Case Title: McNEILL FAMILY TRUST v. CENTURA BANK

Citation: 

Docket Number: 02-43

State: wyoming

Court: Wyoming Supreme Court

Date: 2003-01-08T00:00:00Z

Document:
McNEILL FAMILY TRUST v. CENTURA BANK2003 WY 260 P.3d 1277Case Number: 02-43, 02-44, 02-59Decided: 01/08/2003
OCTOBER TERM, A.D. 2002

 

                                                                                                
    

 

McNEILL 
FAMILY TRUST,

 

Appellant(Defendant/Third 
Party Plaintiff),

 

v.

 

CENTURA 
BANK,

 

Appellee(Plaintiff),

                                                                                                

and

 

SANDRA 
DVORSCAK,

 

                                           Appellee(Defendant),

 

and

 

MEINHOLD, 
STAWIARSKI, SHAPIRO

& 
CODILIS, LLP; LYNN M. JANEWAY,

individually; 
and HAYLEY BELT, individually,

                                                                                                

Appellees(Third 
Party Defendants).

 

CENTURA 
BANK,

 

Appellant(Plaintiff),

 

v.

                                                                                                

 

McNEILL 
FAMILY TRUST,

 

Appellee(Defendant/Third 
Party Plaintiff).

 

McNEILL 
FAMILY TRUST,

 

Appellant(Defendant/Third 
Party Plaintiff),

                                                                                                

v.

                                                                                                

CENTURA 
BANK,

 

Appellee(Plaintiff).

 

 

Appeals 
from the District Court of Park County

The 
Honorable Gary P. Hartman, Judge

 

Representing 
McNeill Family Trust:

Kate 
M. Fox of Davis & Cannon, Cheyenne, Wyoming; and Wm. Daniel Elsom and  Teresa Elsom of Elsom & Elsom, 
Lawyers, Cody, Wyoming 

 

Representing 
Centura Bank:

            
Gary R. Scott of Hirst & Applegate, P.C., Cheyenne, Wyoming  

 

 

Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, 
JJ.

 

            
KITE, Justice.

 

[¶1]      Centura Bank commenced 
a foreclosure by power of sale proceeding on a first mortgage which was in 
default with $87,320.82 due.  Centura's attorneys apparently intended to 
cancel or postpone the sale because they had failed to notify a second mortgagee 
but did not do so.  
No bank representative attended the sale, and Bob G. McNeill, on behalf 
of the McNeill Family Trust (McNeill Trust), made the only bid in the amount of 
$20,000.  The 
district court found the McNeill Trust's bid price so low as to be 
unconscionable, and that finding, together with Centura's mistakes, justified 
the exercise of equitable power to set the sale aside.  In an effort to 
return all parties to the positions they held prior to the sale, the district 
court ordered Centura to pay the McNeill Trust's attorney fees and costs.  We reverse both the 
decision to set aside the original foreclosure sale and the award of attorney 
fees and remand to the district court.

 

 

ISSUES

 

[¶2]      We rephrase the issues 
as follows:

 

I.  Did the district court err when it found an 
unconscionably low sale price required the foreclosure sale be set aside?

 

II.  Was the award of attorney fees and costs to 
the McNeill Trust supported by law?  

 

 

FACTS

 

[¶3]      On March 27, 1996, the 
Shoshone First Bank loaned Robert and Sandra Dvorscak $89,625 and took a first 
mortgage on their Cody residence which had an appraisal value of $119,500.  In September of 
1996, U.S. Bank, formerly First Bank, made a $30,000 home equity loan to the 
Dvorscaks and took a second mortgage on the property.  The first mortgage 
was assigned to Centura in March of 1997.

 

[¶4]      The Dvorscaks filed a 
petition for Chapter 7 bankruptcy protection on November 12, 1997, listing the 
debts on the real property and provided notice to Centura and U.S. Bank.  Pursuant to 11 
U.S.C. § 362(a), an automatic stay went into effect when the bankruptcy was 
filed which precluded any creditor from taking legal action against the 
Dvorscaks or their bankruptcy estate property without first obtaining an order 
for relief from stay from the federal bankruptcy court.  In March of 1998, 
Centura referred the Dvorscaks' mortgage to the Colorado law firm of Meinhold, 
Stawiarski, Shapiro & Codilis, LLP (Centura's attorneys) for foreclosure 
proceedings.  
Centura's attorneys obtained a title report, which did not reflect U.S. 
Bank's second mortgage, and began a foreclosure by power of sale proceeding 
pursuant to Wyo. Stat. Ann. §§ 34-4-101 through 34-4-113 (LexisNexis 2001) by 
notifying interested parties and publishing the notice of foreclosure in the 
Powell Tribune.  
Centura's attorneys did not obtain relief from the bankruptcy stay prior 
to commencing the foreclosure process.  U.S. Bank subsequently advised Centura's 
attorneys of the second mortgage, and the attorneys apparently intended to 
cancel or postpone the scheduled foreclosure sale to allow notification of U.S. 
Bank and a restarting of the process.  However, they failed to do so. 

