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Sostaric v. Marshall

Supreme Court of West Virginia

March 24, 2017

Stjepan Sostaric, Defendant Below, Petitioner
v.
Sally Marshall, Plaintiff Below, Respondent

         Morgan County 12-C-160

          MEMORANDUM DECISION

         Petitioner Stjepan Sostaric, pro se, appeals the order of the Circuit Court of Morgan County, entered on June 21, 2016, granting Respondent Sally Marshall's renewed motion for summary judgment and awarding respondent a deficiency judgment in the amount of $175, 407.45, and attorney's fees in the amount of $1, 749.25, plus court costs and pre- and post-judgment interest. Respondent, pro se, filed a summary response.

         The Court has considered the parties' briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the circuit court's order is appropriate under Rule 21 of the Rules of Appellate Procedure.

         We summarize the facts as follows:[1] Petitioner and his former wife (collectively, "the Sostarics")[2] owned real property located at 99 Garden Drive, Berkeley Springs, West Virginia. The Sostarics used the property as collateral to secure a $200, 000 loan from respondent.[3] The Sostarics executed both a promissory note and a deed of trust. Subsequently, the Sostarics defaulted and respondent directed the trustee to foreclose on the property. At the foreclosure sale on October 17, 2012, respondent purchased the property for $60, 000. [4] Of this amount, $58, 260.757 was distributed to respondent as the holder of the note that was secured by the deed of trust, while the remainder was applied to the costs of the sale.[5]

         Thereafter, respondent filed an action against the Sostarics for a deficiency judgment in the amount of $175, 407.45, and attorney's fees in the amount of $1, 749.25. [6] Subsequently, respondent filed a motion for summary judgment. By order entered on January 16, 2014, the circuit court awarded summary judgment to respondent finding that the amounts claimed by her were supported by sworn affidavits. Accordingly, the circuit court awarded respondent $175, 407.45, for the deficiency judgment and $1, 749.25, for attorney's fees, plus court costs and post-judgment interest.

         The Sostarics appealed the circuit court's January 16, 2014, order granting summary judgment in Sostaric v. Marshall, 234 W.Va. 449, 766 S.E.2d 396 (2014). The Sostarics argued that the property was sold for less than its fair market value at the foreclosure sale and that, accordingly, the amount of the deficiency judgment awarded was too high and should have been adjusted to reflect the property's fair market value at the time of the sale. Id. at 450, 766 S.E.2d at 398. Following full briefing and argument, we reversed the award of summary judgment to respondent holding that "[a] trust deed grantor may assert, as a defense in a lawsuit seeking a deficiency judgment, that the fair market value of the secured real property was not obtained at a trust deed foreclosure sale." Id. at 450, 766 S.E.2d at 397, syl. pt. 1 (overruling Syl. Pt. 4, Fayette County National Bank v. Lilly, 199 W.Va. 349, 350, 484 S.E.2d 232, 233 (1997)).

         Following remand to the circuit court, respondent filed a renewed motion for summary judgment on June 17, 2015, on the ground that the Sostarics failed to provide any evidence that the property's fair market value was greater than the foreclosure sale price. By order entered on October 16, 2015, the circuit court held the renewed motion for summary judgment in abeyance for thirty days to allow the Sostarics to obtain an expert opinion regarding "the fair market value of the property at the time of the [October 17, 2012, ] foreclosure sale." Subsequently, after the Sostarics filed an appraisal valuing the property at $149, 000 as of November 12, 2015, the circuit court denied respondent's renewed motion for summary judgment by order entered on December 15, 2015.

         On December 28, 2015, respondent filed a motion for reconsideration of the December 15, 2015, order denying her renewed motion for summary judgment. Respondent asserted that the appraisal failed to create a genuine issue of material fact because the appraiser failed to value the property as of October 17, 2012, as directed by the circuit court. By order entered on June 21, 2016, the circuit court granted respondent's motion for reconsideration and awarded her summary judgment. The circuit court found that the appraisal, setting the property's fair market value as of November 12, 2015, was insufficient to show what the fair market value was at the time of the October 17, 2012 foreclosure sale. The circuit court awarded respondent a deficiency judgment in the amount of $175, 407.45, and attorney's fees in the amount of $1, 749.25, plus court costs and pre- and post-judgment interest.

         Petitioner[7] now appeals the circuit court's June 21, 2016, order awarding summary judgment to respondent.[8] "A circuit court's entry of summary judgment is reviewed de novo." Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). Rule 56(c) of the West Virginia Rules of Civil Procedure provides that summary judgment shall be granted provided that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

         Evolution of the West Virginia Rule Regarding Deficiency Judgments

         "A deficiency judgment is an imposition of personal liability upon a mortgagor for an unpaid balance of a secured obligation after foreclosure of the mortgage has failed to yield the full amount of the underlying debt." Sostaric, 234 W.Va. at 452, 766 S.E.2d at 399 (quoting Lawrence R. Ahern, III, The Law of Debtors and Creditors, § 8:20 (2014)) (internal quotations omitted).[9] A majority of jurisdictions permit the sale price of a foreclosed property to be challenged in a deficiency judgment action. Sostaric, 234 W.Va. at 453, 766 S.E.2d at 400; Lilly, 199 W.Va. at 355, 484 S.E.2d at 238.

         However, in syllabus point 4 of Lilly, we declined to adopt the majority rule and held that "[a] grantor [of a deed of trust] may not assert, as a defense in a deficiency judgment proceeding, that the fair market value of real property was not obtained at a trustee foreclosure sale." 199 W.Va. at 350, 484 S.E.2d at 233. In Sostaric, we determined that petitioner's argument required us to revisit our holding in Lilly. 234 W.Va. at 455, 766 S.E.2d at 402. We found "good and sufficient cause" to overrule syllabus point 4 of Lilly. Id. at 456, 766 S.E.2d at 403. We summarized our reasoning, as follows:

Our ruling herein is consistent with the majority view of other jurisdictions, with section 8.4 of the Restatement [(Third) of Property: Mortgages], and with prior decisions from this Court that have applied common law principles of equity to permit an action to set aside a real property foreclosure sale. Our ruling will also prevent a creditor from receiving a windfall and being unjustly enriched at the expense of an already financially distressed grantor.

Id. W.Va. at 458, 766 S.E.2d at 405. We found that it was proper to apply common law principles of equity to allow a trust deed grantor to raise the defense that the property's fair market value was greater than the foreclosure sale price in the absence of any statutory provision to the contrary. Id. W.Va. at 456, 766 S.E.2d at 403. In dissent, Justice Davis stated that the Legislature had the responsibility of changing ...


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