Inadequacy of sales price is not enough, on its own, to set aside a Sheriff's sale, at least according to the Appellate Division in a recent decision. In Deutsche Bank National Trust Company, As Trustee, v. Roffman, which was decided on May 10, 2011, the Appellate Division upheld a Chancery Division decision not to set aside a sheriff’s sale, which the borrower challenged solely on the grounds of inadequacy of sales price. Prior to the sheriff’s sale, the borrower did not contest the foreclosure and a final judgment was issued in the amount of $337,290.42. At the sheriff’s sale, the property was purchased for $192,200, a price that the borrower asserted was “grossly inadequate.” Even though Plaintiff had not commenced a deficiency action against borrower, she sought a fair market value hearing on the grounds that the property had been assessed at $376,900 and that she had a competitive market analysis that indicated that the property could be sold for $295,000 to $300,000.
The Chancery Division has the authority to set aside a sheriff’s sale and order a resale of property, but such actions are sparingly exercised and are to be taken only when necessary to correct plain injustices such as fraud, accident, surprise, mistake, and irregularities in the conduct of the sale. However, the Appellate Division reaffirmed that a claim of “inadequate” sales price alone is insufficient to justify equitable relief such as setting aside a sheriff’s sale. Because no irregularities were alleged concerning the sale, the Appellate Division affirmed the Chancery Division’s conclusion that there was insufficient evidence to set aside the sale.
Moreover, the court concluded that the fair market value standard should not be applied when determining whether a sales price is adequate. R. 4:65-6(c) only requires that the property be “sold at its highest and best price at the time of sale[.]” Because a sheriff’s sale is a form of distress sale, courts cannot reasonably expect the production of full fair market value as a result thereof.
Borrower also sought a fair market value hearing pursuant to R. 4:65-5 so that she could not be liable for more than the difference between the fair market value of the property and the mortgage debt. The statute of limitations for a lender to seek a deficiency judgment against a borrower is three (3) months from the date of a sheriff’s sale. N.J.S.A. 2A:50-22(b). The Chancery Division court refused to conduct a fair market value hearing at trial, stating that a hearing would only be necessary in the event that the Plaintiff asked the court to enter a deficiency judgment against borrower. Likewise, the Appellate Division found the issue moot because the Plaintiff did not file an action against the borrower for a deficiency judgment within the statute of limitations and confirmed at argument that it did not intend to do so. Accordingly, fair market value hearings pursuant to R. 4:65-5 are only to be sought by a borrower after a deficiency judgment is brought against it.