Monday, July 5, 2010

Mortgage Company Makes Mistake in Minimum Bid, Pays For It

A mortgage company lost its appeal of a doomed effort to rescind a foreclosure sale after it made a six figure mistake in calculating the minimum bid.  Decisions One Mortgage Co. LLC v. Victor Warren Properties, Case No. A10A0247, 10 FCDR 1990, Decided June 14, 2010.  In this case the company conducted a foreclosure sale and Warren Properties was the high bidder. The winner tendered the funds and received a receipt for the payment for the property.  Several weeks later, however, the company sent the funds back with a letter stating that it had rescinded the sale.  Warren had to file a lawsuit to enforce the sale. 

Decision One pleaded for the court to use its equitable power to rescind the sale.  It submitted an affidavit of a paralegal for the company that was the servicer of the nonjudicial foreclosure process for the law firm that represented Decision One in the foreclosure sale.  The affidavit stated that prior to the foreclosure sale date the servicer was informed by another entity via a program known as MortgageServ of the total debt amount and the servicer was instructed to calculate the opening bid.  Due to a "clerical error" the affiant mistakenly calculated the opening bid at $27,750 when in fact the opening bid should have been $333,000.  When the law firm received the results of the high bid of only $54,000 it was apparent that a mistake had been made.  In other words, Warren bought the property for $279,000 less than the minimum bid was supposed to be.  Now that is a steal! 

The Court of Appeals made short work of Decision One's argument for equity to intervene.  Decision One relied upon a prior case where a contractor was permitted to rescind a bid based on a unilateral miscalculation after establishing four factors:  (1) enforcement of the mistake would have been unconscionable; (2) the mistake related to the substance of the consideration; (3) the mistake occurred regardless of the exercise of ordinary care; and (4) the other party had not been prejudiced.  Here, the court held that Decision One had made no effort to establish that ordinary care had been exercised or that Warren would not be prejudiced by the rescission.  Thus, it upheld the sale of the land. 

1 comment:

  1. The post is telling about the mistakes that mortgage company makes