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A Better Partnership
March 19, 2015

COA holds guaranty actions and foreclosure actions are separate actions for the purposes of compulsory joinder and res judicata.

The Michigan Court of Appeals in Marketplace of Rochester Hills Parcel B LLC, v. Comerica Bank, No 31884, held that foreclosure proceedings and actions against guarantors under the same defaulted loan are not required to be filed in the same action under the compulsory joinder rule, nor will res judicata bar a later action under either claim.
 
Marketplace entered into loan agreement with Comerica Bank and secured the loan with a mortgage on Marketplace’s property. As additional security, two individuals also guaranteed the loan. Comerica filed a claim against Marketplace and the guarantors stating that the loan was in default and alleged a breach of guaranty claim and a motion for appointment of a receiver for the property. Both parties accepted the case evaluation and the actions were dismissed with prejudice.
 
Marketplace, almost a year later, filed suit against Comerica alleging conversion and tortious interference and sought declaratory and injunctive relief to quiet title, alleging that Comerica’s collection of the rents on the property and any further actions under the mortgage, including judicial foreclosure, were barred because Comerica did not join those claims in its first suit, and res judicata barred such actions.
 
The Court disagreed. The Court determined that in order for a claim to fall under MCR 2.203(A) for compulsory joinder, the claims had to arise out of the same transaction or occurrence, and determined that although both the guaranty claims and foreclosure actions may share the fact that Marketplace defaulted on the loan, that one fact was not sufficient to require joinder. It reasoned that a breach of a guaranty claim is a contract claim, while judicial foreclosure requires Comerica to establish the statutory requirements for foreclosure and a determination by the Court that the foreclosure was equitable. Thus, the Court determined that joinder of the other claims, including judicial foreclosure were not required when Comerica filed its claim for breach of guaranty and appointment of receiver.
 
Similarly, the Court determined that the additional claims were not barred under the doctrine of res judicata. The Court used the same reasoning as it did for compulsory joinder and determined that res judicata did not apply because the actions did not arise out of the same transaction or occurrence.

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