State Bank of Florence v. Richard K. Miller

Filing

OPINION filed: AFFIRMED, decision not for publication. Deborah L. Cook, Circuit Judge; Jane Branstetter Stranch, (authoring) Circuit Judge and Frederick P. Stamp , Jr., Senior, U.S. District Judge for the Northern District of West VA.--[Edited 02/05/2013 by PJE]

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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 13a0134n.06
No. 11-2357
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

In re: RICHARD K. MILLER
Debtor
____________________________________
STATE BANK OF FLORENCE,
Plaintiff – Appellant,
v.
RICHARD K. MILLER,
Defendant – Appellee.

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FILED
Feb 05, 2013
DEBORAH S. HUNT, Clerk

ON APPEAL FROM THE BANKRUPTCY
APPELLATE PANEL

OPINION

Before: COOK and STRANCH, Circuit Judges, and STAMP, District Judge.*
JANE B. STRANCH, Circuit Judge. The State Bank of Florence, located in Wisconsin
(“the Bank”), appeals from the decision of the Bankruptcy Appellate Panel (“BAP”) affirming the
bankruptcy court’s decision to deny the Bank relief from the automatic stay and to deny its objection
to the third amended Chapter 13 plan of the debtor, Richard K. Miller (“Miller”), a Michigan
resident. The question before us is whether the Bank’s credit bid at a Michigan sheriff’s sale held
after the Bank foreclosed by advertisement on some of Miller’s property extinguished his entire debt

*

The Honorable Frederick P. Stamp, Jr., Senior United States District Judge for the Northern
District of West Virginia, sitting by designation.
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to the Bank. The bankruptcy court determined that it did and, because Miller’s debt was satisfied,
the Bank did not have a claim against him and could not seek relief from the automatic stay in order
to execute on a pre-petition foreclosure judgment the Bank obtained against Miller in Wisconsin.
For the reasons explained below, we AFFIRM.
I. FACTS
Miller owned a home in Florence County, Wisconsin, known as the “Spread Eagle property.”
On October 16, 2006, Miller signed a promissory note to the Bank in the principal amount of
$221,444.29, secured by a mortgage on the Spread Eagle property (“the Wisconsin mortgage”). The
Wisconsin mortgage included a clause providing that it secured the October 16 promissory note as
well as all of Miller’s obligations, debts, and liabilities then existing or arising later. On January 20,
2007, Miller signed a second promissory note to borrow $400,000 from the Bank, pledging as
collateral his Moon Lake residence and three 40-acre parcels of land located in Michigan. Both
promissory notes stated they were governed by Wisconsin law.
When Miller fell behind on his mortgage payments, the Bank’s senior credit officer, Clyde
Nelson, decided in 2008 to begin foreclosure proceedings against Miller’s properties. An
experienced banker, Nelson had foreclosed mortgages in Wisconsin and Michigan since 1980. The
Bank hired counsel in each state to handle the Miller foreclosures.
On April 4, the Bank commenced a judicial foreclosure proceeding in Wisconsin state court,
and on April 10, the Bank commenced a non-judicial foreclosure by advertisement in Michigan.2
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Michigan statute permits foreclosure by advertisement if specific circumstances exist,
including that no “action or proceeding has . . . been instituted, at law, to recover the debt secured
by the mortgage or any part of the mortgage; or, if an action or proceeding has been instituted, the
action or proceeding has been discontinued[.]” M.C.L. § 600.3204(b). Although the Bank started
the Wisconsin judicial foreclosure proceeding before beginning the Michigan statutory foreclosure,
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The Bank twice published a notice of foreclosure sale for the Michigan properties. The notices
expressly stated that no other legal or equitable proceedings had been instituted to recover Miller’s
debt, although the equitable Wisconsin judicial foreclosure proceeding had commenced.
Miller was at that time a Wisconsin resident. He did not defend the judicial foreclosure in
Wisconsin, nor was he involved in the Michigan foreclosure by advertisement. On May 14, he filed
a Chapter 13 petition in Wisconsin bankruptcy court. The automatic stay required postponement of
the Michigan foreclosure sales. Shortly thereafter, Miller dismissed his bankruptcy petition, sold the
Moon Lake property in Michigan, and paid the proceeds of that sale to the Bank to reduce his debt.
On July 15, the Bank obtained a foreclosure judgment in state court on the Wisconsin
mortgage in the amount of $407,914.04 plus interest, attorney’s fees and costs.3 On July 31, the
Bank published a new notice of foreclosure by advertisement in Michigan scheduling an August 8
sheriff’s sale of the three 40-acre parcels. This notice also erroneously stated that no legal or
equitable proceedings had been commenced to recover the debt secured by the mortgage.
To decide what amount to bid at the sheriff’s sale, Michigan counsel conferred with Nelson,
who informed counsel that Miller owed the Bank a total of $413,560.27 on the Wisconsin and
Michigan promissory notes. Counsel advised Nelson that the Wisconsin promissory note was not
secured by any Michigan mortgage. After this conversation, Michigan counsel attended the sheriff’s
sale on behalf of the Bank and credit bid the entire amount of Miller’s debt to the Bank in the
amount of $413,560.27. Although the record does not disclose the value of the three 40-acre parcels

