretofore made to him, including his solicitor's fees in this and the court below. Williamson v. Dale, 3 Johns. Ch. 293; Duncan v. Dodd, 2 Paige 101. These costs and expenses will be ascertained and taxed by the court or judge of the Second {*143} judicial district. The cause is therefore reversed and remanded, to be proceeded with in accordance with this opinion.