Opinion
C.A. No. 16L-06-028 ALR
10-24-2017
LSF9 Master Participation Trust, Plaintiff, v. Shawn Truitt, Defendant.
Melanie J. Thompson, Esquire, Orlans PC, Attorney for Plaintiff LSF9 Master Participation Trust Michael J. Isaacs, Esquire, Leslie B. Spoltore, Esquire, Wali W. Rushdan II, Esquire, Fox Rothschild LLP, Attorneys for Movants Urban Concepts, LLC and Jennifer M. Schmitz
Upon the Motion of Jennifer M. Schmitz and Urban Concepts , LLC to Vacate/Set Aside the Second July 11 , 2017 Sheriff's Sale and to Confirm the First July 11 , 2017 Sheriff's Sale GRANTED MEMORANDUM OPINION Melanie J. Thompson, Esquire, Orlans PC, Attorney for Plaintiff LSF9 Master Participation Trust Michael J. Isaacs, Esquire, Leslie B. Spoltore, Esquire, Wali W. Rushdan II, Esquire, Fox Rothschild LLP, Attorneys for Movants Urban Concepts, LLC and Jennifer M. Schmitz Rocanelli, J.
This matter is before the Court on the motion of Jennifer M. Schmitz and Urban Concepts, LLC (collectively, "Movants") to set aside a second sheriff's sale conducted after the New Castle County Sheriff's Office ("Sheriff's Office"), sua sponte, vacated the first sheriff's sale for the same property, and also to confirm the first sheriff's sale. Movants contend that the Sheriff's Office lacked authority to vacate the first validly conducted sheriff's sale and to hold a second sale. Plaintiff LSF9 Master Participation Trust ("Plaintiff") opposes the motion.
Factual and Procedural Background
On July 14, 2006, Defendant Shawn Truitt ("Defendant") executed a Purchase Money Mortgage ("Mortgage") on property located at 1214 Tatnall Street, Wilmington, Delaware 19801 ("Property"). After a series of assignments, Plaintiff is the party in interest which filed a Scire Facias Sur mortgage foreclosure complaint on June 7, 2016. On April 10, 2017, Plaintiff obtained a default judgment against Defendant in the amount of $150,881.12.
The Property was exposed to a sheriff's sale on July 11, 2017. Movants and Plaintiff were both present. When the Property was up for bid, Plaintiff made an opening bid of $159,668.00. Movants countered with a bid of $161,000.00 and won the Property ("First Sheriff's Sale").
When Movants attempted to pay the 10% fee required for their winning bid, they were informed that the Property would be subject to a second sheriff's sale because Plaintiff had made an error in bidding. Although the exact nature of the error is unclear, Plaintiff claims that it intended to competitively bid up to $184,405.00 after its initial bid, but that it had failed to do so. Movants objected to a second sheriff's sale at the time, but participated to preserve their interest in the Property. Plaintiff again made an opening bid of $159,668.00, to which Movants made a competing bid. Bidding continued until Movants won the Property again, this time with a final bid of $185,000.00 ("Second Sheriff's Sale"). Movants paid the 10% fee to preserve its winning bid for the Property.
On August 17, 2017, Movants filed a motion to set aside the Second Sheriff's Sale and to confirm the First Sheriff's Sale. Plaintiffs oppose the motion.
Standard of Review
This Court has broad discretion to confirm or set aside sheriff's sales. Review of a sheriff's sale "implicates the court's inherent equitable power to control the execution process and functions to protect the affected parties from injury or injustice." To that end, when reviewing a sheriff's sale, the Court "must ascertain whether there was 'some defect or irregularity in the process or mode of conducting the sale, or [] neglect of duty, or misconduct on the part of the Sheriff or some other sufficient matter whereby the rights of parties to, or interested in the sale are, or may have been, prejudiced.'" It is well-established in Delaware that "mere inadequacy of price, standing alone, is an insufficient ground for setting aside a judicial sale." Additionally, the Court "may not arbitrarily or capriciously refuse to confirm a sale, where there are no irregularities in the sale proceedings and no fraud, unfairness, or other extraneous matter demonstrating unfairness to one of the interested parties is shown." Therefore, "a properly conducted sale should be set aside only when necessary to correct a plain injustice, consistent with the principles of equity."