 

[¶5]      Mr. McNeill, trustee 
of the McNeill Trust, saw the published foreclosure sale notice and attended the 
June 24, 1998, sale.  
The only other person in attendance was Richard Moser, a deputy sheriff 
who was there to conduct the sale.  Mr. McNeill bid $20,000, and Deputy Moser 
accepted the bid.  
Either Deputy Moser or the sheriff's office support staff telephoned 
Centura's law firm for instructions regarding the appropriate payee of the 
check.  Deputy 
Moser informed Mr. McNeill that Centura was the appropriate payee.  Mr. McNeil went to 
the bank, obtained a certified check for $20,000 in the name of Centura Bank as 
the payee, returned it to the sheriff's office, and obtained a certificate of 
purchase.  When 
Mr. McNeill returned home, his wife advised him an attorney for Centura had left 
a telephone message.  
Mr. McNeill returned the telephone call, and the parties discussed the 
validity of the foreclosure sale as well as the possible exchange of money for 
Mr. McNeill's surrender of the certificate of purchase.  A June 25, 1998, 
letter from the law firm to Mr. McNeill documented the telephone call and 
cautioned that litigation could follow if the "erroneous" sale was not 
resolved.  

 

[¶6]      Centura's attorneys 
filed a lawsuit1 on July 27, 1998, naming Mr. McNeill, the 
Dvorscaks,2 the Park County sheriff, and U.S. Bank3 as defendants and asserting:

 

10.  As a result of mistake and the Sheriff's 
failure to ascertain the status of Centura's bid and inquire into the absence of 
a Centura representative [at the foreclosure sale]; as a result of lack of 
notification to [U.S.] Bank of the sale as required to protect its due process 
rights; and as a result of Centura's mistake in not withdrawing or postponing 
the sale, the Mortgagors, Centura, and [U.S.] Bank have all been deprived of 
their rights to obtain reasonable value for the property, to bid in the amounts 
of their liens, and/or to redeem the amounts of their liens from the sale in 
order to fully protect their interests. 

 

11.  Because of the sale, Defendant McNeill has 
received an improper and inequitably huge windfall.

 

The prayer for relief requested the sale be declared void 
and of no effect, the $20,000 payment be returned to Mr. McNeill, and a new sale 
be held.  In 
October of 1998, Centura's attorneys filed a motion to dismiss contending they 
had just learned the Dvorscaks' Chapter 7 bankruptcy was filed prior to the 
foreclosure sale and, therefore, the sale was void because it was conducted in 
violation of the automatic stay.  The district court stayed the action pending 
resolution of these issues by the bankruptcy court.  Centura filed a 
motion for relief from stay in the bankruptcy court asking that the sale in 
violation of the stay be held void and the stay be lifted to allow Centura's 
state court action to proceed.  The McNeill Trust and Mrs. Dvorscak filed 
objections.  
After a hearing, the bankruptcy court granted the motion for relief 
thereby permitting the state court proceedings to go forward and validating the 
foreclosure sale because "[t]o hold otherwise would unfairly reward 
Centura."  
Centura filed a motion for reconsideration which was denied; however, it 
did not appeal the bankruptcy court's holding that the automatic stay did not 
void the sale.

 

[¶7]      Thereafter, in the 
state court action, the sheriff was dismissed, the McNeill Trust was substituted 
for Mr. McNeill as a defendant, and Centura filed an amended complaint making 
the same claimthe sale was void for violation of the automatic staythat had 
been unsuccessful in the bankruptcy court.  Centura's attorneys then filed a motion for 
judgment on the pleadings requesting that the district court declare the 
foreclosure sale void for unilateral mistakes, lack of notice to U.S. Bank, 
unjust enrichment by the McNeill Trust, irregularity of the sale, and 
unconscionability.  
The district court converted the motion to one for summary judgment and 
granted it ordering that all the parties be returned to their presale 
status.  The 
court also directed Centura to pay the McNeill Trust's attorney fees and costs 
of $82,458 in order to fully restore the parties to the presale 
circumstances.  
The McNeill Trust appealed the summary judgment, and Centura appealed the 
award of attorney fees.  

 

 

STANDARD OF REVIEW

 

[¶8]      This case presents no 
factual disputes.  
Centura admits committing unilateral mistakes that inadvertently led to 
the foreclosure sale being held as originally scheduled.  The district court 
granted summary judgment to Centura and invoked its equitable power to restore 
the parties to their preforeclosure sale status.  

 

[¶9]      This court has long 
recognized the foreclosure of a mortgage lien to be an equitable action.  Marple v. Wyoming Production Credit Association, 750 P.2d 1315, 1317 (Wyo. 1988); Baldwin v. McDonald, 24 
Wyo. 108, 156 P. 27, 32 (1916).  We have also embraced the concept that, "by 
adoption of the Wyoming Rules of Civil Procedure[,] the distinction between 
actions at law and suits in equity has been abolished.'  W.R.C.P. 2."  Hyatt Brothers, Inc. ex rel. Hyatt v. Hyatt, 769 P.2d 329, 332 n.2 (Wyo. 1989).  As one result of this abolition, we have 
approved the use of summary judgment in actions which were historically 
equitable in nature.  
Id.

