Murphy v. Financial Development Corp.

• Financial Development Corporation = defendant = lender
• Murphy = plaintiff = mortgagor who financed his mortgage
• In 1980, the home of Murphy in New Hampshire was appraised for $46,000
• Murphy's refinanced mortgage was assigned to a 2nd lender: Colonial Deposit Company (defendant)
• In 1981, Murphy lost his job
• Murphy missed his mortgage payments
• The lender picked out a foreclosure sale date
• Soon, Murphy paid the regular monthly payments; nevertheless, he couldn't pay the overdue fees that had accrued since he fell behind on his mortgage payments
• The lender pushed the new foreclosure date to a 1 month later; the lender posted the foreclosure notice at (1) Murphy's home, (2) the post office, & (3) city hall
• Murphy didn't pay the overdue fees; consequently, the sale proceeded ahead
• The lender's agent was the only bidder who showed up at the foreclosure sale
• The lender's agent placed a winning bid for $27,000; at that time, the home's fair market value was $54,000
• At that time, Murphy owed $27,000.
• The entire $27,000 from the sale proceeds went to pay off the outstanding mortgage
• After the sale, the lender put the home up for sale for $40,000
• The next buyer bought the property for $38,000

• Murphy sued the lender
• A court master ruled that the lender to exercise good faith & due diligence to obtain a fair market price at the foreclosure sale.
• Murphy won in the trial court in New Hampshire

Does a lender owe a borrower a duty to use both (1) good faith & (2) due diligence to sell a foreclosed property for a fair price?

Yes; a lender has duties to a borrower to use both good faith & due diligence to sell a foreclosed property for a fair price.