Bank of Am., NA v. First Am. Title Ins. Co., Docket No. 149599.

CourtSupreme Court of Michigan
Writing for the CourtVIVIANO, J.
Citation499 Mich. 74,878 N.W.2d 816
Parties BANK OF AMERICA, NA v. FIRST AMERICAN TITLE INSURANCE CO.
Decision Date13 April 2016
Docket NumberDocket No. 149599.,Calendar No. 7.

499 Mich. 74
878 N.W.2d 816

BANK OF AMERICA, NA
v.
FIRST AMERICAN TITLE INSURANCE CO.

Docket No. 149599.
Calendar No. 7.

Supreme Court of Michigan.

Argued Oct. 15, 2015.
Decided April 13, 2016.


878 N.W.2d 818

RJ Landau Partners PLLC, Ann Arbor (by Richard J. Landau and Christopher A. Merritt ) for Bank of America.

Brooks Wilkins Sharkey & Turco, PLLC, Birmingham (by Steven M. Ribiat ), for First American Title Insurance Company.

Ottenwess, Taweel & Schenk, PLC, Detroit (by John R. Monnich ), for Westminster Abstract Company.

Warner Norcross & Judd LLP, Grand Rapids (by Gaëtan Gerville–Réache and Rodney D. Martin ) for the Michigan Bankers Association.

The Smith Appellate Law Firm (by Michael F. Smith ) for the American Land Title Association.

VIVIANO, J.

499 Mich. 79

In this case, we are asked to address, among other things, the scope of the full credit bid rule. Plaintiff has asserted a variety of claims against certain entities and individuals involved in various allegedly fraudulent mortgage transactions. The Oakland Circuit Court granted summary disposition pursuant to MCR 2.116(C)(10) in favor of defendants as to all claims. The Court of Appeals affirmed in part and reversed in part, relying on the full credit bid rule as

499 Mich. 80

discussed in New Freedom Mtg. Corp. v. Globe Mtg. Corp.1 to conclude that certain claims raised by plaintiff were barred by plaintiff's full credit bids at the foreclosure sales.

For the reasons stated below, we conclude that the New Freedom panel erred to the extent it held that the full credit bid rule bars contract claims against nonborrower third parties, such as defendants in this case. Therefore, the Court of Appeals in the instant case erred by concluding that plaintiff's full credit bids barred its contract claims against the nonborrower third-party defendants. As to the other claims at issue in this appeal, we conclude that closing instructions constitute a contract upon which a breach of contract claim can be brought, and we remand to the trial court for reconsideration of whether summary disposition is appropriate on this claim. We also conclude that the lower courts erroneously interpreted the parties' closing protection letters and therefore remand to the trial court to reconsider whether summary disposition is appropriate as to plaintiff's claim under the parameters set forth in this opinion. In sum, we reverse the judgment of the

878 N.W.2d 819

Court of Appeals and remand to the Oakland Circuit Court for further proceedings consistent with this opinion.

I. FACTS AND PROCEDURAL HISTORY

In 2005 and 2006, an independent mortgage broker submitted four loan packages to plaintiff Bank of America, NA. Bank of America agreed to finance a percentage of the borrowers' purchases of the properties. After issuing the loan commitments, Bank of

499 Mich. 81

America sent closing instructions to two closing agents, defendants Westminster Abstract Company (Westminster) and Patriot Title Agency (Patriot). Those closing agents agreed to close the four loans in exchange for a fee.

The closing instructions required that a closing protection letter (CPL) be issued in connection with each closing. Defendant First American Title Insurance Co (First American) was the title insurance company for all four sales and agreed to issue CPLs for all four closings. Under the CPLs, First American agreed to reimburse Bank of America for its actual losses incurred in connection with the closing if the losses arose out of, among other things, the fraud or dishonesty of the closing agents.

