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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Mark Thomas v. Joseph P. Casteel Trust (10/8/2021) sp-7557
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.gov.
THE SUPREME COURT OF THE STATE OF ALASKA
MARK THOMAS, )
) Supreme Court No. S-17550
Appellant, )
) Superior Court No. 3AN-16-10316 CI
v. )
) O P I N I O N
JOSEPH P. CASTEEL TRUST, )
) No. 7557 - October 8, 2021
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Andrew Guidi, Judge.
Appearances: Robert A. Sparks, Law Office of Robert A.
Sparks, Fairbanks, for Appellant. Brian Riekkola, North Star
Law Group, LLC, Anchorage, for Appellee.
Before: Bolger, Chief Justice, Winfree, Maassen, Carney,
and Borghesan, Justices.
WINFREE, Justice.
I. INTRODUCTION
A junior lienholder who took no steps to protect his interest at a nonjudicial
foreclosure sale appeals the superior court's subsequent summary judgment decision
----------------------- Page 2-----------------------
dismissing his claim that the sale process was defective and that the sale thus should be
1
set aside.
Seeing no error, we affirm the superior court's decision.
II. LEGAL BACKGROUND
A. Nonjudicial Deed Of Trust Foreclosure
1. Overview
Parties execute and record a deed of trust to secure payment of a financial
2 An impartial third party named to
obligation by creating a lien against real property.
administer the transaction is the trustee, the debtor is the trustor, and the creditor is the
trust beneficiary.3 In the event of default under an obligation secured by a deed of trust,
Alaska law authorizes the trustee to commence nonjudicial foreclosure proceedings and
sell the real property to satisfy the trustor's obligation.4 Prior to sale the trustee must
record a notice of the trustor's default and the beneficiary's election to sell the property5
1 Other parties were involved in the superior court proceedings, but only
Thomas appealed; the caption intentionally omits parties not participating in the appeal.
2 See AS 34.20.110 (providing that "a deed of trust, given to secure an
indebtedness, shall be treated as a mortgage of real estate").
3 SeeYoungv.Embley, 143 P.3d936, 940-42(Alaska2006) (explaining deed
of trust creates lien against real property, title remains with trustor, and deed of trust has
"equity of redemption"); McHugh v. Church, 583 P.2d 210, 218 (Alaska 1978) ("[T]he
trustee . . . owes a duty both to the trustor and the beneficiary of the trust to perform
impartially . . . .").
4 See AS 34.20.070 (specifying nonjudicial deed of trust foreclosure
procedures); see also Farmer v. Alaska USA Title Agency, Inc., 336 P.3d 160, 165
(Alaska 2014) ("Under a deed of trust, the trustee has the power to 'foreclose and sell the
property according to the terms provided in the deed' if the debtor defaults on the loan."
(quoting Baskurt v. Beal, 101 P.3d 1041, 1044 (Alaska 2004))).
5 See AS 34.20.070(b) (requiring that trustee record notice of default and
(continued...)
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and provide notice to all subsequent parties having an interest in, or lien upon, the
6 7
property.
The trustor has the right to cure the default and prevent the foreclosure sale.
A junior lienholder has the same right to cure and may satisfy the trustor's default to
8 The property is sold subject to encumbrances senior to the
avoid the foreclosure sale.
deed of trust, but junior encumbrances are extinguished by the sale.9
5 (...continued)
provide notice of foreclosure sale "[n]ot less than 30 days after the default and not less
than 90 days before the sale").
6 Alaska Statute 34.20.070(c) requires that the trustee provide notice to:
(1) the trustor in the trust deed; (2) the successor in interest to
the trustor whose interest appears of record or of whose
interest the trustee or the beneficiary has actual notice, or
who is in actual physical possession of the property; (3) any
other person actually in physical possession of or occupying
the property; (4) any person having a lien or interest
subsequent to the interest of the trustee in the trust deed,
where the lien or interest appears of record or where the
trustee or the beneficiary has actual notice of the lien or
interest . . . .
7 See AS 34.20.070(b) (setting out trustor's right to cure default before
foreclosure of interest).
