Foxworth v. Murchison National Bank

The following aré the orders of M. M. Mann, Presiding Judge, appealed from, and petition for rehearing which was denied: •

“Order

“Pursuant to petition in the above-entitled cause by W. S. Foxworth, assignee of the rights of the plaintiff, the National Park Bank, an order was granted on April 15, 1925, requiring the defendant, Murchison National Bank, to show cause before the Court at Marion on April 27, 1925, why it should not be required to comply with its bid for a house and lot in the town of Marion sold under decree of foreclosure and sale on March 2, 1925. Hearing was had on the moving papers, the proceedings in the original cause, the separate returns of Murchison National Bank and L. M. Gasque, Esq., its attorney in the foreclosure proceedings, and various verbal admissions and statements of counsel supplementing and in support of the petition and the returns.

“On March 15, 1920, O. G. Minshaw executed and delivered to the Planters’ Bank of Marion his promissory note for $4,500, payable on March 15, 1921, and to secure its payment at the same time executed and delivered a mort *460 gage covering a house and lot in the town of Marion. This note was renewed from time to time, and on September 1, 1924, O. G. Minshew executed and delivered a renewal note for $2,250, payable on December 1, 1924, which the Planters’ Bank attached to the mortgage, and forwarded with the mortgage and the original note for $4,500, marked ‘Paid by Renewal,’ to the National Park Bank as security for a loan then obtained. Thereafter on September 29, 1924, O. G. Minshew executed and delivered to the Planters’ Bank still another note, as a renewal of the remainder of the original indebtedness for $3,347, payable on March 1, 1925. This note was forwarded without any apparent security to Murchison National -Bank of Wilmington, N. C., as security for advances obtained from Murchison National Bank, but the National Park Bank, the actual holder of the mortgage, claims it had no knowledge of any indebtedness secured by the mortgage when it made its advances other than the note of $2,250 attached to the mortgage when received by it.

“On December 19, 1924, the indebtedness to the National Park Bank being past due, through its attorney, M. C. Woods, Fsq., it instituted an action for the foreclosure of its mortgage in the Court of Common Pleas of Marion County against O. G. Minshew, E. D. Bide, attorney, Murchison National Bank, the Planters’ Bank, Bank of Aynor, and O. J. C. Rose, defendants, setting up its mortgage and alleging that the defendants other than O. G. Minshew, the mortgagor, claim some interest in the mortgaged premises junior to the lien of the plaintiff. Murchison National Bank through its attorney, R. M. Gasque, Escp, filed an answer setting up its note and alleging that it also was secured by the mortgage held by the National Park Bank. In the hearing of the case, the National Park Bank contended that it had a first lien upon the mortgaged premises to the amount of its indebtedness, while Murchison National Bank insisted that it was entitled to have the proceeds *461 of sale of the mortgaged premises paid to it and to National Park Bank in proportion to the amount of the indebtedness to each.

“The action for foreclosure resulted in a consent decree whereby it was adjudged that the mortgaged premises be sold on sales day in March, 1925, and that, in view of the fact that the mortgaged property would probably bring enough to pay both the National Park Bank and the Murchison National Bank, the question of priority be left open for future determination, thereby in effect transferring the controversy to the proceeds of the sale.; it being apparent that the question might become academic if the proceeds of sale should be sufficient to pay both debts.

“Pursuant to this decree, after due advertisement, the property was offered for sale on March 2, 1925, by the Probate Judge of Marion County, the duties of the Master in Marion County having been devolved by statute upon the Probate Judge. On the day of the sale, L. M. Gasque, Esq., representing Murchison National Bank, approached M. C. Woods, Esq., representing the National Park Bank, seeking an understanding as to the bidding and suggesting the propriety of some concert of action between the National Park Bank, and Murchison National Bank, but Mr. Woods expressed his unwillingness to make any agreement, and stated that each party would have to look out for himself. When the sale was called, there were only two bidders, Mr. Woods, representing the National Park Bank, and Mr. Gasque, representing Murchison National Bank. The first bid placed upon the property was that of Mr. Woods for $100, and Mr. Gasque and Mr. Woods continued to bid against each other until Mr. Gasque placed a bid of $6,500, which was the highest and last bid. No one else made a bid. The property was thereupon sold to Mr. Gasque, as attorney for Murchison National Bank, for $6,500, which was within a few dollars of enough to pay both debts, together with costs and past-due taxes.

