Source: https://www.buckleybeal.com/blog/2014/july/wrongful-foreclosure-confirmation-and-debtors-re4/
Timestamp: 2019-04-25 15:46:15+00:00

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This post will provide an in depth analysis of what constitutes wrongful foreclosure and when a wrongful foreclosure claim may be brought. This article will examine the circumstances which give rise to a wrongful foreclosure claim, what the elements of such a claim are, what remedies a debtor may receive, and the requirements for proving a grossly inadequate price.
As discussed above, if a creditor has performed a sale of the foreclosed property in bad faith, a borrower may have a claim for wrongful foreclosure. This claim may be asserted "even though a debt is in default" and it may be based upon "fraud, intentional tort, negligence, breach of contract by the creditor, or intentional failure to comply with a statutory duty."
Specifically, where a lender does not comply with his statutory duty to sell the foreclosed property in good faith, "the debtor may either  seek to set aside the foreclosure or  sue for damages for the tort of wrongful foreclosure." However, it is important to note that the debtor "may not both set aside or cancel the foreclosure and also recover damages for the value of the property." In more simple terms, if the property has been wrongfully foreclosed, the borrower may either elect to have another foreclosure sale or seek monetary damages connected to the property value from the creditor, but not both. This being said, a debtor "may seek both cancellation of a foreclosure sale and recovery of damages unrelated to the value of the property, such as mental anguish arising from breach of other duties by the creditor." Thus, a borrower can potentially recover monetary damages and have the sale set aside.
Also, another possible claim is the intentional tort of wrongful attempted foreclosure, which "may be found where a creditor knowingly and intentionally published "untrue and derogatory information concerning the debtor's financial condition," and where "damages were sustained as a direct result of this publication," or where a creditor "knowingly and intentionally violates a notice provision in a deed, and sends letters threatening foreclosure to the debtor, resulting in damages for intentional infliction of emotional distress." However, this claim has a high burden of proof and is outside the scope of this article.
In a wrongful foreclosure action, the plaintiff is "entitled to recover the full difference between the fair market value of the property at the time of the sale and the indebtedness to the seller if the fair market value exceeded the amount of the indebtedness." Thus, if property sold for $10,000, the debt was $50,000, but the property was actually worth $70,000, the owner might be able to recover damages in the amount of $60,000 (which would be used to pay off the deficiency) if wrongful foreclosure was found. But if the property was actually worth $30,000.00, the owner would not be able to recover damages because the value of the property is still less than the debt. Rather, the difference would be applied to the debt.
While  and  are usually easy to satisfy,  and  are intertwined with one another and can be difficult to prove. Specifically, the debtor must show that the creditor's conduct has somehow resulted in an unreasonable lower property sale price and, as a result, "chilled the bidding" at the foreclosure sale. To succeed on a wrongful foreclosure claim based on the creditor's bid-chilling, the debtor must allege a causal connection between "(1) a grossly inadequate price [the damages] and (2) conduct that amounts to fraud, mistake, misapprehension, surprise or similar behavior [the breach of duty of good faith]."
When a creditor executes a foreclosure sale, "[a]ll that is required of [the creditor] is to advertise and sell the property according to the terms of the instrument, and that the sale be conducted in good faith." A "breach of this duty to conduct the sale 'fairly' gives rise to a claim for damages" to the debtor. As we have touched on previously, the two major ways improper foreclosure can occur are  inadequate advertisement of sale or  lack of good faith as shown in a grossly inadequate sale price. As, we previously covered the duties of a creditor in Wrongful Foreclosure, Confirmation, and Debtors' Remedies #2: A Creditor's Duties and so will now focus on how a court determines whether or not the price the property sold for is grossly inadequate.