8 See Young, 143 P.3d at 938, 942 (holding that to protect interests "junior
lienholders have the right to cure a senior interest holder's default on a deed of trust"
because "a foreclosure cuts off all interests junior to the one foreclosed").
9 See AS 34.20.090(a) ("[Foreclosure] sale and conveyance transfers all title
and interest that the party executing the deed of trust had in the property sold at the time
of its execution . . . ."); Adams v. FedAlaska Fed. Credit Union, 757 P.2d 1040, 1042
(Alaska 1988) ("Upon selling the property the interests created subsequent to the deed,
including those of junior lienholders, are cut off."); see also Burnett, Waldock &Padgett
Invs. v. C.B.S. Realty, 668 P.2d 819, 823 (Alaska 1983) ("[L]and purchased at a deed of
(continued...)
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2. Procedural defects
a. Void versus voidable sale
"[A] foreclosure suit, whether it is styled as an action to recover property
or as an action for abuse of process, seeks a relief that sounds properly only in equity
10
. . . ." When defects in a foreclosure are alleged, we ask whether the process was so
inherently "unfair and unreasonable" that setting aside the sale is necessary to achieve
11
an equitable result. "We have set aside foreclosure sales when parties have been
12
deprived of their substantive foreclosure rights or were denied meaningful notice." A
13
sale is set aside only in "the most unusual circumstances." Some defects are "so
inconsequential that they render the sale neither void nor voidable. These defects
14
commonly involve minor discrepancies in the notice of sale."
Only a substantial defect will make a foreclosure sale void, such as lacking
a substantive basis to foreclose because, for example, the trustor was not in fact in default
9 (...continued)
trust sale is subject to prior encumbrances, but not to those made after the deed of trust
is executed.").
10 Young, 143 P.3d at 948 (upholding court's denial of jury trial).
11 Wendt v. Bank of N.Y. Mellon Trust Co., N.A., 487 P.3d 235, 241 (Alaska
2021) (quoting Cook Schuhmann & Groseclose, Inc. v. Brown & Root, Inc., 116 P.3d
592, 596 (Alaska 2005)); see also Alaska Tr., LLC v. Ambridge , 372 P.3d 207, 229
(Alaska 2016) (Winfree, J., dissenting) ("[P]rocedural or substantive inequities
surrounding the foreclosure process may invalidate the sale . . . .").
12 Wendt, 487 P.3d. at 241.
13 Young, 143 P.3d at 948 (quoting Cook Schuhmann, 116 P.3d at 595-96).
14 GRANT S. NELSON ET AL., REAL ESTATE FINANCE LAW § 7.21, at 644 (6th
ed. 2015).
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15
at the outset. Defects involving "the mechanics of exercising the power" to foreclose
16
are not substantial and do not render a sale void.
A trustor retains property title after
17
a void foreclosure sale.
"[D]efects in the mechanics of the trustee's exercise of the power to
18 and the trustor or a junior
foreclose may render the foreclosure sale voidable,"
lienholder "may appeal to have [the] sale set aside" in court.19 If a foreclosure sale is
merely voidable, sale to a bona fide purchaser prevents an interested party from setting
aside the sale.20
b. Grossly inadequate sale price
Although procedural defects may make a nonjudicial foreclosure sale
21
voidable, "mere inadequacy of price is generally not sufficient by itself." But when the
sale price is so grossly inadequate that it shocks the conscience or is combined with
15 See Rosenberg , 727 P.2d 778, 783-84 (Alaska 1986) (holding trustee's
failure to exercise due diligence in obtaining property owner's current mailing address
ELSON ET AL., supra note 14, § 7.21, at 642-43.
did not void sale); see also N
16 Rosenberg, 727 P.2d at 783-84.
17 Id. ; see also NELSON ET AL ., supra note 14, § 7.21, at 642 (explaining that
void sale transfers "neither legal nor equitable title . . . to the sale purchaser or
subsequent grantees").
