Opinion
CA 09-41
Opinion Delivered November 18, 2009
Appeal from the Jefferson County Circuit Court, [No. DR-2005-638-4], Honorable Leon N. Jamison, Judge, Affirmed.
Appellant Clara Harper appeals the order of the Jefferson County Circuit Court confirming the judicial sale of a residence to appellee ADE Investments, LLC (ADE). For reversal, appellant contends that the trial court erred by confirming the sale because the purchase price was so inadequate as to shock the conscience of the court. We affirm the confirmation order.
A review of the record discloses that the judicial sale arose out of the divorce proceedings between appellant and appellee Jimmy Cannon. In the divorce decree dated October 7, 2005, the trial court ordered the parties' marital home to be sold at public auction for a price no lower than $100,000. After deducting the costs of the sale, the parties were to equally divide the proceeds from the sale. The first sale brought no bidders for the property, and on June 26, 2007, the trial court entered an order allowing a private sale of the residence by December 31, 2007. At a hearing in September 2007, testimony given by the realtor disclosed that the foundation of the home was defective. This defect caused a crack in the living room floor and cracks in the brick mortar that resulted in an exterior wall separating from the house. The shifting also caused the doors and windows not to latch properly. The parties received an estimate of $30,000 to repair the foundation. Further, the realtor testified that showings of the home decreased once the foundation problems were revealed. The property did not sell by the December 2007 target date, and on April 24, 2008, the trial court entered an order for the residence to be sold at public auction with no minimum bid requirement. The Commissioner held a sale on May 16, 2008, at which Cannon was the only bidder. The trial court refused to confirm this sale, finding that Cannon's bid of one dollar was grossly inadequate and that neither appellant nor her attorney received notice of the sale.
The Commissioner scheduled another public auction for July 22, 2008. The persons who attended this sale included appellant, Cannon, Linda Evans, Patricia Banks, and a representative from ADE. The Commissioner's report of sale stated that ADE tendered the highest bid in the amount of $48,000. Both appellant and Cannon filed objections to the confirmation of the sale. The trial court held a hearing on September 24, 2008.
At the hearing, both appellant and Cannon expressed their opinions that the home was worth at least $150,000. Cannon testified, however, that the home had defects in the foundation, windows, walls, and ceilings. When the property was listed for private sale, these defects caused the rescission of a $145,000 offer for the home. In her testimony, appellant insisted that these defects were present when she and Cannon purchased the house. She also stressed that the home was the primary marital asset and that a sum greater than $48,000 was needed to retire marital debt.
Appellant also claimed that irregularities occurred during the sale. Appellant testified that she heard a bid of $98,000 and that she followed this bid with her own offer of $108,000. Appellant testified that the bidding concluded with what she thought was an offer of $148,000, not $48,000. On the other hand, Cannon testified that he witnessed no irregularities at the sale and that the last bid he heard was ADE's bid of $48,000.
The Commissioner, Flora Cook, testified that appellant's last bid at the sale was $10,008. She said that the bidding continued between Evans and ADE's representative, who voiced the highest bid of $48,000. Cook stated that she did not hear appellant bid $108,000 for the property.
The trial court found that appellant's final bid was $10,008 and that ADE presented the highest bid of $48,000. The court stated that its conscience was not shocked by this bid, and the court confirmed the report of sale. This appeal followed.
Appellant argues on appeal that the trial court erred by confirming the sale at a price that is one-third of the property's value. She contends that the inadequacy of the price is so great as to shock the conscience of the court. To support her argument, appellant cites Arkansas Code Annotated section 28-51-303(b)(2)(A) (Repl. 2004), which provides that, when real property is sold at public auction by the representative of a decedent's estate, it may not be sold for less than seventy-five percent of its appraised value.
In judicial sales, the court is the vendor, and in the exercise of sound judicial discretion, it may confirm or refuse to confirm a sale made under its order. Kellett v. Pocahontas Fed. Sav. Loan Ass'n, 25 Ark. App. 243, 756 S.W.2d 926 (1988); Estate of Hodges v. Wilkie, 14 Ark. App. 297, 688 S.W.2d 307 (1985). When examining a discretionary decision made by a trial court, the question is not what the reviewing court would have done, but whether, as a matter of law, the trial court abused its discretion. Pingel v. Troy Nichols, Inc., 51 Ark. App. 41, 907 S.W.2d 757 (1995). In reviewing the action of the trial court to see if there has been an abuse of discretion, the appellate court will not substitute its own decision for that of the trial court but merely reviews the case to see whether the decision was within the latitude of decisions which a judge or court could make in a case. Looper v. Madison Guar. Sav. Loan Ass'n, 292 Ark. 225, 729 S.W.2d 156 (1987).
Judicial sales are not to be treated lightly, and to give them desired stability, the court should not refuse to confirm a sale for mere inadequacy of price. Campbell v. Campbell, 20 Ark. App. 170, 725 S.W.2d 585 (1987); Kellett, supra. Mere inadequacy of price, unless so great as to shock the conscience of the court or amount to evidence of fraud, will not justify the court in refusing to confirm a sale. Looper, supra. However, when inadequacy of price is shown, equity will seize upon slight circumstances to go along with the inadequacy of price and justify a refusal to confirm the sale, even in the absence of fraud or misconduct. Campbell, supra.
A price that "shocks the conscience" of the court depends on a variety of circumstances, including the value of the property, the circumstances surrounding the sale, the price, the rights of the parties, and the harm that may result if the sale is confirmed. Pingel, supra. Nevertheless, the decision is one for the trial court to make using sound discretion. Id.; Looper, supra. There is no fixed formula that exists to measure what is a shocking price at a sale, but there are fixed rules for reviewing such a case. Pingel, supra. The appellate court does not retry cases, and factual determinations made by the trial court must be upheld unless clearly erroneous. Id.
Here, the residence failed to sell over a three-year period, either at two previous auctions or in a private sale. The record also reveals that the home has defects that have not been repaired and that, because of those defects, a potential buyer rescinded an offer to purchase the home for $145,000. As far as the record shows, no other offers were made on the home. Although appellant maintains that the home is worth at least $150,000, appellant's opinion does not take into account the defects identified in the testimony. Consequently, appellant's estimate of the home's value is questionable. As for appellant's claim of hardship in relation to marital debt, this circumstance, though not irrelevant, is not considered a substantial reason for refusing confirmation of the sale. See Looper, supra.
Also, appellant's reliance on Arkansas Code Annotated section 28-51-303 is unavailing. This statute governs the public sale of property in a decedent's estate where, prior to the sale, the law requires appraisals by three disinterested persons who are well informed concerning the value of real property in the vicinity. Ark. Code Ann. § 28-51-302(a)(1) (Repl. 2004). Thus, the statute is not particularly well adapted to the present situation. Otherwise, to impose a requirement for property to be sold for not less than three-fourths of the property's value runs counter to the supreme court's pronouncement that no fixed formula exists or can exist for determining what is a shocking sale price. Looper, supra. Finally, the trial court found as a matter of fact that the Commissioner conducted the sale in an appropriate manner. Considering all the circumstances, we find no abuse of discretion in the trial court's decision to confirm the sale and cannot conclude that its findings are clearly erroneous. The record does not support appellant's contention that the purchase price was so inadequate as to shock the conscience of the court.
Affirmed.
GRUBER and MARSHALL, JJ., agree.