Yes, the bank acted improperly. The bank had a responsibility to act in the homeowners' best interest and try to get a fair price. They knew the house was worth much more than what they paid, and the fact they resold it for a big profit right away proves it. Just following the minimum legal rules for advertising the sale wasn't enough. They should have done more, like advertising it in a real newspaper or setting a minimum price, to protect the homeowners' financial stake in the property.

No, we can't be sure the bank acted improperly based on these facts alone. The court didn't establish what extra steps a 'reasonable' seller should have taken. The bank's duty is to be a fair seller, not to bid a high price itself. Just because they sold the house for more later doesn't automatically prove they were lazy or unfair at the time of the auction. The case should be sent back for more fact-finding.

Yes, the bank had a duty to really try to get a fair price for the house, almost like they were taking care of it for the owners. The bank didn't do anything wrong on purpose, but they didn't try hard enough to get a good price because they didn't do things like set a minimum price, delay the sale to get more buyers, or advertise better. The bank knew they could sell it for a lot more right away but only cared about getting the money owed to them, not helping the owners. The bank has to pay the owners the difference between a fair price and what they got at the auction, not the full market value. They don't have to pay the owners' lawyers because they didn't do anything really bad.

I agree the bank had a duty to try to get a fair price, but I don't think the facts show they didn't try hard enough. The court didn't say what exactly the bank should have done that a normal seller would do. The bank didn't have to bid more as a buyer. A low price alone doesn't make the sale wrong unless it's shockingly low, which this wasn't. I think we need more facts to decide if the bank really did something wrong, so I'd send the case back for that.

RSA 479: 25, II "bars any action based on facts which the mortgagor knew or should have known soon enough to reasonably permit the filing of a petition prior to the sale."

As to the foreclosure sale, a mortgagee "must exert every reasonable effort to obtain a fair and reasonable price under the circumstances."

"[A] mortgagee executing a power of sale is bound both by the statutory procedural requirements [of RSA 479: 25] and by a duty to protect the interests of the mortgagor through the exercise of good faith and due diligence."

"In his role as a seller, the mortgagee's duty of good faith and due diligence is essentially that of a fiduciary."

The New Hampshire Supreme Court has recognized a claim for wrongful foreclosure, brought after the foreclosure sale, where the foreclosing mortgagee did not exercise due diligence in conducting the mortgage sale and, as a result, did not get a fair price for the property.

In order to establish bad faith "there must be an intentional disregard of duty or purpose to injure," whereas to determine whether there has been a lack of due diligence, "the issue... is whether a reasonable man in the [lenders'] place would have adjourned the sale... or taken other measures to receive a fair price."

Thus, the New Hampshire Supreme Court in Murphy observed that a lender can be found to have violated its duty to exercise good faith and due diligence even though the lender has complied with all of the statutory requirements regarding notice of the foreclosure sale.

We agree that it is the conflicting or divergent interests at play in a foreclosure sale that necessitate the imposition of an "essentially... fiduciary" duty "to protect the interests of the mortgagor."

If the forecloser is innocent of bad faith, the damages are the difference between foreclosure price and “fair price.”

Yes, a mortgagee breaches its duty of due diligence by failing to take affirmative steps to obtain a fair price. A mortgagee's duty is essentially that of a fiduciary, requiring it to exert every reasonable effort to obtain a fair price under the circumstances, which may necessitate actions beyond strict statutory compliance. Here, the lenders failed to exercise due diligence because they knew the Murphys had substantial equity in the property (an appraised value of $46,000 versus a debt of $27,000), yet made no effort to secure a fair price, being concerned only with covering their own debt. The fact that they were the only bidders and immediately attempted to resell the property for a significantly higher price ($38,000) supports the finding that they knew a better price was attainable and should have taken further steps, such as setting an upset price or engaging in more effective, commercial advertising.

No, the record does not support a finding that the lenders failed to exercise due diligence. The mortgagee's fiduciary duty applies to its role as a seller, but the master made no findings as to what a reasonable, voluntary seller would have done differently under the circumstances. There is no evidence in the record to show that setting an upset price or getting a reappraisal was required. The lenders' post-sale offer to a third party, while relevant to their knowledge of the property's value, does not, by itself, prove what specific actions they should have taken before or during the sale to ensure a fair price. Without more specific findings, a breach of duty cannot be established.

Yes. The lenders were bound by RSA 479:25 and a fiduciary duty to protect the interests of the mortgagor, which includes exerting every reasonable effort to obtain a fair and reasonable price under the circumstances. While there was no evidence of bad faith, an intentional disregard of duty or a purpose to injure, the lenders failed to exercise due diligence in obtaining a fair price for the property because they did not take reasonable steps to protect the plaintiffs' substantial equity, such as establishing an upset price, adjourning the sale, or advertising more effectively to attract other bidders. The lenders had reason to know they could make a substantial profit on a quick turnaround sale but were only concerned with making themselves whole, disregarding the interests of the mortgagors. The proper measure of damages is the difference between a fair price and the price obtained at the foreclosure sale, not the fair market value. The award of legal fees was reversed as there was no bad faith or conduct justifying such an award.

I agree with the majority's analysis of a mortgagee's fiduciary duty in its role as seller at a foreclosure sale. However, on the record before us, I cannot see support for the finding that the lenders failed to exercise due diligence. The master made no findings regarding what an owner voluntarily selling land would have done that the lenders did not do to obtain a fair price. There is no authority for concluding the lenders should have made a higher bid as buyers. A low price alone is insufficient to invalidate a sale unless it shocks the judicial conscience, which the price here did not. Because it is unclear if the master applied the correct standard and the record cannot support a determination that the standard was violated, I would remand for further findings of fact.

Murphy v. Financial Development Corporation

Case Podcast

Rule of Law:

The Legal Principle

Facts:

Procedural Posture:

How It Got Here

Issue:

Legal Question at Stake

Opinions:

Majority, Concurrences & Dissents

Analysis:

Why This Case Matters

Gunnerbot