By ReggieCorley, Esq.

Scott& Corley, PA

USFN Member (SC)

On May 11, 2023, the South Carolina Court of Appeals reversed the lower court’s findings in Buffalo Creek Investments, Inc. v. Stephen H. Pettus (complete case link below). This case involved a foreclosure action where the lower court judge erred by granting the mortgagors’ motion to vacate and set aside the judicial foreclosure case and sale.

Following the foreclosure order and judicial foreclosure sale of the subject property to third-party purchasers, the mortgagors filed a motion to vacate and set aside the judicial foreclosure sale. Following that hearing, the lower court judge granted the mortgagors’ motion. The successful purchasers of the subject property at the judicial foreclosure sale appealed the lower court’s order.

The issues raised by the mortgagors on appeal were: (1) Did the lower court abuse its discretion in setting aside a valid judicial foreclosure sale when it failed to recognize that the purchasers were “bona fide purchasers for value without notice;” and (2) Did the lower court abuse its discretion in setting aside a valid judicial foreclosure sale when it focused on alleged irregularities in the underlying foreclosure action and the “equities,” rather than the absence of any evidence of irregularity in the conduct of the judicial foreclosure sale?

Based on the record before it, the Court of Appeals was compelled to presume the proceedings leading to the judicial foreclosure sale were sufficient, and therefore, “that the lower court erred in not affording the successful purchasers at the foreclosure sale their proper protections under Section 15-39-870, as bona fide purchasers for value without notice.” The Court determined that the buyers at the foreclosure sale were, “. . . bona fide purchasers for value without notice because they satisfied their bid in full and received the deed pursuant to an order from the special referee,” and that the purchasers acted in good faith. Moreover, the Court found that the lower court erred by not determining that res judicata barred the mortgagors' claims (i.e., the lower court’s determination in the foreclosure order that South Carolina Supreme Court Administrative Order 2011-05-02-01 did not apply because the subject property was not “owner-occupied” since “the mortgage granted to allow the mortgagors to invest in a business”), and thus, the issues raised by the mortgagors were not properly preserved for appeal.

Finally, the Court ruled that the lower court abused its discretion in finding the purchasers’ sale price at the judicial foreclosure sale was so low as to shock the court’s conscience (i.e., the purchasers’ final bid amount was greater than 10%  of the subject property’s actual value and there were no other circumstances from with the court could infer fraud had been committed).

A link to the full opinion of the above cited case (Buffalo Creek Investments, Inc. v. Stephen H. Pettus) can be found on page 12 at the following link: https://www.sccourts.org/opinions/advSheets/no182023.pdf

South Carolina Code of Laws Section 15-39-870 can be found at the following link: https://www.scstatehouse.gov/code/t15c039.php

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June 2023 USFN e-Update