*462 “Thereafter National Park Bank assigned all of its rights in the foreclosure proceedings, including its share of the proceeds of sale, to W. S. Foxworth, who has made repeated demands upon Murchison National Bank that it comply with its bid, but having failed to comply on the petition of W. S. Foxworth, Murchison National Bank, on April 16, 1925, was served with an order requiring it to show cause before me in Marion on April 27, 1925, why it should not be required to- comply with its bid.

“The return of Murchison National Bank, filed in its behalf by R. B. Scarborough, Esq., for cause why it should not be required to comply, alleges three grounds: (1) That a compliance cannot be required until the issue of priority of payment is settled by the Court; (2) that E. M. Gasque, Esq., had no authority to bid in the property for it; and (3) that it cannot be required to comply with its bid on a rule to show cause, but is entitled to a jury trial upon the issues presented by the rule and the return. E. M. Gasque, Esq., filed a separate return, alleging his purchase of the property for Murchison National Bank and his authority so^ to do, attaching to his return certain correspondence between himself and Murchison National Bank.

“Since Murchison National Bank consented to the decree of foreclosure and sale of the mortgaged premises, reserving the issue of priority until after the sale, it cannot be heard to object to a compliance on the ground that the question of priority is undetermined. Equally untenable is its contention that it cannot be required to comply with the bid by rule to show cause. This, it appears, is the usual and the approved practice, and, since the decree contains no provision for a resale, in case of noncompliance, it may well be doubted if the matter can properly be brought before the court in any other way. Chemical Company v. McLucas, 87 S. C., 350; 69 S. E., 670; Calder v. Maxwell, 99 S. C., 115; 82 S. E., 997; White v. *463 Brown, 131 S. C., 71; 126 S. E., 750, filed February 27, 1925.

“The only serious question presented for considera-. tion is whether or not Murchison National Bank can be required to comply with the bid made by its attorney, E. M. Gasque, Esq.; it being contended that Mr. Gasque neither had any implied power to bind the bank growing out of the relation of attorney and client nor any express power conferred by his client.

“To sustain the contention as to the want of implied power, reliance is placed upon the cases of Mayer v. Blease, 4 S. C., 10; Gilliland v. Gasque, 6 S. C., 406; Mordecai v. County of Charleston, 8 S. C., 100; Fx parte Jones, 47 S. C., 393, 25 S. E., 285; Dixon v. Floyd, 73 S. C., 202; 53 S. E., 167. None of these cases, however, are directly relevant to the specific point made. It may be conceded, as it must be, that in a suit at law upon a money demand the authority of the attorney ends with the entry of judgment, except merely to collect the money and enter satisfaction of the judgment, and also that an attorney has no implied power to assign his client’s demand, yet none of these cases decide or consider the extent of the implied power of the attorney in relation to the sale of the mortgaged property in a foreclosure proceeding.

“There are evident differences between a suit at law to establish a money demand and a proceeding in equity to foreclose a mortgage. The sole object of the suit at law on a money demand is to establish the debt and to obtain payment of the money in satisfaction of the judgment; it has no direct relation to specific property either real or personal, while in an action to foreclose a mortgage of real estate the purpose of the proceeding is to defeat the mortgagor’s equity of redemption by establishing the liens upon specific property, settling their priority, selling the property for the payment of the lien debts, and finally making settlement through the officer of the court conducting the sale. The *464 controlling purpose of the action of foreclosure is to subject specific property to the payment of the debt and to collect such debt by sale. The object of the action is thus stated in the case of Ex parte Jones, 47 S. C., 393; 25 S. E., 285: ‘In this case the very object of the suit in foreclosure was to settle the priority of liens on the mortgaged property, and to sell the property for the payment thereof.’

“While not necessarily controlling, yet the custom of business as to what by common practice usually is expected of an attorney in the foreclosure of a mortgage of real estate may not be wholly ignored. As a general proposition, when an attorney is employed to foreclose a mortgage of real estate, he is expected, and it is the common practice at the bar of this State, not only to represent his client to the point of obtaining a decree of foreclosure and sale, but also to attend the sale, to' see that his client’s interest is not sacrificed or defeated, to make settlement with the officer conducting the sale, and to obtain a report and an order confirming the sale. If necessary to the protection of his client’s interest, it is usual for the attorney to participate in the sale; indeed he would be derelict in his duty should he permit property to be bought for a grossly inadequate amount which would result in his client receiving nothing upon his demand. It is true that an attorney would not be warranted in making an investment for his client by making a purchase beyond the extent of the client’s interest, but, when he protects his client’s interest only to the extent of this interest, it is not a case of an attorney making an investment for his client, but rather the protection of an investment already made by the client himself.

