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Colonial Cases

McNutt v. Mills, 1875

[sale of business]

McNutt v. Mills

United States Consular Court, Shanghai
Seward, 7 October 1875
Source: The North China Herald, 14 October 1875


Shanghai, Oct. 7th.
Before GEO. F. SEWARD, Esq., Consul-General.
  Mr. WAINWRIGHT appeared for the plaintiff.
  Mr. EAMES for the defendant.
  The case occupied some time in hearing, but possessed little public interest.  Plaintiff was until recently landlord of the Shanghai Hotel, Foochow road; the defendant being also a publican, carrying on business in Hongkew.  By a bill of sale dated the 25th of June last, made between the plaintiff and James Sharp Kermath on the one side, and the defendant on the other, - but reciting that the plaintiff was the sole tenant and proprietor of the said Shanghai Hotel, the defendant advanced the sum of $2,600, the plaintiff making over the hotel and its contents as security for the advance.  There was also a proviso for the redemption of the same by the plaintiff, on payment by the plaintiff to the defendant on demand, or within twenty-four hours afterwards, of the $2,600, with interest at the rate of 6 per cent per annum.  The Bill of Sale also contained a [provision empowering the defendant, in case of the plaintiff's default, to sell the property, either together or in lots.
  On or about the 7th of August, the defendant, in writing, demanded payment of the $2,600, and interest; and plaintiff failing to pay the money, the defendant, of the 25th of the same month, put the property up to auction, - with the exception of the wines and liquors, stores, and a few other articles.  The auction beers, Messrs. Mackenzie & Co., published a catalogue of the sale, dividing the property offered into 346 lots.  At the auction, however, the property was put up in one lot only, and the whole was knocked down to Mr. Sys, an agent of the defendant, for the sum of $2,205 Shanghai taels or thereabouts, and immediately after the sale, defendant took possession of the hotel, and obliged the plaintiff to leave the premises, although he (the plaintiff) was the lessee or tenant thereof.    Defendant had retained possession of the premises, and everything therein until the present time, although possession had been formally demanded of him by the plaintiff.
  The plaintiff, therefore, contended that the purchase of the property by the defendant was wholly illegal and void, and that the possession of the premises, and the appropriation of the wines, liquors, and stores, and other articles, not put up for dale, is also contrary to law.   By the act of the defendant, the plaintiff alleged that he had suffered serious loss.  He therefore prayed the Court that the defendant might be ordered to give up possession of the house to the plaintiff, together with everything therein at stated time of sale, upon payment by him of the said  sum of $2,600, on or before a date to be specified, together with interest to the date of the sale; or that, in case the plaintiff failed to pay the money, the property and effects may be sold by auction in lots under the direction of the Court, and that the proceeds of the sale, after payment there out of the expenses and the sum of $2,600 and interest, may be paid to the plaintiff; and further that the defendant may be decreed to pay to defendant the value of all such property, effects, and things, which it shall be found on enquiry have been lost, destroyed, sold, given away, or otherwise consumed by the defendants; and also such sum of money as the Court shall award by way if damages for the loss and injury sustained by plaintiff.
  The Defendant, in answer to the plaintiff's case, admitted everything with respect to the Bill of Sale and advancing the $2,600; but with reference to the auction, alleged that the property was sold in one lot, because he believed and was advised by the auctioneer that it would command a better price than could be obtained if sold in many lots.  It was also admitted that Mr. Sys purchased the property at the price mentioned in the petition, and although he acted without instructions from the defendant, he (defendant) nevertheless ratified the purchase, and retained possession of the property, having previously taken possession under the said mortgage.  The defendant denied that he consumed or otherwise disposed of any wines, liquors, or stores, which were in the hotel at the time of the auction.
  The plaintiff was present at the sale, and made no objection thereto; and the defendant believes himself to be the lawful owner of the said property, but is ready to transfer his interest therein to the plaintiff, on the latter paying the $2,600, with interest and also the further sum of $1, 023.95, made up of various items of necessary expenditure and liabilities incurred by the defendant.  The defendant further prayed that the plaintiff's petition might be dismissed, and that he be ordered to pay the costs of the suit.
  After taking the evidence of the plaintiff and defendant, to the above effect, and also hearing the addresses of Counsel on both sides,
  The Court and Associates consulted; and the Court afterwards delivered the following:
  In the opinion of the Court, the defendant must be considered the purchaser of the property in question in this suit.  Sys was the actual bidder and it was knocked down to him, but he at once declared his inability to make the deposit demanded by the Auctioneer, and said he had bought for a friend.  A little later the defendant came in, was declared to be the friend, and allowed his name to be entered as the purchaser.  Still later, the defendant paid to the Auctioneer the amount due for commissions and charges on account of the sale.  However Mr. Sys may have bid, this course of action on the part of the defendant, entitled the Court to look to him as the purchaser.
  The Court, looking to all the circumstances, consider further that it is desirable that the  sale of the property required by the Mortgage deed shall take place under direction of the Court, and will give the necessary instructions.
  The plaintiff's claim for damages is disallowed, the Court considering the act of the defendant in entering into possession within his authority under the deed.  There is no reason to believe that the subsequent delays have been more prejudicial to the plaintiff than to the defendant, or less the fault of the plaintiff than of the defendant.
  The question arising our of the defendant's expenditure for repairs and renovations, will be dealt with after the sale and the purchase money has been paid into Court.
GEORGE F. SEWARD, Consul-General.
Approved: CLARK BLETHEN, J. K. THORNDIKE, Associates.


