### IN THE COURT OF APP EALS OF TENNESS EE AT NAS HVILLE Fe bruary22, 200 6 S es sio n LO ST M OU N TA IN D EV EL OP M EN T C O. v. R U F U S KI N G v
.

MA TTHEW B. KEZ AR, ET A L 

### . Appeal f romthe Chancer y Court for F ranklin County No. 16,818 Jeffrey F . Stewart, Chancellor

No. M2004- 02663-COA-R 3-CV - F iled on Decem ber 19, 2006

This case involves a cre ditor’s entitlement to a defic iency judgme nt a fter a fore closure sa le in which the cr editor wa s the only bidder, a nd in which he paid considera bly less for the la

rge t ract of mou n taintop property

than the debtor

alleg ed it was worth. The trial court awar ded the c reditor’ s succe ssor-in-intere st a defic iency judgme nt of over $4 milli on, holding that in ac cordance w ith the rule of Holt v. Citizens CentralBank , 688 S.W .2d 414 (Tenn. 1984) , the debtor sho u l d n o t be permitted to cha lleng e the leg al presumption that the value of t he prope rty at the time of for eclosure was e qual to the sale price be cause there was no e vidence of “irregu l ar i t y , misconduct, fra ud or unfairne ss on the part of the mortg ag ee.” Since the Ho lt c a se didno t in vo lvea

de fi c ie nc y

jud g me nt, we be lieve it is inapplicable. Af ter e x amining both the la w of Te nnessee and that of othe r jurisdictions, we conc lude that the trial court should have permitted the de fendant to challeng e the pr e su mpt ionby

a tte mpt ing to p ro ve that th e sa le price was gr os sly ina de qu a te . We a c c or din g ly reve rse. Tenn. R. App . P . 3 Appeal as of Right; Judgme nt of th e Chancer y Court Reve rsed
P ATR I C I A J. C O T T RE LL , J ., delivere d the opinion of the court, in which W I L L I AM C. K O CH , J R ., P.J ., M.S., joi ned. W I L L I AM B. C A IN , J ., filed a c oncurring opinion.
John C. C a ve tt, Jr., Chattano og a , T e nn e sse e , f or theapp e llant, B e mis Smith
B ra d A . L a mpl e y , N a sh vil le , T e nn e sse e ; Pe te r J. M a c ke y , B ra de nto n, F lorida , f or theapp e lle e s, Willi a m Manf

ul, e t a l.M r. K ing late r le a rn e d thr o u g h d isc o v e ry th a t t h e fo u r a d d iti o n a l sign a to rie s t o the a m e n d e d a g re e m e n t d id 1

n o t co n sid er t hem sel ves mem b e rs o f t h e T e n n e sse e ge n e ra l p a rtn e rs h ip c a lled the L o st M o u n ta in D e v e lo p m e n t C o m p a n y. I ns t ead, t hey cont ended t hey were sh ar ehol ders i n a F l ori da corpora t i on, na med Lost M ount ai n, I nc. , wh i ch was cr eat ed t o a ct a s t h e man ag i n g pa r t n er of t h e Los t M ou n t ai n pa r t n er s h i p.

-2- OP IN ION
I. T HE I N I TI A L T RANS ACT I ONS
On Ma rc h 6, 20 00 , Ruf

us Ki ng so ld a 4, 65 0 a c re tr a c t of mou ntaint op lan d i n Franklin County , Tenne ssee, t o L o s tM o u n t ai n De v el o p m en tC o m p an y , a gr o u p o f F l o ri d a i n v estors org anized a s a Te nn e sse e g e ne ra l p art ne rs hip . T he pu rc ha se pric e wa s $ 4, 60 0, 00 0. Th e L os t Mo un ta in partne rs planned to divide a portion of the property into f ive and ten acr e lots, a nd sell the lots as part of a private g ated c ommunity . They hoped that the be auty

of the prope rty ’s har dwood forests and its pr oximi ty

to s tate pa

rk s, g olf c ou rs e s, theUn ive rs ity

of theSou th, a ndoth e r attr a c tio ns wo uld make the ir

ve ntu resu c c e ssf

ul. The partnership paid Mr. King $150,000 at closi ng and gave him a promissory note for the ba la nc e . T he no te c arrie d a n in te re st r a te of 8% a ndwa s to be pa id o ff in 2 9 mo nth ly ins ta llm e nts

. It was sec ured by

a dee d of trust on the property

. Four L ost Mountain partners, Matthew Kezar , Ken McKe ithen, Mark Og les and B emis Smi th also executed per sonal g uaranties on the note.
Un fo rtun a te ly

fo r the pa

rt ne rs hip , it

wa s u na bleto pa y the sc he du le d in sta llm e nts . A ft e r i t missed five payments, Mr. King beg an for eclosure proce eding s. The parties then reneg otiated the te rm s of the loan, a nd Mr . King c a nc e lle d h is f or e c los ur e e ff

orts. Th e pa

rt ne rs hip pa id $ 80 0, 00 0 in cash unde r an amended a g ree ment to catc h up with back inter est, with the remainder to be a pplied to the princ ipa l.
I n order to obtain the cash f

or the re financ ing, t h e p ar tners had bor rowe d $500,000 from a no the r F lorida

inv e sto r, Willi a m Manf

ull . A sid e fr om the fo ur orig ina l pa rt ne rs of L os t Mo un ta in De ve lop me nt C omp a ny , f ou r a dd iti on a l in div idu a ls s ig ne d th e a me nd e d a g re e me nt o n b e ha lf

of L os t Mo un ta in D e ve lop me nt C omp a ny , in c lud ing Mr . M a nf ull

. 1
The ne w pa y ment schedule included intere st-only monthlyinstallment pay ments of about $2 5, 00 0, a nda

sin g le ba llo on pay me nt of $3 ,8 38,5 93 du e on May 1, 20 01 . T he L os t Mo un ta in partne rship appar ently

manag ed to make the monthly payments, but w as unable to ma ke the balloon payment. The default a g ain left L ost Mountain’ s property interest subject to possible f orec losure.
II. A L AW S UI T AND S U BSEQUEN T T RANS ACT I ONS
On Octobe r 11, 2001, L ost Mountain filed a complaint ag ainst Rufus King in the Chance ry Cou rt o f F r a n k li n Co u n ty

