Case Title: Looper v. Madison Guaranty Sav. & Loan Ass'n

Citation: 292 Ark. 225, 729 S.W.2d 156

Docket Number: 

State: arkansas

Court: Arkansas Supreme Court

Date: 1987-05-18T00:00:00Z

Document:
729 S.W.2d 156 (1987) 292 Ark. 225 Robert E. LOOPER and Entrophy Systems, Inc., Appellants, v. MADISON GUARANTY SAVINGS & LOAN ASSOCIATION, et al., Appellees. No. 86-242. Supreme Court of Arkansas. May 18, 1987. *157 Leonard L. Scott, C. Richard Crockett, Little Rock, for appellants. Wright Lindsey & Jennings, Little Rock, for appellees. HICKMAN, Justice. In a foreclosure proceeding, the chancellor refused to confirm the sale of a residence. The reasons given were because the purchase price shocked her conscience and other circumstances existed which justified the refusal. The question presented involves the law concerning the confirmation of judicial sales when an inadequate price is paid. The appellants argue there is no Arkansas case holding that a sale can be set aside simply because the sale price is inadequate. Conceding that we have said a sale may be set aside because it "shocks the conscience of the court," the argument is that this is only dictum: the law is or should be that some other circumstances must exist, which amount to a fraud brought about by the buyer. It is further argued that since the buyers in this case, the appellants, were faultless, the sale should not have been set aside. The appellees argue that our decisions state a sale can be set aside solely because it shocks the conscience of the court, and even if that were not so, there were other circumstances present which justified the chancellor's actions. Both parties are right in a sense. We have not held that a sale can be set aside simply because of an inadequate sales price. But we have said on four separate occasions that a sale may be set aside if it shocks the conscience of the court. We have never had a case before in which a trial judge set aside a sale solely because it shocked the conscience of the court. Essentially, we have that in this case and affirm the chancellor's decision as being discretionary, permitted by law, and not arbitrary. The sale price was $1,900, and the market value was found to be $42,500; that is, the property sold for 4.4% of its value according to the chancellor's finding. A price that "shocks the conscience" of a judge can never be reduced to a mathematical formula. It depends on a variety of circumstances: the value of the property, the circumstances surrounding the sale, the price, the rights of the parties participating in the sale, and the harm that may result if the sale is confirmed, to name a few. Nevertheless, the decision is one for the chancellor to make, using sound discretion. Summars v. Wilson, 205 Ark. 923, 171 S.W.2d 944 (1943). While no fixed formula exists or can exist for what is a shocking sale price, fixed rules do exist for us to review such a case. First, we are an appellate court; we do not retry cases. We cannot sit as jurors who determine facts in law cases, nor chancellors who do the same in chancery courts. Merriman v. Yutterman, 291 Ark. 207, 723 S.W.2d 823 (1987); Black & Black Oil Co. v. Guy R. Smith Drilling Co., 289 Ark. 487, 712 S.W.2d 901 (1986). Factual determinations of chancellors must be upheld unless clearly erroneous. ARCP Rule 52. When we examine a discretionary decision made by a chancellor, the question is not what we would have done, but whether, as a matter of law, discretion was abusedwas the judgment call arbitrary or groundless? Keirs v. Mt. Comfort Enterprises, et al, 266 Ark. 523, 587 S.W.2d 8 (1979); Robbins v. Guy, 244 Ark. 590, 426 S.W.2d 393 (1968). Other principles also apply when we review a case, sometimes omitted from our opinions, but nonetheless applicable to *158 all our decisions. The appellant, the party losing at the trial level, has the burden of demonstrating error. Baldwin Co. v. Ceco Corp., 280 Ark. 519, 659 S.W.2d 941 (1983). The evidence on appeal and all reasonable inferences from that evidence, and the findings of fact by a judge must be reviewed in a light most favorable to the appellee, the party that won at the trial level. Sipes v. Munro, 287 Ark. 244, 697 S.W.2d 905 (1985); Wasp Oil, Inc. v. Arkansas Oil & Gas, Inc., 280 Ark. 420, 658 S.W.2d 397 (1983). With these principles in mind, we review the chancellor's finding. Nathan Graham purchased a residence, and Madison Guaranty Savings & Loan Association took a mortgage on it for $38,400. Graham made no payments, and Madison sued to foreclose the loan. Foreclosure and judgment were granted. The property was ordered sold at a judicial sale to the highest bidder on June 5, 1986. Madison's attorney, Charles Ward, intended to be there to bid in or near the amount owed Madison. That amount, which was reduced to judgment, was $46,470.61. Graham testified that he did not attend the sale because the lawyer, Ward, had told him that he, Ward, would attend the sale and bid in for Madison the amount of the judgment. Graham concluded he would not need to be there to protect his interests, because such a bid would not result in a deficiency judgment against him. Ward was late to the sale, a few minutes according to him. Two different secretaries had reminded Ward of the noon sale late that morning. Robert Looper, acting alone, and Imran Bohra, acting on behalf of Entrophy Systems, Inc., joined forces and bid on the property. According to the testimony, the opening price bid was one dollar, and the bidding increased competitively to the sale price of $1,900. An expert testified that the