Charter Bank v. Francoeur , 2012 NMCA 78 ( 2012 )

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integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'04- 14:34:12 2012.08.15
Certiorari Granted, August 3, 2012, No. 33,709
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2012-NMCA-078
Filing Date: May 15, 2012
Docket No. 30,551
CHARTER BANK,
Plaintiff-Appellee,
v.
MARGRET FRANCOEUR,
Defendant-Appellant,
and
DARR ANGEL, TRUSTEE OF
THE DARR ANGEL LIVING TRUST,
Intervenor-Appellee.
APPEAL FROM THE DISTRICT COURT OF LEA COUNTY
William G.W. Shoobridge, District Judge
Little & Dranttel, P.C.
Peggy Whitmore
Albuquerque, NM
for Appellee
United South Broadway Corp.
Angelica Anaya Allen
Albuquerque, NM
for Appellant
Heidel, Samberson, Newel, Cox & McMahon
Michael T. Newell
1
Lovington, NM
for Intervenor-Appellee
OPINION
WECHSLER, Judge.
{1} In this foreclosure case, Plaintiff Charter Bank obtained a default judgment after
Defendant Margret Francoeur failed to answer its complaint. After a special master sold
Defendant’s property at a public auction, Defendant moved to set aside the default judgment
and to vacate the foreclosure sale. Defendant appeals two orders of the district court: (1)
an order denying Defendant’s motion to set aside the default judgment and to vacate the
foreclosure sale and (2) an order setting supersedeas bond at $150,000 during the pendency
of the appeal. We hold that the district court did not err in (1) denying Defendant’s motion
to set aside the default judgment because Defendant did not have a meritorious defense, (2)
denying Defendant’s motion to vacate the foreclosure sale because the sale’s price-value
ratio did not shock the conscience of the court and there were no additional circumstances
impeaching the fairness of the sale, and (3) setting the supersedeas bond at $150,000.
Accordingly, we affirm.
BACKGROUND
{2} Defendant and Plaintiff entered into a loan agreement (the loan) on March 26, 2007,
secured by a mortgage on her residential property (the property) in Hobbs, New Mexico.
On April 9, 2009, Defendant received a letter from Plaintiff that she was in default of the
loan. Defendant contacted the Law Offices of T.W. Dvorak (the firm), a Florida-based law
firm specializing in foreclosure defense that Defendant found on the internet. Defendant
retained the firm to represent her and paid a $1500 retainer on June 23, 2009.
{3} On July 27, 2009, Plaintiff filed a complaint in foreclosure seeking an in rem
judgment against the property and in personam judgment against Defendant. Plaintiff sought
a judgment for the unpaid principal balance, interest, late charges, and reasonable attorney
fees and costs associated with the unpaid loan secured by the mortgage on Defendant’s
property. After Plaintiff filed its complaint and served Defendant, Defendant provided the
firm with the complaint. The firm failed to file an answer on Defendant’s behalf, and the
district court entered a default judgment in favor of Plaintiff on September 30, 2009. The
district court awarded Plaintiff $90,467.68 as a judgment for the unpaid loan and ordered the
property sold at a public auction.
{4} Following the default judgment, Defendant learned that the firm’s principal attorney,
Thomas Dvorak, was arrested for driving under the influence and driving with a suspended
license in June 2009 after his involvement in a fatal car accident. Sometime during the
summer or fall of 2009, a Florida court sentenced Dvorak to eight weeks imprisonment, and
2
Dvorak served his sentence from November 5, 2009 to December 27, 2009. Defendant
ultimately learned about Dvorak’s incarceration on February 23, 2010 after the Florida State
Bar sent her a letter informing her that Dvorak was in alcohol abuse rehabilitation and
counseling and that he was withdrawing from the practice of law.
{5} On January 8, 2010, Plaintiff informed Defendant that it transferred the servicing of
the loan to U.S. Bank Home Mortgage (U.S. Bank). U.S. Bank is a participant in the federal
Making Homes Affordable Program (HAMP). HAMP is a program established by the
United States Department of Treasury (the treasury), pursuant to the Emergency Economic
Stabilization Act of 2008, 12 U.S.C. §§ 5201 to -5261 (2008, as amended through 2009).
