City of Wilmington v. Vreeland ( 2022 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
THE CITY OF WILMINGTON, )
A municipal corporation of the State)
of Delaware, )
)
Plaintiff, ) C.A. No. N20J-07653
)
v. )
)
JACOB VREELAND AND )
TAX PARCEL NO. 26-022.10-043, )
Defendants. )
________________________________________________________________
v. )
)
WELLS FARGO BANK, N.A., )
Intervenor.
OPINION AND ORDER
Decided: August 9, 2022
On Intervenor’s Motion to Set Aside Sheriff’s Sale – GRANTED
On Motion to Strike Notice of Lis Pendens - DENIED
Aaron C. Baker, Esquire and John D. Stant, II., Esquire, attorneys for the City of
Wilmington, Plaintiff.
Daniel M. Pereira, Esquire and Christopher A. Reese, Esquire, Stradley, Ronan,
Stevens & Young, LLP, attorneys for Wells Fargo Bank, N.A., Intervenor.
David Matlusky, Esquire, The Matlusky Firm, LLC, attorney for Quality Angels Real
Estate, purchaser.
Brennan, J.
-1-
I. BACKGROUND AND PROCEDURAL HISTORY
The City of Wilmington filed a Writ of Monition on November 23, 2020, with
respect to a property located at 421 West 22nd Street, Wilmington, Delaware, Tax
Parcel ID No. 26-022.10-043 (hereinafter “the Property”).1 Through the Writ, the
City of Wilmington sought to collect on monies owed to the City in the amount of
$6,416.32 levied on Notices were posted on the Property and sent to all lien holders.2
Ultimately a Sheriff’s Sale occurred on April 13, 2021, at which the Property was
sold to Quality Angels Real Estate Company (hereinafter “Quality Angels”) for
$146,000.00.3 On July 22, 2021, an Affidavit of No Redemption was filed by the
New Castle County Sheriff, stating that after “an inspection of the books and records,
as well as an examination of the personnel in [the Sheriff’s office]…there has been
no attempt, nor any Act indicating an attempt to redeem said property [and] [t]hat the
facts set forth in the petition for the deed in this proceeding are true and correct.”4 In
the normal course, Quality Angels then petitioned this Court for the deed of the
property,5 which was granted and Ordered on October 1, 2021.6
Approximately one month later, however, Wells Fargo, N.A. (hereinafter
“Wells Fargo”), which held a mortgage on the Property, filed both a Motion to
Intervene and a Motion to Set Aside the Sheriff’s sale. 7 In support of both motions,
Wells Fargo argued that 1) its security interest in the Property allows it to intervene,
2) it was not provided with sufficient notice of the sale and 3) that Wells Fargo made
a payment to the City of Wilmington in the amount of $7,646.11 on May 20, 2021,
1
See D.I. 1
2
D.I. 6
3
D.I. 7, 9
4
D.I. 8
5
D.I. 10
6
D.I. 11
7
D.I. 26, 30
-2-
and had believed they had effectively redeemed the Property.8 On November 15,
2021, an Affidavit in support of Wells Fargo’s motion to set aside the Sheriff’s sale
was filed, stating that the remaining balance of the Wells Fargo mortgage on the
Property is $167,731.74.9 Quality Angels and the City of Wilmington opposed both
of Wells Fargo’s motions.10
These motions were first presented to the Court on December 10, 2021. The
motion to intervene was granted in a bench ruling, and an evidentiary hearing was
ordered to develop the record surrounding the attempt at redemption by Wells Fargo.
At the hearing, the Court directed the parties’ arguments to the issue of how it came
to be that the City of Wilmington received and deposited the $7,646.11 check from
Wells Fargo following the sale, but no mention of this deposit or attempt was found
in the later filed Affidavit of No Redemption.11 The evidentiary hearing was set for
January 18, 2022, but in the meantime, Wells Fargo filed a Notice of Lis Pendens,
seeking to protect their interest in the Property.12 Following the evidentiary hearing,
the Court requested the City of Wilmington to submit a breakdown of the amounts
owed on the Property at specific dates, namely the date the Motion was filed, the date
of the Sheriff’s sale, the date Wells Fargo’s check was cashed by the City of
Wilmington and the date the Affidavit of No Redemption was filed. The City was
also given the option of supplementing the record with a statement of the Chief
Deputy Sheriff, who filed the Affidavit of No Redemption, as to why the Affidavit
was filed, despite the attempt by Wells Fargo to redeem the property.13
8
D.I. 30
9
D.I. 36
10
D.I. 42, 43
11
D.I. 44, 45
12
D.I. 46, 47
13
D.I. 50
-3-
City of Wilmington’s Evidence
At the evidentiary hearing, the parties presented a Joint Stipulation of facts that
the Court signed off on, and the parties proceeded to present their respective cases.
