6th Circuit Court of Appeals Interprets MCL §600.3280

In DAGS II, LLC v Huntington National Bank, where commercial property sold at foreclosure sale for $1.85 million and subsequently sold less than a year later to a third party for $2.35 million, the Sixth Circuit Court of Appeals held that the latter value was the true value of the property at the time of the foreclosure and used this value to determine whether there was any deficiency left on the debt.  Based upon a debt in excess of $5 million, the court held that there was still a deficiency left to be collected, thereby dismissing the debtor’s claims that the bank engaged in wrongful conduct in pursuing collection of the deficiency.

MCL §600.3280 provides two defenses to a deficiency action:  1), that the property was fairly worth the amount of the debt at the time of the sale, and 2), that the amount bid at the foreclosure sale was substantially less than the true value of the property.  In this case, the court held that the property was worth more than the amount of the foreclosure sale price, but still was substantially less than the debt owed.

© Steve Sowell 2022