Case Name: GOULD a. GAGER
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1863-02
Citations: 18 Abb. Pr. 32
Docket Number: 
Parties: GOULD a. GAGER.
Judges: 
Reporter: Abbott's Practice Reports
Volume: 18
Pages: 32–42

Head Matter:
GOULD a. GAGER.
Supreme Court, Second District;
General Term, Feb., 1863.
Judicial Sale.—Inadequate Price.—Resale.—Protection to Purchasers.—Form of Order.
The court will interfere to set aside a judicial sale for an inadequate price, where there was accident and surprise upon the one side, and advantage taken of it on the other, and where, unless the court can afford relief, the loss will be irreparable.
Thus, where a party intended to appeal in good faith, but, by mistake in the justification of sureties, failed to obtain an effectual stay of proceedings, and the other party, without giving him notice of the defect, disregarded the stay and bid in the property for himself, or as the agent of another person, at a great sacrifice,—Held, that the sale was properly set aside and a resale ordered.
Upon setting aside a sale in foreclosure for mistake, and inadequacy of price, the order should be framed to protect intervening purchasers and mortgagees, and insure the application of the proceeds to the payment of the moneys advanced by them, and to that end the purchase-money upon such sale should be held and not distributed, until the further order of the court, and with leave to apply for further directions.
Appeal by plaintiff and several purchasers, from an order of the Kings County Court directing a resale in five foreclosure actions.
The plaintiff in all the actions was David H. Gould. The defendants in the first action were Edwin B. Gager, William P. Libby, and others; in the second, William A. Woodward, Libby, and others; in the third, Henry Mathews, Libby, and others; in the fourth, Alice C. Lawler, Libby, and others; in the fifth, Clement Kain, Libby, and others.
These actions, to foreclose mortgages, were commenced by summons and complaint in the usual form, and judgment for deficiency was claimed against the defendant William P. Libby, then the owner of the equity of redemption. Libby denied that he had assumed, or that he had become personally responsible for, the payment of the mortgage debts; and as a further defence, alleged that the plaintiff had agreed with him to extend the time for the payment of the principal until it was convenient for him to pay the same, or until he wished to pay it.
These issues were tried before the county judge, who decided thereon in favor of the plaintiff. Thereupon, on the 5th of July, 1861, judgments were entered in the usual form for the foreclosure, and sale by a referee, of the mortgaged premises, and for judgment against Hr. Libby for deficiency. The amount decided to be due on each mortgage was $2,115.35. Subsequently, Libby took appeals from these judgments and gave undertakings in each case in the sum of $1,450: the sureties justified ex parte in $1,400. The plaintiff’s attorney disregarded the same and suffered the sales to proceed in pursuance of the notice already published. On the 3d day of August, 1861, in pursuance of the judgments, the premises were sold at a public auction, held at the Commercial Exchange, in Brooklyn. There was a large attendance at the sale; the day was fair, and the sale was regularly conducted. In the suit against Gager, the premises were struck off to the plaintiff for $500. Subsequently, Gould sold and assigned this bid to the appellant, Henry G. Powers, for an advance of $500. Powers subsequently received his deed of the premises, and paid therefor $1,000. Two months'after, Powers obtained a loan upon a mortgage on the premises, which was duly recorded. Powers took possession of the premises, repaired and let the same, and expended large sums of money in such repairs, and for examining the title. In the suit against Main, the premises were struck off to Hary B. Jackson, for $600, who paid the money upon such bid, and received the deed from" the referee; and she subsequently took possession of the premises and let them. One month thereafter Mrs. Jackson mortgaged the premises upon obtaining a loan from one Peter konwenhoven. The mortgage was duly recorded.
In the suit against Alice C. Lawler, the premises were struck off to Edwin A. Brooks for $50.0 actually paid therefor. Subsequently, Brooks received his deed from the referee, and after-wards commenced an action to recover possession of the premises. In the suit against Mathews and others, the premises were struck off to the plaintiff for $500, who received a deed from the referee; and Gould afterwards commenced an action to recover possession of the premises. In the suit against Woodward, the premises were struck off to the plaintiff for $800. Subsequently, Gould assigned this bid to Stephen W. Head, for an advance of $200. Head paid for the premises $1,000, and received a deed therefor from the referee. Head afterwards commenced an ejectment suit to recover possession of said premises. At the time of the sales there were outstanding taxes which were paid by the respective purchasers before receiving their deeds.
Subsequently, Libby procured a justification by his sureties in $3,000, and on his motion the order appealed from was made by the county court. On the argument in this court Libby claimed a dismissal of the appeal.
William M. Ingraham, Chapman & Hitchcock, and Daniel P. Barnard, for the appellants.
