LAW.coLAW.co

Thompson against Davies

New York Supreme Court of Judicature1816-01
13 Johns. 112

Summary

Holding. The court arrested judgment, holding that although the consideration for the defendant's promise was sufficient, the agreement itself was void as contrary to public policy because it amounted to a combination to prevent fair competition at an execution sale.

The plaintiff obtained a judgment against a debtor named Doughty and sought to enforce it through execution sales. The defendant promised the plaintiff something of value in exchange for the plaintiff's agreement to refrain from bidding at an execution sale of Doughty's property. Although the consideration supporting the defendant's promise was legitimate—the plaintiff actually suffered a loss by bidding more than value on personal property while forgoing a prior lien on real property—the court found the underlying agreement itself to be unlawful.

The court determined that the agreement violated public policy because it constituted a combination to suppress fair competition at an execution sale. The law carefully regulates such sales to ensure competitive bidding and prevent the debtor's property from being sacrificed. When parties with the ability to bid agree with each other not to bid in exchange for a benefit, they undermine this protective scheme, regardless of whether either party was legally obligated to participate in the bidding process.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether forbearance from bidding at an execution sale constitutes valid consideration for a promise
  • Whether an agreement combining to suppress competitive bidding at an execution sale violates public policy
  • Whether the lawfulness of consideration is defeated when the underlying agreement contravenes public policy

Procedural posture

The plaintiff brought an action to enforce the defendant's promise, and the court arrested judgment on the grounds that the agreement was void as contrary to public policy.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Spence#, ;J.,

delivered the opinion, of thecourt.

This case is not distinguishable, from that of Jones v. Caswell, (3 Johns. Cas. 29.,) but by the circumstánce that Doughty was indebted to the plaintiff beyond the sum for which he had obtained judgment and execution, and by the further circum-, stance that he yms indebted to the defendant., The consideration for the..defendantV,promise was, a forbearance, on the part of .the plaintiff, to bid, at the sale on the execution in, favour•of the Bunk- -of. -Columbia, on. the lands of Doughty ; and, also; that the plaintiff should bid, on. the sale of the personal estate of Doughty, to the amount of his own execution, which; it is ayer* -ged, lie. did, and that such fcsid w^s more thán the value thprpofi

The consideration was sufficient. I agree to the position advanced by Radcliff, J., in the case cited; that the foregoing some advantage or benefit, or parting with a right which might otherwise be exerted, is a valid consideration. The plaintiff, here, not only agreed to forbear bidding, but, having the prior lien, both on the personal and real estate, he waived it, on the latter, to his disadvantage, by bidding more, on the personal property, than its value, so that here was an actual loss to the plaintiff.

Whatever may have been the motives of the parties, in making the agreement, and however upright their intentions, the question recurs, is not the promise made by the defendant void, as contravening established principles of public policy ? If the consideration be ever so meritorious, yet, if the act agreed to be done, and which forms the basis of the agreement, be unlawful, the promise cannot be enforced in a court of law.

The judges who delivered opinions in the case of Jones v. Caswell held, that the law had regulated sales on executions with a jealous care, and had provided a course of proceeding likely to promote a fair competition, and that a combination to prevent a competition was contrary to public policy, and the interests of the original debtor, whose property was liable to -be sacrificed by such combinations. The same principle was recognised in Doolin v. Ward, (6 Johns. Rep. 194.,) and in Wilbur v. How, (8 Johns. Rep. 444.) These werecases of sales at auction; but the principle applies with equal, nay, with more, force to sales on execution.

It has been urged that the plaintiff was not bound to bid on the second execution, and was, therefore, at liberty to enter into this agreement. That is not the test of the principle. In none of the cases cited was the party bound to bid; but, being at liberty to bid, he suffered himself to be bought off, in a way which might prevent a fair competition. The abstaining from bidding, upon concert, and by agreement, under the promise of a benefit forothus abstaining, is the very evil the laV intends to repress. A public auction is open to every one; but there must be no combination among persons competent to bid, silencing such bidders, for the tendency to sacrifice the debtor’s property is inevitable. . .

The principle is of too salutary a nature to-permit any refinements which go to sap or subvert it; and, in England^ the judges have, uniformly, held a strict hand over, every attempt.at fraud or circumvention at auctions. (Cowp. 395. 6 Term Rep. 642.)

The court is, therefore, of opinion that the judgment must be arrested,.

Judgment arrested.