CUMBERLAND LUMBER CO. v. TUNIS LUMBER CO. et al., 171 F. 352

BOYD, District Judge (after stating the facts as above). This case is before us to be considered upon the following assignments of error: First. The court erred in entering the decree of July 11, 1908, confirming the sale of certain lands, because it appears upon the face of the proceedings that the act of Congress of March 3, 1893, legulating and governing the sales of lands under the decrees of the United States courts, had not been complied with, and because the said Tunis Dumber Company had had no notice of said confirmation. Second.

The court erred in entering the decree of October G, 1908, refusing to set aside the said decree of July 11, 1908, motion to set aside having been made during the term at which the decree of July 11, 1908, had been entered, and for the reason that it appeared on the face of the proceedings that the sale of the said land had not been made in compliance with the said act of Congress, and that no notice of the confirmation had been given to the Tunis Dumber Company. The act of Congress involved here is Act March 3; 1893, c. 225, 27 Stat. 751 (U. S. Comp.

St. 1901, p. 710), approved March 3, 1893, entitled “An act to regulate the manner in which property shall be sold under orders and decrees of any United States courts.” We give the act in full. It reads : ‘‘First. That all real estate or any interests in land sold under any order or decree of any United States court shall be sold at public, sale at the courthouse of the county, parish, or city in which the property, or the greater pari thereof, is located, or upon the premises, as' the court rendering such order or decree of sale may direct. “Second.

That all personal property sold under any order 'or decree of any court of the United States shall be sold as provided in tlio first

section of this act, unless in the opinion of the court rendering, such order or decree, it would be best to sell it in some other manner. “Third. That hereafter no sale of real estate under any order, judgment, or decree of any United States court shall be had without previous publication of notices of such proposed sale being ordered and had once a week for at least four weeks prior to such sale in at least o-ne newspaper printed, regularly issued and having a general circulation in the county and state where the real estate proxwsed to be sold is situated, if such there be.

If said x>roperty shall be situated .in more than one county or state, such notice shall be published in such of the counties Vhere said property is situated, as the court may direct. Said notice shall, among other things, describe the real estate to be sold.

The court may, in its discretion, direct the publication of the notice of the sale herein provided for to be made in such papers as may seem proper.” The question presented to us in this case rests upon the construction to be given to the act of Congress above set out as to whether the provisions of the said act in regard to the sales of real property are mandatory or merely directory, with the further question, arising upon the proceedings had in the case, whether appellant, by its action in relation to the bidding, together with the decree of acceptance of the bid, and confirmation of the sale, can now be heard to complain of the alleged defect in the form of the sale as directed by the decree.

The act of Congress is explicit in its terms. It makes no exception, but provides one method, and only one, by which lands are to be sold under the orders and decrees of the courts of the United States. If, as contended, the act should be construed as merely directory, the inquiry arises, why the necessity of .the legislation at all? The power already existed in the courts of equity to order or decree sales of realty by public auction, at such place and on such terms as said courts might direct, also the power to make sales by such other method as the courts in their judgment and discretion might adopt.

In the face of these existing powers, and of the fact that the courts of equity, had for time almost out of mind used and favored the practice of selling realty by the' method of sealed bids, the Congress placed, upon the statute books the act of 1893. It will be observed, also, that 'the title of the act states its purpose to be to regulate the manner in which property shall be sold under orders and decrees of the United States courts. The intention of Congress to limit the powers of the courts of the United States in respect to the sales of realty is emphasized by the fact that in the second

section of the act it is provided that personal property shall be sold as provided in the first section, unless, in the opinion of the court rendering the order or decree for sale, it would be best to sell it in some other manner. Thus it will be seen that it is still left by the plain terms' of the act to the discretion of the court to sell personal property otherwise than at public sale; but there is no such provision in the first section, which directs the method by which real property shall be sold.

The conclusion therefore seems to us to be irresistible that the intention of Congress was to confine sales of realty, when made by the orders or decrees of the federal courts, to one method, by public sale, as provided in the statute, and to divest the courts of the discretion which theretofore existed of making sales of such property otherwise.