—I.This appeal is expressly allowed by the Code, § 344, amended 1860, and by § 349.
II. The motions upon which the orders were granted, did not rest in the discretion of the county judge, independent of the rights of the parties. (1 Barb. Ch. Pr., 376, and cases cited ; Breese a. Busby, 13 How. Pr., 485 ; King a. Morris, 2 Abbotts’ Pr., 296.)
III. The distinction in the principles upon which the courts review, or refuse to review orders resting in the discretion of a judge, are well considered in Union Bank a. Mott (11 Abbotts’ Pr., 42), where the defendant appealed from an order.
IV. The undertakings filed on the first day of August did not stay the proceedings upon the judgments.
V. The alterations of the undertakings, made on the 3d of October, could have no retroactive effect, and ought not to have impaired the rights of the purchasers acquired two months previously. (Matter of Berry, 26 Barb., 55.)
VI. The papers show there was no fraud or unfair dealing on the part of the plaintiff or his attorney, or the purchasers. Libby knew of the sales and took no steps to prevent them. He was guilty of laches in making his motion.
VII. Here inadequacy of price is no reason for opening a ■sale under a judgment of foreclosure, even where the plaintiff bids in the property—much less ought a sale to be opened on that ground where third parties have become the purchasers. (Tripp a. Cook, 26 Wend., 143, 156; Murdock a. Empie, 9 Abbotts’ Pr., 283; Stahl a. Charles, 5 Ib., 348; Duncan a. Dodd, 2 Paige, 99; American Ins. Co. a. Oakley, 9 Ib., 259; Wil liamson a. Dale, 3 Johns. Ch., 290; Thompson a. Mount, 1 Barb. Ch., 607.
VIII. The respondent’s counsel is in error in claiming that the purchasers having bought subject to the appeals from the judgments they took the title subject to the proceedings in the suit, and therefore subject to the power of the court to set aside the sales without grounds therefor, and without just terms. At most, the purchasers took their titles subject to the appeals and subject to a reversal of the judgments. This question is not now before the court; in fact, the judgments have been affirmed.
IX. If, for any reason, this court should be of opinion that the sales ought to be set aside, then the orders should be modified so as to set aside the sales upon such terms as are just. 1. The respective purchasers should be indemnified for, and paid all their costs, counsel fees, and expenses, upon the motions below, and upon these appeals. 2. Libby should pay to the purchasers the amounts paid by them respectively upon the purchase of the property, with interest. 3. Libby should pay to each of the purchasers a sum, to be fixed by the court, in lieu of the gains which they might have made by the purchase. (Marsh a. Lowry, 26 Barb., 197; Angus’ case, Ms.) 4. Libby should pay all the cost and expenses of the sales, and all the costs, counsel fees, and expenses incurred by some of the purchasers in the ejectment suits, and other proceedings to recover possession of the premises. 5. ■ Libby should reimburse the purchasers for repairs, the expenses paid upon the purchase, and for searching the titles upon the mortgage loans obtained by some of the purchasers. 6. This court ought in some manner to provide for an indemnity to the mortgagees and tenants of the purchasers who were not before the court below.
Jasper W. Gilbert, for the respondent.
—I The facts in this. case, on settled principles of equity, justify the action of the court below, to relieve Mr. Libby from the heavy loss to which he has been subjected by the sale in question. (Collier a. Whipple, 13 Wend., 224; Tripp a. Cook, 26 Ib., 156; Billington a. Forbes, 10 Paige, 487; May a. May, 11 Ib., 201; Happock a. Conklin, 4 Sandf. Ch., 582.)