HAMP allows the treasury to work with loan service providers to “use loan guarantees and
credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.” 12
U.S.C. § 5219(a)(1). In order to participate in HAMP, service providers must execute a
servicer participation agreement with Fannie Mae. Treasury Supplemental Directive 09-01.
U.S. Bank entered into a servicer participation agreement with Fannie Mae on August 20,
2009. In the servicer participation agreement, U.S. Bank agreed to comply with the
guidelines and procedures issued by the treasury.
{6} Meanwhile, on October 7, 2009, the special master filed the first notice of sale on the
property and scheduled the sale for November 24, 2009. Plaintiff advertised the property
for sale in the Hobbs News-Sun from October 13, 2009 through November 3, 2009. The
special master postponed the sale until January 12, 2010, although Plaintiff did not file
notice of the postponement with the district court until April 21, 2010. The special master
postponed the re-scheduled January 12, 2010 sale until February 16, 2010, and Plaintiff
again filed notice of the postponement on April 21, 2010. The special master again
postponed the re-scheduled February 16, 2010 sale and rescheduled the sale for April 20,
2010. On April 20, 2010, the special master sold the property at auction for $100,000 to
Darr Angell, trustee of Darr Angell Living Trust (Angell). The special master filed the
report of sale with the district court on May 6, 2010. On the same day, the district court
issued an order approving the sale and the special master’s report. The order provided
Defendant a one-month redemption period, expiring on June 7, 2010.
{7} On May 27, 2010, Defendant filed a motion pursuant to Rule 1-060(B) NMRA to set
aside the September 30, 2009 default judgment and to vacate the judicial sale of the property.
Defendant argued that the representation by the firm, which included the failure to answer
Plaintiff’s complaint, was negligent and therefore excusable neglect. Further, Defendant
argued that she had meritorious defenses to set aside the default judgment because (1)
Plaintiff engaged in fraud, misrepresentation, estoppel, or other misconduct during the
foreclosure sale by assuring Defendant that a loan modification was “imminent,” Defendant
never received notice of the judicial sale, and Defendant therefore did not explore other
avenues to avoid foreclosure of the property; and (2) Plaintiff did not comply with treasury
directives required by HAMP and the service agreements because Defendant’s application
for a loan modification was not evaluated within thirty days, she was not notified whether
the application was accepted or rejected, and Plaintiff proceeded with the foreclosure sale
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despite Defendant’s pending application for a loan modification. Further, Defendant argued
that the $100,000 sales price was “grossly disproportionate to the value of the home” and
therefore was another ground for vacating the sale.
{8} Angell, as an intervenor, filed a response on June 10, 2010, and Plaintiff filed its
response on June 14, 2010. The district court issued an order on July 9, 2010, denying the
motion to set aside the default judgment and to vacate the sale. The district court determined
that the default judgment resulted from excusable neglect based on the negligent
representation of the firm but that Defendant did not have a meritorious defense. Regarding
Defendant’s defenses alleging fraud, other misconduct, or estoppel, the district court
determined that Plaintiff and Defendant did not reach an agreement that foreclosure would
be halted while various loan modification alternatives were being evaluated. Further, the
district court determined that the $100,000 sales price was inadequate, but it did not “shock
the [conscience] of the court” to justify setting the sale aside because there were no
additional circumstances impeaching the fairness of the sale. Defendant filed a timely notice
of appeal.
{9} On appeal, Defendant argues that the district court erred by (1) denying the motion
to set aside the default judgment because Defendant had meritorious defenses because
Plaintiff (a) failed to fulfill its contractual obligations under HAMP, (b) misrepresented to
Defendant that she would receive a loan modification and was therefore estopped from
proceeding with the foreclosure sale, and (c) engaged in bad faith by proceeding with the
foreclosure sale even though Defendant’s loan modification application was pending; (2)
determining that the sale should not be vacated because the sales price did not “shock the
court’s conscience;” and (3) setting the supersedeas bond at $150,000 instead of the
property’s fair rental value.
MOTION TO SET ASIDE DEFAULT JUDGMENT
{10} In order to set aside a default judgment under Rule 1-060(B)(1), a court must
determine that (1) the default judgment resulted from mistake, inadvertence, surprise or
excusable neglect, and (2) the party seeking to set the default judgment aside had a
meritorious defense. N.M. Educators Fed. Credit Union v. Woods, 102 N.M. 16, 17, 690
P.2d 1010, 1011 (1984). “If these two elements are found and there are no intervening
equities in favor of the other party, a court should set aside the judgment.” Id. Generally,
“default judgments are not favored and a case should be heard on its merits whenever
possible[.]” Id.
