PNC Bank, National Association, successor by merger to National City Bank, a national banking association v. Select Commercial Assets, LLC et al
Filing
27
OPINION AND ORDER granting in part and denying in part 21 Motion for Summary Judgment; granting in part and denying in part 22 Motion for Summary Judgment AND ORDERING EITHER JOINT AGREEMENT OR BRIEFING BE FILED WITHIN 30 DAYS - See order, page 39. Signed by District Judge Paul D. Borman. (DTof)
Case 2:18-cv-10711-PDB-APP ECF No. 27, PageID.1463 Filed 05/20/22 Page 1 of 40
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
PNC BANK, National Association,
Case No. 18-cv-10711
Plaintiff,
Paul D. Borman
United States District Judge
v.
Anthony P. Patti
United States Magistrate Judge
SELECT COMMERCIAL ASSETS,
LLC and ALL OCCUPANTS OF
32102 DI STEFANO CT, FRASER, MI
48026,
Defendants.
________________________/
OPINION AND ORDER
GRANTING IN PART AND DENYING IN PART BOTH PARTIES’
MOTIONS FOR SUMMARY JUDGMENT (ECF Nos. 21 and 22)
INTRODUCTION
This case arises out of a series of mortgages placed on 32102 Di Stefano Ct., in
Fraser, Michigan. Plaintiff PNC Bank argues that it is entitled to foreclosure on this
property under future advance mortgages created in 2001 and 2003. It also argues
that is entitled to reimbursement for tax and insurance payments that it has made to
protect its interest in the property. Defendant SCA disagrees, and also argues that it
is entitled to summary judgment on the basis of res judicata.
The Court finds that the briefing adequately addresses the issues in contention
and dispenses with a hearing pursuant to E.D. Mich. L. R. 7.1(f)(2).
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I. STATEMENT OF FACTS AND PROCEDURAL HISTORY
A. Statement of Facts
December 2001: National City Bank loans Ercole and Joanne Di Stefano
$45,000, secured by a future advance mortgage on the Property.
On December 20, 2001, Ercole and Joanne Di Stefano granted a future advance
mortgage (the “2001 HELOC1”) on 32102 Di Stefano Ct., in Fraser, Michigan (“the
Property”), to National City Bank (“NCB”), to secure repayment of a line of credit
with a “maximum principal amount” of up to $45,000. (ECF No. 22-2, PageID 660.)
The 2001 HELOC also secured “[a]ll future advances from Lender to Mortgagor or
other future obligations of Mortgagor to Lender under any promissory note, contract,
guaranty, or other evidence of debt executed by Mortgagor in favor of Lender
executed after this Security Instrument whether or not this Security Instrument is
specifically referenced.” (ECF No. 22-2, PageID 661.)
The 2001 HELOC further provided that “Mortgagor will pay all taxes,
assessments, liens, encumbrances, lease payments, ground rents, utilities, and other
charges relating to the Property when due” and “shall keep Property insured against
loss by fire, flood, theft and other hazards and risks reasonably associated with the
Property due to its type and location.” (ECF No. 22-2, PageID 661–62.)
Additionally, it provided that, “[i]f Mortgagor fails to perform any duty or any of the
1
‘HELOC” stands for “home equity line of credit.”
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covenants contained in this Security Instrument, Lender may, without notice,
perform or cause them to be performed,” and that, “[e]xcept when prohibited by law,
Mortgagor agrees to pay all of Lender’s expenses if Mortgagor breaches any
covenant in this Security Instrument.” (ECF No. 22-2, PageID 661–62).
The 2001 HELOC also provided that “the duties and benefits of this Security
Instrument shall bind and benefit the successors and assigns of Mortgagor and
Lender.” (ECF No. 22-2, PageID 663.)
The 2001 HELOC was recorded with the Macomb County Register of Deeds on
January 15, 2002. (ECF No. 22-2, PageID 660.)
December 2001 – November 2002: National City Mortgage Services Co. twice
loans the Di Stefanos $240,000, both secured by mortgages on the Property.
On December 20, 2001, National City Mortgage Services Co. (“NCMSC”)
loaned the Di Stefanos $240,000, and secured this loan with a mortgage on the
Property. (ECF No. 21-2.) This Mortgage was recorded with the Macomb County
Register of Deeds on January 15, 2002. (ECF No. 21-2.)
On November 8, 2002, NCMSC lent the Di Stefanos another $240,000, and
secured this loan with another mortgage on the Property. (ECF No. 22-12.) This loan
was used to pay off the 2001 loan from NCMSC. (ECF No. 22-18, PageID 935.) The
Mortgage was recorded with the Macomb County Register of Deeds on November
25, 2002. (ECF No. 22-12, PageID 795.)
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January 2003: NCMSC’s 2002 Mortgage is discharged.
On January 15, 2003, the Macomb County Register of Deeds entered a
Satisfaction / Discharge of NCMSC’s 2002 Mortgage on the Property. (ECF No. 2213.) This Discharge was signed by the vice president of NCMSC.2 (ECF No. 22-13.)
February 2003: NCB loans the Di Stefanos $44,000, secured by a new future
advance mortgage on the Property.
On February 5, 2003, the Di Stefanos granted another future advance mortgage
(the “2003 HELOC”) on the Property to NCB, this time to secure repayment of a
line of credit with a principal amount of up to $44,000. (ECF No. 22-7.) The 2003
HELOC’s terms were identical to those of the 2001 HELOC. (ECF No. 22-7.) This
HELOC was recorded with the Macomb County Register of Deeds on March 20,
2003. (ECF No. 22-7, PageID 773.)
November 2004 – December 2006: Warren Bank loans the Di Stefanos $800,000
and $150,000, both secured by mortgages on the Property.
On November 18, 2004, Warren Bank (“WB”) lent the Di Stefanos $800,000,
and secured this loan with a mortgage on the Property. (ECF No. 21-7; ECF No. 228.) This Mortgage also secured “[a]ll obligations . . . whether now existing or
hereafter arising” of the Di Stefanos to WB. (ECF No. 22-8, PageID 742.) And it
2
The Discharge identified the 2002 Mortgage by Liber and Page numbers,
demonstrating that that was the Mortgage to which it applied, even though it
misstated that Mortgage’s date of execution as December 20, 2001. (ECF No. 2216, PageID 825.)
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provided that it would “be binding upon and inure to the benefit of the parties, their
successors and assigns.” (ECF No. 22-8, PageID 750.) The Mortgage was recorded
with the Macomb County Register of Deeds on November 24, 2004. (ECF No. 228, PageID 742.)
On March 14, 2006, WB lent the Di Stefanos another $60,000, again secured with
a mortgage on the Property. This Mortgage had the same terms as WB’s 2004
Mortgage. (ECF No. 22-9, PageID 763.) It was recorded with the Macomb County
Register of Deeds on March 24, 2006. (ECF No. 22-9, PageID 755.)
On December 5, 2006, WB’s 2006 loan was increased to $150,000. (ECF No.
21-9, PageID 329.) This change was recorded with the Macomb County Register of
Deeds on December 11, 2006. (ECF No. 21-9, PageID 329.) Otherwise, the terms of
WB’s 2006 Mortgage remained the same. (ECF No. 21-9, PageID 329.)
January 2007 – October 2009: PNC receives NCB and NCMSC’s mortgages on
the Property.
On January 9, 2007, NCMSC assigned its 2002 Mortgage on the Property to
National City Mortgage Co. (“NCMC”). (ECF No. 22-4, PageID 677.) This
assignment was recorded with the Macomb County Register of Deeds on January
24, 2007. (ECF No. 22-4, PageID 677.)