Burge v. Fidelity Bond and Mortgage Co., 648 A.2d 414, 420 (Del. 1994).
Id. at 420.
Id. at 419 (citing Petition of Adair, 190 A. 105, 107 (Del. Super. 1936)).
Id.
Id. at 420.
Id. at 421.
Discussion
I. The Sheriff's Office did not have the authority to conduct the Second Sheriff's Sale, which must therefore be set aside.
The First Sheriff's Sale took place with bidding from both parties and ended when there was no counter-bid to the Movants' bid of $161,000.00. Any challenge to the First Sheriff's Sale should have been presented to this Court by motion requesting a Court Order to set aside the First Sheriff's Sale. Absent that challenge and a ruling from this Court, the Sheriff's Office should have recognized Movant as the prevailing bidder for the Property after the First Sheriff's Sale.
See Burge, 638 A.2d at 419-21 (discussing the standard that this Court uses in reviewing sheriff's sales and providing that judicial review of contested sheriff's sales is within this Court's "inherent equitable power to control the execution process").
According to the Sheriff's Office, the decision to hold the Second Sheriff's Sale was based on its reading of Burge. In Burge, a mortgage company obtained a default judgment on certain property that was then sold in a sheriff's sale. At the sheriff's sale, the representative for the mortgage company made an opening bid, which was followed by the winning bid from a third-party bidder. Two days after the sale, the representative for the mortgage company realized he had read the wrong paper when bidding on the property, and that his mistake resulted in a $50,000 difference between his bid and what he was authorized to bid. The Delaware Supreme Court affirmed the Superior Court's decision to set aside the sheriff's sale. The Supreme Court ruled that the Superior Court was within its discretion to set aside the first sale. In so ruling, the Delaware Supreme Court stated that the third-party bidder should have known that the mortgage company made a mistake in bidding because there was such a large discrepancy between the bid and the "upset price" for the property, and that upholding the sale would result in an unconscionable result to the mortgage company.
Id. at 417.
Id.
Id.
Id. at 418, 422.
Id. at 420-21.
Nevertheless, the Sheriff's Office's reliance on Burge in deciding to hold the Second Sheriff's Sale was misplaced for two reasons. First, the Court, and not the Sheriff's Office, has the authority to set aside a sheriff's sale. Second, even if a mistake similar to that which occurred in Burge took place in this case, Burge does not hold that such a mistake automatically warrants setting aside the sheriff's sale. Rather, the Court in Burge held that it is within the supervisory court's discretion to set aside a sheriff's sale for a unilateral mistake in bidding. Therefore, even if there was an argument based on Burge that Plaintiff's unilateral bidding mistake justified setting aside the First Sheriff's Sale, that argument should have been made to this Court, which would have then had the discretion to set aside the First Sheriff's Sale based on the mistake.
See id. at 420.
Id. at 421.
Second, Plaintiff argues that Movants have insufficient grounds to set aside the Second Sheriff's Sale because Movants are only concerned with the higher price they paid for the Property at the Second Sheriff's Sale, and price alone is insufficient to justify setting aside a sheriff's sale. In making this argument, Plaintiff relies on Smith v. Caldera Properties-Nassau Grove, LLC, in which this Court denied a motion to set aside a sheriff's sale where "[t]he only thing that really matter[ed], as far as the Plaintiffs [were] concerned, [was] the sale price." The Court highlighted that the plaintiffs did not identify "any mistake, misconduct, or fraud in the course of the conduct of the Sheriff's Sale that would justify setting it aside."
2011 WL 2420842, at *3 (Del. Super. June 9, 2011).
Id.