To begin, it is important to keep in mind that as opposed to the standard in a confirmation hearing, "[i]nadequacy of price alone is insufficient to sustain a claim for wrongful foreclosure." In other words, failure to obtain the true market value of the property, standing alone, is not a breach of the duty of good faith. There needs to be some evidence of circumstances that reduce the price of the property's sale amount. These circumstances can be as simple as a misrepresentation in the advertisement or something as deliberate and fraudulent as actively concealing the sale from potential purchasers. However, not all mistakes result in a chilling of the sale price: "Errors that would not confuse the bidding intentions of any potential bidder of sufficient mental capacity to enter a binding contract for the sale of the real property do not show a chilling of the sale so that a fair market value bid was not obtained."
It is important to remember that though it seems counterintuitive that a creditor could both purchase the property itself (ideally at the lowest possible cost), while at the same time trying to reach the highest sale price possible (in good faith to the debtor), "there is no inherent limitation on the [creditor's] ability to purchase the property at the foreclosure sale so long as the security instrument expressly authorizes it to do so." For a more in depth look at an example of circumstances resulting in proof of a grossly inadequate price in a claim for wrongful foreclosure, see the next post in this blog series, Wrongful Foreclosure, Confirmation, and Debtors' Remedies #5: LSREF2 Baron, LLC v. Alexander SRP Apartments, LLC.
 LSREF2 Baron, LLC v. Alexander SRP Apartments, LLC, 1:12-CV-2545-AT, 2013 WL 8335728 (N.D. Ga. Feb. 13, 2013) (citing Brown v. Freedman, 222 Ga. App. 213, 215, 474 S.E.2d 73, 76 (1996) ("A claim for wrongful exercise of a power of sale can be asserted even though a debt is in default.")).
 Ga. Real Estate Finance and Foreclosure Law § 8:11.
 Calhoun First Nat. Bank v. Dickens, 264 Ga. 285, 285-86, 443 S.E.2d 837, 838 (1994).
 Id. (citing Clark v. West, 196 Ga. App. 456, 457, 395 S.E.2d 884 (1990)).
 Dickens v. Calhoun First Nat. Bank, 208 Ga. App. 489, 490, 431 S.E.2d 121, 123 (1993) (emphasis added).
 See LSREF2 Baron, LLC v. Alexander SRP Apartments, LLC, 1:12-CV-2545-AT, 2014 WL 1624088 (N.D. Ga. Mar. 31, 2014) for another example of damage computation.
 Id. (quoting Gregorakos v. Wells Fargo Nat. Assn., 285 Ga. App. 744, 647 S.E.2d 289, 292 (Ga.Ct.App.2007)).
 Discussed in Wrongful Foreclosure, Confirmation, and Debtors' Remedies #2: A Creditor's Duties.
 LSREF2 Baron, LLC v. Alexander SRP Apartments, LLC, 1:12-CV-2545-AT, 2014 WL 1624088 (N.D. Ga. Mar. 31, 2014) ("A claim of "chilling the bidding" arises from allegations that the foreclosing party's conduct (perhaps in combination with the conduct of others) suppressed the bidding at a foreclosure sale.").
 Brown, 222 Ga. App. at 215 (citing Kennedy v. Gwinnett Commercial Bank, 155 Ga. App. 327, 330(1), 270 S.E.2d 867 (1980)).
 Kennedy, 155 Ga. App. at 329.
 LSREF2 Baron, LLC v. Alexander SRP Apartments, LLC, 1:12-CV-2545-AT, 2014 WL 1624088 (N.D. Ga. Mar. 31, 2014).
 LSREF2 Baron, LLC v. Alexander SRP Apartments, LLC, 1:12-CV-2545-AT, 2013 WL 8335728 (N.D. Ga. Feb. 13, 2013).
 Ga. Real Estate Finance and Foreclosure Law § 8:6 ("The basic conceptual obstacle to a creditor purchasing the property at its own foreclosure sale lies in the proposition that a creditor has a duty, either as a trustee or as a fiduciary, to ensure the highest possible sales price, which duty is inconsistent with its own self-interest in purchasing the property at the lowest possible price.4 Georgia courts have directly addressed this issue on several occasions and consistently concluded that the creditor's only obligation is to conduct the sale fairly and in good faith.").

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