property had a market value of $42,500. Looper said he drove by the property and decided not to bid more than $10,000 or $12,000. He said its value was diminished because a youth home was across the street, and he did not know the condition of the interior of the house. Also, he knew the property was heavily mortgaged. After a hearing the chancellor refused to confirm the sale and ordered a new sale. The chancellor made these findings of fact: The appellants do not directly challenge these findings but do argue about their significance. While conceding the chancellor had the right to determine the market value of the property, the appellants really disagree that the fair market value of the property is $42,500. They point to Looper's testimony that he was prepared to bid only $10,000 or $12,000 based on the nearby youth home and the lack of knowledge concerning the condition of the house. Bohra's testimony was that after the sale he discovered the house was sub-standard to neighboring houses and in need of painting and cleaning. However, the appellants concede that the court may not be clearly wrong in finding the value of the property to be $42,500 and, therefore, the price was grossly inadequate. They do not challenge the fact that the price shocked the chancellor's conscience. The appellants argue that they had nothing to do with the apparent representation made by Ward to Graham. If Graham's belief was reasonable, then Madison Guaranty was at fault; if Graham's belief was not reasonable, then it was Graham's faultin neither case was it the fault of the appellants. The appellants do not think Ward was guilty of excusable "inadvertance" when he did not arrive at the sale on time. He was negligent. Ward was in town, in time, to attend the sale; he was twice reminded of the sale by secretaries; he had attended sales before and knew they started at noon; and he conceded he was late simply because he forgot. In four separate decisions we have said that a judicial sale cannot be set aside for an inadequate price unless it shocks the conscience of the court. In Mulkey v. White, 219 Ark. 441, 242 S.W.2d 836 (1951), the chancellor refused to confirm a sale of property for $975. The value of it was $2,000. Other circumstances did exist which prompted the chancellor to set aside the sale. We upheld the chancellor stating: *160 In three prior cases we have recited almost the exact language regarding an inadequate price. We first stated that principle in George v. Norwood, 77 Ark. 216, 91 S.W. 557 (1905): Next, in Stevenson v. Gault, 131 Ark. 397, 199 S.W. 112 (1917), we stated: Then in Doyle v. Maxwell, 155 Ark. 477, 244 S.W. 732 (1922), we said: That principle is a well established principle of law. The two general legal encyclopedias recite it. 47 Am.Jur.2d, Judicial Sales, § 359 states it this way: 50 C.J.S. Judicial Sales § 59 states it this way: When we have overruled a chancellor's order setting aside a sale, it has been clearly warranted by the facts. In Doyle v. Maxwell, supra, the property was sold for $150, and its value was probably $300. We held such a price was not so grossly inadequate as to indicate fraud or shock the conscience of the court. The same was true in George v. Norwood, supra, where the price was $4,000 and its value was near that. Conversely, we have reversed chancellors who confirmed sales that should have been set aside. In Moore v. McJudkins, 136 Ark. 292, 206 S.W. 445 (1918), the chancellor confirmed a sale he should not have confirmed. The sale price was $200, the value at least $1,000. More importantly, the appellants were not notified of the sale. We have emphasized the importance of judicial sales when we have reversed a chancellor who sets aside a sale. In Doyle v. Maxwell, supra, we said: We have emphasized the discretion of the chancellor when we have upheld his decision. In Summars v. Wilson, supra, we said: Other states and circuits have readily affirmed a trial judge who sets aside a sale *161 because it "shocks the conscience" of the court. First Nat. Bank v. M/V Lightning Power, 776 F.2d 1258 (5th Cir.1985); McCartney v. Frost, 282 Md. 631, 386 A.2d 784 (1978); Homecraft Corp. v. Fimbres, 119 Ariz. 299, 580 P.2d 760 (Ct.App.1978); Johnson v. Jefferson Standard Life Insurance Co., 5 Ariz.App. 587, 429 P.2d 474 (1967); Capozzi v. Antonoplos, 414 Pa. 565, 201 A.2d 420 (1964). These cases hold a sale may be set aside if the price shocks the conscience of the court. The Arizona decision of Johnson v. Jefferson Standard Life Insurance Co., supra, is particularly persuasive since the facts and arguments are similar to those in this case. A trial court's order setting aside the sale was upheld. The court said: There were other circumstances in this case which the chancellor recited as reasons for her action, e.g., the fact that Madison, a creditor, would suffer a severe loss, the lawyer that was "inadvertently late," and the owner was not there to protect his interests. While these are not substantial reasons, they, no doubt, influenced her decision. The appellants argue these are not the kind of circumstances that may be considered. They were not entirely irrelevant, and the chancellor did not abuse her discretion in using these circumstances, together with the shockingly low price, to arrive at her decision. Essentially, the appellants want us to adopt an inflexible rule regarding judicial sales, a rule more suitable to law courts than courts of equity. We decline to overrule the language in our cases and cannot say in this case the chancellor abused her discretion. Affirmed.