United States District Court, E.D. Michigan, Southern Division
IN RE TOWN, Debtor.
ECP COMMERCIAL II, LLC, Appellee. TOWN CENTER FLATS, LLC, Appellant, Bankr. No. 15-41307
OPINION AND ORDER AFFIRMING THE DECISION OF THE
BERNARD A. FRIEDMAN SENIOR UNITED STATES DISTRICT JUDGE.
matter is before the Court on appellant's appeal of the
bankruptcy court's decision that Building 53 was properly
redeemed [docket entry 1]. The matter has been fully briefed.
For the reasons stated below, the Court affirms the
bankruptcy court's decision.
following “relatively undisputed” facts were
summarized by the bankruptcy court in its September 28, 2016,
bench opinion and by the parties in their briefs:
2009, the Fox Brothers Company (“Fox”) filed a
construction lien claim against Town Center Development,
Inc., Town Center Flats, LLC, and their shared principal, Mr.
DiLorenzo, in Macomb County Court with respect to unpaid-for
materials and labor. Appellee's Br. p. 5. The property
against which Fox asserted the lien was a fifty-three-unit
condominium housing development called “Building
53.” Id. at 5-6. Fox also named as a
defendant, and properly served, Keybank National Association,
the only other party with a secured interest in Building 53.
However, Keybank never appeared at the proceedings and later
assigned its mortgage interest to appellee in May 2014.
Id. at 6; R. at 496, 1034.
2009, the Macomb Circuit Court entered a judgment of
foreclosure against appellant giving Fox's claim
priority. Appellee's Br. p. at 8; R. at 1032. On October
16, 2009, the Macomb County Sheriff executed a sheriff's
deed on Building 53 in favor of Fox and reflecting a
redemption amount of $32, 244.39. Appellee's Br. p. at 8;
R. at 1033. That same day, the Macomb County Clerk issued a
report of sale for Building 53 for the exact redemption
amount, and on October 23, 2009, it recorded a deed for
Building 53 that named Town Center Development.
Appellee's Br. p. at 8. On November 2, 2009, the Macomb
Circuit Court entered an order confirming the sale and
setting December 2, 2009, as the redemption deadline.
Id. at 9. “On December 4, 2009, DiLorenzo paid
$32, 500” in cash and checks to Fox, the purpose
“of which is now disputed.” R. at 1033. In
mid-December 2009, Fox executed and recorded both a
quit-claim deed from Fox to Town Center Development for
Building 53 and a release of two claims of lien. Id.
early 2015, appellant and Town Center Development filed
Chapter 11 cases, and appellant moved for determination as to
the property of its estate, arguing that it had not
successfully redeemed Building 53. After extensive briefing
and oral argument, the bankruptcy court held that
[t]he real property at issue that was subject to the
construction lien foreclosure [i.e., Building 53] was
redeemed from that foreclosure and was not validly
transferred to Development; and therefore such is property of
the Debtor's bankruptcy estate, subject to the mortgage
interests of ECP Commercial 11, LLC, as assignee of
28, 2016, Order Resolving Motion for Determination as to
Property of the Estate p. 1.
outset, the Court notes that it is satisfied by the
parties' explanation of its jurisdiction. The Court will
review the bankruptcy court's three pertinent findings:
First, that Michigan law allows parties to agree to extend
redemption deadlines in both judicial and advertisement
foreclosures. Id. at 1038-39. Second, that the
parties extended the redemption deadline to December 4, 2009.
Id. at 1039. Third, that the $32, 500 DiLorenzo paid
to Fox on December 4, 2009, was intended to redeem Building
53. Id. at 1043-44. A district court reviews a
bankruptcy court's findings of law de novo and findings
of fact for clear error. See In re Allen-Morris, 523
B.R. 532, 536 (E.D. Mich. 2014).
Court reviews the bankruptcy court's first finding de
novo. The bankruptcy court held that case law from the
Michigan Court of Appeals allows parties to privately extend
redemption deadlines. The Court agrees. The Michigan Court of
Appeals summarized Michigan law on this point in Keybank
Nat'l. Ass'n v. Ameriquest Mortg. Co., No.
242925, 2004 WL 1057814, *4-5 (Mich. Ct. App. May 11, 2004):
Thus, in the instant case, when the statutory redemption
period expired, Nationsbanc's sheriff's deed
presumably should have become operative, and title to the
property should have vested in Nationsbanc. See MCL 600.3240;
Bankers Trust Co of Detroit v. Rose, 322 Mich. 256,
260; 33 N.W.2d 783 (1948), quoting McCreery v. Roff,
198 Mich. 558, 564; 155 N.W. 517 (1915) (“Legal title
does not vest at once upon the auction sale on statutory
foreclosure ... but only at the expiration of the period
allowed for redemption”); Detroit Fidelity &
Surety Co v. Donaldson, 255 Mich. 129; 237 N.W. 380
(1931) (mortgagor does not lose all interest in property
until time for redemption under the foreclosure decree
expires); Dunitz v. Woodford Apartments Co, 236
Mich. 45, 49; 209 N.W. 809 (1926).
the execution creditor may validly contract to waive or
extend the statutory period of redemption:
The time provided by statute for redemption from foreclosure
sale may be extended by agreement of the parties. Thus, the
time for redemption from a mortgage foreclosure sale may be
extended by agreement of the purchaser, in which case the
ownership of the property does not change until expiration of
the extended period. So, also, if a mortgagee enters into a
valid agreement with the mortgagor prior to the expiration of
the statutory period of redemption, which in effect extends
the right of payment of the mortgage debt beyond the
redemption period, he abandons rights acquired as a purchaser
of the mortgaged property on foreclosure of the mortgage, and
in legal effect continues the relation of mortgagor and
mortgagee between himself and his debtor. The extension may
be by verbal agreement, provided it is made before the
expiration of the redemption period; if it is made after that
time it is frequently held to be within the statute of
frauds. Apart from consideration of the statute of frauds,
the agreement to permit redemption or to extend the time of
redemption has been upheld upon the grounds of general
equitable relief, the most frequent of which is found in the
application of the principles of estoppel. . . .
See also 59A CJS, Mortgages, § 1038 (“The parties
may by contract extend the period allowed by law for
redemption, whether the agreement is made pending the time
for redemption or after it has expired”). Cf.
Macklem v. Warren Construction Co,343 Mich. 334,
339; 72 N.W.2d 60 (1955); Thomas v. Ledger, 274
Mich. 16; 263 N.W. 783 (1935); Pellston Planing Mill
& Lumber Co v Van Wormer,198 Mich. 648, 653; 165
N.W. 724 (1917) (“The authorities are numerous, and we
think substantially uniform, that the execution creditor and
the execution debtor may bind ...