Standard of Review
{11} A grant or denial of a motion to set aside a default judgment rests within the sound
discretion of the district court. Gandara v. Gandara, 2003-NMCA-036, ¶ 9, 133 N.M. 329,
62 P.3d 1211. We will only reverse the district court’s grant or denial of a motion to set
aside a default judgment for an abuse of that discretion. N.M. Educators Fed. Credit Union,
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102 N.M. at 17, 690 P.2d at 1011. “An abuse of discretion occurs when a ruling is clearly
contrary to the logical conclusions demanded by the facts and circumstances of the case.”
Sims v. Sims, 1996-NMSC-078, ¶ 65, 122 N.M. 618, 930 P.2d 153. “However, because
default judgments are generally disfavored, any doubts about whether relief should be
granted are resolved in favor of the defaulting defendant and, in the absence of a showing
of prejudice to the plaintiff, causes should be tried upon the merits.” Gandara, 2003-
NMCA-036, ¶ 9 (alteration, internal quotation marks, and citation omitted). When an
argument that a district court has abused its discretion is premised on a misapprehension of
the law, our review is de novo. See id.
HAMP
{12} Defendant argues that the district court erred in determining that Defendant did not
state a meritorious defense based on Plaintiff’s alleged failure to follow HAMP guidelines
that Plaintiff is contractually required to follow. Particularly, Defendant argues that U.S.
Bank violated treasury directives that require servicers to (1) suspend foreclosure sales when
a borrower may be eligible for a loan modification under HAMP, (2) notify borrowers
evaluated for but ultimately determined ineligible for a HAMP modification, and (3) extend
the foreclosure time to allow the borrower to contest a denial of a HAMP loan modification.
{13} Defendant premises her argument on her assertion that she is an intended third party
beneficiary of the servicer participation agreement between U.S. Bank and Fannie Mae and
that U.S. Bank breached its contractual obligations contained in the servicer participation
agreement and treasury directives as the servicer of the loan. See Fleet Mortg. Corp. v.
Schuster, 112 N.M. 48, 49-50, 811 P.2d 81, 82-83 (1991) (stating that a third party may have
an enforceable right against an actual party to a contract if the third party is an intended
beneficiary of the contract). Whether Defendant is a third party beneficiary is a question of
whether the actual parties intended the borrower to be a third party beneficiary. See id.
(stating that a third party is a beneficiary if the actual parties to the contract intended to
benefit the third party). “A prospective third[]party beneficiary may prove the intent of the
parties to an agreement by relying on the unambiguous language of the agreement itself, or,
in the absence of such language, on extrinsic evidence such as the circumstances surrounding
the execution of the agreement[.]” Hansen v. Ford Motor Co., 120 N.M. 203, 205, 900 P.2d
952, 954 (1995) (citation omitted). As a general rule, a member of the public is not an
intended third party beneficiary and cannot enforce a government contract unless the
contract’s terms provide for liability. Restatement (Second) of Contracts § 313(2)(a) (2011).
{14} Defendant cites Huxtable v. Geithner, No. 09cv1846, 2009 WL 5199333 (S.D. Cal.
Dec. 23, 2009), and Reyes v. Saxon Mortgage Services., No. 09cv1366, 2009 WL 3738177(S.D. Cal. Nov. 5, 2009), for the proposition that a borrower is an intended third party
beneficiary to a HAMP servicer participation agreement. However, Huxtable dealt with an
inapposite issue. In Huxtable, the court addressed the sole issue of whether a servicer is a
state actor and therefore subject to a due process claim. 2009 WL 5199333, at *1. Huxtable
does not address whether a borrower is a third party beneficiary to a HAMP servicer
5
participation agreement. See Fernandez v. Farmers Ins. Co. of Ariz., 115 N.M. 622, 627,
857 P.2d 22, 27 (1993) (“[C]ases are not authority for propositions not considered.” (internal
quotation marks and citation omitted)). We acknowledge that Reyes, 2009 WL 3738177, at
*2, held that a borrower’s breach of contract claim against a servicer survived a motion to
dismiss because “[a]rguably, one of the purposes of [a servicer participation agreement] is
to assist homeowners, like [borrower.]” However, as Defendant concedes, this is the rule
in only a minority of jurisdictions that have considered the issue.
