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. In the action below, 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. 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.
Did the master err in denying the motion to dismiss?
The only reasonable construction of the language in RSA 479:25, II relied upon by the lenders is that it 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. The master could not have found that this was such an action, because the only unfairness referred to in his report involves the amount of the sale price. Thus, his denial of the lenders' motion to dismiss was proper.