Source: The North China Herald, 13 January 1876

Shanghai, Jan. 10th.
Before O. B. BRADFORD, Esq., Vice Consul General
Mr. WAINEWRIGHT appeared for the plaintiff.
Defendant conducted his own case.
  Plaintiff was formerly in business at the Shanghai Hotel, the entire contents of which he mortgaged to the defendant for the sum of $2,600, to bear interest at six per cent per annum, giving as security a bill of sale.  This bill contained a clause that it should be lawful for the defendant in case default was made in payment of the said monies or any part thereof, for the space of 24 hours after demand, to sell the property so mortgaged either together or in lots, by public auction or private contract.  On or about the 7th August last, the defendant demanded repayment of the 42,600, and the plaintiff being unable to meet the demand, the defendant took possession under the bill of sale, and ordered a public auction of the effects.  The auctioneers, Messrs. Mackenzie and Co., prepared and circulated a catalogue of 346 lots, but the property was ultimately sold in one lot to a person who said he was only agent for the defendant, and the latter was therefore declared the purchaser at the price officered, Tls. 2,205.  He immediately afterwards turned the plaintiff out of the house, and took sole possession, although he was the lessee and tenant thereof, and retained possession, though possession was formally demanded of him by the plain tiff and on his behalf.  This was refused, and plaintiff in consequence brought an action against defendant, which was heard on the 7th October last; the defendant contending that he had acted bona fide, within the conditions of the bill of sale, and with the full knowledge of the plaintiff.  He also submitted a schedule of items he had expended on repairs and improvements of the premises in the meantime, amounting to $1,033.95, and offered to transfer the property back to the plaintiff on payment of this sum, together with the $2,600 mortgage, and interest from the 25th of June to the date of sale.
  The Court, "looking to all the circumstances, considered it desirable that the sale of the property required by the mortgage deed, should take place under the direction of the Court."  A second sale accordingly took place, the defendant again being the purchaser, at the advanced sum of Tls. 3,050, which was paid into Court to await decision upon the items charged by him for repairs and improvements.  The demand under this head, he had now increased by subsequent payments to over $2,000.
  Mr. WAINEWRIGHT said the question before the Court was, how far was the defendant entitled to recover for outlay on repairs and improvements, which were made while, in point of law, he was in wrongful possession.  He effected those repairs and improvements without any consent, and in the face of an express notice that his right of possession would be disputed.  That was the principal question which the Court now had to decide.
  The general principle was that a man who laid out money in such a way, having no right, or only a limited right, to the property, without the consent of another party interested, could not charge the real owner for it.  Common sense and common fairness showed that to be the case; and it was so well known as a principle of law, that it was hardly worth while troubling the Court with authorities on the point.  He would, however, just refer the Court to "Story, on Equity Jurisprudence;" and also to the standard work, so far as English law was concerned, and he believed the United States law was the same - "Fisher on Mortgages" (vol. 2, p. 888), which, as he had s aid, was the standard work on the subject.  After quoting from both these works, Mr. Wainewright went on to say that it was obvious that a man who laid out money upon property against the will of the real owner, was not to be repaid.  If the defendant's claims were looked at it detail, he (Mr. Wainewright) thought the Court would see there were claims for items for which he could not recover.
