Case ID: ad_116/html/0306-01.html
Source: Caselaw Access Project
Author: {"author": "Ingraham, J.: Houghton, J. (dissenting):", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Peter R. Egan, Respondent, v. Maria A. Buellesbach and Others, Defendants. Newman Grossman, Appellant.
    First'Department,
    December 7, 1906.
    Foreclosure—when defaulting purchaser liable for deficiency on resale — when order directing a resale res adjúdióáta as to liability of purchaser. . " ’ ¡
    When the terms of salé on mortgage foreclosure provide! for a resale without ' . application to the court if the purchaser defaults and that hé will be liable for auy deficiency, a defaulting purchaser is liable for such deficiency on a resale, although" the. second sale was made after readvertising tike property, and pursuant. to an ex- parte ■ order directing a resale, of which advertisement and motion for the resale the purchaser had actual notice. Having actual notice ' óf these facts and having attended the resale, the service pf formal notice upon him was not necessary. . " ¡ . . ■
    
      Moreover, when after the order for the resale the first purchaser applied to the court tobe released from his purchase aud took no appeal from a denial of that relief, his liability is res adjudicata.
    
    Houghton, J., dissented, with opinion.
    Appeal by Newman Grossman from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk qf the county of New York on the 28th day of September, 1906, directing him as purchaser at a foreclosure sale to pay the sum of $550, the amount of the deficiency between the amount bid by him at said sale and the amount realized upon a resale of the property.
    
      Julius Levy, for the appellant.
    
      James A. Foley, for the respondent.
   Ingraham, J.:

In pursuance of a judgment of foreclosure and sale, the mortgaged premises were sold at public auction on May 22, 1906, by a referee appointed in said judgment. At that sale the appellant bid for the property $13,100, and the property was sold to him for that amount. He executed a memorandum of sale as follows:

“I, Newman Grossman, have this 22nd day of May, 1906, purchased the premises described in the annexed printed advertisement of sale, for the sum of Thirteen thousand one hundred ($13,100) Dollars, and hereby promise and agree to comply with the terms and conditions of the sale of said premises as above mentioned and set forth.

“ Dated 'May 22nd, 1906: N. GROSSMAN.”