{15} The vast majority of jurisdictions have rejected the arguments that a borrower has
a direct cause of action under a HAMP servicer participation agreement or that a borrower
can maintain a breach of contract under a third party beneficiary theory. For example, in
Parks v. BAC Home Loan Servicing, L.P., No. 3:11cv541, 2011 WL 5239240, at *2 (E.D.
Va. Nov. 1, 2011), the court held that borrowers do not have a private cause of action to
enforce HAMP regulations because borrowers are incidental beneficiaries, not third party
beneficiaries under HAMP. Further, the court held that a borrower cannot maintain a breach
of contract claim under state law to enforce contractual obligations based on a loan
modification unless the cause of action relates to facts separate from a violation of HAMP
requirements. Id. at *2-3; see Sherman v. Litton Loan Servicing, L.P., 796 F. Supp. 2d 753,
765 (E.D. Va. 2011) (“[D]istrict courts have uniformly rejected the proposition that plaintiffs
have standing to sue under HAMP, under a third[]party beneficiary theory or otherwise.”);
see also In re Salvador, 456 B.R. 610, 622 (Bankr. M.D. Ga. 2011) (“The courts have
unanimously held that borrowers are not intended beneficiaries, but merely incidental
beneficiaries to the contract between loan servicers and the government under the HAMP
program.”). We find the majority view persuasive.
{16} The courts that have held that borrowers are not intended third party beneficiaries to
servicer participation agreements under HAMP and which, therefore, do not have a private
cause of action, have relied on a variety of rationales. Several courts have determined that
the terms of the servicer participation agreement between the servicer and Fannie Mae are
dispositive. See Edwards v. Aurora Loan Servs., LLC, 791 F. Supp. 2d 144, 151-52 (D.D.C.
2011) (reasoning that, although the servicer participation agreement is a means of helping
distressed homeowners, it does not evidence an intent to allow borrowers to enforce the
agreement); see also Speleos v. BAC Home Loans Servicing, L.P., 755 F. Supp. 2d 304, 310
(D. Mass. 2010) (same). Other courts have noted that allowing borrowers to enforce a
servicer participation agreement potentially opens the door to “3-4 million homeowners
filing individual claims.” Thomas v. JP Morgan Chase & Co., 811 F. Supp. 2d 781, 797
(S.D.N.Y. 2011) (internal quotation marks and citation omitted). Another rationale has been
that HAMP does not obligate a servicer to modify loans in that it only requires the servicer
to consider eligible loans for modification, and therefore the agreements are unenforceable.
See Lucia v. Wells Fargo Bank, N.A., 798 F. Supp. 2d 1059, 1068-69 (N.D. Cal. 2011). In
this case, Defendant does not point to any language of the specific servicer participation
agreement applicable to this case to the effect that the agreement intended to provide
borrowers with a right to enforce the agreement.
6
{17} Instead, Defendant argues that the “language of the federal legislation [enacting the
HAMP programs] clearly shows that homeowners were intended beneficiaries of the HAMP
program[s] and [servicer participation] agreements.” Defendant argues that 12 U.S.C. §
5201, 12 U.S.C. § 5219, and 12 U.S.C. § 5220 provide unambiguous language that
borrowers are intended third party beneficiaries of all HAMP servicer participation
agreements. 12 U.S.C. § 5201(2)(A) and (B) identifies “protect[ing] home values” and
“preserv[ing] homeownership,” as purposes of the Emergency Economic Stabilization Act
of 2008, 12 U.S.C. § 5219 grants authority to the treasury to use its credit and loan
guarantees to prevent foreclosures, and 12 U.S.C. § 5220 provides requirements for
programs to assist homeowners. Although these statutes provide benefits to homeowners
facing foreclosure, they do not contain any language indicating congressional intent to
provide homeowners a right to enforce HAMP servicer agreements. See Hart v.
Countrywide Home Loans, Inc., 735 F. Supp. 2d 741, 748 (E.D. Mich. 2010) (“[T]hird[]party
beneficiaries cannot enforce government contracts absent a clear intent to the contrary, and
. . . HAMP expresses no such intent[.]” (internal quotation marks and citations omitted));
Waggoner v. Town of Mesilla, 2011-NMCA-041, ¶ 8, 149 N.M. 596, 252 P.3d 820 (stating
that we employ the plain meaning of the terms of a statute in order to determine legislative
intent).
