July 22, 2014

Supreme Court of Missouri Upholds Lenders' Rights to Obtain Full Deficiency Judgment

In an opinion issued on April 17, 2012, the Supreme Court of Missouri announced the proper measure of a deficiency judgment after a foreclosure sale is the loan balance less the amount paid for the property at a foreclosure sale. This decision affirmed a lender's entitlement to a full deficiency judgment following a foreclosure sale.

In First Bank v. Fischer & Frichtel, First Bank sought a deficiency judgment from its borrower after a foreclosure sale. The borrower defended by claiming the amount of First Bank's deficiency should be reduced by the fair market value of the property, not by the amount of First Bank's credit bid at the foreclosure sale. In making this defense, Fischer & Frichtel urged the court to change over 100 years of Missouri law with respect to the measure of deficiency judgments.

The debate stalled numerous efforts by banks around the state to collect funds owed on defaulted loans. The court refused to follow a growing number of other states that employ the fair market value standard and a deafening chorus from sophisticated borrowers and guarantors urging Missouri to change its law. Rather, the court upheld the present law, holding that First Bank is entitled to a deficiency judgment in the amount of the loan balance (which includes principal, accrued interest, and attorneys fees) less the amount it credit bid at the foreclosure sale.

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About the Author

Richard W. Engel, Jr., Financial Services, Attorney, Armstrong Teasdale, Law fir

Rick Engel serves as the Practice Group Leader of the Financial Services group – the firm’s national banking, bankruptcy and debtor/creditor practice. In his practice, he has represented the interests of local, regional, national and international corporations and financial institutions in all aspects of corporate and financial counseling. His integrated skill set combines advantageously complimentary disciplines, including:

Financial Structuring, Restructuring and Bankruptcy. Rick represents the interests of corporate borrowers, debtors, trade creditors,...


About the Author

Robert Graham III, Financial Services, Real estate, Attorney, Armstrong Teasdale

Robert Graham is a member of the firm’s Real Estate, Financial Institutions and Corporate Services practice groups. His experience includes the representation of financial institutions and other lenders including banks, savings banks and insurance companies in the negotiation, documentation and closing of loan transactions. His experience also includes organizing, counseling and maintaining corporations (profit and non-profit) limited and general partnerships; limited liability partnerships and limited liability companies; the negotiation, preparation and review of contracts,...

Bruce D. LeMoine, Armstrong Teasdale Law firm, Bankruptcy Attorney

Bruce LeMoine is a member of the firm’s Business Services practice group. He concentrates his practice in the areas of financial restructuring, reorganization and bankruptcy.


About the Author

Sara Finan Melly, Armstrong Teasdale Law Firm, Insurance Attorney

A litigator in Armstrong Teasdale’s Financial Services Group, Sara Melly concentrates her practice on representing clients in matters involving debtor and creditor rights, lender liability, loan restructurings and workouts (both in and out of bankruptcy), receivership and foreclosure proceedings, and lien priority disputes.

In addition to her banking practice, Sara represents clients in commercial and insurance litigation cases. Sara frequently represents life, health, and disability insurers in coverage matters and defending first-party claims. Sara also advises clients in a...


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