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Murphy v. Financial Development Corp

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Bloomberg Law

Citation. 126 N.H. 536, 495 A.2d 1245, 1985 N.H.

Brief Fact Summary. The Plaintiffs, Mr. and Mrs. Murphy (Plaintiffs), defaulted on their loans and the Defendants, Financial Development Corp. and Southern Home Traders (Defendants), a mortgagee put Plaintiffs’ house up for sale. Plaintiffs sued to set aside foreclosure sale of their house alleging that the Defendant failed to exercise good faith and due diligence in the sale of their house.

Synopsis of Rule of Law. A mortgagee in conducting a foreclosure sale is acting as a fiduciary of the mortgagor and has a duty of good faith and due diligence.

Facts. The Plaintiffs bought a house in 1966, financing it by means of a mortgage loan. In 1980, they refinanced using the Financial Development Corp. However in 1981, Mr. Murphy became unemployed and the Plaintiffs fell seven months behind in their mortgage payments. Financial Development Corp. sent notice of foreclosure. The Plaintiffs managed to pay the back payments, but failed to pay the legal fees and late fees associated with the seven months. Eventually, the house was sold at a foreclosure sale to the Financial Development Corp., who later resold it Southern Home Traders, which is also a Defendant in this action. The Plaintiffs sued to set aside the sale. The trial court found for the Plaintiffs and awarded them $27,000 against the Defendants as the difference between what the house was sold for and its purported fair market value.

Issue. Whether the lenders complied with:
Their duty to exercise good faith;
Duty of due diligence

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