In this 2001 court decision by the Michigan Court of Appeals, a transaction involving a foreclosure rescue operator who entered into a "lease buyback", foreclosure bailout arrangement with a homeowner facing foreclosure was legally deemed to be nothing more than a loan transaction. Through the invocation of Michigan's "equitable mortgage
" doctrine, the homeowner was deemed to have retained all of her ownership rights to the property involved, notwithstanding the fact that she had actually signed documents, including a warranty deed, that purported to transfer title to the property from her to a foreclosure rescue operator.
Both this 2001 case (London v. Gregory
, which is available here),
along with the 2006 Moore v. Cycon
case from a Michigan Federal Court (available here)
that I referred to in yesterday's post, appear to cite to a rather extensive body of Michigan case law on the "equitable mortgage" issue that can be utilized by homeowners (and their attorneys) to help them retain their ownership rights in those cases where, unwittingly or not, they sign over the title to their real estate to a rescue operator for the purpose of borrowing money. (Neither of these decisions, nor the cases cited therein, appear to have revolved around any fraud, trickery, deception, or any other egregious conduct by the foreclosure rescue operator). However, it does appear clear that, while there are a number of factors that the Michigan courts will consider in each case, there is no fixed, litmus test to be applied in all cases when invoking this doctrine. Because the facts in each case will not be exactly the same, the courts will apparently determine the applicability of the doctrine on a case-by-case basis.
I previously alluded to this case in an earlier blog post
. An article titled Michigan Appellate Court Sends Warning to 'Foreclosure Consultants'
, co-authored by Albert Rush and John C. Murray, discusses this case in some detail and appears on the website of The First American Corporation,
a national title insurance underwriter.
My highlights of this court decision can be found here
On a concluding note, I have found cases from other states that indicate that not only is the "equitable mortgage
" doctrine not something that is limited to the State of Michigan, but rather, this doctrine dates back centuries (back to the days of the old English common law) and apparently is available in some form in most, if not possibly all, states.
I expect to be reporting more on this doctrine on a somewhat periodic basis. I welcome input on this issue from attorneys from anywhere in the country as to the availability of this doctrine in their home states.Click here to search for list of other equitable mortgage blog postsCase Law Citation
:London v. Gregory, No. 216473, Mi. App. Ct., 2001, (2001 Mich. App. LEXIS 1700) Decided February 23, 2001
(available courtesy of the Michigan Bar Association)Revised 1-17-07