the Wisconsin action was instituted in equity, not at law. See Wilson v. Craite, 210 N.W.2d 700, 703
(Wis. 1973) (observing courts of equity approve foreclosure sales).
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A one-year redemption period applied to the foreclosure judgment. Wis. Stat. Ann.
§ 846.10(2).
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of land at the time of the sheriff’s sale, it appears that the Bank’s credit bid created a surplus between
$172,500 and $187,500. The Bank entered the credit bid of $413,560.27 in its books and records,
but the Bank did not pay the bid surplus to the sheriff to be paid to Miller, nor did the Bank credit
the surplus to reduce Miller’s debt to the Bank.4
The sheriff’s deed, which was drafted by the Bank’s Michigan attorney, was recorded in
Michigan. The sheriff’s deed specified that the three 40-acre parcels were sold to the Bank as
highest bidder for $413,560.27, and that the deed would become operative upon expiration of the
one-year redemption period.5 The deed included the affidavit of the auctioneer, who served as an
undersheriff with the Dickinson County Sheriff’s Department. He averred that the “said sale was
in all respects open and fair; and that I did strike off and sell said lands and tenements to said bidder,
which purchased the said lands and tenements fairly, and in good faith, as deponent verily believes.”
Neither the Bank nor Miller took any action to set aside the foreclosure by advertisement.
Nothing transpired for approximately one year. Miller did not redeem the Wisconsin
property by July 15, 2009. The redemption period on the three 40-acre parcels in Michigan was set
to expire on August 8, 2009. The Bank scheduled a Wisconsin foreclosure sale for August. That
sale did not proceed because, on August 3, Miller sought Chapter 13 bankruptcy protection for a
second time. Having moved his residence from Wisconsin to Michigan, he filed a Chapter 13

4

Michigan statute provides in pertinent part that, “[i]f after any sale of real estate, made as
herein prescribed, there shall remain in the hands of the officer or other person making the sale, any
surplus money after satisfying the mortgage on which the real estate was sold, and payment of the
costs and expenses of the foreclosure and sale, the surplus shall be paid over by the officer or other
person on demand, to the mortgagor, his legal representatives or assigns.” Mich. Comp. Laws Ann.
§ 600.3252 (2009). The Michigan mortgage also provided that any surplus must be paid to Miller.
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Miller had one year under Michigan law to redeem the property. Mich. Comp. Laws Ann.
§ 600.3240(12) (2009).
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petition in Michigan bankruptcy court. The automatic stay precluded further action on the Wisconsin
foreclosure. Upon the filing of the bankruptcy petition, the Michigan redemption period for the three
40-acre parcels was extended by sixty days. 11 U.S.C. § 108. At the conclusion of the extended
redemption period, the Bank cancelled Miller’s Michigan promissory note and made an entry on the
Bank’s books indicating that the Bank owned the three 40-acre parcels.
The Bank claimed below that, as of August 1, 2009, Miller owed the Bank $256,162.52 on
the Wisconsin note and $185,013.85 on the Michigan note, for a grand total of $441,176.37,
including principal, interest, and late fees. At the evidentiary hearing held in September 2010, the
Bank claimed that the portion of Miller’s debt attributable to the Wisconsin note and mortgage had
increased to $299,246.93. However, an appraisal that was prepared for the Bank in December 2007,
before real estate prices declined, assigned a fair market value of $284,000 to the Spread Eagle
property. Thus, the Bank argued that the automatic stay should be lifted for cause to allow it to
pursue the Wisconsin foreclosure judgment and because the Bank lacked adequate protection.
The bankruptcy court determined that Miller did not owe the Bank any amount of money
because, applying either Michigan or Wisconsin law, the Bank’s credit bid for the total amount of
Miller’s debt at the Michigan sheriff’s sale satisfied the entire debt. In re Miller, 442 B.R. at
628–37. Thus, the bankruptcy court lifted the automatic stay only to allow the Bank to dismiss its
Wisconsin foreclosure judgment with prejudice, release the Wisconsin promissory note and
mortgage, and turn over the Spread Eagle property to Miller free and clear of any debt. Id. at 637.
The court denied the Bank’s motion for stay pending appeal, but later deferred ruling on
confirmation of Miller’s third amended Chapter 13 plan pending the outcome of the appeal.

