In Raymond v. Gilman, 111 Conn. 605, 613-14, 151 A. 248 (1930), it was stated that: `A judicial sale is one made as a result of judicial proceedings by a [committee of sale] legally appointed by the court for the purpose.... The court is the vendor, and the [committee of sale] appointed to make the sale is the mere agent of the court.Summary of this case from Hartford Fed. Savings Loan Assn. v. Tucker
An order confirming a judicial sale by a court of competent jurisdiction cures all defects and irregularities leading up to or in the conduct of the sale, except those founded in want of jurisdiction or fraud. Adjudications in the nature of an order of sale are ambulatory in nature and are subject to later amendment or modification by the court as changing conditions may require for the best interests of the estate. The rule of caveat emptor is generally applicable to judicial sales including sales by receivers, and when it is relaxed it is on the theory that the purchaser bids on the assumption that there are no undisclosed defects. In receivership actions extreme care and caution should be exercised by counsel, and courts and their officers, to strictly comply with the requirements of the law, rules and court orders. A permanent receiver of a corporation without capital stock was appointed on complaint of one of its members, the corporation admitting the allegations of the complaint. No notice was given the creditors or members of the hearing on the appointment as required by law. Real estate of the corporation was subsequently sold to the defendants, but no one raised any objection to the confirmation of the sale, nor has anyone, except the defendants in the present action for specific performance, questioned the regularity of the appointment of the receiver. The defendants also claimed that certain variances between the judgment ordering the sale and the advertisements published and the sale as made invalidated the title, and that a subsequent modified order of sale was invalid. Held: 1. That the judgment appointing the receiver is not open to collateral attack, as the court had jurisdiction of the necessary parties and subject-matter of the suit, and the parties entitled to notice of the hearing — the creditors and life members — have waived any right to attack it by failing to make timely objection thereto, if any they had. 2. That the defendants having failed to appeal from the order confirming the sale, after they became, as successful bidders, parties to the proceedings, the validity of the title to the real estate was not impaired by the deficiency in the notice of the hearing on the appointment of the receiver. 3. That the modified order of sale was effectual and the remaining irregularities which were not cured by it, in the advertisements and in the sale were not sufficient to mislead or deter bidders, depreciate the value of the property or prevent its bringing a fair price. 4. That, aside from all other considerations, the order confirming the sale, being final and unappealed from, cured all defects and irregularities in procedure.
Argued April 29th, 1930
Decided July 9th, 1930.
ACTION for specific performance of a contract to purchase real estate, brought to the Superior Court in New London County and tried to the court, Simpson, J.; judgment for the plaintiff and appeal by the defendants. No error.
On February 20th, 1929, Martin E. Jensen, a life member of the New London County Agricultural Society, a corporation without capital stock, brought an action, returnable on March 5th, 1929, for the appointment of a receiver for the Society. On March 8th, following, Gilbert S. Raymond was appointed permanent receiver and an order was made for the sale, by the receiver, of the property of the corporation. The facts found relating to the appointment and order of sale, as well as those pertaining to the advertising of the sale and the sale itself, which are pertinent to the present inquiry, are set forth in the opinion.
On May 1st, 1929, the plaintiff receiver, through an auctioneer, sold at public auction, for the sum of $15,750, the real estate of the corporation, subject to a mortgage for $25,000, to the defendants, who were the highest bidders at the sale, and the defendants paid the plaintiff $2000 on account of the purchase price. On the same day, after the sale, the plaintiff, and the defendant George H. Gilman, in behalf of himself and his brother Francis Gilman, executed the bond for deed constituting the contract now sued upon.
On May 17th a motion to confirm the sale was brought on for hearing and no objection was made to the confirmation of the sale or the approval of the receiver's deed, but the matter was not then passed upon by the court. On May 27th the receiver filed a formal return setting forth his doings with reference to the advertising, the sale, and notice of hearing on confirmation, and the court then ratified and confirmed the sale and approved the deed submitted. On June 1st the receiver tendered the deed to the defendants, to be delivered upon the payment by them of $13,750, but the defendants refused to pay the same and accept the deed, and ever since have refused to do so. On June 10th the defendants filed a motion to vacate the order of the court ratifying and confirming the sale to them, which motion, after hearing, was denied; from this action the defendants took no appeal.
