Supreme Court of WisconsinApr 26, 1963
19 Wis. 2d 625 (Wis. 1963)
19 Wis. 2d 625121 N.W.2d 279

April 5, 1963 —

April 26, 1963.

APPEAL from orders of the circuit court for Marquette county: ROBERT H. GOLLMAR, Circuit Judge. Affirmed.

For the appellant the cause was argued by John H. Bowers, assistant attorney general, with whom on the brief was George Thompson, attorney general.

For the respondents there was a brief by Bogue Sanderson of Portage, for Chickering and Jacobson, and Francis W. Murphy of Portgage, for Gumz, and oral argument by Mr. Murphy and Mr. Thomas J. Sanderson.

On April 19, 1961, Production Credit Association of Madison hereinafter "P.C.A.") commenced foreclosure proceedings on certain lands in Marquette county against S. D. Chickering and Kelly Jacobson, copartners doing business as C J Farms. The property consisted of 1,500 acres that had been made into a "muck farm" with draining, tiling, and a steel quonset warehouse.

A judgment of foreclosure was entered on July 31, 1961, against Chickering and Jacobson. As of July 17, 1961, P.C.A. held a mortgage in the unpaid amount of $38,511.05. One J. G. Hull had a prior lien on the premises in the amount, at that time, of $10,099.28. In addition to the aforementioned liens, there existed five subsequent and inferior liens against the property in question: A mortgage subsequent to the first in the amount of $22,000, plus interest; two judgment liens in the amount of $7,711.67 and $12,222.32, both plus interest; and two mechanics' liens in the amount of $8,349.65 and $3,143, both plus interest. The premises, therefore, had liens, plus interest, etc., against it in excess of $110,000.

The judgment of foreclosure provided that the premises be sold by the sheriff of Marquette county at public auction. It was further ordered that there be public notice of the sale and that the same be published in the Marquette County Tribune, a Montello, Wisconsin, newspaper. The judgment provided:

". . . sheriff may accept from the purchaser at such sale, as a deposit or down payment upon the same, not less than One Hundred Dollars ($100), . . ."

The premises were finally offered for sale over a year later on September 20, 1962, at which time the parties to this appeal were present, namely Richard H. Gumz, and the state of Wisconsin through a representative of the Wisconsin conservation commission. The bidding commenced (with only two bidders participating in the final stages) and the premises were sold, subject to confirmation, to the state of Wisconsin for $87,000. The highest bid by Gumz was $86,000. The state of Wisconsin, being the successful bidder, deposited its check for $100 with the sheriff. P.C.A. then made application for confirmation of the sale to the state of Wisconsin. A hearing took place on October 15, 1962.

On that date, Chickering and Jacobson petitioned the court to set aside the sale of September 20th and provide for a resale. The petition stated, in effect, that the sale was "unfair and misleading, and discouraging to prospective bidders . . . so they did not make their best bid," because:

(1) The sale was advertised as being a sale for cash whereas at the time of the sale it was announced that a down payment of only $100 would be permitted and that a binding sale agreement was not required;

(2) The highest amount bid at the sale, to wit: $87,000, did not represent the full value of the property and the bids were low because of improper advertising, lack of understanding of the terms of the sale, and that some prospective bidders were ready to make binding bids while others were not;

(3) There was a rumor at the sale that the state of Wisconsin conservation commission had exhausted its appropriation and although a prospective bidder, could not carry through on a bid;

(4) The successful bidder at the sale, an employee of that commission, did not have proper authority to bid and bind the commission;

(5) Marcus Gumz and Richard Gumz stood ready to bid at least $100,000 on a binding agreement if the terms of sale had been certain, with $10,000 down, but that at the time they not only considered the terms uncertain but also unfair;

(6) That the property has special value as a muck farm and that the advertising did not emphasize this and did not reasonably get to those in the trade who might fairly bid on this type of specialized property with specialized equipment.

The affidavit of Marcus Gumz, opposing the confirmation of the sale, substantiated and re-emphasized the points set forth in Chickering's and Jacobson's petition, and stated that the affidavit was made for the purpose of supporting an application for a new sale so that the Gumz brothers "be given an opportunity to purchase said premises at a reasonable and fair price," and that Gumz was prepared to put $5,000 down to guarantee he would bid $100,000 at a later sale.

After a hearing on October 15th the court ordered, on November 7th, "that the highest bid [$87,000] at the sale . . . by the . . . conservation commission . . . was not sufficiently high in view of the obvious value of this property, to be confirmed by this court," and "That the application . . . for the confirmation of the sale . . . is, hereby denied." (Emphasis added.)

The court then further ordered a new sale, that the sale be advertised in the Packer, a national publication of the muck-farming trade, and that at the new sale a minimum deposit or down payment on the property of at least $10,000 be made by the successful bidder. Finally, the court stated that the order of November 7th would be subject to review on November 27, 1962.

