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| How did BOA feel? |
By Elizabeth Kruska
Ever been to an auction? They’re kind of fun, depending on the type of auction. Want some steers? Go to a cattle auction. Want some art? Go to an art auction. Want hidden treasures? You can often find those at an estate auction.
You can also buy real estate at auction. As you may imagine (for all those times you imagine real estate auctions), those have rules. Can you picture all the shenanigans that might go on if there weren’t real estate auction rules? I’m guessing probably not, since likely you’ve thought about real estate auctions fewer than four times in your lifetime, up to and including right now. But, to prevent issues with sale and title and all that happy stuff, we’ve got rules.
All right. So, the O’Kellys—Seamus and Jennifer—had a piece of property in Washington County that was subject to a foreclosure in 2015. They, and the Vermont Department of Taxes, were given a six-month redemption period in which to redeem the property. Everybody was noticed that if they didn’t redeem within six months the property would be sold at auction.
The O’Kellys and the Vermont Tax Department aren’t parties to this appeal. They’re probably glad.
Since I blabbed on about auctions for a couple paragraphs, you probably know what’s coming next. That’s right: an auction, supported by Bank of America. Sponsored? Is this the kind of thing where there’d be a sponsorship, like a stadium? I think it’d generate more interest in real estate auctions if they got kind of amped up like sporting events. This is directly contradictory to my long-held belief that sponsorship of athletic arenas is a giant waste of money. Listen up. I’m going to still use AT&T for my phone carrier and it has literally nothing to do with the fact they sponsor the stadium where the San Francisco Giants play. In fact, it has less than nothing to do with it, because this is Red Sox Nation (yeah, yeah, some of our readers are Yankees fans; you do you). Also, maybe my phone bill could be a little bit less expensive if they didn’t have to sponsor a stadium. End rant.
An auction got held at the property in Washington County. Three things happened. One person showed up (see above re: more interest in real estate auctions). The other person who was supposed to show up got lost. This is pretty relevant because the lost bidder was actually going to the auction on behalf of the bank. The other thing is that the bank hired an auctioneer, who received communication indicating what the bank’s bid would be.
So, this giant crowd of two set about doing some auctioning. The bidder, a Ms. Lockerby, bid some amount on the property. Hearing no other bids, the auctioneer yelled “Sold!” (I assume, I wasn’t there). This auction probably didn’t take very long.
Then the Bank filed a motion to void the foreclosure sale. Their argument at the trial court was basically, “Hey, no fair, the person we hired to go there got lost.” Then there was some question about whether the auctioneer entered the Bank’s bid on its behalf. Two things: (a) is that even allowed? and (b) if the auctioneer is allowed to enter a bid, why hire someone to go in person? I do not know the answers to these questions, pointing me in a crooked line.
Anyway, the court held a hearing when it found out there was a real, live, in person bidder—Ms. Lockerby—present. The court found that the auction was properly noticed. The court took testimony from Ms. Lockerby, the auctioneer, and the Bank’s representative. Then the Bank argued that the bidder getting lost should be considered “excusable neglect.” It also argued that Ms. Lockerby’s bid was a lot lower than the Bank’s bid and also lower than the foreclosure judgment, making it commercially unreasonable.
Exaggeratedly, you can’t buy a house for $8.
The trial court ultimately confirmed the sale in Ms. Lockerby’s favor, which the Bank appeales.
Interestingly, SCOV reverses.
SCOV concludes that the trial court was outside its discretion in determining that Ms. Lockerby’s bid was the successful one even though it was commercially unreasonable.
There’s this whole thing about needing an in-person bidder and whether the auctioneer could bid on the Bank’s behalf. This wasn’t developed very well in the record, so SCOV gets to the cake of the matter.
These foreclosure-sale-confirmation hearings are discretionary. They don’t have to happen at all. But when they do, they’re meant to ensure that the foreclosure process is fair. The trial court is best situated to determine what’s fair under the circumstances, because it’s the one that receives and weighs the evidence. If a party wants to appeal, SCOV reviews for abuse of discretion. They consider all the information the trial court used in order to make its decision.
And here, SCOV decides there was an abuse of discretion by the trial court. The trial court has to consider all the various factors surrounding a sale in terms of fairness and integrity of the sale process. If confirming a sale would somehow be inequitable for whatever reason, a trial court can refuse to confirm it. One of the factors the court may consider is the commercial reasonableness of the sale.
SCOV found that the trial court abused its discretion by not considering the circumstances of the auction and whether that compromised the fairness of the auction.
So, SCOV reverses, and the trial court now is mandated to make findings including consideration of various factors relevant to the integrity and fairness of the sale.
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