Opinion ID: 2222275
Heading Depth: 1
Heading Rank: 9

Heading: Payment by Personal Check

Text: The trust deed required Ryberg to sell the property to the highest bidder for cash in lawful money of the United States. Cynthia argues that this provision precluded Ryberg from allowing Huber to pay by personal check. We agree that Ryberg erred in allowing Huber to pay by personal check, but we refuse to set aside the sale because Cynthia failed to show that the error caused her prejudice. Trust deeds are subject to the principles of interpretation and construction that govern contracts generally. See, Starcrest Trust v. Berry, 926 S.W.2d 343 (Tex.App. 1996); Cache Nat. Bank v. Lusher, 882 P.2d 952 (Colo.1994). Cf. County of Keith v. Fuller, 234 Neb. 518, 526, 452 N.W.2d 25, 31 (1990) (stating that rules governing the interpretation of contracts are applicable to mortgages). The terms of an instrument are to be accorded their plain and ordinary meaning as ordinary, average, or reasonable persons would understand them. County of Keith, supra . Cash is a fluid term, the meaning of which turns on the context in which it is used. See, e.g., Kutche Chevrolet-Oldsmobile-Pontiac-Buick, Inc. v. Anderson Banking, 597 N.E.2d 1307 (Ind. App.1992) (remanding for extrinsic fact finding to determine whether personal check was cash down payment as that term was used in installment contract on automobile); National Diamond Syndicate, Inc. v. UPS, 897 F.2d 253 (7th Cir. 1990) (holding that extrinsic evidence showed that cash only c.o.d. delivery contract allowed shipper to accept certified checks); Perry v. West, 110 N.H. 351, 266 A.2d 849 (1970) (holding that certified check was not cash as that term was used in notice of sale for municipal sale of property for failure to pay taxes). Within the context of foreclosure sales and analogous situations, courts have generally treated the term cash as including coins, currency, cashier's checks, or certified funds, but not personal checks. See, Boatmen's Bank v. Community Interiors, Inc., 721 S.W.2d 72 (Mo.App.1986); Greenberg v. Alter Company, 255 Iowa 899, 124 N.W.2d 438 (1963). This interpretation of cash balances the needs of the beneficiary and the trustor. It ensures that bidders are required to make payment in a manner that provides some guarantee of their ability to pay, which is advantageous to beneficiaries. But also, it does not require bidders to show up at the sale with a suitcase full of $20 billsan impractical limitation which would deter potential bidders from participating in the sale. Here, it is undisputed that Ryberg allowed Huber to pay the balance of his bid by personal check, and we agree with the district court that the sale did not strictly comply with the terms of the trust deed. But as we have set out above, and as the district court recognized, that does not end the inquiry. We must determine whether the error rendered the sale void or voidable. The error that Ryberg committed does not rise to the level of a fundamental procedural defect that would render a trustee's sale void. The question then is whether the error caused prejudice to Cynthia, thereby rendering the sale voidable. The prejudice which a party must show in seeking to establish a voidable defect in a trustee's sale varies depending upon the alleged defect. Here, the alleged error was how Ryberg managed the sale. Generally, when the defect was in the trustee's management of the sale, courts have focused on the effect that the defect had on the bidding. See, Coventry Credit Union v. Trafford, 764 A.2d 179 (R.I.2000); Country Express Stores v. Sims, 87 Wash.App. 741, 943 P.2d 374 (1997). If the defect did not result in a reduced sales price, courts have refused to set aside the sale. But when the defect chilled the bidding, i.e., deterred bidders from coming to the sale or deterred those bidders at the sale from bidding, courts have granted relief from the sale. See 12 Thompson on Real Property § 101.04(c)(2)(ii) at 404 (David A. Thomas ed.1994). Cynthia presented no direct evidence that Ryberg's decision allowing Huber to pay by personal check deterred bidders from coming to the sale or deterred those bidders at the sale from bidding. We recognize, however, that often it will be difficult to identify credible witnesses willing to testify that but for the trustee's error, they would have come to the sale and bid higher than the sale price. Thus, we conclude that the party seeking to set aside the sale need not necessarily present such direct evidence. Rather, the party may meet its burden by establishing that (1) the defect, by its nature, would have a tendency to result in a reduced sale price and (2) the sale price was inadequate. Here, Cynthia failed to show that Ryberg's decision allowing Huber to pay the balance of his bid by personal check was the type of defect which would have had a tendency to reduce the sale price. Requiring that the high bidder pay in cash protects the beneficiary by ensuring that a winning bidder is able to pay the purchase price so that a debtor cannot indefinitely frustrate a foreclosure sale. Boatmen's Bank v. Community Interiors, Inc., 721 S.W.2d 72, 77 (Mo.App.1986). But such restrictions on the method of payment tend to limit the amount of bidding, because as the terms of payment become less flexible, the field of potential bidders becomes smaller. Thus, when the trustee violates a cash-only requirement and allows bidders to pay by personal check or credit, the number of potential bidders grows, thereby increasing the possibility for a higher sale price. Thus, there is a greater chance that junior lienholders will be paid off or that the trustor will recover at least some of its equity in the property. See, Martin v. Lorren, 890 S.W.2d 352 (Mo.App.1994) (refusing to set aside sale when notice of sale called for cash sale, but successful bidder paid partly by check and partly by funds borrowed from creditor-beneficiary); Boatmen's Bank, supra ; Farmers' Sav. Bank v. Murphree, 200 Ala. 574, 575-76, 76 So. 932, 933-34 (1917) (stating that it is fully settled by our decisions, since the extension of credit to the purchaser rather tends to increase the number of bidders and enhance the price, that even a sale on credit, though expressly authorized for cash, is no ground for setting aside the sale). See, also, Adcock v. Berry, 194 Ga. 243, 21 S.E.2d 605 (1942). Having failed to show that Ryberg's decision allowing Huber to pay by personal check caused Cynthia any prejudice, she was not entitled to have the sale set aside.