Case Name: Martin & Walter vs. Thomas Evans, Sr. et al.
Court: South Carolina Court of Errors
Jurisdiction: South Carolina
Decision Date: 1844-02
Citations: 2 Rich. Eq. 368
Docket Number: 
Parties: Martin & Walter vs. Thomas Evans, Sr. et al.
Judges: Before Dunkin, Ch. at Marion,
Reporter: South Carolina Equity Reports
Volume: 19
Pages: 368–394

Head Matter:
Martin & Walter vs. Thomas Evans, Sr. et al.
Before Dunkin, Ch. at Marion,
February, 1844.
The facts of this case will be sufficiently understood from the decree of the circuit court, which is as follows:
Dunkin, Ch. This suit is on behalf of the creditors of Thomas Evans, Sr. The sheriff testified that he had exhausted all the property of Thomas Evans, Sr., and that there remained in his office unsatisfied executions to the amount of about twenty thousand dollars, and that he had Thomas Evans now in his custody, applying for the benefit of the insolvent debtor’s law.
The principal object of the bill is to set aside certain sales of Thomas Evans’ property, made by the sheriff on the 3d October, and on the seventh November, 1842.
It is proper to premise that the court has been unable to perceive any evidence of fraud, or even impropriety, in the .conduct of Thomas Evans in relation to the sale of the 3d October, which seems to be the principal ground of complaint. All his real estate was under levy, and had been advertised for sale at the suit of various creditors, on the first Monday in October. The country was at that time in a state of great pecuniary difficulties. Money was scarce, and land entirely unsaleable. The witness, Col. Durant, testified that he saw land repeatedly put up by the sheriff, but that no bid whatever could be obtained. On the 17th of September, the defendant, (Thos. Evans) wrote to Martin & Walter, stating that he "had understood that their attorney, W* W. Harllee, Esq. was to bid on his land, that they no doubt would be able to obtain it at a great sacrifice, and promising from the growing crop to pay them $500 (about one-third of their debt.) Their reply of the 21st Sept, says : “ That if they were sure that he would pay off this debt by the first of December, they would wait on him;” they proceed to state that “ they would stop the sale on the first of October, and see how he got on, reserving the right of selling in November or December if they should see fit, and requesting him to shew this part of their letter to W. W. Harllee, Esq.” The letter was shewn to Gen. Harllee, but he had no authority to stop the sale, nor did he pretend to exercise such authority. The sale took place, because, (as the sheriff stated to the'defendant, Evans,) there were so many executions pressing, that he was obliged to sell. Thomas Evans was not present at the'sale except for a moment, when some question arose in regard to a small piece of land. Nor was there any evidence whatever, of collusion or misrepresentation on the part of the sheriff. It is deemed proper to say thus much in consequence of ,the allegations and inferences set forth in the bill, although they were not urged in the argument. But there age, other objections offered to the sale of October, 1842.
The defendant, William Evans, was surety to his brother, Thomas Evans, for about twenty thousand dollars — Dr. Robert 'Harllee was also one of the endorsers of Thomas Evans, on a note in the bank, for about two thousánd dollars. They met at the Court House on the Monday of the sale, but before the sales commenced. Both found they had the same objects in view, viz : to protect themselves if possible, by a purchase of Thomas Evans’ property, if it should be sold low. William Evans said he thought the sureties of his brother ought to have an understanding; to which Dr. Harllee assented. It was .then agreed that Dr. Harllee should not bid, and that if the property was knocked off to William Evans, the sureties of Thomas Evans should,share <pro rata in the benefit of a resale. Dr. Harllee was soon after called away. “In consequence of this arrangement, he made no other efforts, otherwise he would have instructed his agent (presuming the property would go very low) to see and bid, if he could get it at such price.” William Freyer testified that he was an execution creditor of Thomas Evans. He was at the sale in October'. He had come over to Marion Court House, as he stated, “for the purpose of looking after his case. Before the sale commenced, he had a conversation with Gen. Wra. Evans. Does not recollect who began -the conversation. Gen. Evans said, you need not bother yourself; if you will .assign your case to me, I will pay you the money for it. Gen. Evans paid him for it. Gen. Evans paid him on that day $100, and after-wards $200, and since then he has paid him in full, and he has assigned to'Gen. Evans the execution.” On his cross-examination, the witness said “he did not intend to have bid, if Gen.. Evans had not bought his claim, as he understood there were elder executions than his, and he had not funds to pay for the property if he bought any ; that the Evans’ did not know he did not intend to bid ; that he kept that fact to himself. Gen. Evans did not request him not to bid.” This comprises the most important testimony in relation to what passed, before and at the biddings. JR. C. Hamer was also examined, subject to the objection to his testimony. Perhaps his testimony was not very material, but being an execution creditor of Thomas Evans, the court regards him as incompetent.
Under these circumstances, the lands were put up for sale by the sheriff. There was a very cdnsiderable crowd of persons in attendance, and some competition. The Alabama tract was knocked off to Hugh Giles for ten dollars. This tract (according to the witness, Col. Durant) was then worth in cash, fifteen hundred dollars. The John Gasque tract was bid off by Gen. Wm. Evans for ($644) six hundred and forty-four dollars. It was was worth in cash, (says the witness) three thousand dollars. Two other tracts were bid off by other persons, at very inadequate prices, and the bids, including Giles’, subsequently assigned, without valuable consideration, to the defendant, William Evans.
On the subject of public sales, the court can derive little aid from the English authorities. In regard to sales at auction, it is said, in Fuller vs. Abrahams, 2 Brod. and Bing. 116, that if a purchaser, by his conduct, deter other persons from bidding, the sale will not be binding. The true principle which should ap¿ ply to sheriff’s sales, seems to be stated in Jones vs. Caswell, 3 Johns. Cas. 30: “ It is important,” says the court, “ that sales at auction, and particularly on legal process, should be conducted with good faith and without prejudice to any party.” “ The forbearance of bidding was the real consideration ; and it is a consideration which ought not to be sanctioned in a court of justice. The law has regulated sales on execution with jealous care, and enjoined such proceedings as are likely to promote a fair competition ; a combination to prevent such competition, is contrary to morality and 'sound policy. It operates as a fraud upon the debtor and his remaining creditors, by depriving the former of the opportunity which he ought to possess, and the latter of obtaining a full equivalent for the property which is devoted to the payment of his debts, and opens a door for oppressive speculation.” Chancellor Kent (then a Jndge of Common Pleas) agreed with the court, “that the attempt thus to si lence bidders, was against public policy, and the interests of the original debtor, whose property was liable to be sacrificed by such combinations.”
