GORDON v. George E. Gordon, Jr., Defendant and Appellant. (1967)

The defendant has appealed from that portion of a judgment which was in favor of the plaintiff for one-half of the difference in amount between the price bid by the defendant at a sale of a business jointly owned by the parties and for which a receiver had been appointed, which sale was not consummated, and the price received by the receiver from another bidder upon a resale of the business pursuant to the order of the superior court.

The nature of the controversy is disclosed by the findings of fact which were in part as follows:  1. Under the provisions of an interlocutory decree of divorce rendered in this action on January 18, 1963, each party was awarded a one-half interest in the business known as the Gordon Sand Company as his or her sole and separate property.   2. On May 10, 1963, a receiver of all of the assets of the business was appointed by the court.   3. On July 2, 1963, pursuant to the stipulation of the parties, a commissioner was appointed and directed to sell all of those assets, except cash and accounts receivable, at public auction for cash, subject to confirmation by the court.   4. Prior to the commencement of the sale the parties entered into a stipulation, in which the commissioner acquiesced, that if either should be the highest bidder, he or she would not be required to pay 25% of the purchase price at the time and place of the sale by cash, cashier's or certified check, but could “off-set” his or her interest in the Gordon Sand Company against such deposit.   5. At the sale on July 8, 1963, the defendant's bid of $160,000 was the highest bid and the commissioner “did thereupon strike off and sell” the assets of the business to him for that amount, subject to confirmation by the court.   6. Between July 9 and July 15, 1963, the commissioner advised the defendant that at the time of the hearing on July 15, 1963, for the confirmation of the sale, the defendant would be required to pay the balance of the purchase price in cash and would not be permitted to off-set his interest in the business against that balance.   7. At the hearing on July 15, 1963, no higher bids were received.   The defendant thereupon tendered $80,000, and no more, on account of the sales price of $160,000 and stated to the court that he was unable to tender more than the sum of $80,000.   8. “That the interest of [the defendant] George E. Gordon, Jr., in the assets of the Gordon Sand Company was unliquidated, the value of said interest was unascertainable and said interest was subject to claims by [the plaintiff] Kathryn H. Gordon in excess of $90,000, as more particularly set forth in the motion of Kathryn H. Gordon to charge the interest of George E. Gordon, Jr., dated December 4, 1963, and said interest was further subject to the additional claims as set forth in cross-complaint against George E. Gordon, Jr., on file in Superior Court Action SW C 2439.”   9. The commissioner stated to the court that she would not accept any claimed interest of the defendant in the assets of Gordon Sand Company as an offset against the balance of the purchase price of $160,000.   10. The court ordered that “the sale be vacated and that the Commissioner sell the assets of the Gordon Sand Company at public auction, for cash, as provided by law, and the court reserved the right to charge [the defendant] George E. Gordon, Jr., for any deficiency arising as a result of the new and subsequent sale.”   11. At the sale thereafter held on July 22, 1963, the highest bid was $35,000.   That bid was submitted by Alfred A. Grant & Company, Inc., a corporation.   On August 8, 1963, the commissioner's report of sale and petition for confirmation was heard by the court.   Further bids were made, including a bid of $120,000 submitted by the defendant.   The highest and best bid was submitted to the court by the corporation heretofore mentioned and was in the amount of $122,000.   That bid was accepted and approved by the court and the amount thereof was paid in full.   On August 9, 1963, the court made its order confirming such sale.   12. The commissioner's expenses for holding and conducting the second sale were $250.

The conclusions of law were that the defendant was liable to the plaintiff for one-half of the deficiency in price of $38,000 upon the resale, together with interest on the sum of $19,000 from July 15, 1963, that the defendant was liable for the commissioner's expenses of $250 arising from the resale, and that, in view of the defendant's “refusal to pay the balance of the purchase price of $160,000.00 at the time of the hearing for the confirmation of the [first] sale” to the defendant, confirmation of the sale to him “would have been idle action which would have necessitated the immediate vacation and setting aside of such sale and confirmation under such circumstances was not a necessary condition precedent to making George E. Gordon, Jr., liable for any deficiency of the resale of the assets of the Gordon Sand Company.”   Judgment was entered accordingly.¹

The minutes of the court for July 15, 1963, relating to the first sale and the resale are as follows:  “The court, at this time, orders the sale vacated.   A new sale is ordered upon the basis of all cash, and the sale is to be set as promptly as possible as provided by law.   The sale is to be advertised as piecemeal or a whole sum.   The terms of sale will be the total amount cash subject to confirmation.”

