Chancellor may Order Property to be Sold at Public Auction Only if this Method of Sale Promotes Parties’ Interests

The Supreme Court of Virginia in Orgain v. Butler, 255 Va. 129 (Va. 1998) found that the Chancellor abused his discretionary power in ordering the property in a partition suit to be sold at public auction, rather than through a real estate broker as recommended by the commissioner in chancery.Orgain involved a partition suit in which the Supreme Court had to decide whether the chancellor involved in this case (“Chancellor”) abused his discretionary powers when he ordered the property to be sold at public auction.  John Barbour Orgain, III(“Appellant”), and Norvell Orgain Butler (“Appellee”),  are siblings and owned as tenants in common a 40-acre tract of land located in Chesterfield County. Appellee filed a bill of complaint seeking partition or sale of the property and the Chancellor referred the case to a commissioner in chancery. The commissioner determined the fair market value of the property based on appraisal and also noted that the property was unique and  Appellant and Appellee both rejected two private offers to purchase the property. And finally prepared a report recommending “that since the property . . . is unique in . . . nature, it should be publicly marketed through a reputable commercial real estate brokerage firm agreed to by the parties." Neither party filed exceptions to the commissioner's report. Later Chancellor heard argument   concerning the commissioner's report and rejected the commissioner's recommendation that the property be sold privately. The Chancellor noted that the parties already had refused two private offers, and he ruled that a public auction was "the only alternative," due to the "likelihood that the parties will be unable to agree upon any price or method for conducting a private sale.”  

Appellant argued that the Chancellor's conclusion that the parties could not agree on the method and terms for a private sale of the property is devoid of any evidence. Appellant further contended that the Chancellor improperly rejected the commissioner's report since the Chancellor did not find that the report was unsupported by the evidence.  He also contended that the chancellor's ruling is contrary to the parties' best interests. Orgain. 255 Va. 129, 132 

In response Appellee argued that the Chancellor did not abuse his discretion in ordering the property sold at public auction and contended that the commissioner's recommendation was merely advisory and that once the chancellor concluded that an agreement between the parties was unlikely, "it was absolutely within the [chancellor's] discretion to order the public sale." Id.

The Supreme Court observed that Virginia Code (Code) § 8.01-610 gives the chancellor substantial discretion in the manner of reviewing the commissioner's report/ findings. While the recommendations of the commissioner are merely advisory, the statute does not allow the chancellor to ignore the commissioner's report or portions thereof. Id.. (Internal citation omitted).

The Court also stated that when the chancellor disapproves the commissioner's findings, the court must review the evidence and determine whether, under a correct application of the law, the evidence supports the commissioner's findings or the conclusions of the chancellor. Id. (Internal citation omitted).

The court further noted that Code § 8.01-83  empowers the chancellor to order a sale of entire property in a partition suit  when partition of such property cannot be conveniently made and such sale will promote the interests of the parties who are entitled to the subject property or its proceeds. A sale of property in a partition proceeding must be made in a manner that will bring the best price obtainable. In the present case, Chancellor was required to order such method of sale as would obtain the highest price for the property, unless the evidence showed that the parties’ conduct or other circumstances made use of that method unachievable.  Id. at 133. (Internal citation omitted).Id.

The court found that the commissioner's recommendation, that the highest price for the property could only be obtained through public marketing by a real estate broker, was based entirely on his factual finding that the property was unique in nature because of its size and location. The court found that the record does not show that the Chancellor considered this factual finding. Moreover, the record contains no evidence to support the Chancellor's conclusion that the parties likely would be "unable to agree on any price or method for conducting a private sale." The record shows only that the Chancellor assumed that the parties would be unable to agree on the method and terms of a private sale because they had not reached an agreement on any other matter during the course of the proceedings. Id.

The Supreme Court concluded that the Chancellor reached this conclusion despite his acknowledgement that the method of sale recommended by the commissioner would be the most advantageous to the parties. Thus, the Chancellor abused his discretion because he ordered a sale at public auction in the absence of any evidence that the parties' interests would be promoted by this method of sale, or that the parties were unable to agree on terms for listing the property through a licensed real estate broker. Id.

The Supreme Court reversed the Chancellor’s decree, entered the final judgment confirming the commissioner's report, and remanded the case to the chancellor for further proceedings. Id.