On October 24, 1962, the state of Wisconsin moved to confirm the sale of September 20th, and in support of that motion there was an affidavit sworn to by Kent E. Klepinger, an employee of the Wisconsin conservation commission, in which Mr. Klepinger appraised the land in question to be $81,550. An order to show cause why this motion should not be granted was entered November 7, 1962, returnable November 27, 1962.

At the final hearing on November 27, 1962, pursuant to the formal order to show cause and the order for review of the November 7th order of the trial court, the court received an affidavit of S. D. Chickering stating that the property was valued at the very least at $140,000. During the hearing the court made the following summary observation:

"Now, the court has given a good deal of thought to this matter, both at the time it came up originally and subsequently. The court, I suppose, if we use the phrase that has come down to us from ancient times about the court's conscience being shocked by the bid at the sale — it sounds a little antiquated and so on — but the court very frankly felt that there were some rather unusual circumstances involved in this sale which the court felt and still feels require that we should say stop, look, and take another hard look at the entire proceedings.

"In the first place, we have to recognize the fact that this is a small county populationwise. Foreclosure sales involving farms of a value, whether at $87,000 or $100,000, are pretty few and far between up here, and the court felt that the fact that it was apparent that there was then available an offer of $100,000 for a farm that had brought $87,000 at the sale, would at least indicate to the court that the statutory proceedings for advertising foreclosure sales — while adequate in the ordinary normal course of events where somebody is foreclosing on a small house, shall we say, in the village of Montello or something of that sort — might not be sufficiently adequate in this case.

"The court, therefore, reached the conclusion that the price offered at the sale was not upon its face adequate and was rather clearly inadequate as compared with the obvious value of the property.

"While it is true that the price offered was sufficient to cover the face amount and accrued interest and so forth on the mortgage itself, the court was advised, and was well aware of the fact that there was some substantial additional obligations owing, and the court felt very strongly that under all of those circumstances, and taking into account the legal questions raised as to the power of the conservation department to bid — not passing on that question — but recognizing that it might well have had some effect to confuse bidders who were present at the sale, the court certainly feels that there is a sufficient showing of an inadequacy in the price bid to shock the conscience of the court and to warrant the resale which was ordered. [Emphasis added.]

"I cannot see that anyone is injured by that procedure. The state still has its opportunity to bid; they still have their opportunity to acquire this land by whatever processes the law provides; and by not only following the sale procedure set up in the statute but also by following the special advertising that the court directed at the time of the previous hearing, I feel at least that we can now get a sale which will produce the maximum number of interested and competent bidders, and, therefore, the motion of the state is denied and the previous order for resale will stand."

The court then entered a formal written order on November 30, 1962, denying the state's motion to confirm the sale, which order also ratified and confirmed the previous order of November 7, 1962.

Prior to this later hearing, P.C.A. assigned the judgment of foreclosure dated July 31, 1961, to Richard H. Gumz, and thus Richard H. Gumz became the plaintiff in the pending proceeding. When the state took its appeal to the supreme court, Gumz, as the then assignee of the plaintiff and of all the other defendants, moved to dismiss the appeal. In his moving papers, Gumz disclosed that he had paid the taxes, and other mortgages and liens on the property, investing in all an amount in excess of $101,000. The motion to dismiss the appeal was denied, without opinion, on March 12, 1963. Substitution of the state of Wisconsin rather than the Wisconsin conservation-commission also was ordered as the proper intervening party and appellant, and argument on the merits was set by our court for the April assignment.

There are two questions to be considered on this appeal.

(1) Is the state of Wisconsin a proper party to bring this appeal? (Necessary here because the court did not issue a memorandum or opinion at the time of dismissal of the motion to dismiss the appeal, as stated above.)

(2) Did the trial court abuse its discretion in refusing to confirm the sale of the premises to the state of Wisconsin and in ordering a new sale?

(1) Is the state of Wisconsin a proper party to bring this appeal? An early Wisconsin case, Rogers v. Shove (1898), 98 Wis. 271, 73 N.W. 989, clearly establishes that the purchaser at a foreclosure proceeding is a proper party to an appeal. In that case, Shove and his wife, the mortgagors, took an appeal from an order confirming the sheriff's sale of the premises involved in the foreclosure proceedings. The mortgagors served notice of appeal upon the plaintiff, but not upon the purchasers at the sale. The court in that case said, at page 272:

"The purchaser of real estate at foreclosure sale becomes a quasi party to the action, so far as the proceedings to confirm the sale are concerned, and may appeal from orders affecting his right to such confirmation. Ward v. Clark, 6 Wis. 509; Kneeland v. Am. L. T. Co. 136 U.S. 89. Upon all motions affecting that right, he is undoubtedly `the adverse party;' and, if he has the right to appeal from orders denying confirmation, the converse naturally follows, namely, that he is entitled to service of the notice of appeal from the order of confirmation when such appeal is taken by other parties. The statute provides that an appeal is to be taken by serving the notice of appeal `on the adverse party,' and on the clerk of the court. R. S. sec. 3049. In case of such an appeal as the one before us, the purchaser is unquestionably the principal `adverse party,' and must be served with the notice. Barnes v. Stoughton, 6 Hun, 254."

