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Dixon v. City Nat'l Bk. of Metropolis

OPINION FILED SEPTEMBER 7, 1979.

MILLEDGE S. DIXON ET AL., PLAINTIFFS-APPELLANTS,

v.

THE CITY NATIONAL BANK OF METROPOLIS, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Massac County; the Hon. DUANE T. LEACH, Judge, presiding.

MR. JUSTICE KARNS DELIVERED THE OPINION OF THE COURT:

Plaintiffs, Milledge and Irene Dixon, purchased certain real estate for $4,201 at an execution sale conducted to satisfy the judgment debt owed by Roy Moller, a joint owner of said property, to the City National Bank of Metropolis, the defendant. When the sale, and the deed issued in pursuance thereof, were subsequently voided in a previous appeal because of the sheriff's failure to set off the judgment debtor's $5,000 homestead exemption (Dixon v. Moller (1976), 42 Ill. App.3d 688, 356 N.E.2d 599), plaintiffs filed an amended complaint to recover their purchase money which was paid to defendant bank in partial satisfaction of the judgment debt, together with interest thereon from the date of sale. From an order of the Circuit Court of Massac County dismissing plaintiff's amended complaint plaintiffs appeal.

The facts have been set forth in our previous opinion and need not be repeated here. In this appeal, plaintiffs argue that when an execution sale, at which they were purchasers, is rendered null and void so that they receive nothing in exchange for their consideration, they are entitled to recover back from the judgment creditor the purchase money paid at said sale and interest thereon from that date. Defendant bank responds that the purchasers at a void execution sale are legally precluded from recovering from the judgment creditor, to whom the sheriff paid the proceeds of sale, because it has long been held that purchasers at judicial and execution sales take title to property at their own risk unless they can prove, which plaintiffs have not done here, fraud, misrepresentation or a mistake of fact. Defendant further argues, however, that plaintiffs are not without a remedy because the purchasers are entitled to recovery of the amount of consideration paid for the property in question from the original judgment debtor under the doctrine of subrogation.

It has generally been held in most jurisdictions that a purchaser at an execution sale, which is either set aside for some irregularity or found to be void, is entitled to be reimbursed for the purchase money paid by him. (Annot., 142 A.L.R. 310 (1943); 30 Am.Jur.2d Executions §§ 484 et seq. (1967).) The delicate issue in this case, however, is not the purchaser's right to reimbursement, which right defendant bank does not challenge, but to whom he must look for repayment. Plaintiffs' contention that the judgment creditor is liable for this amount is supported by various policy considerations. For example, as between the purchaser and the judgment creditor, it would seem that the purchaser has a greater claim to the disputed proceeds. There is little reason for a court to award the purchase money to the creditor, who is merely entitled to recover from the judgment debtor, as against the purchaser, to whom the money belongs. To hold otherwise would give the creditor a windfall at the expense of the innocent purchaser who believes he is buying the property of the debtor. (See Martel v. Bearce (Me. 1973), 311 A.2d 540.) Furthermore, it is the creditor who has initiated the legal process and who now seeks to benefit from an execution sale which has been subsequently voided. The most equitable solution in such a situation would seem to warrant a return of the purchase money to the purchaser by the creditor and a return of all three parties to their original respective positions. The creditor, therefore, could pursue his remedies against the person or entity justly indebted to him.

While we find much appeal to this reasoning, it appears that the long line of Illinois cases discussing this situation has reached a contrary result. The purchaser's remedy, if any, is not against the judgment creditor but against the debtor or possibly the sheriff who conducted the sale. In the early supreme court case of England v. Clark (1843), 5 Ill. 486, certain personal property was levied upon and sold at an execution sale as being the property of the judgment debtor. When it was later established that the property belonged to a stranger and not the debtor, the purchaser at the sale sought recovery of the purchase money from the judgment creditor, to whom it appears the proceeds had been paid. The court, in applying the doctrine of caveat emptor and thus denying plaintiff purchaser any relief against defendant creditor, stated:

"It seems there ought to be a remedy. But there are but few authorities upon the point; and the difficulty seems to be, as to the person who shall bear the responsibility, and refund the purchaser his money for which he has received no consideration. The courts> seem not inclined to impose it upon the plaintiff in execution, who has but received his due, although it may not have come from his debtor, unless he is guilty of fraud, or has done some other act to charge himself; and we are of the same opinion. The liability must be upon the officer, or the defendant [debtor]. * * * [H]e [debtor] is most benefitted, by having his debt discharged by the advance and application of the purchase money." 5 Ill. 486, 492.

