Issue: Whether a bid approximating either the fair market value of the foreclosed property or the amount of the outstanding loan balance, standing alone, could be considered bad faith under Minn. Stat. 581.05.
| Area of Law: | Real Estate Law |
| Keywords: | Foreclosures by advertisement; Good faith requirement; Outstanding loan |
| Jurisdiction: | Minnesota |
| Cited Cases: | 415 N.W.2d 725; 158 N.W.2d 842; 287 N.W.2d 378; 554 N.W.2d 761; 794 F. Supp. 2d 1060; 483 N.W.2d 712 |
| Cited Statutes: | § 581.05; Minn. Gen. Stat. § 4490 (1905) or 83 Mason's Minn. Stat. § 9638 (1927); Minn. Stat. § 580.11 |
| Date: | 05/01/2012 |
There does not appear to be any authority that references § 581.05 or its predecessor statutes, Minn. Gen. Stat. § 4490 (1905) or 83 Mason’s Minn. Stat. § 9638 (1927). However, there is some authority pertaining to the good faith requirement of Minn. Stat. 580.11, which applies to foreclosures by advertisement. The following authorities are instructive:
Sprague Nat’l Bank v. Dotty, 415 N.W.2d 725 (Minn. Ct. App. 1987) (Where bank bid $100,000 less than the loan amount, which increased the deficiency amount sought against guarantors, a genuine issue of material fact of the bank’s bad faith bid existed.);
Cox v. Mortgage Elec. Registration Sys., Inc., 794 F. Supp. 2d 1060 (D. Minn. 2011) (Minn. Stat. § 580.11 does not create a fiduciary duty owed by the mortgagee to the mortgagor to act in good faith before the foreclosure sale.);
Berke v. Resolution Trust Corp., 483 N.W.2d 712 (Minn. Ct. App. 1992) (When mortgagee stated an outstanding loan balance of $1.1 million, but purchased the property for $357,000, mortgagor’s claim that the mortgagee inflated the amount due in order to deter competing bidders did not amount to bad faith under § 580.11.);
Bradley v. Bradley, 554 N.W.2d 761 (Minn. Ct. App. 1996) (Mortgagee’s purchase of the property $1 million lower than the original mortgage amount was not bad faith or fraud because the mortgagor’s redemption rights allowed it to gain the benefit of the mortgagee’s bargain.);