Thereafter the receiver brought the present action, by complaint dated July 8th, 1929. The defendants, in their answer, alleged, together with other matters not pursued on this appeal, in substance that the title tendered them by the receiver is unmarketable in that the appointment of Raymond as permanent receiver was void because of insufficient notice of hearing thereon, and in that the sale was not advertised and made in accordance with the order therefore, in the respects hereinafter mentioned. The trial court ruled adversely to these claims and held the receiver to be entitled to a decree of specific performance, from which judgment the defendants appeal.
George H. Gilman, for the appellants (defendants).
Edmund W. Perkins, for the appellee (plaintiff).
The appellants claim that the appointment of Raymond as permanent receiver is void, because of a deficiency in notice given of the hearing on the appointment. In this State the power to appoint receivers of corporations, both with and without capital stock, is expressly vested in the Superior Court by statute (§ 3443, as amended by § 3 of Chapter 151 of the Public Acts of 1919). The details of procedure in making appointments, both temporary and permanent, are prescribed by rule — §§ 50, 51, Rules of Superior Court. Practice Book, pp. 252, 253. Section 51 provides that "all appointments of receivers shall be temporary appointments, unless made by the court after the return day of the action, and upon full notice and opportunity to be heard to all concerned." Succeeding provisions clearly contemplate that the court shall order notice of hearing on the appointment of a permanent receiver to all parties concerned "by causing a written or printed notice thereof to be mailed, postpaid, to all known creditors and to all stockholders of record . . . at least six days before such hearing," also "by public advertisement if it seem advisable." It appears that such notice was not ordered or given, as to this hearing, in the present case.
The finding shows that the receivership action was returnable on the first Tuesday of March (March 5th) 1929. Service was made on the defendant Society, which duly appeared by its attorneys, who, on March 6th, filed an answer admitting the allegations of the complaint. No move was made for the appointment of a temporary receiver, but a motion was filed, on March 4th, for the appointment of a permanent receiver and appraisers and for an order authorizing the receiver to sell the assets of the corporation. The fact that the motion was filed a day before the return day is of no moment. Hearing on this motion was claimed for and held at the short calendar session on March 8th, and the requested orders were granted.
No question is made as to the sufficiency of the grounds set forth in the complaint and admitted by the defendant corporation, to warrant the appointment of a receiver. The court had jurisdiction of the necessary parties to the suit — the plaintiff, a life member of the Society, and the defendant, the Society itself — and of the subject-matter of the controversy — the property of the corporation. Its judgment appointing the receiver therefore was not void or a nullity for lack of jurisdiction, and is not open to collateral attack. 1 Clark on Receivers (2d Ed.) § 305; High on Receivers (4th Ed.) § 39a; Vallery v. Denver R. G. R. Co., 236 F. 176, 178; Harned v. Beacon Hill Real Estate Co., 9 Del. Ch. 232, 80 A. 805; Detroit Trust Co. v. Lawrence, 235 Mich. 136, 209 N.W. 61. The effect of the omission to give notice to known creditors and to the life members of the Society was, at most, to render the appointment vulnerable to seasonable direct attack by such creditors or members. The same judgment which appointed the receiver ordered notice of limitation of claims by advertisement and by mail to each known creditor on or before March 31st, 1929, and notice of hearing on the motion to confirm the sale, May 17th, 1929, was mailed to the creditors and life members. No objection was made to the confirmation of the sale, nor does it appear that anyone, except the defendants in the present action, has questioned the regularity of the appointment of the receiver. A party entitled to notice of an application for the appointment of a receiver — even of his own property — may waive such notice by failure to interpose a timely objection thereto. Cogswell v. Second National Bank, 76 Conn. 252, 56 A. 574; Nutter v. Brown, 58 W. Va. 237, 52 S.E. 88, 6 Ann. Cas. 94, 1 L.R.A. (N.S.) 1083; 23 R. C. L. p. 40. It follows that the only persons who could have been prejudiced by the omission complained of have waived any right to attack the validity of the appointment even were they disposed to do so, and the record discloses no such inclination on their part.
