Calvert Associates v. Harris

• Decision Date: 19 April 1979
• Docket Number: Civ. A. No. 9-70610.
• Citation: 469 F. Supp. 922
• Parties: CALVERT ASSOCIATES, a Michigan Limited Partnership, Plaintiff, v. Patricia HARRIS, Secretary, Department of Housing and Urban Development, in her official capacity, Defendant.
• Court: U.S. District Court — Western District of Michigan

469 F. Supp. 922

CALVERT ASSOCIATES, a Michigan Limited Partnership, Plaintiff, v. Patricia HARRIS, Secretary, Department of Housing and Urban Development, in her official capacity, Defendant.

Civ. A. No. 9-70610.

United States District Court, E. D. Michigan, S. D.

April 19, 1979.

As Amended June 19 and 21, 1979.

David S. Snyder, Gurwin, Snyder & Weingarden, Southfield, Mich., for plaintiff.

Ronald W. Mellish, Asst. U. S. Atty., Detroit, Mich., for defendant.

MEMORANDUM OPINION AND ORDER

JOINER, District Judge.

Plaintiff Calvert Associates has asked this court to temporarily enjoin the defendant Patricia Harris, Secretary of the Department of Housing and Urban Development, from selling the properties commonly known as 1409 Collingwood, 1250 Calvert, and 1251 Calvert, all in the City of Detroit, Michigan, which the defendant intends to sell at public sale.

The interests of the respective parties are these. Plaintiff, as owner, granted a mortgage on the properties to a third party, which mortgage was insured under Title VI of the National Housing Act. 12 U.S.C. § 1736-1746a. The mortgagee assigned its interest in the mortgage to another party and that party assigned the same interest to the defendant. Eventually, plaintiff defaulted on its payments of the loan which was secured by the mortgage in question. Defendant is in the process of effecting a foreclosure by advertisement as provided in M.C.L.A. § 600.3201 et seq. Plaintiff now seeks the aid of this court in its attempt to halt the proposed sale.

In its complaint, plaintiff asks this court in Count I to enjoin the sale as proposed by defendant and in Count II to award plaintiff damages alleged to have been caused by the mismanagement of the properties by the defendant. The matters presented in Count II are not presently before the court. Only the request for an injunction to halt the sale is presented to the court for decision at this time.

The defendant has utilized the Michigan statutes which permit foreclosure by advertisement in certain limited circumstances in its effort to foreclose and sell the property. M.C.L.A. § 600.3201 et seq.¹ Plaintiff has alleged in its complaint four separate departures from the statutorily mandated procedure, each of which it claims is enough to support an order of this court enjoining the proposed sale.

Paragraphs 8(A) and (B) of the plaintiff's complaint allege that the advertisement placed in the newspaper in accordance with M.C.L.A. § 600.3208 does not include all of the information that is required to be included by M.C.L.A. § 600.3212. The facts relevant to this claim, as deduced from the record, are as follows. The original mortgage involved three separate buildings. This mortgage was recorded on June 7, 1972, in Liber 18087, Page 931, in the office of the Register of Deeds for the County of Wayne, State of Michigan. Subsequently, plaintiff acquired some additional land which it apparently intended to use for parking for the properties covered in the original mortgage. The mortgage was amended to include this additional property, and the entire mortgage, as amended, was recorded in Liber 18122, Page 172, in the Register of Deeds.

For some unexplained reason, there was executed on November 1, 1973, a document entitled "AMENDMENT TO MORTGAGE", which document appears to have done nothing more than restate the amendment that had been effected and recorded in July of 1972.

Plaintiff's claim is that the advertisement published by defendant was deficient in its description of these events. In relevant part, the advertisement stated:

. . . A certain mortgage was duly executed between Calvert Associates, a Michigan limited partnership, organized and existing under the laws of Michigan, having its principal place of business at 2631 Woodward Avenue, Detroit, Michigan, Mortgagor, and American Institutional Mortgage Co., a corporation organized and existing under the laws of Texas, Mortgagee, dated the 5th day of June, 1972 and recorded June 7, 1972, in Liber 18087, Page 931, in the Office of the Register of Deeds for the County of Wayne, State of Michigan, and re-recorded July 14, 1972, in Liber 18122, Page 172, in the Office of the Register of Deeds for the County of Wayne, State of Michigan . . .

and then described the four parcels just as they are described in the mortgage and the amendment.

