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SMITH V. BLACK, 115 U. S. 308 (1885)
U.S. Supreme Court
Smith v. Black, 115 U.S. 308 (1885)
Smith v. Black
Argued October 26-27, 1885
Decided November 9, 1885
115 U.S. 308
Under a deed of trust covering land in the District of Columbia made by a debtor to two grantees, their heirs and assigns, to secure the payment of a promissory note, by which deed the grantees were empowered, on default, to sell the land at public auction "on such terms and conditions, and at such time and place, and after such previous public advertisement," as they, "their assigns or heirs" should deem advantageous and proper, and to convey the same in fee simple to the purchaser, a sale was had by public auction, under a notice of sale, signed by both of the trustees, and duly published in a newspaper, but at the sale only one of the trustees was present. The proceedings at the sale were fair, both of the trustees united in a deed to the purchaser, and no ground appeared for setting the sale aside. Held that the absence from the sale of one of the trustees was not a sufficient reason, of itself, for setting aside the sale as against the former owner of the land.
The creditor in this case was the purchaser at the sale, and it was held that there was nothing shown which disqualified him from becoming such purchaser.
Alleged inadequacy of price considered, and the sale upheld as against that allegation.
The purchaser, at the time he took the deed from the trustees, settled with one of the trustees on the basis of a purchase for cash, although the terms of sale provided for a credit, and, as holder of the note secured, credited on it the amount of the net proceeds of sale, leaving a sum still due on the note. Held that no right of the former owner of the land was violated by this course.
On the 23d of May, 1872, John Stearns, being the owner of certain land in the City of Washington, in the District of Columbia, on Twentieth Street, New Hampshire Avenue and P Street Circle, or Dupont Circle, containing in all 19,886 square feet, executed with his wife a deed of trust covering the land as security for the payment of a promissory note for $5,500, made by Stearns, dated May 23, 1872, payable in five years, with interest at the rate of six percent per annum, payable semiannually to the order of Walter Linkins, the note being given to secure a part of the purchase money of the land. The grantees in the deed were John F. Fuller and James M. Latta,
their heirs and assigns. One of the trusts in the deed was expressed thus:
"Upon default's being made in the payment of the said note or interest as stipulated, or any proper cost, charge, commission, half-commission, or expense, in and about the same, then and at any time thereafter, to sell the said piece or parcel of ground and premises at public auction upon such terms and conditions, and at such time and place, and after such previous public advertisement"
as the said Fuller and Latta,
"their assigns or heirs, in the execution of this trust shall deem advantageous and proper, and to convey the same in fee simple to, and at the cost of, the purchaser or purchasers thereof, who shall not be required to see to the application of the purchase money, and the proceeds of said sale or sales first to pay all proper costs, charges, and expenses and to retain as compensation a commission of five percent on the amount of the said sale or sales; secondly, to pay whatever may then remain unpaid of the said note and the interest thereon, whether the same shall be due or not; and lastly to pay the remainder, if any, to the said John Stearns, his heirs or assigns."
On the 19th of April, 1873, Mrs. Mary A. Derby purchased the premises from Stearns at the price of $1 per square foot, making $19,886. She paid $6,000 in cash, gave her notes for $8,386, and assumed the payment of the $5,500 note, with interest from November 23, 1872. Stearns conveyed the land to her.
On the 14th of April, 1875, Linkins sold the $5,500 note to the defendant, Walter H. Smith. It fell due May 26, 1877, and was not paid. There was some negotiation between Mrs. Derby and Smith in the summer of 1877 in regard to providing for its payment. Mrs. Derby, being in ill health, on October 27, 1877, conveyed the land in question (with other land) to her daughter Mrs. Black, the plaintiff in this suit, her heirs and assigns, in trust to lease, sell, and convey it, and, after paying expenses and commissions, to pay the proceeds to the grantor, her heirs, executors, or administrators. There was further negotiation between Smith and Mrs. Black, but, the note being past due, with interest from May 23, 1877, the following
notice was published in the Evening Star, a newspaper in the City of Washington, the description of the land in the notice being the same as in the deed of trust to Fuller and Latta:
"B. H. Warner, Real Estate Auctioneer"
"Trustees' Sale of Valuable Property Bordering on the P-Street"
"Circle, New Hampshire Avenue, and 20th Street"
"By virtue of a deed of trust, dated May 23, A.D. 1872, and duly recorded in liber No. 682, folio 405, one of the land records of the District of Columbia, and at the request of the party secured thereby, we will sell at public auction, in front of the premises, to the highest bidder, on Wednesday, January 30, A.D. 1878 at 4 o'clock P.M., the following real estate in the City of Washington, in said district, to-wit: [Here follows the description.] Terms of sale: three thousand dollars in cash, the balance in equal installments in six and twelve months respectively, with interest at eight percent until paid, secured by a deed of trust on the property. Conveyancing at the cost of purchaser. If the terms of the sale are not complied with in five days after the sale, we reserve the right to resell at the risk and cost of the defaulting purchaser."
