Jacqueline Nowicki-Hockey v. Bank of America
331584
| Mich. Ct. App. | Jun 29, 2017Background
- Plaintiff Jacqueline Nowicki-Hockey obtained a mortgage in 1993, refinanced in 1996; monthly payments were to be applied in a specified order (taxes/insurance, interest, principal, late charges) and failure to timely pay could lead to acceleration/foreclosure.
- After a 2000 divorce, plaintiff became solely responsible for the loan; loan servicing moved among entities (ABN AMRO beginning in 1999; Bank of America later).
- Plaintiff alleges servicers repeatedly failed to post and properly apply her payments (including reversals and crediting errors), producing false defaults and forcing her into forbearance and repayment plans from 2002 onward.
- BOA declared default and scheduled a sheriff’s sale for January 6, 2011; plaintiff sued and obtained a temporary restraining order to block the sale.
- BOA moved for summary disposition, arguing plaintiff committed the first substantial breach by missing payments (including April 2005) and therefore cannot sue for BOA’s subsequent breaches; the trial court granted dismissal, finding plaintiff’s evidence (including a CPA report) insufficient.
- The Court of Appeals vacated and remanded, holding plaintiff produced sufficient evidence to create a triable issue whether BOA or its predecessors committed the first substantial breach by failing to apply payments and thereby causing false defaults.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiff committed the first substantial breach, barring her contract claim | Servicers (ABN AMRO/BOA) misapplied and reversed payments, creating false defaults before plaintiff missed payments | Plaintiff missed multiple payments (including April 2005) and thus was the first substantial breacher | Vacated trial dismissal; evidence raises triable fact whether lender committed first substantial breach |
| Whether plaintiff’s evidence (CPA report, payment records) is enough to survive summary disposition | Records and CPA analysis show large cumulative payments that were not properly applied, creating factual dispute | CPA report is incomplete and plaintiff failed to prove many claimed payments | Court: gaps in CPA report create factual issues — not grounds for summary dismissal |
| Whether a borrower’s missed payments automatically preclude enforcing notice/other contractual protections | Missed payments can be caused by lender accounting errors and do not automatically make notice ineffective | Missed payments show borrower breached and cannot sue for later lender breaches | Cites authority that missed payments do not necessarily bar enforcing notice provisions; factual context matters |
| Whether the lender’s alleged accounting breaches could render performance impossible and be a substantial breach | Misapplication of payments could prevent cure and force untenable modification plans, causing a substantial breach | Lender contends it properly applied payments and incurred valid escrow/fees | Court: if jury credits plaintiff, lender breaches could be first substantial breach; remand for trial |
Key Cases Cited
- McCarty v. Mercury Metalcraft Co., 372 Mich. 567 (1964) (establishes the "first substantial breach" rule)
- West v. General Motors Corp., 469 Mich. 177 (2003) (summary disposition standard under MCR 2.116(C)(10))
- Zaher v. Miotke, 300 Mich. App. 132 (2013) (definition of genuine issue of material fact at summary disposition)
- Wayne County v. Wayne County Retirement Comm., 267 Mich. App. 230 (2005) (review standard for summary disposition)
- Walsh v. Taylor, 263 Mich. App. 618 (2004) (MCR 2.116(C)(10) tests factual support of claim)
- Holmes v. Holmes, 281 Mich. App. 575 (2008) (de novo review of contractual interpretation)
- Barclae v. Zarb, 300 Mich. App. 455 (2013) (enforce contract’s plain language to determine parties’ intent)