The relevant statutory requirements are that the notice "specify . . . the date of the mortgage, and when recorded; . . and a description of the mortgaged premises, conforming substantially with that contained in the mortgage . . .." M.C.L.A. § 600.3212(1), (2) and (4).

Obviously, the notice did give the names of the mortgagor and the mortgagee, the date of the original mortgage, the dates of recording of both the original and the amended mortgage, and a full description of the mortgaged properties as included in the original and the amended mortgages. The only thing that is missing is the date of the creation of the amended mortgage, and this is a very minor deficiency which, given the amount of other information that is included, could not cause confusion to anyone who is or might be interested in bidding at or otherwise participating in the auction sale. This is the reason for the notice requirement, and only substantial compliance —that which will prevent the sort of surprise and unfairness that the section is designed to avoid—is required. Guardian Depositors' Corporation of Detroit v. Keller, 286 Mich. 403, 282 N.W. 194 (1938); Oades v. Standard Savings & Loan Ass'n., 257 Mich. 469, 241 N.W. 262 (1932). Additional documents, such as the November 1, 1973, amendment to the mortgage, when their inclusion would add nothing to the substance of the notice, need not be included.

In accordance with the above analysis, this court finds that the claims made in paragraphs 8(A) and 8(B) are not supported by the facts or the law.

In paragraphs 8(C) and 8(D), plaintiff complains that the defendant failed to meet the requirement of M.C.L.A. § 600.3204 that in order to proceed to foreclose by advertisement, there must not have been instituted any suit or proceeding at law to recover any part of the debt then remaining secured by the mortgage.

Plaintiff correctly points out that defendant did file an action against plaintiff in this court which dealt with the property secured by the mortgage. That action, however, was instituted to put the defendant or an independent receiver in possession and control of the property in order that the tenants and the lien holders would be better protected from the further deterioration of the property.

The lawsuit to have a receiver appointed brought by the defendant during the pendency of the advertisements was not a suit brought to recover the debt secured by the mortgage and, therefore, is not a bar to foreclosure by advertisement. M.C.L.A. § 600.3204. The claims in paragraphs 8(C) and 8(D) do not support plaintiff's assertion that the procedures for foreclosure by advertisement have not been properly adhered to.

In paragraph 8(F), plaintiff asserts that there is something improper about the manner in which defendant has gone about adjourning the sale while attempting to reach a "work out" agreement which would eliminate the need for a sale. There are no specific facts alleged in the complaint or brief in support of this claim and it was not pressed in the oral argument at all, so the court assumes that this claim has been abandoned. If it was not the intention of the plaintiff to abandon this claim, the court finds that it was not supported at all and for that reason must be disregarded.

Finally, in paragraph 8(E) of the complaint, plaintiff argues that defendant included a material and prejudicial misstatement in a part of the advertised notice that is statutorily required. M.C.L.A. § 600.3212(5) requires a party seeking foreclosure by advertisement to "specify . . the length of the redemption period as determined under" M.C.L.A. § 600.3240.

The notice published by defendant in this case stated, "Pursuant to federal law there is no post-sale redemption period applicable to this property."

Unlike the other arguments asserted by plaintiff in its attempt to halt the proposed sale, this one does not deal solely with the failure to include something in the advertisement that is required by M.C.L.A. § 600.3212; here, the problem is that the plaintiff asserts that it must be granted a right of redemption under the Michigan statutes while the defendant claims that federal law applies and that it gives no such right.

Michigan law, M.C.L.A. § 600.3240, provides that "in the case of any mortgage executed on or after January 1, 1965 on . . . multi-family residential property in excess of 4 units, the redemption period shall be 6 months from the time of such sale." Defendant claims that a mortgage insured by the federal government under the National Housing Act is not subject to the provisions of Michigan law. Citing United States v. Stadium Apartments, Inc., 425 F.2d 358 (9th Cir. 1970), the defendant further claims that no right of redemption exists in federal law following the foreclosure of a federally insured mortgage.

Stadium Apartments, the leading case on the subject, arose out of an attempt by the United States to foreclose on property subject to a mortgage guaranteed by the Federal Housing Authority. There, the court held that, in a judicial foreclosure proceeding, state law regarding redemption was not applicable.

The court reached its conclusion only after a thorough discussion of congressional, departmental, and judicial consideration of the adoption of state redemption procedures in the factual situation presented. The court found that Congress had not intended for the federal government to be bound by state laws in that situation, and it also found that nothing done by the Department of Housing and Urban Development indicated a decision on its part to adopt the state laws. In...