Title: VT National Bank v. Leninski

State: vermont

Issuer: Vermont Supreme Court

Document:

VT National Bank v. Leninski  (95-587); 166 Vt. 577; 687 A.2d 890

[Filed 13-Nov-1996]

                               ENTRY ORDER

                      SUPREME COURT DOCKET NO. 95-587

                            SEPTEMBER TERM, 1996

Vermont National Bank                }     APPEALED FROM:
                                     }
                                     }
     v.                              }     Windsor Superior Court
                                     }
Steven Leninski and                  }
Patricia M. Leninski                 }     DOCKET NO.  S0375-93WrCf

       In the above-entitled cause, the Clerk will enter:

       Following a strict foreclosure, plaintiff Vermont National Bank filed
  an action against defendants Steven and Patricia Leninski to recover an
  alleged deficiency between the mortgage debt and the value of the property
  as measured by its sale price at public auction.  Relying upon an appraisal
  commissioned by the bank rather than the sale price, the superior court
  determined that the fair market value of the property exceeded the debt and
  therefore no deficiency was owing.  The bank appeals, contending the trial
  court erred by declining to treat the sale price as conclusive evidence of
  fair market value.  We affirm.

       The bank filed a two-count complaint against the Leninskis, seeking
  judgment on a note and an order of foreclosure on the mortgage securing the
  note.  The mortgage covered an undeveloped parcel of land in Hartford.  The
  bank successfully moved for summary judgment on both counts, and in August
  1994, a judgment order and decree of foreclosure was entered. The order
  provided that if the Leninskis did not redeem the property, the bank was to
  recover $58,108.25, representing the amount due under the note and mortgage
  plus court costs, fees, and expenses.

       The redemption period expired in February 1995.  In the same month,
  the bank employed a licensed appraiser to update a previous appraisal he
  had made of the property.  His earlier appraisal, in May 1993, had
  estimated the fair market value to be $67,000.  As of February 1, 1995, he
  estimated the value to be $60,000.  The appraiser was familiar with the
  county where the property was located and had done several hundred
  appraisals in the area.  An expert witness who was an experienced appraiser
  and member of the State Board of Appraisers reviewed the bank's appraisal
  report and concluded that it was done in accordance with accepted standards
  and methodology.

       In March 1995, the bank listed the property for sale with a local
  realtor, who offered the parcel at $59,000.  The asking price exceeded the
  estimated value of $50,460 ascribed to the lot by the listers for the Town
  of Hartford for the tax year 1995.  The property remained on the market for
  three months, from March through May 1995; the average marketing time in
  the Hartford area during this period was more than six months.

       In June, the Leninskis' parcel was one of eighty-six properties
  offered for sale at a public auction administered by the bank.  Nearly all
  of the properties, including the Leninskis', were auctioned on an
  "absolute" basis, meaning that they were to be sold regardless of price.
  Streamlined financing was made available to bidders, who were invited to
  "buy at your own price."  The Leninski property was sold to an adjacent
  landowner for $36,400.  There is no record of whether others bid on the
  property.  The buyer had previously offered to purchase the property from
  the Leninskis for $50,000.

 

       Shortly after the sale, the bank filed a request to establish the
  outstanding judgment amount by crediting the sale price of $36,400 against
  the monetary judgment of $58,108.25, for a deficiency balance of $21,708.25
  including interest from the date of expiration of the redemption period. 
  Following a hearing, the court concluded that the fair market value of the
  lot at the time of the foreclosure was $60,000, based on the estimate of
  value by the bank's appraiser.  The court acknowledged that sale price is
  commonly used to measure market value, but was unpersuaded that it
  represented a reliable measure under the circumstances. Specifically, as
  the court explained, "given the lack of information regarding the number of
  bidders, the ultimate purchase of the property by the adjacent landowner,
  but most importantly, the great disparity between the opinions of the bank
  officer, the real estate broker, the listers for the Town of Hartford, and
  the appraiser, we cannot rest on either the inference or the presumption
  that the sale price here was the fair market value."  Weighing the merits
  of the various opinions of value, the court chose that of the bank's
  licensed appraiser as the most reliable.  Accordingly, it found that the
  security was sufficient to cover the debt, and no deficiency was owing. 
  This appeal followed.

       In an action at law to recover an unsatisfied balance after
  foreclosure proceedings, the burden is on the mortgagee (here the bank) to
  show to what extent the mortgaged property was insufficient to pay the
  indebtedness.  Hewey v. Richards, 116 Vt. 547, 551,