KEEPING CURRENT PROPERTY CASES AUCTIONS: Contract for sale at auction need not contain attorney review provision. Mengxi Liu, an experienced bidder who had purchased six residential properties at auction sales with her husband, attended an auction sale where she made a high bid of $1.1 million. Before the auction, she received a template “Contract for Sale of Real Estate” and a “notice,” which warned that an auction sale is not subject to an attorney review period and advised prospective bidders that the contract is final and binding. Lui paid $121,000 as an earnest money deposit but did not complete the contract. A second auction was held, and the property sold for $825,000. The seller brought an action for a declaratory judgment that Liu breached the contract, claiming the deposit as liquidated damages. Liu argued that the contract was unenforceable because it lacked the attorney review clause required by a decision of the New Jersey Supreme Court for residential sales in which real brokers participate. The trial court ruled that no three-day attorney review clause was necessary for a contract of purchase at an absolute auction, that Liu had breached the contract, and that the seller should receive the deposit. The intermediate appellate court affirmed. On further appeal, the supreme court also affirmed. It explained that a residential real estate sale by absolute auction is distinct from a traditional real estate transaction—in an absolute auction or an auction without reserve, the owner unconditionally offers the property for sale, and the highest bid Keeping Current—Property Editor: Prof. Shelby D. Green, Elisabeth Haub School of Law at Pace University, White Plains, NY 10603, sgreen@law.pace.edu. Contributor: Prof. Darryl C. Wilson.
Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.
creates a final and enforceable contract at the auction’s conclusion. Imposing the three-day attorney review in the absolute auction context would unduly interfere with this method of sale. The notice and template sales contract provided to the bidder before the auction—cautioning that any sale at the auction is final with no attorney review period—serves the consumer protection objectives of the attorney review provision. Sullivan v. Max Spann Real Estate & Auction Co., 276 A.3d 92 (N.J. 2022). BANKRUPTCY: Creditor violates automatic stay by conducting foreclosure sale of home owned by LLC after member of LLC files bankruptcy petition. Eileen Fogarty held a 99-percent interest in an LLC, which in turn owned a residential property that Fogarty occupied as her primary residence. Bayview Loan Servicing LLC initiated a foreclosure action, naming both the LLC and Fogarty as defendants. After Bayview obtained a judgment that authorized a foreclosure sale, Fogarty filed a Chapter 7 bankruptcy petition. Fogarty’s counsel notified Bayview that proceeding with the foreclosure sale would violate the automatic stay that took effect when she filed her bankruptcy petition. See 11 U.S.C. § 362. Bayview responded that because the LLC was a legal entity distinct from Fogarty, her personal bankruptcy petition did not stay acts against the LLC or assets of the LLC. Bayview proceeded
with the foreclosure sale without obtaining relief from the stay from the bankruptcy court. Fogarty then sought sanctions against Bayview under 11 U.S.C. § 362(k), arguing that Bayview willfully violated the statute. The bankruptcy court denied Fogarty’s motion, but the district court reversed and remanded for the calculation of fees and other damages to be charged as sanctions for the violation. The Second Circuit Court of Appeals affirmed, relying on the plain text of the statute. Bayview willfully violated two of the Bankruptcy Code’s automatic stay provisions. First, the code prohibits “the commencement or continuation . . . of a judicial . . . or other action or proceeding against the debtor.” Id. § 362(a)(1). Second, the code prohibits “the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case.” Id. § 362(a)(2). Bayview proceeded with the foreclosure sale of a property when Fogarty was a named party in the foreclosure proceedings, even if she held only a possessory interest in the property. In re Fogarty, 39 F.4th 62 (2d Cir. 2022). FORECLOSURE: Deed of trust provision giving lender the right to enter immediately after default violates statute that bars lenders taking possession before foreclosure. After Santoro defaulted under his home mortgage loan, the loan servicer, Ocwen, had the locks changed on the property and commenced foreclosure. Ocwen maintained that it sent Santoro a “15 Day Vacancy Letter” and received no response. Santoro alleged that he never received the letter. Santoro sued in federal district court, alleging trespass and intrusion upon seclusion. Ocwen defended based on a provision in the deed of trust authorizing the lender to secure the property if the borrower has abandoned
Published in Probate & Property, Volume 36, No 6 © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
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November/December 2022
