Case: COVID and Public Sales
Osby v. Janes, 323 So. 3d 1084 (Miss. 2021)
Eleven cotenants owned land in DeSoto County. One cotenant, Osby, negotiated a contract to sell the land to Janes, but he could not get the consent of all of his other cotenants to the sale. So Osby filed an action to partition the property. The Chancery Court set the sale date for April 9, 2020. On April 1, 2020, Governor Reeves issued a shelter-in-place order due to COVID. At the sale on April 9, ten people attended the sale and twenty-nine bids were made. Janes was the high bidder and purchased the property for approximately 43% of the price for which Osby had contracted to sell the land to Janes. Osby and other cotenants filed motions with the Chancery Court to reject the sale. The cotenants argued, among other issues, that the sale was unfair because COVID prevented some bidders from attending the sale. The Chancery Court denied the motions and confirmed the sale. On appeal by the cotenants, the Mississippi Supreme Court, in a unanimous decision by Chief Justice Randolph, affirmed. Justice Randolph wrote that, “Despite the pandemic, not one person petitioned the court to delay the partition sale date once the sale date was set.”
Note 1: To be clear, this case does not stand for the proposition that if one of the cotenants had filed a motion with the Chancery Court to delay the sale because of the pandemic, the Chancery Court should have granted the motion. The only concrete takeaway is that such a motion would have to be filed before the sale.
Note 2: Partition sales are rare, but the same rationale about COVID deterring potential bidders arguably could apply to any judicial sale, including non-judicial foreclosure sales of real estate. The Osby case should cut off any claims based on past lockdowns unless the owner filed a motion to delay the sale prior to the sale. But what about future lockdowns? Mississippi statutes dictate the time, place and terms of the sale, within some parameters. You couldn’t do a non-judicial foreclosure sale in Mississippi via Zoom. Sales of personal property under the Uniform Commercial Code, on the other hand, can be done virtually to avoid any COVID risk.
Note 3: What about deficiencies following foreclosure sales made during the lock-down? The current state of Mississippi law, as the editor understands it, is that a lender is only entitled to a deficiency if the foreclosure sale is “commercially reasonable.” Arguably an involuntary sale, by its nature, is not commercially reasonable, but that horse has left the barn. Is there a valid argument that it is not commercially reasonable to have an in-person non-judicial foreclosure sale during a pandemic because potential purchasers are discouraged from attending because of the COVID risk? If a person of reasonable prudence would avoid restaurants and movie theaters during a pandemic, would such a person have qualms about attending a non-judicial foreclosure sale? Does the fact that judicial sales typically are conducted outside, on the courthouse steps, make a difference?
Note 4: The editor does not pretend to be knowledgeable about transmission of COVID, but it seems that the riskiest part of a non-judicial foreclosure sale is the trustee reading the notice of sale aloud. Is there a legal requirement to read the entire notice of sale aloud, or is this just custom? What about reading lengthy descriptions? The editor has seen legal descriptions of golf courses and pipelines in deeds of trust that are more than ten pages long. Assuming that the entire description is accurately printed in the notice of sale that is published and posted, is the trustee required to read the legal description at the sale?