Eastern Savings Bank, Fsb v. Sanders

• Decision Date: 16 April 2007
• Docket Number: No. 4234.,4234.
• Citation: 644 S.E.2d 802
• Parties: Ex Parte EASTERN SAVINGS BANK, FSB, Appellants, v. Albert J. SANDERS, Jr., Respondent. In re Eastern Savings Bank, FSB, Plaintiff, v. Roy A. Rouse, a/k/a Roy Rouse; Jean C. Rouse, a/k/a Jean Rouse; Neff Rental, Inc.; and Oswald Wholesale Lumber, Inc., Defendants.
• Court: South Carolina Court of Appeals

644 S.E.2d 802

Ex Parte EASTERN SAVINGS BANK, FSB, Appellants, v. Albert J. SANDERS, Jr., Respondent.

In re Eastern Savings Bank, FSB, Plaintiff, v. Roy A. Rouse, a/k/a Roy Rouse; Jean C. Rouse, a/k/a Jean Rouse; Neff Rental, Inc.; and Oswald Wholesale Lumber, Inc., Defendants.

No. 4234.

Court of Appeals of South Carolina.

Heard April 3, 2007.

Decided April 16, 2007.

Thomas A. Shook and Sean O'Connor, both of North Charleston, for Appellant.

James W. Poag, Jr., of West Columbia, for Respondent.

ANDERSON, J.:

Eastern Savings Bank, FSB appeals the master-in-equity's denial of its motion to vacate and set aside a foreclosure sale because of a bidding mistake by Bank's counsel and low sales price that resulted. We affirm.

FACTUAL/PROCEDURAL BACKGROUND

Eastern Savings Bank, FSB ("the Bank") obtained a mortgage from Roy and Jean Rouse in the amount of $490,000.00 on real property and a house located at 117 Maxie Road in Lexington ("the Property"). When the Rouses failed to make their scheduled payments, the Bank elected to accelerate payment of the entire indebtedness, which, including attorney's fees and costs, amounted to $578,303.20. In August 2005, the Bank sought foreclosure of the mortgage and expressly demanded the right to a deficiency judgment, reserving the right to waive the deficiency at the time of sale. The master entered a judgment of foreclosure for the Bank and ordered the Property sold at public auction.

Following advertisement, the Property was set to be auctioned on October 3, 2005, a regularly scheduled sales date. The Bank instructed its counsel to bid up to $550,000.00 for the property. This information was communicated to Bonnie Hook, a paralegal for the Bank's law firm who typically worked with foreclosures. Hook did not personally go to the sale, but instead sent her assistant with instructions to "begin [bidding] at $100,000.00 and to go up to $550,000.00." Following Hook's instructions, the representative bid $100,000.00. There were no other bids made at that time.

Pursuant to section 15-39-720 of the South Carolina Code (2005), bidding was reopened on November 2, 2005, with several individuals placing offers. Albert Sanders had the highest bid ($246,000.00) and paid the requisite five percent deposit to the court. Neither the Bank, its counsel, nor any other representative was present at the second auction. Presumably, they declined to attend because the Bank was barred from making another bid under section 15-39-720, or possibly because they simply had not realized bidding had not closed after the October 2 proceeding.

On November 3, 2005, the Bank inquired with Hook in regard to the bid from Sanders. Hook then contacted the court, whereupon she learned the Property involved a deficiency judgment and immediately recognized she had made a mistake in her earlier bidding instructions to her assistant.

On November 9, 2005, the Bank filed a motion to vacate and set aside the sale to Sanders. The Bank argued the low sales price, along with the misunderstanding and circumstances that caused the Bank to mistakenly bid only $100,000.00, dictated the sale be set aside. Additionally, the Bank asserted the price Sanders paid was so low as to shock the conscience of the court.

The master held a hearing on the matter in January 2006. As stated in the master's order, Hook "candidly admitted that she made a mistake in her bid instructions and that no one else was responsible for the error. She stated that the sale was properly held and that no third party interfered with bidding."

Testimony and other evidence provided values of the Property ranging from $324,940.00 to $900,000.00. The assistant vice-president for the Bank testified that despite Bank authorizing only $550,000.00 as its highest bid, he valued the Property at $700,000.00 for lending purposes. Although the Rouses never received an offer, the home had been marketed for sale prior to foreclosure and was listed for as low as $625,000.00. Renee Bolos, the real estate agent who first represented the Rouses, stated she estimated the Property to be worth $900,000.00. Rusty Johnson, a real estate agent who later attempted to sell the Property, valued it at $750,000.00. After listing the Property at this price for six months, the amount was reduced to $600,000.00. Nevertheless, Johnson was unable to generate any offers. When the Rouses attempted to sell the Property at private auction with a reserve price of $650,000.00, the highest bid received was $350,000.00. The county tax appraisal for the home was $324,940.00.