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II. JURISDICTION
We have appellate jurisdiction of “all final decisions, judgments, orders, and decrees” entered
by the BAP. 28 U.S.C. §§ 158(a), (b), (d)(1); Buckeye Retirement Co. v. Swegan (In re Swegan),
555 F.3d 510, (6th Cir. 2009). The BAP held that the bankruptcy court’s order denying the Bank’s
motion for relief from the automatic stay is a final, appealable order. In re Miller, 459 B.R. 657, 661
(B.A.P. 6th Cir. 2011) (citing Tidewater Fin. Co. v. Curry (In re Curry), 347 B.R. 596, 598 (B.A.P.
6th Cir. 2006)). The BAP also held, however, that the bankruptcy court’s order denying the Bank’s
objection to Miller’s third amended Chapter 13 plan is not a final, appealable order. Id. (citing Davis
v. Green Tree Servicing, LLC (In re Davis), 386 B.R. 182, 184 (B.A.P. 6th Cir. 2008)). Nonetheless,
the BAP exercised its discretion to construe the Bank’s notice of appeal as a motion for leave to
appeal, granted the motion, and decided the appeal. See id. at 661–62 (citing 28 U.S.C. §§ 158(a)(3),
(b); Fed. R. Bankr. P. 8003(c); DaimlerChrysler Servs. N. Am. LLC v. Taranto (In re Taranto), 365
B.R. 85, 87 (B.A.P. 6th Cir. 2007)). Because the BAP’s decision is final, we have jurisdiction to
entertain the appeal from that decision.
III. STANDARDS OF REVIEW
We independently review the decision of the bankruptcy court that has been once reviewed
by the BAP. See Behlke v. Eisen (In re Behlke), 358 F.3d 429, 433 (6th Cir. 2004). In doing so, we
examine the bankruptcy court’s factual findings for clear error and its legal conclusions de novo.
Id. We review the bankruptcy court’s decision to deny relief from the automatic stay for an abuse
of discretion. See Laguna Assoc. Ltd. P’ship v. Aetna Cas. & Sur. Co. (In re Laguna Assoc. Ltd.
P’ship), 30 F.3d 734, 737 (6th Cir. 1994).