“In a law case on a money demand, there is a final determination of the action upon the entry of judgment, but in an equity case involving the sale of real estate, there is no final or complete determination of all matters within the scope of the action until a sale and an order confirming the report of the sale. McIver v. Thompson, 117 S. C., 195; 108 S. E., *465 411. The scope of the action is comprehensively stated by the Court in the case of Smith v. Cunningham, 59 Kan., 552; 53 P., 760, as follows:

“ Tn a large number of cases the entry of judgment ends the litigation, but in foreclosure proceedings it would seem that the end of the litigation is not reached until the lien is enforced by the sale, and confirmation of sale, of the mortgaged property. The understanding of the profession is that the duties and powers of an attorney continue until the final conclusion of the foreclosure proceedings. Such proceedings are not concluded by a decree directing a sale of the property, nor has an additional retainer or new contract with an attorney to represent his client in the proceedings subsequent to the decree ever been deemed necessary. In such a case the attorney originally employed would be deemed derelict in his duty if he failed to protect the interests of his client by examining the circumstances of the sale and every step taken in enforcing the lien.’

“It is therefore apparent that the scope of an action for the foreclosure of a mortgage of real estate is more extensive than the scope of a suit at law on a money demand. In the case of Cauthen v. Cauthen, 76 S. C., 226; 56 S. E., 978, it is held that the client is bound by the action of his attorney in relation tO' all matters within the scope of the action, and it would seem necessarily to follow that in an action for the foreclosure of a mortgage of real estate the client is bound by the action of the attorney, not only in establishing and settling the priority of the liens, but also in subjecting the mortgaged property to his client’s debt, provided the client be not committed beyond the amount of his investment.

“Applying these considerations to the conduct of Mr. Gasque, it cannot be doubted that he acted in the utmost good faith; indeed his good faith was expressly conceded by counsel for Murchison National Bank in the hearing before me. Prior to the sale, upon discovering that the junior *466 mortgagee would not protect his mortgage, Mr. Gasque sought an understanding with the attorney of National Park Bank, but was unable to obtain any understanding, being informed that each party must look out for himself; and he was confronted with the knowledge that there was no way for his client to receive any payment upon his indebtedness except out of the mortgaged property. The first bid placed upon the property was that of his client’s adversary for $100, which was less than sufficient to cover the costs of the case and taxes. Had he not competed in the bidding, his client would have received nothing, and he would now probably be facing charges of dereliction of duty before the grievance committee of the South Carolina Bar Association. Had Mr. Gasque bid an amount in excess of his client’s interest, a different question would be presented, but he did not bid in excess of the investment already made by the client. It was not making an investment for the client, but the protection of an investment already made by the client himself. Under these circumstances it would be a harsh judgment to condemn his action and place him in the position of having transcended his duty to his client.

“Whatever may be the true rule as to the implied powers of an attorney, if indeed a hard and fast rule would be desirable without regard to the exigencies of peculiar circumstances unexpectedly arising, still, under the peculiar fact of this case, I do not deem it necessary to' rest my conclusions wholly upon the ground that the action of the attorney was within his implied power. From the correspondence between the parties, I am of the opinion that Mr. Gasque was well warranted in concluding he had express power to do whatever was necessary in his judgment to protect his client’s interest,' and I think it was an inference which might properly be drawn by a man of ordinary reason and perception.

“On December 24, 1924, Murchison National Bank addressed a letter to Mr. Gasque, inclosing acceptance of *467 service of the summons and complaint in the case, and directing him to take whatever steps were necessary in answering the complaint inclosed, the last paragraph of the letter being as follows: ‘In view of the fact that the National Park Bank of New York holds the security to notes held both by us and by them, naturally we wish to participate to the extent of our pro rata share in the foreclosure proceedings.’ This letter was acknowledged by letter of December 25th, requesting copy of the papers of Murchison National Bank, and saying: ‘Please let me have these at once, and, upon receipt of same, I will prepare the answer in both cases, and follow them to a termination, looking after your interest in same.’ This letter was acknowledged by letter of December 27th, inclosing the papers requested, and there was no disclaimer of Mr. Gasque’s understanding of his authority to follow the matter to a termination, looking after his client’s interest in the same. By letter of December 31st, Mr. Gasque forwarded copy of his answer, ‘that you may see what we set forth in your interest.’ By letter of January 24th, Mr. Gasque informs his client that the case has resulted in a reference, and a decree for foreclosure, that he is informed that a subsequent mortgagee, Mr. Bide, will in all probability protect the senior mortgages, and that as to this he will keep the bank posted also.