The terms of sale referred to in the memorandum signed by the purchaser, and which the purchaser promised and agreed to comply with, provided that ten per cent of the purchase money would be paid to the referee at the time and place of sale, and the residue of said money should be paid to the referee at his office, in the city of New York, on or before the 22d day of June, 1906, at twelve o’clock m., when the referee’s deeds would be ready for delivery ; that the referée was not required to send any notice to the purchaser, and if he neglected to call at the time a,nd place specified to receive his deed he would be charged with interest thereafter on the whole amount of his- purchase; that “ the biddings will be kept open after the property is struck down, and in case any purchaser shall fail to comply with any of the above conditions of sale, the premises so struck down to him will be again put up for sale under the direction of said referee, under these same terms of sale, without application to the court, unless the plaintiff’s .attorney shall elect to make such application; and such purchaser will be held‘liable for any-deficiency there may be between the sum for which said• premises shall be struck down upon the sale and that for which they may be purchased on the resale, and also for any costs or expenses occurring- on such resale.” -The purchaser subsequently informed the referee that the premises had been purchased by him under a misunderstanding, and refused to accept a deed of the! said premises. Subsequent to such refusal an ex parte order was obtained directing the referee to resell the said premises, and the premises were subsequently duly readvertised for sale and the-property sold for $12,550, leaving a deficiency of $550. Mo formal notice of the application for an order directing a resale was -given to the purchaser. The purchaser gave to’ the referee a check for the ten per cent required . to be paid, but when that check was deposited for Collection it was. returned, with a notice upon it that payment .had been stopped. The purchaser and his attorney called on the referee: on the twenty-third day of May, the day after the sale, and stated that they would refuse'to accept the deeds: of the .property and comply with the terms of sale, and requesting that they- be released; from the -sale, which the .referee refused. Subsequently, on the twenty-eighth day of May, the purchaser had a conversation with the referee, when . the question was discussed as to whether the referee should take the initiative in applying, to the court to, determine whether’ the purchaser should be held to his bid or whether a motion to be relieved from the sale should -be made by the purchaser, The referee stated to the purchaser and his attorney that he would await the resale, which they had consented should take place: before making any move in the matter, and on May 31, 1906,.ih pursuance to the consent of the purchaser, an order was entered ex par-te allowing 'a resale of the -premises. On June twenty-sixth-,, -after advertisements duly published, the resale was held1 and upon that' day both the purchaser and his attorney were pi-esent in the. real estate salesrooms where the sale was conducted, but no bid was made by them for the property; subsequently to the order for a' resale the purchaser made a motion to be relieved from the purchase noticed on the 12th of June, 1906, and tire purchaser stated in his application that a resale was to take place on the 26th day of June, 1906. Subsequent to the resale the purchaser tendered to the referee $100 in settlement of the claim of the referee on account of the bid, and subsequently raised that offer to $250. This the referee refused to accept,.and stated that an application had to be made to the court. None of these facts were denied by the purchaser. It appears, therefore, that after the purchaser refused to complete his purchase he stopped payment of the check which he had given as ten per cent of the purchase, and immediately after the sale refused to comply with his bid and. complete his purchase; that he was notified that an application was to be made ex parte for a resale; had notice of the resale and was present at the time of the res'ale, and-the only objection that he raises upon this appeal is that he was not formally served with .a written ■ notice of the. application of the order for a resale. The terms of sale with which he promised and agreed to comply provided that the bids should be kept open after the property was struck down, and in case any purchaser should fail to comply with any of the conditions of sale the premises so struck down to him would again be put up for sale under the direction of the referee, under the same terms of sale, without application to the court, unless the plaintiff’s attorney should elect to make such application; and such purchaser would' be held liable for any deficiency that there might be between the sum for which the premises should be struck down upon the sale and that for which they might be purchased on the resale. These terms of sale have been in use for many years, and are perfectly familiar to all purchasers at judicial sales. There could be no question but that if the referee had immediately upon the purchaser’s stopping payment of the check andref using to comply with thé terms of.sale put the property up for resale, without application to the court, the purchaser would have been liable for any deficiency. The plaintiff’s attorney, after the purchaser had refused to complete the title, and after the purchaser had been notified .that such an application would be made, obtained an ex parte order directing a resale. There was then a readvertisement of the property, of which the purchaser had full notice. He attended the sale,, and was in a position to protect himself. Ho possible advantage could accrue to ■him by having a formal notice of the application of the order for a resale; ■ He had notice that such an order would be applied for, and did not request that a formal notice be given to him. There was ño claim of any surprise, and" he now makes no claim ¡that he was in any way injured by reason of the failure to give him ¡formal notice of the resale. After the order for the resale he applied to the court to be relieved of his purchase.' That motion having been denied, he took no appeal from the order. The purchaser in effect made an a pplication to relieve him from liability for a failure to comply with his purchase^ and that necessarily involved a determination of the question.as to' whether the resale under an order, •without¡formal notice-to him, relieved him from his liability to pay the deficiency. A denial of that motion was necessarily an adjudication that he was liable for the deficiency, and from that order he took no appeal.' The question, I think, is res judicata and prevents the purchaser from relying upon this objection on a motion to compel him to pay the deficiency.-

In Burton V. Linn (21 App. Div. 609), in discussing the effect of a motion to compel á purchaser to complete a sale under a judgment of foreclosure, it was held that the determination of such 'a motion w;as an "adjudication binding upon the purchaser which lie was bound -to obey precisely as the- purchaser in an ordinary contract would be bound- to obey a judgment .for its specific performance ; and the effect of an order denying the application, by a purchaser to be relieved' from his purchase determines the question as- to the liability of the purchaser under' his contract made at- the time of the sale to complete the purchase. - In Rowley v. Feldman, (74 App. Div. 492) it was held that an order directing a resale made on notice to the purchaser was res judicata^ ás to his liability ; that • the amount of the' liability Only remained to be determined, and that the purchaser was bound by the resale, although be received no-actual "tiotice of its time and place. The mere fact that formal notice of the application for a resale was not given to the purchaser was not af all material. 1 While the order for a resalé, being made without notice,, would not be an adjudication binding upon the purchaser, there is nothing to justify the conclusion that it relieved him from his liability to complete the purchase. The case of Anthon v. Batchelor (22 Abb. N. C. 423) was a decision at,chambers, and it did not appear that the purchaser had actual notice that an order was .to be applied for directing a resale,- or had notice of the time and place of tlie resale. . So far as it holds that a sale under an order without notice to the purchaser was a waiver of the right to enforce the first sale it should not be followed. ¡Notice to the ' purchaser of an application for a resale is only necessary to prevent him from being taken by surprise, or to prevent a resale taking place without: notice to him and without enabling him to protect his" interest. In this case lie had such notice, and, I think, it is clear that he is liable for the deficiency.

