Court Opinion

ID: 9705169
Source: CourtListenerOpinion
Date Created: 2023-08-26 00:58:35.121+00
Date Added: 2024-06-11T18:22:08.456781
License: Public Domain

Kavanagh, C. J.
(concurring in part and dissenting in part). I concur in the majority’s general discussion of the law applicable to this case but dissent from the relief granted the defendants. *131There is no compelling reason to grant equitable relief in this case. Although this appears to be the first "loss before foreclosure” case in Michigan involving a dispute between a mortgagor and mortgagee, the rule announced in this case has been adopted in other jurisdictions. Moreover, in Smith v Grange Mutual Fire Ins Co of Michigan, 234 Mich 119, 124; 208 NW 145 (1926), it was stated that the mortgagor’s right to collect insurance inured as soon as the fire occurred and that the mortgagee’s interest was extinguished when the property was sold for the amount due on the mortgage. A mortgage company should be presumed to know the law applicable to its business.
The evidence does not support a finding that the parties entertained a mutual mistake of law. The defendant’s action was unilateral; it elected to foreclose rather than collect the insurance proceeds. The plaintiffs’ failure to cure the default after the fire is understandable because the mortgage provided that the mortgagee was entitled to the insurance proceeds. After foreclosure, the plaintiffs sued for the insurance proceeds. The plaintiffs’ actions are consistent with their claim that they understood the applicable law. That the defendants’ actions may have been based on an erroneous impression of the law should not remove this case from the general rule.
Finally, as stated in Whitestone Savings & Loan Ass’n v Allstate Ins Co, 28 NY2d 332, 337; 321 NYS2d 862; 270 NE2d 694 (1971), "to allow the mortgagee, after effectively cutting off or discouraging lower bidders, to take the property — and then establish that it was worth less than the bid —encourages fraud, creates uncertainty as to the mortgagor’s rights, and most unfairly deprives the sale of whatever leaven comes from other bidders”.
I would order that the plaintiffs be paid all the insurance proceeds.