On October 1, 2008, NCMC merged into NCB. (ECF No. 22-6, PageID 718–20.)
And on October 27, 2009, NCB merged into Plaintiff PNC Bank. (ECF No. 22-6,
PageID 728.)
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April 2013: The Di Stefanos default on the 2002 loan from NCMSC.
According to PNC, in April 2013, the Di Stefanos defaulted on the 2002 loan
from NCMSC, which had been modified in January 2010. (ECF No. 22, PageID 639
(citing ECF No. 22-5, PageID 683); ECF No. 22-16, PageID 856–57.) Also
according to PNC, “as of October 15, 2021, $339,495.83 is due and owing on” this
loan. (ECF No. 22, PageID 639) (citing ECF No. 22-5, PageID 683).
August 2013: PNC claims an interest in the Property based on NCMSC’s 2002
Mortgage on it.
On August 7, 2013, PNC filed a Claim of Interest on the Property based on the
NCMSC’s 2002 Mortgage on it. (ECF No. 22-14, PageID 817.) In this claim, PNC
stated that “the Mortgage has not been satisfied and there remains an outstanding
balance of approximately $193,939.48.” (ECF No. 22-14, PageID 817.)
October 2013: The Di Stefanos default on the 2003 loan from NCB.
According to PNC, in October 2013, the Di Stefanos defaulted on the 2003 loan
from NCB, and “[a]s of September 29, 2021, $41,236.66 is due and owing on” it.
(ECF No. 22, PageID 639) (citing ECF No. 22-5).
November 2013: PNC files an Affidavit of Erroneous Discharge of the 2002
Mortgage.
On November 4, 2013, PNC filed an Affidavit claiming that the February 2003
Discharge of NCMSC’s 2002 Mortgage was erroneous. (ECF No. 22-15.) In this
Affidavit, PNC stated that the 2002 Mortgage had “not been satisfied” and
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“declared” that “the Discharge . . . [was] hereby cancelled and null and void, and
that the Mortgage . . . [was] reinstated.” (ECF No. 22-15, PageID 820–21.)
February 2011 – December 2013: SCA receives WB’s mortgages on the
Property.
On February 14, 2011, the Federal Deposit Insurance Corporation, as receiver for
WB, assigned WB’s 2004 and 2006 Mortgages on the Property to North CRE
Venture 2010-2, LLC (ECF No. 22-10, PageID 767–68, 770, 779–80, 782.) On
December 13, 2013 North CRE sold these Mortgages to Defendant Select
Commercial Assets, LLC (“SCA”). (ECF No. 21-11, PageID 380–91, 393–94; ECF
No. 22-17, PageID 924.)
September 2014: Di Stefano deeds the Property to SCA.
On September 12, 2014, Joanne Di Stefano3 deeded the Property to SCA in lieu
of foreclosure and in partial satisfaction of her remaining liability to SCA based on
the 2004 loan from WB. (ECF No. 22-11, PageID 792–93.) This deed was recorded
by the Macomb County Treasurer on September 15, 2014. (ECF No. 22-11, PageID
792.)
According to PNC, since receiving the Property, “SCA has failed to pay taxes or
insurance premiums for [it] and has refused to reimburse PNC for the same.” (ECF
No. 22, PageID 641.) PNC claims that it has “paid all taxes assessed to the Property
3
Ercole Di Stefano passed away before this deed. (ECF No. 22-11.)
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during the period of 2013 through 2017, in a total of $27,229.2[8], and further has
paid all insurance premiums since 2013 through the present, in a total amount of
$28,746.44.” (ECF No. 22, PageID 641) (citing ECF No. 22-5).
October 2014 – February 2016: The Macomb County Circuit Court denies
PNC’s claim to a senior interest in the Property based on NCMSC’s 2002
Mortgage on it.
On October 14, 2014, PNC filed a “Complaint to Quiet Title and Hold Discharge
/ Satisfaction of Mortgage Null and Void” in Macomb County Circuit Court against
the Di Stefanos, North CRE, SCA, and FCI Lender Services. (ECF No. 22-16.) PNC
asked the Macomb County Court to:
A. Enter an Order . . . that the recorded [January 2003] Satisfaction /
Discharge . . . is/was Null and Void and that the [2002 NCMSC]
Mortgage . . . be held to have been recorded and perfected on the
date of its recording (November 25, 2002) and to have been in full
force and effect from that date until such date as said Mortgage is,
in fact, discharged or otherwise considered no longer enforceable or
effective.
B. Enter an Order . . . that Quiets Title to the Subject Property in the
name of the Defendants, Ercole Di Stefano and Joanne Di Stefano,
husband and wife, and which declares that the [2002 NCMSC]
Mortgage . . . is a valid perfected senior mortgage interest of record
and holding that all other interests or mortgages of record, including
those of the other named Defendants, be considered junior, inferior
and subject to the senior Mortgage interest of Plaintiff as found in
Paragraph 7, above.
C. Grant such other relief as may be appropriate.
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(ECF No. 22-16, PageID 829.) In addition to NCMSC’s 2002 Mortgage, the
Complaint discussed the WB Mortgages. (ECF No. 22-16, PageID 826–27.) It did
not mention the 2001 and 2003 HELOCs. (ECF No. 22-16.)
On December 30, 2015, the Macomb Court entered summary judgment for SCA.
(ECF No. 22-17.) The Court held that PNC’s Affidavit of Erroneous Discharge “was
not effective” because the Michigan statute that authorizes that type of affidavit
“does not provide for the perfection of a mortgage that was improperly discharged.”
(ECF No. 22-17, PageID 929.) Therefore, PNC’s “[A]ffidavit failed to place SCA
on notice of a legitimate right to the Property, and SCA qualifie[d] as a bona fide
purchaser,” free from NCMSC’s 2002 Mortgage. (ECF No. 22-17, PageID 929.) The
Macomb Court also declined to restore the mortgage in equity, because “SCA
qualifie[d] as an innocent third party.” (ECF No. 22-17, PageID 930.)
On February 16, 2016, after PNC moved for reconsideration, the Macomb Court
affirmed its judgment on the merits. It also shut down PNC’s attempt to raise new
arguments based on NCMSC’s 2001 Mortgage and the 2003 HELOC as follows:
. . . PNC Bank’s reliance on a prior 2001 Mortgage is misplaced. The
U.S. Department of Housing and Urban Development closing statement
. . . clearing shows the subject 2002 NCMSC Mortgage as paying off
the prior 2001 NCMSC Mortgage.
PNC Bank’s complaint only sought an adjudication of its priority based
on the 2002 NCMSC Mortgage. The Opinion and Order dated
December 30, 2015 only resolved this issue. Moreover, PNC Bank has
not proffered any evidence that any actual loan advances were made or
remained unpaid under the Future Advance Mortgage granted by the Di
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Stefanos to National City Bank on February 5, 2003 and recorded on
March 20, 2003. Hence, PNC Bank did not establish—and still has not
established—the Future Advance Mortgage remains a valid senior
mortgage interest.
(ECF No. 22-18, PageID 935.)
B. Procedural History
On March 1, 2018, PNC filed a Complaint against SCA and “All Occupants of
[the Property]” (“Occupants”) in this Court. (ECF No. 1.)
On May 15, 2018, PNC amended its Complaint. (ECF No. 10.) In its Amended
Complaint, PNC requested: 1) “that the Court enter a Judgment of Foreclosure in
favor of PNC, adjudging and ordering that PNC’s mortgage interest in the Property
be foreclosed, and the Property . . . be sold to the highest bidder pursuant to the
applicable Michigan statute(s) and court rule(s), at public auction as one parcel”; and
2) “that the Court enter a Judgment in favor PNC, adjudging and ordering that SCA
pay to PNC all amounts paid by PNC for real estate taxes assessed to the Property
and hazard insurance for the Property since SCA took title thereto, and awarding
PNC all other applicable relief.” (ECF No. 10, PageID 121–26.)
