Abstract
In the 1994 case of BFP v. Resolution Trust Corp., the Supreme Court of the United States ruled that fair market value “presumes market conditions that, by definition, simply do not obtain in the context of a forced sale.” Essentially, the forced sale and free market were distinct. It is this distinction claim and the three cases used to substantiate it (Guardian Loan Co. v. Early, Nevada National Leasing Co. v. Hereford, and East Bay Municipal Utility District v. Kieffer) which this thesis seeks to contextualize. Represented by the three cases, the long history of the forced sale context involved a wide range of contrasting legal approaches that, upon closer inspection, clearly invalidate the BFP majority’s claim of a complete and obvious distinction between free and forced sales. In addition to the cases themselves, their respective jurisprudences and broader legal contexts undermined the distinction claim. Despite in many ways being diametrically opposed to each other, the three cases do not conflict and instead synergize to effectively defeat the distinction claim. First, the Guardian jurisprudence was characterized by circumstance and equity. Courts of equity would follow a holistic review, examining all mitigating circumstances, and, should the case warrant it, implement equitable relief that harmonized the interests of both debtors and creditors. While the BFP majority acknowledged some aspects of the negative circumstances surrounding mortgage foreclosure, the court did not implement equitable relief to close the gap between forced sale and free market conditions, instead ruling on a technicality. Second, the Nevada National jurisprudence incorporated principles of the Contract Clause into mortgage foreclosure, such as upholding rather than altering the existing legal framework. By rejecting free market value as the appropriate benchmark, the BFP majority fundamentally changed mortgage foreclosure in direct contradiction to the spirit of the Nevada National jurisprudence. Further, several cases in the Nevada National jurisprudence explicitly reasoned that mortgage foreclosure itself was not a forced sale, undermining support for the distinction claim. Finally, the East Bay jurisprudence concerned the rules of evidence in eminent domain actions. Despite being an environment of strict doctrine and inflexibility, free market value remained the benchmark. In fact, courts sought to emulate free market conditions.In short, this thesis questions the historical grounds cited by BFP in its denial of relief in cases where foreclosure auctions result in inadequate prices. Divided into three lengthy chapters, this thesis shows diverse and complex treatment of the forced sale in American legal history. In contrast to what BFP claimed about the self-evident and fundamental distinction between the forced sale and free market, the jurisprudence behind each of the supporting cases shows a much more nuanced history. In addition, this thesis tackles a unique problem concerning the historian’s role in addressing dubious judicial claims. Being a rigorous historical analysis, this thesis refrains from promoting one area of law over another and facilitates the legal profession to determine the proper course. That being said, it is clear that free market conditions did in fact pertain to the forced sale.