 

[¶10]   The Oklahoma Court of Civil Appeals, 
addressing a similar circumstance,  held:

 

The underlying action, being one to foreclose a mortgage 
lien, is equitable in nature.  Ordinarily, in reviewing a case of equitable 
cognizance a judgment will be sustained on appeal unless it is found to be 
against the clear weight of the evidence or is contrary to law or established 
principles of equity.  
But because this comes to us from an order granting summary judgment the 
appellate standard of review is de novo.

 

Abboud v. Abboud, 2000 OK CIV APP 116, ¶4, 14 P.3d 569, ¶4 (citations 
omitted).  This 
court has often expressed the standard of review that summary judgment is proper 
"when there is no genuine issue of material fact in dispute and the moving party 
is entitled to judgment as a matter of law."  Paulson v. 
Andicoechea, 926 P.2d 955, 957 (Wyo. 1996).  We examine the case in the same manner as the 
district court and treat the motion as if it were originally before us, using 
the identical materials and information presented to the district court.  Pekas v. Thompson, 903 P.2d 532, 535 (Wyo. 1995).  Therefore, we review 
the district court's order setting aside the foreclosure as a matter of law and 
de novo.

 

 

DISCUSSION

 

 

[¶11]   "The public policy underlying the 
comprehensive framework governing foreclosure sales is a concern for swift, 
efficient, and final sales." 6 Angels, Inc. v. 
Stuart-Wright Mortgage, Inc., 102 Cal. Rptr. 2d 711, 716 (Cal. Ct. App. 
2001).  "The 
obvious advantage of power of sale foreclosure is that it avoids the expense and 
delay of a judicial proceeding."  E. George Rudolph, The Wyoming Law of 
Mortgages § 4.1 at 63 (1995).  Against the backdrop of these policy 
considerations, Centura claimed that, even though its mistakes were unilateral, 
the sale should be set aside in equity because: the sale was inadvertently held 
due to mistakes committed by Centura's attorneys; Centura did not attend the 
sale and did not notice U.S. Bank, the second mortgagee; the sale price was 
grossly inadequate; the McNeill Trust tendered a check shortly after the sale, 
not immediately upon the acceptance of the bid; and the McNeill Trust was 
unjustly enriched.  
The McNeill Trust maintained the original foreclosure sale was valid and, 
therefore, should not have been set aside and it was entitled to rely upon the 
finality of the foreclosure process.  

 

[¶12]   This court has not previously addressed 
whether a foreclosure sale can be set aside because of an inadequate price due 
to unilateral errors on the part of the mortgagee.  In truth, we have 
very little precedent regarding foreclosure sales, and the precedent we do have 
suggests a conservative approach with sales being set aside in only very limited 
circumstances.  
This view is evident in Justice Blume's opinion in Delfelder v. Teton Land & Investment Co., 46 Wyo. 
142, 24 P.2d 702 (1933).

 

[¶13]   The facts in Delfelder are somewhat complicated, yet they are 
sufficiently compelling to warrant review.  J. A. Delfelder and Evelyn M. Delfelder 
executed a $225,000 mortgage on all their property to John Hay.  In doing so, Mrs. 
Delfelder legally waived her homestead rights.  Shortly afterward, Mr. Delfelder died, and 
Mrs. Delfelder was appointed the executrix of his estate.  The principal 
balance of the debt reduced to $70,000, apparently by application of the 
proceeds from the sale of livestock.  Mrs. Delfelder also executed several renewal 
notes for the debt in the amount of $70,000 though no formal claim was filed on 
the debt with her as executrix.  Mr. Hay assigned the mortgage to American 
National Bank which commenced foreclosure proceedings under the power of sale 
provision for the amount due at that time of $79,269.  At the June 2, 1924, 
foreclosure sale, an agent of American National Bank purchased the property for 
$72,000.  In 
March of 1926, the bank sold the property to Teton Land & Investment 
Co.  In 1931, 
Teton Land & Investment Co. filed an action against Mrs. Delfelder to 
recover the premises.  
Mrs. Delfelder asserted the sale should be set aside and the action 
dismissed because of a number of alleged irregularities and her homestead 
exemption.  24 P.2d  at 703.  
Justice Blume's empathy for the widow's condition and efforts to preserve 
the homestead were apparent:

 

We come then to the main question in the case, namely, 
whether or not the foreclosure of the mortgage was valid without presentation of 
the claim of the assignee of the mortgage to the executrix of the estate, in 
view of the fact that the defendant resided on the premises in controversy, and 
claimed the same, as her homestead under the statute.  The point has given 
us an infinite amount of trouble.  We have continually held that the laws 
relating to a homestead should be liberally construed.  And, in view of that 
fact, we have labored long, and have delayed the decision in this case, with the 
hope of finding some way to save the homestead for Mrs. Delfelder without doing 
undue violence to other principles of law and equity involved in the case.  