. T h e c o mp lain t, w h ic h M r
. K in g c h ar a c te r iz e d a s a p r e e mp ti v e s trike, a lle g e d f ra ud , n e g lig e nt m isr e pr e se ntatio n a ndbr e a c h of c on tr a c t on his pa rt , a nda sk e d th e c ou rt

toT he co urt’ s ca l cu l ati o n o f d am ag es includ ed t he o utst an d i ng b alan ce o n t he l o an , ac cu m ulated i ntere st , t ax es, 2 mi s cel l a n e ou s f

e e s , a t t or n e y f

e e s of ov e r $1 33 , 00 0, a n d l i qu i da t e d d a ma g e s of $5 00 , 00 0 p u r s u a n t t o t h e a mended p u rc h a se a g re e m e n t. -3- e njo in f or e c los ur e . A lth ou g h f

or e c los ur e wa s enj oine d f or a tim e , th e inj un c tio n w a s e ve ntu a lly dissolved. Rufus King responde d to the complaint on October 31, 2 0 01 with an answe r, a c ountercomplaint ag ainst L ost Mountain, and a third party complaint ag ainst the eig ht individuals who had signe d the amende d ag ree ment. L ost Mountain subseque ntly filed for bankruptc y

protec tion under Chapter 11, a fter w hich Mr. King filed a motion for p ar t i al s ummary judgme nt ag ainst the four signatories to the original agr eeme nt on their personal g uaranties and against the eig ht signatories to the a me nd e d a g re e me nt o n th e ir thi rdpa rty lia bil ity . H e arg ue d th a t th e aut om a tic stay in bankruptc y

did not prevent him from pursuing i n d i v i d u al partners who r emained jointly and sever ally liable under

Tenne ssee law

. The pa rties man age d t o resolve some of their diff ere nces, r esulting in dismissal of the C h ap t er1 1 p ro ce ed i n g an d d i s m i s s al wi t h p re j u d i ce o f Los tM o u n t ai n ’s cl ai m s aga i n s tM r. Ki n g. The injunction ag ainst fore closure was dissolved, and Mr. King was the only bidder in the May

30, 2003 fore closure sa le on the courthouse steps. He bid $1.1 milli on for the property , and he then f iled a motion for summary

judgme nt in Chancery

Court asking for a

defic iency

judgme nt in the amount of appr ox imately

$4 milli on. Prior to th e h ea ri n g of the summary judgme nt motion, W illiam Manfull purchase d the property in question from Mr. King (with the exception of seve ral hundre d acr es, which Mr . King r e tain e d ) a s w e ll a s M r
. K in g ’ s d e f ic ie n c y c laim , p a y in g a to ta l o f $ 2 , 9 7 5 , 0 0 0

. M r
. M anfull then moved the court to be substitut ed for Mr. King as counte r plaintiff/third party plaintiff, base d on the assig nment of Mr. King ’s rig hts. The trial court gr anted his motion.
Mr. Manfull reac hed settlements with six of the third party defe ndants prior to hea

ring , and he r e le a s e d th e m f

r o m l ia b il ity
. H e th e n p r o c e e d e d a g a in s t B e mi s Sm ith , th e s o ler e ma ining individual defendant. The hea ring on the summary

judgme nt motion was c o n d u ct ed on May 13, 2 0 0 4

. I n it s f

in a l o r d e r o f s u mm ar y ju d g me n t, th e c o u rt f o u n d th a t M r
. Sm ith “ h a s n o t pr esente d e vid e nc e of

‘i rr e g ula ri ty , mi sc on du c t, f

ra udor un fairne ss o n th e pa

rt of themortg a g e e ’ t o o ve rc ome thele g a l pr e su mpt ionthat th e va lue of th e prope rty a t th e tim e of

fo re c los ur e is e qu a l to thesa le price .” The court ac cording ly awa rded Mr . Manfull a judg ment ag ainst Be mis S mith in t he amount of $4,426,135. This appea l followed. 2
III. A Q U ESTIO N O F L AW
For the purposes of

thi s ap p ea l, there is no dispute as to the f acts mate rial to the summary judgme nt issue. We are c alled upon to determine a question of law: whe ther the c ourt may deny or re du c e a de fi c ie nc y

jud g me nt t o a

le nd e r w ho bu y s p ro pe rty a t a fo re c los ur e sa le so le ly on theba sisM r. K i ng was t he l end er who f o recl o sed, b o ught the p ro p e rty and request ed a de f i ci ency judgm ent

. M r. 3 M an f ull t he n b o ug ht t he p ro p erty an d t he claim , i n e f fec t st ep p i ng i nto M r. K i ng ’ s sho es.
A n o p e ra ting li m e sto n e m ine w a s fo rm e rly lo c a te d o n the p ro p e rty. 4
-4- of inade quacy

of price , if no fraud, collusion, irreg ularity or unfairness is proven i n re gard to the c on du c t of

thesa le

. Mr . Sm ithdo e s n ot a lle g e that th e rewa s a ny ir re g ula ri ty in the fo re c los ur e sa le 3 itself, but he contends that the court can and s hould deny a def iciency judgme nt in sit uations where t o g rant such a

judgme nt would result in a windfa ll for the lende r and behighly inequitable to a borrowe r.
Mr. Smit h arg ues that the L ost Mountain property was worth far mor e than the $1,100,000 that Mr. King paid for it at foreclosure

. He points to a detailed a ppraisal r eport that va lued the land at $4,000,000. That a

ppraisal doe s not include the value of minera ls or other re source s on the land, upon which an inde pendent miner al appr aisal plac ed a minimum value of $9,000,000, “ b as ed on probable mineral a nd stone rese rves.” Mr. Smith notes that Mr. M anfull put the land up for auction, 4 and published an a dvertisement f or the property which stated “timber study shows over $2,000,000 in timber.” F urther, Mr . King signe d a sworn statement as a cre ditor in L ost Mountain’s bankruptcy proce eding that his collatera l was worth $4,180,000.
The trial c ourt relied on the case of Holt v. Citizens CentralBank, 688 S.W .2d 414 (Tenn. 1984) in rea ching its judg ment, and both pa rties ag ree that the Ho lt

case must be considere d in any discussion of their re spective le g al rig hts. In that case , Hoyte Holt de faulted on a note held by

the de f e n d a n t b a n k , w h ic h w a s s e c u r e d b y a d e e d o f tr u s t o n a M u r f r e e s b o r o p r o p e rty

. T h e b a nk fo re c los e d on the pr op e rty , a nd it wa s so ld to a bo na fi de pu rc ha se r fo r $8 ,6 00 , wh ic h wa s a pp are ntl y just about enoug h to ext inguish the de bt. The purchase r sol d the property ten day s later for $30,000. Therewas no e vidence of fr aud or c ollusion between the bank and either purcha ser. Mr. Holt filed suit to set aside the for eclosure sale on the ground of ina dequac y of price . The trial court r efuse d to set aside the sa le. Thi s co u rt reve rsed, r ely ing on e stablished prec edent that require d a court of equity to set aside a fore closure sa le wher e the price is so inadequate as to shock thec on sc ie nc e of

thec ou rt

. The Te nnessee Supreme Court g rante d permission to appea l and ruled that the “consc ience

shocking ” rule was im prac tical and should be abandoned. The court re asoned that the standard f or what mig ht shock the consc ience of the c ourt was so va g ue in theory and variable in p ra ct i ce that un de r t hat rul e no bu y e r o r s e lle r c ou ld f e e l c omf orta blewi th t itl e to r e a l e state a c qu ir e d at a fore closure sa le if the sale broug ht le ss than the appraised value of the prope rty

