Court Opinion

ID: 3153938
Source: CourtListenerOpinion
Date Created: 2015-11-12 08:06:10.389176+00
Date Added: 2024-06-11T11:58:22.430259
License: Public Domain

STATE OF MICHIGAN

                           COURT OF APPEALS

BZA 301 HOLDINGS LLC,                                              UNPUBLISHED
                                                                   November 10, 2015
               Plaintiff-Appellee,

v                                                                  No. 323359
                                                                   Oakland Circuit Court
LOUIS STEVENS,                                                     LC No. 2013-134650-CK

               Defendant-Appellant.

Before: SAWYER, P.J., and K. F. KELLY and FORT HOOD, JJ.

PER CURIAM.

       In this action to enforce a promissory note, defendant Louis Stevens appeals as of right
from the order granting summary disposition and judgment in favor of plaintiff BZA 301
Holdings LLC. We affirm.

        The facts in this matter are not in dispute. Defendant entered into a home equity line of
credit agreement with Quicken Loans in October 2005 and received a loan of $41,250. Quicken
Loans secured the loan with a mortgage on defendant’s home. The promissory note that
defendant executed with Quicken Loans was subsequently assigned to Cadence Financial, LLC.
An earlier mortgage on defendant’s property, held by BAC Home Loans Servicing, was senior in
interest to the Quicken Loans/Cadence Financial mortgage. Defendant defaulted on payments
for that earlier mortgage, it was foreclosed in December 2010, and defendant’s home was sold at
a sheriff’s sale in February 2011.

        Cadence Financial filed the instant lawsuit on June 21, 2013, alleging that defendant had
defaulted on the home equity line of credit and owed $43,475.07 plus interest, costs, and attorney
fees. On July 2, 2013, Cadence Financial changed its name to BZA 301 Holdings, LLC
(hereafter plaintiff). It is undisputed that defendant did not respond to interrogatories and
requests for admissions sent by plaintiff in September 2013, and the requests were deemed
admitted pursuant to MCR 2.312(B)(1).

        On December 10, 2013, plaintiff moved for summary disposition pursuant to MCR
2.116(C)(10). In its motion, plaintiff pointed out that defendant was deemed to have admitted,
among other things, that he entered into the home equity line of credit agreement, that he
defaulted on the payments, and the amount due and owing to plaintiff. Plaintiff asserted that
where defendant had failed to respond to discovery and contest liability or the amount of the

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debt, no genuine issues of material fact existed to warrant trial and plaintiff was entitled to
summary disposition pursuant to MCR 2.116(C)(10).

        In his response, defendant conceded that he had signed the home equity line of credit
agreement, that the concomitant mortgage became a second lien on defendant’s home, that the
more senior mortgage on his home held by BAC Home Loans Servicing had been foreclosed,
and the property was sold at a sheriff’s sale. Defendant asserted that plaintiff’s mortgage on the
property was extinguished, and that plaintiff’s promissory note was “no longer negotiable after
the sheriff’s sale.” Defendant also challenged plaintiff’s interest in the note, stating that plaintiff
had not provided any documentary evidence in support of its assertion that it was the assignee of
the note, and argued that plaintiff was not a holder in due course under Michigan law and was
therefore not entitled to enforce the promissory note.

        The trial court initially denied plaintiff’s motion for summary disposition on the ground
that genuine factual issues existed regarding whether plaintiff was in fact the assignee of the
promissory note from Quicken Loans because plaintiff had failed to submit any documentary
evidence of the assignment and/or other evidence establishing plaintiff as a “holder in due
course” who may enforce the promissory note. Plaintiff moved for reconsideration on several
grounds, relevantly arguing that where it held possession of the promissory note and the note had
been negotiated to Cadence Financial, plaintiff was a “holder” of the note entitled to enforce it.
The trial court granted plaintiff’s motion for reconsideration and granted summary disposition to
plaintiff pursuant to MCR 2.116(C)(10), noting that plaintiff had presented evidence that the
promissory note had been endorsed from various entities to plaintiff and that plaintiff was a
“holder in due course” and could enforce the note pursuant to MCL 440.3305(3). In its opinion,
the court also cited Bowles v Oakman, 246 Mich. 674, 678-679; 225 N.W. 613 (1929), as support
for the finding that a maker of a promissory note could not attack the validity of a transfer
between an indorsor and indorsee. The trial court denied defendant’s motion for reconsideration
and entered summary disposition in favor of plaintiff.