 

24 P.2d  at 705.  The court recognized the sale of exempt 
property is voidable, not void, depending on whether there is nonexempt property 
which could be liquidated first and other similar considerations.  However, in the end, 
the court determined Mrs. Delfelder was prejudiced by her own actions, not by 
the mortgagee's failure to file a claim with the estate:

 

The homestead could not have been saved 
. . . without the sale of the farm lands.  Should blame be 
fastened on the assignee of the mortgage because the foreclosure was not started 
sooner?  We do 
not think so. . . . [W]e find in the case at bar the fact 
that the defendant herself, as executrix of the estate, at four different times 
gave, for the purpose of extending the time of payment, renewal notes for the 
original indebtedness under the mortgage, which operated, if not entirely so, at 
least almost like an allowance of the claim, even though not based on a formal 
claim filed with the estate.  The first renewal note was given before, the 
last long after, the time of filing claims against the estate had expired.  She was, 
accordingly, at least equally to blame for not proceeding more promptly in 
attempting to determine whether or not the homestead could have been saved.  Suppose, then, the 
claim had been filed.  
By reason of the extension of the notes, the holder of the mortgage was 
unable to foreclose.  
Thus, as a result of defendant's own act, taxes accrued, interest 
accumulated, and the amount ran up to that ultimately found to be due, and the 
possibility of saving the home became out of the question 
. . . . The fact that these extensions were made by the 
defendant in her capacity as executrix should not, we think, make any 
difference.  We 
have, in considering this matter, earnestly attempted to find out whether she 
might not, in some way, have been damaged by the nonfiling of the claim, but 
have been unsuccessful by reason of the stubborn facts confronting us . . 
. .

 

24 P.2d  at 711.  In short, the court found the renewals delayed 
the foreclosure proceedings and the debt thereby increased to an amount 
sufficient to compromise the homestead exemption.  Justice Blume wrote:

  

The essence of the defense herein is to have a sale under a 
mortgage set aside.  
Such a proceeding is one in equity. . . . And where, 
as in this case, the sale was not absolutely void, but at most voidable, it would seem that it should not be 
set aside unless she was prejudiced or damaged by the failure of the holder of 
the mortgage to file a claim . . . .

 

24 P.2d  at 710-11 (emphasis added).  Professor Rudolph, 
in a discussion of another issue in Delfelder, also 
recognized the court required that the mortgagor be prejudiced by the action of 
another in order to justify setting aside a foreclosure sale.  Rudolph, The Wyoming 
Law of Mortgages, supra, § 4.3 at 67.  

 

[¶14]   Some sixty-nine years later, Manion v. Chase 
Manhattan Mortgage Corporation, 2002 WY 49, ¶7, 43 P.3d 576, ¶7 (Wyo. 2002), 
indicates this court's continued reticence to set aside or vacate a foreclosure 
sale absent clear prejudice and irregularity of the proceedings even when an 
inadequate price has been paid:

 

Although no Wyoming case has addressed this area of law, the 
case law and other authorities establish a general rule that "a foreclosure sale 
free from fraud or irregularity will not be held invalid for inadequacy of the 
price."  Kantack v. Kreuer, 280 Minn. 232, 158 N.W.2d 842, 848 
(1968); Giordano v. Stubbs, 228 Ga. 75, 184 S.E.2d 165, 168-69 (1971); West Roxbury Co-op. Bank v. 
Bowser, 324 Mass. 489, 87 N.E.2d 113, 115 (1949); Pentad Joint Venture v. First Nat'l Bank of La Grange, 
797 S.W.2d 92, 95-96 (Tex. App. 1990).  Stated another way, "The fact that there is 
some inadequacy in the price at which property was sold is not sufficient ground 
for setting aside a sale under a power in a mortgage or trust deed where the 
sale was lawfully made and rightly conducted, with full opportunity for 
competition in the bidding, and without fraud, partiality, or oppression."  59A C.J.S. Mortgages § 680 (1998) (footnote omitted). 

 

This position is substantially consistent with the section 
in Restatement (Third) of Property: Mortgages entitled "Adequacy of Foreclosure 
Sale Price":

 

(a)  A foreclosure sale price obtained pursuant to 
a foreclosure proceeding that is otherwise regularly conducted in compliance 
with applicable law does not render the foreclosure defective unless the price 
is grossly inadequate.

 

(b)  Subsection (a) applies to both power of sale 
and judicial foreclosure proceedings.  

 

Restatement (Third) of Property: Mortgages § 8.3 at 581 
(1997).  The 
comments to this section reflect "close judicial scrutiny of the sale price is 
more justifiable when the price is being employed to calculate the amount of a 
deficiency judgment context."  Id., § 8.3 cmt. a 
at 583.  In this 
case, there was no possibility of a deficiency judgment against the Dvorscaks 
because their liability for any deficiency was discharged due to the bankruptcy 
action. 

 

[¶15]   It can be reasonably inferred from the 
decision letters of April 4, 2000, and October 30, 2001, that the district court 
relied on both what it considered to be an unconscionably low sale price and 
Centura's unilateral mistakes to invoke equity to set aside the foreclosure sale 
and attempt to return the parties to their presale status quo.  We disagree that 
these circumstances justified setting aside the sale. 

