Opinion Date: 04/17/2012
Issues: Suit seeking an injunction against the defendant-bank's foreclosure by advertisement; Whether MCL 600.3204(1)(b) barred the action; Statutory interpretation; Klooster v. City of Charlevoix; Oakland Cnty. Bd. of Rd. Comm'rs v. Michigan Prop. & Cas. Guar. Ass'n; United States v. Leslie (6th Cir.); Whether the guaranty was separate from the mortgage; The "one-action" rule; Mazur v. Young; Church v. Church; Abela v. General Motors Corp.; Contract interpretation; Dobbelaere v. Auto-Owners Ins. Co.; Frankenmuth Ins. Co. v. Masters; Vushaj v. Farm Bureau Gen. Ins. Co. of MI
Court: Michigan Court of Appeals (Published)
Case Name: Greenville Lafayette, LLC v. Elgin State Bank
e-Journal Number: 51366
Judge(s): Per Curiam - Hoekstra, Sawyer, and Saad
The court held that based on the plain language of the mortgage and the plain language of the statute, the trial court erred in granting summary disposition to the defendant-bank (mortgagee) because the action instituted against the plaintiff (mortgagor) constituted an action to recover the debt secured by the mortgage and it specifically included the guaranties as part of the debt secured by the mortgage. Thus, defendant's foreclosure by advertisement was invalid pursuant to the "one-action" rule, which provides that a foreclosure by advertisement is permitted only if "an action or proceeding has not been instituted, at law, to recover the debt secured by the mortgage or any part of the mortgage." The case arose from the bank's foreclosure by advertisement of plaintiff's real property. In 6/07, the parties entered into a "Business Loan Agreement" for about $1.8 million. The same day they entered into a separate mortgage agreement to secure defendant's loan to plaintiff. In the mortgage agreement, plaintiff mortgaged to defendant real property it owned. The $1.8 million loan was also secured by two separate commercial guaranties, each in the amount of $300,000 executed by two people. The loan matured on 6/6/11, with plaintiff owing defendant an outstanding balance of about $1.7 million. Attempts to renegotiate and extend the mortgage were unsuccessful, and defendant sued to collect on the two commercial guaranties in 8/11. The next month while the action on the guaranties was still pending, defendant sent plaintiff its "Notice of Mortgage Foreclosure Sale" which told plaintiff of defendant's intent to foreclose by advertisement on its real property. Plaintiff filed the complaint in this case seeking an injunction against the defendant's pending foreclosure sale and a declaratory judgment stating that defendant was not entitled to proceed with the sale based on MCL 600.3204(1)(b). Defendant filed a motion for summary disposition arguing that Michigan law permits foreclosure by advertisement while an action is pending against a guarantor. The trial court granted the motion. The case turned on the interpretation of MCL 600.3204(1)(b). The court noted that the facts of Leslie were similar to this case where it involved a mortgage foreclosure and a personal guaranty where the guaranty is separate from the mortgage note. The mortgage in this case provided that it was "given to secure payment of the indebtedness." The court held that the plain language of the mortgage contract specifically included the guaranties in the indebtedness secured by the mortgage. Thus, the mortgage included the guaranties as part of the debt secured by the mortgage. Since defendant had already sued to recover on the guaranties and the suit was pending, the court reversed.
Full Text Opinion