Thomas Kearney, Thomas Jordan, and Catherine his wife, Anastasia K. Thomas, Anne E. K. Cheeseborough, and Horatio N. Kearney, Appellants, v. John I. Taylor and others, 15 How. 494

Mr. Justice NELSON delivered the opinion of the Court.-' This is an appeal from a decree of the Circuit Court of the United States for the District of New Jersey. The bill was filed in the court below by the heirs of Edmund Kearney, deceased, against the defendants, to set aside a sale of a part of a farm descended to them, situate on Raritan Bay, in New Jersey, under an order of the Orphans’ Court in that State, in a case of partition, a sale having been ordered upon the ground that partition could not be made without prejudice to the interest of the heirs.

The farm, consisting of some seven hundred and eighty-one acres, was divided by the commissioners into fifteen allotment's, preparatory to the sale, and which sold for the aggregate price of $19,941.19. The bill seeks to set aside six of these allotments, Nos. 5, 6, 7, 8, 9, and 10, embracing about two hundred and eleven acres, and which sold for the aggregate sum of $4,683.15. At the time of the application to the Orphans’ Court for the partition, April term, 1829, there were seven surviving heirs of the estate, four of whom were minors. Daniel and John W.

Holmes, who had purchased some year previously the interest of James P. Kearney; one of the heirs, made the application for the partition. The act of-New Jersey, conferring the powers upon the Orphans’ Court, provides that the application may be made by the heirs, for any person claiming under them, and further, that if, in the opinion of the commissioners, partition cannot be made without great prejudice to- the owners, and on satisfactory proof to the court of the same, a sale of the premises shall be ordered.

It is not material to refer particularly to the proceedings before the Orphans’ Court, as we do not understand that any serious question has been made upon them. It has, indeed, been objected that no personal notice of the application, or of any of the proceedings before the court, was given to the- heirs, whether adults or minors ; and also, that no guardian ad litem was appointed for the latter. But, it is conceded, neither of these steps, however judicious, and proper for the purpose of protecting the interest of the parties concerned, are required by the statute of New Jersey or practice of the court;.

The main ground relied upon for setting aside the sale, is to be found in the allegations and proofs of fraud in the proceedings that took place at the comrhissioners’ sale of the premises, under the order of the court. It is claimed that this sale is void, and should be set aside, on the ground of either actual or constructive fraud, or both. - This sale took place in November, 1829, and was confirmed by the court on the report of the commissioners the January term following.

Deeds of c anveyance were made of the premises sold in the month of April thereafter, when one half of the purchase-money was paid; the remaining half has been since paid in pursuance of the conditions of sale, and order of'the Orphans’ Court; and the whole , of the purchase-money received by the heirs. All of them, except three, became of age as early as at, or before, September, 1831. Another became of age in 1834. This bill was filed October, 1841, some twelve years since the sale took place, and eleven since most of the purchase-money was paid.

Actions of ejectment had been brought in the early part of that year, the precise date is not given. The case has increased very much in importance since the sale by the commissioners in 1829, on account of the large and valuable erections and improvements made upon that part of the premises which is sought to be recovered. A town has sprung up on the bay, called Key Port, containing a population of several hundred inhabitants, with their dwellings, public edifices, docks, or wharves; and a great portion of the property has passed into the hands of bond fide purchasers.

These six lots were purchased at the commissioners’ sale by a company organized pending the sale, and who made the purchase with a view to the laying out and establishment of a town at that point on the bay; and after the confirmation by the court in the name of the bidders, it was agreed between all persons interested in ¿he purchase, and the commissioners, that these lots should be conveyed to John I. Taylor, one of the company, in trust for the owners,.on account of thq. greater convenience in granting town lots, after the town should be laid out and these lots put into the market.

The deed was executed accordingly. But, it appears that some two years subsequent to this conveyance, it was decided by the Supreme Court of New Jersey, (1 Greene’s R. 182,) that a deed made by the commissioners in partition to any one, other than the" person reported as the purchaser, was void. The law was supposed to be otherwise in New Jersey down to this decision, as it is in several of the States. 5 Page, 620; 1 Dana, 261; 2 Dev. & B. 103; 11 Id. 616.The title was first attacked solely on account of this flaw. It led to the institution of the actions of ejectment.

