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Town Center Flats, LLC v. ECP Commercial II LLC

Case Type:
Case Status:
17-1577 (6th Circuit, Mar 07,2018) Not Published
Sixth Circuit Court of Appeals affirms the bankruptcy court ruling that payment to contractor after foreclosure of construction lien was a redemption, not a purchase, as Michigan law permits voluntary extension of redemption deadline, and parties agreed to extension.
Procedural context:
Bankruptcy court determined that payment by debtor of construction lien judgment after foreclosure sale was a redemption rather than a purchase, keeping consensual mortgage intact. District Court affirmed and debtor appealed to the Sixth Circuit.
Town Center Flats (TCF) and Town Center Development (TCD) constructed a 53-story condominium building, legally owned by TCF. Fox Brothers filed a construction lien against both entities and their principal, and proceeded to foreclose on the property. The state court set a redemption deadline of December 2, 2009. The parties agreed the deadline would be extended to December 4, 2009, and on that date, the Town Center entities and their principal paid Fox Brothers the redemption amount. Fox Brothers executed a quitclaim deed to TCD. Fast forward to 2015, when TCF and TCD file chapter 11. In an attempt to strip off a consensual first mortgage, TCF argues that it had not redeemed the property since there was no authority to extend the redemption deadline, and thus, Fox Brothers became the owner of the property, and sold it to TCD. If accurate, the Fox Brothers foreclosure would eradicate the consensual mortgage. The bankruptcy court found that the redemption deadline could be, and was, extended by agreement, and that a redemption had occurred, not a sale.
Cole, Siler and Cook; opinion by Cole

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