The evidence adduced at the hearing showed that on May 25, 2021, the City of
Wilmington received and deposited a $7,646.11 check from Wells Fargo.14 The City
of Wilmington called Farrah Lambert, who works as a Sheriff’s sale administrator
for the City and is responsible for researching and initiating the properties for Sheriff
sale.15 Ms. Lambert testified that as part of her duties, she takes phone calls regarding
delinquent accounts and documents these calls in their operating system.16 She
explained that these notes are kept according to each delinquent property’s account
and she documents any phone calls regarding the account and the pertinent portions
of the conversations in a log type system; the City introduced the log notes for the
Property into evidence.17 Logs are kept for every delinquent account by the City.18
Ms. Lambert did not personally take any calls from Wells Fargo with respect
to the Property’s delinquent account.19 She did make a log entry on March 12, 2021,
indicating that the Sheriff’s sale was scheduled for April 13, 2021. She identified
this as her note, because her initials were located next to the note.20 Ms. Lambert
further described the process in which the City deposits received checks. She
explained that the City complies “batch checks” which are large groups of checks
that come in and process one after the other in a batch. Notes are not made for each
property for which the check is made if the check is in one of these batches. 21 On
14
Transcript of Evidentiary Hearing, p 7, Joint Exhibit 1
15
Transcript at 9, 10
16
Transcript at 10, 11
17
Transcript at 11, 12
18
Transcript at 12
19
Id.
20
Transcript at 15, 16
21
Transcript at 14, 15
-4-
cross-examination, Ms. Lambert admitted that it is possible for calls to be received
on a particular account that aren’t reflected in the log for that account.22
The City next called Susan McGee, an account services agent for the City. Ms.
McGee explained that she is in collections and interacts with delinquent accounts.
She has been working in this capacity with the City for 23 years. As part of her
duties, she quotes amounts due and works with customers, attorneys or anyone who
requests information with respect to a property.23 Similar to Ms. Lambert, Ms.
McGee testified that she takes notes with respect to her interactions to document and
these notes are kept in the same log referenced by Ms. Lambert. According to Ms.
McGee, every call that she takes is documented, saved and initialed.24 It was Ms.
McGee who took the call from a Wells Fargo representative and confirmed that they
paid the $7,674.11 check. According to Ms. McGee, who referenced her notes from
the conversation memorialized the log, she:
[s]poke with representative form Wells Fargo, confirmed company paid
$7,674.11. Advised client payment was applied at the sale date
4/13/2021, and that’s considered as redeemed. Need to call New Castle
County Sheriff’s Department for redemption figures.25
Ms. McGee testified that, despite the City depositing this check and despite
Wells Fargo mentioning redemption of the Property, the City takes absolutely no
action upon cashing of a check for a property that has already been sold at Sheriff’s
sale. She referred Wells Fargo to the Sheriff’s office. The record is devoid of any
evidence demonstrating what was actually said, to the Wells Fargo representative,
since the notes only indicate “Need to call New Castle County Sheriff’s Office for
redemption figures.” Moreover, Ms. McGee offered no independent recollection of
22
Transcript at 16, 17
23
Transcript at 20, 21
24
Transcript at 22
25
Transcripts at 22; see also City of Wilmington Exhibit 1
-5-
the conversation and Wells Fargo is unable to determine through their records, which
employee spoke to the City of Wilmington on June 22, 2021. Ms. McGee admitted
that she understood the payment by Wells Fargo to be an attempt at redemption but
took no action other than telling the caller to contact the Sheriff’s Office.26
No witness was produced from the Sheriff’s Office, nor was any evidence
presented by Plaintiff to indicate whether Wells Fargo did, in fact, contact the
Sheriff’s Office following this call. The City confirmed that the check was cashed
and applied to the Property’s account as a credit towards the balance due.27 At the
time of this payment, the amount owed on the Property was “a little over [$]7,400 for
water fees, a little over [$]5,000 which was due to the City and sought in the monition
for licensing and inspection fines and fees associated with property [sic], and then
costs of $444.”28 Ultimately it was revealed that the monies paid by Wells Fargo