{18} We therefore hold that Defendant did not have a meritorious defense that Plaintiff
failed to comply with its contractual obligations under HAMP. Defendant does not have a
private cause of action under HAMP and cannot maintain a cause of action for breach of
contract to enforce a HAMP servicer participation agreement, and, therefore, the failure of
U.S. Bank to comply with HAMP does not provide a meritorious defense to the default
judgment for foreclosure.
Estoppel
{19} Defendant next argues that the district court erred by determining that equitable
estoppel was not a meritorious defense to the default judgment. Particularly, Defendant
argues that Plaintiff should have been equitably estopped from proceeding with the
foreclosure action and judicial sale while Plaintiff negotiated a loan modification with
Defendant and, further, that Plaintiff told Defendant her application for a loan modification
was likely to be approved, Plaintiff did not notify Defendant when her loan modification was
rejected, and Defendant reasonably relied on Plaintiff’s misrepresentations regarding
approval of the loan modification and therefore did not pursue other options to prevent the
sale of her property.
{20} “[T]he doctrine of equitable estoppel . . . is aimed at preventing a party from
benefitting from deception or misleading conduct.” Mannick v. Wakeland, 2005-NMCA-
098, ¶ 28, 138 N.M. 113, 117 P.3d 919, aff’d by Coppler & Mannick, P.C. v. Wakeland,
2005-NMSC-022, 138 N.M. 108, 117 P.3d 914. “The conduct of the party to be estopped
must be something which amounts either to a representation or a concealment of the
existence of facts; and these facts must be material to the rights or interests of the party
7
affected by the representation or concealment.” Mannick, 2005-NMCA-098, ¶ 28 (internal
quotation marks and citation omitted). In order for a party to raise equitable estoppel, the
following facts must be shown as to the party to be estopped: “(1) [c]onduct which amounts
to a false representation or concealment of material facts, or, at least, which is calculated to
convey the impression that the facts are otherwise than, and inconsistent with, those which
the party subsequently attempts to assert; (2) intention, or at least expectation, that such
conduct shall be acted upon by the other party; (3) knowledge, actual or constructive, of the
real facts.” Mem’l Med. Ctr., Inc. v. Tatsch Constr., Inc., 2000-NMSC-030, ¶ 9, 129 N.M.
677, 12 P.3d 431 (internal quotation marks and citation omitted). Further, “[t]he following
elements must be shown as to the party claiming estoppel: (1) [l]ack of knowledge and of
the means of knowledge of the truth as to the facts in question; (2) reliance upon the conduct
of the party estopped; and (3) action based thereon of such a character as to change his
position prejudicially.” Id. (internal quotation marks and citation omitted).
{21} Defendant provides four factual assertions in arguing that Plaintiff falsely represented
that Defendant’s loan modification “was likely to be approved[.]” First, Defendant’s
affidavit accompanying the motion to set aside the default judgment reveals that the firm
“repeatedly advised [her] that they were in constant contact with [Plaintiff] about [her]
delinquency, and that a loan modification was imminent.” However, Defendant’s affidavit
fails to identify how this representation by the firm, even if false, can be attributed to
Plaintiff. Second, Defendant further relies on a series of emailcommunications she had with
an employee of the firm to support the argument that Plaintiff represented that a loan
modification was “imminent.” However, the emailcommunications only reveal that an
employee of Plaintiff told the firm that she had been in constant contact with Freddie Mac,
that the process was “moving along smoothly” and would be quick, that a decision on
whether the loan modification would be approved would not be made for at least ten days,
and that Plaintiff would “push off [the] sales date” until a decision on the loan modification.
When the firm informed Defendant of this exchange, Defendant asked an employee of the
firm whether Plaintiff is “going to do the loan mod[ification,]” to which the firm’s employee
responded that Plaintiff’s employee “felt confident that everything would be fine.” These
emailcommunications make clear that, although Plaintiff represented that it believed
Defendant’s application for a loan modification would be approved, the decision had not
been made; there was no false representation that Defendant would receive a loan
modification. Third, Defendant states that the same employee of Plaintiff who had
communicated with the firm personally told her that a loan modification was “imminent.”
