Full Credit Bid Rule Bars Recovery for Wrongfully Enjoined Lender

by Snell & Wilmer

On June 30, 2014, Judge James A. Teilborg, a Senior District Judge in Arizona, ruled that Tri City National Bank (“TCNB”) was not entitled to bond money posted by the plaintiffs after TCNB was wrongfully enjoined from executing a trustee sale.  Grady v. Bank of Elmwood, 2014 WL 2930510 (D. Ariz. June 30, 2014).

In Grady, the plaintiffs initially sought injunctive relief against Bank of Elmwood (“BOE”).  Plaintiffs signed a promissory note and a deed of trust with BOE for their home loan of just over $1.8M.  Less than a year later, the plaintiffs filed suit in Maricopa County Superior Court seeking to have the note voided for fraud.  They moved for, and were granted, a preliminary injunction barring BOE from foreclosing on the property.  Plaintiffs were ordered to post a bond in the amount of $165,000 to cover mortgage payments and future costs.  They posted the bond.

Just weeks later, BOE was closed by the FDIC and its assets were sold to TCNB.  TCNB intervened and later sought to modify the preliminary injunction.  The bond amount was also increased to cover additional mortgage payments and property taxes.  Plaintiffs posted the additional $103,330.00.

The FDIC was substituted in for BOE on several of the counts in the complaint on July 7, 2010 and the case was removed to federal court.  It was remanded back to state court after Plaintiffs agreed to dismiss the claims against the FDIC.  TCNB then moved again to increase the bond amount to cover additional mortgage payments and ongoing attorneys’ fees.  The Plaintiffs, however, did not post this additional $81,670.

The Plaintiffs then sought to amend their complaint and add TCNB as a defendant to the claims that were previously dismissed against the FDIC.  The FDIC intervened and removed the case again.

In April of 2012, the Court dissolved the preliminary injunction because the Plaintiffs did not post the additional security bond ordered by the superior court.  TCNB then held a trustee’s sale in October of 2012 and submitted a full credit bid for $1.9M.

The claims against TCNB were ultimately dismissed and then TCNB sought recovery of the security bond.  The Plaintiffs also sought recovery of the bond.

In resolving the dispute over which party is entitled to the security bond, the Court found that TCNB was wrongfully enjoined from proceeding with the trustee sale all along.  A party who is wrongfully enjoined is presumptively entitled to recover the security bond but a defendant is only entitled to recover provable damages as the result of a wrongful injunction.

TCNB sought recovery of missed mortgage payments and property taxes as its damages but the full credit bid rule got in the way of that recovery.  A full credit bid is when a lender, i.e. the beneficiary of a deed of trust, purchases a property by bidding the full amount of debt owed by the borrower and then crediting that towards the purchase price.  The market value of the property is the price it sold for at the foreclosure sale.  Because the lender bid the full amount of the debt owed, it has no damages from the loan itself.

Here, TCNB’s full credit bid was held to have extinguished its damages arising from the Plaintiffs’ debt, including the missed payments and the property taxes.  So, despite having been found to be wrongfully enjoined, TCNB had no damages and thus the Court denied its request to recover the security bond.

The bottom line:  full credit bids can have unintended consequences and care should be taken to ensure that the pros and cons of making a full credit bid are fully evaluated before the trustee’s sale is held.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Snell & Wilmer | Attorney Advertising

Written by:

Snell & Wilmer

Snell & Wilmer on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.