SCA answered this Amended Complaint on June 15, 2018. (ECF No. 11.)
Occupants never filed an answer and have played no role in this case.
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SCA moved for summary judgment4 on September 30, 2021, (ECF No. 21), and
PNC moved for summary judgment on October 1, 2021, (ECF No. 22). They
responded to each other’s motions, and replied to these responses, between October
29, 2021 and November 19, 2021. (ECF Nos. 23, 24, 25, 26.)
II. LEGAL STANDARD
Summary judgment is appropriate where the moving party demonstrates that
there is no genuine dispute as to any material fact. Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); Fed. R. Civ. P. 56(a). “A fact is ‘material’ for purposes of a motion
for summary judgment where proof of that fact ‘would have [the] effect of
establishing or refuting one of the essential elements of a cause of action or defense
4
More specifically, SCA titled its filing: “MOTION TO DISMISS PURSUANT TO
FEDERAL RULE OF CIVIL PROCEDURE 12(B)(1), or ALTERNATIVEY
MOTION FOR SUMMARY JUDGMENT PURSUANT TO FEDERAL RULE OF
CIVIL PROCEDURE 56.” (ECF No. 21, PageID 220.) According to SCA, it
invoked both standards because its motion is based on res judicata and “[i]t is unclear
whether the Eastern District of Michigan views a res judicata defense as one
properly raised under Fed. R. Civ. P. 56 or 12(b)(1).” (ECF No. 21, PageID 234.)
The Sixth Circuit and the District Court for the Eastern District of Michigan
routinely evaluate res judicata defenses under the summary judgment standard. See,
e.g., Raub v. Moon Lake Prop. Owners’ Ass’n, 718 F. App’x 407, 408 (6th Cir. 2018)
(“Defendants are allowed to raise res judicata at summary judgment . . . .”); Harris
v. Ashley, 165 F.3d 27 (6th Cir. 1998) (table) (“[W]e find that the district court was
correct to grant summary judgment on the basis of res judicata . . . .”); Fresh Start
BVBA v. Jaffe Raitt Heuer & Weiss, PC, No. 21-CV-10315, 2022 WL 722204, at *6
(E.D. Mich. Mar. 9, 2022) (“Since all three res judicata elements are met,
Defendants are entitled to summary judgment.”). This Opinion will do the same.
11
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asserted by the parties.’” Dekarske v. Fed. Exp. Corp., 294 F.R.D. 68, 77 (E.D. Mich.
2013) (quoting Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984)). A dispute
is genuine “if the evidence is such that a reasonable jury could return a verdict for
the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48
(1986).
“In deciding a motion for summary judgment, the court must draw all reasonable
inferences in favor of the nonmoving party.” Perry v. Jaguar of Troy, 353 F.3d 510,
513 (6th Cir. 2003) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986)). At the same time, the non-movant must produce enough
evidence to allow a reasonable jury to find in his or her favor by a preponderance of
the evidence, Anderson, 477 U.S. at 252, and “[t]he ‘mere possibility’ of a factual
dispute does not suffice to create a triable case.” Combs v. Int’l Ins. Co., 354 F.3d
568, 576 (6th Cir. 2004) (quoting Gregg v. Allen–Bradley Co., 801 F.2d 859, 863
(6th Cir. 1986)). Instead, “the non-moving party must be able to show sufficient
probative evidence [that] would permit a finding in [his] favor on more than mere
speculation, conjecture, or fantasy.” Arendale v. City of Memphis, 519 F.3d 587, 601
(6th Cir. 2008) (quoting Lewis v. Philip Morris Inc., 355 F.3d 515, 533 (6th Cir.
2004)). “The test is whether the party bearing the burden of proof has presented a
jury question as to each element in the case. The plaintiff must present more than a
mere scintilla of the evidence.” Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000)
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(internal quotation marks and citations omitted). “‘The central issue is whether the
evidence presents a sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a matter of law.’” Binay v.
Bettendorf, 601 F.3d 640, 646 (6th Cir. 2010) (quoting In re Calumet Farm, Inc.,
398 F.3d 555, 558 (6th Cir. 2005)). That evidence must be capable of presentation
in a form that would be admissible at trial. See Alexander v. CareSource, 576 F.3d
551, 558–59 (6th Cir. 2009).
III. ANALYSIS
A. PNC’s claims are not barred by res judicata.
“The doctrine of res judicata was judicially created in order to relieve parties of
the cost and vexation of multiple lawsuits, conserve judicial resources, and, by
preventing inconsistent decisions, encourage reliance on adjudication.” Pierson
Sand & Gravel, Inc. v. Keeler Brass Co., 430 Mich. 372, 380 (1999) (internal
quotation marks omitted). Its application “presents a question of law.” Washington
v. Sinai Hosp. of Greater Detroit, 478 Mich. 412, 417 (2007); see also Bates v. Twp.
of Van Buren, 459 F.3d 731, 734 (6th Cir. 2006) (“The application of res judicata is
a question of law . . . .”).
Here, SCA argues that “PNC’s claims are barred [by res judicata] because they
are based upon the same facts, issues, and evidence that were litigated – or which
13
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could have been litigated – in the prior State Court Case.” (ECF No. 21, PageID
235.) “The preclusive effect of a state court judgment in a subsequent federal lawsuit
generally is determined by the full faith and credit statute, which . . . directs a federal
court to refer to the preclusion law of the State in which judgment was rendered.”
Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985) (citing 28
U.S.C. § 1738). Accordingly, the Court evaluates SCA’s argument under Michigan’s
res judicata law.
Michigan has “taken a broad approach to the doctrine of res judicata.” Adair v.
State, 470 Mich. 105, 121 (2004). In Michigan, “the doctrine of res judicata . . . bars
a second, subsequent action when (1) the prior action was decided on the merits, (2)
both actions involve the same parties or their privies, and (3) the matter in the second
case was, or could have been, resolved in the first.” Id.
“The burden of proving the applicability of . . . res judicata is on the party
asserting it.” Baraga Cnty. v. State Tax Comm’n, 466 Mich. 264, 269 (2002). The
parties agree that SCA can establish the first two elements. See (ECF No. 21, PageID
236–37) (asserting that the first two elements are satisfied); (ECF No. 23) (ignoring
the first two elements when responding to SCA’s motion). But they disagree on the
third.
The third res judicata element is satisfied “‘if the evidence needed to sustain the
second suit would have sustained the first, or if the same facts were essential to
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maintain both actions.’” Adair, 470 Mich. at 124 (quoting River Park, Inc. v.
Highland Park, 184 Ill.2d 290, 307 (1998)). It is also satisfied if the second suit
“aris[es] from the same transaction” as did the first suit and “the parties, exercising
reasonable diligence, could have raised [the second suit’s claim(s) in the first suit,]
but did not.” Id. at 121. “Whether a factual grouping constitutes a transaction for
purposes of res judicata is to be determined pragmatically, by considering whether
the facts are related in time, space, origin or motivation, and whether they form a
convenient trial unit.” Id. at 125 (quoting 46 Am. Jur. 2d, Judgments 533, p. 801
(alterations omitted) (emphasis Adair’s)).
