Meguerditchian v. Smith

Decision Date28 June 2012
Docket NumberNo. 20100850–CA.,20100850–CA.
PartiesMike MEGUERDITCHIAN, an individual, Plaintiff, Appellee, and Cross-appellant, v. Max SMITH, individually and as trustee of the Smith Family Living Trust, Defendant, Appellant, and Cross-appellee.
CourtUtah Court of Appeals

OPINION TEXT STARTS HERE

Darwin C. Fisher, St. George, for Appellant and Cross-appellee.

Paul M. King, Salt Lake City, for Appellee and Cross-appellant.

Before Judges McHUGH, ORME, and DAVIS.

OPINION

DAVIS, Judge:

¶ 1 Max Smith, individually and as trustee of the Smith Family Living Trust, appeals the trial court's ruling partially denying his motion to set aside a sheriff's sale of real property. Mike Meguerditchian, Smith's judgment creditor and the purchaser of the real property, cross-appeals the trial court's granting of the motion with respect to water rights 1 sold at the sheriff's sale. We affirm in part and reverse in part.

BACKGROUND

¶ 2 On December 8, 2008, the trial court awarded Meguerditchian a summary judgment in the amount of $54,690.92 against Smith in connection with a breach of contract suit. On March 26, 2009, Meguerditchian filed an application for a writ of execution, which listed personal property, real property, and water rights belonging to Smith. The trial court issued the writ on April 1, 2009. The writ instructed the sheriff to sell the non-exempt personal property first, and then the real property if sufficient non-exempt personal property could not be found. Smith objected to the writ, asserting that the personal property was exempt from execution because the items of personal property were “tools of his trade,” seeUtah Code Ann. § 78B–5–506(2) (2008). In a status and scheduling conference relating to the objection held on June 17, 2009, Meguerditchian informed Smith and the court that the personal property would not be sold at the sheriff's sale because the officer conducting the sale had been unable to locate the serial numbers for the property. He asserted that it was therefore unnecessary for the trial court to address Smith's objection to the sale of the personal property. Smith did not object to this resolution and does not appear to have attempted to provide the sheriff with the necessary information so as to facilitate the sale of the personal property.

¶ 3 The Sanpete County Sheriff's Office completed posting of the notice of sale on June 15, 2009, and filed an affidavit of posting with the court on June 16. The sheriff's sale was scheduled for July 7, 2009, at 11:00 a.m., and the notice indicated that four items would be sold: (1) Smith's interest in a 9.42 acre parcel of real property, (2) a parcel described as Oaker Hills Plat 4,” (3) Smith's interest in Water Right # 51–224, and (4) “other rights of [Smith] in water rights and/or interests in water wells located in Sanpete County, Utah.” On June 22, 2009, Smith filed a Motion to Set Aside Summary Judgment and Quash Writ of Execution. The trial court held a hearing on the motion on June 24 but continued the hearing to July 8. Because the sale had originally been scheduled for July 7, it was stayed until after the continued hearing. The trial court denied Smith's motion on July 8.

¶ 4 The sheriff's sale was conducted on July 10. Meguerditchian was the only bidder at the sale and purchased, via credit bid, the 9.42 acre parcel for $3,000, the Oaker Hills Plat 4 for $30,000, Water Right # 51–224 for $30,000, and the other unspecified water rights for $3,000. The Sanpete County Sheriff's Office issued a certificate of sale on July 15, 2009. Subsequent to the sale, Meguerditchian and his attorney formed a limited liability company to hold and develop the real property.

¶ 5 On December 8, 2009, Smith moved the court to set aside the sale. Following a hearing, the trial court found that the total fair market value of the two parcels of real property was $505,000 as of the date of the sheriff's sale. It also valued the water rights at $7,500 per acre foot and found that Smith held more than twenty acre feet of water (or at least $150,000 worth). Given the total $33,000 bid for the real property and $33,000 bid for the water rights, the trial court determined that the sale prices of both the real property and the water rights were “grossly inadequate, shocking the conscience of the Court.” 2

¶ 6 The trial court next considered whether there were irregularities in the sale itself. The trial court found that the officer conducting the sheriff's sale acted appropriately by selling the real property and water rights, given that he was unable to locate sufficient personal property. Furthermore, it concluded “that there was nothing misleading regarding the sale of real property ... and no unfairness in the conduct of the purchasing party with respect to the two parcels [of] real property,” and “that there was nothing irregular in the sale of real property at [the] Sheriff's Sale.” However, the trial court ruled that the description of Water Right # 51–224 was insufficient because “several of the rights included in [that] water right have been severed off and have individual water right numbers,” and that the description of the “other water rights” was also insufficient. The court ruled that the insufficient descriptions caused “confusion, which would have the effect of discouraging bidders at the sale and which would have a direct effect of lowering the price at the Sheriff's Sale.” Because there were no irregularities in the sale of the real property, the trial court denied Smith's motion to set aside the sale with respect to the real property. However, the trial court granted the motion with respect to the water rights because it found both that the purchase price was grossly inadequate and that there were irregularities attending the sale.