translated into a credit on the Property account for the water bill. However, there
were remaining Licensing and Inspection fines that were outstanding, and interest
was accruing. Therefore, the redemption figure was significantly greater than the
figures listed on the Monition, which stated that only $6,416.32 was owed. The
approximate redemption figure given to the Court would have been a number close
to $13,000.29
It is still unclear where the very specific figure of $7,467.11 came from, as the
notes recorded by the City of Wilmington for the Property do not indicate any
employee giving this figure to Wells Fargo. The City acknowledged that the amount
paid is too specific to have been conjecture and that it could have been provided by
the City, despite their Property record not reflecting any such conversation. Counsel
26
Transcript at 24-26
27
Transcript at 27
28
Transcript at 28, 29
29
Transcript at 30
-6-
represented to the Court that these figures can also be accessed online, which the City
posited as possible alternative of how Wells Fargo obtained this figure.30 In either
event, at this point in the hearing it was clear that a figure for arrears was obtained by
Wells Fargo based upon information provided by the City of Wilmington – whether
by telephone or electronic means.
Wells Fargo’s Evidence
Wells Fargo called Kelly Renfrow, a corporate representative who had
reviewed the notes kept by Wells Fargo with respect to the Property. Ms. Renfrow
testified that, while Wells Fargo is the beneficial owner of the mortgage, Mortgage
Electronic Registration Systems, Inc. (hereinafter “MERS”) holds the mortgage of
record for the mortgage on the property.31 Ms. Renfrow testified that MERS
electronically notified Wells Fargo on April 9, 2021, that the Property was going to
Sheriff’s sale by forwarding the Notice sent by the City.32 Ms. Renfrow filled in
some gaps and testified that her records “indicate that [Wells Fargo] had an E-mail
from the City that outlines that [sic] was the amount required for redemption.”
Unfortunately, due to storage limitations on Wells Fargo systems, the email itself was
not saved and could not be produced. Ms. Renfrow, however, testified based upon
the notes Wells Fargo kept for the Property.33 According to the Wells Fargo notes,
34
this email was received by Wells Fargo on May 17, 2021. This was one month
following the sale.
Ms. Renfrow testified that the purpose of remitting the $7,646.11 check was,
unsurprisingly, to redeem the Property.35 According to Wells Fargo’s notes, calls
30
Transcript at 33-35
31
Transcripts at 37
32
Transcript at 39
33
Transcript at 40
34
Transcript at 45
35
Transcript at 40, 41
-7-
were made by its representative regarding the Property on June 15, 22 and 29, 2021.
She elaborated that the June 15 call was to the City and made to “confirm receipt of
the funds,” which was not done at the time. The notes contain evidence that this
initial phone call was made to confirm receipt of the check. According to the Wells
Fargo’s notes, the City was not able to confirm redemption and someone else needed
to be contacted. The additional phone calls made were efforts to determine whether
redemption was, in fact, made and to ensure that Wells Fargo had protected its interest
or whether additional action needed to be taken. Ms. Renfrow testified that “[t]he
City looked like, on our records, confirmed that they had received the amount of the
payment we sent. There were some notes that we did need to contact the county,
which was also done. And we were told that the taxes were taken care of at the
county.” With that, Wells Fargo took the position that it had done what it needed to
do.36 Ms. Renfrow testified that the June 29, 2021, call was to New Castle County
and that during that call, Wells Fargo was told that there were no further delinquent
taxes owed.37 Ms. Renfrow clarified that this is the process that Wells Fargo takes
when redeeming a property – it obtains a figure electronically, pays the monies it
believes is owed and places follow-up phone calls to ensure that the money was
received and nothing else was owed.38
Unfortunately, the Court is somewhat hamstrung because the May 17 email is
now unable to be retrieved by Wells Fargo, as it was “autoarchived” and deleted due
to storage issues.39 Additionally, none of the calls made were recorded by either
party. Moreover, the Wells Fargo representative who wrote the email and made the
calls has no independent recollection of the conversations other than what is
36
Transcript at 42
37
Transcript at 46
38
Transcript at 47, 48
39
D.I. 51, Affidavit of Anthony D. Nelson, Wells Fargo, N.A.