Arguments
First, SCA argues that “there is no doubt that the ‘matter’ in this case ‘was, or
could have been, resolved in the’ State Court Case” because the facts here “were all,
or virtually all, part of the State Court Case.” (ECF No. 21, PageID 237–38) (quoting
Adair, 470 Mich. 105 and also citing Burns v. Ocwen Loan Servicing, LLC, No. 1711748, 2017 WL 10751395 (E.D. Mich. Oct. 4, 2017), report and recommendation
adopted by 2018 WL 851284 (Feb. 14, 2018)). To this point, SCA observes that the
Macomb County Court rejected arguments that PNC made about “the alleged
superiority of the 2001 Mortgage” and the 2003 HELOC in its Motion for
Reconsideration. (ECF No. 21, PageID 239–40). And it asserts that “PNC’s claim
that it seeks different relief in this case . . . is not a basis for PNC to avoid” res
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judicata, because “[i]n determining whether res judicata bars a second action, ‘a
comparison of the grounds asserted for relief is not a proper test.’” (ECF No. 21,
PageID 238) (emphasis added) (quoting Jones v. State Farm Mut. Auto Ins. Co., 202
Mich. App. 393, 401 (1993) and also citing York v. Wayne Co. Sheriff, 157 Mich.
App. 417 (1987), among others).
Then, SCA argues that, “even if the State Court Case did not make any argument
regarding the 2001 HELOC, 2003 HELOC or 2001 Mortgage, there is [] no credible
question that PNC should have or could have raised these issues in that case.” (ECF
No. 21, PageID 240) (citing Adair, 470 Mich. 105). It contends that both cases arise
out of “the priority of the parties[’] respective mortgage interests in the Property,”
and that “PNC admits that all of [the] National City mortgages at issue were recorded
against the Property at the time of the State case in 2014.” (ECF No. 21, PageID
240–41.) It also notes that Michigan Court Rule 2.203(A) requires a party filing a
pleading to “join every claim that the pleader has against that opposing party at the
time of serving the pleading, if it arises out of the transaction or occurrence that is
the subject matter of the action and does not require for its adjudication the presence
of third parties over whom the court cannot acquire jurisdiction.” (ECF No. 21,
PageID 240.)
PNC responds that its “request for declaratory relief in the 2014 Quiet Title
Action arose from, and was limited to, the erroneous Discharge of the 2002
16
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Mortgage – a security instrument not at issue in this litigation[,] . . . which relates to
. . . PNC’s right to foreclose under the 2001 HELOC and 2003 HELOC.” (ECF No.
23, PageID 985.) It emphasizes that “the complaint in the 2014 Quiet Title Action
did not even mention the separate and distinct loan transactions embodied in the
2001 or 2003 HELOCS, nor did it relate to or describe the Di Stefanos’ payment
obligations or status under the terms of the 2001 HELOC, 2002 Promissory Note, or
2003 HELOC, which give rise to PNC’s instant claim for judicial foreclosure.” (ECF
No. 23, PageID 985–86) (citing U.S. Bank v. Gorge, No. 35418, 2021 WL 2493859
(Mich. Ct. App. June 17, 2021)). And it asserts that “the trial court made abundantly
clear that neither the 2001 nor the 2003 HELOC was ever part of the 2014 case.”
(ECF No. 23, PageID 992.)
Further, PNC argues that “[t]here simply is no basis for SCA to say that the
question before the Court in this action is whose mortgage(s) have priority, as the
only issue relevant to PNC’s claim for judicial foreclosure is whether an
indebtedness, secured by a mortgage held by the foreclosing party, is in default.”
(ECF No. 23, PageID 990) (citing U.S. Bank Trust, NA v. Bryden, No. 324153, 2016
WL 555848, at *2 (Mich. Ct. App. Feb. 11, 2016)).
Additionally, PNC asserts that “the 2014 Quiet Title Action makes no mention
of PNC’s payment of any monies for property taxes or insurance premiums – which
form the basis for PNC’s claim for unjust enrichment in the instant case – as those
17
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events largely took place well after the filing of the 2014 action.” (ECF No. 23,
PageID 986.)
SCA replies that “PNC’s claim that this is really a different case or that it is
seeking a different relief in this case . . . is not a true statement considering that
‘priority’ is a required element of the analysis that the Court must determine before
it could grant the relief requested.” (ECF No. 25, PageID 1442–43) (citing Senters
v. Ottawa Savings Bank, 443 Mich. 45, 57 n.16 (1993)). It also argues that PNC’s
reliance on Gorge is misplaced, because “Gorge did NOT involve a determination
of the priority of interests, and there was never a question that the bank could bring
a later foreclosure action against Gorge.” (ECF No. 25, PageID 1443.)
Analysis
This case is not barred by res judicata.
To begin with, this case does not depend on the same facts and evidence as did
the 2014 case. In this case, PNC asks the Court for two things: first, to order
foreclosure of the Property under the 2001 and 2003 HELOCs; and second, to order
SCA to repay taxes and insurance on the Property from September 2014, when SCA
came to possess it. (ECF No. 10, PageID 121–26.) The former request requires PNC
to demonstrate that the 2001 and/or 2003 HELOC(s) secured a debt that is now in
default. See III.B, infra. The latter requires PNC to demonstrate that SCA breached
the HELOCs by failing to pay taxes and insurance, resulting in damages to PNC. See
18
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III.C., infra. Neither requires PNC to make any reference to the 2002 NCMSC
Mortgage at all. (The former request involves the 2002 loan from NCMSC, but not
the 2002 Mortgage. See III.B, infra.)
In contrast, PNC hinged its Macomb County case on the 2002 Mortgage. In that
case, PNC asked the Macomb Court for two different things: first, to hold that the
Discharge of the 2002 NCMSC Mortgage was null and void; and second, to
“declare[] that the [2002 NCMSC] Mortgage . . . is a valid perfected senior mortgage
interest of record and hold[] that all other interests or mortgages of record . . . be
considered junior, inferior and subject to” it. (ECF No. 22-16, PageID 829.) The
former request depended on the 2002 NCMSC Mortgage, the Discharge, and the
Affidavit labelling the Discharge erroneous. The 2001 and 2003 HELOCs, and taxes
and insurance paid for the Property since September 2014, had nothing to do with it.
The latter request depended on the terms, execution dates, and transfers of all
“interests or mortgages” on the Property. Notably, PNC’s Complaint did not mention
the HELOCs once. (ECF No. 22-16.) But even if the Macomb Court did need to
examine the HELOCs to verify that the 2002 Mortgage was senior to “all other
interests or mortgages of record” in Macomb County, the Macomb Court still did
not need to consider whether the HELOCs were in default. Neither did it need to
consider the Property’s post-September 2014 taxes and insurance to determine the
2002 Mortgage’s priority.
19
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Thus, this case and the Macomb County case do not depend on the “same
evidence.” Cf. Burns, 2017 WL 10751395, at *7 (“[T]he claims in this action arise
from the same facts and require the same evidence as the prior state court action. . . .
Thus, this factor is satisfied.”); York, 157 Mich. App. at 155 (“proof of the same
facts or evidence as required to sustain the previous action is necessary in this
action”).
Next, this case does not “aris[e] from the same transaction” as the Macomb
County case did. Adair, 470 Mich. at 121. Both relate to the same space—the
Property—and the same parties. But their meaningful connections end there. The
cases’ facts are mostly unrelated in origin, time, and motivation, and do not “form a
convenient trial unit.” Id. at 125.
Indeed, these cases have completely distinct origins. This case originates from
the 2001 and 2003 HELOCs; the Macomb County case originates from the 2002
NCMSC Mortgage. (And again, while PNC argues that the 2001 HELOC secures
the 2002 loan from NCMSC, it does not argue that the 2002 mortgage has any
bearing on its current claims.)
