Equitable Life Assurance Society of the United States v. First National Bank
Facts
The Olsons owned a ranch subject to a first mortgage of $1,250,000 to Equitable Life Assurance Society of the United States (P) and a second of $870,000 to First National Bank (D).
Equitable obtained a foreclosure judgment after the Olsons defaulted on both notes and its mortgage was deemed the superior lien. The court ordered the real estate sold at a public auction. The day before the sale, the parties entered into an agreement in which FNB would purchase the mortgage held by Equitable Life for $1,300,000 and FNB wired the funds the same day.
Before it received confirmation of the funds, an attorney for Equitable Life told the sheriff to cancel the public auction because he was almost certain the judgment had been paid.
Confirmation was not received until the morning of the sale. The attorney tried to call the sheriff but only got a busy signal. The sheriff checked to see if it was cancelled at 11AM and then started the sale at 11:05AM. The attorney reached the sheriff’s office at 11:15 and was told the sale had commenced. The deputy interrupted the sale but the sheriff decided to continue the bidding and the property sold for $1,810,000. At the subsequent hearing, the court confirmed the validity of the auction. Equitable Life and FNB appealed.
Issue
- Can a sheriff’s sale of real property conducted pursuant to a Judgment of Foreclosure be canceled by the mortgagee after bidding has commenced?
Holding and Rule of Law
- Yes. The mortgagee can cancel a sheriff’s sale of real property pursuant to a Judgment of Foreclosure after bidding has commenced.
The Judgment of Foreclosure Sale ordered that the real estate was to be sold at public auction in the manner provided by law. Equitable Life claims that it was error for the circuit court to hold that a sheriff’s execution sale is without reserve.
In an auction with reserve the auctioneer may withdraw the goods at any time until the announced completion of the sale; however if the auction is without reserve the goods may not be withdrawn unless no bid is made within a reasonable time. In this case there are no facts showing that the sale was advertised as one without reserve and thus the sheriff’s sale must be presumed to be sale with reserve. Thus Life Equitable had every right to withdraw the property from the auction before it ended.
The sheriff obtains his authority to serve as auctioneer from the seller. Like every other sale, it must have the assent, express or implied, of both the seller and buyer. It is undisputed that the sheriff was notified to cancel the sale before the auction ended.
Disposition
Judgment reversed.