THE MUTUAL FIRE INSURANCE COMPANY OF THE DISTRICT OF COLUMBIA v. BARKER

THE MUTUAL FIRE INSURANCE COMPANY OF THE DISTRICT OF COLUMBIA v. BARKER. Trustee’s Sales Under Deeds oe Trust ; Oerering in Parcels ; Time oe Sale ; Number oe Bidders ; Inadequacy oe Price. i. In considering whether a trustee’s sale under a deed of trust shall be vacated at the instance of the debtor where the property has been bid in by the holder of the debt secured, it is immaterial that a contract previously entered into exists, whereby the creditor agreed to purchase the property from the debtor for a price much larger than it brought at the trustee’s sale, as the debtor has his remedy either by suit for specific performance of the contract or for damages for its breach ; and whether feelings of hostility on the part of the agents of the creditor towards the debtor had anything to do with the sale being ordered, is immaterial, where the debt secured is long overdue and there is no neglect or misconduct on the part of the trustees. 2. Where real estate embraced in a deed of trust consists of a lot containing two houses each 12^ feet wide, the lot having never been subdivided and having been conveyed as a whole, the fact that in making a sale under the deed of trust the trustees sold the property as a whole without first having offered it in parcels will not justify a court of equity in setting a sale aside at the instance of the debtor, especially where he was present at the sale and neither requested or suggested a sale in parcels. 3. That the day of the sale under a deed of trust was in Christmas week, it being neither Sunday nor a legal holiday, affords no ground for impeaching the regularity and fairness of the sale, nor will such a sale be set aside upon the ground that the state of the weather called for a postponement, where it appears that while the afternoon of the sale was raw and cold, there was neither rain nor snow, and the cold was not excessive; following Anderson v. White, 2 App. D. C. 408. 4. The fact that there is but one bid at an auction sale by trustees under a deed of trust, will not invalidate the sale where it is fair and regular and the price is not grossly inadequate. 5. Where the owner of real estate covered by a deed of trust had offered to sell it to the holder of the debt secured for $14,000, and at a trustee’s sale under the deed of trust it was bid in by the creditor for $9,500, the debt secured being $10,000 -with some accrued interest, taxes and expenses, the price was held not to be grossly inadequate, especially as the debtor at the sale warned intending purchasers not to bid because of pending litigation; following Wheeler v. McBlair, 5 App. D. C. 375. No. 991. Submitted October 16, 1900. Decided November 7, 1900. Hearing on an appeal by a purchaser at a trustee’s sale under a deed of trust from a decree of the Supreme Court of the District of Columbia sitting as a court of equity, vacating the same. Reversed. The Court in its opinion stated the case as follows: This is an appeal, by the purchaser at a sale made by a trustee, from a decree vácating the same. The appellant, the Mutual Fire Insurance Company, is a mutual association incorporated by act of Congress. The control of its affairs, including the investment of its accumulated reserve fund, is in the hands of a board of managers. For some nineteen years before July 27, 1896, and about one year thereafter, the appellee, James W. Barker, was a member of said board. On July 27, 1896, he obtained a loan from the appellant of $10,000, for which he executed his note payable in one year with interest at 6 per cent., payable semi-annually. This was secured by a conveyance to Wilson and Oyster, trustees, of a lot on H street, which was 25 feet' wide and 100 feet deep, and occupied by two frame houses each 12J feet wide, with joint wall between, fronting on H street; and by a stable at the rear. This property produced a rental of about $61 per month. Appellee remained in possession, receiving the rents, but made no payment on account of interest or principal, and failed to pay the taxes accruing due. In October, 1898, the trustees aforesaid, at the request of the appellant, advertised the said property for sale on the 28th of that month. Appellee filed a bill to obtain an injunction against said sale, alleging a contract to sell said lot to the appellant for the sutn of $14,000, and praying decree of specific performance. The sale was suspended by a restraining order. Subsequently that order was recalled. The sale was then readvertised for December 19, 1898, and on that day adjourned, with the consent of the appellee, to December 22, on account of bad weather. On the 22d the weather was still too bad and the sale was again adjourned to the 28th. Before the latter date the appellant visited the trustees and some of the managers and asked postponement to a later day,for the reasons that the weather was bad, his family sick and the holidays were coming on. The trustees expressed a willingness if permitted to do so, and so did some of the managers. No action was taken to postpone and the trustees were directed to proceed. Appellant was promptly made aware of the failure of his request. When that day came the sale was proceeded with in front of the premises at four o’clock in the afternoon. The sale was formally opened by the auctioneer representing the trustees, both of whom were present. The attorney, at the time representing the appellee, made the following announcement before bids were