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Law School Case Brief

Baskurt v. Beal - 101 P.3d 1041 (Alaska 2004)

Rule:

Even where a foreclosure sale price is not grossly inadequate, a low price coupled with some other irregularity in the foreclosure proceeding can be sufficient to render the sale voidable. While mere inadequacy of price has rarely been held sufficient in itself to justify setting aside a judicial sale of property, courts are not slow to seize upon other circumstances impeaching the fairness of the transaction as a cause for vacating it, especially if the inadequacy be so gross as to shock the conscience. If the sale has been attended by any irregularity, as if: (1) 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; (2) if bidders have been kept away; (3) 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 (4) 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.

Facts:

Annette Beal purchased two adjoining parcels of property in 1991 for $95,000 and $135,000, respectively. The promissory notes on the two parcels were secured by a single deed of trust covering both parcels. In 1994, Annette paid off the $95,000 note. In 1999, Annette defaulted on the $26,780.81 debt remaining on the other note. The trustee under the deed of trust foreclosed on both parcels. Sarah Baskurt, Robert Wainscott, and Allen Rosenthal purchased the property at the foreclosure sale for $26,781.81, one dollar over the remaining debt on the property. Thereafter, Annette filed a complaint against Baskurt, Wainscott, Rosenthal, McAlpine, and Land Title seeking to have the foreclosure sale set aside. Baskurt, Wainscott, and Rosenthal subsequently moved for summary judgment, arguing there was no basis for setting aside the sale. Purchasers' motion for summary judgment was denied because a question of fact remained whether "the parties intended for both parcels to be subject to foreclosure upon default of one note when the other note had been satisfied." After a three-day bench trial, the superior court set aside the foreclosure sale as both void and voidable. The purchasers appealed.

Issue:

Should the foreclosure sale be invalidated under Alaska Stat. § 34.20.070 because the inadequacy of the sale price? 

Answer:

Yes.

Conclusion:

The Supreme Court of Alaska noted that the foreclosure sale purchase price of $26,781 was grossly inadequate when compared to the market value of the property, which was $225,000 in 1991. Moreover, the Court found that by conducting the sale in bulk rather than selling only one parcel, the trustee failed in her duty to act reasonably to protect the debtor's interests in such a way as not to sacrifice the debtor's property. Coupled with the inadequacy of the price, the trustee's unreasonable failure to sell only one parcel initially justified invalidating the sale.

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