Opinion ID: 2604963
Heading Depth: 1
Heading Rank: 3

Heading: The question of the validity of the sheriff's sale.

Text: By supplemental record on error, our attention is directed to the fact that plaintiff bought the property involved at sheriff's sale for the sum of $1,000. It is argued (in the Reply Brief) that this manner of pursuing the judgment gives character to defendant's contention that she was defrauded. Although we are unable to treat the transaction in the manner suggested by defendant, we do have the power to relieve defendant from the inequitable and unconscionable effects of the sheriff's sale. It is to be noted that the sheriff observed the requirements of law and our comments are not intended as a criticism of the conduct of the trial court or of counsel. We merely point out that the consequences are so unconscionable as to demand that the sale be set aside. The court awarded damages to the plaintiff in the amount of $40,519. This figure, as noted before, included the $34,000 owing on the note, $4,552.20 interest, $466.80 for insurance paid for by plaintiff, and $1,500 for attorney's fees. The court also ordered that the property which was secured by a deed of trust to the public trustee be sold at special execution by the sheriff of Teller County after thirty days' prior publication of notice of such sale and that the proceeds be applied first to the costs of the sale and then the balance to the judgment debt. A deed of trust may be foreclosed in court under our authority. Neikirk v. Boulder Nat. Bank, 53 Colo. 350, 127 P. 137. A supplemental record filed by the defendant indicates that the sheriff's sale was held and that the property was purchased by the plaintiff Emma Rogers for $1,000. The outcome then is that the plaintiff now has the hotel, the improvements to which alone cost $4,400, the down payment of $6,000, and in addition, has an unsatisfied judgment in excess of $40,000. That such a result may have been obtained through strict adherence to legal procedures does not mitigate its obvious harshness. The words of Mr. Justice Bradley in Graffam v. Burgess, 1886, 117 U.S. 180, 186, 6 S.Ct. 686, 689, 29 L.Ed. 839 are applicable here. It is insisted that the proceedings were all conducted according to the forms of law. Very likely. Some of the most atrocious frauds are committed in that way. Indeed, the greater the fraud intended, the more particular the parties to it often are to proceed according to the strictest forms of law. It is the traditional duty of a court of equity to safeguard the interests of a mortgagor in the foreclosure of his equity of redemption. This power has been summarized by the Supreme Court in these words: In the absence of legislation, courts of equity have exercised jurisdiction in suits for the foreclosure of mortgages to fix the time and terms of sale and to refuse to confirm sales upon equitable grounds where they were found to be unfair or inadequacy of price was so gross as to shock the conscience. Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 446, 54 S.Ct. 231, 243, 78 L.Ed. 413. See also Honeyman v. Jacobs, 306 U.S. 539, 59 S.Ct. 702, 83 L. Ed. 972; Gelfert v. National City Bank of New York, 313 U.S. 221, 61 S.Ct. 898, 85 L.Ed. 1299. Similarly a court of equity possesses the power to examine an execution sale in the ordinary manner and to set aside an unconscionable sale. Graffam v. Burgess, supra; Van Senden v. O'Brien, 61 App.D.C. 137, 58 F.2d 689; Ellis v. Powell, Mo., 117 S.W.2d 225; Kloepping v. Stellmacher, 21 N.J.Eq. 328; LaFitte v. Salisbury, 43 Colo. 248, 95 P. 1065. The power to require confirmation of a foreclosure sale is inherent in a court of equity. 3 Jones, Mortgages, Sec. 2103. The requirement of confirmation constitutes an essential difference between a foreclosure sale and an execution in the ordinary manner. 1 Glenn, Mortgages, Sec. 92 at 557. The employment of the sheriff to carry out the foreclosure sale has been approved by decision of this Court, Scott v. Burlington State Bank, 76 Colo. 582, 233 P. 835. When, however, the sale is carried out through the sheriff, a result such as that found in the present case is possible. Therefore, in the face of such possibility, it is incumbent on a court of equity to supervise the sale in a manner such as that required by Rule 120, Rules of Civil Procedure. By proceeding as she did, plaintiff obtained a decree which neither referred to the statutory right of redemption, Denver Brick and Manufacturing Co. v. McAllister, 6 Colo. 261, nor reserved the right of confirmation of the sale. The results which followed indicate that the failure of the trial court to supervise the sale has resulted in serious prejudice. In fairness to the trial judge, it should be noted that the then attorney for defendant did not move to set aside the sale. As we view it, however, this fact should not operate to permit plaintiff to obtain a double recovery and thus transform a claim for compensation into a highly profitable transaction. Although plaintiff is entitled to be made whole, she does not have the right to use the courts for the purpose of furthering an unconscionable enterprise. The effect of our holding here is not to establish an invariable rule for the conduct of foreclosure sales. We merely recognize and apply traditional equitable principles to a shocking and unconscionable condition. Where a result such as the present one occurs or is threatened the Court should remedy it or raise safeguards to prevent it. The sale of the property in question is hereby set aside and the case remanded. Upon remand, the decree should be amended so as to require the appointment of appraisers in connection with the foreclosure sale. It should also require a return and report of sale and approval thereof by the trial court. If the trial court deems it necessary, a hearing should be had so that the court can be apprised concerning the actual value of the property. It goes without saying that the trial judge should disapprove any sale at a price which bears no relationship to the actual value of the property. The judgment is affirmed in part and reversed in part and the cause remanded for further proceedings consistent with the views herein expressed.