It is insisted, however that appellant became the bidder for the land in this case according to the plan of sale adopted by the court, that the bid was accepted and the sale confirmed by the decree of the court without objection, and thereby the bidder was concluded, or, at least, that the bid was made in full light of the proceeding, that it.was accepted and confirmed by the court, in which the bidder acquiesced, and that the appellant cannot now take advantage of the irregularity in the manner of the sale.

If our construction of the statute is a true one, the decree for sale was not only irregular; but it was directly contrary to the plain mandate of the law, and the acceptance of tlic bid and the decree of confirmation did not establish a contractual relation between the court and the bidder, such as to hind the latter.

In a judicial sale, the court, acting through its duly constituted agency, becomes a vendor, and whilst the court may not be considered a guarantor of title, yet in no case should the court selling real property permit the title of the purchaser to be beclouded by reason of irregularity, defect, or illegality, in the proceeding under which the sale is made.

Undoubtedly, if a judicial sale of land is made under conditions which are in accord with legal requirements, and due proceeding, the doctrine “caveat eniptor” applies, and the purchaser is concluded; but it would be inequitable tó compel a bidder at a judicial sale to pay for and accept a title which might be subsequently impeached for palpable legal defect in the proceeding under which the sale was made. A bidder at a judicial sale has the right to assume that the court which directed the sale acted within its authority, and that the sale is being made under the conditions authorized by the law.

Such bidder, who might otherwise purchase a good title, should not have the title jeopardized by reason of the act of the court itself. The counsel for appellee cites, in support of the position that the decree of the Circuit Court should be affirmed, two cases from the Supreme Court of the United States. The first is Stockmeyer v. Tobin, 139 U. S. 176, 11 Sup. Ct. 504. 35 L. Ed. 123.

We do not see any particular bearing that this case has upon the one under consideration, as the opinion is only to the effect that in Louisiana mere informalities in a judicial sale do not constitute sufficient ground for setting it aside. The other is the case of Pewabic Mining Co. v. Mason, 145 U. S. 349, 12 Sup. Ct. 887, 36 L. Ed. 732. In that case, Mr. Justice Brewer, delivering the opinion of the court says: “It may be stated generally that there is a measure of discretion in a court of equity, both as to the manner and conditions of such a sale, as well as to ordering and refusing a resale.

The chancellor will always make such provision for notice and oilier conditions as will in his judgment best protect the rights of all interested, and make the sale most profitable to all; and, after a sale has once been made, he will certainly, before confirmation, see that no wrong has been accomplished in and by the maimer in which it was conducted.” The court goes on further to say that the purpose of the law is that the sale shall be final, and that no sale should be set aside for trifling reasons on account of matters which ought to have been attended to by the complaining party prior thereto, etc.

This was a case in which complainant was undertaking to defeat the confirmation of a sale where the property had been struck off to another, and the effort was being made to reopen the bidding. The court was of the opinion that the complainant had had ample opportunity, and that the sale should be confirmed. We do not see that there was any question of irregularity or defect in the manner of the sale in that case, and therefore we fail to perceive its application here.

It will be observed also that both of these cases were decided anterior to the act of March 3, 1893, and, of course, the construction of that act was not involved. Another case cited by the appellee is that of Godchaux et al. v. Morris et al., 121 Fed. 482, 57 C. C. A. 434, decided by the Circuit Court of Appeals for the Fifth Circuit in February, 1903.

The act of March 3, 1893, is discussed in that case, and it is held that the failure of the commissioner to offer separately a small parcel of the land of small value, as directed by the terms of the decree, was a mere irregularity which would not defeat the confirmation, unless loss or injury resulted, and it was further held that, where a federal court had jurisdiction to order a sale of real estate, the fact that its decree directed that the sale be made at a place other than the courthouse of the county, parish, or city in which the property, or the greater part thereof, is located, or upon the premises, as required by the act of March 3, 1893, did not render the sale void, nor constitute ground for refusing confirmation, since the decree, although erroneous, is binding, unless reversed on appeal.