After First American issued the CPLs, the closings occurred. Westminster closed on loans for two of the properties: 13232 Enid Boulevard (Enid), for which Bank of America provided a $3,575,000 loan; and 1890 Heron Ridge Court (Heron Ridge), for which Bank of America provided a $2,800,000 loan. Patriot closed on loans for the other two properties: 1766 Golf Ridge Drive (Golf Ridge), for which Bank of America provided a $1,500,000 loan; and 1550 Kirkway Road (Kirkway), for which Bank of America provided a $1,500,000 loan. Unbeknownst to Bank of America, the values of the properties had been inflated by fraudulent appraisals and straw buyers who were paid for their participation. Shortly after closing, all four borrowers defaulted.

Bank of America foreclosed by advertisement on all four properties in accordance with Michigan's foreclosure statutes.2 It subsequently purchased all four properties at sheriff sales with credit bids. It made full

499 Mich. 82

credit bids—i.e., credit bids in the full amount of the unpaid principal and interest plus foreclosure costs—on the Enid and Kirkway properties. Thereafter, Bank of America sold all the properties to bona fide purchasers.3 Bank of America claims it lost roughly $7 million on the deals.

During the foreclosure proceedings, Bank of America discovered the underlying fraud in each of the four loans. Bank of America brought the instant suit against First American, Westminster, and Patriot, as well as several individuals involved in the closings.4 Pertinent to this appeal, Bank of America asserted a claim against Westminster, alleging that it violated the specific terms of the closing instructions, and a claim against First American for recovery under the CPLs for the actual losses arising from Westminster's and Patriot's fraud and dishonesty during the closings.5

Defendants moved for summary disposition. The circuit court granted First American and Westminster summary disposition under MCR 2.116(C)(10) as to all

878 N.W.2d 820

claims and thereafter denied Bank of America's motion for reconsideration.

In a split, unpublished opinion, the Court of Appeals affirmed in part and reversed in part.6 The majority found New Freedom controlling. Quoting New Freedom, the panel defined the full credit bid rule as follows:

499 Mich. 83
"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 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." [7 ]

Although the majority appeared to question the validity of New Freedom, it concluded that New Freedom extended the full credit bid rule to indemnity claims under CPLs. The majority first considered First American's liability under the CPLs for the closings done by Patriot. The majority concluded that genuine issues of material fact remained as to whether Patriot engaged in fraud or dishonesty at the Golf Ridge and Kirkway closings. Nonetheless, it affirmed the trial court's order granting summary disposition in favor of First American as to the claim based on the Kirkway closing. Recognizing that Bank of America made a full credit bid on the Kirkway property, the majority held that the full credit bid rule barred Bank of America's claim against First American stemming from the closing on that property.8 The majority then turned to First American's liability regarding the Westminster closings. The majority concluded that Bank of America failed to produce evidence to create a question of fact as to whether Westminster knew of or participated in the underlying fraud in the closings of the Enid and Heron Ridge properties. Thus, the majority held that the trial court properly granted summary disposition to First American and Westminster. Finally, the majority considered the validity of Bank of America's contract claim

499 Mich. 84

against Westminster.9 The majority concluded that Bank of America did not establish a link between Westminster's alleged violations of the closing instructions and the claimed damages. Even if the majority had concluded there was a link, it also rejected Bank of America's claim against Westminster stemming from the closing on the Enid property because there were no damages due to Bank of America's full credit bid at the foreclosure sale.10

Bank of America sought leave to appeal in this Court. On November 19, 2014, we granted leave to appeal and asked the parties to include among the issues briefed:

