Facing The Boot, Homeowners' Claim That F'closure Sale Price Was So Low As To "Shock The Conscience" Was Enough To Thwart Subsequent Eviction Attempt

In a recent ruling by the Court of Civil Appeals of Alabama, two Alabama homeowners were successful in reversing an adverse lower court ruling and, consequently, able to temporarily stall getting kicked out of their home that had been sold at a foreclosure sale.

The homeowners, Stephanie Berry and her grandmother, Eva Berry, asserted, among other things, that Deutsche Bank was not entitled to a summary judgment in the ejectment action that followed the foreclosure sale of their home because of their claim that the foreclosure upon which Deutsche Bank based its ejectment claim was invalid due to its sale for significantly less than its fair market value. The property was purchased by Deutsche Bank at the foreclosure sale for $33,915 when the market value of the property, according to the local tax assessor, was $84,800.

The lower court granted summary judgment for Deutsche Bank, but on appeal,(1) the state appellate court reversed the ruling and kicked the case back for further proceedings, saying that the existence of a genuine issue of material fact regarding the validity of the foreclosure sale was enough to preclude granting summary judgment in the ejectment action in favor of the lender.(2)

For the ruling, see Berry v. Deutsche Bank National Trust Company, No. 2080840 (Ala. Civ. App., May 14, 2010).

(1) Fortunately for Stephanie and Eva, their motion requesting a stay of the judgment pending resolution of the appeal was granted by the trial court. Had the trial court denied their motion for a stay and allowed for the eviction to go forward, the appeal may have been dismissed as being moot.

(2) Among other points, the appellate court made this general statement of the Alabama law applied in this case (bold text is my emphasis, not in the original text):

• In Hawkins v. LaSalle Bank, N.A., 24 So. 3d 1143, 1151 (Ala. Civ. App. 2009), this court held that, when a plaintiff in an ejectment action claims title to the property by virtue of its having purchased the property at a foreclosure sale, the existence of a genuine issue of material fact regarding the validity of the foreclosure sale will preclude the entry of a summary judgment in favor of the plaintiff.

• Stephanie and Eva argue that they established the existence of a genuine issue of material fact regarding the validity of the foreclosure sale on which Deutsche Bank bases its claim to title because, they say, they showed that the price realized at the foreclosure sale, i.e., $33,915 was so low in relation to the market value of the property as to shock the conscience. "`"The general rule is that, `where the price realized at the [foreclosure] sale is so inadequate as to shock the conscience, it may itself raise a presumption of fraud, trickery, unfairness, or culpable mismanagement, and therefore be sufficient ground for setting the sale aside.'"'" Mt. Carmel Estates, Inc. v. Regions Bank, 853 So. 2d 160, 168 (Ala. 2002) (quoting Breen v. Baldwin County Fed. Sav. Bank, 567 So. 2d 1329, 1333 (Ala. 1990), in turn quoting Hayden v. Smith, 216 Ala. 428, 430-31, 113 So. 293, 295 (1927)).

Based on its subsequent analysis of the surrounding facts and circumstances in this case, as set forth in its ruling, the appeals court found that Stephanie and Eva had successfully established the existence of a genuine issue of material fact as to the validity of the foreclosure sale based on the adequacy of the sale price and, accordingly, reversed the ruling of the lower court granting summary judgment in favor of Deutsche Bank, and remanded the case back to the lower court for subsequent proceedings.