       Defendant contends that the trial court erred in ruling for plaintiff because plaintiff was
not entitled to enforce the promissory note on several grounds, primarily because it was not a
holder in due course under MCL 440.4401 et seq. This Court reviews de novo a lower court’s
decision concerning a motion for summary disposition pursuant to MCR 2.116(C)(10). Smith v
Globe Life Ins Co, 460 Mich. 446, 453; 597 NW2d 28 (1999).

               “In reviewing a motion for summary disposition brought under MCR
       2.116(C)(10), a trial court considers affidavits, pleadings, depositions, admissions,
       and documentary evidence filed in the action or submitted by the parties, MCR
       2.116(G)(5), in the light most favorable to the party opposing the motion. A trial
       court may grant a motion for summary disposition under MCR 2.116(C)(10) if the
       affidavits or other documentary evidence show that there is no genuine issue in
       respect to any material fact, and the moving party is entitled to judgment as a
       matter of law. MCR 2.116(C)(10), (G)(4).” [Smith, 460 Mich. at 454-455, quoting
       Quinto v Cross & Peters Co, 451 Mich. 358, 362-363; 547 NW2d 314 (1996).]

The lower court’s decision with regard to a motion for reconsideration is reviewed for an abuse
of discretion. Churchman v Rickerson, 240 Mich. App. 223, 233; 611 NW2d 333 (2000).

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       After a review of the relevant statutory provisions, it is clear that the trial court correctly
decided that plaintiff was entitled to enforce the promissory note. MCL 440.3301 specifies who
may enforce a negotiable instrument.

               “Person entitled to enforce” an instrument means (i) the holder of the
       instrument, (ii) a nonholder in possession of the instrument who has the rights of a
       holder, or (iii) a person not in possession of the instrument who is entitled to
       enforce the instrument pursuant to [MCL 440.3309] or [MCL 440.3418(4).] A
       person may be a person entitled to enforce the instrument even though the person
       is not the owner of the instrument or is in wrongful possession of the instrument.
       [MCL 440.3301 (Emphasis added; footnote omitted).]

MCL 440.1201(2)(u) further provides the following definition of a “holder.”

               “Holder” means any of the following:

              (i) A person in possession of a negotiable instrument that is payable either
       to bearer or to an identified person that is the person in possession.

              (ii) A person in possession of a negotiable tangible document of title if the
       goods are deliverable either to bearer or to the order of the person in possession.

             (iii) A person in control of a negotiable electronic document of title.
       [Emphasis added.]

        In the instant case, it is clear to us that plaintiff is a “holder” of the promissory note at
issue as set forth in MCL 440.1201(2)(u)(i) and therefore entitled to enforce the promissory note
pursuant to MCL 440.3301. The parties do not dispute that plaintiff holds possession of the
promissory note, and in support of its motion for reconsideration plaintiff produced a copy of the
promissory note along with an affidavit of plaintiff’s custodian of records, who attested that “the
documents attached hereto and which form the basis for this suit are true and exact copies of the
originals.” Additionally, a review of the promissory note itself reflects an endorsement to
Cadence Financial on page 8 of the document.

       To the extent that defendant asserts that plaintiff is not a holder in due course, this is
simply not the appropriate inquiry. Rather than determining whether one is entitled to enforce a
promissory note, the status of being “a holder in due course” goes more to the defenses that may
be asserted against the holder of the note, and not to the issue of enforceability. In Cessna
Finance Corp v Warmus, 159 Mich. App. 706, 710-711; 407 NW2d 66 (1987), this Court
recognized what being a holder in due course means under the law.