The defendants, however, applied to the. legislature for relief, and in March, 1841, a general act was passed, providing, upon proof being made to the satisfaction of the court or jury before whom such deed was offered in evidence, that the lands were sold fairly, and without fraud, and the deed executed in good faith, and for a sufficient consideration ; and with the consent of the persons reported as purchasers, the deed should have the same effect as- though it had been made to the purchaser.

This act, as is admitted, is unobjectionable, and cured this defect in the deed; and the case, therefore., is brought down to the simple question of fraud, actual or constructive, at the commissioners’ sale. The whole of the evidence to be found in the record, except what may be derived from the pleadings, bearing upon this ■question, consists in notes of the testimony taken by the counsel in two trials in the ejectment suits, the one in October, 1842, and the other, in April, 1844.

These notes, being an abridgment of the testimony of the witnesses at these trials, are not always free from obscurity and doubt as to the meaning, and having been taken by the opposing counsel are, in some instances, inconsistent, and contradictory. But, upon an attentive examination of them, and making all due allowance for the circumstances under which they were taken, we are satisfied, the clear weight of the evidence is against the charge of actual fraud in the proceedings before the Orphans’ Court, or in the commissioners’ sale.

An attempt was made on the argument to impeach the good faith of the report of the commissioners, which recommended a sale of the property instead of making partition. But it is not pretended, that the report contained any facts bearing upon this question which were untrue or had the effect to mislead the judgment of the court. The law authorizes a sale, when the land is so circumstanced, that, in the opinion of the commissioners, partition cannot be made without great prejudice to the owners, and upon satisfactory proof of that fact being made to the court.

The commissioners caused a survey, and -map of the premises to be made which accompanied their report,, and they express the opinion, after- an examination of the same; the partition could not be made without injury to the owners. We may presume the judges had satisfactory evidence before them that this opinion was well founded before they granted the order of sale; for, until some facts arc shown going to impeach it, and with which the commissioners or parties interested were privy, such is the legal effect of the order.

Besides, if this question could be regarded as an open one now, in the absence of any evidence going to impeach the order of. the Orphans’ Court, the result would not be changed; for every witness examined on the subject concurs in the opinion that the farm could not, have been divided among the heirs without great prejudice to their interest. By the law of New Jersey, and the order of the court, the commissioners were required to give sixty days’ notice of the sale, by posting advertisements in five of the most public places, and publishing the same in one newspaper in the county.

The commissioners, in conjunction with Joseph Taylor, the guardian of the infant children, in addition to this notice, caused the sale to be published in two newspapers in the city of New York, and also published and circulated some one hundred handbills throughout the country. The greatest pains seem to have been taken to give the widest publicity of the day and place of sale, and to secure the- fullest attendance of bidders.

The farm was divided into fifteen allotments, and, according to the evidence, in the most judicious manner for the purposes of the sale, and which were struck off,-not only at full prices, but at,prices considerably exceeding the highest estimate of those well acquainted with the premises. On this subject the evidence is all one way. Every witness, to whom the question is put, affirms the fact; The highest estimate of value is $15,000. The sales amounted to $ 19,941.19. The highest rent the farm had previously brought was $300 per annum, for most of the time it had been rented for $260.

The soil was light, sandy, and unproductive,- and it is agreed, by all the witnesses who speak on the subject, that, independently of the improvements made since the sale, it would not, at the time they were speaking, sell for more, if for as much, as it had brought at the commissioners’ sale.

This may account for the circumstance, that the bill of com-' plaint is not filed to set aside the sale of the entire farm, but only as to that portion of it upon which the large and valuable improvements have been made, and the parts connected- with it; as, independently of these, ther£ can be no inducement to'' disturb the sale. Success would be rather a misfortune.

The reason why the premises sold for- some $5000 over the estimates and expectations of those best acquainted with them, was owing to the fact, that some enterprising men in the neighborhood foresaw that the Raritan Bay, at that point, was capable of being made a port of some business; and that, by an expenditure of sufficient capital to accomplish this, - a town might be built up, which would afford a remuneration for the'outlay, and the port afford convenience and facilities to the people of that neighborhood, as well as, probably, add something to the value of their property.

The practicability of this scheme was the inducement held out by the commissioners and guardian of the infants, and persons immediately interested in the property, to the purchasers ; and, as is manifest upon the proof, furnished the leading motive for competition in the biddings at the sale.