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IV. ANALYSIS
A. Miller’s failure to object to the Bank’s proof of claim
The Bank first argues that Miller did not object to the Bank’s proof of claim. Consequently,
the bankruptcy court should have allowed the Bank’s claim under 11 U.S.C. § 502(a), which
provides: “A claim or interest, proof of which is filed under section 501 of this title, is deemed
allowed, unless a party in interest . . . objects.” Ordinarily, a secured creditor like the Bank is “not
required to file a proof of claim to maintain its interest in the collateral to which its security interest
attaches,” but if the “creditor’s lien on the collateral exceeds the value of the property, that creditor
has a partially unsecured claim and must file a proof of claim with the bankruptcy court if it wishes
to receive any distribution from the estate to compensate for this deficiency.” PCFS Fin. v. Spragin
(In re Nowak), 586 F.3d 450, 455–56 (6th Cir. 2009). Federal Rule of Bankruptcy Procedure 3001
“governs the filing of a proof of claim in a bankruptcy proceeding.” Oaks v. Bank One Corp., 126
F. App’x 689, 691 (6th Cir. 2005). Rule 3001(f) provides that a “proof of claim executed and filed
in accordance with these rules shall constitute prima facie evidence of the validity and amount of the
claim.”
The Bank filed a proof of claim on July 21, 2010. On August 23, the bankruptcy court issued
an order scheduling a consolidated evidentiary hearing on the Bank’s motion for relief from the
automatic stay and its objection to confirmation of Miller’s amended Chapter 13 Plan. The court
specified that “the major issue to be determined is the amount of the debt, if any, owed by the Debtor
to the Bank as of the filing date.” The Bank did not object to this order.
On August 25, Miller filed his third amendment to the Chapter 13 Plan stating that the Bank
“shall have no claim in this case” because the Bank’s overbid at the Michigan sheriff’s sale
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extinguished the Bank’s claim. Miller cited case law to support his position. On August 30, the
Bank filed an amended objection to Miller’s third amendment to the Chapter 13 Plan listing four
reasons why the amended plan should not be confirmed, but none of the grounds concerned whether
Miller had filed an objection to the Bank’s proof of claim in accordance with Federal Rule of
Bankruptcy Procedure 3007(a).
Prior to the evidentiary hearing, the parties filed legal briefs addressing whether the Bank had
a valid claim, whether the Bank could obtain relief from the automatic stay in order to seek relief
from the Michigan foreclosure and execute on the Wisconsin judgment, and whether Miller’s third
amended Chapter 13 Plan should be confirmed. The Bank did not mention in its brief that Miller
failed to file a Rule 3007(a) objection to the Bank’s proof of claim. The parties then litigated the
issues at the evidentiary hearing. During closing argument, the Bank’s attorney briefly stated, “We
have a proof of claim that has been filed that has never been objected to, to my knowledge.” Counsel
did not further develop this argument, nor did he cite any legal authorities requiring the bankruptcy
court to deem the Bank’s claim allowed solely on the basis that Miller failed to file an objection to
the proof of claim.
On appeal to the BAP, the Bank sought reversal on several grounds, including that Miller
failed to file an objection to the Bank’s proof of claim. The BAP ruled that the Bank forfeited the
procedural argument by waiting too long to raise it, citing Kontrick v. Ryan, 540 U.S. 443, 460
(2004). See In re Miller, 459 B.R. at 669–71. Following the BAP’s decision, the Bank filed another
amended objection to confirmation of Miller’s Chapter 13 Plan, stating that “[t]he Plan as amended
does not account for the [Bank’s] claim which is deemed admitted pursuant to 11 U.S.C. § 502(a)
due to the debtor’s failure to file an objection thereto.”
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In Kontrick, the Supreme Court held that a debtor forfeits the right to rely on a time period
for action set forth in a bankruptcy procedural rule “if the debtor does not raise the Rule’s time
limitation before the bankruptcy court reaches the merits of the creditor’s objection to discharge.”
540 U.S. at 446. The Bank attempts to distinguish Kontrick on the ground that a time bar is not at
issue here.
The principle embedded in Kontrick, however, is that a party may not litigate the merits of
an issue and later attempt to defeat an adverse decision by asserting the other party’s failure to
comply with a claim-processing rule. 540 U.S. at 460. Kontrick applies here because the Bank
waited until the appeal, after the bankruptcy court had ruled on the merits in favor of Miller, to
elucidate its argument that Miller failed to file an objection to the proof of claim.
The record demonstrates that Miller clearly notified the Bank in writing of his objection to
the Bank’s claim when he filed the third amendment to his Chapter 13 Plan and briefed the legal
aspects of his position. The Bank did not take advantage of several opportunities to develop an
argument in the bankruptcy court that the mandatory consequence of Miller’s failure to file a Rule
3007(a) objection is the allowance of the Bank’s claim. Instead, the Bank responded to Miller with
its own filings and briefs and then litigated the validity of its claim at the evidentiary hearing. Under