In Haas v. Moloch Foundry Machine Co. (1939), 231 Wis. 529, 532, 286 N.W. 62, this court quoted with approval the above statement from the Rogers Case, supra, to the effect that the purchaser at a foreclosure sale "may appeal from orders affecting his right to such confirmation."

Counsel contends that the state is not a "party aggrieved" under sec. 274.10, Stats., and therefore not entitled to appeal.

"`274.10 WRIT OF ERROR NOT ESSENTIAL, PARTIES DEFINED. Any judgment within sec. 274.09 or any order defined in sec. 274.33 may be reviewed before the supreme court upon an appeal by any party aggrieved. A party first appealing is the appellant. All others are respondents."

However, counsel fails to cite any authority, nor can we find any, that one standing in the shoes of the state in a situation as presented in the case at bar is not an "aggrieved party."

Gumz cites Gerhardt v. Ellis (1908), 134 Wis. 191, 196, 114 N.W. 495, to wit: "It is clear that the title [to the foreclosed premises] does not pass until confirmation so as to vest the purchaser with the right of possession." This is true, but that does not substantiate the position that prior to the confirmation of the sale, the purchaser cannot be classified as an aggrieved party under sec. 274.10, Stats. There is no conflict between the Rogers Case and the Gerhardt Case. The fact that one is not entitled to possession does not preclude his being an aggrieved party.

The state, therefore, in the case at bar, is a proper party to bring this appeal.

(2) Did the trial court abuse its discretion in refusing to confirm the sale of the premises to the state of Wisconsin and in ordering a new sale? The main question on this appeal is whether or not the trial court abused its discretion in refusing to confirm the sale of the mortgaged premises to the state of Wisconsin and in ordering a resale. This question has been before this court on many occasions and in a very early case of John Paul Lumber Co. v. Neumeister (1900), 106 Wis. 243, 246, 82 N.W. 144, the following rule was established which is still the law today:

"The granting or refusing of an application to set aside such sale [foreclosure] and order a resale, as a matter of favor, rests in the sound discretion of the trial court; and its determination will not be disturbed, except for a clear abuse of such discretion."

A further rule is firmly established in Wisconsin that a sale will not be set aside simply because the price obtained by the sale was inadequate. As stated in A. J. Straus Paying Agency v. Jensen (1938), 226 Wis. 462, 466, 277 N.W. 105, this rule "is confined to cases `where there is absolutely no fact appearing except that the price is inadequate.'" The Straus Case quotes from Griswold v. Barden (1911), 146 Wis. 35, 37, 130 N.W. 952:

"`Whenever other facts appear, such as mistake, misapprehension, or inadvertence on the part of the interested parties or of intending bidders, as a result of which it seems to the court that the failure to obtain a fair and adequate price for the property was due in whole or in part to such mistake, misapprehension, or inadvertence, the court will readily refuse to approve the sale. No fraud is necessary to justify the court in so withholding its approval. The question simply is, Is the sale under all the circumstances one of which the court, in justice to all parties, should approve?' See also Kremer v. Thwaits, 105 Wis. 534, 81 N.W. 654; Johnson v. Goult 106 Wis. 247, 82 N.W. 139."

To like effect are Estate of Strass (1960), 11 Wis.2d 410, 105 N.W.2d 553; Gratiot State Bank v. Martin (1943), 242 Wis. 254, 7 N.W.2d 863.

In other words, a trial court may refuse to confirm a sale if he is satisfied (1) that the price received for the property was inadequate, and (2) that there was a showing of mistake, misapprehension, or inadvertence on the part of interested parties or prospective bidders.

Moreover, under Wisconsin law a trial court also has discretion to refuse to confirm such a sale even though there is no mistake, misapprehension, or inadvertence, where the sale price is not only inadequate, but is so grossly inadequate as to shock the conscience of the court. Anthony Grignano Co. v. Gooch (1951), 259 Wis. 138, 140, 47 N.W.2d 895, cites the general rule that mere inadequacy of price is not usually sufficient grounds of itself for vacating a judicial sale, but further states, quoting from 31 Am. Jur., Judicial Sales, p. 465, sec. 127, "`. . . unless the inadequacy is so gross as to shock the conscience and raise a presumption of fraud, unfairness, or mistake.'"