taken: “For the benefit of any intended purchaser, Mr. Barker has requested me to announce that the property which is about to be sold is in litigation; that a suit has been entered against its sale and that suit is now pending in the Supreme Court of the District of Columbia. The suit is entitled Barker v. The Mutual Fire Insurance Company, and is No. 19,857 in equity. Any buyer will of course be involved in this litigation.” The auctioneer at request of the trustees immediately announced that the sale was conditioned upon a good title. The auctioneer made formal cry, and after calling three bids as made in the sums respectively of $8,500, $9,000 and $9,500, declared the property sold to the appellant. The afternoon was cold and raw; but there was neither rain nor snow. There were not more than fifteen persons present. All wore overcoats. No request was made of the trustees to postpone on account of the weather, or the small attendance upon the sale. The lot was sold as a whole. No request was made for a sale in parcels separating the improvements. The appellee’s home lies across a narrow alley from the premises, and he witnessed the entire proceeding. In due order, after the sale, a deed was executed and delivered to the appellant, which was recorded. The bill to vacate the sale was filed May 22,1899. Other litigation between the parties and its results to date are stated therein as follows: March 17,1899, appellant brought an action of ejectment against appellee to recover possession of the premises; April 4, 1899, appellee’s bill for specific performance, heretofore mentioned, was, upon hearing, dismissed, though without prejudice to his right to sue at law for damages. On April 20, 1899, appellant sued appellee to recover a balance of $2,978.40 due on the note after crediting the net proceeds of the sale. On this bill a restraining order was granted staying prosecution of the actions at law until further order. The regularity and fairness of the sale are attacked upon the following grounds substantially: First, because it was made in bulk instead of in parcels; second, because made at an improper season, namely, during Christmas week, and on an inclement day; third, because there were no bona fide bidders present, and the property was sold to the beneficiary of the trust deed, without genuine competitive bidding, at a price fixed by it and which virtually amounted to a private sale for said price; fourth, because the price obtained was grossly inadequate, resulting from the aforementioned irregularities and improprieties in said sale. The appellant, and the trustees who were also made parties to the bill, answered under oath denying all charges of illegality and irregularity and asserting that the sale was legally and fairly made for a reasonable and sufficient price. The appellant also charged that it had offered to reconvey the property upon payment of its debt, with interest and costs of sale, and redeclared its willingness to do so. Upon hearing, the court sustained several of the aforesaid grounds of the bill and decreed the vacation of the sale. Mr. Walter V. R. Berry and Mr. Benjamin S. Minor for the appellant: 1. There is no known rule which fixes the minimum or maximum limit upon the number of persons that shall attend an auction sale in order to make it valid and binding. No court of equity would set aside a sale of property where the price realized was its full value, because there were present only two bidders, or even one bidder, provided the sale was duly and properly advertised, as was the sale in this case. In view of the previous public advertisement, the number of bids made, and the price realized for the property, the smallness of the attendance at the sale has no force in this case, even if there had been present only one-half the number estimated by the witnesses. Beck v. Meek, 1 Freeman’s Chan. (Miss.) 441. 2. Bad faith or negligence on the part of the trustees must be positively shown and will not be presumed by the court; but the presumption ip that the trustees performed their whole duty. Graham v. Fitts, 53 Miss. 307; Bank v. Lanahan, 45 Md. 396. 3. No injury has been shown to justify the court in setting aside the sale on the ground that the property was sold in bulk and not separately. The trustees considered a sale in bulk the most advantageous and this opinion was concurred in by every witness in the case save one. See, on this point, Benkendorf v. Vincenz, 52 Mo. 444; Carter v. Abshire, 48 Mo. 302; Loveland v. Clark, 11 Colo. 265. 4. The time selected for the sale was propitious for the reason that there being a relaxation from business, business men have more time and are more likely therefore to attend an auction sale. But, before this ground can have any force, it must be shown by positive proof that some person or persons were prevented from attending on account of the day selected, and that injury has resulted to the complainant. Bank v. Lanahan, 45 Md. 411. 5. That, under a deed of trust like the present, the creditor, for the satisfaction of whose debt the sale is made, has a right to compete fairly at the sale and may become the purchaser, is well settled in this District. _ Richards v. Holmes, 18 How. 443; Smith v. Black, 115 U. S. 315. There is no rule in this District or elsewhere that fixes the number of bids to be made at an auction sale in order to make it valid and binding upon the parties in interest, nor is there a requirement that there shall be competitive bidding, provided the sale is duly and properly advertised and properly conducted so that those who desire to attend and bid may do so, and the property is not sold at a grossly inadequate price. That the creditor became the purchaser, as it had a right to do, is no reason for setting aside the sale. Certainly not, until it can be shown affirmatively that at a resale a better price will be realized. Bank v. Quick, 71 Mich. 534; Landrum v. Bank, 63 Mo. 48. 