Talmer Bank & Trust v. Parikh

• Citation: 304 Mich.App. 373,848 N.W.2d 408
• Decision Date: 25 February 2014
• Docket Number: Docket Nos. 312632,313122.
• Parties: TALMER BANK & TRUST v. PARIKH.
• Court: Court of Appeal of Michigan (US)

304 Mich.App. 373

848 N.W.2d 408

TALMER BANK & TRUST

v.PARIKH.

Docket Nos. 312632, 313122.

Court of Appeals of Michigan.

Submitted Feb. 5, 2014, at Detroit.

Decided Feb. 25, 2014, at 9:00 a.m.

Barris, Sott, Denn & Driker, PLLC, Detroit (by Matthew J. Bredeweg, Morley Witus, and James S. Fontichiaro), for plaintiff.

Dailey Law Firm, PC (by Brian T. Dailey and Justin G. Grove), for defendants.

Before: MURPHY, C.J., and M.J. KELLY and RONAYNE KRAUSE, JJ.

MURPHY, C.J.

In Docket No. 312632, defendants, Vrajmohan C. Parikh and Sivaji Gundlappalli, appeal as of right the trial court's order that granted a motion for reconsideration filed by plaintiff, Talmer Bank & Trust (Talmer), which then resulted in summary disposition being granted in favor of Talmer after its earlier motion for summary disposition had been denied by the court. Talmer cross-appeals the trial court's order denying its request for attorney fees in the case. In Docket No. 313122, the same defendants appeal as of right the trial court's order, issued by a different judge in a separate action, granting Talmer's motion for summary disposition. The court awarded Talmer attorney fees in the action. These consolidated appeals arise out of defendants' purchase of two condominium units in Las Vegas, Nevada, foreclosure sales of the condos following defaults pursuant to power-of-sale provisions in deeds of trust that had secured two promissory notes executed by defendants relative to their purchase of the condos and Talmer's attempts to collect deficiency judgments in Michigan against defendants on the notes in the instant actions. Separate suits were filed regarding each note. Defendants are presently residents of Michigan and were so when they executed the promissory notes, and the bank that initially provided the loans was a Michigan bank, as is Talmer. The notes were executed in Michigan, and defendants, until the defaults, performed under the notes by way of making payments in Michigan. The crux of the dispute is whether Nevada law or Michigan law governs the deficiency actions, with the trial courts ultimately concluding that, as urged by Talmer, Michigan law controls. Deficiency judgments were entered against defendants in the amounts of $244,476 in LC No. 2011–123327–CK (Docket No. 312632) and $454,932 in LC No. 2011–123328–CK (Docket No. 313122). We affirm in all respects, except that we reverse the trial court's order in Docket No. 312632 that denied Talmer's request for attorney fees and remand for entry of an award of reasonable attorney fees.

I. BACKGROUND

On November 14, 2006, defendants, who are both Michigan doctors, executed a 30–year promissory note as borrowers in the amount of $336,000. The lender on the note was Citizens First Savings Bank (Citizens), which had an address in Port Huron, Michigan. Defendants obtained the loan in order to purchase a condominium unit in Las Vegas, Clark County, Nevada, as part of an investment strategy. The promissory note provided that the monthly payments of $2,235 were to be mailed or delivered to Citizens' Port Huron address. The note also indicated that, upon default, Citizens could declare the entire unpaid principal balance on the note and all accrued unpaid interest immediately due and payable. The note further provided for the payment of reasonable attorney fees associated with any collection efforts should there be a default. In a paragraph addressing the governing law, the promissory note provided:

This NOTE will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Michigan without regard to its conflicts of law provisions. This NOTE has been accepted by Lender in the State of Michigan.

The promissory note was secured by a deed of trust executed by defendants on November 14, 2006, in favor of Citizens. The deed of trust granted and conveyed to the trustee, Nevada Title Company (NTC), to be held “in trust, with power of sale,” the Las Vegas condominium unit being purchased. The deed of trust provided that it “shall be governed by federal law and the law of the jurisdiction in which the Property is located.” The deed of trust was recorded on November 22, 2006, with the Register of Deeds for Clark County, Nevada.

On August 31, 2007, defendants executed a second 30–year promissory note as borrowers in the amount of $760,000 relative to the purchase of another Las Vegas condominium. The lender on the note was again Citizens. The promissory note provided that the monthly payments of $5,056 were to be mailed or delivered to Citizens' Port Huron address. This note did not include a choice-of-law or governing-law provision as was included in the first note. The note provided for the payment of reasonable attorney fees associated with any collection efforts should there be a default.