“From this correspondence, which is only a small portion of the correspondence between the parties, but sufficient to throw light upon their understanding, it will appear that Mr. Gasque understood that he had plenary authority to follow the matter to* a termination and to do' all that was necessary in the interest of his client, and, although given express notice of this understanding, the client never at any time repudiated it.

“By the letter of January 24th, Murchison National Bank was informed that a decree for foreclosure had been obtained, and the bank could not have had more explicit notice that a sale would result, and that Mr. Gasque assumed that *468 he would be expected to do whatever was necessary to protect his client in that regard. It is true, as is earnestly urged by the bank, that Mr. Gasque spoke of the probability of a junior mortgagee protecting the senior mortgages, but this was suggested, not as a fact, but only as something which might occur; yet this could not definitely be ascertained until the sale. It is also earnestly urged by the bank that Mr. Gasque said he would keep it posted, and that he failed to do so, but this suggested lapse by the agent in the performance of his duty to the principal cannot be urged to the detriment of third parties who- did not employ the agent and are interested in having the sale confirmed.

“In view of the entire correspondence between the parties and the surrounding circumstances, I cannot escape the conviction that the most reasonable inference to be drawn therefrom is that Mr. Gasque had express authority to do whatever was necessary in his judgment to the protection of his client’s interest, and upon the entire record, I am constrained to conclude that the preponderance of the evidence establishes express authority for the action of Mr. Gasque.

“It is further suggested with much force that Murchison National Bank assumes an impossible position. It contends that the bidding of Mr. Gasque was wholly without effect, just as if he had not bid at all; this view being expressly conceded, by counsel in argument. If this be true, then it necessarily follows that the only bona fide bid on the mortgaged property was that of $100 by the National Park Bank. Hence, to follow the argument of Murchison National Bank to its logical conclusion, the property must be awarded to W. S. Foxworth, the assignee of the National Park Bank, for $100, and he declares his willingness to comply, yet Murchison National Bank refuses to accede to this proposition. It therefore will neither surrender its bid nor yet will it accept it. Looking at the issue from another angle, had his attorney not entered a bid, the property would have gone to National Park Bank for less than *469 costs and taxes; and the security in so far as Murchison National Bank is concerned, would have been gone irrevocably. That it still has any interest in the property, or any security for its debt, is due to the vigilance of its attorney. For the bank to hold this benefit with one breath, and repudiate the means that brought'this beneficial situation about with the other — the hand of Esau and the voice of Jacob — - does not appeal to any sense of justice.

“One put tO' the choice between two inconsistent positions is required to elect, to take either one or the other. He cannot temporize to the detriment of others, and in no event should he be permitted to play fast and loose,-or, as somewhat graphically expressed by counsel for petitioner, ‘blow hot and cold,’ with the Court on the orderly administration of the law. Even conceding that Mr. Gasque had no authority to bid so as to bind Murchison National Bank, yet, upon being informed that its agent had gone beyond what it now claims was his authority, it was its duty within a reasonable time either to ratify or to disclaim the action of its agent. The one thing it could not do was neither to ratify nor disaffirm, while at the .same time holding to each alternative in order to affirm if advantageous and reject if not advantageous. As a general rule under such circumstances the principal will be held to have ratified the unauthorized act of the agent, unless he disaffirm it within a reasonable time. This is based upon elementary principles of good conscience and fair dealing.

“The rule has been stated as follows: ‘As a general rule, the principal upon learning of the unauthorized act of his agent, if he does not intend-to be bound thereby, must within a reasonable time repudiate it. It has been variously stated that the principal should repudiate the áct promptly, immediately, at once, or as soon as informed or notified of the act; but the rule usually applied is that of a reasonable time, what is a reasonable time being dependent upon the circumstances of the particular *470 case, which may be such on the one hand as to require prompt or immediate action, or on the other hand as to make some delay excusable or immaterial.’ 31 Cyc., 1275.

“ ‘With regard to the effect upon a client of acts of his attorney done without express authority, the usual rule as to such acts of agents applies, and under some circumstances the client will be held tO' have ratified the unauthorized acts of his attorney or to be estopped to deny the latter’s authority. The authority of an attorney, or a ratification of his unauthorized acts, may be inferred from circumstances, as for instance, from the silent acquiescence of the client for a long period, or from the client’s acceptance and retention of the fruits of the unauthorized act of the attorney:’ 2 R. C. E„ p. 977.