In Thompson vs. Davies, 13 John. R. 114, Mr. Justice Spencer, approving Jones vs. Caswell, says : “ whatever may have been the motives of the parties in making the agreement, and however upright their intentions; the question recurs, is not the promise made, by the defendant void, as it contravened established principles of public policy! It has been urged that the party was not bound to bid ; that,” says the Judge, “ is not the test of the principle. In none of the cases cited was the party bound to bid, but, being at liberty to bid, suffered himself to be bought off in a way which might prevent a fair competition. The abstaining from bidding upon concert and by agreement, under a promise of benefit for thus abstaining, is the very evil the law intends to repress; a public auction is open to every one, but there must be no combination among persons competent to bid, silencing such bidders, for the tendency to sacrifice the debtor’s property is inevitable. The principle is of too salutary a nature to permit any refinements which go to.sap or subvert it.”
The foregoing were cases at law on notes given in consideration of forbearance to bid. But in Troup vs. Wood, 4 J. C. R. 228-254, where there was an agreement by the owner of the execution with certain other persons to prevent the usual competition at a sheriff’s sale, whereby the property was sold for a mere nominal price, it was hold that the sale was voidi In Rowe vs. Cockrill, Bailey’s Eq. 126, a purchase at sheriff’s sale was set aside,-but that decree was founded on circumstances of actual fraud in the party. In this case, William Evans was the surety of his brother, a stronger situation than that of a creditor. It seems to have been understood both by himself and the other sureties, that their only chance for protection was in purchasing the property low and taking the advantage of a re-sale on more inviting terms. Their object was not to speculate for the purpose of obtaining an undue advantage, but rather to seize a plank in the wreck. Whether under any circumstances the property purchased would more'than indemnify the sureties, was a question not easily solved, but which the court does not deem it necessary to investigate or determine. In the language of Mr. Justice Spencer, whatever may have been the motives of the parties, and however upright the intentions, the conduct of the defendant in thus silencing those who were at liberty to bid, had a tendency to prevent fair competition, and “contravened established principles of public policy.” It is well known that property, particularly real estate, is usually sacrificed when sold by the sheriff under execution, yet the court has never regarded itself at liberty to interfere where the sale was regular, and competition open. In Yongue vs. Stockdale, Rice Eq. 3, the defendant had purchased the land at a fiftieth part of its real value, yet the court held the principle as well settled, that mere inadequacy of consideration would not authorise the intervention of the court; that it would be particularly mischievous to apply a different principle to sales under judicial process, (fee. But this is one of the reasons which has rendered it Incumbent on the court to regard such sales with jealous care, and has induced the Legislature to establish safeguards for the security, as well of creditors, as of the unfortunate individual whose property is thus subjected to compulsory sale. If Hugh Giles had insisted on his purchase of the Alabama tract at ten dollars, it is not perceived that he could have been divested of his title. He appears to have known nothing of the arrangements made by the other parties. He bid with motives of benevolence, but he made no communication of his motives to any one; in the same spirit he transferred his bid to the defendant, William Evans. He can derive no more advantage from it, but stands in the same situation as if he were the original bidder. He takes it infected with the objection that competition was not full and free ; and he is not permitted to avail himself of any advantage which may have resulted from the suppression of biddings. It was argued that Freyer did not intend to bid, but as is said by Judge Spencer, in Thompson vs. Davies, ‘‘that is not the test of the principle. He was at liberty to bid, and suffered himself to be bought off in a way which might prevent a fair competition.” Freyer attended the sale for the purpose of looking after his execution. He may not have come with the intention of bidding; but when he saw the Alabama tract knocked off to Hugh Giles for ten dollars, who can say that if his interest had not been extinguished he would not have become a competitor. In the language of the same Judge, “the principle is too salutary to permit any refinements which go to sap or subvert it.” The court is of opinion that the sales of real estate made on the first Monday of October, must be set aside, and that the same must be resold by the sheriff of Marion District.
It is proper next to consider the objections to the sales in November, 1842.
The sheriff had advertised for sale,' under executions against Thomas Evans, amongst other things, nineteen negroes, also some horses, cattle, household furniture, &c. The defendant, William Evans, held a mortgage of the negroes dated 22d February, 1839. He had become surety on a bond of Thomas Evans to Elijah'P. Coachman, for eighteen thousand dollars, payable in six equal annual instalments. The condition of the mortgage was, that if Thomas Evans should pay the bond the mortgage should be void. At the time of the sheriff’s sale in November, 1842, the mortgage was forfeited; and ultimately the defendant was obliged to pay Coachman nine thousand five hundred and sixty-eight dollars, on account of his suretyship. William Evans attended the sale, and, when the negroes were offered, he forbade the sale, exhibiting his mortgage. The sheriff persisted, and they were knocked off to him for a nominal sum. After the case of the Bank against Gourdine, Holmes, et al., decided at Charleston in February last, it is hardly necessary to say, that the sheriff had no authority to make the levy, and that the sale was properly forbid. The legal title was in William Evans. If it is supposed that the property is more than is sufficient to indemnify him, the proper parties may still have their remedy.
No other objection was made to the sale in November which might not probably be urged against every sheriff’s sale. No improper measures were resorted to for the purpose of suppressing competition. It may be that the prices were inadequate. It was a kind of property not likely to sell advantageously at any -time, and very likely to be sacrificed at sheriff’s sales. There was nothing, however, to prevent creditors from protecting themselves ; the defendant, William Evans, purchased the property and paid his money to the sheriff. It may here be necessary to remark, that any claim he may have had under the Foxworth execution had been already satisfied in full.
It is urged that William Evans, after the sales in November, suffered Thomas Evans to remain in possession of the property which he had thus purchased, and that, according to the rule in Smith vs. Henry, 1 Hill, 22, this possession is per se fraudulent, not susceptible of explanation, and that the sale must be set aside. This is certainly a misapplication of the rule. Kidd vs. Rawlinson, 2 Bos. & Pull. 59, and Watkins vs. Birch, 823, are both cited with approbation in Smith vs. Henry, as entirely reconciieable with the rule therein indicated. In the former case the goods of A. were put up at sheriff’s sale, and bid off by his brother-in-law, who, out of kindness allowed A. to retain the possession of the goods ; in the latter case goods were bought and paid for at sheriff’s sale, and then allowed to remain in the possession of the defendant, on rent, or hire. This, in both cases, was held to be no fraud. The distinction is fully stated by the court in Smith vs. Henry, and it is not necessary to dwell further upon it. Chancellor Kent, in 2 Commentaries, 409, also cites the cases in which the purchasers of goods, seized on execution, have been protected, “ though the goods were suffered to continue in the possession of the defendants, on the ground that the transaction was necessarily notorious to the whole neighborhood, and the execution notice to the world, and the cases, being free from fraud, in fact, were, under those circumstances, free from the inference of fraud in law.” But in the case before the court, the delay in dispossessing the defendant can hardly be regarded as a circumstance in itself of any weight. The sale took place on the 7th of November, 1842, and these proceedings were instituted almost immediately afterwards ; the bill being sworn to in January, 1843, and injunction and conditional order for a receiver made on the 16th February.