. Id. , 688 S.W .2d at 416. The c ourt ac cording ly announce d a new rule a s follows: “I f a f orec losure sale is leg ally

held, conduct ed an d consummated, ther e must be some evide nce of irreg ularity , misconduct, fraud, or unfairne ss on the part of the trustee or mortg ag ee that cause d or contributed to an inadequate price fora c our t o f equ it y t o s e t a sideth e sa le .” Id . (empha sis added).-5-

Mr. Smith poi nts out that the Holt v. Citizens CentralBank ho ldi ng did no t dea l di re c tly wi th the propriety of a defic iency judgme nt a fter a sale at fore closure, but only with wh at m i gh t be require d to se t the sale aside. He acc ording ly contends that it should notbe construe d as controlling authority for this ca s e. He a lso arg ues that whe re the orig inal owner purcha ses the prope rty

at fore closure f

or a fra ction of its actual va lue and is made whole by the purc hase, the court should not g rant h im an u nc on sc ion ablewi nd fa ll b y or de ri ng thede bto r t o p a y him a de fi c ie nc y

jud g me nt.
Mr . M a nf ul l arg ue s to thec on tr ary that Mr . Sm ith ’s arg ume nt h a s b e e n f or e c los e d b y

thi s c o u rt’ s o p in ion in McD ill C olumbus Corp. v. the Lakes Corporation, No. 03A01-9112CV00445, 1992 WL 115576 (Tenn. Ct. App. June 1, 1992) (pe rm. app. de nied Oct. 26, 1992) . I n that case , the holder of a

note had paid $700,000 at fore clos u re fo r a campg round complex, and sued for a defic iency

of almost $550,000 on the note. At trial, the debtor pre sented a n appraisal that valued the property at the time of forec losure at ove r $2 million. The proof also showe d that the cr editor offe red the property

for sale at a price of $1.9 milli on. The trial c ourt ruled in fa vor of the plaintiff and g rante d it a judgme nt f or the defic iency , acc rued interest, and expenses. On appe al, this court noted that the debtor

did not prove any fraud or bad faith on the part of t he creditor, and we c ited the rule set out in Holt v. Citizens CentralBank , supra, d ec l aring that the de cision in that case w as “broa d enoug h to embrac e the issues in the c ase at bar.” Mc Di ll , 1992 WL

115576 at *2.
Howeve r, Mr. Smith counters by citing another opinion of this court which a ppear s to retre at from our holding in McDi ll , at least in part. B& H Inve stments v. Brooks , No. W1999-01252-COAR3-CV, 2000 WL

1141566 (Tenn. Ct. App. Aug

. 10, 2000) (no Tenn. R. App. P

. Rule 11 application filed) involved a

debtor who bor

rowe d ab o ut $20,000 to purchase a piec e of pr operty . After he defaulted on the note, the c redit o r fo rec losed and purc hased the property itself for $6,000. The cre ditor then alleg edly

sold the property for $18,000 and subsequently obtained a $16,000 de ficienc y judgme nt ag ainst the debtor in the trial court. Be cause the rec ord was incomplete, we rema nded the case to the trial court f

or a de termination of whe ther the pr operty was a ctually

sold, and if so for w hat price

. I n doing so, w e cited our holding in Mc

Di ll , that if a c ontrac t so permits, a cre ditor will be a llo we d to re c ou p a

de fi c ie nc y

a s a m att er of

le g a l rig ht “ un le ss the reis b a d f a ithor fr audin connec tion with the forec losure.” H oweve r, we went on to say that “. . . the c o urt disfavors defic iency judgme nts w hen the party has bee n made whole and see ks a windfa ll.” B&H I nv e stm e nts at *2 (citing the case of Un ion J oin t Sto c k Lan d Ba nk

of L ou isv ill e v . Kn ox

Cou nty , 97 S.W .2d 842, 846 (Tenn. Ct. App. 1936).
Mr . Sm ithis a sking thi s c ou rt to t ake thene xt ste p a ndde c larethat it wo uldbe ina

pp ro priate for a court to aw ard a

defic iency

judgme nt under c ircumstance s that would unjustl y en ri ch the cre ditor. He re asons that it would not violate the Ho lt rule to disallow a deficienc y judgme nt where thefo re c los ing pa

rty do e s n ot n e e d s uc h a judg me nt t o b e ma de wh ole , o r w he reso me ir re g ula ri ty ou tsi de of the sa le its e lf wo uld make it ine qu ita ble fo r the c re dit or to re c e ive a wi nd fa ll. Mr . Sm ith arg ues that un d er t h e trial court’s interpre tation of the law, it mig ht be hy pothetically

possible for a c re dit or wh o w a s care fu l to make su re the fo re c los ur e pr oc e e din g wa s f re e of de fe c ts t o b id o nlyC our t s i n ot her j ur i s di ct i ons ha ve i nt er pret ed D u ke v. D a n i els as p er mi t t i ng t he i s s ue of t he va l ue of

forec l ose d 5 p ro p e rty to b e ra ise d in a d e ficie n c y ju d g m e n t ac tio n
. S e e , e .g ., F a y e tte C o u n ty N a tio n a l B a n k v . L ill y , 484 S. E. 2d 232, 2 3 8 (W

. V a. 1 9 9 7 ). O t he rs hav e c i t ed i t fo r estab l i shing a p resu m p t i o n that t he sales p rice i s fair, a nd the d eb t o r m ust sh o w gr o ss in a d e q u a c y to o v e rc o m e tha t p re su m p tio n
. Nat i onal Canada Cor por at i on , 868 P. 2d 1131, 1134- 35 ( Col o. C t

. A p p
. 19 9 3 ). T he co urt i n Nat i onal Canada al s o equat ed t he D uke hol di ng wi t h Col orado aut hor i t y t hat t he s al es pri ce i s co ncl usi ve unl ess t he d eb t o r p l ead s and p roves t hat t he sal e was “not co nd uct ed i n a s t ri ct l y f ai r manner” and i f t he sal e was unf ai r, t he am o unt of t he d ef i ci ency i s t o be de t erm i ned by t he f act f i nd er.