"JAMES M. LATTA"
"JOHN F. FULLER"
"J. F. CALDWELL, Salesman"
The sale took place by public auction in front of the premises at the time named in the notice, and they were sold to the defendant Smith, he being the highest bidder, for $7,000. On the 13th of February, 1878, Latta and Fuller, the trustees, executed a deed conveying the land to Smith, his heirs and assigns. The deed contained this recital:
"And whereas the period fixed for the payment of said note has expired without the same being liquidated, and the said party of the first part at the written request of the legal holder of the said note, being the party secured by said trust, did, on the seventeenth day of January, A.D. 1878, according to the provisions of said trust, advertise the hereinafter described premises for 12 days in the
Evening Star, a newspaper printed and published in the City of Washington, District of Columbia, to be sold on the thirtieth day of January, A.D. 1878, at the hour of four o'clock P.M., on the premises at which public sale the said Walter H. Smith being the highest bidder, the same was sold to him for the sum of seven thousand dollars, the terms of which sale being three thousand dollars in cash and the balance in two payments, in six and twelve months, with interest at eight percent, and whereas the said Walter H. Smith having complied with the terms of said sale, the said party of the first part executes these presents."
On the 25th of March, 1880, the bill in this suit was filed by Mrs. Black in the Supreme Court of the District of Columbia. The defendants are Smith, Fuller, and Latta, and the trustees in two deeds of trust, each to secure $3,000, which Smith has executed, covering the premises, since they were conveyed to him; but it is stated in the bill that the plaintiff does not seek to disturb the rights acquired by those trustees. The bill alleged that in March, 1880, Smith dedicated to public use a part of the land fronting on P Street Circle, and sold to one Page for $14,200 another part of it, receiving $8,200 in cash, and an agreement to pay the $6,000 secured by the two deeds of trust above named, and that the plaintiff does not seek to disturb the rights acquired by Page.
The bill prayed for a decree that as to so much of the land as Smith did not convey to Page (excepting what was dedicated to public use), the sale by Fuller and Latta be set aside, and their deed to Smith be cancelled; that an account be taken of the proceeds of the sale by Fuller and Latta, and of the amount due on the $5,500 note at the time of the sale, and of all taxes on the property chargeable to the plaintiff; that the proceeds of the property, whether from the sale to Page or from rents collected by Smith, be accounted for by him, and be brought into court to constitute a trust fund for the benefit of the plaintiff; that the amount properly payable on the $5,500 note, and all costs and charges properly to be added thereto, be ascertained; that the same be paid in liquidation of the note and charges, and the plaintiff and the land be released from
liability therefor, and that the balance of the fund be paid to her. There is also a prayer for general relief.
The bill alleges that Fuller knew nothing about the advertisement, or that the property was to be sold, or had been sold, until the day on which he executed the deed to Smith; that Latta acted on his own sole responsibility in fixing on the place and time and terms and conditions of the sale, and was the only trustee present at it; that Fuller signed the deed to Smith at the request of the latter, who brought it to him when he was ill in bed, and told him that it was satisfactory to Linkins; that Linkins did not authorize Smith to represent that Linkins was satisfied with the sale; that the sale took place at 4 o'clock in the afternoon of an inclement day, few persons being present; that one person asked if a lot could be sold with a privilege, and was told it could not, although he was ready to make a bid therefor; that there was no competition; that the price of thirty-five cents a foot at which it was knocked down to Smith, was wholly inadequate; that, in view of the absence of his co-trustee, the absence of bidders, and the low price offered by Smith, it was the duty of Latta to adjourn the sale, and that the property, even at a forced sale, would have brought, with the least competition, fifty cents a foot.
The bill further alleges that B. H. Warner was entrusted with looking after the property; that Smith knew this fact; that the plaintiff learned from a letter sent by Warner, dated January 24, 1878, that the sale was advertised for January 30, 1878; that she then sent a relative to Washington to see what could be done, and he sent back word that he could accomplish nothing, and that the holder of the note had purchased the property at the sale for $7,000; that she, being at a distance and unacquainted with business, relied on the fact that if any irregularity had existed in the sale, notice of it would have been communicated by Warner, as the advertisement showed that the sale was to be conducted by an auctioneer from Warner's establishment; that she supposed that she no longer had any rights in the premises; that she had never received any account or communication from the trustees; that she had only within a few days past accidentally learned that there were
suspicious transactions at the sale and that it was irregularly conducted, and that as soon as she heard it, she took steps to discover the facts.
Smith answered the bill, as did Fuller and Latta. Proofs were taken, and on a hearing the court at special term on the 19th of February, 1881, made a decree setting aside the sale except as to the land sold to Page and that dedicated to public use, and referring the case to an auditor to state an account between the parties as prayed in the bill. The auditor reported March 24, 1881, that there was due from Smith to the plaintiff $5,860.30. Both parties excepted to the report as to items in the account, but the court at special term overruled the exceptions and confirmed the report as made, and rendered a decree on April 12, 1881, finding that there was due on that day from Smith to the plaintiff $5,860.30 and ordering that within twenty days he pay her that sum, with interest from that day, and that Fuller and Latta, within thirty days, execute to her a deed of release for that part of the premises as to which the sale was set aside. The decree imposed the costs of the suit on the plaintiff. Smith appealed from the decree to the general term, and the plaintiff appealed to it from so much of the decree as omitted to allow her interest from the date of filing the bill and from so much as overruled her exceptions to the auditor's report and as charged her with costs. Both appeals were heard by the court in general term, and on the 20th of March, 1882, it rendered a decree affirming both of the decrees of the special term, with the modification that Smith join with Fuller and Latta in the conveyance to the plaintiff, and he was ordered to pay the costs of the appeals. From that decree Smith has appealed to this Court.
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