In the role as a seller, the mortgagee's duty of good faith and due diligence is essentially that of a fiduciary. Such a view is in keeping with the trend towards liberalizing the term fiduciary in order to prevent unjust enrichment. A mortgagee, therefore, must exert every reasonable effort to obtain a fair and reasonable price under the circumstances, even to the extent, if necessary, of adjourning the sale or of establishing an upset price below which he will not accept any offer.
At the sale, the lenders purchased the property for the amount owed them, plus costs. Within a few hours, the lenders had sold the property to another defendant for an amount much greater than the foreclosure sale price. The mortgagors brought an action to set aside the foreclosure sale which the lenders moved to dismiss. The master denied the lenders' motion to dismiss and found that the lenders had failed to exercise good faith and due diligence, assessed damages against them equal to the difference between the property's fair market value and the price obtained at the sale, and awarded attorney fees.
Is the mortgagor precluded from questioning the foreclosure sale, whose only remedy is to file a petition to enjoin a proposed foreclosure sale?
On appeal, the court held that denial of the motion to dismiss was proper because RSA 479:25, II only barred an action challenging a foreclosure based on facts the mortgagor knew or should have known soon enough to permit filing a petition to enjoin the action prior to the sale. Here, the action was based on events at or after the sale. The court found insufficient evidence to support the master's finding of bad faith, but did find a lack of due diligence in obtaining a fair price. The master erred with respect to the measure of damages, which should have been the difference between a fair price for the property and the price obtained at the foreclosure sale.