The promissory note was secured by a deed of trust executed by defendants on August 31, 2007, in favor of Citizens. As with the first deed of trust, it granted and conveyed to trustee NTC, to be held “in trust, with power of sale,” the Las Vegas condominium unit being purchased in the second transaction. Also as with the first deed of trust, it provided that the deed of trust “shall be governed by federal law and the law of the jurisdiction in which the Property is located.” The deed of trust was recorded on September 7, 2007, with the Register of Deeds for Clark County, Nevada.

Subsequently, Citizens became CF Bancorp, and CF Bancorp later failed, resulting in the Federal Deposit Insurance Corporation (FDIC) taking CF Bancorp into receivership. In April 2010, the FDIC and First Michigan Bank (FMB), which was later to become Talmer, entered into a purchase and assumption agreement, pursuant to which FMB was to assume CF Bancorp's liabilities and purchase its assets. These assets included the two promissory notes and deeds of trust regarding the loans used to purchase the Las Vegas condominiums. The purchase and assumption agreement between the FDIC and FMB reflected the FDIC's acceptance of FMB's “[a]sset premium (discount) bid of (19.8)% (negative),” which meant, according to defendants, that FMB paid approximately 20 cents on the dollar relative to the assets being purchased from the FDIC. In May 2010, defendants stopped making the monthly payments on the promissory notes given the severe downturn in the economy and drastically reduced real property values. In October 2010, and pursuant to the earlier purchase and assumption agreement, the FDIC formally granted, assigned, and transferred CF Bancorp's assets to FMB. Accordingly, Talmer, formerly known as FMB, came to hold the notes and deeds of trust executed by defendants. Talmer is a Michigan bank.

In light of defendants' failure to pay on the notes, in November 2010, notices of default and election to sell under the deeds of trust were served on defendants and recorded. With respect to the condo covered by the first note and deed of trust, it was sold at public auction in a trustee's sale on September 15, 2011, to a third party, GMM Investments, LLC, for $133,450, leaving an outstanding loan balance of $233,261 as of the sale's date. With respect to the condo covered by the second note and deed of trust, it was sold at public auction in a trustee's sale on September 15, 2011, to Talmer for $382,590, leaving an outstanding loan balance of $454,932 as of the sale's date.

On November 30, 2011, in LC No. 2011–123327–CK (Docket No. 312632), Talmer filed a breach-of-note action in the trial court against defendants in regard to the first note, seeking a deficiency judgment for the outstanding balance on the note, $233,261, plus interest, costs, and attorney fees that had accrued since the trustee's sale. On November 30, 2011, in LC No. 2011–123328–CK (Docket No. 313122), Talmer also filed a breach-of-note action in the trial court (different judge) against defendants in regard to the second note, seeking a deficiency judgment for the outstanding balance on the note, $454,932, plus interest, costs, and attorney fees that had accrued since the trustee's sale.

In both actions, Talmer filed motions for summary disposition under MCR 2.116(C)(9) and (10), arguing that defendants had failed to raise any dispute regarding the material facts, nor had they presented any colorable defense. In response, defendants argued that Talmer elected to foreclose pursuant to Nevada law and was required to abide by the mortgage foreclosure deficiency collection laws and procedures of Nevada, which allegedly presented hurdles not found under Michigan law. We shall explore later the particulars of Nevada law relied on by defendants. Defendants contended that Talmer had been required to pursue any deficiency claims in Nevada in association with the earlier trustee sales and failed to do so. Defendants additionally argued that summary disposition was premature, because discovery had not yet been completed. Defendants further maintained that one of the promissory notes did not specify that it was secured by collateral and thus the trustee sale was improper. Defendants also emphasized that FMB, now known as Talmer, purchased the notes and deeds of trust at a significant discount from the FDIC, which should be taken into consideration with regard to any claimed deficiency. Finally, defendants contended that Talmer lacked the authority to exercise the power-of-sale clauses because the FDIC assignment was never recorded.

In LC No. 2011–123327–CK (Docket No. 312632), a hearing was held in May 2012 on Talmer's motion for summary disposition. The trial court denied Talmer's motion, concluding that the note and deed of trust were interrelated, that the deed trumped the note given the sale at auction, that the choice of Nevada law set forth in the deed of trust therefore governed, that Nevada had a substantial relationship to and interest in the transaction considering that the condo was located in that state, that Michigan...