At the hearing on July 15, 1963, the plaintiff's counsel stated:  “For various reasons with which I won't take up the court's time, it is imperative that we either have confirmation of this sale today or strike the sale because there are various things occurring in connection with a new lease and bids, etc., that make it imperative for us to move on the sale.  * * * [If] Mr. Gordon has the cash, then we would like to see the sale confirmed.   It he doesn't have the cash, why, we would like another sale to be held.”   The defendant's counsel, after stating that half of the business belonged to the defendant, said:  “At the terms of $160,000, we are prepared to pay $80,000 today.”   After discussion between the court and counsel, the court stated:  “The court will order that, at this time, the sale be vacated and a new sale be ordered;  that it be ordered upon the basis of all cash and set the sale for as promptly as possible and as provided by law.”   Thereafter counsel for the plaintiff requested an order as follows:  “May I have a further order, your Honor, to the effect that, in the event the subsequent sales price is less than $160,000, * * * that the defendant, Mr. Gordon, be liable for the difference?”   The court stated:  “We will cross that bridge when we get to it.   It might bring in more.   So, set the sale at the earliest possible date and return to this court.”

On this appeal the defendant makes two contentions.   He asserts that liability could not properly be placed on him for any part of the difference in amount between the respective highest bids on the two sales for the reason that there was no confirmation of the first sale.   He also contends that he was not subject to such liability because the conditions with respect to the resale were not the same as those in effect as to the first sale.

In support of his first contention the defendant places reliance on section 568.5 of the Code of Civil Procedure.   That section is as follows:  “A receiver may, pursuant to an order of the court, sell real or personal property in his possession as such receiver, upon the notice and in the manner prescribed by law for the sale of such property under execution.   The sale shall not be final until confirmed by the court.   Sales made pursuant to this section shall not be subject to redemption.”   Such a sale is a judicial sale.  (See note, 68 A.L.R. 659, 664–666.)   In Hammond v. Cailleaud, 111 Cal. 206, at page 215, 43 P. 607, at page 609, it was stated:  “There are three modes of proceeding in a court of equity, when a purchaser, after confirmation, fails or refuses to complete his purchase:  (1) Set aside the sale, release the purchaser, and order a resale;  or (2) decree a specific performance of the contract;  or (3) order a resale, holding the purchaser responsible for any deficiency.”

In Camden v. Mayhew, 129 U.S. 73, 9 S.Ct. 246, 32 L.Ed. 608, the Supreme Court had before it an appeal from a final order requiring the appellant Camden to pay the difference between the amount bid by him for certain real estate offered for sale at a public auction, under the decree in the suit, and the amount the same property brought on a resale had because of his refusal to comply with the terms of his bid.   In the order of resale the court reserved, for future determination, the question as to his liability for any deficiency in the amount the property might bring upon resale.   In the course of the opinion Mr. Justice Harlan stated (129 U.S., at pages 82–85, 9 S.Ct., at pages 248–249):  “It is undoubtedly true that Camden's bid of $173,050 was, in legal effect, only an offer to take the property at that price;  and that the acceptance or rejection of that offer was within the sound equitable discretion of the court, to be exercised with due regard to the special circumstances of the case, and to the stability of judicial sales.   [Citations.]  It is further contended that an acceptance of that offer could only have been manifested by an order confirming the sale;  and, as no such order was in fact made, that Camden could not be held liable for a deficiency arising upon a resale of the property.  * * * It may be that if the court below had determined to hold Camden to his bid for the property, a necessary preliminary step to that end would have been the formal confirmation of the sale, and perhaps the tender of a deed, to be followed by an order compelling him to pay the whole amount that he offered.   But it was not restricted to that particular mode of securing the rights of the parties for whose benefit the property was sold;  for, upon appellant refusing to pay the amount bid, the court, without confirming the sale by a formal order, could have held him to his offer, and ordered a resale in the meantime at his risk, both in respect to the expenses of the resale and any deficiency resulting therefrom.  * * * But if there was any ground to insist that a confirmation of the sale was necessary before Camden could be made liable for the deficiency resulting from the resale, all difficulty upon that point was removed by the distinct offer, made in open court, to confirm the sale to him upon his complying with the terms thereof by paying in cash the amount of his bid.   This offer having been refused, and the court having been thereby informed that he did not wish to complete the purchase according to the terms of the decree and of his bid, there was no necessity to go through the form of confirming the sale to him, and then immediately ordering a resale, at his risk and cost;  but, as we have seen, the court was at liberty, without such formal confirmation, to order a resale, holding him responsible for any deficiency resulting therefrom.”