6. Something more than gross inadequacy of price must be shown in order to impeach the genuineness or the validity of the sale. The well-established principle is that inadequacy of price alone is not sufficient to vacate a sale, unless it be so gross and inordinate as to indicate some mistake or unfairness in the sale, for which the purchaser is responsible, or misconduct or fraud on the part of the trustee. Smith v. Black, 115 U. S. 318; Bank v. Lanahan, 45 Md. 411; Cohen v. Wagner, 6 Gill, 236; Johnson v. Dorsey, 7 Gill, 269; Condon v. Maynard, 71 Md. 601; Warfield v. Ross, 38 Md. 85; Mahoney v. Mackubin, 52 Md. 366; Lœber v. Eckes, 55 Md. 3 ; Dircks v. Logsdon, 59 Md. 178; House v. Walker, 4 Md. Chan. 63; Glenn v. Clapp, 11 G. & J. 2; Cunningham v. Schley, 6 Gill, 158 ; Hubbard v. Jarrell, 23 Md. 67; Bank v. Clark, 28 Md. 145 ; Horsey v. Hough, 38 Md. 130; Bailor v. Daly, 18 D. C. 175; Hitz v. Jenks, 16 Npp. D. C. 530; Carter v. Abshire, 48 Mo. 300; Beck v. Meek, 1 Freeman’s Ch. (Miss.) 441; Parmly v. Walker, 102 Ills. 617; Robinson v. Amateur Asso., 14 S. C. 148. 7. The existence of the suit against the defendant company to compel specific performance of the alleged agreement to purchase this property, and which was then undecided upon its merits, was not a lis pendens having the force and effect of an injunction against the sale under the deed of trust. Hitz v. Jenks, supra. 8. If the statement of the attorney of complainant that the property was in litigation resulted in injury to the complainant and caused the property to sell for less than its value, the trustees and the purchaser can not be held responsible. It was the fault of the complainant alone; and to set aside the sale on this ground would be to allow the complainant to profit by his own wrong. Mr. D. W. Baker and Mr. Wilton J. Lambert for the appellee 1. While mere inadequacy of price has rarely in itself been held sufficient to justify setting aside a judicial sale of property, courts are not slow to seize upon other circumstances impeaching the fairness of the transaction, as a cause for vacating. If the inadequacy be so gross as to shock the conscience, if the property be sold in such a manner that its full value could not be realized, if the bidders have been kept away, if any advantage has been taken to the prejudice of the owner, or if he has been lulled into a false security, or if the sale has been collusively or in any other manner conducted for the benefit of the purchaser and the property has been sold at a greatly inadequate price, the sale-may be set aside and the owner permitted to redeem. Schroeder v. Young, 161 U. S. 334; Fowler v. Taylor, 19 D. C. 456. 2. The duties imposed upon a trustee of this kind are such as compel him to protect both the interests of the debtor and the creditor. It is well settled that "the trustees are bound by their office to sell the estate under every possible advantage for the beneficiaries, and if there are different cestuis que trust they must act with a fair and impartial attention to the interests of all. If the trustees or their agents fail in reasonable diligence in inviting competition or in their management in relation to the sale, or if they proceed under circumstances of haste and improvidence, or if they try to advance the interests of one party at the expense of another, they will be personally responsible to the injured party for the loss, and the court will refuse to decree a specific performance, though the purchaser was without fault.” Perry on Trusts, Sec. 770. See, also, Clark v. Simmons, 150 Mass. 357. [MAJORITY — Mr. Justice Shepard] Mr. Justice Shepard delivered the opinion of the Court: The facts hereinabove stated appear without substantial contradiction in the recitals of the bill, answers and depositions. Such additional facts as we have considered established, and which have special relation to the particular questions to be determined, will be adverted to as these are considered in their order. The motives actuating the managing officers of the appellant in pressing the sale of the property, as well as in the prosecution of suits, after said sale, for recovery of possession and of the balance left unpaid after crediting the proceeds thereof, have been the subject of animadversion on the argument, special emphasis being laid upon their refusal to perform the alleged contract of purchase made with the appellee for the sum of $14,000. These, however, are matters of no practical importance in the consideration of the case disclosed by the record. Whether a substantial contract, upon valuable consideration, was made between appellant and appellee for the private sale of the property is not in issue here. If such a contract was in fact made and broken by the appellant, the appellee has a remedy either on a bill for specific performance, or in an action for damages. It appears that he filed such a bill and that it has been dismissed. In that disposition he seems to have acquiesced, as no appeal has been prosecuted the:efrom. The remedy at law is open to pursuit. In this view, he clearly will have