878 N.W.2d 821
(1) whether a separate contract between the lender and the closing agent existed outside of the closing protection letters; (2) whether there was a genuine issue of material fact regarding the closing agent's violation of the terms of the lender's written closing instructions; and (3) whether the full credit bid rule of New Freedom Mortgage Corp. v. Globe Mortgage Corp., 281 Mich.App. 63 [761 N.W.2d 832] (2008), is a correct rule of law and, if so, whether it
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87 practice notes
  • Rafaeli, LLC v. Oakland Cnty., Docket No. 156849
    • United States
    • Supreme Court of Michigan
    • July 17, 2020
    ...not subject to suit, but which no private purchaser could have done."); see also Bank of America, NA v. First American Title Ins. Co. , 499 Mich. 74, 91, 878 N.W.2d 816 (2016) ("No one disputes that the mortgagee is entitled to recover only his debt. Any surplus value belongs to others, nam......
  • Emergency Dep't Physicians P.C. v. United Healthcare, Inc., Case No. 2:19-cv-12052
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • December 17, 2020
    ...828 (2) Defendants’ breach of the contract, and (3) damages to Plaintiffs caused by the breach. Bank of Am., NA v. First Am. Title Ins. , 499 Mich. 74, 100–01, 878 N.W.2d 816 (2016). To prove that the parties had an implied contract, Plaintiffs must also show: (1) competency to contract, (2......
  • Bank of Am., NA v. Fid. Nat'l Title Ins. Co., Docket Nos. 311798
    • United States
    • Court of Appeal of Michigan (US)
    • June 21, 2016
    ...the contract, and (3) the breach resulted in damages to the party claiming breach." Bank of America, NA v. First American Title Ins. Co. 499 Mich. 74, 100, 878 N.W.2d 816 (2016) (FATCO ).A CPL is a contract between the title company and the lender whereby the title insurance company agrees ......
  • Associated Mortg. Corp. v. Weaver (In re Weaver), Bankruptcy Case No. 13–12548 EEB
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Colorado
    • January 5, 2018
    ...not affect or extinguish Plaintiff's right to seek damages for fraud against Debtor. See Bank of America, NA v. First Am. Title Ins. Co ., 499 Mich. 74, 878 N.W.2d 816, 828–29 (2016) (concluding bank's full credit bid during foreclosure did not bar later claim for fraud against third party ......
  • Request a trial to view additional results
84 cases
  • Rafaeli, LLC v. Oakland Cnty., Docket No. 156849
    • United States
    • Supreme Court of Michigan
    • July 17, 2020
    ...not subject to suit, but which no private purchaser could have done."); see also Bank of America, NA v. First American Title Ins. Co. , 499 Mich. 74, 91, 878 N.W.2d 816 (2016) ("No one disputes that the mortgagee is entitled to recover only his debt. Any surplus value belongs to others, nam......
  • Emergency Dep't Physicians P.C. v. United Healthcare, Inc., Case No. 2:19-cv-12052
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • December 17, 2020
    ...828 (2) Defendants’ breach of the contract, and (3) damages to Plaintiffs caused by the breach. Bank of Am., NA v. First Am. Title Ins. , 499 Mich. 74, 100–01, 878 N.W.2d 816 (2016). To prove that the parties had an implied contract, Plaintiffs must also show: (1) competency to contract, (2......
  • Bank of Am., NA v. Fid. Nat'l Title Ins. Co., Docket Nos. 311798
    • United States
    • Court of Appeal of Michigan (US)
    • June 21, 2016
    ...the contract, and (3) the breach resulted in damages to the party claiming breach." Bank of America, NA v. First American Title Ins. Co. 499 Mich. 74, 100, 878 N.W.2d 816 (2016) (FATCO ).A CPL is a contract between the title company and the lender whereby the title insurance company agrees ......
  • Associated Mortg. Corp. v. Weaver (In re Weaver), Bankruptcy Case No. 13–12548 EEB
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Colorado
    • January 5, 2018
    ...not affect or extinguish Plaintiff's right to seek damages for fraud against Debtor. See Bank of America, NA v. First Am. Title Ins. Co ., 499 Mich. 74, 878 N.W.2d 816, 828–29 (2016) (concluding bank's full credit bid during foreclosure did not bar later claim for fraud against third party ......
  • Request a trial to view additional results

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