Foreclosure: Sale Price and Delays in Sale

       The trustee is under a duty to “use all reasonable diligence to obtain the best price.” 

     If the trustee determines that in order to fulfill his fiduciary duty to realize the highest price for the property, a recess is necessary, he or she should recess the sale. Arguably, the recess is within the scope of the discretion afforded trustees in the conduct of the foreclosure sale. For example, if a bidder who previously advised the trustee of his interest in bidding on the property is delayed, the trustee, in his discretion, may recess the sale to a later hour on the same day to allow the bidder to attend the sale. If the trustee fails to accommodate the bidder and the property is sold for a price less than the bidder was willing to pay, the trustee may have breached his duty to “use all reasonable diligence to obtain the best price.” A decision by the trustee to recess the sale, however, should not impair the sale by making it impossible or impracticable for the bidders to appear and bid at the recessed sale.
     The postponement of a foreclosure sale to a different day is not a recess and is governed by statute. Virginia Code §55-59.1(D) provides that the trustee, in his discretion, may postpone the sale to a different day, and no new or additional “notice” must be given. Presumably, the “notice” referred to in this section is notice of the postponement. The trustee needs only to announce at the sale that it has been postponed. §55-59.2(D) provides that if the sale is postponed, the trustee must advertise the “new” sale in the same manner as the original advertisement. Read in conjunction, these sections require the trustee who postpones the foreclosure to re-advertise the sale in the same manner as the original sale was advertised. Although the secured obligation will not need to be accelerated again, all other aspects of the foreclosure must be completed. Effectively, a postponed sale is a new sale in which the trustee must complete all acts that he or she completed in the first sale.

Foreclosure: Sale Price and Delays in Sale

     The trustee is under a duty to “use all reasonable diligence to obtain the best price.”
     If the trustee determines that in order to fulfill his fiduciary duty to realize the highest price for the property, a recess is necessary, he or she should recess the sale. Arguably, the recess is within the scope of the discretion afforded trustees in the conduct of the foreclosure sale. For example, if a bidder who previously advised the trustee of his interest in bidding on the property is delayed, the trustee, in his discretion, may recess the sale to a later hour on the same day to allow the bidder to attend the sale. If the trustee fails to accommodate the bidder and the property is sold for a price less than the bidder was willing to pay, the trustee may have breached his duty to “use all reasonable diligence to obtain the best price.” A decision by the trustee to recess the sale, however, should not impair the sale by making it impossible or impracticable for the bidders to appear and bid at the recessed sale.
     The postponement of a foreclosure sale to a different day is not a recess and is governed by statute. Virginia Code §55-59.1(D) provides that the trustee, in his discretion, may postpone the sale to a different day, and no new or additional “notice” must be given. Presumably, the “notice” referred to in this section is notice of the postponement. The trustee needs only to announce at the sale that it has been postponed. §55-59.2(D) provides that if the sale is postponed, the trustee must advertise the “new” sale in the same manner as the original advertisement. Read in conjunction, these sections require the trustee who postpones the foreclosure to re-advertise the sale in the same manner as the original sale was advertised. Although the secured obligation will not need to be accelerated again, all other aspects of the foreclosure must be completed. Effectively, a postponed sale is a new sale in which the trustee must complete all acts that he or she completed in the first sale.

Foreclosure: Sale Price and Delays in Sale

     The trustee is under a duty to “use all reasonable diligence to obtain the best price.”
     If the trustee determines that in order to fulfill his fiduciary duty to realize the highest price for the property, a recess is necessary, he or she should recess the sale. Arguably, the recess is within the scope of the discretion afforded trustees in the conduct of the foreclosure sale. For example, if a bidder who previously advised the trustee of his interest in bidding on the property is delayed, the trustee, in his discretion, may recess the sale to a later hour on the same day to allow the bidder to attend the sale. If the trustee fails to accommodate the bidder and the property is sold for a price less than the bidder was willing to pay, the trustee may have breached his duty to “use all reasonable diligence to obtain the best price.” A decision by the trustee to recess the sale, however, should not impair the sale by making it impossible or impracticable for the bidders to appear and bid at the recessed sale.
     The postponement of a foreclosure sale to a different day is not a recess and is governed by statute. Virginia Code §55-59.1(D) provides that the trustee, in his discretion, may postpone the sale to a different day, and no new or additional “notice” must be given. Presumably, the “notice” referred to in this section is notice of the postponement. The trustee needs only to announce at the sale that it has been postponed. §55-59.2(D) provides that if the sale is postponed, the trustee must advertise the “new” sale in the same manner as the original advertisement. Read in conjunction, these sections require the trustee who postpones the foreclosure to re-advertise the sale in the same manner as the original sale was advertised. Although the secured obligation will not need to be accelerated again, all other aspects of the foreclosure must be completed. Effectively, a postponed sale is a new sale in which the trustee must complete all acts that he or she completed in the first sale.