these circumstances, we are not persuaded to grant the Bank relief from judgment through a belated
application of a claim-processing rule. See Kontrick, 540 U.S. at 446, 460.
B. Whether Michigan or Wisconsin law controls the effect of the Bank’s credit bid
The Bank next faults the bankruptcy court for concluding that Michigan law governed the
effect of the Bank’s credit bid at the Michigan sheriff’s sale. Because the promissory notes expressly
stated they were governed by Wisconsin law, the Bank argues, the bankruptcy court should have
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applied Wisconsin law. Further, the Bank contends, Miller possessed at most a claim against the
Bank for the surplus that resulted when the Bank entered its high credit bid at the Michigan sheriff’s
sale. Thus, the bankruptcy court erred in holding that the Michigan foreclosure extinguished a
Wisconsin debt secured solely by Wisconsin real estate.
The Bank relies on State Farm Life Ins. Co. v. Pyare Square Corp., 331 N.W.2d 656, 657–58
(Wis. Ct. App. 1983), for the proposition that Wisconsin law applies to its promissory notes. That
case, however, supports Miller’s position. The promissory notes at issue there were expressly
governed by Minnesota law, but the real property was located in Wisconsin, prompting the
Wisconsin Court of Appeals to apply its own state’s law to hold that a mortgagor did not have the
right to reinstate a mortgage in a foreclosure action. Id. at 656, 658. Application of Pyare Square
Corporation requires us to conclude that Michigan law governs the effect of the Bank’s Michigan
foreclosure by advertisement and sheriff’s sale concerning Michigan property even though the notes
specify application of Wisconsin law. Thus, Pyare Square Corp. does not advance the Bank’s
position.
As the BAP pointed out, the federal circuits are split on whether state or federal law supplies
the choice-of-law rules in bankruptcy cases. In re Miller, 459 B.R. at 671 (comparing Lindsay v.
Beneficial Reins. Co. (In re Lindsay), 59 F.3d 942, 948 (9th Cir. 1995) (holding federal choice-oflaw rules apply and citing cases) with Bianco v. Erkins (In re Gaston & Snow), 243 F.3d 599, 605–06
(2d Cir. 2001) (holding forum state choice-of-law rules apply and citing cases)). We need not
resolve that issue here. See Jafari v. Wynn Las Vegas, LLC (In re Jafari), 569 F.3d 644, 648–51 (7th
Cir. 2009) (discussing but declining to resolve circuit split where Nevada law would apply either
way)). As the bankruptcy court observed, In re Miller, 442 B.R. at 630–333, under either Michigan
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or Wisconsin law, the Bank’s overbid of the full amount of the debt at the Michigan sheriff’s sale
extinguished the entire debt. We agree, relying on cases from Michigan and Wisconsin state courts,
as well as similar cases decided in other state and federal jurisdictions. See In re Miller, 442 B.R.
at 630–32.
In Pulleyblank v. Cape, 446 N.W.2d 345 (Mich. Ct. App. 1989) (per curiam), the mortgagees
bid the full amount of the debt owed to them at a foreclosure sale conducted under the Michigan
foreclosure by advertisement statutes. When the mortgagees realized that the foreclosed property
was worth less than the debt, they tried to foreclose on a second parcel of property and credit the
mortgagor with only the fair market value of the original foreclosed property. The Michigan Court
of Appeals prohibited the second foreclosure proceeding, holding that the mortgagees, as the
purchasers at the foreclosure sale, stood in the same position as any other purchaser, and because
they bid the full amount of the debt, they were required to apply the entire amount of their bid to the
debt. Id. at 347. The court noted “[i]t would defy logic to allow [the mortgagees] to bid an inflated
price on a piece of property to ensure that they would not be overbid and to defeat the equity of
redemption and to then claim that the ‘true value’ was less than half of the value of the bid.” Id. at
348. The court decided that the mortgagees, by their own actions, extinguished the debt by bidding
the full amount of the debt, so that no debt remained to support a second foreclosure on another
property. Id. at 348.
In Bank of Three Oaks v. Lakefront Properties, 444 N.W.2d 217, 553 (Mich. Ct. App. 1989)
(per curiam), the mortgagee bank bid $147,129.42, constituting the full amount of the debt plus the
costs of foreclosure and statutory attorney’s fees, at the foreclosure sale following a Michigan
foreclosure by advertisement. When the sheriff’s deed became operative at the conclusion of the
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redemption period, the bank became the titled owner of the property. Thereafter, the bank sold the
property for $150,000. The bank filed suit against the mortgagors to collect an alleged deficiency
for the interest, taxes, and insurance premiums accrued between the date of the foreclosure sale and
the date the redemption period expired. Id. at 554–55. The Michigan Court of Appeals held that
“[w]hen property is purchased at a foreclosure sale for an amount equal to the amount due on the
mortgage, the debt is satisfied.” Id. at 555 (citing Guardian Depositors Corp. v. Hebb, 287 N.W.796
(Mich. 1939), and Powers v. Golden Lumber Co., 5 N.W. 656, 657 (Mich. 1880)). Because the debt
was extinguished at the foreclosure sale, the court held that the bank could not pursue any deficiency
