Wicks v. Westcott

Irving, J., delivered the opinion of the Court. Upon the fourth day of September, 1878, Joseph J. Webb and wife executed a mortgage, to one William Yannort, for two farms in Kent County, Maryland, to secure the payment of eight thousand four hundred and fourteen dollars and thirty-two cents, which was evidenced hy an obligation under seal, payable twelve months after date.' On the second of October, 1880, William Yannort assigned the debt and mortgage to George B. Westcott, Jr., the appellee. There was a power in the mortgage that in default of performing any condition of the mortgage, “ the said William Yannort, his heirs, executors, administrators and assigns, are authorized and empowered at any time thereafter, to sell the said mortgaged premises.” Default having been made, and the power having devolved upon the assignee, George B. Westcott, Jr., he did, on the ninth of November, 1880, sell the mortgaged property at ²⁷⁴ public sale, after due advertisement of the sale. He reported the sale to the Court; exceptions were filed by the appellant, a judgment creditor of the said Joseph J. Webb, which having been overruled, and the sale having been ratified by the Court, this appeal has been taken.

It appears, that on the second day of June, 1872, Asenath E. Webb, widow of Joseph W. Webb, of Kent County, executed a release of dower in the lands of her husband, to her son Joseph J. Webb, reserving an annual rent from the farms already mentioned, of four hundred dollars, from and after the fourth day of January, 1872. The deed reserved the right of distress, and also the rig’ht of renting in case of default in the payment of this rent. The trustee’s report states, that being unable to find out how much of this rent charge was in arrear, just before the sale, it was distinctly stated “that the rent charge being a prior lien to the mortgage, the property would be sold subject to the payment by the purchaser of so much of the rent in arrear as might ultimately be shown to be unpaid, and subject to the payment of four hundred dollars per annum, during the life-time of Mrs. Webb.” The report states that the farms were bought by William T. Hepbron and Prank H. Harper, the home farm for sixty-five hundred dollars, and the Pond farm for forty-six hundred and twenty-five dollars. The exceptions, which are seven in number, are all directed to the manner in which the property was offered by the trustee.

Substantially they charge that the trustee offered the property subject to the accumulated arrears of the annuity or rent charge due Mrs. Webb, without accurately indicating what was due on account of such arrears; so that the exceptant and other bidders were bidding in the dark, and in such uncertainty, that they could not intelligently bid for the property; and because the trustee stated a sum as the possible amount of such arrears, without stating that a certain judgment and mortgage were given ²⁷⁵ on account thereof, whereas notice was given of such judgment and mortgage, as if they were independent liens, when in fact they were additional security for the arrears of rent charge. There was also an exception to the effect, that the trustee, in making the computation of what was probably due on the rent charge, included interest thereon, whereas the exceptant contends, that such arrears do not draw interest from the time of falling due, or at all; and that including the interest, the amount of arrears due would fall far short of the amount stated by the trustee as the amount subject to which purchasers would take. Testimony was taken, and when the case came up for a hearing, the learned Judge in his opinion stated that it was the duty of the trustee to so offer the property as would invite fair and open competition; and that it was the duty of the trustee to have ascertained the precise amount due for arrears of annuity or rent charge, which was so easily obtainable by him ; and that it was his duty to have given notice, that the judgment and mortgage were additional security for such arrears, so that bidders might form some intelligent judgment respecting what they would have probably to pay, and how far the securities would he available to the payment of the arrears; and this not having been done, he would he compelled to set aside the sale, if it did not appear that there was some doubt whether the property had not brought its fair market value, which was the gist of the whole matter; and therefore he remanded the case for further testimony. In ordering further testimony the Judge says, “ what I want to know is, in the first place, the precise sum due as arrearages, and then assuming this sum to he due, whether the property sold for its market value, not however, what a judgment creditor behind the mortgage, might hid ; hut what a purchaser would hid without regard to protecting a -claim, that is to say, the market value of the property.” A mass of testimony was taken touching the market value of the property, and the case again came up for final ²⁷⁶ hearing.

The Court said the proof was very conflicting, and did not satisfy the judicial mind that the property had sold at a depreciated price; hut on the contrary, considering the weight of testimony was in favor of the property having brought its fair market value, the sale was ratified. Inasmuch as the Court had found affirmatively that the trustee did not do his whole duty in the premises, and that the representations respecting the possible amount of incumbrances on the property by reason of the arrearages, of annuity due Mrs. Webb, had been made by the trustee’s agents or attorneys at the sale, calculated to prejudice the sale; and the assignee or trustee was not personally present directing the sale, and exercising his judgment, in respect to the circumstances connected with it, which aggregated facts discredited it; there should be no intendment in its favor. Ordinarily, the presumptions are that the trustee did his whole duty, and that a sale made at. public auction, after due-notice, has brought the best price; but when facts are found to exist, calculated to prejudice-the sale, the presumption is against the sale. In such cases a Court of equity will sometimes ratify a sale, when strict conformity to requirements has not been observed in making it, but such ratification will not he accorded unless, it appears from the proof, that the sale is an advantageous one, and ought to be ratified notwithstanding the infirmity in the methods of proceeding.

In such case the Court will infer depreciated price from much lighter evidence than would otherwise be required. The method adopted in this case of bringing the property under the hammer, was so especially calculated to dampen the sale and decrease the price the sale might otherwise realize, we think the proper course for the Court was to set the sale aside, without, remanding the commission for any further testimony. Nor do we regard the testimony, procured on the remand, sufficient to sustain the Court in upholding the sale and ratifying it under the circumstances. ²⁷⁷ The mortgagee, with power of sale to him or his assignee, or the assignee in making the sale under such mortgage, is, as was said by the Judge below, but a trustee for all the parties in interest. His power is coupled with an interest, but his position is nevertheless a voluntarily assumed relation of trustee, and he is subject to the .same rules of duty which belong to other trustees.

It was no doubt his duty as was decided by the Court below, so to bring the property under the hammer as to invite fair and open competition. He should have exercised that prudence which would be expected of a prudent man in making sale of his own property, in order that the property may sell for all that it will. Chappell’s Case, 42 Md., 166 . As a general rule, we do not think it is the duty of the assignee or trustee, in selling property, upon which prior incumbrances rest, to ferret out the exact state of such liens, and ascertain how much, if any, may be due upon them.

The rule of caveat emptor excludes such rigid ex-action of a trustee. If the liens are very numerous, or complicated, and the title clouded, so that it may be doubtful if any valuable interest is to be sold, a creditor might file a bill for the purpose of removing the cloud, and having the property sold by decree and the proceeds of sale marshalled; but such duty would not rest on the trustee. Looking at the peculiar character of this lien on account of accumulated arrears of rent, the Court below thought it was the trustee’s duty to have ascertained, as information was easily accessible, what was due and to have so announced. This may not have been his duty; but if he was not bound to inquire or make any statement respecting the amount of arrears, the trustee was bound, if he undertook to make any statement respecting it, to be sure that the statement he did make was, at least, approximately accurate, and not in anywise misleading.

Informaron was given, by public announcement, that the prop ²⁷⁸ erty would be sold subject to Mrs. Webb’s rent charge or annuity of $400, and the arrearages of rent, which might, reach four thousand dollars. If it exceeded four thousand dollars, the