Hirst et al. v. Freeman et al.
| Citation | 1 D.&C. 675 |
| Parties | Hirst et al. v. Freeman et al. |
| Decision Date | 05 June 1922 |
| Court | Pennsylvania Supreme Court |
William T. Brennan and Daniel C. Donoghue, for plaintiffs.
Allen S. Olmsted, 2nd, and Saul, Ewing, Remick & Saul, for defendants.
At a public sale of real estate the plaintiffs' decedent made a bid of $110,000 for the property, which was accepted by the defendants, auctioneers employed to make the sale by the owners. $5000 was paid as down-money, and the usual auctioneers' receipt given. At the time of the sale the premises were occupied by the Society of the American Red Cross, which held under a two-year lease. The lease contained this option to the tenant to purchase the property, viz.: "Should the lessor have a proposal for the purchase of the property, the lessor agrees to give the lessee the first opportunity to buy the same, subject to the understanding that if notice is served upon the lessee to that effect it is to decide within one week as to whether or not it will purchase the demised premises."
The sale was advertised by the auctioneers as being After the sale the attorney for the estate which owned the property notified the bidder that the lessee had elected to purchase under the option in the lease. The bidder thereupon increased his offer to $117,500, which offer was not accepted. The lessee has failed to buy the property and the bidder is not now disposed to consummate the purchase. This suit is brought to recover the $5000 paid to the auctioneer at the sale.
The defendants in their affidavit of defence urge that a binding contract for the sale was made at the time the property was struck down to the plaintiffs' decedent, and that the plaintiffs are under the duty to consummate the sale, and, therefore, not entitled to the return of the money paid on account. The plaintiffs seek judgment for want of a sufficient affidavit of defence and obtained this rule.
If the plaintiffs are obligated under the terms of the sale to purchase the real estate at the price bid, regardless of the election by the lessee to take under the option, then the affidavit of defence is sufficient. But if the bid at the public sale amounted only to an offer, which was automatically rejected by the exercise of the option, then the affidavit is insufficient, for it merely insists that the plaintiff carry out a contract which, in fact, was never completed.
The question is whether at a public sale of real estate, subject to a lease containing an option to the lessee, the bidder obligates himself to purchase a title which may be divested by the exercise of the option, or whether his bid is merely an offer which is automatically rejected when the lessee signifies his intention to buy at the price bid.
At an auction sale the striking of the property to the highest bidder is an acceptance of the bidder's offer, and the contract is completed on the terms announced by the auctioneer. The contract for the sale of the real estate in this case became binding upon both parties with that act, and neither could refuse to carry out its provisions except by mutual consent. The seller contracted to sell his entire interest in the property, that is, the full title, on condition, however, that the lessee might purchase the same within seven days, and the bidder, having knowledge of the condition, contracted to take.
Defendants' contention is, the purchaser of an equitable title (including one held by a vendee under articles of agreement), of a title inchoate or defective on its face, takes subject to all the countervailing equities to which it was subject in the hands of the person from whom he purchases: Kramer v. Arthurs, 7 Pa. 165; Reed v. Dickey, 2 Watts, 459; La Belle Coke Co. v. Smith, 221 Pa. 642. One who purchases land with notice that the title is defective takes the whole risk on himself: Walker v. Quigg, 6 Watts, 87. It is admitted that the bidder had knowledge of the outstanding encumbrance, and according to the analogy in the case of Coolbaugh v. Ransberry, 23 Pa. Superior Ct. 97, equity would specifically enforce the contract entered into between the lessor and lessee, and to which the bidder would become a party by taking the title of the lessor. In Coolbaugh v. Ransberry, a vendee took a conveyance of land through which the vendor had previously agreed to give a right of way to a railroad company. The vendee had knowledge of this agreement, although it was not mentioned in his deed, and equity compelled specific performance of the agreement with the railroad company. The option in the present lease was in the nature of a continuous offer to sell, and, when accepted, became a complete contract of sale: Kerr v. Day, 14 Pa. 112; Napier v. Darlington, 70 Pa. 64. A vendee who takes title to land with the knowledge that his grantor has agreed to sell it to another person, takes it subject to the equitable estate vested in the said vendee: Smith v. Gibson, 1 Yeates, 291; Riel v. Gannon, 161 Pa. 289; Dillinger v. Ogden, 244 Pa. 20. The same is true where a grantee, with notice of a prior option, which has not expired, takes subject to the right of the person holding the option to compel specific performance: Hamory v. Sargent, 25 Pa. C. C. Reps. 191. In the present case the bidder had knowledge of the option, and the lessee had the absolute right to make the contract binding within the time specified.
It is clear that the defendants admit that at the sale the bidder offered to buy the title of the owner, i. e., a good legal title, but one which...
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