Plaintiff's reliance on Smith is misplaced, as Movants here have not solely identified price as a concern. Rather, Movants identified a procedural defect or irregularity in the sheriff's sale process — namely, the Sheriff's Office's decision to conduct the Second Sheriff's Sale. It is this procedural defect or irregularity, and not the higher price, that warrants setting aside the Second Sheriff's Sale.
The Sheriff's Office did not have the authority to hold the Second Sheriff's Sale after a winning bid was accepted from the First Sheriff's Sale. By conducting another sheriff's sale after the properly conducted First Sheriff's Sale, the Sheriff's Office committed a "defect or irregularity" in the sheriff's sale process that resulted in prejudice to Movants. Because of this procedural defect in conducting the Second Sheriff's Sale, it must be set aside.
See id. at 419.
II. There were no irregularities in the sale proceedings for the First Sheriff's Sale, which must therefore be confirmed.
It is well-settled law in Delaware that "mere inadequacy of price, standing alone, is an insufficient ground for setting aside a judicial sale." In order to justify setting aside a sheriff's sale, the price must shock the conscience of the Court. Here, the sales price of $161,000.00 at the First Sherriff's Sale does not shock the conscience of the Court.
Id. at 419.
Id.
Burge is instructive. The Court in Burge found that the third-party bidder should have known of the mistake given the $50,000 discrepancy between the bid and the authorized bid. Here, the discrepancy between Plaintiff's opening bid and what they were authorized to bid was only $24,737.00 In addition, there has been no showing that Movants knew or should have known that Plaintiffs made a mistake in bidding or that Movants winning bid of $161,000.00 was not a fair price for the Property.
Id. at 420-21.
Smith is also instructive. Due to its alleged bidding error, Plaintiff contends that the price at the First Sheriff's Sale was too low. Had Plaintiff properly filed a motion to set aside the First Sheriff's Sale, this Court would have applied the well-settled Delaware law that mere inadequacy of price is insufficient to set aside a sheriff's sale.
There were no defects or irregularities in the way that the First Sheriff's Sale was conducted. Both parties were able to, and did in fact, bid on the Property. In addition, as previously mentioned, there are no facts to suggest that Movants knew or should have known that Plaintiff made a mistake in bidding and, therefore, there are no facts to support a finding of fraud or unfairness in the way that the First Sheriff's Sale was conducted. The Court in Burge held that this Court "may not arbitrarily or capriciously refuse to confirm a sale, where there are no irregularities in the sale proceedings and no fraud, unfairness, or other extraneous matter demonstrating unfairness to one of the interested parties is shown." Accordingly, the First Sheriff's Sale must be confirmed.
Burge, 648 A.2d at 420.
III. The Movants should be restored to their status quo and therefore it is equitable to award costs and fees to Movants.
This Court has authority to award costs and fees in this case as part of its equitable power over mortgage foreclosures. In Burge, the Court awarded costs and fees to the third-party bidder so that they could be "made whole" and "restored to their status quo." The Court stated that the third-party bidder was "innocent of any wrongdoing" when their "apparent good faith purchase was set aside because of a unilateral mistake caused by the mortgagee." Here, Movants were also innocent of any wrongdoing with respect to their good faith purchase of the Property in the First Sheriff's Sale. Therefore, it is equitable to award Movants their costs and fees in pursuing this Motion in order to restore them to the status quo.
Id. at 421-22.
Id.
Id. at 422. --------
Conclusion
For the reasons stated, the Second Sheriff's Sale must be set aside; the First Sheriff's Sale must be confirmed; and Movants are entitled to an award of costs and fees.
NOW, THEREFORE, this 24th day of October, 2017, the Motion of Jennifer M. Schmitz and Urban Concepts, LLC to Vacate/Set Aside the Second July 11, 2017 Sheriff's Sale and to Confirm the First July 11, 2017 Sheriff's Sale is hereby GRANTED. Movants may petition the Court for any costs and fees sought pursuant to this Order, and Plaintiff may respond as to the reasonableness of any costs and fees sought.
IT IS SO ORDERED.
/s/ _________
The Honorable Andrea L. Rocanelli