Meguerditchian v. Smith: Court Provides Guidance Regarding Adequate Water Right Description in Sheriff Sales

Introduction

In 2008, the trial court awarded Meguerditchian $55,000 in a breach of contract action.  Meguerditchian filed for a writ of execution, listing private and real property and water rights belonging to Smith.  The trial court approved the writ and instructed the sheriff to sell non-exempt personal property, then real property, if necessary.  The sheriff did not locate personal property and posted a notice of sale for Smith’s interest in (1) a 9.42 acre parcel, (2) an Oaker Hills Plat 4 Parcel, (3) water right 51-224, and (4) “other rights of [Smith] in water rights and/or interests in water wells located in Sanpete County, Utah.”  Smith sought to set aside the motion for summary judgment and quash the sale; the court denied his motion.  

At the Sheriff sale Meguerditchian purchased the 9.42 acre parcel for $3,000, the Oaker Hills Plat 4 for $30,000, water right 51-224 for $30,000, and the other water rights for $3,000.  Smith moved to set aside the sale and the court found that the value of the two parcels was $505,000 and the water rights was about $150,000.  The trial court determined that the sale prices for the real property and water rights was “grossly inadequate, shocking the conscience of the Court.”  However, the court found there was nothing misleading, irregular, or unfair about the sale itself.  The trial court denied Smith’s motion to set aside the sale of the real property and granted its motion to set aside the sale of the water rights.  Smith appealed the ruling regarding the sale of real property; Meguerditchian appealed the trial court’s ruling regarding the water rights.  

On appeal, Smith argued that the purchase price for the property was so low in this case, that the court should set aside the sheriff sale even without any irregularities in the sale.  While the Court acknowledged that Smith’s argument may be true, it stated that a sheriff sale has never been set aside solely on price in Utah case law.  Therefore, the Court declined to rule on the issue of whether a court could set aside a sheriff’s sale based on inadequate price alone.  

Trial Court Did Not Abuse its Discretion in Declining to Set Aside the Sheriff’s Sale in the Absence of Irregularities

The trial court possesses a “high degree of discretion” in determining whether to invalidate the sheriff’s sale; the Court would only reverse where it found the trial court’s decision to be unreasonable.   Here, the defendant paid $33,000 for $505,000 worth of property, or 1/15 of the market value.  The Court determined that this discrepancy “while significant, does not present an exceptional discrepancy between the purchase price and the market value.”  The Court therefore affirmed the trial court’s decision to not set aside the sheriff’s sale in the absence of irregularities.

Trial Court Did not Abuse its Discretion in Determining There Were No Irregularities in the Sale

Where the purchase price is grossly inadequate, even slight circumstances of unfairness in the conduct of the party benefiting from the sale will create a presumption of fraud.  To this end, Smith argued that Meguerditchian failed to provide the sheriff with complete information regarding Smith’s personal property, which property should have been sold before the land and water rights.  The Court disagreed and held that the sale was not misleading or irregular because the Sheriff looked for, but could not locate personal property identified by Meguerditchian and Smith objected to the sale of personal property.  The Court also upheld the trial court’s decision that Meguerditchian was not misleading or unfair and that there were no irregularities in the sale.               

The Trial Court Erred in Determining that Water Right 51-224 Was Not Adequately Described

The Notice of Sale described two separate water rights.  The first was for “[a]ll rights of [Smith] in water right number 51-224, and all other rights of [Smith] in water coming from and the well producing said water.”  The trial court ruled this was an inadequate description because several water rights had been severed from this water right and renumbered.  The second was for “[o]ther water rights of [Smith] in water rights and/or interests in water wells located in Sanpete County, Utah.”  The trial court also found this description inadequate.  On appeal, the Court disagreed that the segregation and renumbering of parts of water right 51-224 affected the adequacy of the Notice of Sale’s description of the water right.  The Court determined that “because anyone who searched the property records would have been able to immediately determine what interest Smith held in water right 51-224, the description in the notice provided a sufficiently, ‘particular description of the property to be sold’” as required by Utah Rule of Civil Procedure 69B(b)(3).  The Court held that the trial court abused its discretion in setting aside the sale of water right 51-224.  The Court did not discuss the trial court’s setting aside of the sale of Smith’s other water rights, leaving this ruling in place.    

Conclusion     

The Court held that the trial court did not abuse its discretion in determining there were no irregularities in the Sheriff’s sale and that, in the absence of irregularities, the price alone was not a reasonable basis to invalidate the sale.  The Court held that the trial court abused its discretion in setting aside the sale of water right 51-224 because Smith’s interest in this water rights was easily discoverable.  

This case is important for all parties purchasing and selling water rights in a Sheriff’s sale because it provides guidance on how parties should describe water rights to be sold.