18 Baskurt v. Beal, 101 P.3d 1041, 1044 (Alaska 2004); see also Burnett,
Waldock &Padgett Invs. v. C.B.S. Realty, 668 P.2d 819, 823 (Alaska 1983) ("Generally,
irregularities in a deed of trust sale render it voidable, not void.").
19 Burnett, 668 P.2d at 824 n.1 (Rabinowitz, J., concurring); see also
AS 34.20.070(l) (specifying that trustors and lienholders are among parties who "may
bring an action in court to enjoin a foreclosure").
20 Rosenberg, 727 P.2d at 784.
21 Farmer v. Alaska USATitleAgency, Inc., 336 P.3d 160, 165 (Alaska 2014).
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22
significant procedural irregularities, invalidating the sale may be justified. "Gross
inadequacy is measured by reference to the fair market value of the property at the time
23
of the sale." We use a sliding-scale approach adopted by the Restatement (Third) of
Property: Mortgages to determine the effect of the combination of price and irregular
24
procedures on the sale's fairness. The more egregious the price deficiency is, the less
25
significant a procedural defect must be to warrant setting aside the sale. But we also
26
recognize a forced-sale price may be lower than fair market value.
III. FACTS AND PROCEEDINGS
A. Facts
The material facts relevant to this case are undisputed. In 2011 George
Elkins purchased residential real property from Josef Frelin. Frelin financed the
purchase, and Elkins executed a promissory note to Frelin. The note was secured by a
recorded deed of trust naming Frelin as beneficiary and Elkins as trustor; Fidelity Title
Agency of Alaska, LLC was the successor trustee. In 2016 Elkins defaulted on the
22 Id.
23 Id. (quoting Baskurt, 101 P.3d at 1044). We have not considered whether
fair market value of the "property" includes anything other than the interest subject to
foreclosure.
24 Baskurt, 101 P.3d at 1045 (noting Restatement explains that court may
invalidate sale, even when value cannot be characterized as "grossly inadequate," if there
is "even a slight irregularity in the foreclosure process coupled with a sale price that is
ESTATEMENT (THIRD) OF PROPERTY:
substantially below fair market value" (quoting R
MORTGAGES § 8.3 cmt. b, at 587 (AM. LAW INST . 1997))).
25 Id.
26 Farmer, 336 P.3d at 165 n.33; see also BFP v. Resolution Trust Corp., 511
U.S. 531, 537-38 (1994) (holding that price received at foreclosure sale reasonably may
be less than price received in fair market sale).
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obligation and Frelin authorized Fidelity to commence a nonjudicial deed of trust
27
foreclosure.
At sale the property, valued between $358,600 to $370,000, was subject to
the following additional encumbrances: (1) delinquent property taxes of$5,910.75; (2) a
condominium association judgment lien for $11,856.52; (3) a judgment lien for
$94,994.53 held by Mark Thomas; and (4) a child support lien for $4,127.43 held by
Alaska's Child Support Services Division (CSSD) for Elkins's ex-wife, Mary Elkins.28
The delinquent property taxes and the condominium association lien had priority over
Frelin's deed of trust. Thomas's and CSSD's liens were subordinate to Frelin's deed of
trust, with the CSSD lien in the most junior position.
Fidelity gave the statutorily required notice of the default and pending
29 Although Fidelity did not give CSSD a
foreclosure sale to all interested parties.
27 See Kuretich v. Alaska Tr., LLC , 287 P.3d 87, 91 (Alaska 2012) (explaining
differences between nonjudicial and judicial foreclosure proceedings).
28 We hereafter refer to Mary by her first name to avoid confusion; we intend
no disrespect.
29 Alaska Statute 34.20.070(b) provides in relevant part:
[T]rustee shall record . . . a notice of default setting out
(1) the name of the trustor, (2) the book and page where the
trust deed is recorded or the serial number assigned to the
trust deed by the recorder, (3) a description of the trust
property, including the property's street address if there is a
street address for the property, (4) a statement that a breach
of the obligation for which the deed of trust is security has
occurred, (5) the nature of the breach, (6) the sum owing on
the obligation, (7) the election by the trustee to sell the
property to satisfy the obligation, (8) the date, time, and place
of the sale, and (9) the statement described in (e) of this
(continued...)
