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Foreclosure sale set aside when purchase price was grossly inadequate because of mortgagee's innocent mistake.

When a mortgagee's innocent mistake caused foreclosed property to be sold at a grossly inadequate price, the foreclosure sale must be set aside to prevent injustice, according to the District Court of Appeal of Florida.

Long Beach Mortgage Corporation (Long Beach) held a mortgage on real property in Martin County that went into foreclosure. After Long Beach and the other mortgagees agreed on the relative priority of their mortgages, Long Beach obtained a foreclosure judgment for a credit bid of $716,239.60 and set the foreclosure sale for May 22, 2007, at 10:00 a.m. Long Beach intended to bid on the property up to its appraised value of $500,000, and its lawyer authorized a sales agent to do so.

The lawyer, however, mistakenly believed that the sale began at 11:00 a.m. and failed to provide the sales agent with timely bidding instructions; as a result, the agent could not bid on Long Beach's behalf despite being present at the sale. The only other party at the sale, Aqua-Terra, Inc. (Aqua-Terra), purchased the property for $1,000. Long Beach filed suit to set aside the sale on the grounds of its agents' mistakes and miscommunication. The trial court held that because Long Beach's failure to bid was not the fault of Aqua-Terra, the sale should not be set aside. Long Beach appealed.

The appellate court noted that inadequacy of price alone is not sufficient grounds to set aside a foreclosure sale; however, the court found that when a party's innocent mistake results in a grossly inadequate price, the sale should be set aside to prevent injustice. The court held that this rule applies even when the mistake was made by the person seeking to set aside the sale, as in this case.

The law seeks to promote the viability of the foreclosure sale process and to encourage good faith bids, according to the court. Here, the court found that the disparity between the property's $1,000 sale price and its $500,000 appraised value was unconscionable. The court thus concluded that the sale to Aqua-Terra must be set aside to prevent injustice.

Long Beach Mortgage Corporation v. Bebble

District Court of Appeal of Florida

June 11, 2008

2008 WL 2356861 (Fla. App. 4 Dist. 2008)
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Title Annotation:Recent Court Decisions
Publication:Appraisal Journal
Geographic Code:1USA
Date:Sep 22, 2008
Words:380
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