Article courtesy of Jeff Dutson (King & Spalding)
The Supreme Court of Mississippi affirmed a Chancery Court’s refusal to set aside a foreclosure sale, holding the statute of frauds prevented the enforcement of an oral promise to sell property purchased at foreclosure sale back to prior owners, promissory estoppel was inapplicable as former owners could not prove reliance, and the price paid at the sale was not so inadequate as to shock the conscience and require the court to set aside the sale. Evans v. MC&J Investments, LLC, 378 So.3d 936 (2024).
Samuel and Sandra Evans (the “Evans”) defaulted on their mortgage payments, prompting Bank of America (“BOA”) to commence foreclosure proceedings. The Evans were advised the foreclosure sale was scheduled for January 4, 2017. They attempted to bring their payment obligations current; accordingly, BOA sent the Evans a “Reinstatement Calculation” which instructed the Evans to send a $9,511.13 payment, “good through” January 3, 2017. The Evans sent their payment January 3, to be received January 4, 2017. BOA proceeded with the foreclosure sale, which the Evans did not attend, selling the property to MC&J Investments, LLC (“MC&J”) for $15,834.83. Julious McClinton (“McClinton”), serving as managing member of MC&J, allegedly promised to sell the property back to the Evans. After MC&J received the trustee’s deed, the Evans sued, seeking to invalidate the sale.
The Chancery Court held in favor of MC&J, prompting the Evans to appeal. The court addressed two issues in the appeal: (1) whether the statute of frauds prevented enforcement of McClinton’s oral promise; and (2) whether the price paid at the foreclosure sale was unconscionable. With respect to the first issue, the court first held that contracts for the sale of lands are encompassed by the statute of frauds. See Ms. Code Ann. § 15-3-1 (Rev. 2003). Likewise, the oral agreement between the Evans and McClinton was for the sale of three acres of land and a house located on the land; hence, this oral contract was required to be in writing. It then addressed the Evans’ argument that even if the agreement was subject to the statute of frauds, it was still enforceable under the doctrine of promissory estoppel. While promissory estoppel can override the statute of frauds, the court held it was inapplicable here. Promissory estoppel contains three elements: (1) making of a promise, even without consideration; (2) intention the promise be relied upon and is relied upon; and (3) a refusal to enforce the promise would sanction the perpetuation of fraud or would result in other injustice. C.E. Frazier Constr. Co. v. Campbell Roofing & Metal Works, Inc., 373 So.2d 1036, 1038 (Miss. 1979). The court’s analysis rested on Samuel Evans’ testimony, which displayed no reliance on McClinton’s promise to sell back the property. The court noted that Samuel Evans sent a check to BOA to redeem the property from foreclosure, and he did not attend the foreclosure sale as he thought his payment to BOA was sufficient to avoid foreclosure, displaying no reliance on McClinton’s promise. Therefore, promissory estoppel could not provide a means to enforce the oral promise.
With respect to the second issue, the court ruled that fair market value, as determined by the trier of fact, must inform the adequacy of purchase price. Allied Steel Corp. v. Cooper, 607 So.2d 113, 118 (Miss. 1992). To set aside a foreclosure sale, a price must be so far below fair market value as to shock the conscience of the court. Wansley v First Nat’l Bank of Vicksburg, 566 So.2d 1218, 1224 (Miss. 1990). Yet, the court noted the murkiness of this standard, prompting it to cite a more definite rule of forty percent of fair market value as the threshold for unconscionability. Here, the Evans failed to present or establish the fair market value of the property at the time of foreclosure in 2017, citing only a $40,800 deed of trust in 2003. Hence, the court did not use the Evans’ valuation as a metric for the forty percent standard. In contrast, McClinton testified that as of the time of the foreclosure sale, the home was badly rundown and in need of repair. Accordingly, McClinton’s testimony was deemed a sufficient basis for the trial court to hold that MC&J’s purchase price of $15,834.83 was not unconscionable.
Finding that there was no reasonable evidence to support the Evans’ valuation of the foreclosed property, the Supreme Court of Mississippi affirmed the judgement of the Chancery Court.