Collections: Liability for Charges above the Credit Limit - Part I

     A client recently asked me to write about situations where a customer makes retail purchases for products in an amount greater than the customer’s established credit limit – specifically, if the customer later fails to pay for the product, can he be successfully sued for payment.
     I will review this situation with four varying fact patterns in two separate issues.
     Fact Pattern One: When the retail account was originally opened, the credit limit (stated in a letter to the customer) was set at $4,000. The credit terms in the credit application state the applicant agrees "to pay any and all sums that may become payable under this account". During the next several years the credit limit was increased to $6,000. Normally no notification is sent of the increase, but in this case a letter was sent to the customer notifying the customer of the credit limit increase. Customer makes charges up to $6,000, but fails to make full payment. Retailer sues customer for the amount owed, let us say that it is $6,000. Customer raises the defense that charges above the credit limit should not have been allowed. Customer’s attorney does not have a copy of the letter increasing the credit limit, but produces the original letter opening the account with a $4,000 credit limit. Customer’s attorney argues that the retailer was the one who set the credit limit at $4,000, and by not exercising due diligence of his business, allowed the credit limit to be exceeded. Customer’s attorney argues that his client's liability should not exceed $4,000, while the retailer argues that the liability should be $6,000. In what amount should the retailer be able to judgment against the customer?
     In an actual case in Seattle, Washington, the trial judge was ready to grant the request for a reduction in liability to $4,000. However, since the retailer had his customer file folder with him and found the letter increasing the credit limit to $6,000, the judge granted the retailer judgment in the amount of $6,000.
     Fact Pattern Two: When the retail account was originally opened, the credit limit (stated in a letter to the customer) was set at $4,000. The credit terms in the credit application state the applicant agrees "to pay any and all sums that may become payable under this account". Despite the credit limit, customer is allowed to makes charges over the $4,000 limit. Later customer fails to make full payment. Retailer sues customer for the amount owed, let us say that it is $6,000. Customer raises the defense that charges above the credit limit should not have been allowed. In what amount should the retailer be able to judgment against the customer?
     In Ingram Micro Inc. v. ABC Management Technology Solutions, LLC the United States District Court for the Eastern District of Virginia held that a creditor was entitled to recover payment of an unpaid debt because the debt was within the scope of the continuing guaranty agreement. The agreement clearly included a guaranty of all debts. Further, the court reiterated a contractual principal that when an agreement is complete, clear, and unambiguous on its face, it must be enforced according to the plain meaning of its terms and the intent of the contracting parties.
     In this fact pattern, the original agreement stated that the applicant agrees “to pay any and all sums that may become payable under this account”. This agreement was intended to cover credit up to $4,000. However, the agreement is also likely to cover any and all other debts over the original credit limit if it can be shown that the intent of the contracting parties as expressed through the contractual language was to include any debts incurred after the credit application was accepted.
     Next week's Blog will address the next two fact patterns.

Foreclosure: Sale Price and Delays in Sale

     The trustee is under a duty to “use all reasonable diligence to obtain the best price.”  

     If the trustee determines that in order to fulfill his fiduciary duty to realize the highest price for the property, a recess is necessary, he or she should recess the sale. Arguably, the recess is within the scope of the discretion afforded trustees in the conduct of the foreclosure sale. For example, if a bidder who previously advised the trustee of his interest in bidding on the property is delayed, the trustee, in his discretion, may recess the sale to a later hour on the same day to allow the bidder to attend the sale. If the trustee fails to accommodate the bidder and the property is sold for a price less than the bidder was willing to pay, the trustee may have breached his duty to “use all reasonable diligence to obtain the best price.” A decision by the trustee to recess the sale, however, should not impair the sale by making it impossible or impracticable for the bidders to appear and bid at the recessed sale.
     The postponement of a foreclosure sale to a different day is not a recess and is governed by statute. Virginia Code §55-59.1(D) provides that the trustee, in his discretion, may postpone the sale to a different day, and no new or additional “notice” must be given. Presumably, the “notice” referred to in this section is notice of the postponement. The trustee needs only to announce at the sale that it has been postponed. §55-59.2(D) provides that if the sale is postponed, the trustee must advertise the “new” sale in the same manner as the original advertisement. Read in conjunction, these sections require the trustee who postpones the foreclosure to re-advertise the sale in the same manner as the original sale was advertised. Although the secured obligation will not need to be accelerated again, all other aspects of the foreclosure must be completed. Effectively, a postponed sale is a new sale in which the trustee must complete all acts that he or she completed in the first sale.