-8-
contained in the Wells Fargo notes.40 Post evidentiary hearing, the New Castle
County Sheriff’s Office submitted a letter, via its attorney, which essentially stated
that the Affidavit of No Redemption was filed because their records did not indicate
any attempt at redemption.41
II. STANDARD OF REVIEW
Upon a motion to set aside a Sheriff’s sale, the Court has great discretion in its
review. In so doing, the Court “must ascertain whether there was some defect or
irregularity in the process or mode of conducting the sale, or neglect of duty, or
misconduct on the part of the Sheriff or some other sufficient matter whereby the
right of parties to, or interested in the sale are, or may have been, prejudiced.”42 Mere
inadequacy of the price, alone, is not sufficient to set aside a Sheriff’s sale, and the
Court may not arbitrarily or capriciously refuse to confirm a sale, where there are no
irregularities in the sale proceedings, fraud, unfairness or other matters demonstrating
unfairness to any interested party.43 “[A] properly conducted sale should be set aside
only when necessary to correct a plain injustice, consistent with the principles of
equity.”44
Under Superior Court Civil Rule 60(b), a Sheriff’s sale may be set aside for
multiple reasons including, but not limited to, mistake, inadvertence, excusable
neglect, newly discovered evidence and fraud.45 However, relief under Rule 60(b)
requires “extraordinary circumstances” and the Rules vest Superior Court with the
power to vacate judgments “whenever such action is appropriate to accomplish
40
Transcript 52, 53
41
D.I. 54
42
LSF9 Master Participation Trust v. Truitt, 2017 WL 8787509 *1, citing Burge v. Fidelity
Bond and Mortgage Co., 648 A.2d 414, 420 (Del. 1994).
43
Id.44
Burge, 648 A.2d at 421, citing In re Downham Co., 165 A.2d 152, 153 (Del. 1932).
45
Superior Court Civil R. 60(b)
-9-
justice.”46
III. DISCUSSION
Wells Fargo raises several challenges to the Sheriff’s sale of the Property: 1)
that notice wasn’t given to it in sufficient time to contest, 2) that it made an attempt
to redeem the property, 3) based upon the information given to it by both the City of
Wilmington and the Sheriff’s Office of New Castle County, it believed that it had
successfully redeemed the Property, and 4) an unjust result would occur should the
sale not be set aside. Both the City of Wilmington and Quality Angels filed motions
in opposition. Both argued that notice was sufficient, the process of the sale was
proper, and that if the sale is overturned, an unjust result would occur. The City of
Wilmington argued that the unjust result occurs when finality of sales is in jeopardy
to valid purchasers. Quality Angels argues that it has spent significant resources on
the purchase of the Property and would suffer financial loss should this sale be set
aside. All parties agree on one thing: Quality Angels is an innocent third-party in
this transaction and no alleged wrongdoing has been lodged against it as the
purchaser.
I. SHERIFF’S SALE PROPERLY NOTICED TO ALL LIEN HOLDERS
Wells Fargo’s first argument to set aside the sale is that there was inadequate
notice of the Sheriff’s sale because MERS did not provide it notice of the sale until
shortly before it occurred. The City maintains that notice is proper, because it
complied with the requirements of Superior Court Civil Rule 69(g), which mandates
that notice must be given 7 days prior to the sale. The City contends that notice was
provided to MERS, the Mortgagee of record. The City is correct. The record reflects
that proper notice was given to the lienholder of record, and therefore, the argument
46
City of Dover v. Hunter, 880 .2d 239, 244 (Del. Super. 2004) citing Dixon v. Delaware
Olds, Inc., 405 A.2d0117 (Del. 1979) (further citations omitted).
-10-
that MERS failure to timely pass notice along to Wells Fargo is unpersuasive and is
not a basis to set aside the Sheriff’s sale. Any issue regarding MERS failing to
provide Wells Fargo timely notice is an issue between Wells Fargo and MERS, as
the City complied with its notice requirements.