In Welfare Building Loan Asso. v. Gearhard (1940), 235 Wis. 229, 293 N.W. 813, the court held, at page 235: "`It is also well settled in this state that mere inadequacy of the bid or consideration of a mortgage foreclosure sale does not ordinarily justify the court in refusing to confirm such a sale unless the inadequacy of the bid shocks the conscience of the court or results in an injustice. Northwestern Loan Trust Co. v. Bidinger, 226 Wis. 239, 245, 276 N.W. 645; A. J. Straus Paying Agency v. Jensen, 226 Wis. 462, 277 N.W. 105.' Cameron v. Heinze, 231 Wis. 479, 487, 286 N.W. 47."

In his formal order of November 7, 1962, the trial court found "that the highest bid [$87,000] at the sale . . . by the . . . conservation commission . . . was not sufficiently high in view of the obvious value of this property, to be confirmed by this court." In the later hearing on November 27th, when the trial court gave his final ruling from the bench he stated: ". . . the court certainly feels that there is a sufficient showing of an inadequacy in the price bid to shock the conscience of the court and to warrant the resale which was ordered." (Emphasis added.)

The formal order entered by the court following this hearing made no additional findings and merely ordered the denial of the state's motion to confirm the sale and it further ordered that the order of November 7th be ratified. In other words, there was no formal written finding which identically set forth the judge's oral declaration that: "The court certainly feels that there is a sufficient showing of an inadequacy in the price bid to shock the conscience of the court and to warrant the resale which was ordered." It is well established that "where the trial court in its memorandum decision makes a full analysis of all the facts, the decision is accorded the consideration and weight of formal findings." L. Rosenheimer Malt Grain Co. v. Kewaskum (1957), 1 Wis.2d 558, 560, 85 N.W.2d 336; Will of Daniels (1937), 225 Wis. 502, 274 N.W. 435. The judge's oral declaration, reduced to writing, was a "memorandum decision."

In the face of this record, the trial court's determination is enough to set aside the sale provided we are satisfied that the record before the trial court sustained his finding. The trial court did have the affidavits of Mr. Klepinger, Mr. Chickering, and Mr. Gumz, all as to value; the Chickering petition and Gumz affidavit representing that Gumz was ready to deposit $5,000 to guarantee that he would make a bid at an ordered resale of at least $100,000. It is also important to note that whereas the state was definitely considering the land for a wildlife refuge, and it might very well have a value of only $87,000 for that purpose, Mr. Gumz and other prospective bidders were not, and the trial court might well have had in mind the fact that this property was improved as a muck farm and that it might have considerably more value for that purpose. The court could well have considered the fact that a great deal of money had been invested on draining, tiling, and on storage facilities. The trial court stated many times that its objective was to get the best possible price and with this in mind it cannot be said that the trial court abused its discretion in its findings. The trial court made no actual finding of what the true value of the property was and could well have considered that it was worth even more than the $100,000 minimum set by Gumz.

Another factor that we must consider is that the whole foreclosure procedure is equitable in nature and that such a proceeding contemplates the exercise of considerable discretion on the part of the trial court.

Although the setting aside of a foreclosure sale by a trial court should also be sustained if it is not prepared to go as far as to say (as the trial court did here) that the inadequacy of price shocks the conscience of the court, but if it concludes that there is an inadequacy of price coupled with mistake, misapprehension, or inadvertence such as to make the confirmance of the sale unfair and unjust, it is not necessary to consider the application of this rule here since the court did in fact find that the successful bid price did shock the conscience of the court. Nevertheless, Gumz and the mortgagors do assert various grounds of "mistake, misapprehension, or inadvertence, " claiming in substance that the advertising of the sale was nebulous, that one would believe that the buyer was not entering into a binding agreement, that rumors circulated that the Wisconsin conservation commission had no authority to purchase the property, that the Wisconsin conservation commission had exhausted its appropriations and could not complete a successful bid, and that the advertising of the sale of the property was too localized. Without considering these detailed contentions, suffice it to say that the trial court did not make any formal findings nor did he even express any fixed conclusions orally backing up any of these claims, and thus it must be concluded that the trial court's determination was not in any respect based on any alleged "mistake, misapprehension, or inadvertence." That the court did pay some attention to these complaints is shown by the terms of the resale ordered on November 7th, which order requires publication of the resale in Packer, a publication receiving wide circulation among muck farmers, and directing that the successful bidder at the resale deposit $10,000 in cash to bind the sale.

Because of the result reached, it is not necessary for us to decide any of the questions raised concerning the authority of the representative of the state to bid at the sale, or the authority of the state of Wisconsin or the Wisconsin conservation commission to make this particular proposed purchase.

By the Court. — Orders of November 7, 1962, and of November 30, 1962, affirmed.