Thomas Evans and Thomas Godbold had been the administrators of Thomas- Godbold, the elder. The sale bill', dated April, 1821, amounted to $3,219.37. A bill was filed for an account and settlement of the estate ; and at February Term, 1834, a report was made charging the defendants, Thomas Evans, with a balance of $5,294.47, and interest from the 1st February, 1834, and Thomas Godbold with a balance of $662.39, and interest from the 1st February, 1836; which report was duly confirmed, and an execution issued for the amount due to the distributees respectively, on the 14th July, 1834, and lodged on that day in the sheriff’s office. It seems to be conceded that all the distributees were paid except Stephen Godbold, whose share was $1,394.40, with interest from 1st February, 1834. No credits are entered on the execution subsequent to 1st February, 1835. On the 6th September, 1842, the defendant, William Evans, on understanding, as he says, from Stephen Godbold, that his share was unpaid, took an assignment of his interests, and gave him his note for two thousand dollars, or thereabouts, being the amount then due. In the settlement of William Evans with the sheriff for his purchase of the land, to wit, on the 4th October, 1842, the amount apparently due to Stephen Godbold on this execution was allowed. The'bill charges that Stephen Godbold, as well as all. the other parties interested in the execution, had been paid and satisfied prior to the .assignment to the defendant, William Evans, and several circumstances are stated raising that inference. As to Stephen Godbold the bill is taken •pro confesso. William Evans states.that he knows .nothing but as derived from Godbold. The answer of Thomas Evans states that he was indebted to Stephen Godbold in large sums of money, besides what was due to him on this execution, that, in making him payments, he took from him loose receipts, in some of which the above named case is stated, in others without any reference to the case; but simply for so much money, to be accounted for on settlementthat he ,has paid S. Godbold more than sufficient to satisfy his part of the execution-if it were so applied; that it was his (defendant’s) original intention, and he thinks the understanding between him and -the said Stephen Godbold, that the said payments should b.e so applied on settlement, tut as the application of the fund had not been actually credited on the execution, and his affairs becoming very embarrassed, he supposes that the said Stephen Godbold, innocently thought he could control the application of Said payments to either class of .indebtedness, and, by crediting the same to claims against him not in judgment, might well secure the whole.” When this statement of Thomas Evans is taken- in connexion with the silence of Stephen Godbold, who had so strong an interest to repel the charge óf satisfaction, and who was in fact in the Court House, during a part of the hearing, the court is driven to the conclusion that his claim under the execution has been extinguished, and that his assignment to William Evans passed nothing. The remaining question relates to the validity of the title of Thomas Evans, Jr., to what is called the Cat-fish land.. The statement of facts is taken substantially from the answer, and the testimony of Thomas Evans, Sr.
The land was purchased at sheriff's sale by E. Leggett, for Thomas Evans the elder, who. was then absent. ' The sheriff’s deed to Leggett is dated in September, 1824. Leggett was a clerk for Thomas Evans, Sr.,- who was for many years in business at Marion Court House. In January, 1827, Leggett, being about to leave the employment of Thomas Evans,.suggested that the title should be changed, and Thomas Evans, Sr;, requested him to make a deed of the land to his son, Thomas Evans, Jr., then a very young boy. This was accordingly done, and both deeds proved and recorded in March, 1827. The land cost Tho^mas Evans the. .elder, seven hundred dollars. He always has been in possession of the land; and his sop, who is recently of age, has always resided with him. On the part of the complainants it is insisted, that this deed being voluntary, and the donor indebted at the time, it cannot be sustained.- The general principles on this subject seem now very well established. Yet difficulties and doubts frequently arise in the application of them to the circumstances of the several cases. . In 1821, Thomas Evans was embarrassed ; in. 1823, he was insolvent. In 1826 and 1827, he owned the house and lot on which he resided, and ten or twelve negroes ; regarded himself, and was regarded by .others,, as prosperous; he was in mercantile business, kept stage horses-for $2,500 per annum which was very profitable. Yet at this-timey to wit, in 1826, 1827 and 1828, he was indebted, and executions stood against him in the sheriff’s office. -Alt these executions have since been satisfied. One was a judgement and execution in favor of John Gibson, on which a balance was due on the 12th April, 1832. On that day he came to a general settlement of his money transactions with John Gibson. Satisfaction was entered on the judgment, and he gave Gibson a new note'for twelve hundred and fifty dollars, being the amount then due him on their entire (transactions. On this note the administrator of Gibson obtained judgment against Thomas Evans, in March 1841, which is still dué: But - in 1827, Thomas Evans, asyhas been stated, was one of the administrators of Thomas Godbold, deceased. He was, chargeable with the amount of the sale bill, (upwards of three thousand dollars,) which probably fell due in 1822. Proceedings were instituted for an account ofhis administration, and in February, 1834,- by a decree of this Court, he was found indebted to that estate in the sum of five thousand two hundred and ninety-four dollars. This decree the Court has every reason to believe, has also been satisfied ; but at what time it was ultimately paid in full does not appear. In November, 1834, a payment of five hundred dollars was made by Thomas Evans ; but when he settled with the heirs of Foxworth, and with Stephen Godbold, his receipts would perhaps show. It would seem from his. answer, that he has always been indebted to Stephen .God-bold on some account, from the date of the decree.until this time, and that he continues his debtor, in the language of his answer,, “ by promissory notes and accounts.” In February, 1839, Thomas Evans became indebted to E. P. Coachman, in the sum of eighteen thousand dollars, and during that year to many other persons. Judgments to a large amount were obtained against him in 1840, 1841 and 1842, and which it is admitted could never be satisfied by the sales of his property, under the most advantageous circumstances.
In McElwee vs. Sutton, 2 Bail. 130, the Court, say “ so too, if the doiior at the time of the gift is indebted, but subsequently pays his debts, and is' entirely free from debt, then such subsequent indebtedness cannot vitiate the gift; but not if the old debts are paid off by creating new ones,” cfcc. So in Izard vs. Izard, Bail. Eq. 217, “If a man were ever so much indebted at the time of the settlement, and should afterwards pay off his debts and become totally unembarrassed, these debts could not affect the settlement, though he should subsequently become insolvent. He has proved his solvency at the time of the settlement.” According to these principles, when an existing indebtedness has been shown, it becomes incumbent upon thosé avering the validity of the gift, to prove that the donor subsequently became totally unembarrassed. But he has not ceased to be indebted to Gibson from 1822 until this time, and the execution of Gibson’s administrator now claims payment of his estate; it is not shown that his liability to the heirs of Godbold was removed prior to 1839, when his heavy responsibilities were assumed. It must be remarked, too, that the onus was on him, and the evidence, if it existed, was in his power alone to produce. He was indebted at the;time of the gift. He has not been shown to be clear of debt at any period since; whatever may have been the purity and integrity of his motives, the Court is obliged, as is said in Izard vs. Izard, to lay down for themselves some “ tests by which to form a judgment, and the making a certain inference, from certain appearances, becomes at length a subsidiary rule of law.” The deed to Thomas Evans, Jr., must therefore be set aside, and the property subjected to the payment of.the creditors of Thomas Evans the elder.