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30
statutorilyrequired supplemental notice, CSSDreceived actualnoticeofthedefault and
sale; under its governing policy, it declined to participate or otherwise protect its lien in
the foreclosure process. Thomas received actual notice of the default and sale, but he
neither attended nor sent a representative to the sale.
Joseph Casteel was interested in purchasing properties at foreclosure sales.
Casteel's daughter was the Fidelity title officer handling Frelin's foreclosure of Elkins's
property. Casteel is trustee of the Joseph P. Casteel Trust; his daughter is a trust
beneficiary and a joint owner on his personal bank account. The title officer researched
the property value, obtained approval from her supervisor for her father's trust to bid on
the property, and arranged for a Fidelity representative to bid on the trust's behalf at the
foreclosure sale. Fidelity had in other instances facilitated bidding for clients who were
unavailable to bid in person. But Fidelity's representative later testified that Fidelity
would not have let the title officer handle the foreclosure sale if it had known her father
intended to bid on the property.
29 (...continued)
section describing conditions for curing the default.
30 Alaska Statute 34.20.070(d) provides:
If the State of Alaska is a subsequent party, the trustee, in
addition to the notice of default, shall give the state a
supplemental notice of any state lien existing as of the date of
filing the notice of default. This notice must set out, with
such particularity as reasonably available information will
permit, the nature of the state's lien, including the name and
address, if known, of the person whose liability created the
lien, the amount shown on the lien document, the department
of the state government involved, the recording district, and
the book and page on which the lien was recorded or the
serial number assigned to the lien by the recorder.
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Casteel Trust was the only bidder at the nonjudicial foreclosure sale and
purchased Elkins's property for $26,443.40, just $1 over Frelin's offset bid for the
balance due on Elkins's promissory note. Casteel Trust was prepared to bid $107,000
at the foreclosure sale, but it limited its bid in the absence of other bidders. Including the
senior lien obligations accepted by purchasing at the sale, Casteel Trust paid
approximately 9% of the property's total estimated value.
B. Relevant Proceedings
Mary subsequently filed a superior court complaint to enforce civil liability
31
under AS 25.27.260;
she sought compensatory and punitive damages for violating
32
AS 34.20.070(d) and to set aside the foreclosure sale. She named as defendants Casteel
Trust, Fidelity, Elkins, and all other lienholders. CSSD declined to participate, and Mary
unsuccessfully sought to compel CSSD's participation. Mary ultimately stipulated to
dismissal of her civil liability and damages claims.
Thomas filed a cross-claim asking that the superior court: (1) hold the
foreclosure sale was voidable because of the "grossly inadequate" sale price; (2) impose
a constructive trust on the property; (3) order that Casteel Trust reconvey the property
to Elkins and that Fidelity schedule a new nonjudicial foreclosure sale; and (4) award
him costs and attorney's fees.
Casteel Trust sought summary judgment dismissing Thomas's and Mary's
33 The superior court agreed with Thomas's assertion
claims to set aside the foreclosure.
31 AS 25.27.260 (establishing civil liability for failure to comply with child
support lien against real property prior to sale).
32 AS 34.20.070(d) (requiring supplemental notice prior to nonjudicial
foreclosure sale when State has lien against property).
33 See Alaska R. Civ. P. 56(c) (providing summary judgment is proper if
(continued...)
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that the price disparity triggered a need to review the foreclosure proceedings to ensure
no part of the sale was fraudulent, and the court based its summary judgment decision
in favor of Casteel Trust on the following undisputed facts:
(l) the failure to provide supplemental notice did not
prejudice any party, as it is undisputed that [CSSD] otherwise
received notice of the sale; (2) despite actual notice, Thomas
failed to attend the sale to protect his own interest as a junior
lienholder; (3) the successful bidder was prepared to pay
more but was not required to do so due to the absence of
other bidders; and (4) Casteel[] [Trust's] status as a bona fide
purchaser entitles [it] to retain the property and allows the
court to uphold the foreclosure.