“ ‘If a company is informed of the borrowing of money by its agent, in its name, and within a reasonable time thereafter fails to disavow such acts of its agent, the jury are authorized to consider the company as assenting to what was done in its name.’ Union Gold Mining Co. v. National Bank, 96 U. S., 640; 24 L. Ed., 649 (syllabus).

“The repudiation must be communicated to the other party to the transaction, and not merely to the agent. Bement v. Armstrong (Tenn. Ch. App.), 39 S. W., 899.

“In the case of Ex parte Jones, 47 S. C., 393, 25 S. E., 285, one of the grounds for sustaining an alleged unauthorized act of an attorney was the fact that the transaction' complained of had been communicated by the attorney to his client, on the day of its consummation, and the action of the attorney had not been repudiated.

“On March 3, 1925, Mr. Gasque wrote Murchison National Bank full particulars of the sale. To this letter the bank replied on March 5th, ‘As, we seem to have ample security to cover the indebtedness to us of the Planters’ Bank, we prefer not buying unless there' is a very decided advantage to us in doing so and very good prospects .for an *471 immediate sale,’ and this contradicts the purpose expressed in this letter of December 24, 1924. In the same letter inquiry is also made as to the value of the property with a request for full information. On March 7th, Mr. Gasque replied fully, explaining that he was compelled to purchase the property in order to protect the bank’s interest, that, if the bank does not accept the bid, he will have to have it resold and let some one else take the bid, suggests sending check in order to comply with the bid, and also says: Tf you do not want to do this, I am inclosing you a release and waiver of your rights under it, which I will thank you to sign and return to* me so I can dispose of it in another way. If you will release your rights to it, of course I will turn it over to the receiver of the Planters’ Bank, and let them get as much as they can, feeling that they have an equity in it. Please give this your immediate attention.’ On the same day; March 7th, the bank wrote Mr. Gasque, stating that after careful consideration ‘it seems to us that it will be best for us not to undertake to buy the Minshew property.’ However, it does not release its claim to the bid, but suggests the advisability of taking its chances and collecting what it can out of what may be paid by some one else, and asks the advice of Mr. Gasque as to what in his opinion could be collected under that plan. The matter is thus still left undecided. On March 9th, the bank replies to Mr. Gasque’s letter of March 7th, entirely ignoring the suggestions therein contained, but requesting further information.

“Mr. Gasque replied to this letter March 10th, as follows : ‘The situation is just this, I bid off the property as attorney for you at $6,500, and the Park National Bank, together with the Court cost, is demanding of me a compliance, and to finance the claim would require an outlay of money that I am not willing to put out and have you to' claim a payment of the difference, but I must comply one way or the other, and with that in view I want you to either send this money and take title to yourself or release me from having *472 to pay any difference on your notes. Will thank you to let me have reply at once.’

“To this letter the bank replied on March 13th, that it felt it should have been consulted before the purchase was made, but that it was unwilling to give up any security. Mr. Gasque replied on March 14th, specifically demanding that the bank take a definite position as to compliance with the bid one way or the other. The language of this letter is as strong as possible and is as follows: T am sorry that I am about to be embarrassed in this matter, but feel as if I have done what I thought to be your interest, and now must ask that you either comply or release me from it, and, if not, I will have to have the Court to resell the property on May salesday, and, as it will bring what is due to the other parties, I see no reason that would cause you to claim anything above. I am returning to Columbia to the Legislature on Monday, and will ask that you kindly write me at that point upon receipt of this letter, either taking this property or releasing me from the bid for you, so- I can finance it by some one else; or, if you desire to repudiate my official record as your attorney, why, do that so- I will know how to proceed. * * * However, let me know exactly what you intend doing, so I will know how to proceed.’

“On March 17th, the bank replied, still without taking any definite position either way, but requesting information as to the probable effect of reselling the property, or of turning it over to other bidders. To this Mr. Gasque on March 18th, replied, requesting the bank in the strongest terms to take a definite position one way or the other, the language of the letter being as follows: ‘As the situation stands now, you will either have to take title and pay the Probate Judge the amount I sent you, or refuse to comply, in which event, while very embarrassing to me, I will have to report to the Probate Judge and have the property resold next salesday, and, if that is done, some one would have to *473 represent you in making it bring your notes or you would be in no better situation than you are to-day.’

“In the face of repeated and urgent requests by Mr. Gasque that the bank take a position one way or the other, and that, if it desired to repudiate his authority as attorney, to do so in order that he might know how to proceed, it takes no position, but holds the negotiations open and temporizes. In the face of demands by the assignee of the plaintiff in the cause it maintains silence. It communicates no word of explanation to the officer of the Court making the sale. It assumes no definite position, until brought before the Court and forced to give a definite reply only a few days less than two months after the event.