 

[¶16]   As an initial matter, "[o]ne of the 
basic tenets of equity is that equitable remedies depend upon a showing by the 
claimant of clean hands."  Fremont Homes, Inc. v. 
Elmer, 974 P.2d 952, 959 (Wyo. 1999); see also Dewey 
v. Wentland, 2002 WY 2, ¶37, 38 P.3d 402, ¶37 (Wyo. 2002).  Centura does not 
come to this litigation with clean hands.  Centura's unilateral errors, and those of its 
legal representatives, set the stage for this dispute.  The mistakes 
included the failure to: (1) identify and notice all lienholders prior to 
initiating the foreclosure proceeding; (2) observe the automatic bankruptcy 
stay; (3) effectively postpone or cancel the foreclosure sale; and (4) attend 
the foreclosure sale.  
A mistake by only one of the parties ordinarily does not offer a reason 
for a remedy for that party unless the mistake was produced by the fraudulent or 
inequitable conduct of the other party.  Givens v. Fowler, 
984 P.2d 1092, 1096 (Wyo. 1999); Raymond v. Steen, 
882 P.2d 852, 855 (Wyo. 1994); 27A Am. Jur. 2d Equity 
§ 12 (1996).  
Following these acts of misfeasance, Centura attempted to strong-arm the 
McNeill Trust into surrendering the certificate of sale and to have the 
bankruptcy court void the sale despite Centura's own violation of the stay.  The latter tactic 
backfired when the bankruptcy court recognized the disingenuous nature of the 
request and validated the sale with the following comments:

 

In the Tenth Circuit, action taken in violation of the 
automatic stay is void.  Ellis v. Consolidated 
Diesel Elec. Corp., 894 F.2d 371, 372-73 (10th Cir. 1990).  However, the Tenth Circuit Court of Appeals 
also recognizes that under some circumstances, retroactive relief is 
permissible.  In re Calder, 907 F.2d 953, 956 (10th Cir. 1990).  In Calder, the debtor had actively litigated against the 
creditor, only raising the automatic stay issue when it was to his legal 
advantage.  That 
court found the debtor's conduct inequitable and refused to void the 
litigation.

 

In this case, the original mistake was made by Centura.  Litigation 
ensued.  
Although it is not evident at what point in the proceedings the automatic 
stay became an issue, all parties proceeded to conduct themselves as though the 
automatic stay was not in effect.  The court agrees with the debtor that Centura 
should not profit by its mistake, and that the status quo in the state court 
should be maintained.  
Therefore, the court will annul the automatic stay to validate the 
foreclosure sale.  
To hold otherwise would unfairly reward Centura and effectively void the 
actions taken by Judge Hartman in the Wyoming District Court action.  

 

[¶17]   Yet another mainstay of equitable relief 
is that equity will not be invoked if an adequate remedy at law exists.  Texaco, Inc. v. State Board of Equalization, 845 P.2d 398, 402 (Wyo. 1993); Colorado Interstate Gas Company v. 
Natural Gas Pipeline Company of America, 842 P.2d 1067, 1072 (Wyo. 
1992).  As one 
seeking the benefits of equity, Centura must show it had no adequate remedy at 
law.  BHP Petroleum Company, Inc. v. Okie, 836 P.2d 873, 876 
(Wyo. 1992).  
Neither the parties nor the district court addressed this issue.  However, it is 
obvious Centura could have pursued purchasing the certificate of purchase from 
the McNeill Trust or the right of redemption from the bankruptcy trustee and 
sought recoupment of any loss ultimately incurred, if any, through an action 
against its attorneys for their alleged negligence in processing and supervising 
the foreclosure sale.  
It is somewhat ironic to note this matter could have been much more 
quickly and inexpensively resolved had Centura taken advantage of the $10,000 
offer to sell the certificate of purchase that Mr. McNeill made to Centura's 
attorneys on the day of the original sale.  

 

[¶18]   Even if we were to assume clean hands 
and no adequate remedy at law, these circumstances still do not warrant setting 
aside the foreclosure sale.  A four-pronged test used by the Minnesota 
Court of Appeals is useful to evaluate the merits of setting aside a foreclosure 
sale:

 

"(1)  A blameless plaintiff fallen into serious 
error . . . , which promises a disastrous result, wholly 
unintended by any of the parties to the transaction . . . ; (2) 
absence of negligence of the person seeking relief; (3) defendants with 
knowledge of the mistake attempting to secure by inequitable conduct an 
unconscionable advantage of plaintiff and to enrich themselves unjustly at his 
expense; [and] (4) the ability of the court to restore the status quo as to all 
of the interests involved."  Peterson v. First Nat'l 
Bank of Ceylon, 162 Minn. 369, 379, 203 N.W. 53, 56-57 (1925). 

 

Pole v. Trudeau, 516 N.W.2d 217, 221 (Minn. Ct. App. 1994).