sustained no injury by reason of the wrongful foreclosure of the deed of trust. On the other hand, if no such contract was in fact made there remains no foundation for complaint. Whatever effect feelings of hostility on the part of the managers and officers towards the appellee may have had in stimulating them, at last, to the enforcement of the security for his unpaid loan, their action was, nevertheless, in the line of their plain duty. In view of their obligations as trustees of a fund confided to them for prudent investment and diligent safe-keeping, their only apparent dereliction in the premises would seem to consist in the failure to commence proceedings at a much earlier date. The loan was made, as we have seen, in July, 1896; not a single installment of interest had been paid; and the principal had been due more than a year when the first step was taken in October, 1898. The fact that the appellee was himself a trustee of the fund when the loan was obtained, made his duty of prompt payment all the more binding; it certainly gave him no claim to indulgence. The board of managers would better have performed the high duties of their trust had they refused to loan to a fellow-manager whose private interests might thereby be made to conflict with his duty to his trust. Coming now to the special grounds upon which it is sought to support the decree vacating the sale, we find nothing reasonable in the complaint that the property was sold as a whole without first having been offered in parcels. The lot had never been subdivided by the owner, and was conveyed as a whole; and it requires little testimony to establish the belief that its subdivision for sale into two lots of 12J feet front would have produced no good result. The weight of the evidence supports this view. Moreover, it appears that neither the owner, who witnessed the sale, nor the attorney who attended it in his interest, demanded or even suggested an offer in parcels. That the day of the sale was in the Christmas week, it being neither Sunday nor a legal holiday, affords no ground for the impeachment of its regularity and fairness. Anderson v. White, 2 App. D. C. 408, 420. Nor was the state of the weather such as reasonably to require postponement. The testimony conclusively shows that the afternoon was w'hat is usually reported as “fair,” there being neither rain nor snow. It was “raw and cold,” but not to the freezing point. Those who attended the sale wore overcoats, but no one testified that the cold was excessive, or so severe as reasonably to deter persons in ordinary health from attending and remaining until the close of the sale. To set aside sales, otherwise fair and regular, because had during weather as above described, would establish a rule practically prohibiting them during midwinter in this climate. Anderson v. White, supra. The third ground of objection to the sale, heretofore stated, and which embodies the substance of several specific items set out in the bill, is, that there were no bona fide bidders present., and the property was sold to the appellant without genuine competitive bidding, at a price fixed by it, which virtually amounted to a private sale for that price. The testimony does not sustain these charges. The sale had been regularly advertised for a late day in October, and, having been restrained on the bill filed by appellee, was regularly readvertised when that impediment was removed. Two adjournments were had on account of bad weather; one with the express consent, and the other without the objection, of the appellee. There is not a particle of testimony tending to establish an inference even that there was any collusion between the appellant and the trustees, or attempt to suppress competitive bidding at the sale. It is true that very few persons attended the sale, and that most of these consisted of the trustees, auctioneers and agents and friends of creditor and debtor. But this can not be attributed to the want of proper advertising, to improper conduct of trustees or beneficiary, or to special inclemency of the weather. The lack of general interest in such sales is one of the risks that the mortgagor must be presumed to take into consideration when he executes the mortgage. The mortgagee usually guards against it by leaving a reasonable margin between the loan and the estimated cash value of the security. The sale was formally opened with this attendance and bids asked for in the usual manner. The first bid of $8,500 was made on behalf of the appellant. After an interval, a stranger to all present offered $9,000. The appellant then made a second bid of $9,500. This was cried for sometime without eliciting an advance, and the property was declared sold to the appellant. There is nothing to indicate collusion between, the representatives of the purchaser and this stranger. The effect of his bid was to advance the price paid for the property one thousand dollars. That no other bids were offered does not prove that there were no other possible purchasers present. One of the fitnesses for the appellee, who attended the sale as his friend and closely watched the proceedings from beginning to end, testified that there was a person present, whose name was to him unknown, whom he regarded, from his remarks, as one intending to bid on the property. When the announcement of the pending litigation was made by the appellee’s attorney, this person was asked if he intended to make an offer. His reply was: “ No; I don’t care to buy a law suit.” He was called