It is adjudged and declared, that the sales of the real estate of Thomas Evans, made by the sheriff of Marion District, on the sale day of October, 1842, were void ; and also, that the deed to Thomas Evans, Jr., is void, so far as the rights of the creditors of Thomas Evans the elder are affected ; and it is ordered and decreed, that the real estate first mentioned, be sold by the sher iff of Marion District, and the proceeds be appropriated to the payment of the creditors of the said Thomas Evans, according to the priority of their respective liens, and the sheiiff refund to the said William Evans any sums which he may have actually paid to the sheriff, on account of his purchases in October, 1842.
It is further ordered and decreed, that the real estate described in the conveyance from Ebenezer Leggett to Thomas Evans, Jr., dated 9th January, 1827, be sold by E. A. Law, Esq., commissioner in equity for Darlington District, on some convenient sale day at Marion Court House, after the usual notice; for one-third cash, the balance on a credit of twelve months, with interest ; purchaser giving bond with approved personal security, and mortgage of the premises ; and that the said commissioner hold the proceeds subject to the further order of the Court. It is finally ordered, that the complainants have leave to make the as-signee of Thomas Evans, under the insolvent debtor’s Act, party to these proceedings; and also, to apply for such further order or orders, as may, from time to time, be deemed necessary.
The defendants, William Evans and Thomas Evans, Junior, appealed, on the following grounds:
1. Because the sales of the real estate of Thomas Evans, Sr., made by the sheriff in October, A. D. 1842, were valid, and not infected by any agreement in fraud of the law, or in contravention of any principle of public policy, and his Honor on circuit should so have decreed.
2. Because an agreement (if proven) between two bidders to purchase jointly at a sheriff’s sale, where there is other competition, and such agreement is bona fide, and unattended with actual fraud, and corrupt or oppressive combination, is not against any principle of public policy, and does not invalidate the sale : and his Honor on circuit ought so to have decreed.
3. Because the deed of conveyance to Thomas Evans, Jr., from Ebenezer Leggett, of the Cat-fish lands, under the circumstances and proof in this case, vested a good title to the same in the said Thomas Evans, Jr.; and his Honor on circuit should so have decreed.
4. Because no creditor of Thomas Evans, Sr., subsisting at the time of the execution of the deed to Thomas Evans, Jr., being a party to the proceedings in this case, and claiming to set aside the deed, nothing short of actual fraud on the part of Thomas Evans, Sr., in procuring said deed, can vitiate it so as to permit subsequent creditors to set it aside ; and as no fraud on the part of the said Thomas Evans, Sr., was proven, his Honor ought to have decreed in favor of the deed.
5. Because the recording and lapse of time, from the execution and recording of said deed, perfected in Thomas Evans, Jr., a good title to the lands in said deed named.
iSims, for the appellants.
Marllee & Petigru, contra.

Opinion:
In Hamilton vs. Hamilton, the opinion of the court was delivered by
Dunkiist, Ch.
The court is of opinion, that in order to succeed in their motion, the appellants must present a case which would entitle them to the rescisión of an executed contract. It is necessary, then, to inquire whether, on principle and precedent, the circumstances developed warrant the interference of the court. The brief details the facts, and they are substantially sustained by the affidavits which accompany it. A sale liad been ordered by the Court of Chancery, for the .satisfaction of the liens on Rice Hope, a plantation on Savannah river. The debts and priorities were established and fixed by the decree directing the sale. The plantation belonged to the trustee of Mrs. Hamilton, whose right had been judicially declared to be subordinate only to those of the lien creditors. Among these liens were two mortgages held by the Bank of Charleston, which were recognized and protected by the decree. The Bank had also a demand against Gen. Hamilton, amounting to about $L6,000, for which they had no claim whatever on the land, any more than if it had been the property of a stranger, and which is described in the decree as their " uncovered debt." The trustee of Mrs. Hamilton was desirous of becoming the purchaser of the property at the master's sales; and, after a negotiation, as the witness stated, of more than a twelvemonth with the Bank, it was finally agreed that the Bank would advance the money to enable the trustee to buy the land, upon condition that he would secure the uncovered debt by a mortgage of the property. Up to one o'clock on the day before the sale, " it was thought," says the witness, " both by Gen. Hamilton and the Bank of Charleston, that there would be no bidders for the plantation for any thing like its value, and that the parties holding mortgages would not be likely to bid much, as their,claims were comparatively small, and the difficulties of settling Savannah river! lands very great, in consequence of the climate." The mortgage of Dr. North, securing a debt of $17,000, was junior to those of the Bank of Charleston, of Barquet and of Timothy, which together amounted to $32,000. In order to reach and satisfy the lien of Dr. North, it was necessary that the land should sell for about $50,000. It was proved that Dr. North, aided by Mr. Adger (on whom there was a contingent liability for North's debt) intended to bid the plantation to that amount. It was also proved, that about one o'clock on the day previous to the sale, both the bank and the trustee of Mrs. Hamilton were informed that there would be competition. Upon further inquiry it was ascertained on the day of the sale, that the competition was on the part of Dr. North. In consequence of this information, the trustee went to the agent of Dr. North. " The object," says he, " in going, was to prevent the Norths from bidding, as I was well satisfied that if they did not bid, the uncovered debt would be secured — if they did bid, it would not be secured." The witness, Mr. Gourdin, was also a Director of the Bank of Charleston, and was one of the committee of the Bank appointed to 'arrange the matter. A negotiation accordingly took place, and an arrangement was ultimately made, by which, if the land did not sell for more than $3.0,000, it was to be bid off by the Bank, North's debt was to be secured by a mortgage of the property, to come next after the mortgage debt of the Bank, and his competition was to be withdrawn. The plantation was to be, in fact, held by the trustee of Mrs. Hamilton, who, after satisfying the mortgages of the Bank and of Dr. North, was to apply the net proceeds of the crops towards the discharge of the uncovered debt of the Bank of Charleston. The sale took place, and the plantation was knocked down to the trustee of Mrs. Hamilton for $11,000. The property was proved to be worth about $40,000. The direct effect, then, of the arrangement, was to withdraw from the market a competitor who was prepared to bid $50,000, and the result was that property, intrinsically worth $40,000, was knocked down to one who was a party to the arrangement, for $11,000. The price bid is insufficient to satisfy the mortgages of the Bank, and if the sale stands, Barguet and Timothy lose their debts. These are not all of the facts of the case, but they are all which it is deemed necessary to repeat, in order to render intelligible the judgment of the court.