The superior court concluded that the circumstances did not indicate fraud
and that "the absence of a supplemental notice does not constitute a procedural error[]
affecting the fundamental fairness of the transaction." The court further concluded that
Fidelity's trustee's deed "meets all of the statutory requirements, and thus provides
34 Thomas sought
conclusive evidence that Casteel [Trust] is a bona fide purchaser."
reconsideration, which the court denied.
33 (...continued)
"there is no genuine issue as to any material fact and . . . the moving party is entitled to
judgment as a matter of law").
34 The court concluded that Casteel Trust was a bona fide purchaser for value
without notice under AS 34.20.090(c):
A recital of compliance with all requirements of law
regarding the mailing or personal delivery of copies of
notices of default in the deed executed under a power of sale
is prima facie evidence of compliance with the requirements.
The recital is conclusive evidence of compliance with the
requirements in favor of a bona fide purchaser or
encumbrancer for value and without notice.
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The superior court then granted Casteel Trust summary judgment on
Mary's claim to set aside the foreclosure sale, concluding that because CSSD had been
the lienholder Mary was not a party in interest for a wrongful foreclosure claim. The
court also referred to its decision dismissing Thomas's claim, noting that for the same
reasons Mary's claim had no basis.
The superior court granted Casteel Trust prevailing party status against
Mary and Thomas and entered final judgment. Mary initially appealed, but she
dismissed her appeal after settling with Casteel Trust. Thomas appeals the summary
judgment decision dismissing his claim against Casteel Trust.
IV. STANDARD OF REVIEW
"We review the 'grant of a summary judgment motion de novo, affirming
if the record presents no genuine issue of material fact and if the movant is entitled to
35
judgment as a matter of law.' "
"[S]ummary judgment is appropriate only when no
36 In
reasonable person could discern a genuine factual dispute on a material issue."
makingthis determination all reasonableinferences aredrawn in favor ofthenonmovant,
but a movant must present more than "unsupported assumptions and speculation."37
V. DISCUSSION
Thomascontendsthattheforeclosure sale is voidable becausethesaleprice
was grossly inadequate and the failure to send CSSD supplemental notice was a
procedural error. Thomas also argues that there was fraud by Fidelity and that Casteel
35 Farmer v. Alaska USA Title Agency, Inc. , 336 P.3d 160, 162 (Alaska 2014)
(quoting Erkins v. Alaska Tr., LLC , 265 P.3d 292, 296 (Alaska 2011)).
36 Christensen v. Alaska Sales &Serv., Inc., 335 P.3d514,520 (Alaska 2014).
37 Farmer, 336 P.3d at 162 (quoting Boyko v. Anchorage Sch. Dist., 268 P.3d
1097, 1103 (Alaska 2012)).
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Trust is not a bona fide purchaser for value. For the following reasons, we affirm the
superior court's decision upholding the foreclosure sale.
A. Procedural Defect
Thomas contends Fidelity's failure to provide CSSD supplemental notice
constitutes procedural error in the foreclosure process and that error, combined with a
grossly inadequate sale price, warrants setting aside the sale. Not every failure to comply
with statutory nonjudicial foreclosure requirements justifies the extraordinary equitable
38
remedy of setting aside a foreclosure sale.
And although we recognize the importance
39
of following statutory requirements, we also consider them in light of their purpose.
Insufficient notice may warrant setting aside a voidable sale if fairness
demands it. In Rosenberg v. Smidt we overturned a voidable sale due in part to
40 In Rosenberg the trustee mailed foreclosure sale notice to the
insufficient notice.
interest holders' prior address, but when it was returned as undeliverable the trustee
made no attempt to find a current address.41 The interest holders sued to overturn the
sale, and the property's purchasers argued that due diligence in providing notice of
default was not required and would increase costs.42 We concluded it would be unfair
38 See, e.g., Young v. Embley, 143 P.3d 936, 948 (Alaska 2006) (deciding
foreclosure proceeding validity based on statutory interpretation).