where the mortgagor did not redeem the property. Id. at 556–57.
The same legal principles have been applied in other Michigan cases. See Smith v. Gen.
Mortg. Corp., 261 N.W.2d 710, 712–13 (Mich. 1978) (per curiam); Kennedy v. Brown, 15 N.W. 498,
499–500 (Mich. 1883); New Freedom Mortg. Corp. v. Globe Mortg. Corp., 761 N.W.2d 832, 836
(Mich. Ct. App. 2008); Emmons v. Lake States Ins. Co., 484 N.W.2d 712, 714 (Mich. Ct. App.
1992); Shoaff v. Estate of Baldwin, No. 276469, 2008 WL 2597553, at *2 (Mich. Ct. App. July 1,
2008) (unpublished per curiam). Similarly, the Second Circuit applied Michigan law in Chrysler
Capital Realty, Inc. v. Grella, 942 F.2d 160 (2d Cir. 1991), to hold that a mortgagee who
successfully bid the entire amount of the debt at a foreclosure sale could not thereafter maintain an
action for damages against the mortgagor, despite the mortgagee’s allegations that the actual value
of the property at the time of the foreclosure sale was far less than the debt and that the mortgagee
had been fraudulently induced into making the transaction.
The governing legal rule is no different in Wisconsin. The Wisconsin Supreme Court has
reasoned that, “where the purchaser complains that his overbid [at a foreclosure sale] was the result
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of a unilateral mistake, he will be bound by his bid. Only if he can show the bid was the result of
artifice, fraud, or other improper inducement will he be relieved.” Wilson v. Craite, 210 N.W.2d
700, 703 (Wis. 1973). The court explained that a purchaser making a unilateral mistake must be held
to his bid because he has “full control of his own bid and has the means of ascertaining the
property’s true value. Where an overbid is made, which has in no way resulted from deceit, undue
influence or other form of fraudulent inducement but is, rather the result of one’s own negligence,
ignorance or inadvertence, we feel that equity should not intervene.” Id. Importantly, the court
distinguished a purchase overbid from a purchase underbid. Where a purchaser underbids the price
so as to shock the conscience of the court, the trial court may set aside the completed execution sale
in order to protect the debtor, “who has little or no control over the amount bid, and to insure that
the property being sold is not given away or sold to the prejudice of the debtor.” Id. at 702. But “the
test used for an underbid is inapplicable to an overbid.” Id. at 703. Where the purchaser bids too
much for the property, he acts at his own peril and will be held to the amount of his bid. Id.
The Wisconsin Court of Appeals followed Wilson in Horicon State Bank v. Kant Lumber
Company, 478 N.W.2d 26 (Wis. Ct. App. 1991). There a bank purchased a property at a sheriff’s
sale and later asked the trial court to vacate the sale because the bank learned after it purchased the
property that the soil was contaminated with petroleum. Id. at 27. The Wisconsin Court of Appeals
reasoned that the bank could have obtained an environmental evaluation prior to the sale, but instead,
the bank overbid at the sale, and “[w]e will not intervene if an overbid at a sheriff’s sale results from
the bidder’s ignorance.” Id. at 28 (citing Wilson, 210 N.W.2d at 703).
The Wisconsin Court of Appeals followed both Wilson and Horicon State Bank in
Metropolitan Life Insurance Company v. James Wilson Associates, 582 N.W.2d 503, 1998 WL
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255046 (Wis. Ct. App. May 21, 1998) (unpublished per curiam). There the purchaser’s mistake at
a sheriff’s sale was solely attributable to the purchaser’s own negligence. Id. at *3. The court of
appeals reiterated the rule of Wilson and Horicon State Bank that “[o]ne who overbids at a sheriff’s
sale through a unilateral mistake must bear the consequences.” Id. The court further held that the
trial court exceeded its authority when it granted the purchaser’s motion to vacate the sale. Id.
The Bank has not cited any Michigan or Wisconsin legal authorities to contradict the
holdings of these cases. The rule is clear in both jurisdictions that a purchaser who overbids at a
sheriff’s sale based on a unilateral mistake must accept the consequences of that decision, unless the
purchaser can show fraud or other improper inducement in the making the bid. Miller was not
involved in the Michigan foreclosure by advertisement, and the Bank has not alleged that Miller or
anyone else defrauded the Bank or induced it to overbid the price for the Michigan parcels.
Accordingly, the bankruptcy court did not err in concluding under both Michigan and
Wisconsin law that the effect of the Bank’s credit bid at the Michigan sheriff’s sale was to extinguish
the entire debt Miller owed to the bank. In re Miller, 442 B.R. at 637. As a result, the Bank may
not execute on the Wisconsin foreclosure judgment to recover a debt that no longer exists.
The BAP concluded that the bankruptcy court erred in holding that the extinguishment of the
debt meant that the Bank lacked standing to object to Miller’s third amended Chapter 13 plan.
Instead, the BAP analyzed the issue as a question of setoff and determined that the Bank’s credit bid
of $413,560.27 in Michigan is set off against the Wisconsin foreclosure judgment in the amount of
$407,914.04, thereby satisfying the Wisconsin judgment. In re Miller, 459 B.R. at 674–76. We
agree with the BAP on this point.