II. Nor does the interposition which has been exerted con travene the rule of protection adopted in behalf of bona-fide purchasers (Thompson a. Mount, 1 Barb. Ch., 607; American Ins. Co. a. Oakley, 9 Paige, 259; Baring a. Moore, 5 Ib., 48; Woodhull a. Osborne, 2 Edw., 614; Mott a. Walkley, 3 Ib., 590), because—1. In all cases either Ingraham or Gould made the bid, and the purchasers had actual notice of all the facts creating the unfairness and surprise. Notice to an agent is notice to the party. (1 Story's Eq. Jur., § 408.) 2. All were purchasers pendente lite. Every man is presumed to be attentive to what passes in the courts of justice, and, therefore, a purchase made of property actually in litigation pendente lite for a valuable consideration, and without any express or implied notice in point of fact, affects the purchaser in the same manner as if he had such notice. (1 Story’s Eq. Jur., §§ 405, 406; Bridgman a. Green, 2 Ves., 627; Wilm., 64; Huguenin a. Basely, 15 Ves., 289; Story's Eq. Jur., § 409; Dart’s V. & P., 404; Cockell a. Taylor, 15 Eng. L. & Eq., 111; Murray a. Lylburn, 2 Johns. Ch., 441; See also Murray a. Ballou, 1 Johns. Ch., 566, maxim—pendente lite nihil innovetur ; Gaskell a. Durdin, 2 Ball & Beatty, 167; 1 Dow P. C., 31 (3 Sugden's V. & P., 459.) 3. In all the cases where the court refused the application for a resale on the ground of protecting the purchaser, the sale had been made to a stranger in good faith, under a final decree nnappealed from, and when all litigation as to the subject-matter of the action had been ended, but—4. The purchasers, in this case, are chargeable with notice that the litigation was not ended, that an appeal had been taken and an undertaking given, with the view to stay proceedings, and of the mistake which prevented the operation of the undertaking as a stay and the power of this court to allow an amendment of the justification of the sureties, and of the appellate court to make restitution. (Code, § 330.) A purchase under such circumstances cannot be bona-fide. (Gallatian a. Cunningham, 8 Cow., 361, 374, 382; S. P. Denning a. Smith, 3 Johns. Ch., 332, 344: Brinckerhoff a. Lansing, 4 Ib., 65, 70 ; Manhattan Co. a. Evertson, 6 Paige, 457, 466; Attorney-general a. Gower, 2 Eq. Ca. Ab., 685 ; Jackson a. Sharp, 9 Johns., 163; 3 Sug. Vend, & Pur., 454; Kennedy a. Green, 3 Myl. & Keen, 699; Whitehead a. Boulnois, 1 You. & Coll. Exc., 303; Williamson a. Brown, 15 N. Y., 354.) Constructive notice has been repeatedly held to exist in the absence of any idea by the court of actual personal knowledge (1 Phill., 253), where it was satisfactorily shown that the purchaser placed implicit and bona-fide confidence in the faith of his vendor, and this upon the principle that he must be fixed with all the knowledge which it was reasonable he should acquire. (Jackson a. Rowe, 2 Sim. & Stu., 472.) And when the purchaser has been guilty of such negligence in not availing himself of the means of acquiring actual notice he is charged with constructive notice, because otherwise his conduct -would be a cloak to fraud. (Jones a. Smith, 1 Hare, 43, 55; West a. Reid, 2 Ib., 249, 257; Sterry a. Arden, 1 Johns. Ch., 261; Green a. Slayter, 4 Ib., 38; Dunham a. Dey, 15 Johns., 555.) 5. The power of amendment necessarily implies full relief against the mistake, and the effect of the amendment in this case is to put the parties in the same situation they woxild have been in if the affidavit of justification had been correct originally. Such was the express provision of the Revised Statutes, and this provision is continued in force by section 471 of Code, and is also preserved by section 469 of the Code. (See also Rule 93, Code, § 327; 2 Rev. Stat., 556, §§ 33, 34; Potter a. Baker, 4 Paige, 290; Schermerhorn a. Anderson, 1 N. Y. (1 Comst.), 430; Wilson a. Allen, 3 How. Pr., 369; Beach a. Southworth, 6 Barb, 173; Wilson a. Onderdonk, 2 Code Rep., 63; Mills a. Thursby, 11 How. Pr., 129 ; Shaw a. Lawrence, 14 Ib., 94; People a. Tarbell, 17 Ib., 120; Bellinger a. Gardner, 2 Abbotts' Pr., 441.) 6. The rule has long been settled that a purchaser under a decree submits himself to the jurisdiction of the court in that suit as to all matters connected with such sale, or relating to him in the character of purchaser. Requa a. Rea, 2 Paige, 339; Collier a. Whipple, 13 Wend., 224; 1 Story's Eq. Jur., § 406.) Hence the cases above in the Court of Chancery and Court of Errors, where sales were opened for misconduct of the master without any fault of the purchaser. (Mott a. Walkley, 3 Edw., 590; American Ins. Co. a. Oakley, 9 Paige, 259; Baring a. Moore, 5 Ib., 48; Collier a. Whipple, 13 Wend., 224), and on the ground of accident which prevented the party attending the sale, as in Thompson a. Mount (1 Barb. Ch., 607), and Hoppock a. Conklin (4 Sandf. Ch., 582), notwithstanding the purchasers were bona-fide.