However, based on the content of the email-communications, Defendant was aware that a
decision had not been made as to whether she would receive a loan modification. As a
result, this statement did not rise to the level of a misrepresentation that Defendant would
receive a loan modification. Fourth, Defendant further argues that she received “regular
letters . . . which provided every indication that [her] mortgage relationship with [Plaintiff]
would be continuing.” The first letter, from Plaintiff and dated January 8, 2010, notified
Defendant that U.S. Bank would be the new servicer of the loan. The second and third
letters, dated February 18, 2010 and March 3, 2010, respectively, appear to be form letters
U.S. Bank sent to its existing customers encouraging existing mortgagors to apply for a
8
HAMP loan modification. The fourth letter, dated April 13, 2010, informed Defendant of
a shortage in her escrow account. None of these letters can be construed to contain a false
representation that Defendant’s application for a loan modification would be approved. The
district court therefore did not err in determining that estoppel was not a meritorious defense
because Plaintiff did not make a false representation or conceal material facts regarding
Defendant’s application for a loan modification.
{22} We note that Defendant argues that this case is factually similar to Aceves v. U.S.
Bank, N.A., 120 Cal. Rptr. 3d 507 (Ct. App. 2011), and thus compels a similar result. In
Aceves, the court held that the plaintiff adequately pled a claim for promissory estoppel
based on the defendant’s clear and unambiguous promise not to proceed on the foreclosure
of the plaintiff’s home without first negotiating a loan modification. Id. at 513-14. The
plaintiff relied on the promise in deciding to forego chapter 13 bankruptcy proceedings,
which would have allowed the plaintiff to discharge her mortgage debt. Id. at 515-16.
However, as we have determined in this case, Plaintiff did not promise or make a false
representation to Defendant, and, therefore, this case is distinguishable from Aceves.
Bad Faith
{23} Defendant next argues that Plaintiff failed to meaningfully engage in the loan
modification process and that Plaintiff’s actions constitute bad faith. See Sanders v. FedEx
Ground Package Sys., 2008-NMSC-040, ¶ 7, 144 N.M. 449, 188 P.3d 1200 (“New Mexico
courts have held that every contract imposes a duty of good faith and fair dealing on the
parties with respect to the performance and enforcement of the terms of the contract.”). In
making this argument, Defendant relies on the assertions stated in the previous sections that
Plaintiff misrepresented that Defendant would receive a loan modification, failed to notify
Defendant that her application for a loan modification was denied, and therefore induced
Defendant to not pursue other options to avoid foreclosure. Additionally, Defendant argues
that Plaintiff scheduled and intended to conduct the judicial sale while Defendant’s
application for a loan modification was pending.
{24} However, Defendant did not preserve the issue in the district court. “To preserve a
question for review[,] it must appear that a ruling or decision by the district court was fairly
invoked[.]” Rule 12-216(A) NMRA. In order “[t]o preserve error for review, a party must
fairly invoke a ruling of the district court on the same grounds argued in this Court.” Roark
v. Farmers Group, Inc., 2007-NMCA-074, ¶ 38, 142 N.M. 59, 162 P.3d 896 (internal
quotation marks and citation omitted).
{25} In her motion to set aside the default judgment and vacate judicial sale, Defendant
argued that she had meritorious defenses of Plaintiff’s failure to adhere to the requirements
of HAMP, estoppel, fraud, misrepresentation, “or other misconduct.” Defendant did not
specifically raise a bad-faith defense and therefore did not fairly invoke a ruling by the
district court. Defendant’s assertion is not specific enough to satisfy the preservation
requirements for a defense of bad faith. See Kilgore v. Fuji Heavy Indus. Ltd., 2010-NMSC-
9
040, ¶ 26, 148 N.M. 561, 240 P.3d 648 (“A ruling or decision is fairly invoked if a party’s
objection or motion is made with sufficient specificity to alert the mind of the [district] court
to the claimed error.” (internal quotation marks and citation omitted)). We therefore decline
to address the merits of Defendant’s unpreserved argument. See Diversey Corp. v. Chem-
Source Corp., 1998-NMCA-112, ¶ 14, 125 N.M. 748, 965 P.2d 332 (stating that this Court
will not address issues not preserved for review).