The principle which governs all sales at auction, is that there should be full and fair competition. Any agreement, the object and effect of which is to chill the sale and stifle competition, is illegal) and the party to the agreement can derive no benefit from the sale. Such is the doctrine recognized by the text writers, and well sustained by the authorities. Sir E. Sugden says that; in sales before the master, "although the report be absolutely confirmed, and the purchaser entitled to demand a conveyance, the sale will be set aside if the parties have' agreed not to bid against each other." Sug. Vend. 38. Sowell understood is the rule in England, that in Fuller vs. Abrams, 3 Brod. Bing. 116, where, at a public sale by the assignees of a bankrupt, the purchaser proclaimed to the by-standers that he had a claim against the owner .of the property, by whom, he said, he had been ill-used, and by thus exciting their sympathies,-obtained the property at one fourth of its value, the Court of Common Pleas declared themselves clearly of opinion that a sale under these circumstances could not be supported. "Agreements," says Mr. Justice Story, § 293, " whereby parties engage not to bid against each other at a public auction, especially in cases where sticlv auctions are directed or required by law, as in cases of sales of property under execution, are held void; for they are uncon-scientious, and against public policy, and have a tendency injü-riously to affect the character and value of sales at public auction, and mislead private confidence."
In ordinary auctions, the owner of the property is free to afct. He may sell or withdraw his estate from the auctioneer's hammer. According to the authorities, he is even permitted to employ a bidder, who may prevent the sale below a limited price. But in judicial sales, no such option is allowed. The sale is positive, is generally against the will of- the debtor, and not un-frequently, against the desires and interests, of many of the creditors. No safeguards, which the law can interpose, do or 'will prevent the sacrifice of some interests, but all should have the chances of prbtectiom that are affordedrby free competition. In Jones vs. Caswell, 3 Johns. Cas. 30, Chancellor Kent, (then a Judge of the Common Pleas,) agrees with the court in the "importance that sales at auction, and particularly on. legal process, should be conducted with good faith, and without prejudice to any party;" that "the attempt to silence bidders is against public policy, and the interests of the original debtor, whose property was liable to be sacrificed by such combinations." And, reiterating the rule in Troup vs. Wood, 4 J. C. R. 254, he says, " the law has regulated sales on execution with a jealous care, and a. combination to prevent competition is contrary to sound policy. It operates injuriously both to the debtor and his remaining creditors, by depriving the former of the opportunity of obtaining a full equivalent for the property which is devoted to the payment of his debts, and opens a door for. oppressive speculation." The interests of the creditors are in equal jeopardy with those of the debtor, and they may be equally incompetent with him to guard against the ruinous consequences of stifled competition. Barbara Barguet and the representative of Timothy might have attended the sale of Rice Hope, and been the witnesses of the sacrifice, but they had no power to avert it. They could neither pay twenty-two thousand dollars to the Bank of Charleston, nor become the proprietors of a Savannah river plantation. They sought the payment of their debt, and the law secured to them, in the language of Chancellor Kent, the opportunity of obtaining a fair equivalent for the property devoted to the payment of that debt, which is afforded only by free competition. Judge Spencer says in Thompson vs. Davies, 13 J. R. 113, "a public auction is open to every one, but there must be no combination among persons competent to bid, silencing such bidders, for the tendency to sacrifice the debtor's property is inevitable." " The principle is of too salutary a nature to permit any refinements which tend to sap or subvert it." It may be added that these principles depend for their vindication on no local statute, on no peculiar usage. They have a much higher origin, and have been promptly recognized in every State where it has been foqnd necessary to consider them. In North Carolina the subject has been very ably discussed by Mr. Ch. J. Henderson. In Smith vs. Greenlee, 2 Dev. 128, the principles are thus, condensed : " A sale at auction is a sale to the best bidder, its object, a fair price, its means competition. Any agreement, therefpre, to stifle competition, is a violation of the principles on which the sale is founded. It not only vitiates the contract between the parties, so that they can claim nothing from each other, but also any purchase made under it, their claims against the vendor being weaker than those against each other — policy alone forbidding that the last mentioned should be enforced, but both policy and justice uniting to condemn the former. If this be the rule with regard to auctions instituted by private individuals, a fortiori should it be as to those public auctions instituted by law for great public purposes, such as execution sales, where the object is to secure the creditor, if possible, the satisfaction of his debt, and, at the same time, to obtain for the debtor a fair price for his property. Men may, from the very worst of motives, both towards the creditor and the debtor, abstain from bidding, without incurring any legal censure. They have a right to abstain from action — they may act or not, at their pleasure; but, if they do act, they must do it fairly. They cannot claim to themselves any benefit from a. sale, the first principles of which they have violated, fair competition being the very essence of an auction sale. An agreement not to bid, for the purpose of paralyzing competition, vitiates the sale so that no party to such agreement can claim any benefit from it. The sale is void at law. _ Thére is no part of the transaction," concludes the Judge, " which should be preserved."
It is shown, however, in that, as in other cases, that persons may, properly, unite for the purpose of making a bid among themselves, where no one of the associates was able to purchase, or desired to own, the entire property exposed for sale. The effect of such an agreement is to advance the object which the policy of the law favors, a fair price to the parties interested in the article sold. In Phippen vs. Stickney, 3 Met. 385, where the general rule is examined and approved by the Supreme Court of Massachusetts, this distinction is noticed and illustrated. The court say that, "after an examination of .the adjudged cases, they cannot judicially declare that every contract between two or more individuals, in which it may be stipulated that one is to be the purchaser for the joint benefit of himself and another, and that the other is not to interfere with his bidding, shall be held void as a violation of the rights of the vendor and as against public policy, merely because he, who seeks to enforce the contract, may have been thereby induced to abstain from bidding. Cases may readily be imagined, and are of frequent occurrence in sales of large magnitude, where two or more do unite, and are enabled to become purchasers, when neither of them could otherwise have participated in the bidding. By such an association the interest of the vendor as well as that of the vendee will be directly advanced." But they declare that the doctrine of invalidating such contracts applies "to all combinations having for their object to stifle fair competition at the biddings, with a design of becoming the purchasers at a price less than the fair value of the property." The current of decisions is so uniform, and the general principle so clearly announced, that it is not deemed necessary further to consider its validity, or the importance of preserving it. It is proper to notice the consideration, which was so strongly and so confidently urged, as rendering the rule inapplicable to this case. The argument was that this was not a combination to paralyze, but to promote, competition — that the trustee agreed to pay a much larger price than the highest bidder, Dr. North, would have offered. But this does not meet the policy of the law, nor satisfy the exigency of the rule. He did not agree to pay to the right persons. The object of the law is to secure a fair price to those interested in the property. If a purchaser at sheriff's sale silences competition by buying off the bidders, and thereby has the property knocked off to him at one-fourth its value, it may be that the speculation will prove unprofitable — he may have agreed to pay, by this complicated arrangement, more than the property was worth, and more than the most enterprizing bidder would have offered — but this affords no relief, and is no reply to the defendant in the proceedings, or to his execution creditors. The inquiry of the law is, not whether the purchaser made a good or a bad bargain, but whether the persons interested in the property had the benefit of a full and free competition. If mot, the sale is void. The whole transaction is void ; and can be enforced by none of the parties to it, even against each other. The purchaser of Rice Hope agreed to pay a full price by assuming to discharge the debt of a third person to the Bank of Charleston. The land was not bound for that debt in any way — and the mortgagees of Rice Hope — those interested in the sale, derived no benefit from that payment, or from that part of the arrangement. In judicial sales this court has established the principle that no inadequacy of consideration, however gross, should impair the validity of the contract. In Young vs. Stockdale, Rice Eq. 3, the land was bid off at sheriff's sales at one-fiftieth part of its real value. There was no suppression of biddings, no unfairness, and the purchaser was held entitled to the benefit of his contract. This was due to the public — to the security of purchasers under judicial process. But, while thus sternly protecting its own sales, it is the duty of the court to take care that none of the principles of public sales are violated. Men, intending no injustice, desiring only to protect their own interests, may misapprehend, or forget, or disregard those principles. It is the province of courts to expound and enforce them. " They are too salutary" — in the language of Judge Spencer — "to permit any refinements which have a tendency to sap or subvert them."
