In 1373 Moulin, LLC v Wolf, a published Michigan Court of Appeals opinion, a mortgagor granted two mortgages on property. The mortgagor defaulted on the first and the mortgagee foreclosed. Before the redemption period expired, the mortgagee recorded an affidavit stating the mortgagor and mortgagee had entered into an agreement which, if fulfilled, would set aside the sale, that the mortgagor had fulfilled the condition, and that the sale was thus set aside. The mortgagor subsequently sold the property. The balance of the first mortgage was paid, but funds were held in escrow for payment of the second and never paid over to the holder of the second mortgage.
The second mortgagee subsequently sold the mortgagee to one of the defendants, who then foreclosed. The purchaser filed suit seeking to quiet title, claiming that the affidavit was ineffective to set aside the first mortgage foreclosure and that foreclosure extinguished the second mortgage. On cross motions for summary disposition, the trial court found that the affidavit was effective to set aside the first foreclosure and thus the second mortgage was not extinguished. The purchaser appealed.
The purchaser argued that, pursuant to Wilmington Savings Fund Society v Clare, discussed here, the affidavit was insufficient to set aside the sale. The court distinguished Clare holding that the affidavit in Clare did not state facts, but instead created a condition, while the affidavit in this case only recited that a condition had been made and fulfilled. The affidavit was upheld and the second mortgage was not extinguished.
When faced with a situation where an affidavit purporting to affect a foreclosure sale has been recorded, the purchaser should proceed cautiously.