The master found the value of the Property to be $550,000.00. Although recognizing the sales price was below market value, he stated that he did not believe it to be so inadequate as to shock the conscience of the court. Further, the master determined it was by mistake on the part of the bidder on the Bank's behalf, not any conduct by the sales officer or other bidder, that caused the winning bid to be less than the actual value of the Property. Accordingly, the master denied the Bank's motion to vacate and set aside the sale. The Bank filed a Rule 59(e), SCRCP, motion to alter or amend the judgment. The master denied this motion.

STANDARD OF REVIEW

"A mortgage foreclosure is an action in equity. Our scope of review of a case heard by a master who enters a final judgment is to determine facts in accordance with our own view of the preponderance of the evidence." Hayne Federal Credit Union v. Bailey, 327 S.C. 242, 248, 489 S.E.2d 472, 475 (1997) (internal citations omitted). However, the determination of whether a judicial sale should be set aside is a matter left to the sound discretion of the trial court. Investors Sav. Bank v. Phelps, 303 S.C. 15, 17, 397 S.E.2d 780, 781 (Ct.App.1990) (citing Bonney v. Granger, 300 S.C. 362, 387 S.E.2d 720 (Ct.App.1990)). The review of a judicial sale is equitable in nature and within the discretion of the trial court. Fed. Nat'l Mortgage Ass'n v. Brooks, 304 S.C. 506, 512, 405 S.E.2d 604, 607 (Ct.App.1991) (citing Spillers v. Clay, 233 S.C. 99, 102, 103 S.E.2d 759, 760 (1958)).

LAW/ANALYSIS

The Bank contends the master erred in failing to grant its motion to set aside and vacate the sale. We disagree.

Where a mortgagee has sought a deficiency judgment, law requires the foreclosure sale held open for thirty days after the initial sale date. S.C.Code Ann. § 15-39-720 (2005). The South Carolina Code provides:

In all judicial sales of real estate for the foreclosure of mortgages and sales in execution the bidding shall not be closed upon the day of sale but shall remain open until the thirtieth day after such sale, exclusive of the day of sale. Within such thirty day period any person other than the highest bidder at the sale or any representative thereof in foreclosure and execution suits may enter a higher bid upon complying with the terms of sale by making any necessary deposit as a guaranty of his good faith, and thereafter within such period any person, other than such highest bidder at the sale or any representative thereof, in foreclosure suits may in like manner raise the last highest bid, and the successful purchaser shall be deemed to be the person who submitted the last highest bid within such period and made the necessary deposit or guaranty. But the mortgagee or his representative shall enter such bid as he desires at the time the sale is made, and he and all persons acting in his behalf shall be precluded from entering any other bid in any amount at any other time except the single or last bid made by him or in his behalf at the sale. . . .

The bidding shall be reopened by the officer making the sale on the thirtieth day after the sale, exclusive of the day of the sale, at eleven o'clock in the forenoon and the bidding shall be allowed to continue until the property shall be knocked down in the usual custom of auction to the successful highest bidder complying with the terms of sale. . . .

S.C.Code Ann. § 15-39-720 (2005). Thus, "[t]he mortgagee must enter his bid at the time the sale is made and is precluded from entering any other bid after his last bid at the initial sale. This effectively forces the mortgagee to enter his highest and best bid at the initial sale." 27 S.C. Juris. Manner of Sale § 128 (1996) (internal citation omitted).

"A judicial sale should not be set aside except for cogent reasons. The purpose of the law and of the proceedings in which a sale has been decreed is that it shall be final." Spillers v. Clay, 233 S.C. 99, 104, 103 S.E.2d 759, 761-62 (1958). "As has been said time and again in cases involving the setting aside of judicial sales, it is the policy of the Courts to uphold such sales when regularly made, and when it can be done without violating principle or doing injustice . . . ." Henry v. Blakely, 216 S.C. 13, 18, 56 S.E.2d 581, 583 (1949). Our courts zealously insure judicial sales be openly and freely conducted and nothing be allowed to chill the bidding. Howell v. Gibson, 208 S.C. 19, 31, 37 S.E.2d 271, 276 (1946).

"[T]he rule is well settled that inadequacy of price, unless so gross as to shock the conscience of the court, or accompanied by other circumstances warranting the interference of the court, will not justify the setting aside of a judicial sale." Spillers, 233 S.C. 99, 104, 103 S.E.2d 759, 761 (citing Brownlee v. Miller, 208 S.C. 252, 37 S.E.2d 658 (1946)). "[M]ere inadequacy of price, unaccompanied by other circumstances which would invoke the exercise of the Court's discretion is not sufficient, unless, perhaps, it is so great as to raise a presumption of fraud or to shock the conscience of the Court." Henry, 216 S.C. at 18, 56 S.E.2d at 583. "Where unfair means have not been employed to prevent competition at a judicial sale, mere inadequacy of price is no ground for setting [the sale] aside." Ex parte Cooley, 69 S.C. 143, 154-55, 48 S.E. 92, 95 (1904). Thus, a judicial sale can be set aside for two reasons: (1)...