M & I Bank, FSB v. COUGHLIN et al

Filing 226

ORDER: The request for consideration in 200 M&I's trial brief, treated as a motion for reconsideration, is DENIED. See order for complete details. Signed by Judge Neil V Wake on 4/19/12. (NKS)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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No. CV 09-02282-PHX-NVW

M & I Bank, FSB,
Plaintiff,

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vs.

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ORDER

Ty Coughlin, et al.,
Defendants.

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The parties’ recent filings have raised questions that should be addressed ahead of

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the final pretrial conference. Certain issues will require a status conference as soon as

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reasonably possible.

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I.

TREATMENT OF CREDIT BIDS

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M&I’s trial brief (Doc. 200) asks this Court to reconsider certain issues relating to

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damages. This is a motion for reconsideration, and it is forfeited because not filed within

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14 days of the original ruling. LRCiv 7.2(g)(2). It will also be denied on its merits.

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In the process of resolving Defendants’ motion for judgment on the pleadings (in

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M&I’s favor), the Court addressed certain issues related to credit bids. See M & I Bank,

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FSB v. Coughlin, 805 F. Supp. 2d 858, 865–68 (D. Ariz. 2011). The Court explained,

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among other things, that

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[a] beneficiary’s credit bid, whether full or partial, is actual
payment to the beneficiary to the extent of the bid, just as a
cash bid and payment by a non-beneficiary would be. A
beneficiary who bids high, drives out other bidders, and takes

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the property for the amount of its bid may not then say it was
not really paid because it paid itself too much.

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Id. at 868.
At summary judgment (granted in M&I’s favor as to the liability of certain
defendants), it became clear that M&I nonetheless continued to assert damages based on
the difference between the outstanding indebtedness and the amount for which M&I
resold the property after taking it through a credit bid at the trustee’s sale. The Court
therefore repeated the above-quoted passage and noted that M&I’s damages “must be
calculated with respect to its credit bid, not the resale price.” (Doc. 163 at 14.)
In its recently submitted trial brief, M&I now asserts the this ruling “should be
reconsidered.” (Doc. 200 at 5.) Specifically, M&I believes that it should be able to hold
non-borrowers liable for the outstanding indebtedness minus the resale value, irrespective
of the credit bid. The following passages from the trial brief illustrate M&I’s reasoning:
 “The public policy of calculating a lender’s loss from its bid at foreclosure is a
protection afforded the borrower and guarantor. There is no basis to extend
such a benefit to third parties for breach of contract and torts, up to and
including fraud.” (Id.)
 “The fiction that the lender actually received funds when it credit bids the
property is a fiction of public policy to protect borrowers, not third parties.”
(Id. at 12.)
 “The fiction that the credit bid at foreclosure establishes the final loss to the
lender should not be applied to non-borrowers, because the lender is not and
cannot seek a deficiency against non-borrowers and non-guarantors.
Moreover, there is no public policy reason to extend such to breaches of
contract, breach of fiduciary duty, constructive fraud, negligence, fraud, etc., to
third parties.” (Id. at 13.)
M&I’s arguments display certain misconceptions. Credit bids are not fictions.
Credit bids reflect economic reality. It is the secured lender’s election to bid cash or
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credit at a trustee’s sale, and a cash bid would create pointless round trip transactions.

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See M & I Bank, 805 F. Supp. 2d at 865.

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economically identical to any other bidder’s cash in the same amount. A secured lender

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has the property and value in the amount the lender itself attributed to the property.

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M&I’s request for reconsideration is in error and will be denied.

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II.

The secured creditor’s credit bid is

ISSUES REQUIRING DISCUSSION

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The joint proposed pretrial order (Doc. 199) is rejected. It raises various issues

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that are not suitable for jury determination. However, before requiring a new proposed

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pretrial order, the Court will hold a status conference to discuss various topics, including:

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 Whether economic damages are subject to reasonable dispute, and if not,

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whether a brief motion under Rule 56(f) should be invited to resolve such

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damages as a matter of law.

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 Availability of comparative fault, apportionment, and like defenses.

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Court staff will contact counsel by e-mail shortly to establish a time at which such

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a status conference can be held.
IT IS THEREFORE ORDERED that the request for consideration in M&I’s trial
brief (Doc 200), treated as a motion for reconsideration, is DENIED.
Dated this 19th day of April, 2012.

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