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C. Whether the Bank is entitled to relief from the automatic stay
The Bank argues that the bankruptcy court should not have decided the issue of whether the
Bank’s overbid at the Michigan sheriff’s sale extinguished Miller’s entire debt. Instead, the court
should have lifted the automatic stay for cause or on the ground that the Bank lacked adequate
protection. See Laguna Assoc. Ltd. P’ship, 30 F.3d at 737. Lifting the automatic stay would have
allowed the Bank to try to set aside the sheriff’s sale in Michigan. It also would allow the Bank to
ask the Wisconsin state courts to determine the effect of the Bank’s overbid in Michigan on the
Wisconsin foreclosure judgment.
The bankruptcy court may grant relief from the automatic stay “for cause,” which includes
inadequate protection of the Bank’s interest in collateral, or when the debtor has no equity in the
property and the property is unnecessary to reorganization. Id. Because the bankruptcy code does
not define what constitutes “cause,” courts decide “whether discretionary relief is appropriate on a
case-by-case basis.” Id.
“Michigan courts have long held that statutory foreclosures should not be set aside without
very good reason and, thus, have placed the burden of proof upon the party who attempts to impeach
them.” United States v. Garno, 974 F. Supp. 628, 633 (E.D. Mich. 1997). “The Michigan Supreme
Court requires a strong case of fraud or irregularity, or some peculiar exigency, to warrant setting
a foreclosure sale aside.” Id. (citing Detroit Trust Co. v. Agozzinio, 273 N.W. 747, 748 (1937), and
Calaveras Timber Co. v. Mich. Trust Co., 270 N.W. 743, 745 (1936)). In Calaveras Timber
Company, 270 N.W. at 454, the Michigan Supreme Court observed that “[h]arsh results may and
often do obtain because of mortgage foreclosure sales, but we have never held that because thereof,
such sale should be enjoined, when no showing of fraud or irregularity is made.” Similarly, in
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Garno, the court held that the issues raised with regard to the foreclosure sale did not rise to the level
of fraud, irregularity, or exigency to justify setting aside the sale. Garno, 974 F. Supp. at 633.
Three other Michigan cases cited by the Bank offer little support to its argument. In Senters
v. Ottawa Savings Bank, 503 N.W.2d 639, 641 (Mich. 1993), the Michigan Supreme Court
reaffirmed the general principles that foreclosures by advertisement “are defined and regulated by
statute” and that the “mortgage debt is considered paid and the mortgage lien discharged” once the
foreclosure sale is complete. Id. But Senters did not concern a mortgagee’s overbid at a foreclosure
sale, as occurred in this case. Senters ruled only that the purchaser at the foreclosure sale was not
entitled to require the mortgagor to pay at redemption the cost of a construction lien the purchaser
redeemed earlier. Id. at 641–45.
The Bank also cites Freeman v. Wozniak, 617 N.W.2d 46 (Mich. Ct. App. 2000) (per
curiam), but that case also did not concern a mortgagee’s overbid at a foreclosure sale. The trial
court set aside a foreclosure sale on the ground that the mortgagor was mentally incompetent during
the foreclosure proceedings. Id. at 47. The court of appeals reversed and reinstated the sale because
the mortgagee had complied with the statutory requirements and the mortgagor made no showing
of fraud, accident, or mistake. Id. at 48–49. This holding supports Miller.
In addition, the Bank cites Mitchell v. Dahlberg, 547 N.W.2d 74 (Mich. Ct. App. 1996),
which involved a contract for the purchase of land. There the court recognized that foreclosures are
equitable in nature so they may be set aside for fraud or unusual circumstances, id. at 724, 726–27,
but here the Bank has not alleged, nor could it allege, any fraud on the part of Miller or any other
unusual circumstance warranting relief. The bankruptcy court correctly held under the Michigan