on two or three times, but declined to bid. He may possibly, however, have been the person who made the second bid. Whether so or not, it nowhere appears that he would have offered more than the bid of $9,500 had there been no apprehension of litigation arising out of the purchase. At any rate, his abstention could only be attributed either to his unwillingness to offer more than $9,500, or to the warning given by the appellee’s attorney. If attributable to the first cause, no damage acci ued; if to the latter, the appellee has himself to blame. As shown by the prearranged warning to purchasers, his policy was to prevent a sale through the intimidation of prospective bidders. For these reasons, it hardly lies in his mouth to object now to the consummation of the sale because there were not enough actual bidders to produce fair competition. We are aware of no rule of law that requires the attendance of a certain number of prospective bidders upon a sale, or that a fixed number of bids, exceeding one, shall be actually offered in order to make the sale regular and confer title upon the purchaser thereat. We can reasonably conceive valid sales made upon the first and only bid offered. It might be that many expectant bidders would be present and yet none willing to raise the first offer. If such a sale should be, in all other respects, fair and regular, and the price not grossly inadequate, it surely would not be invalidated on that ground. The last ground of objection is on account of the inadequacy of the price obtained. As is commonly the case, the evidence of the value of the lot was widely variant. Some witnesses expressed the opinion that the price obtained was all that the property was worth. Others, on behalf of the appellee, valued it at from $15,000 to $18,000. It is not necessary to determine the actual value of the property ; in fact it would be impossible to do so. It is sufficient, for present purposes, to say, that, upon a careful examination of all the evidence tending to show the foundations of the opinions of witnesses, and their means of knowledge, our conclusion is that the price obtained is certainly not less than might have been expected at a forced sale under ordinary circumstances. The owner’s own determined effort to force the property upon the mortgagee at the price of $14,000 is sufficient contradiction of those who valued it at more than that sum. He had owned it for more than fifty years, and lived across the alley from it. He alone knew the cost of the improvements, and the annual charges for repairs, and the constant net value of rentals. For this reason also, as well as others, we attach no weight to the evidence concerning the valuation of the property by the appellant’s managers at the time the loan was made in July, 1896. It appears that it was a rule of the managers to carefully appraise property offered as security for a solicited loan, and to limit the amount of the loan to one-half of this appraised value. A regular committee was charged with the appraisement and it was its duty to report the result in writing. An exception to this rule was made in the case of the appellee, who was himself one of the managers at the time. No written. repoi’t was made, and all that has been made to appear is, that the committee reported verbally that the security was sufficient. We have heretofore seen, that there was nothing in the time, place, conduct, or conditions surrounding the sale, tending to show misconduct or neglect on the part of the trustees, or fraud or wrongdoing on the part of the appellant. If then, there was anything in connection with the conduct of the sale tending directly to prevent the realization of a greater price than $9,500, it was the warning given by the appellee. The trustees did all that was in their power to counteract the effect of this announcement, by giving notice that the purchaser would not be required to accept anything but a good title. In an opinion in a former case of this nature we had occasion to use the following words, which are equally applicable to the facts of this case: “The only conduct at the sale likely to prevent full competition among bidders was that of complainant’s agent, who gave notice of the invalidity of the sale and of the pending litigation. If this protest, which is probable, caused the property to bring less than it might otherwise have done, the complainant has herself to blame for it. She can not visit the consequences of her own act upon the lien creditor, who did all that he could to counteract them by promising complete indemnity from all loss and damage to whomsoever might make the successful bid.” Wheeler v. McBlair, 5 App. D. C. 375, 383: S. C. 172 U. S. 643. It would seem that on the hearing below, attention was not called to either the foregoing case or that of Anderson v. White, before cited. Had it been, the result would probably have been different. In both of those cases we undertook to define in general terms the duties of trustees in making sales under the authority of the ordinary trust deed to secure creditors, in common use in this jurisdiction, and to discriminate between the discretion imposed upon them and that intrusted to other trustees in general. Applying those principles to the facts of this case, as they appear in the record, we find no support for the decree appealed from, which must therefore be reversed, with costs. The cause will be remanded with direction to set aside the decree vacating the sale, and dismiss the bill. Reversed.