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Always Be On Time!
by Robert Franco | 2010/09/30 |

When a bank representative was seven minutes late for a sheriff's sale, a 3,058 square foot home with 32.5 acres sold for $27,500, a bit shy of the bank's $114,253.45 mortgage.  The trial court refused to set aside the sale and the bank appealed, claiming that the price was "inadequate."

Source of Title Blog ::

The Middletons, in Searcy County Arkansas, took out a mortgage with Simmons First National Bank in 2006.  In 2009, the court entered a default decree of foreclosure and ordered the Middletons' home to be sold.  A notice of sale was published, stating that the sale would be held on May 26, 2009 at 10:00am.

The only bidders that attended the sale were John L. Stephenson, Mrs. Middleton's brother, and Mr. Stephenson's wife.  The house was sold to them for $27,500.  

Danny Horton, the bank's vice president and commercial lender, arrived at 10:07 and found out that the property had already been sold.  In his testimony, he said he was aware of the date and time of the sale but "he was involved with a customer at his office that morning and lost track of time."  He further said that he would have made a minimum bid of $70,000 on the property and had instructions to bid up to a maximum of $89,000. 

The bank's appraiser also testified.  He stated that his initial appraisal in 2006 was for $145,000, but due to "structural problems including considerable settling of the floor in the kitchen and living room," its current value was $100,000. 

Mr. Stephenson testified that he based his bid on personal knowledge of the home, including the property's boundaries, access, lack of adequate water, and foundation issues.

"I looked at thirty-two acres with a dilapidated old home on it with major foundation issues," he said.

The trial court found that, in consideration of the nature of the sale, the bid price of $27,500 paid by Mr. Stephenson, although objected to by Simmons Bank as being shockingly insufficient, was a fair price for the property offered.

On appeal, the bank argued that the sale should have been set aside because the consideration received was inadequate under the standards applicable pursuant to Arkansas law.

The appeals court held that mere inadequacy of price, unless so great as to shock the conscience or amount to evidence of fraud, will not justify the court in refusing to approve the sale.  However, when great inadequacy of price is shown, equity will seize upon slight circumstances to go along with the inadequacy of price and justify a refusal to confirm a sale.  The trial court has considerable discretion to confirm or refuse to confirm the sale, thus the appropriate standard for review is whether the trial court abused its discretion.

The bank attempted to show a "great inadequacy of price" by comparing the sales price to the recent $100,000 appraisal and the $114,253.45 principal balance of the Middleton's mortgage.

It further explained "additional circumstances" that it believed justified setting aside the sale.  The banks argued that the commissioner was aware that a representative for the bank was scheduled to attend the sale and make a minimum bid of $70,000.  Yet, instead of waiting for Mr. Horton to arrive, or telephoning him to remind him of the sale, he sold the property to a lone bidder.

The bank also pointed out that the bidder was the brother of Mrs. Middleton and he was aware of the amount she owed on the mortgage, which was substantially less than his bid.

These "procedural anomalies," the bank claimed, undermined the fairness of the sale and it should have been set aside.

The appellate court found no abuse of discretion in confirming the sale.  With the structural problems, and other factors that caused the value to decline, Mr. Stephenson thought his bid was consistent with the fair market value at the time of the sale. 

And, even if the trial court had found a "great inadequacy" of price, it would not have been required to set aside the sale because there were insufficient circumstances of unfairness. The bank failed to cite any legal authority for the proposition that the commissioner's knowledge that the bank intended to make a minimum bid prohibited him from conducting a sale when the banks agent failed to appear at the scheduled time.

Further, there was no misunderstanding of miscommunication in this case.  The bank was well aware of the date and time of the sale, but through no one else's fault failed to timely attend and protect its interests.  The commissioner was not required to delay the foreclosure sale or notify the bank's representative as the bank suggested.  Thus, no unfairness occurred.

The lesson to be learned... always be on time!  Tardiness cost the bank here about $8,785 for every minute Mr. Horton was late.  Though I guess he should be commended for taking care of his customer that morning - perhaps Mr. Horton should have made other arrangements that morning.



Categories: Foreclosures, General Interest

1163 words | 3635 views | 2 comments | log in or register to post a comment

No sympathy here ...

Always show up 15 minutes early.

 I can understand starting out early and being trapped in traffic due to a major highway incident delay or accident (excluding usual congestion or construction delays): use you cell phone and call the sheriff.  I have no sympathy for knowing the time and intentionally delaying. 

That must have been one extraordinarily important, wealthy customer!

by Bobbi Shorthouse, Notary Public | 2010/09/30 | log in or register to post a reply

OK I am so busted..

I am habitually late ! It's a sad fact that everyone who knows me acknoweldges. Most people just lie to me about the time an event may be starting on the off chance that I may show up on time. It is not, I promise you, arrogance on my part. I'm just always running behind.  Now though I think I will make much more of an effort to be on time. 

by CHARLENE PERRY | 2010/10/01 | log in or register to post a reply
Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco



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