. -6- $1 for pr operty

worth $100,000 at the f orec losure sale , rec over the property , and also obtain a $99,999 defic iency

judgme nt ag ainst the debtor.
IV. R E QUI RE M E NT S F OR D E F I CI E NCY J U D G M EN TS A F T E R F OR ECLO SUR E S A LE
This court must follow the dictates of t he Te nnessee Supreme Court as se t out in Holt v. Citi zens Central Bank , s up ra . How eve r, we a g re e wi th M r. Smith th a t Ho lt addre ssed the re qu ir e ment s fo r s e tti ng a sid e a fo re c los ur e a nddidno t in vo lvea su it f or de fi c ie nc y

jud g me nt. Whil e the McDi ll

and B&H I

nv e stm e nts op ini on s a

repe rs uas iveauth ority , w e areno t bo un d to follow them. Tenn. R. Sup. Ct. 4 (H)(1).
Be fore deciding whether we should adopt the Ho lt ru le fo r de fi c ie nc y jud gment case s, there by ag ree ing w ith McDi ll , or establish some other standard such as those used in other states, we think it prudent to identify what Tenne ssee law on this subjec t was prior to Holt. Th a t e xer c ise wi ll tell us what the law c urre ntly is if Ho lt ma de no c ha ng e in the la w o f d e fi c ie nc y jud g me nts

. Prior to Ho lt , the re levant rule s o n defic iency judgme nts after

a for eclosuresale of r eal property wer e: (1) the value of the property sold is not looke d to in a defic iency case unless there is a cha rg e of f raud in the ma nner of

sale or a char g e that the sa les price was grossly inadequate; (2) in the absenc e of an alleg ation of irre g ularity in the sale, there is a presumption that the price broug ht at the public sale is the fair marke t price of the prope rty ; and (3) w here g ross inadequa cy is claimed, the burde n of overcoming the presumption attache d to a sale fre e of irreg ularity is on the defe ndant ag ainst whom a deficiency judgme nt is sought. Du k e v . D an ie ls , 6 60 S.W. 2d79 3, 79 5 ( Te nn . Ct

. App. 1983).
Th us , a de bto r c ou ld r a ise the iss ue of ina de qu a c y

of thefo re c los ur e sa le s p ri c e a s a de fe ns e to an ac tion to collect the diffe renc e betwe en the amount owed and the fore closure pr ocee ds. I n that situation, the issue befor e the court is “ the value of the re al estate at the time of the f orec losure.” Id ., 660 S.W .2d at 794. What the Duke opinion make s clea r, howe ver, is that ther e ar e ce rtain g uidelines that must be applied by

the court, inc luding the presumption that attache s wher e the defe ndant does no t alle g e a ny ill e g a lit y , fr aud or imp ro prie ty in the ma nn e r o f the sa le . N on e the le ss, thede bto r i s entitled to present e vidence about the fair marke t value of the property at the time of the sa le so as to attempt to overcome the pre sumption and prove that the sa le price was g rossly inadequate. 5A ltho u g h it is no t en tire ly cle a r, it a p p e a rs tha t t h e ina d e q u a c y o f t h e fo re c lo su re sa le s p r ic e w a s r a is e d in 6

co nnect i o n wi t h an argument t o s et asi d e t he sal e. H o wever, t he co urt d i d no t p l ace t he co m m ent s q uo t ed i n t he co nt ext o f a g ro u n d fo r se tti n g a sid e the sa le a s d isting u ish e d fro m a re a so n to re d u c e o r d e n y a d e ficie n c y ju d g m e n t.

For ex amp l e, i n a ca s e f ocus i ng o n dam age s su s t ai ned t hr ough mi s r epre s ent at i on i n t he pur cha s e of a h om e, 7
t h i s c ou r t c i t ed D uke fo r t he p rop o si t i o n t hat the f o recl o sur e b i d , a b sent any i rr egul ari t y i n t he fo recl o sur e i t sel f , i s t he b e st e v id e n c e o f va lue a t t h e ti m e o f t h e sa le

. P erry v. F l a t f o rd , N o
. 0 3 A 0 1

- 9 6 0 9

- C H

- 0 0 3 0 5 , 1 9 9 7 W L 4 4 4 3 8 (T enn. C t

. Ap p. Feb. 5, 199 7) ( perm. app. deni ed Jun e 30, 199 7). T he co urt added, “ I t i s wel l

- ni gh conc l us i ve. ” Id

. , a t * 3. In Al bi n v . U ni on Pl ant er s Nat i onal Bank , 66 0 S.W

. 2 d 78 4 , 78 6 (T enn. C t

. A p p
. 19 8 3 ), t he m ast er and t ri al co urt d et erm i n ed t h at t h e for ec l os u r e s al es pr i ce wa s t h e f ai r mar k et v al u e, an d al t h ou g h t h e opi n i on does n ot d et ai l t he
e v id e n c e b e lo w , i t re m a rk s th a t th e re c o rd o f p ro o f o n a ll the issu e s w a s v o lum ino u s a n d tha t no n e o f t h e m a ste r’s f i nd i ngs were p reci p i t o usl y m ad e. I n holdi ng t hat t he t ri al co urt was not requi red t o hear evi d ence o f a l at er s al e o f

t he propert y b y t he forec l osi ng l ender , t hi s cour t s t at ed s uch ev i dence woul d onl y be mat er i al i f t he forec l osu r e s al e pr i ce had been s o l ow as t o s hock t he cons ci enc e. Id. -7- The principles set out in Duke arec on sis te nt w ithe arl ie r c a se s, su c h a s Erwin Nat. Bank v. Ri dd le , 79 S.W .2d 1032 (Tenn. Ct. App. 1934), w here in t h e co u rt h el d t hat the dec ree of the trial court operated to g ive the debtors cre dit f or the approximate value of the prope rty at the time of sale

. Id ., 79 S.W .2d at 1041. The c ourt discussed the pr oof of marke t value conside red by the trial court a nd its re so lut ion of the matte r by pe rs ua din g the le nd e r to re du c e its de fi c ie nc y jud g me nt r e qu e st. Id. , at 1040-41. Er

win wa s a def

ic ie nc y jud g me nt ca se wh e re no c ha lle ng e to the c on du c t of thesa le was made . Its primary re l evanc e is that the court allowed proof as to the fair marke t value of the pr op e rty , a s d ist ing uis he d f ro m th e a mou nt p a id f

or thepr op e rty at th e for e c los ur e sa le , s o a s to decide the proprie ty

of the a mount of the defic iency judgme nt.
Simi larly , in Brown v. Eck hardt , 129 S. W

. 2d 1122 (Tenn. Ct. App. 1939), the trial court he ardfr om m a ny

wi tne sse s, inc lud ing app raise rs , a s to the va lueof there a l pr op e rty

a s o f the date of the for eclosuresale. That proof was rele vant bec ause the debtors alleg ed that the amount bid by the cr editor at the f

orec losure sale was inade quate and “[t] he inadequa cy , if any , must be determined on theba sis of the re a l va lue of the la nd a t the tim e of the sa le a ndits re latio n to thetot a l de bt a g a ins t the prope rty ” in the purc haser ’s hand. Id ., 129 S.W .2d at 1128. 6
Whil e the standa

rd set out in Du k e v . D an ie ls has bee n expressed in diffe rent way s, no court 7 has direc tly

overr uled it. I n Orlando Residenc e, Ltd. v. Nashville Lodging C o. , 104 S.W .3d 848, (Tenn. Ct. App. 2003), which wa s not a defic iency judgme nt action pe r se , this court cited both Duke
v . D an ie ls and Ho lt for the proposition that conclusive ef fec t is given to the f

orec losure sale price absent some e vidence of “irr eg ularity , misconduct, fraud or unfairness on the pa rt of the trusteeor mortg ag ee.”
V. A N A L Y SIS
We h a ve c on c lud e d th a t Ho lt did not addre ss the def

iciency judgme nt situation and did not mention Du k e v . D an ie ls or any other de ficienc y

judgme nt case , and t h er e i s no other contr olling authority that chang es the rule s expl ained in Duke

