First Bank v. FISCHER & FRICHTEL, INC.
2012 Mo. LEXIS 92
Mo.2012Background
- Fischer & Frichtel defaulted on a $2.576 million loan from First Bank secured by nine unsold lots in a Franklin County development, with foreclosure occurring in December 2008.
- First Bank acquired the nine lots for $466,000 at foreclosure; trial testimony showed FMV of the property at default was about $918,000.
- At trial, the court instructed the jury to award the deficiency based on the difference between the principal balance and the foreclosure sale’s fair market value, not the sale price.
- The jury found a deficiency of $215,875 plus interest, based on FMV rather than the sale price.
- The trial court granted First Bank a new trial, concluding the deficiency should be based on the foreclosure sale price, not FMV.
- The Missouri Supreme Court affirmed the trial court, holding deficiency is measured by the sale price, with voiding available only for a sale so inadequate as to shock the conscience.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What is the proper deficiency measure after foreclosure? | Fischer & Frichtel argues FMV should set the deficiency. | First Bank argues the deficiency is the difference between the debt and the foreclosure sale price. | Deficiency measured by foreclosure sale price; FMV use only to void an inadequate sale. |
| May a debtor challenge the adequacy of the foreclosure price in a deficiency action? | Fischer & Frichtel contends it should be able to rely on FMV in deficiency. | First Bank argues adequacy challenges belong in a separate action to void the sale, not in deficiency action. | No; challenges to sale adequacy are not raised in the deficiency action. |
| Should Missouri adopt the Restatement (Third) approach (FMV-based deficiency)? | Fischer & Frichtel urges adoption of FMV-based measure via Restatement §8.4. | First Bank opposes, arguing retention of the traditional sale-price measure aligns with policy and precedent. | Missouri should not adopt FMV-based deficiency; retain sale-price measure. |
| Does public policy or debtor sophistication warrant changing the rule outside statute? | Rule adjustment warranted by fairness to sophisticated commercial debtors who cannot bid at sale. | Policy concerns insufficient to modify common law without legislative action; standards for voiding sales are sufficient. | Public policy concerns do not justify altering the common-law rule; decline to modify. |
Key Cases Cited
- Roberts v. Murray, 232 S.W.2d 540 (Mo.1950) (voiding improper foreclosure sale as remedy for inadequacy)
- Judah v. Pitts, 62 S.W.2d 715 (Mo.1950) (shock-the-conscience standard for setting aside sale)
- Cockrell v. Taylor, 145 S.W.2d 416 (Mo.1940) (standard for voiding a foreclosure sale)
- New York Store Mercantile Co. v. Thurmond, 85 S.W. 333 (Mo.1905) ( foreclose sale pricing context influencing deficiencies)