These cases also zero in on different points in time. This case starts with the 2001
and 2003 HELOCs. It includes the 2002 loan. And it must take account of the
October 2009 merger between NCB and PNC, (ECF No. 22-6, PageID 728), and the
September 2014 deed of the Property from Di Stefano to SCA, (ECF No. 22-11,
20
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PageID 792). But after that, this case focuses on the ongoing defaults on the 2002
and 2003 loans, which began on April 2013 and October 2013, respectively, and on
SCA’s failure to pay taxes on and insure the Property since September 2014.
The Macomb County case’s time frame does overlap with that of this case.
Because it concerned the 2002 NCMSC Mortgage’s seniority as compared to all
other interests on the Property, it implicated all of the other Mortgages, mergers, and
assignments listed in this case: the 2001 NCMSC Mortgage, the 2001 and 2003
HELOCs, the 2004 and 2006 WB Mortgages, the January 2007 assignment of the
2002 Mortgage from NCMSC to NCMC, the October 2008 merger of NCMC into
to NCB, the October 2009 merger of NCB into PNC, the February 2011 assignment
of the WB Mortgages to North CRE, the December 2013 sale of the WB Mortgages
to SCA, and the September 2014 deed of the Property to SCA.
But the Macomb County case primarily focused on the 2002 NCMSC Mortgage,
and its validity in light of the January 2003 Discharge, the August 2013 Claim of
Interest, and the November 2013 Affidavit labelling the Discharge erroneous, none
of which factor in to this case. Additionally, the Macomb County case did not
involve any facts that occurred after after SCA’s procurement of the WB Mortgages
in December 2013.
These cases have different motivations too. In this case, PNC seeks to foreclose
on the Property to secure repayment of the 2001, 2002, and 2003 loans, based on the
21
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terms of the 2001 and 2003 HELOCs. It also seeks to secure repayment of postSeptember 2014 taxes and insurance on the Property. It does not seek an adjudication
of the priority of the interests on the Property. See III.B, infra.
In contrast, the Macomb Court quite clearly stated that the 2014 case “only . . .
adjudicate[ed] [] [PNC’s] priority based on the 2002 NCMSC Mortgage.” (ECF No.
22-18, PageID 935.) That case was not motivated by a desire to vindicate the rights
established by the 2001 and 2003 HELOCs. Cf. Jones, 202 Mich. App. at 399
(“Where ‘more than one primary right of [the] plaintiff [has been] invaded, or if
there has been more than one invasion of a single primary right,’ res judicata will
not bar the second suit.” (quoting Citizens Telephone Co. v. Anderson, 291 S.W.2d
527, 528 (Ky.1956) and applying Kentucky res judicata law)). Nor was it motivated
by a desire to address defaults on any loans, a desire to foreclose on the Property, or
a desire to recoup taxes and insurance payments. Cf. Gorge, 2021 WL 2493859, at
*6 (“The facts in the 2017 case centered around the formation of the mortgage . . . .
By contrast, the present foreclosure action centers on defendant’s subsequent default
under the mortgage, including his failure to make monthly payments.” (emphasis
added)).
For the same reasons, these two cases do not form a particularly convenient trial
unit. They share some background facts, but turn on separate legal and factual issues.
So combining them would not save a dispositive amount of time or effort.
22
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Therefore, the Court DENIES SCA’s Motion for Summary Judgment on the
grounds of res judicata. Cf. Pierson Sand & Gravel, Inc., 460 Mich. at 383 (“The
goal of res judicata is to promote fairness, not lighten the loads of the state court by
precluding suits whenever possible.”).
B. PNC is entitled to foreclosure on the Property based on the 2003 HELOC.
In general, “[b]efore receiving a judgment of foreclosure, [a] mortgagee must
prove that [a] debt exists and the amount of the debt. Additionally, the mortgagee
must make a showing that the debt was in default.” Wilmington Sav. Fund Soc’y,
FSB v. Kattula, No. 16-CV-12813, 2018 WL 3599036, at *4 (E.D. Mich. July 27,
2018) (internal citation and quotation marks omitted) (citing 31800 Wick Rd.
Holdings, LLC v. Future Lodging-Airport, Inc., 848 F. Supp. 2d 757, 763 (E.D.
Mich. 2012) and Select Commercial Assets, LLC. v. Carrothers, No. 326968, 2016
WL 3419018, at *3 (Mich. Ct. App. June 21, 2016)); see also Bryden, 2016 WL
555848, at *2.
Arguments
PNC asserts that the following facts are undisputed: “the Di Stefanos granted the
2001 HELOC and 2003 HELOC”; “the 2001 HELOC secures repayment of ‘[a]ll
future advances from Lender to Mortgagor or other future obligations of Mortgagor
to Lender under any promissory note, contract guaranty, or other evidence of debt’”;
the 2001 HELOC provides that “[t]he duties and benefits of [it] shall bind and benefit
23
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the successor and assigns of Mortgagor and Lender”; “PNC is the successor by
mergers to [NCB] and [NCMSC]”; and “the Di Stefanos have defaulted on their loan
repayment obligations under the 2002 Promissory Note and 2003 HELOC, and [] a
collective $380,732.49 is currently due and owing on these loans.” (ECF No. 22,
PageID 645–46). “Accordingly,” PNC concludes, it is “entitled to summary
judgment of its affirmative claim for judicial foreclosure of the 2001 HELOC and
2003 HELOC.” (ECF No. 22, PageID 646) (citing Bryden, 2016 WL 555848, at *2,
M.C.R. 3.410(B)(2), Mich. Comp. Laws Ann. § 600.3115, and 12 U.S.C § 215a(e)).
SCA does not directly respond to this argument. Instead, SCA’s response to
PNC’s Motion for Summary Judgment reiterates, almost verbatim, its previouslyfiled Motion for Summary Judgment on the grounds of res judicata. (It does also
contain a short section on PNC’s tax and insurance claim.)
However, within its res judicata arguments, SCA makes some points that are
relevant to the merits of PNC’s foreclosure claim. It argues that, to order foreclosure,
the Court must first “determine[] . . . whether SCA’s mortgage interests on the
Property are superior to PNC’s mortgage interests on the [] Property.” (ECF No. 24,
PageID 1034) (citing Senters, 443 Mich. at 57 n.16). It claims that PNC “is a junior
interest holder, as determined by the state court,” and thus “PNC’s only interest in
this property exists in the ‘surplus proceeds’, if any would exist after the debt to SCA
is satisfied.” (ECF No. 25, PageID 1444) (citing In re $55,336.17 Surplus Funds,
24
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319 Mich. App. 501 (2017)). And it asserts that “any claim by PNC that SCA lost
its superior senior interest in the Property when it executed the Deed-in-Lieu of
Foreclosure [] fails” because the Deed “expressly and clearly provides that ‘[n]o
merger of this mortgage and this fee is intended at this time.’” (ECF No. 24, PageID
1036) (quoting ECF No. 24-14).
PNC replies that “priority” has no “bearing on the straightforward legal elements
of this foreclosure action.” (ECF No. 26, PageID 1450.) Further, it adds that “the
law is long-settled and clear under Michigan’s race-notice statute that an earlierrecorded security interest holds priority over a later-recorded one.” (ECF No. 26,
PageID 1454) (citing Mich. Comp. Laws Ann. § 565.29).
Analysis
PNC is entitled to foreclose on the Property through the 2003 HELOC, because
that HELOC secures the 2003 loan of $44,000 from NCB to the Di Stefanos, and
that loan is in default. However, PNC is not entitled to foreclose on the Property
through the 2001 HELOC, because that HELOC does not secure the 2002 loan and
PNC has not produced any evidence that the 2001 loan is in default.