It is ordered and decreed, that the sale of Rice Hope made by Mr.-Gray on the 3d January, 1844, be set aside and annulled, and that the cause be remanded to the Circuit Court of Equity for Charleston District, to make such order, at the next sittings thereof, for the sale-of Rice Hope, and the execution of the decree pf March, 1843, as to the said court rnay seem just and proper.-
JohNson, Ch. and O'Neall, Butler, Wardlaw and Frost, JJ. concurred.
Richardson, J. absent at the argument from indisposition.
In the case of Martin & Walter vs. Evans the opinion of the court was also delivered by
. Dunkin, Ch. For the, reasons stated in the decree, as well as those in Hamilton vs. Hamilton, the court is of opinion that, on the principal ground of appeal,- the motion should be dismissed.
Butin regard to the conveyance of 1827 to Thomas Evans, Junior, the court thinks the decree should be reformed. The deed was recorded soon after its date. The.title never vested in Thomas Evans, Senior. But it was a gift of so much money to his son. None of his then existing creditors now seek to impeach the transaction. It is not certain that any such exist. He was indebted, however, at the time of .the gift, arid he did not prove to the satisfaction of the Chancellor that he had, at any time, ceased to be in dqbt.
The. question then is presented whether, after a lapse of thirteen or fifteen years, a son shall be called on to refund a sum of money given to him by his father under the circumstances detailed iri the decree. In Partridge vs. Gopp, 1 Eden, 163, Lord Northington, with great reluctance, and against his first impressions, held the child accountable, but it appears from the note of Mr. Henley that the decision was not very satisfactory to the profession. It must be remarked too that'.the Lord Keeper thought there were circumstances in that transaction, which, as he expressed it, "seemed to. smell strong of fraud and experiment." There was no doubt of the good faith of Thomas Evans, Sr., in this matter. Considering his means and the extent of business - in which he was engaged, the gift to his son was inconsiderable, and might well be made-with the purest motives. It. is not necessary to determine more than the case before us, arid the court is of opinion that, under the circumstances, the son was not responsible to the complainants ; and that trié decretal order subjecting the Cat-fish lands to the payment of their demands must be reversed. In other respects the decree of the circuit court is affirmed, and the appeal dismissed.
JohnsoN, Ch. and O'Neall, Butler, Wardlaw and Frost, JJ., concurred.
Harper, Ch.
If it were of any importance to the ease, I should think it singular to contend, that the case of Hamilton vs. Hamilton is to be considered as if it were a bill by the purchasers of the property for a specific performance of the contract. Certainly the intermediate mortgagees, as stated in the circuit decree, were the actors in the application which was heard and determined. The purchasers were contented. Some confusion of ideas seems to have arisen from the irregular manner in which the case was brought before the court. This was by the consent of all the parties, who were anxious to have their rights determined on: but I think the precedent a bad one, and hope it will not be followed in any other instance. But suppose the purchasers had not consented. Then, after giving the mortgagees a reasonable time to file their bill, the master would as of course have executed a conveyance in pursuance of his official duty. Or if he had refused to do so, and the purchasers had taken out a rule against him, the court would as of course have made the rule absolute, unless upon sufficient cause shewn to the contrary. Suppose him to have shewn for cause the facts and circumstances which are in evidence, as stated to him on the part of the mortgagees, (though it would be singular that he should shew for cause the statements of third persons,') could the court have proceeded to hear evidence and determine the merits of the cause in such a proceeding 1 The object of a rule is to compel the officers of the court to do their duty, when there is no dispute about facts ; certainly not to try and determine litigated issues. This forms a distinction between the case of contract made with an individual and one made with an officer of the court, who is subject to its control by a summary proceeding. Such a return of the officer would be no sufficient cause, as the parties might fil'e their bill and try their rights in a regular manner.
The only question whicli seems to have been regarded as material is the inducing of a person not to bid at a sale by auction. It seems to be understood that there is some rule (if rule it may be called, for I really have not perceived any definite riile on the subject suggested or contended for) avoiding purchases made under such circumstances,- as contrary to public policy. I will venture to say that the utmost that Can be made of the cases is, that such an act is prima facie evidence of fraud in the purchaser, unless explained. To such a rule there can be no objection. Indeed the natural inference is that the party so deterring bidders, does it with a view to cause a sacrifice of the property and to procure unjust gain to himself. This would be actual covenous practice, as to the owner of the property, and, according to circumstances, might perhaps be so as against creditors, — for the rule; even as I have stated it, cannot be of universal application as to creditors.
The case of Jones vs. Caswell, 3 Johns. Cas. 29, is evidently the foundation of the American cases, which were cited, on the subject. Yet if we examine the case itself, apart from the dicta, I cannot perceive that it bears at all on the matter we are considering. In that case (to state it shortly) the defendants had purchased a tract of land, bound by a judgment of which they had no notice. The land was advertised for sale, and the defendants applied to the owner of the judgment and offered to pay it off if he would not bid against them. He refused, unless they would also give him their notes to the amount of one hundred and fifty dollars, which they did. On these notes the suit was brought. Now, whether they were deterred by ignorance or whatever cause, it is plain that the defendants had nothing todo but to pay off the execution in the sheriff's office and their title would have been perfect. If there was any fraud it was not on the sale, but on the defendants, by taking advantage of their ignorance or alarming their fears. If the plaintiff had bid more than the amount of his execution, he would have lost his money. If, by affecting to bid, he had induced the defendants to bid more, he would have been guilty of, at least, a moral fraud on them. No bidder was deterred who had any right to bid.