II. AN INJUSTICE OCCURRED WARRANTING THE SETTING ASIDE OF THE
SHERIFF’S SALE
The parties disagree about whether an injustice has occurred which would
warrant setting aside of the sale of the Property. Wells Fargo relies heavily upon this
Court’s decision in City of Dover v. Hunter in support of their motion. In so relying,
Wells Fargo argues that the facts and circumstances surrounding the actions of the
City – namely depositing its check and leaving it with the belief that the Property was
redeemed – justify such an extraordinary remedy here. The City of Wilmington
argues that Wells Fargo’s attempt at redemption was unsuccessful and that the facts
of this case do not justify setting aside the sale. Quality Angels argues that as a
bonafide purchaser, there should be finality and predictability in this process, that the
City of Dover case is distinguishable and that because it has expended significant
costs in pursuit of this Property already, it would be unjust to set aside the sale.
This Court’s decision in City of Dover is instructive and applicable. In City
of Dover, due to a discrepancy in how the City of Dover and the County (Kent)
identified the property at issue, for certain properties, taxes were not credited to the
correct account. On one such account, the Hunter’s, the City sought Monition under
the mistaken belief that there were unpaid taxes. The property was sold at Sheriff’s
sale to an innocent third-party buyer. Due to the discrepancy in tax parcel
identification numbers assigned to the property, taxes were paid, but in an amount
corresponding to a smaller parcel at no fault of the mortgage company, Cendant.
Therefore, a small amount of taxes remained unpaid. Following a number of steps,
-11-
Cendant attempted to redeem the property. Despite those attempts, the sale was
confirmed. Suit ensued and the issue of whether the sale should be set aside was
presented in the form of a motion for summary judgment. In that procedural posture,
the Court ultimately decided that justice required setting aside the sale. In doing so,
the Court thoroughly reviewed Delaware jurisprudence regarding setting aside a
Sheriff’s sale.
Most instructive to the Court is the analysis that City of Dover undertook when
looking at the efforts made by Cendant, in attempting to redeem the property. The
Court found that any neglect by Cendant in failing to ensure the property was, in fact,
redeemed, was excusable under Rule 60(b). The Court reasoned that Cendant’s
failure to properly redeem was based upon its reliance that paying the small amount
of taxes that remained owed on the property, but not the 15% redemption fee, as was
required. In its analysis, the Court noted that Cendant’s action was consistent with
someone who had redeemed the property.47
Likewise here, it is illogical to assume that Wells Fargo would make payment
on the water fees for the Property for any other purpose than to redeem the Property.
It is also illogical to assume that Wells Fargo would be willing to pay the water bill,
but would not have been willing to fully redeem the property had it been aware of or
understood the additional costs owed on the property. Wells Fargo obtained what it
thought was a payoff figure directly from the City of Wilmington and remitted
payment. Accordingly, the City of Wilmington deposited that payment and credited
the Property’s account. Additionally, the City of Wilmington’s own employee
documented her belief that Wells Fargo was attempting to redeem this Property.
Moreover, Wells Fargo represented that it had reached out to the Sheriff’s Office and
was told that the taxes were satisfied, and upon this reliance, took no further action.
47
City of Dover, 880 A.2d at 246.
-12-
And upon learning that Quality Angels had the deed transferred into its name, Wells
Fargo immediately filed the Motion to Intervene and the instant Motion to set aside
the sale.
Wells Fargo actively reached out to the City of Wilmington multiple times to
assert its interest, obtained a figure for payoff or redemption that was so specific that
it admittedly could have only come from someone within the City. While the City is
devoid of records for providing this figure, the monetary figure paid is credible as
having come directly from the City of Wilmington and the testimony and the
evidence presented by the Wells Fargo representative is reliable. While it is
unfortunate that the electronic mail documentation of the redemption figure is no
longer accessible, Wells Fargo, like the City, maintained case notes regarding this
Property. Their notes are both credible and consistent with the testimony and their
actions. The only reasonable inference that can be drawn from these facts is that
Wells Fargo was attempting to redeem the Property and thought, albeit incorrectly to
no fault of their own, that it had successfully done just that.
In assessing the totality of what occurred, any neglect of Wells Fargo is
certainly excusable, for it was reasonable for Wells Fargo to have relied on the actions
of the City of Wilmington depositing its payment in the very amount provided to it
and the statement of the Sheriff’s Office in informing it that the taxes were paid.