First, PNC has proven that in 2001 and 2003, the Di Stefanos granted HELOCs
on the Property to secure loans from NCB. See (ECF No. 22-2; ECF No. 22-7). It
has also proven that it currently holds NCB’s interests in these HELOCs, by way of
merger. See (ECF No. 22-6) (NCB merges with PNC); (ECF No. 22-2, PageID 663)
25
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(providing that the 2001 HELOC would “bind and benefits the successors and
assigns of [the Di Stefanos] and [NCB]”); (ECF No. 22-7, PageID 736) (same, for
the 2003 HELOC); see also 12 U.S.C. § 215a(e) (providing that, in the “[m]erger of
national banks or State banks into national banks,” “[t]he receiving association, . . .
shall hold and enjoy all rights of property, franchises, and interests . . . in the same
manner and to the same extent as such rights, franchises, and interests were held or
enjoyed by any one of the merging banks or banking associations at the time of the
merger, subject to the conditions hereinafter provided”); (ECF No. 10, PageID 120)
(characterizing PNC as “a national banking association” (emphasis added)). SCA
does not dispute these facts. Cf. (ECF No. 24, PageID 1034) (assuming that PNC
has “mortgage interests on the [] Property”).
Second, PNC has proven that the 2001 HELOC secured an initial loan of $45,000
from NCB to the Di Stefanos, (ECF No. 22-2, PageID 660), that the 2003 HELOC
secured an initial loan of $44,000 from NCB to the Di Stefanos, (ECF No. 22-7,
PageID 733), and that both HELOCs secured “[a]ll future advances from [NCB] to
[the Di Stefanos] or other future obligations of [the Di Stefanos] to [NCB] under any
promissory note, contract, guaranty, or other evidence of debt executed by [NCB] in
26
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favor of [the Di Stefanos] executed” after each HELOC. (ECF No. 22-2, PageID
661; ECF N. 22-7, PageID 734).5 SCA does not dispute these facts either.
But PNC cannot prove that the 2001 HELOC secured the 2002 loan from
NCMSC to the Di Stefanos.6 The 2001 HELOC secured “[a]ll future advances from
[NCB] to [the Di Stefanos],” (ECF No. 22-2, PageID 661), and provided that the
“duties and benefits” that it created would “bind and benefit[] the successors and
assigns of [the Di Stefanos] and [NCB].” (ECF No. 22-2, PageID 661, 663.). But
when NCMSC made the 2002 loan it was a separate entity from NCB—and not yet
a “successor [or] assign” of it.7 Therefore, this loan did not create any “duties [or]
benefits” under the 2001 HELOC.
Third, PNC has proven that the Di Stefanos have defaulted on the 2003 loan from
NCB. It has done so by producing an Affidavit from Thomas Morris, “an Officer[]
and Senior Default Litigation Specialist” at PNC, that states, in relevant part:
12. The Di Stefanos failed to make the payment due under the 2003
HELOC beginning in October 2013 and each month thereafter, and are
in default of their loan repayment obligations under the 2003 HELOC.
5
By these terms, the 2001 HELOC also secured the 2003 loan. But because PNC
never makes this point, and this point would not affect the outcome of this case
anyway, the Court need not consider it further.
6
PNC emphasizes that the 2002 Mortgage that secured this loan is “not at issue in
this litigation.” (ECF No. 23, PageID 985.) It also does not argue that the 2003
HELOC secured this loan, presumably because the loan preceded that HELOC.
7
The Court need not decide whether the 2001 HELOC would have secured a loan
made from NCMSC after it became a successor to NCB.
27
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13. As of September 29, 2021, $41,236.66 is due and owing on the 2003
HELOC.8
...
17. The amount stated herein are based on my review of the records
contained in Mortgage Services Package (‘MSP’). I use records from
MSP to confirm the amounts due and rely on such records in my daily
work activity. In addition, the amounts stated herein are based on my
review of records from the Online Computer Information Exchange
(‘OCIE’), which contains certain archieved records from MSP that are
older than twenty-four months from the date of my review. I also rely
on the OCIE records in my daily work activity.
18. PNC uses MSP to automatically record and track mortgage
payments. This type of record-keeping system is recognized as standard
in the industry. . . .
...
19. . . . [M]y review of PNC’s business records gives me no reason to
believe that the process for tracking and recording payments worked
improperly with respect to the . . . 2001 or 2003 HELOCs.”
(ECF No. 22-5, PageID 680, 684–86). Because SCA has not challenged this
Affidavit,9 it is sufficient to establish the default. C.f. Kattula, 2018 WL 3599036, at
*5 (“[P]laintiff introduced no admissible evidence regarding the current status of the
8
Although this Affidavit does not identify the specific loan that the Di Stefanos
failed to repay, the record makes clear that the loan at issue must be the 2003 loan
from NCB.
9
The only time SCA references this issue is when it states that, “[a]s of at least April
2013 the DiStefano’s were allegedly in default of the 2003 National City HELOC.”
(ECF No. 24, PageID 1026) (emphasis added). This is not an admission, but it is not
a denial either.
28
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loan in question. . . . Plaintiff failed to meet its burden of proof regarding a showing
that the loan is in default.”).
Accordingly, the Court GRANTS PNC’s Motion for Summary Judgment on its
claim for foreclosure of the Property through the 2003 HELOC to secure repayment
of the $41,236.66 (plus interest accrued since September 29, 2021) due on the
defaulted 2003 loan. C.f. Bryden, 2016 WL 555848, at * 2 (“. . . U.S. Bank met its
initial burden of proof demonstrating entitlement to judicial foreclosure by
presenting . . . a copy of (1) the mortgage, evidencing defendants as mortgagors, (2)
the mortgage assignments and modification agreement, evidencing U.S. Bank as the
mortgagee, and (3) the notice of indebtedness sent to defendants and defendants’
answers to plaintiff's first interrogatories, evidencing that defendants defaulted on
the loan.”).
On the other hand, PNC has not offered any evidence that the 2001 loan from
NCB is in default. And, as discussed, the 2001 HELOC did not secure the 2002 loan.
Therefore, no jury could rule for PNC on its claim for foreclosure through the 2001
HELOC. Accordingly, given that the parties have fully briefed this issue, the Court
GRANTS SCA’s Motion for Summary Judgment on this claim. See Fed. R. Civ.
Pro. 56(f)(2) (“After giving notice and a reasonable time to respond, the court may:
. . . grant the motion on grounds not raised by a party . . . .”).
29
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The Court also notes that the priority of SCA and PNC’s interests have no bearing
on these determinations. SCA points out that in Senters the Michigan Supreme Court
acknowledged, in a footnote, that the author of a Michigan property law treatise has
“caution[ed] lenders to order a title report before a foreclosure sale by
advertisement.” (ECF No. 24, PageID 1034); Senters, 443 Mich. at 57 n.16 (citing 1
Cameron, Michigan Real Property Law: Principles and Commentary, § 18.80, p.
648). But this case does not involve a foreclosure sale by advertisement. And even
if it did, Senters does not hold that a party must ask the Court to determine the
priority of interests before such a foreclosure.