 

[¶19]   In the instant case, Centura, by its own 
admission, was not a blameless plaintiff, and it is at least questionable 
whether the ultimate loss, if Centura had purchased the certificate of purchase 
or redemption rights, would have had a "disastrous effect."  This is especially 
true since Centura had a potential remedy at law to recoup those funds if, in 
fact, the mistake was the fault of its attorneys.  Centura's negligence also prevents meeting the 
second prong of the test.  The third prong requires the McNeill Trust to 
have had knowledge of the error and the intent to take unfair advantage.  Clearly, this was 
not the case prior to the actual sale date.  Mr. McNeill saw the published foreclosure 
notice and went to the sale. We decline to infer bad faith from Mr. McNeill's 
attendance at the foreclosure sale and recognition of a bidding opportunity 
where inexplicably no representative for the mortgagee appeared at the sale. 

 

[¶20]   The fourth and final prong of the test 
requires the court to ascertain whether it is actually feasible to return the 
parties to their presale status.  In another Minnesota case, TCF Banking & Savings, F.A. v. Loft Homes, Inc., 439 N.W.2d 735, 739 (Minn. Ct. App. 1989), the Minnesota Court of Appeals provided 
factors "critical in determining whether a return to the status quo can be 
achieved:  
first, reliance to a party's detriment upon the foreclosure, and second, 
any subsequently acquired rights of a third party."4  As to the first 
factor, it is reasonable to infer the McNeill Trust relied on the sale to its 
detriment by paying U.S. Bank for an assignment of the second mortgage to 
protect its interest in the property from redemption.  Centura 
characterizes the McNeill Trust's actions as unreasonable given knowledge of its 
competing claims.  
However the McNeill Trust was entitled to rely upon the sanctity and 
finality of the foreclosure process and to protect the interest it purchased in 
compliance with the statutory procedures.  While the district court ordered that the 
McNeill Trust's sale funds be returned and attorney fees and costs be paid, it 
denied recoupment of the payment made for the second mortgage assignment.  The McNeill Trust 
could not have been made completely whole without affecting the subsequently 
acquired rights of a third party, U.S. Bank. Therefore, we conclude the parties 
cannot be substantially returned to their presale status.  Harkening back to 
the Manion case where our discussion began, we note 
this appeal presents no indication of fraud or other irregularity that, in 
conjunction with an inadequate sale price, would be sufficient to support 
setting aside the foreclosure sale.  Consequently, we find, as a matter of law, the 
district court's decision to do so should be reversed. 

 

[¶21]   We must specifically address, although 
the district court did not, the remaining three reasons Centura claims the sale 
should be deemed invalid and set asidenamely, Centura did not attend the sale 
or notice U.S. Bank, the McNeill Trust did not tender a check immediately upon 
the acceptance of the bid, and the McNeill Trust was unjustly enriched.

 

[¶22]   We can identify no legal requirement 
that the mortgagee either attend the sale or provide notice of the sale to a 
second mortgagee.  
The "Acceleration; Remedies" clause of the instant mortgage provides in 
relevant part:

 

Lender shall give notice to Borrower prior to acceleration 
following Borrower's breach of any covenant or agreement in this Security 
Instrument . . . . If the default is not cured on or before 
the date specified in the notice, Lender at its option may require immediate 
payment in full of all sums secured by this Security Instrument without further 
demand and may invoke the power of sale and any other remedies permitted by 
applicable law. . . .

 

            
If Lender invokes the power of sale, Lender shall give notice of intent 
to foreclose to Borrower and to the person in possession of the Property, if 
different, in accordance with applicable law.  Lender shall give notice of the sale to 
Borrower . . . . Lender shall publish the notice of sale, and the 
Property shall be sold in the manner prescribed by applicable law.  Lender or its 
designee may purchase the Property at any sale.

 

This language does not require that the mortgagee/lender bid 
or even be present at the foreclosure sale.  In fact, the instrument states the 
mortgagee/lender may 
purchase the property at the sale; therefore, it is reasonable to conclude the 
mortgagee/lender's participation is wholly discretionary.  

 

[¶23]   Our "applicable law" governing 
foreclosure by power of sale is found in §§ 34-4-101 through 34-4-113.  The statutes 
expressly indicate the foreclosure and sale may be accomplished in accordance 
with either the terms of the mortgage or the statutes themselves.  Section 
34-4-101.  The 
act augments, rather than limits, the remedies available in mortgage default 
circumstances.  
This is relevant because, similar to the mortgage terms, the statutory 
provisions permit, but do not compel, the mortgagee/lender to attend and/or bid 
at the foreclosure sale.  Section 34-4-108.  We find no 
indication in either the mortgage or the statutes that a foreclosure sale is 
invalid if the mortgagee/lender does not attend the sale.  

 

[¶24]   The mortgage language at issue in this 
case requires that notice of the alleged default and scheduled foreclosure sale 
be given in a prescribed manner to the mortgagor/borrower and anyone currently 
in possession of the property, if it is a different person.  Publication of the 
notice of foreclosure sale is also required.  However, no requirement exists to notify other 
lienholders.  
Certainly, a foreclosure sale held without notice to other lienholders 
would not resolve all outstanding encumbrances.  "When a junior lienholder is not made a party 
to a foreclosure, the junior interest is not bound by the foreclosure decree, 
and the lienholder is entitled to exercise his rights as if the foreclosure had 
never taken place."  
Patel v. Khan, 970 P.2d 836, 839 (Wyo. 
1998).  However, 
it does not follow that failure to give notice would cause the sale to be 
invalid.  
"Equity will not set aside a sale merely on the ground that the property 
was encumbered with other mortgage and judgment liens, at least if there appears 
to be no controversy as to the amount and priority of such liens."  59A C.J.S. Mortgages § 679  at 182 (1998).  Similarly, the statutory prerequisites to 
foreclosure in § 34-4-1035 do not require notification to other 
lienholders.  