“There is only one reasonable inference to be drawn from these facts, and that is that the bank for an unreasonable time assumed to hold its decision in suspense so that at its own choice it could hold to the bid, or reject it as to its interest might seem best. A purchaser at a judicial sale cannot thus trifle with the Court, and Murchison National Bank by its conduct has in good conscience become bound by the bid of its attorney, even conceding it beyond the warrant of his agency either express or implied.

“Its return in my opinion being insufficient, the rule should therefore be made absolute, and Murchison National Bank should be required to comply with the bid of its attorney, E. M. Gasque, Esq., by forthwith paying into the hands of the Judge of Probate of Marion County the sum of $6,500, with interest from March 2, 1925, at the rate of 7 per cent, per annum, and it is so ordered.

“No expression as to fact, or finding thereon, or determination of any issue pertinent to the question immediately before the Court, is to be construed as prejudicial to, or in any wise affecting the rights of the parties in the ultimate question of priorities, or rights in the fund derived from-the sale of the premises mentioned.

*474 “Appendix

“Appellant’s and respondent’s attorneys not having been able to agree fully on case on appeal — pursuant to Rule 5 of this Court, it was submitted to Judge M. M. Mann for settlement and his order follows:

“This matter comes before me at this time under the rule requiring the Trial Judge to settle the case on appeal when attorneys therein cannot agree on the same.

“Attorneys for the respondent Gasque object to the following paragraph in the proposed case :

“ ‘Appellant had no notice of the sale until advised of it by respondent Gasque by letter dated March 3, 1925, and to which it promptly replied on March 5, 1925, advising him that it did not want to take the property and later, on the 7th of March, the day on which he asked to hear from the appellant, it notified him positively that it was not interested and that it did not approve of his action in buying it.’

“Such a construction of the letters mentioned, taken alone, permits of a view contrary to' that of the Trial Judge on the case as a whole. I do not see how these letters can be separated from the entire correspondence and independently considered without doing serious harm to the intelligence conveyed in the other portions of the correspondence. In fact, the entire chain of correspondence is so intimately related, so vital as a whole in considering the question at issue, that I do not see how any one or group of letters can be separately considered. In order to arrive at the full relationship of Gasque and appellant, their reciprocal duties, and their attitude toward each other and their respective duties in the premises, the whole correspondence must be carefully studied and considered as a unit. That is the way the Trial Judge considered it, and that is the way he prefers that the Supreme Court should be asked to consider it.

“Therefore, let the paragraph come out and let the following be substituted in lieu thereof:

*475 “ ‘On March 3, 1925, respondent Gasque advised appellant by letter of the sale, and it is from the date of this letter and the receipt thereof until the issuance of the rule to show cause that we find Gasque and appellant in controversy over the question at issue. The correspondence between them sufficiently states the issue, and, since the Court will be called to draw serious inferences and conclusion therefrom, no synopsis or abbreviated digest, of the contents of this correspondence is here given.’

“And it is so ordered.”

“Petition for Rehearing under Rule 17.

“The petitioner, Murchison National Bank, appellant in the above case, by J. W. Yates, its vice-president, respectfully shows:

“(1) That the decision herein was filed within less than ten days from the date hereof, to wit, on the 13th day of July, 1926, and the remittitur has not yet been sent down.

“(2) That your petitioner respectfully requests a rehearing herein under Rule 17 of this honorable Court, and upon the points and grounds hereinafter stated, to wit:

“(a) Because the uncontradicted written testimony set out in the printed case herein, and also the appellant’s sworn return to the rule issued against it, specifically shows that appellant had no information as to the time or place of the foreclosure sale out of which this controversy arose, that it did not authorize, and for lack of knowledge could not have authorized its attorney, Gasque, or any other person to attend the said sale in its behalf, or purchase the property in question for it, therefore, that the finding of Judge Mann against appellant was contrary to the testimony; and it deferentially submits that this honorable court was not advertent to the said testimony, in the particulars mentioned, or it would not have affirmed the finding of the Circuit Judge in that particular.

“(3) It was held on circuit that this appellant played ‘hot and cold,’ neither accepted nor declined the bid which *476 respondent Gasque is alleged to’ have made, and your petitioner deferentially suggests that, in approving and adopting the conclusions reached by his Honor, Judge Mann, in this particular, the Court must have overlooked the uncontradicted fact that the appellant, upon learning of the sale, immediately, and without equivocation, advised the respondent Gasque, on March Sth and again on March 7th, following his notice of March 3d, that it would not accept the property he had undertaken to purchase for it, and had neither authorized the bid, nor would accept it.