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cases discussed above that the Bank must bear the burden of its own negligence. In re Miller, 442
B.R. at 630–32.
Finally, the Bank points to Michigan Court Rule 2.612(C)(1)(a), which is the Michigan
equivalent of Federal Rule of Civil Procedure 60(b)(1). The Bank contends that it can argue to a
Michigan court that it is entitled to relief from the sheriff’s sale due to mistake or inadvertence. The
rule provides a basis for relief, however, from a court “judgment, order, or proceeding.” The
Michigan courts clearly characterized foreclosures by advertisement as statutory, not judicial,
proceedings that may be set aside only in very limited circumstances. See e.g., Pulleyblank, 446
N.W.2d at 347–48.
Even if Wisconsin law applies in this case, the Bank has not shown a basis to overturn the
bankruptcy court’s decision. The Bank relies on a Wisconsin statute, § 806.07(1)(a), the counterpart
to Federal Rule of Civil Procedure 60(b)(1), and Bank of New York v. Mills, 678 N.W.2d 332 (Wis.
Ct. App. 2004), to argue that a Wisconsin court would grant relief because judicial foreclosure
proceedings are equitable in nature and the trial court retains broad discretion to deny confirmation
of a foreclosure sale if there is an apparent price inadequacy caused by mistake, misapprehension,
or inadvertence on the part of the bidder.
We find at least two flaws in the Bank’s argument. First, even if the Bank were allowed to
present its arguments to a Wisconsin court, the Bank could not present any issue concerning judicial
confirmation of the Michigan foreclosure sale. The Michigan proceeding was a statutory foreclosure
by advertisement, not a a judicial foreclosure action. Therefore, court confirmation of the sale is not
relevant. Second, the Wisconsin Supreme Court made clear in Wilson that a trial court has broad
discretion to protect a debtor from a purchaser’s underbid at a foreclosure sale, but a purchaser like
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the Bank who overbids at a foreclosure sale must face the consequences of its own mistake.
Wisconsin equity courts will not intervene to relieve a purchaser from its own negligence. See
Horicon State Bank, 478 N.W.2d at 28. Thus, even if the Bank argued that its overbid at the
Michigan sheriff’s sale did not affect its Wisconsin foreclosure judgment, the Wisconsin courts
would likely rule under Wilson and Horicon State Bank that the Bank extinguished the entire debt
through its own unilateral mistake in Michigan.
Consequently, the bankruptcy court did not abuse its discretion in holding that the Bank is
not entitled to relief from the automatic stay for cause where the Bank no longer has a debt to enforce
in Wisconsin state court. For the same reason, we need not reach the Bank’s argument that the
automatic stay should have been lifted on the ground of lack of adequate protection. The bankruptcy
court correctly lifted the automatic stay for the limited purpose of allowing the Bank to dismiss with
prejudice the Wisconsin foreclosure judgment. See In re Miller, 442 B.R. at 637.
D. The Bank’s due process rights were not violated
We do not tarry long on the Bank’s final contention that the bankruptcy court violated its
procedural and substantive due process rights. Our review of the bankruptcy proceedings reveals
that the bankruptcy court treated the Bank with complete fairness and gave the Bank every
opportunity to present all facts and legal authorities to support its position. Although the Bank
criticizes the bankruptcy court for failing to maintain neutrality, there is no evidence in the record
that the court was not a neutral arbiter and no evidence that it acted with partiality. Finally, our
preceding discussion compels a conclusion that the bankruptcy court did not deprive the Bank of its
property—the Wisconsin foreclosure judgment—without due process of law. The Bank bid the

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entire amount of its notes and thereby insured that it would not be overbid. The bankruptcy court
simply applied the law and required the Bank to bear the consequences of its own bid in Michigan.
V. CONCLUSION
For all of the reasons stated, we can find no basis to overturn the bankruptcy court’s
judgment. The Bank forfeited its argument that Miller failed to object to the Bank’s proof of claim.
Both Michigan and Wisconsin law support the bankruptcy court’s conclusion that the Bank’s overbid
at the Michigan sheriff’s sale extinguished the entire debt Miller owed to the Bank. Neither
Michigan nor Wisconsin law provides a basis for the Bank to set aside the Michigan foreclosure or
to execute on the Wisconsin foreclosure judgment. Lifting the automatic stay only to permit
dismissal with prejudice of the Wisconsin judgment was not an abuse of the bankruptcy court’s
discretion. The bankruptcy court acted fairly and in accordance with the applicable law, and did not
deprive the Bank of due process. Accordingly, we AFFIRM.

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