20250218_C367762_120_367762.Opn.Pdf
20250218
| Mich. Ct. App. | Feb 18, 2025Background
- This case involves foreclosure actions under the Michigan Construction Lien Act (CLA) on four commercial properties tied to a development project.
- K2 Retail Construction Services, Inc. (K2) was the project's general contractor and filed suit for unpaid construction services, seeking foreclosure and allowing itself to credit bid its liens at auction.
- WL Acquisitions, LLC (WLA), then the property owner, and affiliates (the "WL defendants") challenged K2’s and several subcontractors' liens and the foreclosure proceedings.
- The trial court ruled in favor of foreclosing and allowed K2’s credit bid at the sale, setting a two-week redemption period. K2 and its assignee (Delta) ultimately took title to the properties.
- WLA did not redeem, and its property rights were extinguished. It then appealed, claiming improprieties in the foreclosure process, including the handling of credits, surplus, and due process.
- On appeal, most issues were deemed moot due to WLA’s failure to redeem, but the appellate court retained the issue of WLA’s entitlement to any surplus from the foreclosure sale.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether failure to redeem moots appeal | WLA claims violations warrant relief | K2 argues all rights extinguished post-redemption period | Failure to redeem extinguished property rights; most issues moot |
| Allowance of credit bids in CLA foreclosures | WLA: Not permitted under CLA; improper | K2: Permitted by statute/equity, efficiency | Credit bids are permitted in CLA foreclosures |
| Requirement to determine lien amounts before credit bid | WLA: Amount must be determined before foreclosure/credit bid | K2: Not required before sale, can determine later | Court erred in not determining K2's lien amount or surplus; remanded for findings |
| Due process & conduct of hearings | WLA: Muting counsel denied due process | K2: Court managed process properly | No due process violation; court acted within authority |
Key Cases Cited
- Bryan v. JPMorgan Chase Bank, 304 Mich App 708 (failure to redeem extinguishes property rights for mortgagor under foreclosure by advertisement)
- Can IV Packard Square, LLC v. Packard Square, LLC, 328 Mich App 656 (failure to redeem under judicial foreclosure renders appeal moot)
- Legacy Custom Builders, Inc. v. Rogers, 345 Mich App 514 (nature and function of construction liens under Michigan law)
- Maldonado v. Ford Motor Co., 476 Mich 372 (trial court's authority to control proceedings and manage conduct of counsel)