The defendants, as the successful bidders, became, from the time they entered into the contract of purchase, parties to the proceedings. Rice v. Ahlman, 70 Wash. 12, 126 P. 66; 1 Clark on Receivers (2d Ed.) § 489a. As such they had the right to interpose objections to the confirmation of the sale. The order of confirmation, being final in its nature, as to the particular parties and matters affected by it, could have been appealed from by them. Barber v. International Co., 74 Conn. 652, 657, 51 A. 857; Links v. Connecticut River Banking Co., 66 Conn. 277, 283, 33 A. 1033. They took no such appeal, but on June 10th, 1929, filed a motion to vacate the order, on what grounds it does not appear. This, after hearing, was denied, but no appeal was taken or attempted. We conclude that the validity of the title to the real estate in question is not impaired by the deficiency in notice of hearing on the appointment of the receiver.
On March 8th, 1929, the receiver was ordered to sell the assets of the corporation, including both real and personal estate, as a whole, at public auction, on May 1st, 1929, the premises to be sold free and clear of all mortgages, except one to Charles D. Greenman, trustee, for $25,000, and was directed to advertise the sale by publishing a notice thereof containing a description of the real estate and personal property in a designated daily newspaper, not less than six times commencing on March 15th, 1929. The first advertisement, published March 15th, mentioned and described the real estate only, stated that the property would be sold subject to the Greenman mortgage which the purchaser must assume, and that the sale would be held Monday, May 1st, 1929. That date fell on Wednesday, instead of Monday.
On April 12th, 1929, upon motion of the receiver, the court modified the order directing the sale of the real and personal property as a whole, so as to permit the receiver to sell the personal property at such time or times and in such manner as he saw fit, at public or private sale, and as a whole or in parcels. An advertisement of the auction sale of described personal property on Wednesday, May 1st, 1929, at eleven a. m. and of the real estate on the same day at two p. m. was published on April 17th, 20th, 23d 25th, and 27th. This, also, stated that the purchaser must assume the Greenman mortgage. At the sale, before the bidding, it was announced that the real estate would be sold subject to the mortgage; purchasers were not required to assume it.
The defendants contend that the sale of the real estate is void because of claimed variances between the judgment ordering it and the advertisements published, and the sale as made. Most of these criticisms depend upon the fallacious claim that the modification, April 12th, of the judgment of March 8th was invalid and ineffective. Adjudications of this nature must, in reason and of necessity, be subject to such later amendments and modifications, by the court having control of the receivership proceedings, as changing conditions, new developments, or other exigencies may require for the best interests of the estate. "A judgment appointing a receiver never terminates a cause. It remains the duty of the court to supervise and direct his conduct as receiver, and to make whatever orders may be necessary from time to time." Barber v. International Co., 74 Conn. 652, 657, 51 A. 857. An order (of sale) such as that under consideration, particularly, is ambulatory in its nature and not strictly amenable to the restrictions upon the opening and amendment of final judgments lately considered in In re Application of Title Guaranty Co., 109 Conn. 45, 145 A. 151.
The inadvertent misstatement, in the first publication of advertisement of the sale, of the day of the week upon which the prescribed date fell does not invalidate the sale. The ambiguity was obvious and easily resolved. Notices giving the day and date correctly were published five times during two weeks before the sale, negativing any probability that anyone could have been misled or confused by the original error, and differentiating this case from those in which mistake or ambiguity as to time continued uncorrected, or was corrected too late to leave sufficient time for general information, as in Wellman v. Lawrence, 15 Mass. 326. Nor is there any suggestion of an inadequacy of purchase price which might be ascribed to defective notice, as in Thacker v. Tracy, 8 Mo. App. 315. Cases enforcing strict compliance with formalities prescribed by statute are not applicable.