What is not reasonable is for the City to not have alerted the Sheriff’s Office that
there was an attempt at redemption of the Property. Therefore, the Court now finds
that any neglect on the part of Wells Fargo is excusable and sufficient to set aside the
sale under Rule 60(b)(1).
Because any neglect present is excusable, and because the actions of the City
of Wilmington amount to apathy, at the very least, it cannot be said that the Affidavit
filed by the Sheriff’s Office is valid. The Affidavit, which states that following “an
-13-
inspection of the books and records…there has been no attempt, nor any Act
indicating an attempt to redeem said property…”. 48
While the Court understands
that the Sheriff’s Office is only attesting to and responsible for its own books and
records, justice does not allow the City, who is a party to this action and initiated
these proceedings, and who was aware of an attempt at redemption and seemingly
did nothing with that information, to shield itself from setting aside a sale on this
technicality.49 While it cannot be determined exactly where the fault lies, the fact
remains that justice requires a finding that this Affidavit is incorrect.50
At the time of the sale, Wells Fargo held a $167,731.74 mortgage on the
Property, which sold for less than that: $146,000.00. Further, Wells Fargo has paid
$7,473.11 to credit the balance of the water fees owed on the Property, which further
diminishes its value in the Property. Accordingly, these facts – along with the totality
of the facts that have been developed – form the basis for the Court’s finding of both
a mistake, as well as extraordinary circumstances existing here to set aside the sale
itself under Rule 60(b)(6), as justice so requires. To rule otherwise leaves Wells
Fargo devoid of its substantial security interest in the Property.
III. AWARD OF COSTS AND FEES TO QUALITY ANGELS
This inequity in the proceeding makes it most unfortunate for Quality Angels.
48
D.I. 8.
49
Jewell v. Division of Social Servs., 401 A.2d 88 (Del. 1979) (The Court may vacate a
judgment under 60(b)(6) for “any other reason justifying relief” whenever such action is
appropriate to accomplish justice.)
50
During the evidentiary hearing, as stated above in the facts, the City of Wilmington
presented only two witness – both employees of the City. No testimony was presented
from the Sheriff’s Office explaining how or why the Affidavit was filed. The Court gave
the City the opportunity post-hearing to supplement the record with a statement from the
Sheriff’s Office. The Sheriff’s Office did file a response to the Court, but did not provide
any indication as to why this attempt at redemption was not a part of their records.
Therefore, the record is devoid of any facts one way or other on this point and the Court
has no basis for form an opinion on such, nor is that the issue before the Court in the
instant matter.
-14-
The Court acknowledges and sympathizes with Quality Angel’s position and does
not disagree that there is a strong public policy interest in favor of bonafide
purchasers having finality of sales. It is truly unfortunate that here, due to the apathy
of the City of Wilmington, that Quality Angels suffers a loss. There is certainly
support in controlling authority for the Court’s role in attempting to make Quality
Angels whole and restore it to its status quo as a result of this action.51 Because the
Court has no information on the record before it, and without application, further
development of the record is needed before the Court will make a final ruling as to
what costs are to be assessed and by whom they are to be paid.
IV. MOTION TO STRIKE NOTICE OF LIS PENDENS DENIED
During the pendency of this litigation, Quality Angels filed a Motion to Strike
Notice of the Lis Pendens that Wells Fargo lodged upon the Property. That motion
was stayed pending the decision in this case, as the two rulings are co-dependent. As
a result of this decision setting aside the sale, the Motion to Strike Notice of the Lis
Pendens is DENIED. However, costs associated with that Motion may be awarded
pursuant to Section III, above.
NOW, THEREFORE, on this 9th day of August, 2022, the Motion of Wells
Fargo Bank, N.A. to set aside the Sheriff’s sale is GRANTED. Movant Wells
Fargo, as well as Quality Angels, may petition the Court for any costs and fees
sought pursuant to this Order and Plaintiff may respond as to the
reasonableness of any costs sought.
IT SO ORDERED.
Danielle J. Brennan
___________________________________________________________________
Danielle J. Brennan, Judge
51
LSF9 Master Participation Trust, 2017 WL 8787509 at *3-4, citing Burge, 648 A.2d at
421-422; The City of Dover, 880 A.2d at 247 (citing Superior Court Civil Rule 60(b)).
-15-