 We agree with the court below that under the circumstances of the present case a formal confirmation of the sale to the defendant would have served no purpose and, accordingly, was not required as a condition precedent to liability on the defendant's part in the event of a resale of the property for a lower amount.   But an order relating to a matter of that nature should be clear and unequivocal so that any person subject thereto is adequately advised at that time as to his obligations and can determine his future action in the light thereof.   The difficulty in the case now under consideration arises from the fact that while the order of the court as embodied in the minutes of July 15, 1963, vacates the first sale and orders a resale, it neither contains a provision that the defendant Gordon shall be liable for any deficiency ² (cf. Kerrigan v. Maloof, 98 Cal.App.2d 605, 608, 221 P.2d 153) nor a reservation (as in the Camden case) of that matter for future determination.   An order of a court (see Code Civ.Proc., § 1003) is subject to the same rules of interpretation as any other written instrument.  (Maxwell v. Perkins, 116 Cal.App.2d 752, 756, 255 P.2d 10;  see Yarus v. Yarus, 178 Cal.App.2d 190, 197, 3 Cal.Rptr. 50.)   Consequently, there was no sound basis for the determination embodied in the findings of fact in the proceedings leading to the present judgment that “the court reserved the right to charge [the defendant] George E. Gordon, Jr., for any deficiency arising as a result of the new and subsequent sale.”

A problem of a kindred nature was presented in Mariners' Savings Bank v. Duca, 98 Conn. 147, 118 A. 820.   In that case the highest bidder at the first sale was unable to complete the sale.   The court ordered a resale.   The second sale was confirmed.   In the course of its opinion upholding the return to the bidder at the first sale of his deposit, the court stated (118 A., at pages 823–824):  “Proceeding to a consideration of the remedies against a purchaser who has defaulted upon a judicial sale, it appears that the procedure has been well settled.   Upon proper application the court may discharge the sale and order a resale;  may confirm the sale, order the purchaser to complete payment, and hold him in contempt for noncompliance with the order;  may confirm the sale and order a resale for the account of the purchaser, charging him with any deficiency arising out of the resale, and incidentally order the application of money paid as a deposit to be applied on account of such deficiency.  [Citations.]  Passing to a consideration of what was actually done in the present case, we gather from the record that after the failure of the purchaser * * upon the application of the plaintiff in the action the court made an order of resale without in terms discharging or ratifying the earlier sale, differing in no respect from the form of the sale ordered in the original judgment except as to dates of advertisement and sale, and with a further provision that the expenses of the earlier sale were to be paid out of the proceeds of sale as well as those of the sale contemplated by the modification of the judgment.   No provision is made to charge the purchaser with any deficiency resulting from resale nor with any of the additional expenses incurred in the resale.   The modified and amended judgment is simply an order of resale.   Its operation goes no further than its terms.   It imposes no liability upon the purchaser.   Unless such a liability or charge is expressly imposed, the purchaser is discharged.  * * * Had a confirmation of the sale been made by the court, and then a simple resale ordered, it might be claimed that the question of the liability of the purchaser lay in reserve, subject to the further action of the court, but, as there is in the record no suggestion of confirmation, no such claim can be entertained.” ³

It is true that in the Mariners' Savings Bank case, it did not appear of record that anything but an order for a simple resale was requested of the court.   But the court in the present case declined to make any order other than one for a resale.   Under such circumstances the reasoning of the Mariners' Savings Bank case is apposite with respect to the order of July 15, 1963.   As in the Connecticut case, by that order the court treated the first sale as a nullity.

Since the judgment must be reversed for the reasons stated, it is unnecessary to discuss the defendant's second contention that the judgment cannot stand because the conditions with respect to the resale were not the same as those in effect as to the first sale.

The judgment is reversed.   Each party shall bear his or her own costs on appeal.

FORD, Presiding Justice.

COBEY and MOSS, JJ., concur.