¶ 7 Smith appealed the trial court's ruling with respect to the real property. Meguerditchian filed a cross-appeal challenging only the trial court's ruling with respect to Water Right # 51–224.

ISSUES AND STANDARDS OF REVIEW

¶ 8 Smith argues, first, that the trial court erred in declining to set aside the sale in the absence of irregularities and, second, that the trial court erred in determining that there were no irregularities in the sale of the real property. On cross-appeal, Meguerditchian argues that the trial court erred in setting aside the sale of Water Right # 51–224 because that particular water right was sufficiently described.

¶ 9 The standard for setting aside a sheriff's sale is based on case law. [W]e consider the trial court's interpretation of binding case law as presenting a question of law and review the trial court's interpretation of that law for correctness.” State v. Richardson, 843 P.2d 517, 518 (Utah Ct.App.1992). Nevertheless, “a district court has a high degree of discretion in determining whether the facts of a case justify extending a redemption period or setting aside a sheriff's sale after the expiration of the redemption period,” and “a district court's decision to set aside a sheriff's sale is to be reviewed for an abuse of ... discretion.” Pyper v. Bond ( Pyper II ), 2011 UT 45, ¶ 24, 258 P.3d 575 (omission in original) (internal quotation marks omitted); see also Goggin v. Goggin, 2011 UT 76, ¶ 17, 267 P.3d 885 (We review a grant of equitable relief for an abuse of discretion,” reviewing the trial court's “factual findings for clear error and ... its legal conclusions for correctness.” (omission in original) (internal quotation marks omitted)).

ANALYSIS
I. The Trial Court Did Not Abuse Its Discretion by Declining to Set Aside the Sheriff's Sale in the Absence of Irregularities.

¶ 10 One of the main justifications 3 for setting aside a sheriff's sale or extending the redemption period involves the interplay of two factors: (1) gross inadequacy of the purchase price and (2) irregularity in the sale so as to indicate at least “slight circumstances of unfairness.” See Pyper v. Bond ( Pyper I ), 2009 UT App 331, ¶¶ 11–12, 224 P.3d 713 (internal quotation marks omitted) (citing Young v. Schroeder, 10 Utah 155, 37 P. 252, 254 (1894), aff'd,161 U.S. 334, 16 S.Ct. 512, 40 L.Ed. 721 (1896)), aff'd, Pyper II, 2011 UT 45, 258 P.3d 575. “These factors operate on a sliding scale. Thus, the greater the disproportionality in price, the less unfairness or fewer irregularities a party must demonstrate before a court may justifiably extend a redemption period or set aside a sheriff's sale.” Pyper II, 2011 UT 45, ¶ 15, 258 P.3d 575. Smith argues that the purchase prices of the real property in this case were so disproportionate to the market value that no irregularity was necessary to justify setting aside the sheriff's sale. We disagree.

¶ 11 It has been theorized that an “inadequacy [of price] ... so gross as at once to shock the conscience of all fair and impartial minds, ... such that every honest man would hesitate to take advantage of it,” might alone justify a trial court in exercising its equitable powers to grant relief, even where there are no irregularities in the sale. See Young, 37 P. at 254;see also Pyper I, 2009 UT App 331, ¶ 12 n. 5, 224 P.3d 713 (observing that the possibility of an exception to the general rule requiring both inadequacy of price and irregularity in the sale has not been foreclosed). However, because redemption is generally a sufficient remedy to a grossly inadequate purchase price in the absence of other irregularities or unfairness, see Pyper I, 2009 UT App 331, ¶ 25, 224 P.3d 713 (Davis, J., dissenting); Jones v. Johnson, 761 P.2d 37, ¶ 41 n. 2 (Utah Ct.App.1988) (“Judicial sale of property for less than its fair market value, alone, does not justify setting aside a judicial foreclosure sale, and is balanced by the right to redeem the property within six months. (emphasis added)), this circumstance is so rare that we are unaware of any case in our jurisprudence that has actually set aside a sheriff's sale or extended a redemption period based on...

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