SALES PRICE
{26} Defendant additionally argues that the district court erred in determining that the
$100,000 did not “shock the conscience” of the court, based on our Supreme Court’s
decision in Armstrong v. Csurilla, 112 N.M. 579, 583, 817 P.2d 1221, 1225 (1991), because
the sales price was 48.7% of the $206,000 appraised value of the home. The district court
determined that the sales price was “inadequate” but that there were no additional
circumstances that would impeach the fairness of the sale and that, therefore, the sales price
did not shock the conscience of the court. Determining whether a price-value ratio is so great
as to shock the conscience resides in the sound discretion of the district court. See id. at 592,
817 P.2d at 1234. We therefore review under an abuse of discretion standard.
{27} In Armstrong, our Supreme Court held that a court may set aside a foreclosure sale
based on a grossly inadequate sales price or an inadequate sales price combined with “other
circumstances” leading to unfairness. Id. at 593, 817 P.2d at 1235. Although, our Supreme
Court “decline[d] to adopt any fixed numerical percentage as establishing a price-value
disparity that in every case will be so great as to shock the court’s conscience[,]” the Court
provided guidance on the issue. Id. at 592, 817 P.2d at 1234. The Court held that when a
sales price falls within the range of 10-40% of the appraised value of a property, the court
must apply “special scrutiny . . . to be sure that . . . additional circumstances do not produce
an inequitable result.” Id. at 593, 817 P.2d at 1235. The Court further held that a sales price
may still be inadequate if it falls within the range of 40-66% of the appraised value and there
are additional circumstances regarding the sale leading to unfairness. Id. In this case,
because the sales price was 48.7% of the properties appraised value, we do not apply special
scrutiny in determining whether the circumstances of the sale caused an unfair result.
{28} Defendant points to several circumstances in arguing that, when combined with the
inadequate sales price, the judicial sale led to an unfair result: (1) the firm’s negligent
representation resulting in the default judgment, (2) Plaintiff’s and U.S. Bank’s
representations that a loan modification was “imminent,” (3) Plaintiff’s scheduling and
conducting the foreclosure sale while Defendant’s application for a loan modification was
still pending, and (4) the special master’s postponing the original sale and publishing and
filing after the sale occurred. As discussed in addressing Defendant’s estoppel, we disagree
that Plaintiff and U.S. Bank misrepresented that Defendant would receive a loan
modification. Further, we disagree that the record supports Defendant’s argument that the
foreclosure sale occurred while Defendant had a pending application for a loan modification.
The foreclosure sale did not occur until April 20, 2010, after the denial of Defendant’s
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application for a HAMP modification on March 24, 2010, and the denial of all loan
modifications on April 5, 2010. We therefore only address whether the firm’s negligent
representation and whether the unpublished and unfiled notices of postponement rose to the
level of circumstances leading to unfairness invalidating the judicial sale.
{29} We do not give any weight to the firm’s negligent representation leading to the
default judgment as a circumstance leading to an unfair result in the judicial sale. Although
the firm’s representation led to the default judgment leading to the judicial sale, the firm no
longer represented Defendant in the months proceeding the sale and had no involvement in
the judicial sale. The firm’s representation therefore did not impact the result of the sale.
{30} We further determine that the failure to publish or file the notices of postponement
are not circumstances that led to an unfair result in the judicial sale. Defendant characterizes
the failure to publish the notices of postponement as depriving potential buyers of the
opportunity to learn of the sale and submit bids. See Las Vegas Ry. & Power Co. v. Trust
Co. of St. Louis Cnty., 15 N.M. 634, 648, 110 P. 856, 861 (1910) (invalidating a judicial sale
where circumstances prevented “two parties vitally interested in the sale” from bidding on
the property). However, the special master published the original sale date, time, and place
for four weeks in the Hobbs News-Sun. Each subsequent notice of postponement assured
that the parties present at the postponed sale would be notified and the new date and time
would be confirmed as acceptable to all parties present. Defendant does not address how
this procedure kept potential buyers from bidding on the property nor does she actually
identify any potential buyers precluded from bidding on the property.
{31} We further note that the sales price of $100,000 was greater than the amount
Defendant owed on the loan including costs and fees, and the sale therefore did not result
in a deficiency judgment against Defendant. We consider the lack of a deficiency judgment
a factor weighing in favor of finding that the foreclosure sale was fair. See Armstrong, 112
N.M. at 581, 817 P.2d at 1223 (stating that legislative or judicial attempts to invalidate
foreclosure sales as unfair to the debtor are aimed to prevent situations where both the debtor
loses the property and the sales price is so low as to result in a deficiency judgment).
