Opinion ID: 201972
Heading Depth: 3
Heading Rank: 3

Heading: SRC's Handling of the Micu Bid and Florence Offer

Text: 33 TAT argues that SRC violated its fiduciary duty by failing to facilitate the transfer of Micu's interest to Florence and failing to disclose the Florence offer to TAT. TAT alleges that Micu expressed the desire to assign her contract rights to another buyer through her phone message to Garrett and her signature on the sales contract as Linda Micu or Assigns. TAT argues that, given SRC's knowledge of Micu's alleged desire to assign, SRC should have assisted Micu in assigning her rights under the sales contract to Florence, or, at the very least, told TAT of Florence's offer. 34 We do not find any support in the record for TAT's contention that Micu expressed to SRC her desire to assign her rights. The fact that Micu signed the contract Linda Micu or Assigns does not constitute a request that SRC help her assign her rights to another party. Micu's telephone message, rather than being a request for assignment assistance as TAT contends, is merely notification of and an apology for her failure to complete the sale. Micu took no action at any time to assign her rights to a third party. 35 Generally, Massachusetts law requires sale of foreclosure property by public auction. Mass. Gen. Laws ch. 183, § 21. [I]n mortgage foreclosure sales, if the highest bidder fails to pay, the trustee of the property may declare that the next highest bidder may purchase the property, may resell the property promptly, or may readvertise the sale for another day. 146 Dundas Corp. v. Chemical Bank, 400 Mass. 588, 511 N.E.2d 520, 524 (1987). Courts have explained that efforts to resell the property promptly must take place at the public auction, not through a private sale which is not advertised to the public. See id. at 524 (collecting cases). After being notified of the Florence offer, SRC's attorney researched the issue and concluded, based on his interpretation of state law, that SRC could not accept Florence's offer because it was outside the foreclosure auction process. Less than two months after the first auction took place, SRC held the second foreclosure auction and sold the property to the highest bidder at the auction. Based on these facts, SRC did not violate its duty of good faith and reasonable diligence by failing to arrange a sale to Florence. 36 Nor did SRC violate its fiduciary duties by failing to discuss the Florence offer with TAT. A mortgagee's fiduciary duty to junior lienholders generally requires that the mortgagee inform parties whom it knows to be interested in buying the property of an upcoming sale. See Sandler, 198 N.E. at 751 (finding that failure to give notice of sale to a party with a pre-mortgage attachment who had expressed her intention to buy was evidence of bad faith); Danielczuk v. Ferioli, 7 Mass.App.Ct. 914, 388 N.E.2d 724 (1979) (finding disputed reasons for mortgagee's failure to meet with prospective bidder prior to foreclosure sale were material to question of compliance with fiduciary duties); see also In re LaPointe, 253 B.R. 496, 500 (1st Cir.BAP 2000) (upholding bankruptcy court's finding of lack of reasonable diligence by foreclosing bank for failing to provide notice of sale to a party it knew to be interested in buying). It is undisputed that SRC informed Florence of the upcoming auction. 37 TAT argues that a mortgagee has, in addition to its duty to inform interested buyers of an upcoming auction, a duty to inform junior lienholders of the existence of interested buyers. However, TAT fails to provide any case law to support this assertion or any meaningful explanation of why such a duty would protect TAT's interest in the property in this case. TAT argues that, if it had been informed of the Florence offer, it may have been able to consummate the sale of the Property to him. However, TAT does not explain how it could have facilitated a sale to Florence, nor has it presented any evidence supporting the inference that it could have done so. 38 Presumably, circumstances may exist where a court could infer bad faith from a mortgagee's failure to mention an offer of sale to lienholders. If, for example, a mortgagee was secretive or evasive in discussing the details of an upcoming auction with prospective buyers and purchased the property itself, its failure to disclose to junior lienholders that more substantial offers had been proposed by other buyers would certainly be suspect. Cf. Bon v. Graves, 216 Mass. 440, 103 N.E. 1023, 1026 (1914) (noting that a mortgagee's evasiveness with interested buyers, along with other circumstances, showed that he was acting in the interest of buying the property at his own price rather than the highest price competitive bidding could bring). However, in this case, SRC fully informed Florence of the opportunity to bid on the property through the public auction. Furthermore, SRC was not the buyer and TAT does not allege that SRC was colluding with the buyer to lower the sales price. Thus, no breach of its fiduciary duties can be inferred from SRC's failure to discuss the Florence offer with TAT. 39