Court affirms foreclosure sale price

CHARLESTON – The state Supreme Court has found that the purchase price obtained for a piece of property at a foreclosure sale did not “shock the conscience” and affirmed the circuit court’s denial of the property owner’s request for a preliminary injunction.

The unanimous court issued the memorandum opinion, affirming the Circuit Court of Jefferson County, on May 3.

Alex Rahmi is the sole member of Universal Enterprise of West Virginia, LLC. In August 2006, Rahmi obtained a loan from Sovereign Bank in the principal amount of $2.1 million secured by a deed of trust on real estate owned by Rahmi that had been operating as a Chevrolet dealership.

Sovereign obtained a judgment of over $2.6 million on the loan, including attorneys fees, and the bank held a foreclosure sale in which the property sold for $1.6 million. After associated costs and fees were applied, Sovereign applied the proceeds of the sale to the loan, leaving a balance of $1,336,425.56.

Thomas Motta, a licensed certified real estate appraiser, had valued the property several times at the bank’s request. The values had ranged from a high of $4.2 million down to a value of slightly more than $2 million at the approximate date of the foreclosure sale in September 2010. The drop in value was attributed to the economic downturn in both the real estate market and the car business.

Rahmi filed a request for a preliminary injunction, arguing that the foreclosure sale should be set aside for fraud and civil conspiracy by Sovereign in its handling of the matter. Rahmi sought to prevent Sovereign from obtaining any assets of Rahmi that were held in a Bankruptcy Trust in another matter.

The court wrote: “In an order entered August 31, 2011, the circuit court denied petitioner’s request on both procedural and substantive grounds. The circuit court found the following procedural shortcomings with petitioner’s request: (1) petitioner failed to serve respondent with a copy of his request for a preliminary injunction; (2) although petitioner requested a preliminary injunction, he filed no complaint or other pleading seeking more permanent relief; and (3) petitioner would not be able to post a bond in the amount necessary for an injunction to go into effect."

On the substantive issues, the circuit court noted that it found that Motta’s various appraisals had contradicted Rahmi’s contentions regarding the value of the property. The circuit court noted that it found Motta’s testimony “very credible.”

“Mr. Motta opined that at the time of the foreclosure sale, the property had a value of $2,050,000. The property was purchased for 78% of that value ($1,600,000). Accordingly, the circuit court found that ‘the Universal foreclosure sale was regular and proper and that the price obtained was close to the fair market value of the real estate and does not shock the conscience or support a claim of fraud,’” the opinion says.

“On appeal, petitioner argues that the price obtained for the property at the foreclosure sale was so low that it shocks the conscience.

“Respondent notes that based on the undisputed testimony of Mr. Motta, the property’s market value on the date of the foreclosure sale was $2,050,000 and that it was purchased at 78% of that value. Respondent further notes that Mr. Motta impressed the circuit court with his expertise and candor.

“This Court finds no basis to disturb the circuit court’s determination that Mr. Motta’s testimony was ‘very credible.’ Therefore, after careful consideration, this Court concludes that the circuit court did not abuse its discretion in denying petitioner’s request for a preliminary injunction. Because petitioner simply reiterated arguments previously made, this Court also finds that the circuit court did not abuse its discretion in denying his motion to amend/emergency petition.”