chevron-down Created with Sketch Beta.
April 30, 2016 Practice Points

Should a Trustee Be Physically Present at the Auction Sale?

Developments in technology have raised this question

by Denis F. Alia

The old saying goes “If you want something done right, do it yourself.” In Maryland, under widely recognized rules, a trustee’s duties to guide and facilitate the sale of real property at auction were no exception to this dictum. Although delegation of certain menial tasks, such as the posting of a notice for sale, were seen as permissible, more significant duties, such as deciding whether or not to sell, at what price, and upon what terms, were viewed as “vital decisions” which involved the exercise of powers maintained exclusively within a trustee’s province. Indeed, “attendance at the place and time of sale is an obligation of a trustee”. See Hopper v. Hopper, 79 Md. 400 (1894). Nevertheless, the conveniences of modern times, such as the use of mobile devices, have challenged the stringent requirement of physical presence and have presented the courts with new inquiries, including whether “constructive presence” and what degree thereof is sufficient to avoid any prejudice to the party seeking to vacate the property sale.   

In Fisher v. Ward, 226 Md. App. 149, 153, 126 A.3d 825, 827 (2015), the Maryland Court of Appeals held that the foreclosure sale of real property, where the trustee was not physically present at the auction sale but made himself available by telephone to answer questions, was valid, devoid of any irregularities, and did not prejudice the property owner. Although Maryland Code, Real Property, Title 7 and Md. Rule, Title 14 were silent as to the obligation of a trustee to physically attend the sale, the court concluded that the trustee’s “constructive presence” by telephone was sufficient based on the totality of the circumstances of the sale. Specifically, the sale proceedings were brief and uncluttered, no questions were posed to the auctioneer and no objections were voiced by any interested parties in attendance, and one of the Trustees was communicating by telephone directly with the auctioneer to ensure that any concerns were easily addressed. As such, the trustee in Fisher was found to have been constructively present at the foreclosure sale.

More than a century before Fisher, the court entertained the notion of “constructive presence” and held that absence of a trustee from the sale of property was merely a circumstance to be considered when determining the fairness of the proceedings, and that being “in town, near at hand and readily accessible” was sufficient to support a determination of constructive presence. See Wicks v. Westcott, 59 Md. 270, 273 (1883).

The degree of availability sufficient to satisfy “constructive presence” ultimately rests on a factual determination, one that depends on whether or not the trustee is “readily accessible” to address any problems or concerns during the sale. Even so, technological advances in the methods in which we communicate or make ourselves available to others further complicate the analysis of what constitutes “easily accessible.” If constructive presence via telephone is permitted, would availability to respond to inquiries via text messages be sufficient? How about simply being available to respond to phone calls when necessary? What if a trustee is available to address questions only through Skype from Beijing? See Fisher v. Ward (Leahy, J., concurring). The concern stemming out of these inquiries is that determining what is sufficient to constitute “constructive presence” is no easy task and that permitting one form of constructive presence would inevitably open the door to other modes of remote participation, ultimately eroding the traditional practice of Trustees’ physical participation at foreclosure sales. Such practice would run contrary to the common law view that failure of a trustee to be physically present at the sale constitutes an irregularity, which, should it result in prejudice, would be fatal to that sale.

Despite the contrasting schools of thought of what “constructive presence” is and how it ought to be construed, the well-settled test measuring the overall adequacy of a foreclosure sale remains nestled in the inquiry whether the property was “sold under such conditions and terms…as a prudent and careful man would employ, seeking to obtain the best price for his own property”. See Fisher, citing Waters v. Prettyman, 165 Md. 70, 74 (1993). Indeed, this standard perhaps provides a clear view of an auction’s ultimate goal by polishing the notion that what matters in the end is not an agent’s mere presence at an auction, rather their ability to secure an optimum result for the sale of the property.

Denis F. Alia is an associate with Cetrulo LLP in Boston, Massachusetts.

Copyright © 2016, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).