The case of Thompson vs. Davies, 13 Johns. R. 112, very fully sustains the decree in Martin & Walter vs. Evans. That case purports to be decided on the authority of Jones vs. Caswell, by Chief Justice Spencer. With the utmost deference for that very eminent Judge, I must be permitted to say that I do not perceive the grounds of law, justice or reason on which it can be supported. It is supported by the case of Jones vs. Caswell, as we have seen. The plaintiff had a senior, and, in effect, the defendant a junior execution against one Doughty, They had also been under liabilities for Doughty as endorsers, which the plaintiff had discharged. The defendant had alsp other claims against Doughty to a considerable amount. Real and persona] estate of Doughty was levied on under execution, and it was agreed between them that the plaintiff should bid for the personal estate to the amount of his execution 5 that he should give his note to the defendant for $225, part of the- liability as endorsers above mentioned, (as it is stated) which he did, and afterwards paid; that defendant should bid off the real estate and afterwards sell it to the.best advantage, and if it should sell for more than enough to satisfy his own demands, to reimburse plaintiff the $225. Plaintiff did bid off the personal estate to the amount of his execution, which was more than its value. Defendant bid off the real estate and afterwards sold it at a large advance.. The action was for the $225. Here was a combination, not to sacrifice the property, but to make it, both real and personal, sell higher than it otherwise would have done, and to apply the proceeds to the payment of debts. Yet it was held that, however fair the intentions of the parties may have been, the agreement was void on ground of public policy, The agreement was for the benefit of the owner of the property ; no other creditor's appear to have been in question, and I suppose the defendant was allowed to retain the whole of the advanced price for which he sold the land. It only seems to., me that, by the aid of the court, he consummated a fraud on the plaintiff.
I do not think it necessary to examine the other New York cases which were cited. Some of them were cases of the grossest actual fraud, as Troup vs. Wood, 4 Johns. Ch. 228, in which there was a combination to sacrifice a large property and to purchase it at a merely nominal price. The same dicta are répeat-' ed, that an agreement not to bid at a public sale, is void, ás against public policy and tending to fraud.
The decisions of New York were then of great weight in the other States, and deservedly so from the ability of their Judges. The decisions in question have been followed to a certain extent in other States, but in no instance' without qualifications and ex-céptions. And what, was the nature of these- exceptions1? It. will upon examination be found uniformly this, — that where the circumstances are such as shew that there was no actual fraudulent intention to occasion a sacrifice of the property, such ah agreement-may be good ; leading to the conclusion I have before expressed, that it can only be regarded as prima facie evidence of fraud. Such was the case cited from North Carolina of Smith vs Greenlee, 2 Dev. 126. The -Chief Justice, Henderson, put varioiis cases in which such an agreement may be good, as where the property was too large for either of several bidders, but each desired a part, they might agree that one should bid for the whole, &c. The matter seems to have been put upon its proper footing in Massachusetts, by the case of Phippen vs. Stickney, 3, Metc. 384. That was a case in which one party desired to have one portion of the property, which was to be sold entire, and the other another portion. The agréement that one should bid for both, was supported. The New York cases were cited. It was held by Mr. Justice Dewy to " embrace within the rule all fraudulent acts and all combinations, having for their object tó stifle fair competition at-the biddings, with the design that they should become the purchasers at a price less than the fair value of the property."
The only English case cited Was that of Fuller vs. Abrahams, 3 Bred. & Bing. 116; 7 Eng. C. L. R. 371. At an auction, a person requested the bystanders not to bid, as he had a claim on the owners, who had used him ill. They did, in effect, abstain from bidding, and he purchased the property for one fourth of its value. Here was a combination by which the property was sacrificed for less than its fair price.
Then the question in this case is (supposing that any bidders wére deterred) whether the matter has been sufficiently explained. All the circumstances are before us, and we must determine whether there was or was not actual fraud. What act was there of fraudulent character, as- respects the intermediate mortgagees? Is the arrangement between Dr. North, who did not wi'sh to bid, and Mr. Adger, evidence of a fraudulent intention to injure the mortgagees? Why, the whole scope and purport of it was, if carried into full effect, to make them secure beyond the power of casualty. Instead of deterring a bidder, it was to bring a new bidder into the field of competition. Then as to the arrangement between the Bank and Mr. Adger and Dr. North. From the estimated value of the plantation, the strong probability at that time was that it would' sell for more than $22,000. In that case, the agreement .between Dr. North and Mr. Adger would .have held good, and - the mortgagees might have been still secured. This is -no evidence of any injurious intention towards the mortgagees, nor, so far as we can see, has it produced any'injurious effect. Dr. North would of course bid off the land as low as possible. The agreement to bid $50,000, was of course understood, if it should . be rendered . necessarry by competition at the sale. Dr. North (or fhé gentleman repre- seating the parties who were interested in the bond in his name) knew the extent of the Bank's liens. Without any agreement, it would have bid high enough to cover these, and had no inducement to bid more. If, without any agreement, it had bid to this extent, and Dr. North had made a nominal advance on that bid, the land would have been knocked down to him, and these mortgagees would have been equally defeated. This might as well be called a fraud on the mortgagees, for if he had bid up to the whole amount of his debt (which the parties seem to think he was bound to do) he would probably have lost his debt, and been compelled to satisfy these mortgagees. Can it make any difference that the Bank was bound by its agreement to bid to this extent? Then as to the arrangement by which the Bank agreed to extend its bid to $30,000. Can this be regard-as a fraud on the mortgagees ? It was to secure the payment in toto of the demands of one, and a considerable amount on those of the other. It was to create competition to a certain extent — certainly not to prevent if; still leaving Dr. North's arrangement to be carried into effect, if competition should carry the land beyond the proposed bid. If it did not, no injury was done. I can lay my hand on no fact or arrangement, which, at the time it occurred or was entered into, was not apparently calculated to add to the security of the mortgagees.
The case seems to be argued on no distinct and palpable ground or grounds of fraud, public policy or mistake; but it seemed to be thought that mingled together, they might make out a case for relief. Undoubtedly fraud is contrary to public policy, and relief will be granted in cases of mistake. But the truth is, that the only ground for the mortgagees is this, that debts to which they had a priority have been secured in preference to theirs, and they cannot but imagine there must be some way or other to correct this supposed anomaly. As I have said in the circuit decree, in Hamilton vs. Hamilton, " suppose that the Bank and the owners of North's bond, speculating on the chances of intermediate mortgagees failing to attend the sale, or their being unwilling to bid, or from their circumstances unable to purchase, had entered into the agreement, in such event, to bid off the property, as they have done, so as to gain the priority, which they have gained, without doing anything to mislead or deceive the parties, would there have been any thing fraudulent in this?" I will venture to say that no case can be found in the books — certainly none has been produced to this court, in which a bona fide creditor has contrived to obtain satisfaction or security for his debt, that he has been deprived of his advantage, without some actual covenous practice on the party alleging himself to be injured. One creditor prosecutes his suit, perhaps with much trouble and expense, but when he is on the eve of obtaining his judgment, another bona fide creditor obtains from the debtor, .security or satisfaction for his debt; this cannot be impeached ; though this seems to be taking a hard and injurious advantage of the suing creditor. Or if after judgment and execution, he can obtain money or choses in action, these cannot be taken away from him. Yet the only fraud attempted to f>e imputed, is the design on the part of Dr. North to secure his debt, and of the Bank to secure its uncovered debt.