. Con se qu e ntl y , th e qu e sti on we mus t de c ideis whether to adopt the McDi ll statement that the Ho lt rule should be applied to actions for de ficienc yT he part i es ha ve mad e s om e a r gu ment s bas ed on aut hor i t y f r om ot her s t at es , and we hav e c onduct ed r es ear ch 8 into the q u e stio n o f ho w o the r sta te s a p p ro a c h d e ficie n c y j u d g m e n ts, ha v ing b e e n info rm e d tha t T e n n e sse e w a s n o t i n t he major i t y ( i f

t he H o lt ho l d i ng ap p l i es t o de f i ci ency judgm ent s)

. W e wi l l dis cuss t ho se f i nd i ngs l at er. -8- j u d gm en tas we l l as ac t i o n s t o s etas i d e afo re cl o s u re s al e, t h er eb y o v erru l i n g Du k e v . D an ie ls. Even if we de cide not to follow McDi ll , we ca n also consider whether to adopt a rule from anothe r jurisd ic tio n th a t mo dif

ie s Du k e v . D an ie ls

. 8 We beg in with the Ho lt

decision itself. Ther e ar e a numbe r of important re asons t o limit the bases upon whic h a foreclosure sale may be set aside. Traditionally , the courts have imposed hig her bu rd e ns up on pa

rt ie s se e kin g to re sc ind a

de e d o r o the r t

rans a c tio n o r t o s e t a sid e or va ry thete rm s of re corde d instruments. The Court in Ho lt was pa rticularly conce rned w ith the vag ueness and varia bilityof the old rule and in providing a g reater de g ree of reliability and certainty to parties who pu rc ha se d landa t a

fo re c los ur e sal e. Th os e re a so ns do no t app ly wi th e qu a l f

or c e to a po stfo r e c los ur e su it f

or de fi c ie nc y

jud g me nt w he rethec re dit or wa s th e on ly

bid de r at th e fo re c los ur e sa le and no parties are involved in the defic iency action other

than the cr editor and de btor. Additionally , the Ho lt

rule spea ks in terms of “irr eg ularity , misconduct, fraud, or unfair ne ss on the part of the trustee or mortg ag ee.” (empha sis added) See also O r l a n d o Residenc e, Ltd. 104 S.W .3d at 855 (including unfairn ess on the part of the mortg ag ee a s a basis for avoiding the conclusive e ffe ct of the sa les price ). In states where fa i rn es s of the sale or unfair ac tions bythe c re dit or c a n b e raise d in def

e ns e of a de fi c ie nc y

jud g me nt, thefo re c los ing c re dit or ’s failu reto b id the fa ir value may

be a f actor in determining unfairne ss. NationalCanada Corporat ion , 868 P.2d 11 31 , 11 34 -35 (Co lo. Ct. Ap p. 19 93 ) ( ho ldi ng that un de r C olo ra do auth ority thesa le s p ri c e is c on c lus iveun le ss the de bto r p leads a ndpr ov e s th a t th e sa le wa s “ no t c on du c te d ina stric tly fair manner ,” and a cr ed itor’s failure to bid the fair va lue tog ether with other fa ctors may

be evide nce of unfairness).
Absenc e of irr eg ularity

in the conduct of the sale may be a g ood rea son to refuse to set aside a for eclosuresale, e specia lly in view of the ot h er i n t er es t s that may have attached a fter the sale. Howeve r, unfairness in the conduc t of the sale is not the onlykind of unfairness that may result from a for eclosuresale to the c reditor who w as the sole bidder

. That si tuation cre ates the possibi lityof unfairne ss in the price that is bid, no m atter how strictly the technica lities relating to a fore closure sale a re f ollowed. Thus, allowing a debtor to r aise the ina dequac y of the sale price , as an indication of un fairne ss o n th e pa

rt of the mortg a g e e , is not inc on sis te nt w iththequ ote d lang ua g e fr om Ho lt or contra dictory

to its goals. The g oal of fairness underlies the defic iency judgme nt approa ch take n by the Restatement (Third), w hich is based on determination of t he fair m arke t value of the land, bec ause that approa ch:

. . . e na ble s the mo rt gag e e to b e ma de wh olewh e rethemortg a g e d r e a l e state is ins uf fi c ie nt t o s a tis fy

themortg a g e ob lig a tio n, bu t at the sa me tim e pr ote c ts a g a ins t the mo rt gage e purchasing the prope rty at a de flated price, obtaining a def iciencyF o r e x a m p le , u n d e r T e x a s la w , a p a rty a g a ins t wh o m a d e ficie n c y ju d g m e n t i s so u g h t m a y m o v e the c o u rt to 9 det er mi n e t h e f ai r ma r k et v al u e of t h e r ea l pr oper t y a t t h e t i me of t h e for ec l os u r e s al e. V

. T

. C. A. Pr oper t y Code S ec t i on 5 1

. 0 0 3

. I f

t he co urt f

i nd s t hat t he f ai r market val ue was great er t han t he fo recl o sur e sal e p ri ce, the d eb t o r o r deb t o rs are ent i t l ed t o a n off s et aga i ns t t he def i ci enc y , i n t he amo un t by whi ch t he f ai r mark et val ue exc eeded t he s ale pri ce. V

. T

. C

. A

. P rop ert y C o d e Se ct i o n 5 1

. 0 0 4

. U nd er N o rt h C aroli na l aw, where t he ho l d er of a s ecured ob l i gat i o n s el l s t he
re a l p ro p e rty a t fo re c lo su re a n d b e c o m e s the p u rc h a se r o f th e s e c u re d p ro p e rty a t t h e fo re c lo su re sa le , t h e m o rtg a g o r is all o w ed t o p ro ve the re aso na b l e v alue o f t he fo rec l o sed p ro p erty, an d t o use su ch va l ue as a d efen se in d efi cien cy suit s. (c o n tinu e d ...) -9- judgme nt and, by

rese lling the r eal e state at a profit, a ch i ev ing a

rec overy that e xce e ds theob lig a ti on
. Th us , it is aime d p ri mari ly

a t pr e ve nti ng theun

jus t enric hment of t h e mortgag ee. T his section also protec ts the mortga g or fr om the harsh c onsequenc es of suff ering both the loss of the rea l estate and the burden of a defic iency

judgme nt that does not fairly rec og nize the value of that rea l estate.
R ES TA TEM ENT OF THE LAW (T H I RD ) O F P R OP ER TY (M ortg a g e s) § 8 .4 , c omm e nt a. The fairness conc ept has be en incor porate d in other situations involvi ng fore c losure sale , and courts haveadopted r

ules to protect de btors from unfairness in a c reditor pur chase at fore closure and to pr event the cre ditor from rec eiving a double rec overy
. See P enn Mutual Life Ins. Co. v. Cleve land Mall Associates , 916 F. Supp. 715, 716-17(E.D

