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Equitable Life Assurance Society of the United States v. First National Bank

    Brief Fact Summary. Plaintiff and Defendant are both mortgage companies, which obtained liens against a ranch. When the owners defaulted on both mortgages, Plaintiffs mortgage was judged superior. Plaintiff made arrangements for a sheriff’s sale of the ranch. The morning of the sale, Defendant offered to buy the ranch form Plaintiff. Plaintiff’s attorney tried to contact the sheriff to stop the sale, but could not get a hold of him. All three parties, including the party that bid highest on the ranch, appeal to determine the status of the land.

    Synopsis of Rule of Law. When there is a Sheriff’s sale, it is up to the mortgagee, when the auction is not without reserve, to withdraw the property form the auction.

    Facts. The Olson’s owned a ranch. They had two mortgages on it, one for $1,250,000.00 with Equitable the other with First National Bank (FNB) for $870,000.00. The Olson’s defaulted on both mortgages and Equitable was adjudicated superior. Equitable took the necessary steps to have a sheriff’s sale. The day before the sale, Equitable and FNB entered into an agreement in which FNB would purchase Equitable’s interest in the land for $1,300,000.00. They completed the deal on the morning of the auction. Equitable’s attorney tried twice to reach the Sheriff to tell him to cancel the sale but could not reach him. He finally did reach the Sheriff after the bidding had already started. At the request of two of the bidders, the sheriff kept the bidding going until Carl Matthews won the bid at 1,800,000.00.

    Issue. Should the sheriff’s sale stand?

    Held. No.
    The lower court was incorrect to state that the auction was “without reserve”. The advertisements did not say it was without reserve and, thus, it is not presumed to be “without reserve”.
    When an auction is without reserve, the auctioneer may withdraw the item any time before the bidding ends.

    Discussion. An auction that is without reserve can be canceled any time before the gavel hits the podium.


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