III. The doctrine that a purchaser, pending an appeal, acquires a right to hold the subject of his purchase, subject to the final determination of his appeal, so as in any degree to affect the powers of the court below over the proceedings in the suit, or those taken under'the decree, is utterly unsound, for, if carried out, it would be subversive of the principles before stated which are obviously essential to the administration of justice, and would encourage and multiply the very mischiefs which the court, in the cases cited and numerous others, have been so careful to prevent. And the cases which hold that a stay by the filing and service of an undertaking, does not divest a lien before acquired, have no bearing on this case, for they do not touch the power of amendment, or the power to control and vacate the proceedings in a suit.
IY. The respondent in these cases so far from acquiescing in the right of this court to reverse or modify the order appealed from, denies its jurisdiction to entertain these appeals, but as the controversy affects the title to real estate, and may produce a conflict of jurisdiction resulting in intolerable litigation, he desires that any order adverse to him which may be made, may be put in such form as that the question of jurisdiction may be determined by the Court of Appeals.

Opinion:
By the Court. —Brown, J.
The court will not interfere and set aside a sale under a judgment or decree of foreclosure, for mere inadequacy of price. But where there has been fraud or collusion, or the parties having an interest as owners or creditors have been prevented from attending the sale by the representations of the master or referee, or by sickness or inevitable accident, then it will exercise its power and order a resale. In Collier a. Whipple (13 Wend., 224,) a resale was granted and affirmed on appeal, upon the ground that the judgment-creditors were prevented from attending the sale in consequence of impressions received by their agent, from a conversation with the master, that the sale would not take place. In Tripp a. Cook (26 Wend., 143,) it was held that a resale will be ordered where the mortgaged premises have been sold below their real value, and bought in by the mortgagee, if the mortgagor or those representing his interest have been misled by the mortgagee, or even by a third person, in reference to the foreclosure of the mortgage, and in consequence do not attend the sale. In Requa a. Rea (2 Paige, 339), a resale was ordered, because the master, mistaking his duty, sold the premises for $1,000 to a purchaser who was aware at the time that the master had written instructions from the complainant's solicitor not to sell for less than $2,600. It was also held that the purchaser at such sale submits himself to the jurisdiction of the court as to all matters connected with the sale. In Billington a. Forbes (10 Paige, 407), a resale was ordered where a co-defendant of the mortgagor took advantage of the absence of the latter from illness, and prevented a postponement of the sale, and then became the purchaser himself at one-third of the real value of the premises. To the same effect is the case of May a. May (11 Paige, 201). The papers disclosed improper interference and management to prevent competition at the sale, and the chancellor ordered a resale upon the application of a judgment-creditor who was not present when the sale was effected. (Vide, Denning a. Smith, 3 Johns. Ch., 332; Powell a. Tuttle, 3 N. Y. (3 Comst.), 396.)
The five cases in favor of David H. Gould, of which the titles are given above, were actions brought in the County Court of Kings County, each to foreclose a mortgage upon premises in Brooklyn. William R. Libby was not the morrgagor in either, but he was made a party as the owner of the equity of redemption in each case. The complaints charged that he had assumed and become personally chargeable with the payment of the mortgage debts, and on that account the complaints prayed, in addition to the usual relief, a judgment against him personally for the deficiency. This claim was put in issue and resisted by the defendant Libby, and upon the trial, j udgment was rendered against him. He thereupon appealed to the Supreme Court on the 1st of August, 1861. These appeals were regular in all respects, and were designed by him to operate as a stay of all the proceedings in the actions until the appeals could be heard and determined. They did not have the effect, however, in consequence solely of the affidavits of justification of the sureties to the undertakings being in the amounts stated therein, and not in double those sums, as required by the practice. The under takings, with these imperfect affidavits of justification, were filed and served'on the 1st day of August, 1861, and on the 3d of that month the plaintiff proceeded to a sale of the mortgaged premises, Libby not being present, and without returning the undertakings or intimating to him or his attorney the defect which he must have observed. In the first-named action, the property was struck off to and purchased by the plaintiff for $500. He assigned his bid to one Henry I. Powers for $1,000, and the referee conveyed the premises to Powers, the plaintiff settling with the referee for the purchase-money. This was on the 6th of August. On the same day judgment was entered against Libby for the difference of $1,953.09. In October thereafter, Powers mortgaged the premises to one Philo W. Titus. The- premises in the second-named action were also struck off to and purchased by the plaintiff at the sale for $800. On the 5th of August, he also sold this bid to one Mead for $1,000, who, on the 6th of August, took the referee's deed. Judgment in this action for $1,645.88 deficiency was also entered against Libby. In the third-named action, the premises were purchased by the plaintiff, at the sale, for the sum of $500, for which he took the referee's deed on the 6th of August, and entered his judgment against Libby for $1,947.41, the deficiency therein. In the fourth-entitled action, the premises were bid in at the sale by the plaintiff, as the agent of Edwin A. Brooks, for $500. He also settled the consideration-money with the referee, and took the deed to Brooks, August 5th. Judgment in this case was entered against Libby for $1,945.88, the deficiency therein. In the fifth and last of the above-entitled actions, the premises were struck off to and purchased by the attorney for the plaintiff, as agent of one Mary B. Jackson, who afterwards mortgaged this lot to one Cowenhoven. Four things are worthy of observation here: 1. Each of the five lots were bid in at the sale by the plaintiff, or by his attorney in the actions, for himself or as the agent of other persons. 