Opinion
Argued June 17, 1890
Decided October 7, 1890
Adelbert Moot for appellants.
Truman C. White for respondent.
The defense to this action was placed upon two grounds: (1) That the bond and mortgage in suit was obtained by duress. (2) That it was not supported by a valid and legal consideration.
The referee found that Mrs. Ensign executed the bond and mortgage "intelligently and without duress, with full knowledge of all her rights," and as there was ample evidence to support that conclusion, the exception to that finding need not be further referred to.
The lack of a valid consideration to support the contract is said to result from the agreement on the part of the mortgagee not to bid at the foreclosure sale, under the Potter mortgage, and it is contended that that agreement was one to prevent or suppress competition at a public sale and was, therefore, void as against public policy.
There is authority for this contention in many of the older cases. ( Jones v. Caswell, 3 Johns. Cas. 29; Doolin v. Ward, 6 Johns. 194; Wilbur v. How, 8 id. 444; Thompson v. Davies, 13 id. 112; 1 Story's Eq. Juris. § 293.)
But the rule applied in these cases has been very materially modified by the later decisions of the courts, and it is now settled that agreements between two or more persons that all but one shall refrain from bidding, and permitting that one to become the purchaser, are not necessarily and under all circumstances void. They may be entered into for a lawful purpose and from honest motives, and in such cases will be upheld, and they will not vitiate the purchase or necessarily destroy the completed contracts to which they refer and in respect to which they are made. ( People v. Stephens, 71 N.Y. 527-546; Marsh v. Russell, 66 id. 288; Marie v. Garrison, 83 id. 14-28; Myers v. Dorman, 34 Hun, 115; Kearney v. Taylor, 15 How. [U.S.] 494; Wicker v. Hoppock, 6 Wall. 94; Phippen v. Stickney, 3 Metc. 384; Maffat v. Ijams, 103 Penn. 266; Garrett v. Moss, 20 Ill. 549; N Bk. of Metropolis v. Sprague, 20 N.J. Eq. 159; In re Carew, 26 Beav. 187.)
It was said in Phippen v. Stickney: "When such an agreement is made for the purpose and with the view of preventing fair competition and by reason of want of bidders to depress the price of the article offered for sale below the fair market value, it will be illegal, and may be avoided as between the parties as a fraud upon the rights of the vendor. But, on the other hand, if the arrangement is entered into from no such fraudulent purpose, but for the mutual convenience of the parties and for a reasonable and honest purpose, such agreement will be valid and binding."
The rule thus stated was approved by this court in Marsh v. Russell.
In Marie v. Garrison, it was said that "the mere fact that an arrangement fairly entered into with honest motives for the preservation of existing rights and property may incidentally restrict competition at a public or judicial sale, does not, we think, render the arrangement illegal. The question of intent, at all events, is one for the jury upon the whole facts as they shall appear at the trial."
And in Wicker v. Hoppock, Justice SWAYNE, speaking for the court, said: "The validity of such an arrangement depends upon the intention by which the parties are animated, and the object sought to be accomplished. If the object be fair — if there be no indirection — no purpose to prevent the competition of bidders, and such is not the necessary effect of the arrangement in a way contrary to public policy, the agreement is unobjectionable and will be sustained."
It would be impossible to distinguish, in their facts, many of the cases I have cited from the earlier decisions in Johnson's Reports, and so far as those early cases lay down the broad rule that every agreement of which the consideration is the forbearance of bidding at a public sale is per se void, they must be deemed to be overruled, and the extent to which the doctrine will now be carried seems to embrace only cases of fraudulent acts and combinations having for their object to suppress fair competition at the sale with the purpose of acquiring the property at less than its fair value.
The courts will now look to the intention of the parties, and if that be fair and honest, and the primary purpose be not to suppress competition but to protect their own rights, and there be no fraudulent purpose to injure or defraud others interested in the result of the sale, the agreement may be upheld. The question is one of fact to be determined by the trial court upon the evidence before it.
We have then in this case to inquire as to the character of the agreement which the appellant assails.
Mr. White, the mortgagee, had rendered a large amount of professional services to the surviving partner of the firm of Holt Ensign, for which he had received no compensation, and for which compensation could not be compelled on account of Holt's insolvency. He might have secured the amount by bidding at the sale, and expected to reimburse himself in that way. He refrained from so doing on account of Mrs. Ensign's promise to pay the debt.
It was her desire to obtain title to the property for the amount due on the Potter mortgage, and the only creditor of her husband's estate, who appears to have been pecuniarily interested in that estate, was willing that she should do so. If all parties interested in the land had agreed that Mrs. Ensign might purchase the property freed from their claims upon paying to White the amount of his debt, no one could question the legality of such an agreement. Public policy would not forbid it, and no one being injured there would be no one who could complain.
Substantially that is what was done. Mrs. Hamilton's attorney made the arrangement with White by which he refrained from bidding in consideration of receiving security for his claim and he testified that it was important for Mrs. Hamilton's interests that some compromise should be made. Every one who had any substantial interest in the land, therefore, consented to the arrangement.
We are of the opinion that this agreement was not illegal, although it had the effect incidentally to prevent competition between White and Mrs. Ensign.
The referee has not found that the intention of the parties was to suppress competition, and the evidence shows that such was not their purpose. Mrs. Hamilton, who was the only person who would have benefited by such competition, consented to the arrangement.
If it is said that May Ensign, as the owner of the legal title to the land, was prejudiced or injured by the agreement, the answer is that if she was she cannot attack it in this action. If she has been injured it was by the sale of the land for less than its value, and it would be a gross perversion of a salutary principle of law to permit her, while acquiescing in the purchase of the land by her mother, to successfully assail the agreement by which her mother was enabled to acquire the title. If this defendant has cause for complaint, her remedy must be found in an application to set aside the sale and not in this action, which involves only the validity of the agreement and the parties to it.
There is no analogy between such an agreement as we are considering and one made to suppress bidding when a contract for the performance of a public work is to be awarded to the lowest bidder, or one where the intention is to have property sell for less than its real value, and thus deprive those interested therein of their just rights.
The first class are justly declared void on grounds of public policy, and the second because of their corrupt purpose and the fraudulent intent of the parties to them.
Here there was no corrupt intent and no illegality in White's attempting to obtain payment or security for that which was equitably due to him, and there was no valid ground for the claim that his purpose was injurious to those interested in the sale.
The purpose of the agreement being lawful, and the motive of the parties honest, in the absence of a finding of unlawful intent, the case falls within the principle of the authorities cited.
We are also of the opinion that White's relinquishment of his right to bid at the sale was a sufficient consideration to support the mortgage. It is not essential that the consideration should import a gain or loss to either party. If the party in whose favor the contract was made foregoes some right or benefit it is sufficient.
In the cases cited from Johnson's Reports ( supra), it was conceded by the learned judges who held that the agreements were illegal, that in other respects foregoing the right to bid was a valid and valuable consideration. ( Jones v. Caswell, 3 Johns. Cas. 29; Thompson v. Davies, 13 Johns. 112; Myers v. Dorman, 34 Hun, 115.)
We have examined the other points made by the appellant, but there are none which require further discussion.
The judgment should be affirmed, with costs.
All concur, except BRADLEY, J., not sitting.
Judgment affirmed.