848 N.W.2d 408
Mich. Ct. App.2014Background
- Defendants (Michigan residents) took two Michigan-origin loans from Citizens to buy Nevada condos; notes were executed and payments made in Michigan. Deeds of trust named Nevada law for the property and included power-of-sale clauses. One note expressly chose Michigan law; the other was silent.
- CF Bancorp (Citizens) failed; FDIC sold the loan assets to First Michigan Bank (FMB), later Talmer, at a discount; Talmer is a Michigan bank and acquired the notes and deeds.
- Defendants defaulted; trustee’s sales in Nevada occurred in September 2011 (one condo sold to third party, one to Talmer). Talmer then sued in Michigan for deficiency judgments on each note.
- Defendants argued Nevada law (and Nevada’s anti-deficiency/public-policy rules, including NRS 40.459(1)(c)) governed and that Talmer was required to pursue Nevada deficiency procedures; Talmer argued Michigan law governed the notes and allowed deficiencies and contractual attorney fees.
- Two Michigan trial courts granted Talmer summary disposition and entered deficiency judgments ($244,476 and $454,932); one trial court awarded attorney fees, the other denied fees. Appeals and a Talmer cross-appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for notes: which state governs deficiency claims? | Michigan law governs because notes were negotiated, executed, and performed in Michigan; one note expressly chose Michigan law. | Nevada law governs or at least its anti-deficiency protections apply because the collateral (property) and foreclosure occurred in Nevada. | Michigan law governs the promissory notes and deficiency suits; Restatement and contacts favor Michigan. |
| Effect of Nevada anti-deficiency statute NRS 40.459(1)(c) (note-buyers’ purchase price as limit on deficiency) | Talmer: Michigan law applies; Nevada statute shouldn’t displace parties’ expectations or govern these Michigan-origin notes. | Defendants: NRS 40.459(1)(c) could wipe out deficiencies because Talmer bought the notes at a steep discount from FDIC. | Nevada statute could be materially different, but court found similarities between Michigan and Nevada regimes and declined to apply Nevada law here; did not decide whether NRS 40.459(1)(c) actually benefits defendants. |
| Whether Talmer was required to pursue deficiency remedies in Nevada after exercising power-of-sale | Talmer: exercise of power-of-sale in Nevada does not preclude suing on the debt in Michigan; trustee sale is not an "action" requiring joinder under Nevada law. | Defendants: Talmer’s election to foreclose under Nevada law locked it into Nevada deficiency procedures and joinder rules. | Court: Talmer was not required to bring deficiency suits in Nevada; Nevada’s joinder statute does not convert a trustee sale into an "action" that precludes separate suits. |
| Entitlement to contractual attorney fees | Talmer: note’s fee-shifting clause entitles Talmer to reasonable attorney fees for collection and appeal. | Defendants: argued fee award was unnecessary/unreasonable given choice-of-law dispute and routine nature of collection. | Contractual attorney fees are recoverable; trial court erred in denying fees in one docket. Remand to determine reasonable fees; other docket’s fee award affirmed. |
Key Cases Cited
- Elba Twp v Gratiot Co Drain Comm’r, 493 Mich 265 (review standard for summary disposition and de novo review)
- Sutherland v Kennington Truck Serv, Ltd, 454 Mich 274 (choice-of-law analysis; apply Michigan law unless foreign state interest warrants otherwise)
- Citizens Bank v Boggs, 299 Mich App 517 (explaining MCL 600.3280 and full-credit-bid rule in deficiency context)
- Sandpointe Apartments, LLC v The Eighth Judicial Dist Court of Nevada, 313 P.3d 849 (Nev. Sup. Ct. advisory on NRS 40.459(1)(c) applying to trustee sales after statute’s effective date)
- Guardian Depositors Corp v Darmstaetter, 290 Mich 445 (deficiency actions and entitlement to evidentiary proceedings/jury on valuation issues)