## Facts

- Richard S. and Beatrice K. Murphy refinanced their home with a promissory note and power-of-sale mortgage held by Financial Development Corporation and later assigned to Colonial Deposit Company.
- After Richard Murphy became unemployed, the Murphys fell seven months behind on mortgage payments and also failed to pay certain taxes and assessments.
- The lenders sent written notice of intent to foreclose and scheduled a foreclosure sale, complying with statutory notice requirements.
- The Murphys cured the arrearage but did not pay foreclosure-related costs and fees; at their request, the lenders postponed the sale and required payment of costs and all amounts then due by the rescheduled date.
- At the rescheduled sale, the lenders did not conduct advertising or outreach beyond the statutory notices and postings.
- The only bidder at the sale was the lenders’ representative, who bid $27,000 (approximately the amount of the debt), and the lenders took title.
- The property had been appraised at $46,000, and the trial court later found a fair market value of $54,000 at the time of sale.
- The lenders resold the property to a third party two days later for $38,000.
- The Murphys sued to set aside the foreclosure or recover damages, alleging lack of good faith and lack of due diligence in conducting the sale.

## Issues

1. Whether the lenders breached a duty of good faith owed to the mortgagors when exercising the power of sale.
2. Whether the lenders failed to use due diligence to obtain a fair and reasonable price at the foreclosure sale.
3. If due diligence was breached, what measure of damages applies and whether the trial court’s damages award was proper.

## Decision

- The court reversed the finding that the lenders acted in bad faith.
- The court affirmed the finding that the lenders failed to exercise due diligence to obtain a fair price at the foreclosure sale.
- The court accepted the general measure of damages as the difference between a fair price and the foreclosure price.
- The court affirmed in part, reversed in part, and remanded for reassessment of damages consistent with its analysis.

## Legal Principles

- A mortgagee conducting a power-of-sale foreclosure must comply with statutory procedures and also act as a fiduciary to protect the mortgagor’s interests through good faith and due diligence to obtain a fair and reasonable price under the circumstances.
- Good faith concerns honest purpose and absence of intent to defraud or take improper advantage; inadequate marketing efforts do not, by themselves, establish bad faith.
- Due diligence concerns the methods used to obtain a fair price; the sale should use ordinary methods of making buyers aware comparable to those used in a voluntary sale.
- Evidence supporting lack of due diligence may include minimal efforts to attract bidders and a prompt resale at a substantially higher price.
- When due diligence is breached, damages are measured by the difference between a fair price for the property and the price obtained at the foreclosure sale.

## Conclusion

The court held that the lenders acted in good faith but failed to use due diligence to obtain a fair price at foreclosure; it confirmed a fair-price-minus-foreclosure-price damages framework and remanded for recalculation consistent with its separation of good faith from due diligence.


Murphy v. Fin. Dev. Corp., 126 N.H. 536, 495 A.2d 1245 (N.H. 1985)