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JP Morgan Chase Bank, N.A. v. Shea

Superior Court of Delaware

August 28, 2019

JP Morgan Chase Bank, National Association, Plaintiff,
v.
William M. Shea and Providence Owners Association, Inc. Defendants

         Upon Plaintiff's Motion to Set Aside Sheriffs Sale Granted

          OPINION AND ORDER

          CRAIG A. KARSNITZ, JUDGE

         The dual goal of any Sheriffs Sale is to follow the procedural rules and achieve the highest price. This Sheriffs Sale involved a bidding error, and a sale price that was either just below or just above 50% of the value of the property, depending upon which appraiser's opinion I accept. I have wide discretion to review Sheriffs Sales. In my view, the high bid at this sale was insufficient and prejudicial to both the lender and the owner. The low price was primarily the result of a bidding error of the lender's agents. Had I addressed the issue of whether a unilateral bidding error by the lender was sufficient to set aside a Sheriff Sale on my own, I might have answered no. However, the Delaware Supreme Court twenty five years ago answered yes, [1] as I will do. Given the low price and the bidding error, I am exercising my discretion to set aside the sale. Under the circumstances, and because of the lender's error, I also will require the lender to make the successful bidder whole.

         FACTS

         The facts are simple and undisputed (with the sole exeception of the appraisal of the property). Plaintiff JP Morgan Chase Bank, National Association, ("JP Morgan") filed a foreclosure action against a landowner, Defendant William M. Shea ("Shea") to sell residential real property owned by Shea with a postal address of 5 John Hall Drive, Ocean View, Delaware, the property went to sale and was purchased by 1995 Property Management, Inc. ("1995") for the price of $ 109, 000. Shortly after the sale was completed, JP Morgan realized its agents had made a mistake in executing its bidding instructions. In short, an error was made by the law firm for JP Morgan, and the firm did not bid up to the maximum bid price of just under $206, 800, as directed. When JP Morgan realized the error, and within a week of the sale, it notified 1995, and shortly thereafter filed this Motion.

         ANALYSIS

"Judicial review of a contested Sheriffs Sale implicates the Court's inherent equitable power to control the execution process and functions to protect the affected parties from injury or injustice."[2]

         Mistake of fact, including a unilateral mistake, may be grounds to set aside a Sheriffs Sale.[3] The Superior Court has broad discretion to confirm or set aside a Sheriffs Sale.[4]

         In the scale of reasons to set aside a Sheriffs Sale, a bidder's unilateral error is towards the weaker end. As 1995 argues, the unilateral error of JP Morgan to justify setting a sale aside gives the lender rights which are superior to all other bidders. For me, though, when that error is coupled with an inadequate price, the tipping point has been reached.

         The sale price of $109, 000 is less than half of the property value, if the appraisal by JP Morgan is accepted, or just over 53% of the property value, if the appraisal provided by 1995 is accepted. I utilize the appraisal provided by 1995. It is for more comprehensive and includes a review and analysis of both the interior and exterior of the property. The appraisal provided by JP Morgan was a classic "ride by" appraisal which fails to consider a number of issues in the interior.

         The math works as follows: 1995's appraisal gave a value of $204, 000. $109, 000 divided by $204, 000 equals 53%. JP Morgan's appraisal was $240, 000. $109, 000 divided by $240, 000 equals 45%.

         Delaware law provides a bright line. If a property is sold at Sheriffs Sale for less than half its fair market value (the 50%) test), it "shocks the conscience of the Court", and justifies setting aside the sale.[5]

         Acceptance of 1995's appraisal puts the price-to-value ratio at just over 50%). I find little solace that this exceeds the necessarily arbitrary figure of 50 percent, especially when the difference, as here, is nominal. The low price coupled with the bidding error is enough for me. I also think it ...


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