“(4) It further deferentially suggests that the Court overlooked the admission of respondent Gasque,. contained in his letters, offered as exhibits to appellant’s return, that it was optional whether appellant accepted the unauthorized bid which he had made, and to the contrary clearly admitted its right to decline the bid. And the Court apparently overlooked the fact that clearly respondent had no express authority to bid, and that the law did not clothe him with implied authority.

“(5) It further deferentially submits that the Court overlooked the very important fact his Honor, the Circuit Judge, held in effect, that respondent Gasque not only had express authority to do whatever was necessary in his judgment, but that it was his duty, in this particular case, to purchase the property in question, and, in effect, that, had he failed to do so, he would have been liable to censure before the State Bar Association; the finding in the Circuit Court in the first particular being directly contrary to the testimony, and his finding in the other particular, neither a correct nor logical inference to be drawn from the circumstances, or a sound conclusion of law.

“(6) It further deferentially suggests that, in affirming the order of Judge Mann as a whole, the Court doubtless overlooked the fact that it was committing itself, not only to his conclusions unsupported by testimony, namely, that the letters offered in evidence showed (1) that Mr. Gasque *477 had express authority to bid for petitioner appellant, (2) that it had sufficient notice of the sale, (3) that petitioner declined either to accept or disaffirm the bid made on the property in question, but also to the legal conclusions reached by his Honor, Judge Mann, namely, that an attorney of record, especially in an equity case, has both actual and implied authority to purchase for his client, without instruction, property offered for sale in a case to which such client is a party, which ruling petitioner respectfully and deferentially submits was not in accord with the former decisions of this honorable Court, and it is loathe to believe that it was the intention of the Court to express an agreement with the ruling of the Circuit Judge on the issues of law presented by appellant in its exceptions and argument before the Court.

“Wherefore, your petitioner respectfully petitions that the remittitur herein be stayed and a rehearing ordered according to the practice of this honorable Court.

“July 20th, A. D. 1926.

“Murchison National Bank,

“By J. W. Yates, Vice-President. “Robt. B. Scarborough,

“Attorney for Petitioner.”

“Petitioner, Murchison National Bank, hereby stipulates and consents, that the stay of remittitur herein, if granted, shall be upon the condition that the status of the property involved shall not be disturbed until after the final determination of the case.

“July 20th, A. D. 1926.

“Murchison National Bank, “By J. W. Yates, Vice-President.”

The opinion of the Court was delivered by

The order of his Honor, M. M. Mann, Circuit Judge, in this cause is full and clear, and, in our opinion his finding and holdings are in accord with law, equity, and justice. Ret the order be reported in full.

We also agree with the order of Judge Mann settling the case for appeal.-

It is the judgment of this Court that both the orders appealed from be, and the same are hereby affirmed.

(dissenting) : I very earnestly favor a rehearing in this case for the following reasons in addition to those urged in my dissenting opinion and in the exceedingly forcible views presented in the petition which should be reported:

The Court, having affirmed the decree of the circuit Judge for the reasons stated by him, has committed itself not only *493 to an affirmance of the decree, but to the annunciation of a principle which I regard as erroneous and fraught with incalculable harm and confusion — that an attorney of record, especially in. an equity case, has both actual and implied authority to purchase for his client, without instruction, property offered for sale in a case to which such client is a party.

In an experience of 42 years at the bar I have never known such a principle to be acted upon or even suggested, and do not believe now, notwithstanding this decision, that any reputable lawyer in the state would assume such responsibility, particularly where he has failed to notify his client of the sale, and has created upon his mind the impression that it would not be necessary for the client to bid upon the property, as appears in this case.

In the case of Savery v. Sypher, 6 Wall., 157; 18 L. Ed., 822 (Supreme Court of the United States), the administratix of the mortgagee brought foreclosure proceedings against the mortgagor, a proceeding as here in equity. At the sale of which the mortgagee had notice, the attorney for the mortgagee bid off the property at a certain price and had it charged to his client. The mortgagor insisted upon the mortgagee complying with the bid which her attorney had made. The Court declined to confirm the sale, saying:

“The burden of proof was imposed on * * * [the mortgagor] who seeks to confirm the sale, to show the authority of * * * [the attorney]; for an attorney, virtute officii, has no authority to purchase property in the name of his client.”