39 See, e.g., Farmer, 336 P.3d at 162 ("We 'apply our independent judgment
to questions of law, adopting the rule of law most persuasive in light of precedent,
reason, and policy.' " (quoting Shaffer v. Bellows, 260 P.3d 1064, 1068 (Alaska 2011))).
40 727 P.2d 778, 783 (Alaska 1986).
41 Id.
42 Id. at 782.
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to uphold the sale because the trustee had not exercised due diligence in notifying the
43
interest holders.
Our decisions reflect a greater equitable interest in receiving initial notice
44 In Farmer v. Alaska USA Title Agency, Inc. the
than in receiving additional notice.
trustor defaulted and the trustee commenced foreclosure proceedings.45 The trustor did
not receive additional notice of numerous sale postponements.46 Arguing that "equity
required re-notice after each [sale] postponement and that the lack of re-notice violated
his due process rights," the trustor sued to overturn the sale.47 We affirmed summary
judgment upholding the sale, determining that the trustor knew the sale was pending, did
not appear at the first properly noticed sale, and therefore could not blame lack of notice
for his failure to protect his interest.48
It is uncontested that Thomas received all the notice to which the law
entitled him; he had actual notice of the sale, but he failed to take any action to protect
his interest. The statutorily required supplemental notice protected only CSSD's
43 Id. at 783
44 See, e.g., Farmer, 336 P.3d at 161-62 (involving additional notice of
pending nonjudicial foreclosure sale); Rosenberg, 727 P.2d at 782-83 (involving initial
notice of pending nonjudicial foreclosure sale).
45 336 P.3d at 161.
46 Id. at 162 (noting statute governing nonjudicial foreclosure process
"requires re-notice to the debtor only when 'the foreclosure [is] postponed for more than
12 months.' " (alteration in original) (quoting AS 34.20.080(e))).
47 Id. at 161-62.
48 Id. at 162-64, 166.
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49
interest, and Thomas cannot claimCSSD's protection to protect his interest (which was
50
senior to CSSD's interest).
We agree with the superior court that failure to provide
CSSD supplemental notice did "not constitute a procedural error[] affecting the
fundamental fairness of the transaction."
B. Sale Price
Thomas contends that the sale price of 7% of fair market value, or even 9%
when considering the required satisfaction ofsenior liens,isgrosslyinadequate. Thomas
relies on our Baskurt v. Beal decision affirming the superior court's decision to "set aside
51
the sale on the grounds that it was void and voidable." The purchasers in Baskurt,
believing the property was "worth at least $250,000," brought cashier's checks totaling
well over that amount to the foreclosure sale; they ultimately bid "$26,781.81, one dollar
52 This equated to less than 15% of the
over the remaining debt on the property."
property's estimated fair market value.53
But, as Casteel Trust correctly points out, in
Baskurt the primary interest holder was disputing the sale of two adjoining parcels when
selling one parcel would have satisfied the debt. We recognized that "a trustee under a
deed of trust is a dual fiduciary owing duties to both the trustor and the beneficiary";
those duties include taking "reasonable and appropriate steps to avoid sacrifice of the
49 See AS 34.20.070(d) (requiring supplemental notice setting out State's lien
interest information in addition to default notice).
50 See Farmer, 336 P.3d at 163 n.20 (noting that those "who receive notice
of [a] foreclosure sale[] . . . know that the property is threatened with foreclosure and
have an obligation to stay informed of the status of the foreclosure process" (quoting In
re Nghiem, 264 B.R. 557, 562 (B.A.P. 9th Cir. 2001))).
51 101 P.3d 1041, 1042 (Alaska 2004).
52 Id. at 1041, 1043.
53 Id. at 1046.
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54
debtor's property and interest." We affirmed setting aside the sale because the superior
court correctly found that "[b]y conducting the sale in bulk rather than selling only one
parcel, . . . the trustee failed in its duty to act reasonably to protect [the trustor]'s
interests."55
Inadequate sale price alone generally is not enough to set aside a
foreclosure sale, unless the sale price is so grossly inadequate that it shocks the
conscience by creating a presumption of fraud or is combined with procedural
irregularities.56 A purchase price of less than 15% of market value may trigger an
evaluation by the court to determine if anything untoward occurred in the sale process.57
The superior court in this case engaged in such an evaluation; it determined that the
"circumstances in this case do not indicate fraud in the foreclosure sale" and that there
were no procedural irregularities creating unfairness. On the undisputed record before
us, the court correctly determined that no basis existed to set aside the sale.
