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Wells Fargo Bank, N.A. v. Ahmed

A-4574-08T1 (N.J. Super. App. Div. 2010) (Unpublished)

FORECLOSURE; MORTGAGES — The Chancery Division has the power to vacate a sheriff’s sale and order a resale of a property in its discretion based upon considerations of equity and justice including a significant disparity between a property’s assessed value and the successful bid.

A bank obtained a final judgment of foreclosure on a residential property. Prior to the sheriff’s sale, the bank e-mailed its attorney an authorization to bid a maximum of $629,800 at the sale to protect the bank’s interest. The bank’s attorney sent written instructions to the bank’s bidding agent authorizing a maximum bid of only $63,000. Another bidder had the winning bid of $382,000. Three days later, the bank’s attorney discovered the error and tried to have the sheriff’s sale vacated. The lower court vacated the sheriff’s sale and the other bidder appealed. The Appellate Division affirmed.

The lower court viewed the circumstances of the bid, the scrivener’s error by the bank’s attorney in authorizing a $63,000 bid instead of a $630,000 bid, and the economic realities. It then concluded that the seemingly successful bidder was not substantially prejudiced by the bank’s misstep and was not entitled to the application of equitable estoppel. The lower court found that the bank’s mistake was understandable in times of overwhelming pressure on resources and that there was a significant difference between the winning bid and the value of the real property. Therefore, the lower court vacated the sheriff’s sale and ordered the bank to reimburse the bidder for lost interest on the deposit and other costs incurred after the sale, including attorneys’ fees.

On appeal, the seemingly successful bidder claimed that the lower court erred because the bank’s mistake did not warrant equitable relief, that its own winning bid was not grossly inadequate consideration for the property, and that the bank’s mistake did not warrant setting aside the sheriff’s sale. The Appellate Division disagreed, noting that the Chancery Division has the power to vacate a sheriff’s sale and order a resale of a property in its discretion based upon considerations of equity and justice. A sheriff’s sale may be set aside due to accident, surprise, mistake, irregularities in the conduct of the sale or for other equitable considerations. However, meagerness of the price is not sufficient for vacating a sale unless the price is so low that it supports an inference of fraud or it if shocks the conscience. In this case, the Court agreed with the lower court’s conclusion that the disparity between the property’s value and the successful bid, in harsh economic times, justified vacating the sale. Further, any inequity to the bidder as a result of vacating the sale was mitigated by the lower court’s awarding interest and attorneys’ fees to make the bidder whole.


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