The sale as actually made — subject to the Greenman mortgage, but without requiring the purchasers to expressly assume it — was in accordance with the order of sale. The finding shows that no intending bidders present at the sale could have been misled by the statement in the advertisement that assumption would be required, and there is no suggestion in the record that it served to deter bidders, depreciate the value of the property, or prevent its bringing a fair price. The sale was not rendered void thereby. Mowry v. Sanborn, 68 N.Y. 153; Gray v. Shaw, 14 Mo. 341; Chandler v. Cook, 2 McArthur (9 D.C.) 176; 16 R. C. L. p. 56; 75 Am. Dec. 704, note.
While we have indulged in discussion of the several objections raised by the appellants, the effect of the judgment confirming the sale, being final and unappealed from, is ample, of itself, to dispose of these contentions. "A judicial sale is one made as a result of judicial proceedings by a person legally appointed by the court for the purpose. . . . The court is the vendor, and the person appointed to make the sale is the mere agent of the court. The sale is not absolute until confirmed. The order of confirmation gives the judicial sanction of the court, and when made it relates back to the time of the sale and cures all defects and irregularities except those founded in want of jurisdiction or fraud. The court has power to confirm the sale, although the terms of the decree may not have been strictly followed. The matter of confirmation rests peculiarly upon the sound discretion of the court, to be judicially exercised in view of all the surrounding facts and circumstances, and in the interest of fairness, justice, and the legal rights of the respective parties." Nevada Nickel Syndicate v. National Nickel Co., 103 F. 391, 395; 35 Corpus Juris, Judicial Sales, § 73, and cases cited. "It is the general rule in the United States that the confirmation of a judicial sale by a court of competent jurisdiction cures all irregularities in the procedure leading up to or in the conduct of the sale, and that while such a sale will be set aside where fraud, mistake, or surprise is shown, mere irregularities in the preliminary proceedings do not render the sale invalid, and will not suffice to set it aside after confirmation." Heid v. Ebner, 133 F. 156, 158; 1 Clark on Receivers (2d Ed.) § 491(a).
The rule of caveat emptor is generally applicable to judicial sales including sales by receivers. 1 Clark on Receivers (2d Ed.) § 490(a); 35 Corpus Juris, p. 75. When relaxation of this rule is granted, in that a bona fide purchaser is held entitled to a marketable title free from reasonable doubt, it is on the theory that the purchaser bids on the assumption that there are no undisclosed defects. Toole v. Toole, 112 N.Y. 333, 19 N.E. 682, 2 L.R.A. 465; Peoples Bank v. Bramlett, 58 S.C. 477, 484, 36 S.E. 912; 35 Corpus Juris, p. 75. We have accorded the appellants the benefit of such relaxation, to the extent of consideration and decision of the several questions raised which might affect marketability, notwithstanding the inference, which seems fair, that they made their successful bid with knowledge of the facts as to most if not all of the matters of which they now complain.
While the curative effect of application of the legal principles above referred to avails to absolve the title to the real estate in question from harmful infirmities due to the specified defects in the proceedings, this case forcibly suggests and emphasizes the desirability, indeed necessity, in receivership actions, of extreme care and caution, by counsel, courts and their officers, in the performance of their respective duties, in order that the requirements of the law, rules, and court orders be so fully and strictly complied with as to "stand the test of the closest scrutiny, and be invulnerable to any after objections to their legality in form or substance. . . . There is but one perfectly safe road to travel in order to avoid difficulty. The path marked out by the law should be strictly followed. When it is departed from there is always more or less danger. It is true that there are many mere irregularities . . . that are not of sufficient degree to vitiate the proceedings; but if they exist they furnish a foundation for future litigation and expense, which might readily, by ordinary care, have been guarded against, to say nothing of the extra trouble to the courts." Nevada Nickel Syndicate v. National Nickel Co., 103 F. 391, 394.