In this action to recover a purported deficiency consisting of amounts not included in a full credit bid at a foreclosure sale, plaintiff appeals by right the circuit court’s order granting defendants’ motion to dismiss.
After HLL defaulted, plaintiff foreclosed on the property by advertisement and made a successful bid sufficient to fully satisfy HLL’s outstanding principal and interest, plus the foreclosure costs. Plaintiff then sued defendants, the guarantors of HLL’s loan obligations, for unpaid taxes and insurance premiums.
The circuit court granted summary disposition in favor of defendants, ruling that plaintiffs bid was a “full credit bid” that completely extinguished HLL’s obligations under the note and mortgage. Accordingly, the court ruled, defendants could not be held responsible for repaying HLL’s satisfied obligations. The court also briefly mentioned that plaintiff did not provide any notice of deficiency to HLL or defendants, even though neither party had raised this issue.
We review de novo the circuit court’s grant of summary disposition. Nuculovic v Hill,
As this Court stated in New Freedom Mtg Corp v Globe Mtg Corp,
When a lender bids at a foreclosure sale, it is not required to pay cash, but rather is permitted to make a credit bid because any cash tendered would be returned to it. If this credit bid is equal to the unpaid principal and interest on the mortgage plus the costs of foreclosure, this*521 is known as a “full credit bid.” When a mortgagee makes a full credit bid, the mortgage debt is satisfied, and the mortgage is extinguished. [Citations omitted.]
“The power to render a deficiency decree in foreclosure proceedings is entirely statutory.” Bank of Three Oaks v Lakefront Props,
the property sold [by advertisement] was fairly worth the amount of the debt secured by it at the time and place of sale or that the amount bid was substantially less than its true value, and such [a] showing shall constitute a defense to such action and shall defeat the deficiency judgment... either in whole or in part to such extent.
Interpreting our Supreme Court’s decision in New York Life Ins Co v Erb,
Plaintiff argues that defendants remain liable under the note and mortgage for HLL’s liabilities because
Plaintiff contends that defendants are liable for the unpaid taxes that became due before the foreclosure sale, notwithstanding the fact that plaintiff did not actually pay these taxes until it sold the property to a third party. Although HLL’s property taxes were to be paid regularly and held in escrow, plaintiff concedes that it did not actually incur these costs until it sold the property to a third party, well after the foreclosure sale was completed. As our Supreme Court noted in Erb,
Plaintiff next argues that defendants remain liable for the insurance premium payments that it made before the foreclosure sale. We agree that, under the abovementioned authorities, plaintiff should ordinarily be permitted to recover by way of a deficiency judgment for the insurance premiums that it actually paid before the foreclosure sale. However, defendants raise an alternative ground for affirmance. Specifically, they claim that plaintiff cannot recover for the preforeclosure insurance premium payments because it failed to follow the contractual notice requirements before seeking a deficiency judgment.
Although the parties did not raise this issue in the circuit court, the court spontaneously stated at oral argument that plaintiff had failed to provide notice of the deficiency. Because this matter was never properly raised in the circuit court, the record does not contain sufficient evidence to determine whether plaintiff actually provided notice of the deficiency to HLL or defendants.
Finally, plaintiff argues that defendants remain liable for all taxes, insurance premiums, and escrow amounts, regardless of whether HLL remained liable, because the guaranties contained broad language requiring defendants to repay all of HLL’s obligations, even those that had been discharged. However, even if the contractual language in a guaranty broadly extends to all of a mortgagor’s liabilities and debts, a guarantor cannot be held liable for obligations that were either satisfied or never incurred by the mortgagor. Bank of Three Oaks,
We affirm the circuit court’s determination that defendants are not liable for the unpaid taxes paid by plaintiff after the foreclosure sale. However, we reverse the circuit court’s determination that defendants are not liable for any of the insurance premium payments made by plaintiff before the foreclosure sale. We remand for further proceedings with respect to this question.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction. No taxable costs pursuant to MCR 7.219, neither party having prevailed in full.
Notes
Defendants’ motion to dismiss was, in reality, a motion for summary disposition. The circuit court did not identify the subrule under which it was granting the motion. But because the court considered evidence outside the pleadings, we review its decision as having been made under MCR 2.116(0(10). See Nuculovic v Hill,
Plaintiff initially sought to recover unpaid taxes and insurance premiums that accrued up to the date of the resale of the property to a third party. But plaintiff has modified its request and now seeks only to recover the unpaid taxes incurred and insurance premiums it paid up to the date of the foreclosure sale.
Because Lakefront Props was decided before November 1, 1990, it is not binding on this Court. MCR 7.215(J)(1); People v Cooke,
There is an exception that requires a mortgagor to pay for interest, taxes, and insurance premiums that accrue between the date of the foreclosure sale and the expiration of the redemption period when the mortgagor exercises its right of redemption. MCL 600.3240(1) and (2); Bank of Three Oaks,
Defendants suggest that plaintiff failed to sufficiently plead that it provided adequate notice of the deficiency. But defendants offer no legal support to establish that plaintiff was required to plead such a fact. To the contrary, if plaintiff provided inadequate notice under the agreements to recover a deficiency, this is a defense that defendants were required to plead and prove. See MCR 2.111(B) and (F).
Plaintiff contends that it made $11,724.41 in insurance premium payments before the foreclosure sale. However, according to defendants, the insurance payment printout indicates that plaintiff may have actually paid less than this amount before the sale. Factual development concerning this matter will be required on remand.