We understand even in that case that, although the sale was public, the direction to sell otherwise than provided in the statute was error which would have been corrected on appeal; but we do not regard that case as decisive of the point we are considering, for, from our view, it is clear that the prime object Congress had in mind was to require real property sold under the orders and decrees of the United States courts to be disposed of at public sale.

As a general thing (though there are, of course, some exceptions), the decisions of the courts of this country, relative to judicial sales of land, have been in cases where a defeated competitive bidder has undertaken to assert some right, or where the defendant in the action in which the land was-decreed to be sold undertook subsequently to establish ownership by’ reason of alleged irregularity or defect in the proceeding.

And it is in these cases, more particularly in the latter class, that the courts of equity have held that the previous action of the party should have a material bearing upon the question of relief sought.

If it appear that a bidder was present at the sale, was fully informed of the terms and conditions, as well as the character, quality, and quantity of the property offered, and he stood by and permitted another to become the purchaser, the courts of equity have not been inclined to favor opposition on his part to a confirmation of the sale, and if the land is decreed to be sold by a court of competent jurisdiction, and the owner of the land, who was a party to the suit, is fully informed as to the proceeding-, and acquiesces therein, permits his land to be sold, the sale confirmed, title passed to the purchaser, he will not thereafter be heard to assert title to the land because of-alleged defect or irregularity in the proceedings under which the sale was made.

The latter proposition is founded on the principle of equitable estoppel. This principle is well discussed in the case of Kirk v. Hamilton, 102 U. S. 68, 26 L. Ed. 79, and the doctrine there declared is in entire harmony with the elementary treaties on the subject and with American decisions generally.

The discussion of this doctrine in connection with the case here may seem to be something of a digression, and we really think it is; but we are led to it by reason of the fact that the appellee argues that the action of the appellant, under the circumstances, was such as to take away the right to complain; ,but we do not think that the appellant conies within the rule laid down in any of the cases referred to, nor have we been able to find any case which holds that a proposed purchaser is bound under conditions, such as existed in this case. The appellant was not a party to the suit.

It had no interest in the suit, and, so far as appears, no knowledge of it, anterior to the time the receivers advertised the land for sale, and the appellant is not undertaking to prevent a confirmation of the sale to another, on account of some irregularity or defect in the proceeding; but the effort is to be relieved from a bid ma.de at a judicial sale, because of the fact, as alleged, that, after the bid was made, it was discovered that the decree directed the sale to be made in a manner not authorized by law.

It is well settled, as a general principle, that a bidder at a judicial sale, whose bid is reported to the court and accepted and the sale confirmed, becomes a party to the suit in which the sale is decreed, to the extent that the court may compel compliance; but wc do not think that this principle applies in this case. According to our construction of the act of Congress, the decree for sale in this case was void. It conferred no authority upon the receivers to make the sale of the land in question.

Their action therefore was a nullity and constituted no basis for enforceable obligation on the part of the bidder. Therefore, following the views we have expressed, we think that the decree for sale was unauthorized and void, and that the subsequent proceedings, both by the receivers, in attempting to make the sale, and the decree of the court confirming it, were of no legal force. In the discussion so far, we have not referred to the third

section of the act of March, 1893, prescribing the manner in which judicial sales of real property shall he advertised. That

section provides expressly that no sale of real estate under any order, judgment, or decree of any United States court shall be had without the advertisement 1 herein provided, which is the publication of notices of the proposed sale in a newspaper once a week for at least four weeks prior to the sale, etc.

So taking the entire act together, beginning with the title, which sets out that the purpose of the act is to regulate the manner in which property shall be sold under the orders and decrees of the United States courts, then the first section, which declares specifically that all real estate or interests in land sold under orders- or decrees of United States courts shall he sold at public sale, with the provision in the second

section leaving it to the discretion of the court to sell personal property otherwise, followed as above stated by the provision for advertisement, it is clear to our minds that it was the intention of Congress to establish a single and uniform method of selling realty under the orders and decrees of the federal courts and to confine the courts to it. The prayer of the appellant’s petition should have been granted, and the decree of confirmation of the salé set aside. The judgment of the Circuit Court is therefore reversed. Reversed.