This enterprise, however, required a considerable outlay of capital in the construction of docks, or wharves, and in the erection of a warehouse, and other edifices, for the accommodation of the publiG, beyond the means of any individual in that somewhat retired locality, or of any one who might be inclined to take an interest in it.

To overcome this difficulty, those interested in the sale, and who were desirous the property should bring the highest price, exerted themselves to form an association or company, composed, of persons in the neighborhood who had a common and general interest in the object in view, viz. the building up of this little port and town, for the purpose of bidding in the property, and engaging in the enterprise. Holmes, the owner of one seventh, H. N.

Kearney, one of the heirs, and Joseph Taylor, the guardian of the minors, were more or less active in getting up this association, and no doubt with the knowledge and approbation of the commissioners. There was, also,, another circumstance that operated in the formation of this company. A little port and town had sprung up at a neighboring point on the bay called Middletown point; and it was given out that the people of this town had associated to bid off the site of this new one at the sale, in contemplation and with a view, to prevent a rival place of business in that vicinity.

Under these circumstances, the company in question was formed, and bid at the sale in competition with the Middletown point .association.; and, being the highest bidders, the property was struck off to them. . There are some cases deriving their principles from the severe doctrines of Bexwell v. Christie, Cowp. 396, and Howard v. Castle, 6 T.

R. 642, to be found in books of high authority in this country, that would carry us the length of avoiding this sale, simply on the ground of "this association having been formed for the purpose of bidding off the premises, for the reason that all such associations tend to prevent competition, and thereby to a sacrifice of the property. 3 Johns. Cases, 29; 6 Johns. Rep. 194; 8 Id. 444; 13 Id. 112; 2 Ham. 505; 5 Halst. 87; 2 Kent, 539; 1 Story’s Eq. Jur. § 293.

Later cases, however, have qualified this doctrine, by takmg a more .practical view of the subject and principles involved, and have placed it upon ground more advantageous to all persons interested in the property, while at the same time affording all proper protection against combinations to prevent competition. 2 Dev. 126; 3 Metc. 384; 25 Maine Rep. 140; 2 Const. Rep. (S. C.) 821; 3 Ves. 625; 12 Id. 477; 11 Serg. & Rawle, 86.

It io true that in every association, formed to bid. at the sale, and who appoint one of their number to bid in behalf of the company, there is &n agreement, express or implied, that no other member will participate in the bidding; and hence, in one sense, it may be said to have the effect to prevent competition. But it by no means necessarily follows that if the association had not been formed, and each member left to bid on his own account, that the competition at the sale would be as strong and efficient as it would by reason of the joint bid for the benefit and upon the responsibility of all.

The property at stake might be beyond the means of the individual, or might absorb more of them than he would desire to invest in the article, or be of a description that a mere capitalist, without practical men as associates, would not wish to encumber himself with. Much of the property of the country is .in the hands of incorporated or joint-stock companies; the business in which they are engaged being of a magnitude requiring an outlay of capital that can be met only by associated wealth.

Railroads, canals, ship channels, manufacturing establishments, the erection of towns, and improvement of harbors, are but a few of the instances of private enterprise illustrating the truth of our remark. It is apparent that if, for any cause, any one of these or of similar masses of property, should be brought to the stake, competition at the sales could be maintained only by bidders representing similar companies, or associations of individuals of competent means.

Property of this description cannot be divided, or separated into fragments and parcels, so as to bring the sale within the means' of individual bidders. The value consists in its entirety, and in the use of it for the purposes of its original erection; and the capital necessary for its successful enjoyment must be equal not only to purchase the structures, establishments, or works, but sufficient to employ them for the uses and purposes for which they were originally designed.

These observations are sufficient to show that the .doctrine which woirld prohibit associations of individuals to bid at the legal public sales of property, as preventing competition, however specious in theory, is too narrow and limited for the practical business of life, and would oftentimes lead inevitably to the evil consequences it was intended to avoid. Instead of encouraging competition, it would destroy it. Arid sales, in many instances, could be1 effected only after a sacrifice of the value, until reduced within the reach of the means of the individual bidders.