54 Id.
55 Id.
56 Id. at 1044 ("[I]f the inadequacy of the sale price is (1) 'so gross as to shock
the conscience and raise a presumption of fraud or unfairness,' or (2) is coupled with
other irregularities in the sale procedures, then invalidation of the sale may be justified."
(quoting McHugh v. Church, 583 P.2d 210, 213-14 (Alaska 1978))); see also Farmer v.
Alaska USA Title Agency, Inc., 336 P.3d 160, 165 (Alaska 2014) ("[M]ere inadequacy
of price is generally not sufficient by itself."); NELSON ET AL., supra note 14, § 7.22, at
645 ("All jurisdictions adhere to the recognized rule that mere inadequacy of the
foreclosure sale price will not invalidate a sale, absent fraud, unfairness, or other
irregularity.").
57 See Baskurt, 101P.3d at 1046 ("The fact that the foreclosure purchase price
. . . was less than fifteen percent of the sale price indicates that the gross inadequacy
standard was met.").
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C. Fraud
Thomas raised the issue of fraud before the superior court; he suggests in
his reply brief that fraud occurred, although fraud is not a point expressly raised in his
appeal. The superior court determined no fraud occurred because "Thomas was aware
of the sale, and . . . [t]here is no evidence that [Thomas's] absence at the sale was
fraudulently induced."
In McHugh v. Church we outlined irregularities that might suggest fraud
or an otherwise unjust result that might justify setting aside a foreclosure sale:
If the sale has been attended by any irregularity, as if several
lots have been sold in bulk where they should have been sold
separately, or sold in such manner that their full value could
not be realized; if bidders have been kept away; if any undue
advantage has been taken to the prejudice of the owner of the
property, or he has been lulled into a false security; or, if the
sale had been collusively, or in any other manner, conducted
for the benefit of the purchaser, and the property has been
sold at a greatly inadequate price, the sale may be set aside,
and the owner may be permitted to redeem.[58]
The record in this case suggests some potentially questionable behavior on Fidelity's
part, given that its representative handling the foreclosure and facilitating Casteel Trust's
bid was Casteel's daughter, but nothing rising to the level of fraud sufficient to set aside
a voidable sale. Unlike the situation we described in McHugh, as trustee Fidelity
conducted the sale in accordance with its contractual duties to Elkins and Frelin; Fidelity
had no obligation to protect junior lienholders.59 There is no evidence that Fidelity
conducted the sale in a manner that unduly benefitted Casteel Trust; Frelin received the
58 583 P.2d at 213.
59 See id. at 218 ("[T]he trustee . . . owes a duty both to the trustor and the
beneficiary of the trust to perform impartially . . . .").
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----------------------- Page 17-----------------------
full amount of his secured interest, Elkins did not contest the foreclosure sale, and
Thomas was given sufficient notice of the foreclosure process that, had he wanted to, he
could have participated to protect his judgment lien on the property. Thomas's
suggestion of fraud sufficient to set aside the foreclosure sale is unsupported.
D. Bona Fide Purchaser
The superior court also held that on the undisputed facts in the record
Casteel Trust was a bona fide purchaser for value who took title clear of Thomas's
allegations of irregularity. Thomas contends that Casteel Trust's bona fide purchaser
status is defeated because (1) Fidelity failed to provide CSSD the statutorily required
supplemental notice and (2) Casteel Trust was prepared to bid a higher amount, proving
actual knowledge that its bid was grossly inadequate. Thomas argues that because
Casteel Trust is not a bona fide purchaser, the sale can and should be set aside. Because
we conclude the sale was not voidable, we do not need to address Casteel Trust's status
as a bona fide purchaser.
VI. CONCLUSION
The superior court's decision is AFFIRMED.
-17- 7557
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| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
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