Earlier this year we reported on a Michigan trial court opinion, issued by Judge Edward R. Post of the Ottawa County Circuit Court in First Financial Bank, N.A. v. Scott T. Bosgraaf, et al., Case No. 11-02488 (click here to read), concluding that a court-appointed receiver has the power to sell mortgaged commercial real property free and clear of statutory mortgage foreclosure redemption rights.

This important issue has now been addressed in an unpublished opinion of the Michigan Court of Appeals, CSB Bank v Christy, Case No. 305869 (Mich. App. Oct. 18, 2012). In Christy, the trial court appointed a receiver of commercial property upon motion of the mortgagee. Unlike in Bosgraaf, the mortgagor in the Christy case did not stipulate to the receiver’s appointment. Neither, however, did the mortgagor timely contest the receiver’s appointment or the scope of the receiver’s powers. The receivership order entered by the trial court included a provision that “authorized and directed” the receiver to sell the property for cash to a bona fide third-party purchaser, subject to mortgagee’s approval, and specified that the mortgagee, mortgagor or receiver were allowed to petition the court for the approval of any contract of sale of the property. The receiver subsequently sold the property based upon a petition submitted by the mortgagee.

One of the mortgagors appealed, arguing that the sale by the receiver ran afoul of Michigan’s foreclosure requirements. In rejecting this argument, the Michigan Court of Appeals held that because the sale was a receivership sale and not pursuant to foreclosure, the various requirements for a sale by foreclosure, specifically including statutory redemption rights, are “simply inapplicable in the instant case.” Even though this unpublished opinion is, as a technical matter, not binding precedent, given its holding is entirely consistent with the earlier Bosgraaf opinion, its significance should not be ignored and the legitimacy of its holding will be difficult to dispute.