Importantly, SCA’s rights will not be vitiated by the foreclosure ordered here. If
SCA has a mortgage interest senior to PNC’s, then SCA will still be entitled to
foreclose on the property to recoup that interest at a later date. Alternatively, if it has
a junior interest, then it can assert its right to redeem any surplus funds during PNC’s
foreclosure proceedings. See In re $55,336.17 Surplus Funds, 319 Mich. App. at 509
(“[T]he foreclosure of a senior mortgage extinguishes the lien of a junior mortgagee
where the junior mortgagee does not exercise its right to redeem. . . . However, after
the sale of property, there is a statutory period during which a junior mortgagee,
amongst others, has a right to redeem the property.”); Fed. Home Loan Mortg. Corp.
v. Werme, 335 Mich. App. 461, 482 (2021) (“Ordinarily, the foreclosure of a junior
mortgage does not impact the senior mortgagee’s rights because the senior mortgage
30
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rides through the foreclosure and the junior mortgagee takes the property subject to
the senior mortgage.”).
C. PNC is entitled to reimbursement for the taxes it paid on the Property since
September 2014, but not for any insurance it acquired for the Property.
“The theory underlying quantum meruit recovery is that the law will imply a
contract in order to prevent unjust enrichment when one party inequitably receives
and retains a benefit from another.” Morris Pumps v. Centerline Piping, Inc., 273
Mich. App. 187, 194 (2006). Under Michigan law, a plaintiff may “sustain a claim
of quantum meruit or unjust enrichment” by establishing “(1) the receipt of a benefit
by the defendant from the plaintiff and (2) an inequity resulting to the plaintiff
because of the retention of the benefit by the defendant.” Id. at 195.
“‘However, a contract will be implied only if there is no express contract covering
the same subject matter.’” Id. at 194 (quoting Belle Isle Grill Corp. v. Detroit, 256
Mich. App. 463, 478 (2003)). In other words, “‘[g]enerally, an implied contract may
not be found if there is an express contract between the same parties on the same
subject matter.’” Id. (quoting 42 CJS, Implied and Constructive Contracts, § 34, p.
33) (emphasis removed).
Arguments
PNC asserts that there is no “dispute that since September 12, 2014, SCA has
owned the Property, and therefore, as a matter of Michigan law, has been the party
legally responsible for payment of property taxes assessed thereon.” (ECF No. 22,
31
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PageID 648) (citing Mich. Comp. Laws Ann. § 211.3). It also observes that “under
the terms of the 2001 HELOC and 2003 HELOC, PNC was authorized to advance
monies for property taxes and hazard insurance to protect PNC’s interest in the
Property.” (ECF No. 22, PageID 648) (citing ECF Nos. 22-2, 22-7).
PNC maintains that “there is no dispute that since the Di Stefanos defaulted on
their loan repayment obligations in 2013, PNC has paid real estate taxes assessed on
the Property, in the amount of $27,229.2[8], and further paid approximately
$28,746.44 for hazard insurance to protect the Property from loss.” (ECF No. 22,
PageID 648). And it argues that “SCA has benefitted by these payments by PNC, in
that (i) these payments have protected SCA’s respective interests in the Property;
and (ii) SCA was the party legally responsible for making such payments from the
time it owned the Property.” (ECF No. 22, PageID 648.) “It would be inequitable,”
PNC concludes, “to permit SCA to retain these benefits without paying PNC.” (ECF
No. 22, PageID 648)
In response, SCA “acknowledges and agrees that Plaintiff paid property taxes on
the subject property.” (ECF No. 24, PageID 1039.) It also states that it “never
requested nor was aware that property taxes were being paid by” PNC, but “to the
extent P[NC] paid and can prove payment of those property taxes, [SCA] has always
agreed . . . it would reimburse PNC for those taxes.” (ECF No. 24, PageID 1039);
32
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see also (ECF No. 25, PageID 1442) (stating that “SCA has not sought to ‘retain’
any benefit from PNC” and “asked PNC to stop making tax payments”).
SCA then argues that PNC’s “claim for unjust enrichment as to casualty
insurance must be denied.” (ECF No. 24, PageID 1039.) It asserts that it “maintained
its own casualty insurance on the property at all times” and “never requested, or was
aware, that PNC was maintaining casualty insurance on the property.” (ECF No. 24,
PageID 1039.). Further, SCA contends that, because “the property insurance
maintained by PNC named only itself as the beneficiary,” SCA “never in any way
benefited from . . . such insurance.” (ECF No. 24, PageID 1040.)
Additionally, in its Reply to its own Motion for Summary Judgment, SCA
emphasizes that “[t]he law will not imply a contract where a party (PNC) fails to
mitigate its damages and has unclean hands.” (ECF No. 25, PageID 1441–42) (citing
Dumas v. Auto Club Ins. Ass’n, 437 Mich. 521 (1991), Martin v. East Lansing School
District, 193 Mich. App. 166 (1992), and Pamar Enterprises, Inc. v. Huntington
Banks, 228 Mich. App. 727 (1998)).
PNC replies that “SCA offers no evidence, whatsoever, that it purchased its own
insurance for the property” and thus “the Court should not consider this argument.”
(ECF No. 26, PageID 1455) (citing Anderson, 477 U.S. at 249 and Fed. R. Civ. Pro.
56(c)(1)). Further, it argues that, “had a claim been made” on the casualty insurance,
“and PNC been paid the proceeds, under the terms of both the 2001 and 2003
33
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HELOCs, these monies would have been used to either: (1) pay down (or pay off)
the indebtedness secured by PNC’s lien interests in the Property; or (2) repair
damage to the Property,” and “SCA would have benefited in either event.” (ECF No.
26, PageID 1456) (citing Dargis v. Boss, No. 273473, 2008 WL 4228350, at *3
(Mich. Ct. App. Sept. 16, 2008) and Coveyou Meadows Property Owners
Association v. Coveyou, No. 204778, 1999 WL 33453955, at *7 (Mich. Ct. App.
Feb. 23, 1999)).
Analysis
The Court DENIES PNC’s unjust enrichment theory because the undisputed
facts demonstrate that the 2001 and 2003 HELOCs are express contracts that bind
these parties and cover the transactions at issue within this claim. See Morris Pumps,
273 Mich. App. at 194.
However, the Court will consider PNC’s claims here on the more appropriate
grounds: breach of contract. See Fed. R. Civ. Pro. 56(f)(2). The parties’ briefs
already address the factual issues relevant to these grounds.
“Under Michigan law, promissory notes, mortgages, and guaranties are to be
construed as ordinary contracts. When contract terms are unambiguous, the contract
is to be enforced as written and the construction is a question of law.” 31800 Wick
Rd. Holdings, LLC, 848 F. Supp. 2d at 763 (internal citations omitted).
34
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“A party asserting a breach of contract must establish by a preponderance of the
evidence that (1) there was a contract (2) which the other party breached (3) thereby
resulting in damages to the party claiming breach.” Miller-Davis Co. v. Ahrens
Const., Inc., 495 Mich. 161, 178 (2014). “The causation element requires that the
party show ‘a causal link between the asserted breach of contract and the claimed
damages.’” Yaghnam v. Doe, No. 353547, 2021 WL 3009756, at *2 (Mich. Ct. App.
July 15, 2021) (quoting Gorman v. American Honda Motor Co., 302 Mich. App.
113, 118–19 (2013)).
Here, the 2001 and 2003 HELOCs provide, in relevant part:
8. CLAIMS AGAINST TITLE. Mortgagor will pay all taxes,
assessments, liens, encumbrances, lease payments, ground rents,
utilities, and other charges relating to the Property when due. Lender
may require Mortgagor to provide to Lender copies of all notices that
such amounts are due and the receipts evidencing Mortgagor’s
payment. Mortgagor will defend title to the Property against any claims
that would impair the lien of this Security Instrument. Mortgagor agrees
to assessing to Lender, as requested by Lender, any rights, claims or
defenses Mortgagor may have against parties who supply labor or
materials to maintain or improve the Property.