 

[¶25]   Centura also alleges the payment by the 
McNeill Trust was irregular because of a brief delay while the proper payee was 
determined and Mr. McNeill went to the bank to obtain a certified check. This 
argument might have some merit had Centura's attorneys taken this opportunity to 
explain to the sheriff's office, when it called to ascertain the proper payee, 
that the sale was held in error.  However, this did not occur, and, essentially, 
the check was delivered to the sheriff contemporaneously.  Centura cannot 
demonstrate prejudice from the brief delay and actually participated to the 
extent it took no corrective action though contact was made regarding the form 
of the payment check.  
"Where the terms of sale provide for payment forthwith of the money bid, 
the bidder may be allowed a reasonable time to produce the amount of his 
bid."  59A 
C.J.S. Mortgages, supra, § 
864 at 436.  
Centura attempts to place technicalities of form over substance to undo 
the damage flowing from its own errors and/or those of its representatives. 
 

 

[¶26]   We now consider whether the McNeill 
Trust has been unjustly enriched.  "The burden of proving the elements of unjust 
enrichment is on the party seeking that remedy."  Boyce v. Freeman, 
2002 WY 20, ¶9, 39 P.3d 1062, ¶9 (Wyo. 2002).  The elements that must be established are: 

 

"(1) Valuable services were rendered, or materials 
furnished,

 

"(2) to the party to be charged,

 

"(3) which services or materials were accepted, used and 
enjoyed by the party, and,

 

"(4) under such circumstances which reasonably notified the 
party to be charged that the plaintiff, in rendering such services or furnishing 
such materials, expected to be paid by the party to be charged.  Without such 
payment, the party would be unjustly enriched."

 

Id. at ¶12 (quoting Coones v. Federal 
Deposit Insurance Corporation, 894 P.2d 613, 617 (Wyo. 1995)).  "[U]njust enrichment 
claims visualize a situation where a party receives something of value without 
payment, which was accepted and used so as to unjustly enrich the recipient of 
the goods or services." Metz Beverage Company v. Wyoming Beverages, Inc., 2002 WY 21, ¶36, 39 P.3d 1051, ¶36 (Wyo. 2002).  The circumstances of this case fail to prove 
the fourth element of unjust enrichment"reasonably notified the party to be 
charged that the plaintiff, in rendering such services or furnishing such 
materials, expected to be paid" more than the amount bid.

 

[¶27]   The McNeill Trust made its $20,000 bid 
at what was advertised to be a competitive foreclosure sale arranged by Centura 
and its representatives.  Under these circumstances, we cannot find the 
McNeill Trust was on notice that, if it was successful in obtaining the subject 
property by competitive bid for a price less than the outstanding mortgage 
balance, Centura would expect payment for the difference.  This suggestion is 
wholly inconsistent with the normal and reasonable understanding and expectation 
of a competitive bid sale.  The only thing the McNeill Trust should 
reasonably have been on notice of was that the highest bid would purchase the 
property.  The 
McNeill Trust did not lose rights or receive heightened responsibilities solely 
because the price it paid was substantially less than the debt.

 

[¶28]   We are not persuaded, pursuant to the 
particular facts of this case, that this bid should be considered 
unconscionable, grossly inadequate, or the root of unjust enrichment.  As we noted in Manion:        

 

[N]ot only did Manion have the right to go to the 
foreclosure sale and purchase the property to protect his investment, Wyoming 
law also provides a right of redemption following a foreclosure sale.  This right is 
available to both the person whose real property has been sold as well as a 
mortgagee such as Manion.  Wyo. Stat. Ann. §§ 1-18-103 and -104 
(LexisNexis 2001).  
Generally, "where the right of redemption is not cut off by the sale, the 
courts are more reluctant to set it aside for inadequacy of price than where the 
sale bars the right altogether."  59A C.J.S. Mortgages § 680.  

 

2002 WY 49, ¶8.  
"There is no requirement that foreclosed property be sold for its 
appraised value, which may or may not reflect the price that could be obtained 
upon sale of the property."  World Savings and Loan 
Association v. Amerus Bank, 740 N.E.2d 466, 474 (Ill. App. Ct. 2000).  "[F]air market 
value' presumes market conditions that, by definition, simply do not obtain in 
the context of a forced sale."  BFP v. Resolution Trust 
Corporation, 511 U.S. 531, 538 (1994); see also 
Krohn v. Sweetheart Properties, Ltd., 52 P.3d 774, 
780 (Ariz. 2002).

