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A Better Partnership
February 26, 2014

COA applies Michigan law to deficiency claims from promissory notes issued by Michigan residents to Michigan bank, and secured by Nevada real property

In Talmer Bank & Trust v. Parikh et. al., the Court of Appeals conducted a choice of law analysis to determine whether Nevada or Michigan law applied to the bank's action to collect on the deficiencies that remained on defaulted promissory notes after the bank had foreclosed upon and sold the real property that secured those notes.  In this case, the notes were executed by Michigan residents in favor of a Michigan bank, and secured by real property in Nevada.  After default on the terms of the notes, the bank foreclosed on the properties, sold them at auction and initiated legal actions in Michigan to collect the remaining balance on the notes.  The borrowers defended those actions arguing that Nevada law applied to the collection action, and that the application of Nevada law could greatly reduce the amount owed.  In two separate cases, the trial courts held that Michigan law applied and awarded the bank summary judgment for the entire amount of the deficiency on the note.  In a consolidated appeal, the Court of Appeals conducted a detailed choice of law analysis noting that the relevant factors including residency, as well as the place of contracting and performance all favored the application of Michigan law to an action on the obligations of the promissory note.  In addressing Nevada's competing interests, the Court "question[s] Nevada's interests in seeing Michigan residents avoid deficiency judgments at the hands of a Michigan bank merely because the properties securing the loans, which originated and were paid in Michigan, were located in Nevada."  The Court of Appeals, therefore, upheld the judgments in favor of the bank.  Additionally, because they were specifically required in the contract, the Court of Appeals required the award of reasonable attorney fees to the bank.           

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