. Tenn. 1996); W hitestone Savings and Loan Assoc. v. Allstate Ins. Co. , 270 N.E.2d 694 (N.Y . 1971). This court ha s stated:
Pr op e rty sh ou ld b ri ng its fair

mark e t va luea t for e c los ur e sa le s. Mo rt g a g e e s w ho bid in the pr op e rty fo r the fu ll amou nt o f the de bt mus t ha ve de te rm ine d th a t th e pr op e rty wa s worth at least as much as the de bt since re asonably prudent lende rs would not pu rc ha se pr op e rty

fo r m or e than it s f

a ir mark e t va luea ndwo uldno t impr ud e ntl y relinquish their rig ht to pursue a de ficienc y ag ainst t he mortg ag or. Allowing mortg ag ees to purc hase pr operty for the f ull amount of the debt t o as s er t that the property is actually

worth less than their bid unde rmin es the integ rity of the fore closure sa le itself and c reates the po s s ibilit y of fr aud or of

a double r ecove ry w h e n t h e m o rt g a g e e s e e k s t h e p r o c e e d s o f a n y i n s u r a n c e o n t h e p r o p e rt y.
First Investme nt Co. v. Allstat e Ins. Co. , 917 S.W .2d 229, 231 (Tenn. Ct. App. 1995). Although the fac tual situation addressed in First Investme nt Co. is differe nt from that i n d eficiency judgme nt situations, the goa l of fairness should apply equally to both sit uations.
I n addition, Mr. S mith makes another arg ument on the basis of the Ho lt decision itself. He observe s that in r ejec ting the “consc ience -shocking ” standard, the Ho lt court adopted a rule that had previously

been e nunciated by the courts of Texas and North Car olina. See J ink ins v . Ch am be rs , 522 S.W. 2d61 4 ( Te x. Ap p. 19 81 ); Swindell v. Ove rton , 302 S.E.2d 841 (N.C. App. 1 9 8 3 ), an d cited those opinions with approval. He asserts that in both t hose states, howe ver, the kind of defic iency judgme nt gr anted in this case would have been prohibited by operation of other features of the law, sp e c if ic a lly statut e s. 9(

. . . con t i n u ed) 9 N

. C

. G

. S.A

. Secti o n 45

- 2 1

. 3 6

. M o st s i gni f i cant l y , how ever, where a fo recl o sur e of m o rt gaged pro p ert y i s fo r t he
r ema i n i n g ba l an ce on a n ot e ex ec u t ed as pa r t of a pu r ch as e mon ey t r an s ac t i on , “ t h e mor t g ag ee or t r u s t ee or h ol der of t h e n ot e s s e c u r e d b y s uch mo r t g a g e or de e d o f t r u s t s h a l l n ot be e n t i t l e d t o a de f i c i e n c y j u dg me n t

. . . . ” N. C. G

. S. A. Sect i on 45- 21

. 38

. A ccor di ng t o M r
. Smi t h, N ort h Car ol i na r ecogn i zes t hat pur cha s e money l oans ar e di f fer ent f r om ot her lo a n s se c u re d b y re a l es ta te b e c a u se the va lue o f the p ro p e rty is e v id e n c e d b y the a rm s-len g th tra n sa c tio n giv ing rise to t he l oan. Si nce t he pres ent ca s e ar ose f r om a pur cha s e mo ney t r ans act i on, he ar gu es t hat i f t hi s ca s e h ad been t r i ed un der N o rth C a ro lina law M r. M a n full w o u ld ha v e b e e n fo u n d to ha v e no c a u se o f ac tio n a g a ins t him a t all.

-10- We h a ve c on c lud e d th a t Ho lt do e s n ot g ov e rntheis su e in thi s c a se . We a lso re sp e c tf ull y decline to a dopt the McDi ll holding that the Ho lt opinion was “broa d enoug h to embrac e the issues in the c a se a t ba

r. ” To thee xten t McDi ll can berea d to impose lim itations on defense s to deficienc y actions that ar e g reater than those e nunciated in Du k e v . D an ie ls , we must also disag ree with that ho ldi ng a nd de c lin e to a do pt i t he re in. I ns te a d, we c on c lud e that Du k e v . D an ie ls se ts o ut the we ll established law in this are a, and the principles discussed t here in apply to resolution of the c ase be fore us.
We see no ne ed to attempt to alter or tweak the Du k e v . D an ie ls standards. That appr oach is simi lar to the one adopted by the R estateme nt of t he L aw of Property . The a

pplicable Restate ment pr ov isi on de fi ne s th e de fi c ie nc y a s th e dif

fe re nc e be tw e e n th e mortg a g e ob li gati on a ndthe“ fair value” of t he for eclose d rea l estate. R ES TA TEM ENT OF THE LAW (T H I RD ) O F P R OP ER TY (M ortg a g e s) § 8.4, Reporter ’s No t e to C omment a. The se ction on actions for defic iency

afte r for eclosure pr ov ide s: (a ) If t h e f

o re cl o s u re s al e p ri ce i s l es s t h an t h e u n p ai d b al an ce o f t h e m o rt gage o b ligation, an action may be broug ht to recove r a de ficienc y judgme nt ag ainst any person who is pe rsonally

liable on th e m o rt gage oblig ation in acc ordanc e with the provisions of this section. (b) Subject to Subsec tions (c ) and (d) of this section, the defic iency judgme nt is for the amount by

which the mortg ag e oblig ation exceeds the f orec losure sale price

. (c) Any person a g ainst whom such a r ecove ry is so u gh t m ay request in the pr oc e e din g in wh ic h th e a c tio n f or a de fi c ie nc y

is p e nd ing a

de te rm inatio n o f the fair marke t value of the rea l estate a s of the date of the for eclosuresale. (d ) If i t is de te rm ine d th a t th e fair mark e t val ueis g re a te r tha n th e fo re c los ur e sa le pric e , th e pe rs on s a g a ins t w ho m r e c ov e ry of thede fi c ie nc y

is s ou g ht are e nti tle d to an off set ag ainst the defic iency in the amount by which the f

air mar ket value, le ss the amount of any

liens on the real estate that wer e not ex tinguished by the fore closure, exceeds the sa le price

