Levy v. Broadway-Carmen Bldg. Corp.

• Decision Date: 16 April 1937
• Docket Number: Gen. No. 23002.
• Citation: 8 N.E.2d 671,366 Ill. 279
• Parties: LEVY v. BROADWAY-CARMEN BLDG. CORPORATION.
• Court: Illinois Supreme Court

366 Ill. 279

8 N.E.2d 671

LEVY

v.BROADWAY-CARMEN BLDG. CORPORATION.

Gen. No. 23002.

Supreme Court of Illinois.

April 16, 1937.

Suit by Henry R. Levy against the Broadway-Carmen Building Corporation. From a judgment (278 Ill.App. 293), affirming an adverse decree, complainant appeals.

Judgment and decree reversed, and cause remanded, with directions.

HERRICK, C. J., and ORR, J., dissenting.Appeal from Second Division of the Appellate Court, First District, on Appeal from Superior Court, Cook County; Robert E. Gentzel, Judge.

Isaac B. Lipson, of Chicago (A. C. Lewis, of Chicago, of counsel), for appellant.

Kamfner, Halligan & Marks, of Chicago (Samuel M. Lanoff, of Chicago, of counsel), for appellee.

FARTHING, Justice.

Henry R. Levy, the appellant, was the principal stockholder in the Studebaker Sales Company of Chicago. In January, 1926, David Gordon purchased the land involved in this foreclosure, from that company. He paid $35,000, in cash, and secured the balance of $100,000 by a mortgage. He reduced the debt to $70,000, and on April 13, 1931, when this became due, an agreement was made between Gordon and Levy by which $5,000 more was paid and the property was deeded to the Broad-way-Carmen Building Corporation, organized by Gordon. That company gave its note for $65,000, guaranteed by Gordon and his wife, and secured by a trust deed on the premises. In addition, Levy received a commission of $1,950. After $2,500 had been paid on the principal debt, default was made by the mortgagor, and Levy obtained a judgment at law against David Gordon and Ida Gordon, his wife, for $66,691.87. He also brought this suit to foreclose the trust deed. The superior court of Cook county rendered a decree on May 26, 1933, and found that $70,246.91 was due Levy on March 15, 1933. It ordered the mortgaged premises sold at public auction and directed the master in chancery to carry out the decree. Accordingly the master, on June 21, 1933, struck off the property to appellant, Levy, for $50,000. The appellee filed objections to the report of sale. It claimed that the property was reasonably worth $80,000, but that economic conditions had resulted in the destruction of the market for real estate in Chicago. It prayed that the court establish the value of the premises and credit that value on the amount found due Levy; that a deficiency judgment be denied and that the judgment previously rendered against Gordon and wife, be satisfied in full. It stated that it had offered, and was then willing, to deed the property to the appellant in cancellation of the debt. Levy answered, denying that the premises were worth more than $50,000. He set up the fact that the property was being managed by a receiver and that the rental was $150 per month, plus $5 for each automobile sold by the lessee; that the 1929, 1930, and 1931 taxes, totaling $6,000, were unpaid. He offered to assign his certificate of purchase to any one for the amount of his bid. The mortgaged premises are located at a street intersection and are known as No. 5100 Broadway. The lot is 97 by 100 feet and is improved with a one-story automobile display building and service garage. Both parties introduced affidavits as to value. Those on behalf of appellee, set the value at $77,400 to $80,000, which was based on a rental value of $400 per month, and a possible rental of $500 if the building were divided into storerooms. The affidavits on behalf of appellant showed that the improvements cost $35,902 thirteen years before, and that their replacement value was $22,500. They showed the reasonable rental value to be $250 per month and fixed the value of the premises at from $40,000 to $50,000. At the close of the hearing on the objections, the chancellor ordered that the sale be approved, provided that appellant released and canceled the outstanding judgment against the Gordons, and the mortgage indebtedness, but Levy refused to do this. A decree was entered on January 20, 1934, denying confirmation of the master's report of sale. It ordered a resale of the property at an upset price of $71,508.45, the amount then due, together with interest and costs of suit. The Appellate Court for the First District affirmed this decree on appeal. We granted leave and the cause is here on appeal.

Appellant contends that the order of January 20, 1934, denying confirmation of the master's report and directing a new sale at an upset price, was an amendment to the foreclosure decree dated May 26, 1933, and that the later decree was of no effect, because it was rendered at a succeeding term. This contention cannot be upheld. It was the duty of the court to supervise the sale and to approve or reject the report. If rejected, it was the duty of the court to order a resale and directions as to time, place, and terms of sale were but incidents to such order. Mariner v. Ingraham, 230 Ill. 130, 82 N.E. 577;Union Trust Co. v. Curtis, 182 Ind. 61, 105 N.E. 562, L.R.A.1915A, 699.

