442 B.R. 621
Bankr. W.D. Mich.2011Background
- Debtor Richard K. Miller filed Chapter 13 on Aug. 3, 2009, and proposed plans treating the Bank of Florence as secured by the Spread Eagle Property.
- Bank foreclosed Michigan property by advertisement and credit-bid $413,560.27, equal to the entire indebtedness, after prior Wisconsin foreclosure litigation and a Moon Lake Property sale proceeds were applied to the debt.
- Debtor argued the Michigan foreclosure paid the debt in full and sought dismissal of the Wisconsin foreclosure and plan confirmation; Bank sought relief from stay to undo the Michigan sale and pursue further collection.
- Court held hearings on the Objection and Motion; central issue was the amount of debt, if any, owed by Debtor to the Bank, and the status of the Michigan Foreclosure Sale.
- Key issues included the enforceability of the Bank’s full-debt bid, proper choice of law, and the Bank’s standing to object to plan; the court found Debtor owes nothing to Bank.
- Court ultimately granted limited relief from stay to dismiss the Wisconsin foreclosure with prejudice and scheduled a further confirmation hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Bank’s full debt bid at Michigan foreclosure enforceable as payment in full? | Bank overbid bid total; credit bid should extinguish debt. | Debtor argues bid paid in full; surplus funds belong to Debtor. | Bank bid equal to debt; Debtor owed nothing. |
| What law governs the foreclosure and surplus credits? | Wisconsin choice-of-law provision governs. | Michigan foreclosure sale governs; real property located in Michigan. | Michigan law controls; surplus credit rules apply. |
| Does Bank have standing to object to Debtor’s plan after overbid relief? | Bank claims ongoing claim and interest. | Bank lacks standing since no remaining debt. | Bank lacks standing to object; no pecuniary interest remains. |
| Is relief from stay appropriate to pursue Wisconsin foreclosure? | Bank seeks stay relief to pursue further collection. | No debt remains; relief should be to dismiss Wisconsin action. | Relief from stay granted only to dismiss Wisconsin action with prejudice. |
Key Cases Cited
- Pulleyblank v. Cape, 179 Mich.App. 690 (Mich.App. 1989) (mortgagee credit bid and surplus applied to debt; overbid credits the mortgagor)
- Three Oaks v. Lakefront Props., 178 Mich.App. 551 (Mich.App. 1989) (surplus proceeds belong to mortgagor; overbid is applied to debt)
- Grella v. Chrysler Capital Realty, Inc., 942 F.2d 160 (2d Cir. 1991) (Whitestone rule imported into Michigan; bid full debt prevents deficiency)
- Kennedy v. Brown, 50 Mich. 336 (1883) (surplus proceeds belong to owner of equity of redemption)
- In re Spillman Dev. Group, Ltd., 401 B.R. 240 (Bankr. W.D. Tex. 2009) (credit bid equals payment; no deficiency when bid equals debt)
- United States v. Garno, 974 F.Supp. 628 (E.D. Mich. 1997) (Michigan policy against altering foreclosure outcomes absent fraud)