We must, therefore, look beyond the mere fact of an association of persons formed for the purpose of bidding at this sale, as it may be not only unobjectionable, but oftentimes méritorieras, if not necessary, and examine into the object and purposes of it; and if, upon such examination, it is found, that the object and purpose are, not to prevent competition, but to enable, or as an inducement to the persons composing it, to participate in'the biddings, the sale should be upheld — otherwise if for the purpose of shutting out competition, and depressing the sale, so as to obtain the property at .a sacrifice.

Each- case must depend upon its own circumstances; the courts are quite competent to inquire into them, and to ascertain and determine the true character of each. Applying these principles to the sale before us, it is quite clear, upon the evidence, that it should be maintained. The leading motive of the association, and purchase, was the construction of a little port and town upon the bay in their neighborhood, which, it was believed, besides the convenience afforded-to their business transactions, would tend to enhance the value-of the property in the vicinity.

The association was composed, chiefly, of the farmers in the neighborhood,- who had not the means individually to meet the expenses of the enterprise, as the necessary outlay, to afford any chance of success, would be considerable. Hence the agreement to join in the purchase and in the expense. From ten to twelve thousand dollars were, in point of fact, laid out by the company at an early day, in ■ the construction of o dock, warehouse, and tavern-house, with a view to the encouragement of the settlement of the town.

The members composing it did not regard the purchase as a speculation of any great value at the time, as three of them sold out their interest soon afterwards at an advance only of from twenty-five to forty dollars each, and others withdrew from it. Holmes, one of the most active in getting it up, sold his interest for $25,• an’d. H. N. Kearney; one of the heirs, his, for $40. And, as appears from the evidence, none of the parties concerned in the purchase, and in the building up of the town, have made profits of any account out of the enterprise.

It has been, as a whole, rather an unfortunate concern, 'aside from the costs of this litigation, and the chances of losing the town itself, with all its erections and improvements, as the final result of it. The only fortunate parties concerned, are the heirs, who have realized a very large price for their property — a price which, it is admitted upon the evidence, it would not sell for at the present time, aside from the -new and expensive improvements. They had rented it, for a series of years, at $260 a year. The proceeds'of the sale, at interest, produces nearly $1400 per annum.

Each heir had been in the receipt of less than $40 a year, as his or her share of the rent since the sale, nearly $200 each, thus receiving an annual income equalling almost, if not quite, the net entire income of the seven. We are satisfied that no actual fraud has been shown in. the case, and that the sale cannot be disturbed on this ground. Then, is the sale void, and liable to be set aside on the ground of constructive fraud ?

It is said that the commissioners, and guardian of the minor children, were interested in it, and that from the relation in which they stood to the property, and to the heirs, this interest infected the purchase with illegality as matter of law, so as to compel a court of equity to set it aside. Admitting the facts to be true, the conclusion is not denied. But the answer is, the proofs fail to make out the allegation.

Taylor, the Eiardian, and two of the commissioners, James Hopping and eonard Walling, took an interest in the company some three months and more after the sale, namely, in the February following, Taylor bought out the interest of Holmes, for which he gave him an advance of forty dollars. Leonard Walling took the interest of Stevens, and James Hopping of another of the. members, at íhe same time. The company were then about commencing the improvements with a view to the laying .out of the town and construction of the dock or wharf.

This is the first time these persons are spoken of in the evidence as having any interest in the concern, and these are the circumstances under which it was taken. The three died some years before the institution of this or of the ejectment suits, and we have not, therefore, the. benefit of their explanation. Taylor, the guardian, died in 1836, and Hopping and Walling, the two commissioners, a year or two later.

Edward Taylor, the only surviving commissioner, was examined as a witness in the ejectment suit,, and expresses his confident belief that neither of these persons had any interest in the purchase at the time of the sale, and has again affirmed the same in his answer to this bill. The fact is denied in the answers of all the defendants; and there is not only no proof to contradict it, but affirmative evidence, as we have seen, sustaining the answers in this respect.

Doubtless, if these persons were living, and we could have had the benefit of their own account of the matter, the explanation would, have, been more, full and satisfactory. But the circumstance' should not operate to the prejudice, of the defendants. The delay in the commencement of the litigation and in the impeachment of the conduct of three of the principal parties to the transaction, until after their decease, is alone attributable to the complainants. It would be unjust to indulge in presumptions against thé fairness of their conduct under such circumstances.

