831 N.W.2d 876
Mich. Ct. App.2013Background
- HLL defaulted on its note; plaintiff foreclosed by advertisement and made a full bid sufficient to satisfy principal, interest, and foreclosure costs.
- Plaintiff then sued guarantors for unpaid taxes and insurance premiums; some premiums were paid before the foreclosure sale, though taxes were paid after the sale.
- Trial court granted summary disposition, holding the bid was a full credit bid that extinguished HLL’s obligations; taxes were not recoverable post-sale.
- Court noted lack of any notice of deficiency, though the issue was not raised by the parties.
- Court recognized local authorities allowing recovery of pre-foreclosure taxes/insurance in some contexts but held taxes were extinguished since paid after sale, while pre-foreclosure premiums could be recoverable subject to notice and other prerequisites.
- On appeal, court affirmed in part, reversed in part, and remanded for further proceedings on pre-foreclosure insurance premiums.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is there a deficiency for unpaid taxes remaining after foreclosure? | Tax liability paid after sale; pre-sale bid extinguished debt, so no deficiency for taxes. | Taxes paid pre-sale by mortgagee may be recoverable; but here taxes paid after sale should be extinguished. | Taxes not recoverable in deficiency after foreclosure. |
| Whether the final bid constituted a full credit bid for all obligations including taxes and insurance | Bid included principal, interest, and costs; should be considered a full credit bid. | Full credit bid does not cover pre-foreclosure taxes or insurance unless paid before sale. | Final bid was a full credit bid extinguishing the mortgage debt. |
| Whether plaintiff may recover pre-foreclosure insurance premiums from defendants | Defendants are liable for insurance premiums paid before foreclosure. | Notice deficiency and other procedural requirements may bar recovery; damages contested. | Remanded to determine pre-foreclosure insurance premium amounts and notice adequacy; not foreclosed. |
| Whether guarantors can be liable for obligations that were satisfied or never incurred by the mortgagor | Guaranty language broad enough to require repayment of all mortgagor liabilities. | Guarantors cannot be liable for obligations extinguished by foreclosure. | Guarantors not liable for extinguished debts; liability limited to enforceable obligations. |
| Whether plaintiff lacked proper notice of deficiency, and whether notice issues bar recovery | Notice not properly raised at trial; potential deficiency notices should not bar recovery without proper record. | Adequate notice is required; failure to plead notice may be a defense. | Record inadequate on notice; remand to resolve notice and related issues. |
Key Cases Cited
- Bank of Three Oaks v. Lakefront Props, 178 Mich App 551 (1989) (deficiency defenses; taxes/insurance after foreclosure not recoverable when extinguished by sale)
- New Freedom Mtg Corp v Globe Mtg Corp, 281 Mich App 63 (2008) (full credit bid defined; mortgage debt extinguished)
- New York Life Ins Co v Erb, 276 Mich 610 (1936) (taxes paid by mortgagee post-foreclosure not reforeclosed; pre-sale taxes may be recoverable)
- Wood v Button, 205 Mich 692 (1919) (taxes paid before/at foreclosure considerations)
- Nuculovic v Hill, 287 Mich App 58 (2010) (summary disposition standards; use of 2.116(0)(10) standard)