.W e d o no t p u rp o rt to a d o p t the R e sta te m e n t, b u t m e re ly p o int o u t tha t T e n n e sse e law is no t i n c o n siste n t with 10 its m a jo r p ro v isio n s.
T he R es t at ement al s o def i nes f ai r mark et val ue as s peci f i cal l y exc l udi ng t he i mp act of t he f o rec l osu r e. 11 R EST ATEM ENT O F THE L A W (T HI RD ) O F P R OP E R T Y (M o rtg a g e s) § 8 .4 , co m m e n t c ( D ef i n i n g ‘f a i r m a rketva l u e’) , wh i ch may be d i f

fer ent f r om t he approach t ake n by T enn es s ee cour t s , whi ch ha ve s peci f i cal l y r ecogn i zed t hat pri ces at force d
sa le s a re fre q u e n tly lo w e r th a n if a vo lun ta ry sa le ha d b e e n ne g o tiate d

. See H ol t v . Ci t i z ens Cent r al Bank , 688 S. W

. 2d at 416. -11- R ESTAT EMENT OF THE LAW (T H I RD ) O F P R OP ER TY ( M o rtg a g e s ) § 8

. 4 ( F o r e c lo s u r e : A ction for a Def iciency ). 10
The Restate ment provision differ s from the Du k e v . D an ie ls a na ly sis in that it do e s n ot u se the fore closure sa les price as t he beginning point and the presumptive fair marke t value. Whatever 11 proce dural rule s or burdens of proof apply , under both analy ses t he is sue i n defic iency actions is the fair ma rket va lue of the pr operty

at the time it was sold. Thus, the fundamenta l principle is that the d ef i ci ency judgme nt should reflec t the differ encein the fair ma rket va lue, if it is gr eate r than the sales pric e, and the amount still owed. We think this principle is well-g rounded and promotes the g oa l of fairne ss.
Further, a lthough

o th e r a p p r o a c h e s ma

y be used, inc luding those imposed by statute, we think the use of the sales pric e as the presumptive fair value, with the debtor having the burden of raising its inadequac y

and over coming the pre sumption by proof is also sound. As indi cate d, the appr oach to d efic iency

judgme nts varies a mong the states. The dr afte rs of the R ES TA TEM ENT OF THE LAW (T H I RD ) O F P R OP E R TY have c ompiled those varianc es and ex p l ai n ed t h em, and wecopy that explanation here sinceit fullyand ac curately cover s the are a:
Se ve ra l st a te s c on tin ue to a dh e reto the c omm on -l a w r ulethat w he n a for e c los ur e sa le do e s n ot yie ld at le a st the a mou nt o f the mortga g e ob lig a tio n, themortg a g e e is entitled to a def

iciency judgme nt measure d by the differ ence betwee n the fore closure pric e a nd the mortg a g e ob lig a tio n. Un de r this app ro a c h, thefo re c los ur e sa le pric e is the c o nclusive mea sure of the amount to be applied to the oblig ation unless the mortg ag or can prove that the fore closure pr ocess itself wa s defe ctive. See , e.g. , New England Sav. Bank v . Lopez , 630 A.2d 1010 (Conn.1993) (powe r of sale fore closure on ly ); Ga rla nd

v . H ill , 3 57 A. 2d37 4 ( Md .1 97 6) ; Drannek Realt y C o. v. Nathan Frank, Inc

. , 1 39 S.W. 2d92 6 ( Mo .1 94 0) ; Lindell Trust Co. v. Li eberm an , 825 S.W .2d 35 8 (M o. Ct . App.1 99 2) ; Rhode Island De positors' Economic Protection Corp. v. Macom ber , 6 58 A. 2d 51 1 (R . I . 1 99 5) ; McD ill C olumbus Corporati on v. The Lakes Corp. , 19 92 WL 11 55 76 (T e nn . Ct . A pp .1 99 2) ; Fi tc h v . B uff alo Fe de ra l Sa v ing s & Lo a n A s s 'n , 7 51 P.2 d 1 30 9 ( Wy o. 19 88 ); Abrams v. Fe dera l De p o sit Ins. Corp. , 5 F .3 d 1 01 3 ( 6thCir .1 99 3) (K e ntu c ky ); Re so lut ion Tru st Cor p. v . Ca rr , 13 F.3d 425 (1st Cir.1993) (Massa chusetts). Cf. Resolution T rust Corp. v. Holtzman , 618 N.E.2d 418 (I ll. App. Ct. 199 3 ) (f o reclosure sale should be confirmed and de ficienc y-12-

judgme nt entere d unless "the terms of s al e were unc onscionable, . . . the sale wa s conducte d fraudulently

or . . . justice wa s not otherwise done .")

. At theop po sit e e xtre me , s omestate s flatly pr oh ibi t def ic ie nc y jud g me nts in c e rt a in contexts. S ome statutes bar a defic iency judgme nt a fter a power of sale for eclosure

. See Alaska Stat. 34.20.100; Ariz. Rev. Stat. § 33-814(E) ; West’s Ann. Cal. Code Civ. Proc. § 580(d); Mont. Code Ann. § 71-1-317; W ash. Rev. Code Ann. § 61.24.010, 040, 100. I n addition, severa l state statutes prohibit a def iciency judgme nt after

the fore closure of a pur chase money mortg ag e. See Ar i z
. R ev
. S t at

. § 3 3 -7 2 9 (A ); W es t 's An n. Ca l. C od e Civ . Pr oc . § 58 0( b) ; Mo nt. Cod e An n. § 71- 1- 23 2; N .C. Ge n. Stat. § 45- 21.38; Or. Rev. Stat. § 88.070; So. Dak. Cod. L aws §§ 44-8- 20 to 44-8-25. A few of these states apply the def iciency proh i bition to vendor purcha se money mortg ag ees only

. See Mont. Code Ann § 71-1-232; N.C. Ge n. Stat. § 45-21.38.
The Uniform L and Securi t y I n t erest Act (UL SI A), promulg ated by the National Confere nce of

Commi ssioners on Uniform State L aws in 19 85, permits defic iency judgme nts in g ener al, but prohibits them as to purchase money mortg ag es g iven by mortg a g or -o c c up a nts of

re sid e ntial real e state to v e nd or s o r thir d p arty le nd e rs
. UL SI A § 511(b). See Mix on and Shepar d, Antideficie ncy Relief for