It follows that the order appealed from should be affirmed, with ten dollars costs and disbursements."

McLaughlin, Clarke and Scott, JJ., concurred; Houghton, j., dissented.

Houghton, J. (dissenting):

I dissent.

In this.case the order for'resale, which did not adjudicate in any manner that the purchaser would be liable for any deficiency which might arise, was obtained ex parte, before the purchaser, this appellant, presented his petition to the court to be relieved from his bid. ’

The prevailing opinion concedes the proposition, and it must -be conceded, that an order directing a resale, where the terms of a judicial sale are not coin plied with, is res adjudicata-mto the rights of the purchaser and of the parties to the action in which the sale is made. This being the effect of such an order, I do not think any subsequent order which might have been made upon the appellant’s petition for relief would have any effect upon the prior order of resale. Whether it would or not,' it would seem to be a sufficient answer to the proposition that the petitioner is barred of his rights, by its provisions, to say that the-record does not contain any such order. The record does contain the petition of Newman Grossman praying that he be relieved from his bid because of the misapprehension under which hé labored when he made it, and asking that the check which he liad given for a part of the purchase money be returned to him, and a memorandum of Mr. J usticé Tbuax giving certain reasons for denying such petition; but no order appears in the record and no reference to it, except it is stated in. the moving affidavits that- an order was entered and no appeal taken.

Of course, the memorandum, or opinion is not an order and cannot •be treated as such. | '

In the first place, it seems to me that if We are to hold that a judgment is binding upon a party we ought to have the opportunity of inspecting the judgment itself; and, in the next place, that whatever the form of the order of denial may have béen, it could not fasten liability upon the purchaser because he had been" relieved from liability by the order Of resale made prior thereto.

The order for resale being, in effect a binding adjudication and containing no provision fastening liability for deficiency upon the, purchaser, he could not be made liable by any subsequent order while the former order was .still in force.- The parties to the action saw fit, instead of reselling without an order of the court to obtain and enter, without notice to the purchaser, an order having all the" effect of a judgment which did not adjudicate that he should be. liable for any deficiency which might arise upon a.resale.

, Parties conducting a judicial sale have ,four courses open to them when the purchaser refuses to cothplete his bid": (1) They can move to compel him to complete, and if just that he should, the court can enforce his compliance by contempt proceedings:; (2) they can "resell without order, at once,, according to' the terms of sale, and he Will be held for the deficiency ; (3) they can, on -notice to him, obtain-an order of the court for resale- on his. account, adjudging that lie shall be liable for any .deficiency and repuiblish,: in which, case the purchaser will-be entitled to any surplus' Which may arise as well as liable for any deficiency that may occur ; (4) they can obtain an order ex parte or on notice, without any adjudication that the purchaser shall be liable for any deficiency and republish, in which case the parties to the action and not the purchaser will be entitled tó any surplus arising. !

t It Was the latter course, which was pursued in this case. From what the parties to the action did it must be assumed that they did not care to give the purchaser the benefit of any. surplus which might arise, but chose rather to waive their deficiency claim against him and retain the right to the surplus to themselves. If this assumption is not true then we simply have the fact that the parties were mistaken as to the law and obtained a judgment in the form of an order which adjudicated no liability against the delinquent purchaser. In either case the purchaser was relieved.

