Murphy v. Financial Development Corp.

Richard and Beatrice Murphy (plaintiffs), after Richard lost his job and fell behind on their refinanced mortgage held by Financial Development Corporation and Colonial Deposit Company (defendants), worked with the lenders to delay foreclosure but ultimately couldn't catch up in time. The lenders gave only the legally required notice of the sale without further advertising, never re-appraised the $46,000-appraised house, and let it sell at auction to their own representative for just $27,000 — barely covering the debt — with no other bidders present; that same day, the lenders turned down an offer to buy the property for $27,000, then countered at $40,000 and sold it two days later for $38,000. The Murphys sued to set aside the sale or recover damages, and the trial court, adopting a master's findings that the lenders acted in bad faith and lacked due diligence, awarded $27,000 — the difference between the $54,000 fair market value and the sale price; the lenders appealed.