As stated by appellant, the remaining points for consideration are embodied in the question: May the chancellor, in a suit to foreclose a real estate mortgage, require the plaintiff to waive his right to a deficiency decree as a condition precedent to confirming the master's report of sale, or, in the alternative, may the chancellor fix a value and direct the master not to accept a bid lower than this reserved or upset price? Appellant says a court of equity is without power to disapprove a master's report of sale in a foreclosure suit, except there be mistake, fraud, or some violation of duty by the purchaser or the master. He says that no matter how grossly inadequate the bid may be, it does not constitute fraud, or warrant the chancellor in disapproving the sale. No argument is required to disclose or sustain the wisdom of the rule that public policy and the interest of debtors require stability in judicial sales and that these sales should not be disturbed without cause. However, it is to be observed that the rule requiring more than mere inadequacy of price, and the showing of a breach of duty by the purchaser or the officer, or a fraud upon the debtor, arose out of cases where the judicial sales had been consummated and not out of mere offers to buy from a court. For example in Skakel v. Cycle Trade Publishing Co., 237 Ill. 482, 86 N.E. 1058, the complainant brought his action to set aside a sheriff's sale and a deed already executed. The cases of Mixer v. Sibley, 53 Ill. 61,Davis v. Pickett, 72 Ill. 483,O'Callaghan v. O'Callaghan, 91 Ill. 228, and Smith v. Huntoon, 134 Ill. 24, 24 N.E. 971,23 Am.St.Rep. 646, all involved sales under executions at law. Dobbins v. Wilson, 107 Ill. 17, concerned a deed issued following a United States marshal's sale. Quigley v. Breckenridge, 180 Ill. 627, 54 N.E. 580, involved a sale made pursuant to a decree for partition, and although we held that the sale was fair and the master's report of sale should have been approved, nevertheless we reaffirmed the doctrine that a court of chancery possesses a large discretion in passing upon masters' reports of sale. In that case we pointed out the fact that such a sale is not completed until it is confirmed, and that until then, it confers no right in the land upon the purchaser. The sale in Bondurant v. Bondurant, 251 Ill. 324, 96 N.E. 306, Ann.Cas.1914D, 18, was made by a trustee who had power to sell the land at public vendue and was not a judicial sale in the legal sense. In the case of Allen v. Shepard, 87 Ill. 314, we exercised our judicial power to determine whether or not the bid made at an administrator's sale was adequate, and determined that it was. In Clegg v. Christensen, 346 Ill. 314, 178 N.E. 925, we again exercised the same power. Abbott v. Beebe, 226 Ill. 417, 80 N.E. 991,117 Am.St.Rep. 257, concerned a partition sale. The land brought more than two-thirds of the appraised value. We again declared that there was power in the chancellor to set aside a judicial sale for inadequacy of price, but we held that the facts showed the sale under consideration was fairly made. The record did not disclose any inadequacy in the price.

In sales by conservators, guardians, and trustees, involving consideration of objections filed before reports of sale were approved, inadequacy of price has always been considered in determining whether the sale was fairly made and whether the report should be approved and confirmed. In most of the cases the objector tendered a larger bid and very often the bid was required to be secured, but the fact that there was such an increased bid was, at most, evidence that the sale price was inadequate. In Kloepping v. Stellmacher, 21 N.J.Eq. 328, a sheriff sold property worth $2,000 for $52. The owner was ignorant, stupid, and perverse, and would not believe his property would be sold for so trifling an amount, although he had been forewarned. Redemption was allowed upon payment of the purchase price and costs. The court said: ‘But when such gross inadequacy is combined with fraud or mistake, or any other ground of relief, in equity it will incline the court strongly to afford such relief. The sale in this case is a great oppression on the complainants. They are ignorant, stupid, perverse and poor. They lose by it all their property, and are ill-fitted to acquire more. They are such as this court should incline to protect, notwithstanding perverseness.’

In Graffam v. Burgess, 117 U.S. 180, 6 S.Ct. 686, 692, 29 L.Ed. 839, the Supreme Court of the United States, speaking through Mr. Justice Bradley, said: ‘It was formerly the rule in England, in chancery sales, that until confirmation of the master's report the bidding would be opened upon a mere offer to advance the price 10 per centum. 2 Daniell, Ch.Pr. (1st Ed.) 924; (2d Ed. by Perkins, 1465, 1467); Sugden, Vend. & Pur. (14th Ed.) 114. But Lord Eldon expressed much dissatisfaction with this practice of opening biddings upon a mere offer of an advanced...