2. In each case, the plaintiff or his attorney settled with the referee for the purchase-money. 3. The deeds were all executed and delivered on or before the 6th of August, within three days of the time of the sale. 4. The entire'proceeds of the sale is $2,900, and the deficiency for which judgments are entered, $9,313.08. The proof as to the value of the mortgaged premises is, as usual, con flicting; but there are two facts of some significance in this connection. Libby is the purchaser and owner of the equity of redemption, with an agreement to pay the several mortgage debts, as the plaintiff alleges; and, as a part of the papers upon which the County Court granted the order to re-sell, there is the offer of Libby's brother, who is thought to be of ample ability, to bid $1,500 upon each lot at the resale. I can hardly doubt that the property was sold at a ruinous sacrifice. The affidavits of justification were amended and corrected on the 3d of October, 1861, under an order of the County Court. Libby then moved the County Court for a resale, which was granted upon terms, from which the plaintiff has appealed in each case to this court.
I arrive at the conclusion, from a perusal of the papers, that Libby intended in good faith to bring an appeal in each of these actions—an appeal which should stay the plaintiff's proceedings and arrest the further progress of the sale. It follows as a corollary to this proposition that the defect in the affidavits of justification, which rendered the appeals ineffectual to stay the sale, was an inadvertence, a mere accident, a thing which will occasionally occur in the present transition state of the practice, whatever may be the care and skill employed. The defendant Libby confided, as he certainly had a right to confide, in the efficacy of the appeal papers to stop the sale, and did not, therefore, attend or give himself any concern therewith. The defect in the papers was unknown to Libby, but it was well known to the plaintiff, and having the control of the sale, he was armed with power to work great mischief to his adversary. He was not bound, under any rule of practice, to return the undertakings as insufficient, and to give the owner of the property notice that the sale would proceed. The question is not, so much what he was bound to do, as what he was in equity and good faith bound not to do. His only legitimate object in prosecuting tbe actions was to collect his money. He knew his adversary was laboring under a delusion, and that one word from him would make him aware of the peril and danger of his position. If his omission to speak that word resulted in irreparable injury to his adversary and large benefit to himself, he cannot complain if the court exerts its power to redress the injury, doing him no wrong at the same time. In Billington a. Forbes (supra), the mortgagor was unable to attend the sale from illness. A co-defendant interfered and prevented a postponement, and became the purchaser of the property himself, at one-third of its real value, and a resale was ordered. In this case the owner of the property was not physically ill; he was, however, laboring under a misapprehension, a delusion, as to the sale of his property. This was well known to the plaintiff, who, notwithstanding, proceeded with the sale and bid in the property for himself and others at one-third of its real value. The two cases are not dissimilar in principle, and the one should be open to the same relief as the other. There was accident and surprise upon the one side, and advantage taken of it upon the other, and unless the court can afford relief, the loss will be irreparable. I am influenced somewhat by the haste with which the plaintiff had the conveyances executed and the sales perfected, and by the speed with which others became interested as purchasers and mortgagees. It looks like the execution of a purpose to place barriers between the owner and the relief he now seeks. The circumstances are peculiar and unusual, certainly, The transfers and changes referred to form no insurmountable impediment to a resale of the property. The persons having these claims are not purchasers without notice, so as to entitle them to hold against the equities of the owner. All the lots were bid in by the plaintiff and his attorney, either for the plaintiff or the others, and notice to the agent is notice to the principal. Besides, purchasers under a judgment or decree of the court submit themselves to its jurisdiction in respect to the property purchased, and take it subject to its power to vacate the sale under proper limitations and to promote the ends of justice.
The order's of the County Court should be affirmed and modified so as to protect the purchasers at the sales, and the subsequent mortgagees, and insure the application of the proceeds of any sales of the mortgaged premises, to be made hereafter, to the payment of the moneys advanced by them; and to that end the purchase-money upon such sales should be held and not distributed until the further order of the court, and with leave to the parties interested to apply for further directions. The orders to be settled upon notice, by the justice who delivers this opinion.
Present, Brown, Scrugham, and Lott, JJ.