In 1874, the Illinois Supreme Court again addressed the applicability of the caveat emptor doctrine to void execution sales in Conwell v. Watkins (1874), 71 Ill. 488. In that case, after execution was issued following a judgment, the sheriff levied on the property of the debtor. The sheriff, however, proceeded no further with the execution until nine years later, at which time the property was sold to a purchaser. Prior to this sale, the execution lien had expired, thereby permitting the debtor to sell the property to a third party. The third party successfully brought an action to quiet title to his property caused by the unlawful execution sale prompting the purchaser to seek repayment of the purchase money. In denying relief to the purchaser, the court stated that "the maxim of caveat emptor well applies in such a case. Appellant [purchaser] took his chances in bidding, and is presumed to have known what he was buying, and all about it." 71 Ill. 488, 492.

In Alday v. Rock Island County (1892), 45 Ill. App. 62, the creditor recovered a judgment against the debtor and levied upon property which it erroneously believed belonged to the debtor. The property was sold at an execution sale with the proceeds being paid to the creditor. Upon discovering that the property belonged to a third party, the creditor refunded the purchase money and moved to set aside the original execution and sale, and for a new execution. The court in refusing to order a new execution, held, in essence, that the receipt of the proceeds realized at an execution sale by a judgment creditor, even if said sale is void, discharges that portion of its claim against the debtor. The court justified its decision as follows:

"[T]he sale was made to a third party who was not interested in the judgment or concerned in obtaining satisfaction of it, and who paid his money in consideration of such right or title in the lot as he might acquire or become entitled to by reason of his purchase, and he could have no right nor be entitled to any relief in the absence of fraud or misrepresentation except upon the supposition that by his purchase he acquired a right to a title. There is no warranty of title at a judicial sale, but the rule of caveat emptor applies and the validity of the title is at the purchaser's own risk. * * * As there is no warranty on the part of a sheriff in making a judicial sale, neither is there any implied on the part of the execution creditor. * * * Gruhl [purchaser] had no claim against appellee [creditor] and no right which it could acquire and enforce by giving him the amount that he had bid at sale. Appellee [creditor] had obtained full payment of its judgment by the sale to a third party without fraud or misrepresentation, and was under no obligation to refund to him the amount lost by his own want of ordinary care. By such voluntary act it could not again make appellant its debtor without his consent." (45 Ill. App. 62, 63-64.)

Although the court stated that the purchaser would not be entitled to reimbursement from the judgment creditor, it did not express any opinion whether such purchaser could have recovered the purchase money from the debtor had he not received repayment.

The supreme court again addressed the validity of the doctrine of caveat emptor at execution and judicial sales in Hutson v. Wood (1914), 263 Ill. 376. In that case, the judgment debtor, in an effort to recover possession of property sold at an execution sale, was successful in proving the judgment, upon which the execution, levy and sale were made, was void. The court found that the sheriff's sale was equally void and therefore held that the purchasers took no title to the property. In discussing whether the purchasers were entitled to reimbursement of their purchase money, the court stated:

"The rule of caveat emptor applies to sales upon execution and judicial sales, and we know of no case where a purchaser at such sale, in the absence of a statute, has been enabled to recover the money paid, either for a defective title or where for want of power to make the sale he has acquired no title." 263 Ill. 376, 387.)

Nevertheless, as a condition to the court granting equitable relief to the owner of the property, the court required her to reimburse the purchasers for the amount they had paid to relieve the land of existing encumbrances:

"[W]here a possessor or purchaser, in good faith, of real estate has paid money to discharge an existing encumbrance, having no notice of any infirmity in his title, he is entitled to be re-paid the amount of such payment by the true owner ...


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