Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-02282/USCOURTS-azd-2_09-cv-02282-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

M & I Bank, FSB, 

Plaintiff, 

vs. 

Ty Coughlin, et al., 

Defendants.

No. CV 09-02282-PHX-NVW

ORDER 

The parties’ recent filings have raised questions that should be addressed ahead of 

the final pretrial conference. Certain issues will require a status conference as soon as 

reasonably possible. 

I. TREATMENT OF CREDIT BIDS 

M&I’s trial brief (Doc. 200) asks this Court to reconsider certain issues relating to 

damages. This is a motion for reconsideration, and it is forfeited because not filed within 

14 days of the original ruling. LRCiv 7.2(g)(2). It will also be denied on its merits. 

In the process of resolving Defendants’ motion for judgment on the pleadings (in 

M&I’s favor), the Court addressed certain issues related to credit bids. See M & I Bank, 

FSB v. Coughlin, 805 F. Supp. 2d 858, 865–68 (D. Ariz. 2011). The Court explained, 

among other things, that 

[a] beneficiary’s credit bid, whether full or partial, is actual 

payment to the beneficiary to the extent of the bid, just as a 

cash bid and payment by a non-beneficiary would be. A 

beneficiary who bids high, drives out other bidders, and takes 

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the property for the amount of its bid may not then say it was 

not really paid because it paid itself too much. 

Id. at 868. 

At summary judgment (granted in M&I’s favor as to the liability of certain 

defendants), it became clear that M&I nonetheless continued to assert damages based on 

the difference between the outstanding indebtedness and the amount for which M&I 

resold the property after taking it through a credit bid at the trustee’s sale. The Court 

therefore repeated the above-quoted passage and noted that M&I’s damages “must be 

calculated with respect to its credit bid, not the resale price.” (Doc. 163 at 14.) 

In its recently submitted trial brief, M&I now asserts the this ruling “should be 

reconsidered.” (Doc. 200 at 5.) Specifically, M&I believes that it should be able to hold 

non-borrowers liable for the outstanding indebtedness minus the resale value, irrespective 

of the credit bid. The following passages from the trial brief illustrate M&I’s reasoning: 

 “The public policy of calculating a lender’s loss from its bid at foreclosure is a 

protection afforded the borrower and guarantor. There is no basis to extend 

such a benefit to third parties for breach of contract and torts, up to and 

including fraud.” (Id.) 

 “The fiction that the lender actually received funds when it credit bids the 

property is a fiction of public policy to protect borrowers, not third parties.” 

(Id. at 12.) 

 “The fiction that the credit bid at foreclosure establishes the final loss to the 

lender should not be applied to non-borrowers, because the lender is not and 

cannot seek a deficiency against non-borrowers and non-guarantors. 

Moreover, there is no public policy reason to extend such to breaches of 

contract, breach of fiduciary duty, constructive fraud, negligence, fraud, etc., to 

third parties.” (Id. at 13.) 

M&I’s arguments display certain misconceptions. Credit bids are not fictions. 

Credit bids reflect economic reality. It is the secured lender’s election to bid cash or 

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credit at a trustee’s sale, and a cash bid would create pointless round trip transactions. 

See M & I Bank, 805 F. Supp. 2d at 865. The secured creditor’s credit bid is 

economically identical to any other bidder’s cash in the same amount. A secured lender 

has the property and value in the amount the lender itself attributed to the property. 

M&I’s request for reconsideration is in error and will be denied. 

II. ISSUES REQUIRING DISCUSSION 

The joint proposed pretrial order (Doc. 199) is rejected. It raises various issues 

that are not suitable for jury determination. However, before requiring a new proposed 

pretrial order, the Court will hold a status conference to discuss various topics, including: 

 Whether economic damages are subject to reasonable dispute, and if not, 

whether a brief motion under Rule 56(f) should be invited to resolve such 

damages as a matter of law. 

 Availability of comparative fault, apportionment, and like defenses. 

Court staff will contact counsel by e-mail shortly to establish a time at which such 

a status conference can be held. 

IT IS THEREFORE ORDERED that the request for consideration in M&I’s trial 

brief (Doc 200), treated as a motion for reconsideration, is DENIED. 

Dated this 19th day of April, 2012. 

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