For eclose d Homeowne rs: UL SI A Section 511(b), 27 Wake F. L . Rev. 455 (1992). This section not only

reje cts ea ch of the fore g oing limitations on deficienc y judgme nts, but also the traditional common-law view that the fore closure sa le price should be automatica lly

applied in measurin g defic iency judgme nts. I nstead, the section adopts the approa ch of the num erous states that throug h leg islation or judicial decision def

ine the def

iciency as the diff

ere nce be tween the mortg ag e oblig ation and th e “ f a ir v a lu e ” o f

th e f o r e c lo s e d r e a l e s tate. See Ariz. Re v. Stat. § 33 -8 14 (“ fair mark e t va lue ” a s o f the date of sa le ); Wes t' s A nn . Ca l. C od e Civ . Pr oc . § § 5 80 a (“ fair marke t value” a s of date of sale in powe r of sale for eclosure ), 726(b) (“f air va lue” a s of sale date in judicial fore closure) ; Colo. R ev. Stat. Ann. § 38- 38-106 ( “fair marke t va lue ” ); Conn. Ge n. Stat. A nn . § 49 -1 4( a ) ( “ a c tual va lue ” a s o f d a te tit le ve ste d in mortg ag ee in strict f

orec losure); Ga . Code Ann. § 44-14- 161 (“truemarke t value” a s of sale date); I daho Code § 6-108 (“ rea sonable va lue”) ; Kan. Stat. Ann. § 60-2415 (“f air va lu e” ); M e. R ev. Stat. Ann. tit. 14, § 6324 (“fair marke t value” a t time of sa le ); Mic h. Comp. L a ws An n. § 6 00 .3 28 0 (“ true va lue ” a t ti me of sa le ); Min n. Stat. An n. § 5 82 .3 0, su bd . 5 (a ) ( “ fair ma rk e t va lue ” ); Ne b. Re v. S tat. § 7 6- 10 13 (“ fair marke t value” a s of sale date); Ne v. Rev. Stat. §§ 40.455-40.457 (“f air mar ket value” as of sa le date) ; N.J . Rev. Stat. § 2A:50-3 (“f air mar ket value” ); N.Y. Real Prop. Acts. § 1371 (“fair and rea sonable mar ket value” as of sa le date) ; N.C. Gen. Stat. § 45-21.36 (“ true va lue” a s of sale dat e) ; N.D. Cent. Code §§ 32-19-06, 32- 19-06.1 (“f air value” ); Okla. Stat. Ann. tit. 12, § 686 (“f air a nd rea sonable mar

ket value” as of sale date) ; Pa. Stat. Ann. tit. 42, § 8103 (“fair ma rket va lue”) ; S.C . Code Ann. § 29-3- 7 0 0 e t s e q
. ( “ tr

u e v a lu e ” ) ; S

. D

. Co d if

ie d L a w s A n n
. § 2 1

- 4 7

- 1 6 ( “ f a ir a nd-13-

re a so na bleva lue ” ); Te x. Pr op . Co de An n. § 5 1. 00 3 ( “ fair ma rk e t va lue ” a s o f s a le date) ; Utah Code Ann

. § 57-1-32 ( “fair marke t value”) ; Wash. Rev. Code Ann. § 61.12.060 (“f

air va lue”) ; Wi s. Stat. Ann. § 846.165 (“fair value” ).
A fe w states appe ar to ha ve adopted the fair value approac h throug h judicial decision. Florida courts havesignific an t flexi bilityin determining whether to use the fore closure price or

the fa ir marke t value in measuring the defic iency

. See Fi rst Un ion Nat ion al B an k

of F lor ida v . G oo dwi n B e ac h P ar tne rsh ip , 644 So.2d 1361 (F la . D ist . Ct . A pp .1 99 4) ; Howell v. Gaines , 608 So.2d 64 (Fla. D ist. Ct . App.1992); Mizn e r B an k

v . A dib , 588 So.2d 3 2 5 (F la. Dist. Ct. App.1991) (party seeking d ef i ci en cyj u d g m e n tm u s tp re s en tco m p et en tev i d en ce t h att h e m o rt gage indebtedness e x cee ds the fair marke t value of the property ); G. N EL S ON & D. W HI TMAN , R EA L E S TA TE F I NAN CE LAW § 8.3 (3 d e d. 19 94 ). B ut see Fe de ra l D e po sit Insurance Corp. v. H

y Kom De velopme nt Co. , 6 03 So. 2d59 (F la . D ist . Ct

. App.1992) (de ficienc y

judgme nt based on for eclosur e sale price “is the rule r ather than th e e x cept ion ” un le ss f ra udor oth e r i ne qu ita

blec on du c t in fe c ts the sa le proce ss). I n Mississ ippi, in a deficie n cy p ro ce eding , the mortg ag ee “ must give the debtor fair cre dit f

or the commerc ially rea sonable va lue of the c ollatera l.” Shutze v. Credithrif t of America , 607 So.2d 55, 65 (Miss.1992). The Montana Supreme Court has used its inhere nt equitable powe rs to requ i re that fair mar ket value of

the fore closed re al estate be the measurein a def iciency proce eding

. See Trustees of the W as h. -I da ho -M on t.- Car pe nte rs- Em

ploy e rs R eti re me nt T

ru st Fun d v . G all e ria Pa rtn e rsh ip , 780 P.2d 608, 614 (Mont. 1989) (“When the f air mar ket value of property is deter m i n ed by

the District Court, that fig ure w ould be the basis of a defic iency

judgme nt, if any ”). V ermont, a stric t forec losure state, r equire s that the value of the fore closed re al estate be applied to the mortga g e oblig ation. See Lic ur si v. Swee ney , 594 A.2d 396, 398 (Vt.1991) ( The prope rty was va lued by

the court far in excess of the amounts owed. T here is n o d eficiency , and the plaintiff c annot rec over)

. R ES TA TEM ENT OF THE LAW (T H I RD ) O F P R OP E R TY § 8.4, Reporter ’s Note to Comment a.
We se e no rea son to modify or twea k the holding of Du k e v . D an ie ls in light of the va rying approa ches survey ed. Consequently , we hold that the t rial court should have applied t he ana ly sis set out in Du k e v . D an ie ls to the defic iency action below.
VI . R ESULT
Mr . Sm ithraise d a s a de fe ns e the a lle g a tio ns that (1 ) the fo re c los ur e sa le s p ri c e wa s g ro ssl y ina de qu a te a nd(2 ) t

hat th e c re dit or

un fair ly bidthat lo w p ri c e , a c qu ir e d the la nd , a ndso ug ht a defic iency

judgme nt that would inequitably provide him a windfall. Accor ding to Duke v. Daniel , Mr. Smith t hen had the burden of overc oming the pr esumption that the price w as fair. D uke v

. Da nie ls , 6 60 S.W. 2da t 79 5. We thin k th e mate ri a l hepr ov ide d insu pp ort of his op po sit ionto-14-

su mmary j u d g m e n t r a i s e d a d i s p u t e o f f a c t a s t o t h e a c t u a l f

a i r v a l u e w h i c h w a s s u f

f i c ie nt t o fore close summary

judgme nt for the c reditor. Ac cording ly , we rev er s e the g rant of summary jud g me nt. Cos ts o f this app e a l areta xeda g a ins t th e app e lle e s, Willi a m Manf ul, e t a l.

_____ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _______ PATRI CI A J . COTTRELL , J UDGE