In Bauman v. Eschallier, 184 F., 710; 107 C. C. A., 44, another case in equity, the mortgagee placed the mortgage in the hands of an attorney for foreclosure; judgment was obtained and at the foreclosure sale the attorney, without instructions, bid off the property and. had it charged to the *494 mortgagee. Upon the question whether the mortgagee was bound by the act of the attorney, the Court said:

“We find nothing in the record to support such a conclusion [that the attorney acted as the agent of the mortgagee in bidding off the property], McQuaide [the attorney] was her agent to foreclose the mortgage and have the mortgaged property sold by the sheriff; but he was not authorized to bid for Mrs. Bauman' [the mortgagee] at the sheriff’s sale. His relation to Mrs. Bauman was that of attorney to client. While an attorney has large discretionary powers in the conduct of a suit, he has no power, by virtue of his mere authority to conduct a suit and collect the judgment, to purchase property for his client, and thereby substitute such property for the money.”

In Beardsley v. Root, 11 Johns. (N. Y.), 464; 6 Am. Dec., 386, the syllabus is as follows :

“An attorney, by his general authority as such, cannot purchase land sold under execution in favor of his client, either in trust or for the benefit of such client.”

The Court very aptly says:

“To permit an attorney, in this way, to make his client his debtor, might frequently lead to the most injurious consequences. Many clients, instead of recovering and receiving their money according to the ordinary course of proceeding, would unexpectedly find themselves involved in intricate and extravagant speculations, to the management of which they might be totally incompetent, and which in the end might prove ruinous.”

It appears in the case at bar that the Murchison Bank had collateral which to a considerable extent protected them, and naturally, located in another state, in the banking, not real estate business, they would not have authorized the purchase at the full price of both mortgages, which is admitted to have been more than could have been realized except after long holding.

*495 In Treasurers v. M’Dowell, 1 Hill (S. C.), 184; 26 Am. Dec., 166, it is said:

“The authority of an attorney, * * * is confined to the conduct and management of his client’s cause, in which his skill and learning only is put in requisition.”

In Le Conte v. Irwin, 19 S. C., 554, it was held that the attorney for the plaintiff had the right at foreclosure sale to purchase the property for himself. The Court says:

“We do not see why the attorney of the plaintiff, * * * may not be a bona fide bidder at a judicial sale fairly conducted, as well as any other person. Fie has no duty fi> perform that is inconsistent with the character of purchaser.”

From these authorities and upon principle I think it is clear that Gasque as attorney for the Murchison Bank had no implied authority arising from that relation, to bind the bank to his bid.

It is equally clear that he had no express authority to do so, and does not claim that he had. The plain unvarnished facts of the case are that he had received no instructions from the bank to bid any amount at the sale; that the bank, having collateral sufficient to protect them, was not interested at all in making the property bring the amount of both mortgages; that the bank was not notified of the sale; that the bank was left under the impression by Gasque that Lide would run the property up to a figure that would protect both mortgages senior to Lide’s claim.

The effect of the decision is to saddle the bank with the ownership of a piece of property which it did not want and authorized no one to buy for them. O'f course in complying with their bid the bank must pay in the amount of the national bank mortgage, $2,250 with interest and attorney’s fees and receipt for the amount of its mortgage $3,347 and interest, although it holds other Collateral .sufficient to protect a substantial part of its debt. All of *496 this collateral will be lost to the bank as soon as it receipts for the amount of its mortgage.

But assume for the sake of argument that Gasque had express or implied authority to bid for the bank at the sale, in protection of its interest, I think that his action in running the property up to $6,500 was so improvident as to render the bank not responsible therefor, tie'was advised that the bank held other collateral. He did not inform himself as to its value and the consequent interest which the bank may have had in running up the property. Certainly that interest did not require the property to bring the full amount of both mortgages. He concedes that his bid of $6,500 was more than could be realized out of the property except it be held for a considerable time in the uncertain hope of better times for real estate.

July 13, 1926.

On petition for Rehearing, August 23, 1926.

The opinion of the Court was delivered by The order of his Honor, M.M. Mann, Circuit Judge, in this cause is full and clear, and, in our opinion his finding and holdings are in accord with law, equity, and justice. Let the order be reported in full.

We also agree with the order of Judge Mann settling the case for appeal.

It is the judgment of this Court that both the orders appealed from be, and the same are hereby affirmed.

MR. CHIEF JUSTICE GARY and MESSRS. JUSTICES WATTS and STABLER concur. *Page 479

On Petition eor Rehearing

On the petition for rehearing by Murchison National Bank, appellant, the following order was made: “Petition for rehearing denied.”