U.S. BANK NATIONAL ASSOCIATION (AS SUCCESSOR-IN-INTEREST TO BANK OF AMERICA, N.A., SUCCESSOR BY MERGER TO LASALLE BANK NATIONAL ASSOCIATION), AS TRUSTEE, IN TRUST FOR THE REGISTERED HOLDERS OF BANC OF AMERICA MERRILL LYNCH COMMERCIAL MORTGAGE INC., COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES 2007-1 APPELLANT
COURTYARDS UNIVERSITY OF KENTUCKY, LLC; AND IB NEW VENTURES, LLC APPELLEES
FROM FAYETTE CIRCUIT COURT HONORABLE ERNESTO M. SCORSONE,
JUDGE ACTION NO. 17-CI-01000
FOR APPELLANT: Griffin Terry Sumner Louisville, Kentucky
FOR APPELLEE IB NEW VENTURES, LLC: Anne A. Chesnut P. Branden
Gross Lexington, Kentucky
BEFORE: CLAYTON, CHIEF JUDGE; JONES AND LAMBERT, JUDGES.
CLAYTON, CHIEF JUDGE.
Bank National Association (USBNA) appeals from a Fayette
Circuit Court judgment confirming the judicial sale of property
following a mortgage foreclosure.
March 17, 2017, USBNA initiated a foreclosure action on a
student housing complex located in Lexington. USBNA held a
mortgage loan on the property of $16.875 million. The circuit
court appointed a receiver and on March 7, 2018, it entered
an order foreclosing on the property. The order set an
initial date of April 9, 2018, for the judicial sale of the
property by the Master Commissioner.
provided under the terms of the foreclosure order, USBNA
canceled the date and moved the Master Commissioner to
reschedule the sale, tendering a proposed order to be filled
in with the new date. The Master Commissioner rescheduled the
sale to June 11, 2018. USBNA's law firm received the
order indicating the new date and placed the order in a file,
but inadvertently failed to notify USBNA's counsel or to
send the order to USBNA.
upcoming sale was publicly noticed and duly advertised. It
was well-attended with standing room only. The Master
Commissioner opened the bidding on the property at $9.666
million, two-thirds of the appraised value of $14.5 million.
A representative of IB New Ventures, LLC, bid the full
amount. As there were no other bids on the property, IB New
Ventures was declared the highest bidder and the auction
one hour later, USBNA learned of the sale and immediately
contacted the Master Commissioner's office in an
unsuccessful attempt to stop the bid from being accepted.
USBNA thereafter filed a motion for relief and objections to
the Master Commissioner's report of sale and an affidavit
from its counsel explaining the clerical error and how USBNA
could not possibly have known of the sale. Following a
hearing, the circuit court denied the motion for relief and
objections. IB New Ventures filed a motion to confirm the
amended report of sale and to cause delivery of the deed.
USBNA objected and the circuit court held another hearing at
which it orally granted IB New Ventures' motion to
confirm. The circuit court entered an order confirming the
amended report of sale, payment and distribution of proceeds,
and delivery of deed. The deed was transferred to IB New
Ventures. USBNA posted a supersedeas bond but because the
deed had already been transferred it ultimately acquiesced to
the bond being released by the circuit court. This appeal by
argues the circuit court abused its discretion in failing to
set aside the judicial sale because the sale price of $9.666
million was grossly inadequate and USBNA was unfairly
surprised by the sale. It contends the Master Commissioner
and circuit court unfairly prioritized the purported rights
of a mere bidder over USBNA, the secured creditor.
the value of the property, it has long been the rule in this
jurisdiction that mere inadequacy of price is an insufficient
ground for setting aside a judicial sale." Sterling
Grace Mun. Securities Corp. v. Central Bank & Trust
Co., 926 S.W.2d 670, 673 (Ky. App. 1995), as
modified on denial of reh'g (Mar. 1, 1996)
(citations omitted). "For an inadequate price to require
reversal for a new sale, the amount brought in the original
sale must be so grossly inadequate as to 'shock the
conscience' of the circuit court or raise the presumption
of fraud." Id. (citation omitted). On the other
hand, "where the inadequacy is accompanied by
circumstances, though only slight and insufficient in
themselves, which tend to cause it, or where it is attended
by apparent unfairness or impropriety or oppression on the
part of those connected with the sale, the sale ought to be
and will be set aside." Gross v. Gross, 350
S.W.2d 470, 471 (Ky. 1961) (citation omitted).
reluctance to overturn judicial sales furthers the salutary
policy of engendering and maintaining confidence in the
stability of such sales. Id. "If a judicial
sale is to be set aside upon slight grounds and a resale
ordered upon a promise of an increase in the purchase price,
judicial sales would become so unstable as practically to put
a premium upon the bad faith of bidders, and take from the
purchaser his right under the law of having a reasonably
speedy determination of his case." Jones v. Deposit
& People's Bank, 180 Ky. 395, 202 S.W. 907, 910
circuit court's decision to confirm or vacate a judicial
sale is reviewed for an abuse of discretion. Lerner v.
Mortgage Electronic Registration Systems, Inc., 423
S.W.3d 772, 773 (Ky. App. 2014). The test for abuse of
discretion is whether the trial court's decision was
"arbitrary, unreasonable, unfair, or unsupported by
sound legal principles." Commonwealth v.
English, 993 S.W.2d 941, 945 (Ky. 1999) (citations
omitted). A sale "ought not to be lightly disapproved
where it was conducted in a ...