On December 12, 2023, Justice Ruchelsman of the Kings County Commercial Division issued a decision in Su Hwa Chu v. Lai, 2023 NY Slip Op. 34408(U), holding that a referee had the authority to reject the highest bid at a judicial sale, explaining:
There is scant authority outlining the precise responsibilities of the referee and the discretion afforded the referee. Thus, in Phelan v. Phelan, 148 AD2d 433, 538 NYS.2d 827 [2d Dept., 1989] the court held the referee exceeded his authority when he announced, prior to the sale, that the sale was subject to any liens upon the property when the interlocutory Judgement directing the sale only mentioned four liens. Again, in Bank of New York v. Love, 3 AD3d 303, 772 NYS2d 645 [4th Dept., 2004} the court held a ref6ree exceeded his authority by requiring all taxes to be paid at closing without any credits, which contradicted the judgement as well as RPAPL 1354. Of course, a referee has no discretion to alter the terms of a court order delineating the terms of any sale. By contrast, the referee has the discretion whether a partition sale should be conducted in parcels. Further, the referee maintains discretion to consummate the foreclosure sale so as to best protect the rights of. the mortgagees while simultaneously ensuring a successful completion of the sale. A referee must retain limited flexibility, while still acting within the authority of the court as conferred in the judgment of foreclosure, to meet those unforeseen circumstances that might otherwise jeopardize the success of a foreclosure sale. Moreover, the referee has the discretion to extend the time for the completion of the purchase. Significantly, in Salvation Army v. Simpson, 268 NY 499, 198 NE 373 [1935] the Court of Appeals affirmed a lower court ruling that denied a request to compel a referee to accept bids on property that were being sold following a partition. The court rejected the argument the referee was merely a ministerial job and maintained no discretion to reject a bid on the grounds it. was inadequate,. That case squarely approves of the referee’s decision to reject Plotch’s bid.
In this case the referee refused to accept the highest bid on the grounds it was well below the minimum sales price. Thus, the court is responsible with supervising all judicial sales and thus it is appropriate to examine the precise facts which took place at the judicial sale. Indeed, in that case the court explained that Courts of equity exercise a supervision of sales made under their decrees, which is not in all cases controlled by legal rules, but may be guided by considerations resting in discretion. They may set aside their own judicial sales may relieve against mere accidents or hardships or oppressive or unfair conduct of others, though such conduct may not amount to a violation of law.
Thus, a court may invalidate a judicial sale where the price is so low as to shock the conscious of the court or if not that low but is inadequate and is accompanied by mistakes, accidents, hardships or surprise.
In this case, the court already concluded there had been an offer for $1. 3 million. Thus, a bid of approximately a third of the value was wholly inadequate. Moreover, other irregularities took place at the judicial sale, namely neither party was present at the time of the sale. Thus, the court reviewing the sale surely has the discretion to confirm the referee’s determination rejecting Plotch’s bid. As noted, the referee maintains that discretion despite whether such authority appears in any orders.
Therefore, the motion seeking to compel the acceptance, of the bid by Plotch is denied.
(Internal quotations and citations omitted).