 

[¶29]   Some jurisdictions have adopted 
arbitrary percentages of fair market value as their benchmark of 
unconscionability and which could be utilized to support an unjust enrichment 
claim.  For 
example, New Mexico identifies sale prices of ten percent to forty percent of 
value as inadequate and sufficient to justify setting aside a sale when combined 
with other inequitable circumstances.  Crown Life Insurance 
Company v. Candlewood, Ltd., 818 P.2d 411, 415 n.2 (N.M. 1991); Armstrong v. Csurilla, 817 P.2d 1221, 1235 (N.M. 
1991).  Delaware 
uses a fifty percent fair market value test, and it is suggested in the comment 
to § 8.3 of Restatement (Third) of Property: Mortgages that less than 
twenty percent of fair market value is widely accepted as "grossly 
inadequate."  Burge v. Fidelity Bond and Mortgage Company, 648 A.2d 414, 419 (Del. 1994); Restatement (Third) of Property: Mortgages, supra, § 8.3 cmt. b at 
584.  We will 
not substitute arbitrary limitations for thorough examination of the facts and 
equities of each case to determine unconscionability or unjust enrichment. 

 

[¶30]   Pursuant to our analysis, we conclude 
the district court erred in granting summary judgment to Centura and endeavoring 
to return the parties to their presale status.  We reverse the grant of summary judgment to 
Centura and remand for entry of summary judgment on the McNeill Trust's motion 
and dismissal of all other claims and defenses.  

 

 

[¶31]   As an integral part of the exercise of 
equitable discretion, and in an effort to restore the presale status quo, the 
district court ordered Centura to pay the McNeill Trust's attorney fees and 
costs in excess of $80,000.  Centura disputed this award as part of its 
objection to the district court's ruling setting aside the foreclosure sale.

 

[¶32]   We recently reviewed the standards for 
award of attorney fees reiterating that Wyoming subscribes to the American 
rule.  Alexander v. Meduna, 2002 WY 83, ¶49, 47 P.3d 206, ¶49 
(Wyo. 2002); Schlesinger v. Woodcock, 2001 WY 120, 
¶21, 35 P.3d 1232, ¶21 (Wyo. 2001); Cline v. Rocky 
Mountain, Inc., 998 P.2d 946, 949 (Wyo. 2000).  

 

Under the American rule, each party is generally responsible 
for his own attorney fees.  However, a prevailing party may be reimbursed 
for his attorney fees when express statutory or contractual authorization exists 
for such an award.  
Moreover, an exception may be applied in the circumstances of fraud and 
the corollary award of punitive damages.  See Olds v. Hosford, 354 P.2d 947, 950 (Wyo. 1960) 
(recognizing an exception to the general rule denying recovery of attorney fees 
and costs in a replevin action where "fraud, malice, oppression or wil[l]ful 
wrong" can be shown).

 

Alexander, 2002 WY 83, ¶49 (some citations 
omitted).  The 
district court's award of attorney fees was not based on a statute or contract, 
nor did it include a finding of fraud, malice, or willful wrongdoing.  Instead, it was an 
aspect of the court's exercise of equitable discretion and attempted restoration 
of the parties to their presale status, which action we have reversed.  Therefore, we 
reverse the award of attorney fees to the McNeill Trust and hold all parties 
responsible for their own fees and costs of litigation consistent with the 
American rule.  

 

[¶33]   Reversed and remanded to the district 
court for issuance of an order consistent with this opinion.

 

FOOTNOTES

1The lawsuit was apparently 
filed without Centura's knowledge or authorization.  However, Centura 
subsequently ratified its attorneys' actions.

 

2Mr. Dvorscak never 
responded in the suit, and Mrs. Dvorscak participated in a very limited manner 
in the district and bankruptcy court forums.  She did not file a notice of appeal.

  

3The McNeill Trust purchased 
U.S. Bank's second mortgage.  Like Mr. Dvorscak, U.S. Bank did not 
participate in the litigation below or file an appeal. 

 

4These are referred to as 
the Romkey factors pursuant to Romkey v. Saumweber, 212 N.W. 816 (Minn. 1927).

 

5

            
(a)  To entitle any party to give a notice as hereinafter 
prescribed and to make such foreclosure, it is requisite:

 

            
(i)  That some default in a condition of such mortgage has 
occurred by which the power to sell became operative;

 

            
(ii)  That no suit or proceeding has been instituted at law to 
recover the debt then remaining secured by such mortgage, or any part thereof, 
or if any suit or proceeding has been instituted, that the same has been 
discontinued, or that an execution upon the judgment rendered therein has been 
returned unsatisfied in whole or in part; and

 

            
(iii)  That the mortgage containing the power of sale has been 
duly recorded; and if it has been assigned, that all assignments have been 
recorded; and

 

            
(iv)  That written notice of intent to foreclose the mortgage 
by advertisement and sale has been served upon the record owner, and the person 
in possession of the mortgaged premises if different than the record owner, by 
certified mail with return receipt, mailed to the last known address of the 
record owner and the person in possession at least ten (10) days before 
commencement of publication of notice of sale.  Proof of compliance with this subsection shall 
be by affidavit.