The truth is, however, that in legal contemplation, Mr. Cru-ger, the trustee of Mrs. Hamilton, or young Mr. Hamilton, was the purchaser. They had nothing to do with the arrangements which are supposed to have deterred bidders, and their only fraud was in consenting that the land should stand encumbered with the debts of Gen. Hamilton to a greater extent than it was before.
Then as to mistake; it is clear that the only mistake was that the parties took up the spontaneous impression, without any cause for it, except that Dr. North was the last incumbrancer, that he would bid at the sale. Indeed, they had rather cause for thinking the other way; for the land was so deeply incumbered before reaching the incumbrance of Dr. North, (according to the evidence about its full value) as to render it almost nugatory for him to attempt to secure his debt, or any material part of it. And it seems no such attempt would have been made, but for the arrangement with Mr. Adger. Neither this nor any other of the subsequent arrangements were communicated to the mortgagees, and could not have influenced their conduct. I see no footing on which this case can stand, unless it be laid down as a general rule, that in every case of several incumbrances, the last in-cumbrancer is bound to bid high enough to secure all those who have a priority over him.
I should hardly think it necessary to notice the ground taken, that the transaction in question operated as a fraud on the decree of the court, which directs the incumbrances to be paid off in a certain order, had it not been urged with apparent seriousness by able counsel. When the court directs property to be sold for the satisfaction of incumbrances, in their order, it means, oí course, if the property shall sell for enough to satisfy them all. But it is said the price adjudged to have been paid is $60,-000, instead of $11,000 bid at the sale ; and you cannot assume one price for one purpose, and another price for another purpose. This can scarcely be called a fallacy — certainly it is not a- plausible one. Yet the Bank .would have paid exactly the same price it has now paid. - The order means the price which shall be bid at the sale. This would be to open the whole case. If, on equitable principles, such as have been considered, the parties can get at that price, no doubt their .debts will be satisfied. But if not, and the transaction be fair, it does not concern them what price the purchasers may have paid to third persons. If the Batik had bid off the land for $11,000,,and without any concert or arrangement had then consented, from whatever motive, that it should stand pledged as it now is, could this be called a fraud on the decree of the court, or give the mortgagees a right to hold the land still subject to their incumbrances ?
' It is said, however, that it was bid off in pursuance of concert and arrangement. Very well.; if there was any thing unlawful or fraudulent in that arrangement, it may be invalidated and the sale ,set aside. But if not, the case is the same with that I have first supposed,. . If in any case of such decree, the first incumbrancer, having, purchased the property at a' low price, should, from- motives of conscience or humanity, pay a further price to the owner, or should choose to pay off the junior of several incumbrances, how could the intermediaté incumbrancers entitle themselves to the additional price so paid?
It is in reference to this part of the case, that the commentary of Judge Story was referred to, in order to show his disapprobation of the doctrine of tacking, as being inequitable in its operation, and his impression that qui prior est tempore potior est jure would be the proper rule. With deference to that learned commentator, I tjiink the rule was properly adopted, and of necessity, and that there is nothing inequitable in it. The doctrine is considered by Lord Hardwicke in the case of Wortley vs. Birkhead, 2 Ves. 573, referred to by Professor Story. He thought it rightly settled, but adds, that it was so " by the particular constitution of the law of this country." It must be recollected that at law, in England, a mortgage is a conditional sale, and after condition broken, the estate of the vendee was absolute. It was a high exercise of authority on the part of courts of equity to divest him of his legal title, and regard it only as a security. If the mortgagor himself were coming to redeem, and the mortgagee had afterwards advanced him money, or otherwise created a debt not secured by the mortgage, there would be an obvious equity for him to say to the mortgagor, the property is mine, absolutely, by law; you may redeem — but only on condition that you pay me every thing you owe me.' The case I think is not at all different with respect to subsequent in-cumbrancers, where.the owner of property (the first mortgagee) had. no notice at the time,he gave the new credit.
B gives credit to A, and takes a security, say a bond. A month or a year afterwards, C also credits A, knowing nothing of B's claim, and takes his note ; what is there in justice or equity, to give one of these claims a preference over the other, or to prevent the junio,r creditor from obtaining satisfaction or security, though to the disappointment of the other ? The court has adopted the maxim, qui prior est tempore potior est jure, as a rule of convenience, and because it is necessary to have some rule on the. subject — not that there is any inherent right or equity in favor of one claimant rather than another. Indeed there are cases, and these I think not of unfrequent occurrence, where, in justice and conscience, the junior creditor ought to be preferred; though there are. not sufficient grounds for the court to interfere in his favor. Equity, when at liberty to. do so, inclines to put all debts on an equality, without reference to rank or date. But if the junior creditor can obtain a confession pf judgment or- a mortgage, what is there in equity to deprive him pf his advantage '? So in. the case of a junior mortgagee., who buys in the first mortgage, he is clothed with all the equities of the first mortgagee ; having no notice of the intermediate mortgages at the time he advanced his money or gave credit. It .makes no difference that the junior mortgagee had notice of the intermediate incum-brances at the time he purchased the elder; which is the common case; he had a right to protect himself. He purchased and paid his money, with a view to the security of his debt, amj in justice and conscience, he had a right to, take that security; as much so as a simple contract creditor has to take a judgment or mortgage, to the prejudice of an older specialty creditor.
There is no case in which the court has ever acted on the maxim,. qui prior est tempore, potior est jure, where one of the claimants has the legal estate. The distinction is pointed out by Lord Eldon, in Maundrell vs. Maundrell, 10 Ves. 260. Where the legal estate is in a trustee, as where there is an out standing term, the purposes of which have been satisfied, the termor or his legal representative is made a trustee for creditors, and there the rule applies qui prior &c. But he adds " it was very early decided, that if AandB advanced money innocently, and G bought also innocently, not having notice of each others advances, he who first had the luck to get the legal estate, had as good a right as any one; and should hold, by his legal title, the possession against the prior equities."
With respect to the case of Martin & Walter vs. Evans, I think the conclusion still more palpable. In both the cases, the combination, as I have said, was to make the property sell higher than it would otherwise have done, for the satisfaction of creditors ; and it makes no difference that by the arrangement, some creditors were defeated, provided there was no fraudulent design or practice towards them; but by the judgment of the circuit court any imputation of a fraudulent design is disclaimed. The case differs from that of Hamilton, in that it does not appear that the complainants had any reason to believe that there were other incumbrancers who would bid up the property to secure their demands. They might not have known that the property would be sold on the day on which it was sold, but it was their business to attend to this.
I am of opinion, that the decree in the case of Hamilton vs. Hamilton should be affirmed, and in the case of Martin & Walter vs. Evans, reversed.
Johnston, Ch. and Evans, J. concurred,