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Home foreclosure over $250 debt struck down


It would not be much of a stretch, the family’s attorney said, to call it a Christmas miracle. Just before the holiday, a family whose home had been foreclosed upon over a mere $250 in unpaid homeowners’ association dues learned that they would finally be getting their house back after the South Carolina Supreme Court reversed a judicial foreclosure sale of their home, finding that price that the purchasing company paid for it at auction was so low that it shocked the court’s conscience.

In the process, the court sharply rebuked a law firm that has fashioned a business model out of aggressively weaponizing minuscule arrears on HOA dues in order to swiftly foreclose on homes—something that was almost unheard of a decade ago, but which courts are now seeing come across their dockets with increasing frequency.

“I am elated. I think it makes a difference for all South Carolina homeowners,” said Brian Boger of Columbia, who represented the family. “This case changes the landscape in a very wonderful way.”

Devery and Tina Hale purchased their home in Richland County for just over $100,000 in 1998. They fell behind on their HOA dues in January 2011, and in April 2011 the HOA filed a lien, and later filed a foreclosure complaint seeking the sale of the property over $500 in unpaid dues, plus interest. The Hales failed to answer the complaint, so the HOA submitted an affidavit of default.

Shortly after it filed the complaint, the HOA sent the Hales a bill for $250. The Hales promptly paid the bill, thinking the payment resolved the matter, and the HOA’s law firm sent them a notice that the lien had been satisfied, but the HOA did not withdraw its suit. Instead, a master-in-equity authorized a judicial sale of the home at public auction. Two weeks later, the home was sold at auction for a paltry $3,036, and the buyer, Regime Solutions, promptly sought to evict the Hales from their home.

The Hales sought to set aside the sale of their home. After a divided Court of Appeals panel affirmed the sale, the Supreme Court granted a petition to review the ruling. Writing for a unanimous court in a Dec. 18 decision, Justice John W. Kittredge said that the price paid for the property was so grossly inadequate that the sale could not be sustained.

Kittredge noted that there are two methods used to calculate whether a bid price is so grossly inadequate as to shock the conscience: the debt method, which focuses on the amount of debt a foreclosure purchaser must incur before gaining a free-and-clear title to the foreclosed property, and the equity method, which focuses on the amount of equity the purchaser stands to gain through the foreclosure sale. No appellate court in South Carolina has ever held courts must apply one method over the other.

Kittredge wrote that, in most cases, a purchaser will assume an obligation to pay an outstanding mortgage balance in order to obtain free-and-clear title to the property, and so in such cases, the debt method should be used. But the court rejected “the notion of a categorical, blind application of the Debt Method in all instances for exactly the circumstances presented in this case.”

Regime had no intention of assuming the mortgage on the home—its business model is to let the mortgagee re-foreclose on a home or sell it back to the homeowners for an “exorbitant” fee—so it would be “absurd” for courts to give it credit for the mortgage balance, and using the equity method was “only logical option,” Kittredge wrote. Under that method, Regime’s bid constituted less than 5 percent of the home’s value, well under the 10 percent that courts have consistently found to be a shock-the-conscience markdown (although the court avoided drawing any bright-line thresholds).

The court also noted its concerns about the foreclosure proceeding itself. At the initial hearing on Regime’s motion to evict the family, the circuit court commented the HOA’s attorney’s law firm had become “a pioneer” in treating arrears in HOA fees “as ruthlessly and quickly” as defaulted mortgages.

“In response, the HOA’s attorney brazenly bragged her firm had already received seven judgments in favor of various HOA clients in their first two to three years of business,” Kittredge wrote. “A foreclosure proceeding is a last resort, not a business model to be swiftly invoked for the purpose of exploiting property owners. We do not countenance the improper use of foreclosure proceedings by the HOA, its attorney, or Regime.”

It’s a litigious day in this neighborhood

Chief Justice Donald Beatty wrote a concurring opinion in favor of adopting the equity method of calculating an adequate sale price for residential property in a foreclosure action and requiring that a homeowner who is in default receive notice of the date and time of the foreclosure sale.

“Homeownership is the quintessential American dream,” Beatty wrote. “Purchasing a home is the largest investment that most South Carolinians will make. To allow the hard-earned equity to be confiscated by a bidder’s minimal investment is unconscionable. This is especially troubling when the foreclosure sale is the result of an HOA lien.”

Boger, who called the ruling one of the proudest moments of his legal career, said the phenomenon of HOAs foreclosing on homes over piddling debts is one that’s emerged only in the last ten years or so in South Carolina. The tactic is easier to pull off here because under state law, HOAs don’t have to name the mortgagee as a defendant, so lenders typically won’t know that their security is at risk. But Boger said he hoped the ruling would have a chilling effect on some of the most aggressive measures that HOAs have been undertaking.

“I think there’s been so much of this in the news and the courts that the Supreme Court wanted to establish a brighter line for these kinds of cases and at least level the playing field to some extent for the homeowner,” Boger said. “We didn’t get a bright-line rule about shocking the conscience, but we’ve certainly gotten a better definition. It’s a lot brighter than it was two weeks ago.”

Kathleen Barnes of Hampton also represented the Hales on appeal.

Eric Hale and Elias Fain of Clarkson & Hale in Columbia and Stephanie Trotter of McCabe, Trotter & Beverly in Columbia represented the homeowners’ association and Regime Solutions.

Trotter was the attorney that Kittredge characterized as having bragged about her firm’s success with such actions. In 2018, a federal judge in South Carolina found that the firm had committed violations of the Fair Debt Collection Practices Act in a separate case. That same year, a Dorchester County judge certified a class action lawsuit against the firm, also alleging violations of the FDCPA. In September, the judge declared a mistrial in that case (after concerns about whether the firm had adequately produced documents critical to the case), and the two sides are awaiting a new trial date.

An email to Trotter generated an out-of-the-office reply. Hale did not reply to a voicemail message seeking comment on the ruling.

The 11-page decision is Winrose Homeowners’ Association, Inc. v. Hale (Lawyers Weekly No. 010-079-19). The full text of the opinion is available online at

Follow David Donovan on Twitter @SCLWDonovan

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