Successful Bidder at Foreclosure Sale Entitled to Set Aside Sale and Get Deposit Back Based Upon Referee’s Unauthorized Actions
In a case involving a foreclosure sale, the Appellate Division, Second Department ruled that when unauthorized activity by the referee overseeing the foreclosure resulted in additional liability to the successful bidder not contemplated in the foreclosure judgment, the foreclosure sale must be set aside. In Cicorelli v. Hickey’s Carting, Inc., the foreclosure judgment contained certain language – stating that the property would be sold subject to “any and all Hazardous Materials in the Premises including, but not limited to, flammable explosives, radioactive materials, hazardous wastes, asbestos or any material containing asbestos and toxic substances” – which language the Court crossed out from the judgment. But the terms of the foreclosure sale signed by both the referee and a representative of the successful non-party bidder, Empire State Properties, included the same hazardous materials provision that had been affirmatively crossed out in the judgment.
The Court ruled that a “referee lacks authority to alter the terms of the judgment of foreclosure.” Further, the Court ruled that the referee’s “unauthorized actions” caused injury to Empire’s property rights as the “referee added a liability to the terms of the sale that had been affirmatively stricken from the judgment.” Finding that courts have “equitable powers” to set aside a foreclosure sale where there is “evidence of fraud, collusion, mistake or misconduct,” the Court set aside the foreclosure sale and directed that the referee return to Empire its full deposit of $60,000.