Because the circumstances of the foreclosure sale did not lead to an unfair result to
Defendant, the district court did not abuse its discretion in determining that the sales price
did not shock the court’s conscience.
SUPERSEDEAS BOND
{32} Defendant lastly argues that the district court erred in setting the supersedeas bond
at $150,000 instead of the fair rental value of the property. Specifically, Defendant argues
that NMSA 1978, Section 39-3-9 (1933), mandates that “where title to real estate is
involved, the rental value is an appropriate measure of damage for purposes of the
supersedeas bond.” It therefore appears that Defendant is essentially arguing that a district
court abuses its discretion if it sets the supersedeas bond above the rental value of the
property. Our review is governed by Rule 12-207(D) NMRA, which states that “[t]he
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decision of the district court shall be set aside only if it is shown that the decision (1) is
arbitrary, capricious or reflects an abuse of discretion; (2) is not supported by substantial
evidence; or (3) is otherwise not in accordance with law.”
{33} The relevant portions of Section 39-3-9 state that “[w]here an appeal is taken . . .
from a judgment . . . of any district court involving the title to or possession of real or
personal property, the [district] court shall fix the amount of supersedeas bond . . . for such
sum as will indemnify the appellee for all damages that may result from such supersedeas[.]”
Further, Section 39-3-9 provides that “the rental value, and all damages to improvements and
waste, shall be considered elements of damages.” By its plain language, Section 39-3-9 does
not limit the supersedeas bond in this case to the rental value of the property. See T-N-T
Taxi, Ltd. v. N.M. Pub. Regulation Comm’n, 2006-NMSC-016, ¶ 5, 139 N.M 550, 135 P.3d
814 (“We begin the search for legislative intent by looking first to the words chosen by the
Legislature and the plain meaning of the Legislature’s language[.]”). Section 39-3-9 directs
a district court to set the supersedeas bond at an amount that indemnifies the appellee for “all
damages” and states that the “rental value” of the property shall be considered an element
of damages, not the sole measure. The district court therefore did not abuse its discretion
under Section 39-3-9 by considering potential damages to Plaintiff outside of the rental value
of the property.
{34} In addition, to the extent that Defendant argues that the $150,000 supersedeas bond
is too high because it is three times the amount that Defendant informed the district court she
would be able to post, we disagree. In setting the supersedeas bond, the district court
correctly acknowledged that Section 39-3-9 requires the district court to indemnify an
appellee for all damages that may occur as a result of the stay and that the amount is not
dependent on the amount the appellant can pay. The district court therefore considered the
lost rental value, interest Angell paid to Plaintiff for the property, damages to improvements
and waste on the property, and Angell’s potential lost profit if the property was to be
purchased for resale. The district court noted that Defendant had the property appraised at
$206,000 and that Angell purchased the property at auction for $100,000 for a potential
profit of $106,000 if he were to resell the property. Considering the $106,000 in potential
lost profit in addition to lost rental value, interest on money paid, and the potential for
damage and waste to the property while this appeal was pending, the district court did not
abuse its discretion in setting the supersedeas bond at $150,000, regardless of whether
Defendant could only pay $50,000.
CONCLUSION
{35} The district court did not err in (1) denying Defendant’s motion to set aside the
default judgment because Defendant did not have a meritorious defense, (2) denying
Defendant’s motion to vacate the foreclosure sale because the sale’s price-value ratio did not
shock the conscience of the court and there were no additional circumstances impeaching
the fairness of the sale, and (3) setting the supersedeas bond at $150,000. Accordingly, we
affirm.
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{36} IT IS SO ORDERED.
____________________________________
JAMES J. WECHSLER, Judge
WE CONCUR:
____________________________________
CELIA FOY CASTILLO, Chief Judge
____________________________________
LINDA M. VANZI, Judge
Topic Index for Charter Bank v. Francoeur, Docket No. 30,551
APPEAL AND ERROR
Standard of Review
CIVIL PROCEDURE
Bad Faith
Default Judgment
Estoppel
Failure to Answer
Intervention
Supersedeas Bond
Third-party Actions
PROPERTY
Foreclosure
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