The state Superior Court has ruled that a sheriff’s sale of real estate cannot be set aside simply because a buyer comes forward after the fact and makes a substantially higher offer.
A split three-judge panel said Butler County Common Pleas Judge S. Michael Yeager abused his discretion when he set aside the sheriff’s sale of a home after the estate of the homeowner found a buyer willing to pay more than double what it sold for.
Judge Christine L. Donohue said appellants Gregory Simakas and Michael Newman, the winning bidders, had lawfully purchased the property at issue.
“If the property can be resold at a profit, appellants are entitled to reap the reward of the risk they took in purchasing the property at the sheriff’s sale,” Donohue said.
Donohue was joined by Judge John L. Musmanno.
Senior Judge Robert E. Colville, however, dissented, saying he did not believe Simakas and Newman had properly preserved their issues for appeal.
“Although appellants attended the hearing on the petition to set aside the sheriff’s sale, they were not parties to the litigation at that time. Appellants’ interest in the property/proceeding was the same (if not greater) at the time of the hearing as it was following the hearing; nevertheless, they did not seek to intervene and obtain the rights of a party until after the trial court entered the order on appeal,” Colville said.
On Feb. 13, 2009, according to Donohue’s opinion in Bank of America v. Estate of Robert L. Hood, Bank of Americafiled a complaint in foreclosure against a house and 100 acres of property owned by the Estate of Robert L. Hood and the property was put up for sheriff’s sale on Sept. 17, 2010.
The outstanding mortgage on that date was about $204,000, according to Donohue, andSimakas and Newman purchased the house at the sheriff’s sale with the winning bid of $255,800.
But on Oct. 18, 2010, the estate filed a petition to set aside the sale and Yeager conducted a hearing on Jan. 26, 2011, at which the estate, pointing to comparative market analyses, argued that the property was actually worth $562,000 and that Alexander K. Wing was prepared to offer $580,000 for it, Donohue said.
Yeager ruled that the price Simakas and Newman had paid was grossly inadequate and ordered Wing and the estate to enter a binding purchase agreement on Jan. 31, 2011, and to close the sale by Feb. 28. On Feb. 18, however, Simakas and Newman filed a petition to intervene, asking the court to rescind the order, according to Donohue.
On Feb. 24, 2011, Yeager allowed Simakas and Newman to intervene but refused to rescind the order. Simakas and Newman appealed to the Superior Court the following day, Donohue said.
Donohue said that, under the Superior Court’s 2002 ruling in Blue Ball Nat’l Bank v. Balmer, a decision regarding whether a sale is adequate is one that must be made on a case-by-case basis.
“Pennsylvania courts have concluded that a sheriff’s sale price is grossly inadequate where sale price was a small percentage — roughly 10 percent or less — of the established market value,” she said, adding that, under the court’s ruling in Continental Bank v. Frank, the outstanding mortgage balance must be taken into account.
In Bank of America, according to Donohue, the $255,800 purchase price was about 44 percent of Wing’s $580,000 offer, but the trial court found it to be grossly inadequate because it was substantially less than what Wing would have offered had he “been afforded the opportunity to bid on the property.”
But Donohue argued that the purchase price Simakas and Newman paid was a “far greater” portion of the property’s market value than in several other cases where courts set aside sales deemed to be grossly inadequate. Donohue added that Simakas’ and Newman’s purchase price was also more than $50,000 more than the amount of the outstanding debt on the property.
In addition, Donohue said the sheriff’s sale was duly advertised and lawfully conducted, noting that Wing offered no explanation as to why he wasn’t present to make his bid at the sale.
Donohue said the trial court also failed “to apply the rule that the price obtained at a lawfully conducted sheriff’s sale is presumptively the best price obtainable,” first set forth by the Balmer court.
According to Donohue, Wing had testified at the Jan. 26 hearing that if he had been at the sheriff’s sale he would have “paid in excess of the price that the property fetched, up to the $580,000 we believe the property is worth.”
But Donohue said this testimony only established that the property would have sold for an undetermined amount higher than $255,800 if Wing had been at the sheriff’s sale.
“Nothing in the record supports a conclusion that the sheriff’s sale price — presumed to be the best price obtainable — would have risen to anywhere near $580,000, even with Wing present,” Donohue said. “This is so because we have no way to know how long appellants would have remained in the bidding. After the fact, Wing had no choice but to make a high offer in hope of persuading the court that the sale price was grossly inadequate. In essence, the trial court permitted Wing to buy his way out of his failure to attend a lawfully conducted sheriff’s sale.”
Counsel for Simakas and Newman, Butler, Pa.-based solo attorney Michael John Pater, as well as counsel for the estate and its co-executor Linda H. Jansen, Brian F. Levine of Levine Law in New Castle, Pa., could not be reached for comment at press time.
Counsel for Wing and the estate’s co-executor Jill Swensen, Ryan O. Hemminger of Leech Tishman Fuscaldo & Lampl in Pittsburgh, declined to comment beyond noting that the firm has filed a motion for reargument en banc.
Bank of America’s attorney, Jeremy J. Kobeski of Phelan Hallinan & Schmieg in Pittsburgh, said he was not authorized to comment.
(Copies of the 13-page opinion in Bank of America v. Estate of Robert L. Hood, PICS No. 12-0615, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •