morning panel my allergies are bothering news morning so pardon me for the puffy face in this swollen lips and that sure what is done here but it got me or me this case boils down to a real simple proposition and it seems between us the lawyers and the courts we've made it much more difficult if the doctrine of merger applies in michigan then we win if it doesn't we lose and the dr a merger says when the lesser a state and greater estate merge in a single title holder the lesser estate is destroyed so in this case what we have is huntington bank holds two mortgages a first in a second a lesser integrator state they assign the second mortgage to fourteen corp and fourteen corp forecloses on the second for the purpose admittedly of manipulating the bid process to discourage other bidders because they hold the first back in their pocket so they can bid unimpeded by the first yet other bidders would have to take subject to it so we file a motion for summary disposition years ago in the district court ruled against me and we came up here and this court said it basically boils down to whether fourteen corporation in huntington were alter egos and if so did the two of them do something that individually they could not have done was it wrong and did it result in injury this court concluded as a matter of law in our last appeal that huntington and fourteen corporation were mere instrument another they included that they're one of the same meaning if either one in ten fourteen or and or a combination the two hold the first and second mortgage both those mortgages reside in the same person so then this court send it back down for trial to determine whether huntington and or fourteen by foreclosing on the second committed a fraud or wrong you started out by saying maybe there's a way to simplify this case and i believe me i'm all for you there that resonated with me entirely but i wonder if there's a slightly different way to simplify the case let's assume they all are alter egos and so just call it huntington i mean fourteen is doing some stuff we still have a debt of about five point two million at the beginning of the saga we have a sale and i realize you think that doesn't capture what it's true value of one point eight that leaves roughly three point five million in in an effort to simplify the case and figure out whether we really need to get into this alter ego stuff can you go through why if they are alter egos honey and he's got more than it deserves because i mean it's  point two at the beginning i'll grant you that instead of it being worth the initial foreclosure one point let's say it's worth two point three ok what if they eventually sold it i know you dispute that i got that but unless the district court was required to credit your experts on the value it seems to me we don't need to get into the alter ego so if if i were trying to simplify this case i would say let's go to the question of whether we've got to follow the district court's view as to what the quote true value was because if it was a right if it was in the neighborhood of two point three don't you agree we're going to get into alter ego and all that other stuff in my so far being fair about it you may be fair but i don't agree well fair in terms of framing but yes you're fair in terms of framing so my point is maybe instead of question and if true value or fair market value really had anything to do with merger title i think that would be something the district court would have had to address i think it's an element that they added the doesn't exist on trying to take out of the merge really you were the one that wanted to simplify i mean to simplify is not to do with merger it's what is the true value of the property that was originally sold for one point eight they resold for two point three your experts say it's worth over five this to court didn't buy your experts tell us why that was reversible there well after all if you're wrong about that the case goes away and i write i don't believe so but it's reversible error because the district court was told by this court to consider the fair market value of the real property and fur market value has a very specific definition we talked about the definition when we were here last time it's announce it in the federal code for market value is this in the district court said i'm not considering fair market value i'm going to consider fair share failure which is what the district court said over and over in its opinion it consider was not fair market value for sure several years and those are different we agreed to share sell properties tend to bring less than they do in the fair market but i thought the you're right the district court concluded that huntington did commit a wrong and they manipulated foreclosure process and they allowed a bid a negotiated bid at the sheriff's sale to occur at a much lower value than what was realistic the judge done said what's a fair share sell value and he said well it clearly wasn't what the share sale for up it was something different and he came to a different conclusion roughly half a million dollars more but again he was determining what is a fair share of value not fair market value is this court directed him and this court was very clear when we're talking about it sure cell value is different than fair market value this court sent it back down for determination and fair market value in the tr do i can't tell from the language of the district court when i look at the methodology and what he's thinking about with respect to experts i think he looks like he's trying to get to fair market value that's what i that's what i read him to be doing i use i realize he's using different words but i thought he was skinny to the same point and i can't predict what this judge was trying to get it in his mind i can only rely on what he wrote down on paper when he said i needed according to six circuit review fair market value but that's not what i'm doing i'm reviewing sure sell value and i think those are very different things we've i mean i'm not sure about the panel but i've had a lot of foreclosure assessment hundreds of hundreds maybe a thousand and it brings it sure feels different than fair market value if i'm sitting in my home negotiating with you and you want to come and buy at my home is worth more than if the bank is taken away there's a big sign on the front door in his padlock and says this homes in foreclosure we don't know what the conditions merger and if there's a merger we win and if there's no merger we lose so how does that issue relate to this issue because i'm i understand each one of them separately but i'm having trouble putting them together i don't think a court needs to ever get to a monitor issue fair market value share so value or any of the like it's very simple head hunted down and i think we all agree on that said huntington how the first and second in their own name and done what they did the first would have been gone and they could not have executed on it everyone seems to agree with it the debate is when they use fourteen corporation to manipulate the process do they get to do something they otherwise would not have been able to do alone ok so just to be do the logic tree these are two strings to the boat your first one is if we buy that argument we don't ever talk about numbers because they lose no matter what the numbers are if we don't agree with you on that then we get to this issue that the logical flow here if you don't agree with me on the merger issue in your in your doing something contrary to what i believe which is adding yet another element to merger you're adding a valuation method then yes you've got to get to our other arguments but again if there's no merger you lose because there's no merger then you still want to play down the value ok if there's no merger we're done i agree with that if if the first and second don't merge because there is a merger we still have to get to what things were i disagree with that i don't think that's an element once the once the two titles if you have a let's say you own a home somebody else owns a home and you have a mortgage on that home and you foreclose on the mortgage and take the home back your mortgage doesn't exist anymore no matter what the value was whether it was a dollar fifty thousand five hundred thousand the market is gone because the two estates merged into one you now are fee simple hold or no mortgage you do not then get to go execute against that mortgage because you hold the key if you hold a first and second mortgage the same thing occurs if you foreclose on the home whether it be on the if you foreclose on the second the first is destroyed because title to the first and second merge into a single title holder when huntington bank or fourteen forecloses on the second they now become a fee holder subject to the first yet they hold the first so the first is necessarily by operation of law destroyed and now they hold the fee no greater nor lesser with or without the mortgage it's just simply a single state and once that mortgage is gone the first mortgage there are no more hurdles to get over you don't value evaluate the property or its value you don't say whether or not the first secured to the green monster tax credits or anything else or restaurant equipment you simply say the first is gone you know or have the effect unfortunately the first is gone you mean the people don't owe any money under it absolute that's the critical point from your side it's not a it's not a title sort of question is it in effect forgive the debt for as the district court correctly said this case and i'm quoting from th one twenty five thirty forty four eleven this case turns on whether one in ten and fourteen corp are the legal alter egos of each other if so then at the time of the foreclosure huntington was effectively the holder of both the two thousand and four and two thousand and five mortgages and under michigan law the remaining debt owed by baker to hunting was extinguished upon the cirrus l the district court was right when it said that that's exactly the law there's not another hurdle to say once that mortgage is gone what was it worth it's gone it doesn't come back it doesn't ever get revived it's simply gone just like if a lender forecloses on a home the mortgage is gone once the law undertakes title that mortgage never can be revived it's gone in this case the first mortgage which they executed upon after taking the property back was gone at the time they executed under it and that was forgiven by operational law morning your honour's jeff raffles and i'm behalf of one hundred national bank and fourteen corporation judge sudden you have accurately identified exactly the right way to simplify this case this case comes down to whether the value of the property for closed upon was greater or less than the amount of the debt and the courts fact finding judge bell a thirty year veteran of the federal bench before he stepped down in december conducted a four day trial on that and concluded the value that would have been obtained fairly conducted sheriff's sale was the two point three five five million you identified earlier that being the case applying all the other collateral that huntington resorted to following the sheriff's sale there is still over one point one million of debt the other mortgage disappears and that's not in the math changes so tell us how that works i'll tell you why that's wrong your honor and in this court has actually already explained that in the previous opinion the in michigan there is a statute and c l six hundred point three two eight zero which says that if a creditor forecloses at a sheriff's sale and then pursues a deficiency against the borrower the borrow shall have credit against that deficiency a set off or defense of the true value of the property that's the source of the true value phrase you were using earlier your honor that statute did not apply in the rents and case because there were two separate notes securing different debts and they were cross collateralized so the rents in court said i'm going to use the equitable doctrine of merger to make that statute applicable and in that state in that case it was unquestioned that the the first debt was five hundred thousand dollars i'm sorry the first mortgage was secured one point one million the second mortgage secured five hundred thousand and the property taken was undisputedly worth three million dollars so you had a creditor going in bidding five hundred thousand dollars all the debt on the junior mortgage and then pursuing the one point one million dollars deficiency the rents in court specifically got it wrong what i would have intuitively said the right conclusion is is all of this merger doctrine is designed to deal with the flaws in the sheriff's sale but if you find out that if you credit the sale not by the sheriff s but by its true value you fix all of those problems and therefore this merger doctrine disappears my getting it wrong wrong in my getting it you are getting it correct your honor it's a very complicated application in this in this setting because merger doctrine deals with interests in real estate you have a first mortgage of a second mortgage for closing the second mortgage you get a fee which is deemed to sub e the interest in real estate created by the first mortgage debt is a function of contract separate from the mortgages there's really no explanation in any of the cases plaintiffs are really to be honest even in the rents in case how extinguish of the interest in real estate created by the first mortgage results in extinguishment of debt now we don't need to resolve it here because we also have the tories case a case this court has already relied upon and the tourist case actually does a decent job of explaining it in a circumstance more applicable to the one here if we want to talk technical merger doctrine and i want to get off that as quickly as we can the foreclosure upon the second mortgage it does extinguish the interest in real estate created by the first mortgage but because the second mortgage secures all debt because this cross collateral is ation also secured by the first mortgage the debt still exists as a result of the contractual documents creating the debt and the the mortgage is extinguished if the property is worth more than that your honor and that's that's really the crux of the point and that's what this court recognizing its earlier opinion on page eight i'm sorry page twenty one of this court's earlier opinion the paragraph begins here on like torres questions of fact remain as to whether the fair market value of the property at the time of the foreclosure sale was less than the total remaining debt that is in rents and like we said we had credit unquestionably going for windfall a double recovery in the court said under those circumstances in the renting court specifically uses those words under these circumstances equity will not infer that the creditor intended to keep the estate separate it would have been in equity or view of rents and the merger there works in favor of the debtor in favor of the debtor and here they want it to work doesn't arise in this case because huntington bank is still underwater to the tune of one point one million dollars this comes back to my point i thought the thing driving this was the falsity of the value of the shares isn't that what's driving the merger doctrines application and that's what allows for effectively right now i have to disagree with i believe what's driving the applicability of merger is the fact that the creditor was seeking a double recovery and so equity wouldn't intervene to prevent intent not to have those a states merge wins out because it is against the creditors interest the creditor isn't doing something greedy like pursuing a double recovery or windfall i would contend here those advocating automatic application the doctrine merger even in cases where the properties were substantially less than that that they are the one seeking the windfall they're seeking extinguishment of that that isn't repaid that's what's happened here and the share sale value was five hundred thousand and what was the total amount of the d bt one point six million ok so how would rents and of come out if share sales five hundred thousand state court looks at the true value of that property and decides it's one of them one point six million they said no merger now they would say merger if the well if the true value was worth more than the debt then the debt is satisfied upon taking the property ok well all right with them isn't that  coming from that what with this whole state law doctrine is trying to capture the difference between unfair use of share sale value versus true value direct and correct i agree on that amy i think we are on the same page and then so then we have to go to so what was the true value of the property right and in this case the judge made very detailed findings of fact as to what he thought the true value of the property was he thought it was the two point three five million he  while he never expressed lee said that he felt huntington hitmen or fourteen corp had manipulated the foreclosure process he had questions about it and concerns about it he could not conclude it was a fair share of sale so he looked at the totality of the evidence judged the weight of the documents presented and the credibility of the witnesses and determined that the subsequent sale to g r developments for two point three five five million represented the value that would have resulted at a fairly conducted sheriff's sale again he cited considerable michigan law and we can go over to this court in fact has cited the same proposition that sheriff sales don't produce a fair share sales not a fair market value transaction it's not there just too many artificial pressures as mr beale indicated they produce something less than fair market value so if we're starting from the michigan statute or source of the phrase true value for doing anything to judge the outcome of the sheriff's sale it ought to be based on a value the sale value that is realistically achievable at a sheriff's sale and i believe that is why well that's one of the reasons judge bell used this fair share of sale rubric the other is the definition of wrong for purposes of piercing the veil analysis which came from this court and elsewhere is did huntington or fourteen corp taney price advantage through the use of the corporate form in the assignment of the mortgage and the only way to answer that question is well they did if they got it for less than would normally have obtained at a sheriff's sale so for purposes of this analysis i believe true value is something less than fair market value but i don't want to go overboard on that analysis this court did use the phrase fair market value a number of times in its earlier opinion however that there was really no briefing on the point in that much discussion i don't consider fair market value to have been law of the case but even if you use fair market value the number still don't work the way plaintiffs want them to if the the fair share of sale value the court determined was two point three five five million the court also made very detailed findings on the other evidence all of which went to fair market value that's what both experts of pintu that's what the suppose real estate investors were pining to the judge made those findings because he wanted to use fair market value as a check against his conclusion of fair share of sale value was about seventy five percent and that gave him comfort but he made very detailed findings over which expert presented more credible evidence and that was the evidence presented by huntington's expert jeff gans in his conclusion was the fair market value the property was three million eighty thousand dollars if you use that figure instead of the judge's fair share of sale value there's still over four hundred twenty five thousand dollars of debt on repaid so we still do not have a situation where huntington bank was seeking a double recovery or windfall we have a debtor who seeking to have the four hundred twenty five thousand dollars wiped out through an in appropriate application of the merger doctor if we if we have to make a determination of which of those two is right does that affect your interest that is do you lose seven hundred thousand if we if we say he should have used fair market value or is it just as long as you're underwater you can have taken these remedies that you took with the clowder on that there is no on the other collateral right i don't believe i feel depends on the differential i was in your position one that would not be fair but but judge bugs raises a very interesting point which is the allegation that judge bell didn't file this court's mandate that just false and i want to back to page twenty one of this court's opinion that's the paragraph that begins here on like torres questions of fact remain as to whether the fair market value the property the time of the foreclosure sale was less than the total remaining debt that paragraph concludes after discussing some of the evidence that was of record the last time we were here does a question of fact exist as to whether fork whether huntington use fourteen to commit a wrong for purposes of piercing the corporate veil the judge made no finding the just specifically said because i conclude fair the value the true value of the property was were substantially less than the debt i don't need to get to the second and third elements of the appears in the mail analysis because exactly as you suggested that is at the end of the day huntington is going to be underwater and so any talk about whether a wrong was committed a price advantage was obtained is still pretty hypothetical the but the debt is still not repaid there is no other claim that the resort to the other collateral was justified and there's no more collateral to resort to and the debt there's really only one debt even though there are two mortgages correct because they were cross collateralized which is why the presumption doesn't make sense they advocate  presumption where someone bidding on the second mortgage takes into account the debt secured by the first mortgage that would make sense if they were separate debts because foreclosing on the second mortgage still requires satisfaction for his mortgage but where the cross collateralized every dollar realizing foreclosure on the second mortgage also satisfies the exact same to secure by the first mortgage had somebody bid five point two five million dollars at the sheriff's sale we wouldn't be here your honor because all of the huntington debt would have been wiped out and i see my time is up i've seconds i don't want to burn the court with five more seconds unless you have any questions title takes out the first to the first is now gone the debt still sticking out here but you don't get to take this first mortgage which has very specific unfortunate visions and at the so if you can hold and you don't get to rely on that you still get your debt you know first mortgage you can still sue the debtor on the debt but you can't  yourself of a share sale and sell it if worth two million dollars and you can't sell restaurant equipment worth more money under the provisions of this contract because that contract was gone when you foreclosed on the second that's all we're saying law the doctor in a merger is very clear when when a lesser and greater estate merge in one titled or the lesser is gone it's destroyed with it comes back to rents on rents and runs an articulated a very old principle run sun s michigan adopts the doctrine of merger runs and didn't create that law that law had been around for centuries decades not centuries century it's been around for a decade that says when the lesser and greater state merge and single titles are the lesser is destroy