Preview:

STATE OF MICHIGAN COURT OF APPEALS

EILEEN V. GRAVES, Plaintiff/CounterdefendantAppellee, v AMERICAN ACCEPTANCE MORTGAGE CORPORATION, Defendant-Appellant, and BOULDER ESCROW, INC., Defendant/CounterplaintiffAppellant, and STEVE A. DIAZ, Defendant.

FOR PUBLICATION May 15, 2001 9:00 a.m.

No. 215141 Oakland Circuit Court LC No. 96-511648-CZ

Updated Copy July 20, 2001

Before: Sawyer, P.J., and Jansen and Gage, JJ. GAGE, J. This case involves a priority dispute between a lienholder and a mortgagee. Defendants appeal as of right from an order granting plaintiff summary disposition pursuant to MCR 2.116(C)(10). We reverse and remand. I In 1987, plaintiff Eileen V. Graves and her husband, defendant Steve A. Diaz, executed a land contract for the purchase of 72 West End in Waterford. Plaintiff and Diaz divorced in 1994. The June 9, 1994, judgment of divorce ordered the following with respect to 72 West End:

-1-


[T]he real property located at 72 West End, Waterford, Michigan, shall be awarded to the Plaintiff [Diaz] subject to a lien in favor of the Defendant [Graves] in the amount of seven (7 %) percent interest per annum payable within one year from March 30, 1994, for the following debts which Plaintiff owes to the Defendant: 1) Any child support arrearages; 2) Rental arrearages in the amount of Nine Hundred ($900.00) Dollars relative to the property at 1048 La Salle, Waterford, Michigan; 3) Any arrearages owed on the land contract relative to 1048 LaSalle, Waterford, Michigan, as of March 31, 1994. These arrearages amount to Seven Thousand Five Hundred Four ($7,504.00) Dollars. That the Plaintiff shall assume any outstanding obligation thereon and hold the Defendant harmless therefrom. At 8:54 a.m. on September 7, 1994, plaintiff recorded her lien. Later on September 7, 1994, Diaz entered a mortgage agreement with defendant-appellant American Acceptance Mortgage Corporation. With the mortgage proceeds, Diaz, who had defaulted on his payments under the 1987 land contract, paid off the amount due under the contract, thus obtaining legal title to 72 West End. A warranty deed transferred the property to Diaz "subject to acts or admissions of grantee since 8-25-87 being the date of a certain land contract in fulfillment of which this deed is given."1 American Acceptance recorded Diaz' mortgage on October 5, 1994, and later assigned the mortgage to defendant/counterplaintiffappellant Boulder Escrow, Inc., which recorded the assignment on April 13, 1995. On January 12, 1996, plaintiff filed a complaint against Diaz, American Acceptance, and Boulder to foreclose on her judgment lien, alleging that Diaz owed her more than $15,000.2 On July 17, 1996, Boulder filed a cross-claim against Diaz for defaulting on his mortgage obligation,3 and a counterclaim against plaintiff asserting the priority of its mortgage interest over plaintiff 's judgment lien. Plaintiff moved for summary disposition. American Acceptance and Boulder (hereinafter referred to collectively as "defendants") also moved for summary disposition. The trial court found that as a matter of law plaintiff 's lien had priority because plaintiff recorded her lien before the mortgage was recorded, thereby giving defendants constructive

1

The deed was executed on September 13, 1994, and recorded on October 6, 1994.

2

Diaz apparently had failed to attend a November 22, 1995, hearing regarding a motion by plaintiff to enforce her judgment lien. The trial court therefore ordered that plaintiff "shall be permitted to enforce her lien against Defendant Steve Diaz' real property by foreclosing upon 72 West End."

3

On April 2, 1997, a default judgment of foreclosure was entered against Diaz, who is not a party to this appeal.

-2-


notice of the lien.4 Accordingly, the trial court granted plaintiff summary disposition pursuant to MCR 2.116(C)(10) and denied defendants' motion. II Defendants contend that the trial court erred in granting plaintiff summary disposition because their purchase money mortgage has priority over plaintiff 's prior divorce judgment lien, irrespective of who filed first. We review de novo a trial court's summary disposition ruling. Spiek v Dep't of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998). In reviewing a motion granted under MCR 2.116(C)(10), we consider the entire lower court record in the light most favorable to the nonmoving party to determine whether any genuine issue of material fact exists, or whether the moving party is entitled to judgment as a matter of law. Smith v Globe Life Ins Co, 460 Mich 446, 454-455; 597 NW2d 28 (1999). In this case, the material facts appear uncontested. Accordingly, we must determine as a matter of law whether plaintiff 's lien on Diaz' interest in the land contract has priority over defendants' mortgage interest. III A holder of an interest in real estate who first records his interest generally has priority over subsequent purchasers. See MCL 565.29, which provides in relevant part as follows: Every conveyance[5] of real estate within the state hereafter made, which shall not be recorded as provided in this chapter, shall be void as against any subsequent purchaser in good faith and for a valuable consideration, of the same real estate or any portion thereof, whose conveyance shall be first duly recorded. See also MCL 565.25(4) (providing that "[a]ll subsequent owners or encumbrances shall take subject to the perfected liens, rights, or interests"). It is well established, however, that a promptly recorded purchase money mortgage takes priority over earlier creditors' interests,

Boulder foreclosed on Diaz' mortgage and sold 72 West End by the time the trial court, Alice L. Gilbert, Jr., granted plaintiff summary disposition. In her opinion and order, Judge Gilbert also found that Boulder's sale of the West End property violated a provision of the April 2, 1997, default judgment, entered by predecessor Judge Gene Schnelz, which "ordered and found that the sale of the West End Property shall be held immediately subsequent to the Court's determination as to the priority of the parties." MCL 565.35, with certain exceptions irrelevant in this case, defines "conveyance" as "embrac[ing] every instrument in writing, by which any estate or interest in real estate is created, aliened, mortgaged or assigned; or by which the title to any real estate may be affected in law or equity . . . ."
5

4

-3-


notwithstanding that the earlier interests were duly recorded. Fecteau v Fries, 253 Mich 51, 5354; 234 NW 113 (1931).6 A purchase money mortgage, whether or not recorded has priority over any mortgage, lien,[7] or other claim that attaches to the real estate but is created by or arises against the purchaser-mortgagor prior to the purchaser-mortgagor's acquisition of title to the real estate. [Restatement Property, Mortgages, 3d,

Download EILEEN V GRAVES V AMERICAN ACCEPTANCE MORTGAGE.pdf

Michigan Law