...
11. AUTHORITY TO PERFORM. If Mortgagor fails to perform any
duty or any of the covenants contained in this Security Instrument,
Lender may, without notice, perform or cause them to be performed.
Mortgagor appoints Lender as attorney in fact to sign Mortgagor’s
name or pay any amount necessary for performance. Lender’s right to
perform for Mortgagor shall not create an obligation to perform, and
Lender’s failure to perform will not preclude Lender from exercising
any of Lender’s other rights under the law or this Security Instrument.
If any construction on the Property is discontinued or not carried on in
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a reasonable manner, Lender may take all steps necessary to protect
Lender’s security interest in the Property, including completion of the
construction.
...
16. EXPENSES; ADVANCES ON COVENANTS; ATTORNEYS’
FEES; COLLECTION COSTS. Except when prohibited by law,
Mortgagor agrees to pay all of Lender’s expenses if Mortgagor
breaches any covenant in this Security Instrument. Mortgagor will also
pay on demand any amount incurred by Lender for insuring, inspecting,
preserving or otherwise protecting the Property and Lender’s security
interest. These expenses will bear interest from the date of the payment
until paid in full at the highest interest rate in effect as provided in the
terms of the Secured Debt. Mortgagor agrees to pay all costs and
expenses incurred by Lender in collecting, enforcing or protecting
Lender’s rights and remedies under this Security Instrument. This
amount may include, but is not limited to, attorneys’ fees, court costs,
and other legal expense. This Security Instrument shall remain in effect
until released.
...
19. INSURANCE. Mortgagor shall keep Property insured against loss
by fire, flood, theft and other hazards and risks reasonably associated
with the Property due to its type and location. This insurance shall be
maintained in the amounts and for the periods that Lender requires. The
insurance carrier providing the insurance shall be chosen by Mortgagor
subject to Lender’s approval, which shall not be unreasonably withheld.
If Mortgagor fails to maintain the coverage described above, Lender
may, at Lender’s option, obtain coverage to protect Lender’s rights in
the Property according to the terms of this Security Instrument.
...
Unless otherwise agreed in writing, all insurance proceeds shall be
applied to the restoration or repair of the Property or the Secured Debt,
whether or not then due, at Lender’s option. Any application of
proceeds to principal shall not extend or postpone the due date of the
scheduled payment nor change the amount of any payment. Any excess
will be paid to the Mortgagor. If the property is acquired by Lender,
Mortgagor’s right to any insurance policies and proceeds resulting from
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damage to the Property before acquisition shall pass to Lender to the
extent of the Secured Debt immediately before the acquisition.
...
22. JOINT AND INDIVIDUAL LIABILITY; CO-SIGNERS;
SUCCESSORS AND ASSIGNS BOUND. . . . The duties and benefits
of this Security Instrument shall bind and benefit the successors and
assigns of Mortgagor and Lender.
(ECF No. 22-2, PageID 660–63; ECF No. 22-7, PageID 734–36.)
First, both parties have affirmed that these contracts exist by producing them. See
(ECF Nos. 21-3, 21-6, 22-2, 22-7).
Second, PNC has proven that SCA breached these contracts by failing to pay
taxes on the Property. PNC has done this by demonstrating: that paragraphs 8 and
22 of the HELOCs require the Di Stefano’s assigns to pay the Property’s taxes, (ECF
No. 22-2, PageID 660–63); that SCA became the Di Stefano’s assign on September
12, 2014, when they deeded it the Property, (ECF No. 22-11); and that PNC “has
paid real estate taxes assessed on the Property” “[s]ince December 2013,” (ECF No.
22-5, PageID 684) (emphasis added). (Because real estate taxes are paid only once,
the Court assumes that any such taxes paid by PNC were not paid by SCA.) SCA
has not contested these points.
On the other hand, PNC has not proven that SCA breached the contracts’ policies
on insuring the Property. PNC has demonstrated that paragraphs 19 and 22 of the
HELOCs require the Di Stefano’s assigns to pay for insurance on the Property,
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among other things, (ECF No. 22-2, PageID 662–63), and that, as noted above, SCA
became the Di Stefano’s assign on September 12, 2014, (ECF No. 22-11). But it has
not demonstrated that SCA has ever failed to pay for insurance on the Property.
While PNC has offered undisputed evidence that “it has paid hazard insurance
premiums for the Property” “[s]ince August 2013” (ECF No. 22-5, PageID 684),
insurance, unlike taxes, can be paid multiple times—that is, different parties can pay
for different insurance plans on a property. And after months of discovery, PNC has
not provided any evidence that SCA has not paid for concurrent insurance on the
Property since September 2014.10 Indeed, PNC does not even allege that SCA failed
to pay for insurance on the Property within its unjust enrichment argument, even
though that fact would have strengthened its original claim.11 See (ECF No. 22,
PageID 647–48.)
PNC’s briefing does not suggest that SCA violated the HELOCs’ insurance
requirements in any other way either.12 Therefore, the Court GRANTS SCA
10
SCA also asserted that it has insured the Property. (ECF No. 24, PageID 1039.)
But because SCA offers no evidence to support this assertion, the Court has not
considered it. See Fed. R. Civ. Pro. 56(e).
11
PNC does state that “SCA has failed to pay . . . insurance premiums for the
Property” within its Statement of Facts, but it provides no citation for that statement.
12
To the extent that PNC could have argued that SCA breached other, more
ambiguous insurance-related provisions of the HELOCs, these arguments have been
waived. The Court has exercised its discretion to assess whether PNC’s briefing has
clearly established a breach of contract violation, but it need not and cannot make
new arguments for PNC.
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summary judgment on PNC’S claim for reimbursement of the money it has spent to
insure the Property. Fed. R. Civ. Pro. 56(f)(2).
Third, PNC has proven that it was damaged by SCA’s failure to pay taxes on the
Property. PNC has provided undisputed evidence that, “[s]ince December 2013, [it]
has paid real estate taxes assessed on the Property in the amount of $27,229.28.”
(ECF No. 22-5, PageID 684) (emphasis added), which payment was authorized by
paragraph 11 of the HELOCs, (ECF No. 22-2, PageID 661), and made “[t]o protect
[PNC’s] security interests in the Property” in light of SCA’s breach, (ECF No. 225, PageID 684).
Accordingly, the Court GRANTS PNC summary judgment on its claim for SCA
to reimburse it for the Property’s real estate taxes. Fed. R. Civ. Pro. 56(f)(2). But
PNC is only entitled for reimbursement of the taxes it has paid since September 12,
2014, and the cost of these taxes is not conclusively established by the briefing
before the Court. Therefore, the Court ORDERS the parties to file a joint agreement
on the amount of money SCA owes for these taxes within 30 days of this Order. If
the parties cannot agree on the amount, they may instead file separate briefs on the
sole issue of how much money PNC has spent on taxes for the Property since
September 12, 2014.
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CONCLUSION
The Court DENIES SCA summary judgment on the grounds of res judicata. The
Court GRANTS PNC summary judgment on its claim for foreclosure, but only
through the 2003 HELOC, as described above. The Court GRANTS SCA summary
judgment on PNC’s claims for foreclosure on all other grounds. The Court
GRANTS PNC summary judgment on its claim for SCA to reimburse it for the taxes
it has paid on the Property since September 12, 2014. And finally, the Court
GRANTS SCA summary judgment on PNC’s claim for reimbursement of the
money it has spent to insure the Property.
IT IS SO ORDERED.
s/Paul D. Borman
Paul D. Borman
United States District Judge
Dated: May 20, 2022
40
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