Creditors’ and Debtors’ Rights • Deficiency Judgment Act

Sanderman Family Trust v. Laurel Sword Co., PICS Case No. 14-0164 (C.P. Monroe Jan. 2, 2014) Zulick, J. (11 pages).

Where plaintiff’s and defendant’s expert real estate appraisers in an action to determine fair market value of foreclosed property failed to take into account the presence of municipal sewer and water utilities, and difficult topography, respectively, proper fair market value should correctly be in between both valuations. Ordered.

Plaintiff Sanderman Family Trust was judgment creditor purchaser at sheriff’s foreclosure sale of property owned by defendants. Plaintiff filed a petition for deficiency judgment, contending that the balance owed on the mortgage note was more than the fair market value of the property.

Pursuant to the Deficiency Judgment Act §8103, if sale proceeds are insufficient when real property is sold to judgment creditor at sheriff’s sale, the judgment creditor must file a petition to fix the fair market value; if there is a deficiency, the judgment creditor can proceed to execute against debtor’s other property for the balance of the debt.

Both parties called qualified expert real estate appraisers to establish their proposed fair market value. Plaintiff’s appraiser, Mr. Fisher, considered parcels of comparable size sold between January 2007 and June 2012, as smaller parcels sell for more money per acre. Mr. Fisher established a lower per acre price for the subject property due to the “serious rock outcropping” that would make on-site sewer difficult, also factoring in the superior market in 2007-2008, to arrive at a value of $370,000 after the cost of demolition of derelict buildings on the property.

Defendants’ appraiser, Mr. McKeown, disagreed with the use of sales from 2007-2008, deeming it a “totally different market.” Mr. McKeown also noted that Mr. Fisher failed to consider the presence of municipal sewer and water connections available along the frontage road; Mr. McKeown also discounted the presence of difficult topography, arguing that the presence of municipal utilities would curtail those difficulties for developers. Mr. McKeown used smaller properties in his analysis, some of which were zoned differently and already had site work done. However, he arrived at an ultimate value of $720,000.

The court found Mr. Fisher’s valuation too low because it failed to consider the presence of municipal utilities, and the use of comparables from 2007-2008. The court also found Mr. McKeown’s valuation too high; although it agreed with his conclusion of lesser impact from the topography, it found that his valuation discounted the difficult topography altogether. The court also noted that Mr. McKeown’s comparables were of smaller properties that already had site development and subdivision approvals. Based on the comparables of the appraisers that were most similar to the subject property, the court found a fair market value of $492,968, after demolition costs.