In considering the question the character of liability .of a purchaser at a judicial sale should be borne in mind. By bidding he subjects himself to the jurisdiction of the court, although not a party to the action in which the sale is made. (Andrews v. O'Mahoney, 112 N. Y. 567; Requa v. Rea, 2 Paige, 339; Hegeman v. Johnson, 35 Barb. 200; Bicknell v. Byrnes, 23 How. Pr. 486.) He may be held liable upon his bid, although no memorandum of sale is signed, for a judicial sale of real property is not within the Statute of Frauds. (Andrews v. O' Mahoney, supra.) The signing by him of a memorandum of sale is merely a submission of himself to the jurisdiction of the court as a purchaser, and he thereby enters into no contract and cannot be sued thereon nor bring action against the officer conducting the sale or any of the parties to the decree. (Miller v. Collyer, 36 Barb. 250.) He may be compelled to complete his purchase by motion whether he signs a memorandum of sale or not. (Miller v. Collyer, supra; Requa v. Rea, supra.) If he refuses to complete his purchase and an order for resale is made upon notice to him, the resale may be had ob his account and an adjudication made that he will be liable for any deficiency which may arise, and if the property brings more on the resale than he bid he is entitled to the surplus as well as liable for the deficiency. (Jones Mort. [6th ed.] § 1642.)

An order for resale directed to be made on account of the purchaser, on notice to him, adjudging that he pay any deficiency that may arise on such resale, is res adjudioata of his rights and liability. (Rowley v. Feldman, 74 App. Div. 493.) If the order for resale, even if lie be given notice thereof, is a bare order of resale, and does not specify that it is on his account or that he shall be liable for deficiency, whether he signs the terms of sale or not, he cannot be held liable for the deficiency if the property sells' for less than he bid. (Phelan v. Downs, 59 App. Div. 282; affd., 173 N. Y. 619 ; Goodwin v. Simonson, 74 id. 133.)

I have taken occasion to examine the record in Phelan v. Downs ()supra), and find that the terms of salé signed by the purchaser in that case áre identical in all material points with the: terms of sale, in the present case. It is true that in that case an unauthorized agent had bid in the property and used the money of his principal to make the required deposit, and that the action was- brought by the principal to recover such moneys'. The case was! decided, however, on the groimd that the principal could recover them back because the agent himself could, recover them. The agent had signed the terms of sale which provided that in case he did not comply with them a resale might be had 'without notice'and without order, or upon a new order, at the option of the plaintiff. After making his deposit he failed to pay the balance of his bid. An order was made requiring him to complete,, with lyhich he failed to comply. Instead of taking contempt proceedings against him, the ■ premises were resold upon a new order which neither forfeited the deposit nor adjudged him responsible for the deficiency, and it was held that such order was a protection from liability • for deficiency and from any forfeiture of the deposit which had been made.

In Goodwin v. Simonson (supra) the purchaser signed the terms of sale and failed to complete Ms purchase. An order was granted requiring him to complete.. He failed to comply with this order, and subsequently another order was made directing á resale, which was had, a large deficiency arising. The mortgagor Moved to vacate the judgment of deficiency entered against her,.: which' would not have arisen if the purchaser had been held to his first bid. The motion was denied and an appeal taken. In considering the questions involved, Miller, J., said : “ Aside from: the. considerations suggested, there is another reason for sustaining the order. A purchaser at a foreclosure sale may be compelled to complete his purchase, or may be discharged and a resale ordered. (Requa v. Rea, 2 Paige, 339; Miller v. Collyer, 36 Barb. 250.) The plain tiff had an election either to proceed against'the purchaser for-a contempt or to apply for a resale; and the omission to take the former course did not discharge the surety.. As the; court granted a resale, the purchaser was discharged from liability to make good the deficiency arising in the last sale by the order of the court. This' order is conclusive, and relieved the plaintiff ¡from any obligation to institute proceedings to recover the deficiency of the purchaser.” ....

The principles enunciated in these two latter cases, it seems to me, are decisive of the question presented on this appeal. The order for a resale did not save any rights against the appellant as purchaser, or direct that the resale be had. on his account, or provide that he should be liable for any deficiency which might arise on the resale. The order thus made being decisive of his rights as well as his liability and it not having made him liable for any deficiency, he could not thereafter be made liable on his own motion to be relieved frbm his purchase, even if it be assumed that am order denying his petition was actually entered. His motion to be relieved might very properly have been denied upon the ground that he was already relieved by the order for resale which the' parties to the action had elected to take.

I think the order should be reversed and. the motion denied.

Order affirmed, with ten dollars costs and disbursements. Order . filed.