The Michigan Court of Appeals recently handed down a decision in Johnston, et. al. v. Sterling Mortgage Investment Co. et. al., Docket No. 324855 which involved a couple who had attempted to sell their home to a bona fide purchaser before the redemption deadline from a sheriff’s sale but whose efforts were frustrated by the financial institution which bought the property at auction. The Johnstons defaulted on the mortgage for their house is Northville, Michigan in November of 2013 which resulted in a sheriff’s auction. The property was purchased at auction by Sterling Mortgage & Investment Co. and Citi Investments, LLC. Sterling then filed an Affidavit of Purchaser stating that the mount to redeem the property was $322,542.83 plus interest, subject to change in the event that Sterling paid taxes and insurance.
The Johnstons requested an exact payoff amount from Sterling in February of 2014, which was given via email as $333,786.85. The Johnstons then requested an exact payoff amount for the last possible date of redemption to which Sterling replied that calculating the payoff statement a second time would require a $250 statement fee upfront. Rather than paying that fee, the Johnstons obtained a statement of the payoff amount from the Oakland County Register of Deeds, which was $331,409.94. This statement also clearly stated that the payoff amount was to be remitted by cashier’s check to the Register of Deeds.
On April 30, 2014, before the redemption date, the Johnstons entered into a purchase agreement with a buyer for the price of $341,409.94. The buyer then deposited $350,000 with the Johnstons’ attorney. A title company was hired which attempted to contact Citi and Sterling to confirm the payoff amount and wiring instructions on May 5, 2014. However, a response was not received until May 29, 2014, which was after the redemption date. The response indicated that such information had been transmitted by fax on May 5. The title company did not receive this fax.
The Johnstons claimed that because they showed that they were ready and willing to pay the payoff amount it constituted a “tender” and, therefore, the redemption was valid. They claimed that they only failed to meet the strict deadline because Sterling frustrated their purpose by refusing to receive the funds. However, the district court stated that because they could have made payment to the Register of Deeds, the Johnstons did not have this argument available. The Court of Appeals affirmed this decision. The Court further noted that the statutory language regarding this matter requires “payment” not “tender.” This required that the Johnstons actually pay the amount owed, not simply show that they are ready and willing to do so.
There are many takeaways from the multiple layers of this case. Firstly, statutory interpretation played a large role in this case. The crux of this case rested upon the difference between the Black’s Law Dictionary definitions of “tender” and “payment.” The Johnstons relied upon the term “tender” which only required the signaling of readiness and willingness whereas the statute actually used the term “pay” which required performance. Secondly, this case reminds us of the importance of exhausting all possibilities before quitting and claiming frustration of purpose. The Johnstons could have paid the Register of Deeds. After all, the statement they received from that office instructed them to do so.
Foreclosure and redemption proceedings may often become very complicated. It is highly recommended that one seek adequate representation by an attorney versed in such matters when dealing with such issues.
This article was written by Tyler Kemper, law clerk.