  (These items were about thirty in number, and included legal fees in connection with the bill of sale, rent, wages, auctioneers' commission on the two sales, new furniture, scraping, painting, and varnishing old furniture, gilding large mirror and pictures, refurbishing Corinthian columns, generally cleaning up and making ready to resume business, building a chimney, &c., &c.)
  The Court decided to investigate them seriatim, and to take defendant's explanations of each as it was reached.
  Mr.  WAINEWRIGHT offered no objection to the legal expenses of preparing the hill of sale; but on the second item, a charge of $2 per day for bailiff's services, he objected that as the man had only been paid $1 per day for several of the earlier days when he was there only as an assistant, he could not easily see why he should be paid $2 per day when he became a bailiff.
  Defendant, in answer to a question why he had taken possession and incurred expense in the way he had, replied that one morning he went to the house and found a woman breaking the furniture, and if he had not "gone in" then, he would soon not have had a "cent's worth" of property as security for his money.  There were two men playing billiards in the house at the time, and he out one of them in possession.  He was there 26 days, and he (defendant)) paid him $52 for his services as bailiff, believing that to be the regular charge.  He denied that the plaintiff had made a contract with the man for $1 per day, because he (plaintiff) was lying ill in bed, having received a dangerous cut on the head with a glass bottle.
  Mr. WAINEWRIGHT also objected to item 3, $45, wages to a European for taking charge of the house from the 25th of August to the 24th of September, as having been incurred in consequence of the defendant's action in regard to the abortive sale.  He would not object to pay the commission on the second sale, by Mr. Phoenix, the Marshal of the court, at 5 per cent.  That sale was rendered necessary by the defendant's former act, and it was only right the defendant should pay the commission on the first sale, which was a useless one.
  Defendant contended that according to the bill of sale, the first sale was not useless; but the Court ordered a second sale, and he abided by its order, and thought he ought to get his money back.
  Mr. WAINEWRIGHT said the whole of the other items, excepting some four or five, came under one description - for repairs - and therefore came under one objection; they were effected in the face of an express notice that the first auction would be disputed, upon which he contended the defendant could not recover.
  The Court said it would prefer to take the items seriatim; not that there was any good ground for doing so, but it wished the defendant to see that the case was being sifted to the bottom.  It had been hanging over for six months, and the Court intended to go through with it to-day, so as not to be troubled with it again.
  The remaining items were then taken separately, but none of them presented any additional features of public interest; and at the close
  Mr. WAINEWRIGHT merely renewed the objection he had previously mentioned.  There was, however, a word to say on the question of interest.  His client was willing to pay interest on $600, as they were received first, from the 1st of June to the 25th of August; and on $2,000 from the 25th of June to the 25th of August, at 6 per cent, being a total of $28.46.
  Defendant s aid the Court would find that the $2,600 were included in one date in the bill of sale - from the 25th of June.
  The Court said in that case, the plaintiff was willing to pay more than the defendant asked for, and the offer was therefore in his favour; but if the defendant liked the Court would confine itself to the letter of the bill of sale.
  Defendant said he only came into Court to prove as much as he could swear to.  He had paid all the money he had included in the items.
  The COURT said it would, with the Associates, examine the vouchers and objections submitted.  The proceeds of the second sale, Tls. 3,050, had been reduced at 73, and produced $4, 708.  It now remained to be seen whether the defendant's claim and interest would amount to that sum.  If it did not, there would be a surplus, to be paid over to the plaintiff.  The Court then adjourned.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School