It has been said, also, that inasmuch as the trust imposed upon these commissioners had not expired at the time they becapje interested in the company in February, 1830, even admitting their interest then commenced, the case is still within the principle, forbidding the trustee to purchase- The one half of the purchase-money was to be received from the purchasers on the first of April thereafter; and the security to be taken for the remainder. But, we think this conclusion would carry the application of the principle beyond the reason upon which it is founded.

The only consequence of the.interest taken in the purchase by the commissioners at this period was to subject themselves personally to the first payment of the purchase-money, which we do not see could operate prejudicially to the heirs. It is also said that Primrose Hopping, the auctioneer at the sale, was interested in the company, and hence a purchaser, and, that for this reason the sale should be set aside.

We are free to admit, if it clearly appeared that he was one of the association, who bid off the property at the time of the sale, there" would be very great difficulty in upholding it, even in the absence of any actual fraud in the case.

The reasons for this conclusion are too obvious to require explanation, We have accordingly looked with some care and interest into the record, for the purpose of ascertaining whether this allegation is well founded, and although we regard this as the most doubtful and unsatisfactory portion of the defence, and one upon which different minds might arrive at different results, in this very complicated and confused mass of pleadings and of proofs, yet, the inclination of our mind after the most attentive examination is, that he was not a member of the association, and had no interest in it at the time the sale took place.

Primrose himself was a witness in the ejectment suits and denies his interest, and this is substantially confirmed by Holmes, the most active man in getting up the company. Some of the answers admit, upon information and belief, others more directly, while some deny, that Primrose was a member of the company. Tlie truth is, the association was got up suddenly by a mere verbal understanding at the time, and no one seems to have known with any certainty the exact number or persons comprising it. Hence scarcely any two of the defendants in their answers, or witnesses agree, as to the individuals engaged in it. Mr.

Lippencott, who appears to have been one of the most intelligent and responsible members', says, in his answer, that the particular persons concerned in it were not finally settled upon or fixed until about the time the first payment of the purchase-money in April; and this is the first time he mentions Primrose- as having become a member.

As we have already said, the evidence in the case consisting of the notes of the opposite counsel in the ejectment suits, is very much abridged, and some parts of it of doubtful meaning, and frequently inconsistent and contradictory; but we think the fair construction and weight of it confirms the testimony of Primrose himself.

It is very probable, and indeed is virtually admitted by himself, that he was aware at the time of the sale, he could have an interest in the company if he wished; and, if this was a case that fairly admitted the question of actual fraud to be raised, this expectation,-or contemplation of a possible future interest, would be entitled to great weight.

But, in the absence of actual fraud, and with the admitted fact, that the property was sold not only for a full, but, for a very large price, and which the heirs have received, and been in the enjoyment of for the last eight or ten years, we think it would be pressing the principle of constructive fraud to a refinement in its practical application, beyond the reason of it, as it certainly would be in utter subversion of the justice in the particular case, to concede to it the effect claimed.

The conduct of the auctioneer is also impeached in respect to the biddings upon lot No.' 8, one of the most valuable lying on the bay, and in striking it off to the bidder on behalf of this company. But neaiiy all the witnesses examined on this subject concur in disproving the charge.

Taylor, the only surviving commissioner, and who has never had any interest in the premises in dispute, and was superintending the sale at the time, says the lot was cried audibly several times to get another bid after the bidding had ceased; and that, after it was thus cried, timely notice was given by the auctioneer, that if none other was made,, it would be struck off. It is also said that, after bids had been made upon this lot the first day of the sale, the sale was stopped, and adjourned until the next day.

But all the witnesses agree, that this was for the purpose of preventing a sacrifice of the property, and to secure greater competition. The bid was at twenty-eight dollars per acre when the adjournment took place. The next day it sold for forty-three dollars per acre. Without pursuing the case further, we are satisfied that the decree below in favor of the defendants is right, and should be affirmed. Mr. Justice McLEAN, Mr. Justice WAYNE, and Mr. Justice CURTIS dissented. Order.

This cause came on to be heard on the transcript of the record ’ from the Circuit Court of the United States for the District of New Jersey, and was argued by counsel. On consideration whereof, it is now here ordered, -adjudged, and decreed by this court, that the decree of the said Circuit Court in this cause be, and the same is hereby, affirmed, with costs.