Court Opinion

ID: 9746521
Source: CourtListenerOpinion
Date Created: 2023-08-27 14:20:31.900157+00
Date Added: 2024-06-11T07:25:14.347789
License: Public Domain

Allen, C.J.,
dissenting. The majority today holds that a court may disregard the value established by auction after strict foreclosure, even though defendants failed to demonstrate that plaintiff bank acted in bad faith or without reasonable diligence in disposing of the property. After almost a decade during which we reversed a sizeable number of tax appeals because the State Board of Appraisers or the superior court did not adequately explain its rationale, we now not only affirm such oversight, but adopt the same ipse dixit standard of explanation that we have vigorously and repeatedly criticized.
I agree with the majority that it was the bank’s burden to prove the amount of the deficiency. In this case the bank met its burden by establishing the mortgage debt and presenting reasonably detailed evidence concerning the attempts' to sell the property through a broker and the actual sale. Thereafter it was defendants’ burden to demonstrate that the bank failed to act in good faith and with due diligence. See Bascom Constr., Inc. v. City Bank & Trust, 629 A.2d 797, 800 (N.H. 1993) (in foreclosure sale, mortgagee owes mortgagor duty of good faith and due diligence); see also West Roxbury Co-op Bank v. Bowser, 87 N.E.2d 113, 115 (Mass. 1949) (burden is on mortgagor to prove mortgagee did not act in good faith or with reasonable diligence in exercising power of sale). “‘[T]o constitute bad faith there must be an intentional disregard of duty or a purpose to injure.’” Murphy v. Financial Dev. Corp., 495 A.2d 1245, 1250 (N.H. 1985) (quoting Wheeler v. Slocinski, 131 A. 598, 600-01 (N.H. 1926)). To determine whether a mortgagee has acted with due diligence, one must ask “ ‘whether a reasonable man in the [lenders’] place would have adjourned the sale’ or taken other measures to receive a fair price.” Id. (quoting Wheeler, 131 A. at 601).
Defendants did not introduce any evidence to support their burden. There is also nothing in the trial court’s decision or defendants’ brief suggesting that the sale fell short of the good faith or diligence expected of it upon disposition of the property In strict foreclosure actions, the deficiency is the difference between the fair market value of the property and the mortgage debt. Bailey v. Groton Mfg. Co., 113 Vt. 288, 290, 34 A.2d 182, 183 (1943). In most eases, the sale price is the fair market value. Reporter’s Notes, VR.C.E 80.1. If the mortgagor cannot show that the mortgagee acted in bad faith or without reasonable diligence in conducting the sale, the trial court is not entitled to disregard the sale price in determining the fair market value. See Regional Inv. Co. v. Willis, 572 S.W.2d 191, 192 (Mo. Ct. App. 1978) (sale price at trustee’s sale is basis for measuring deficiency, provided sale was fairly conducted).
The majority cites Sondergeld v. Town of Hubbardton, 150 Vt. 565, 567, 556 A.2d 64, 66 (1988), for the proposition that there is not one exclusive method for determining valuation under Vermont law. Sondergeld is the strongest possible explanation of the majority’s misstep in this case. Before the State Board of Ap*580praisers in Sondergeld were valuation figures provided by the State, based on actual sales. Id. at 567, 556 A.2d at 66. The Town explained precisely how it used this information, as did the Board. Id. at 567, 556 A.2d at 65. That detailed explanation —what we have demanded for years — is not remotely met by the trial court’s attempt to explain why it preferred an appraisal to the auction value in the present case. Likewise, the majority opinion responds with the same quantum of analysis as the trial court: “The court was . . . within its discretion in finding that the circumstances of the auction sale made it a less reliable indicator of fair market value than the bank’s own appraisal, which was contemporaneous with the final foreclosure decree.” 166 Vt. at 579, 687 A.2d at 892-93.*
The trial court never tells us that the auction was unreliable; it simply mentions the absence of evidence as to the number of bidders. The number of bidders, however, is not relevant unless the mortgagee’s lack of diligence or want of bona fides is the reason for the low number of bidders. See Arnold v. Melvin R. Hall, Inc., 496 N.E.2d 63, 65 (Ind. 1986) (“proof that there was but one bidder at the sale will not serve, by itself, to rebut the presumption that the bid represents the value of the property”); see also Chartrand v. Newton Trust Co., 5 N.E.2d 421, 423 (Mass. 1936) (fact that representative of mortgagee was only bidder does not establish that price received was so grossly inadequate as to constitute bad faith); Nebraska Fed. Sav. & Loan Ass’n v. Patterson, 321 N.W.2d 71, 72 (Neb. 1982) (affirming sale for amount less than alleged value where there was no evidence of fraud, no shocking discrepancy between price and value, and no evidence that a higher bidder could be obtained in another sale). Defendants did not present any evidence relating the number of bidders to a lack of good faith, nor did the court find that the bank did not meet an appropriate standard of care or honesty.
The trial court’s main rationale for rejecting the sale price seems to be that the sale price differed markedly from nearly concurrent appraisals. What, however, did the court tell us about why it preferred one of the appraisals to the actual sale price? Merely this: “[Tjhe property is unique and was not easy to appraise. Although an appraisal is only an opinion, in this case Mr. Wood was a trained professional who based his appraisal on research and used a methodology approved by his profession at arriving at that opinion.” This explanation does not address the ultimate issue, the good faith and due diligence of the mortgagee, and therefore is hardly sufficient to withstand review.
In sum, the bank was entitled to a deficiency equal to the difference between the mortgage debt and the fair market value of the foreclosed property. Where there was no real challenge to the bona fides of the sale, or any findings or conclusions stating that the sale did not meet standards of diligence and good faith, the fair market value was established by a sale at auction following the bank’s three-month effort to sell through a broker.
I therefore dissent.

 I should add that Sondergeld did not overrule Royal Parke Corp. v. Town of Essex, 145 Vt. 376, 488 A.2d 766 (1985). Royal Parke held that fair market value “is perforce established for appraisal purposes” by the operation of an actual, relatively concurrent, bona fide sale. Id. at 378-79, 488 A.2d at 768. Where such a sale exists, there is no need to consider other factors in estimating fair market value. Id. at 379, 488 A.2d at 768. Sondergeld did not hold that a court may ignore a value established by an actual sale of the subject property where no question is raised about the fairness or bona fides of the sale.