               A holder in due course of an instrument is one who takes the instrument
       (1) for value, (2) in good faith, and (3) without notice that it is overdue or has
       been dishonored, or of any defenses or claims to it. MCL 440.3302. Holder-in-
       due-course status operates to insulate the holder from certain defenses to the
       instrument of any party with whom the holder has not dealt. However, a holder is
       subject to all defenses of a party with whom the holder has dealt. MCL 440.3305.
       [Emphasis added.]

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Thus, rather than determining whether one may enforce a promissory note, holder-in-due-course
status means that the holder will be protected from various defenses to complying with the terms
of the instrument made by one with whom the holder has not dealt.1

       This is further confirmed by a review of MCL 440.3305, which provides in pertinent part:

               (1) Except as otherwise provided in this section, the right to enforce the
       obligation of a party to pay an instrument is subject to the following:

                (a) A defense of the obligor based on (i) infancy of the obligor to the
       extent it is a defense to a simple contract, (ii) duress, lack of legal capacity, or
       illegality of the transaction which, under other law, nullifies the obligation of the
       obligor, (iii) fraud that induced the obligor to sign the instrument with neither
       knowledge nor reasonable opportunity to learn of its character or its essential
       terms, or (iv) discharge of the obligor in insolvency proceedings.

              (b) A defense of the obligor stated in another section of this article or a
       defense of the obligor that would be available if the person entitled to enforce the
       instrument were enforcing a right to payment under a simple contract.

               (c) A claim in recoupment of the obligor against the original payee of the
       instrument if the claim arose from the transaction that gave rise to the instrument,
       but the claim of the obligor may be asserted against a transferee of the instrument
       only to reduce the amount owing on the instrument at the time the action is
       brought.

               (2) The right of a holder in due course to enforce the obligation of a party
       to pay the instrument is subject to defenses of the obligor stated in subsection
       (1)(a), but is not subject to defenses of the obligor stated in subsection (1)(b) or
       claims in recoupment stated in subsection (1)(c) against a person other than the
       holder. (Emphasis added.)

        After reviewing the record evidence in the light most favorable to defendant, we agree
with the trial court that no genuine issues of material fact existed concerning whether plaintiff
was entitled to enforce the subject promissory note. This conclusion is particularly appropriate
under the present facts where defendant failed to respond to plaintiff’s discovery requests,
including plaintiff’s requests for admissions. In sum, although our analysis differs, we are of the
view that the trial court reached the correct conclusion that plaintiff was entitled to summary
disposition. Further, this Court will uphold a decision on appeal where the lower court reached
the correct result, even if for different reasons. Gleason v Dep’t of Transp, 256 Mich. App. 1, 3;
662 NW2d 822 (2003).

1
 We note that the trial court misspoke to the extent it stated that plaintiff was a holder in due
course and therefore entitled to enforce the promissory note.

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        Defendant also asserts on appeal that the trial court erred in relying on the Supreme
Court’s decision in Bowles, 246 Mich. 674. We have reviewed the Bowles case and find it
factually distinguishable. It is clear to us that the trial court’s citation to Bowles was certainly
not a pivotal part of its decision to grant reconsideration of its prior order denying plaintiff’s
motion for summary disposition. Indeed, the trial court observed that genuine factual issues did
not exist to warrant trial where the record was clear that the subject promissory note was
endorsed to Cadence Financial, which changed its name in July 2013 to BZA 301 Holdings. In
other words, the court clearly found on other grounds that plaintiff was entitled to enforce the
subject promissory note, and given that the facts in Bowles are distinguishable from the instant
case, the trial court’s citation to Bowles in granting reconsideration did not amount to an error of
law or an abuse of discretion that warrants reversal of its order.

       Affirmed.

                                                             /s/ David H. Sawyer
                                                             /s/ Kirsten Frank Kelly
                                                             /s/ Karen M. Fort Hood

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