Michigan Court of Appeal Issues Ruling on Foreclosure Statute of Limitations

On November 12, 2020, in an unpublished opinion in James Akouri and Karen Akouri vs. Comerica Bank, the State of Michigan Court of Appeals confirmed not only that the six-year statute of limitations to pursue a suit on a note begins running at the time of acceleration rather than default, but also that failure to pursue action on a note within six years did not bar foreclosure of the mortgage within 15 years. The decision stems from a 2005 home equity line of credit encumbering the mortgagors’ home with a maturity date in 2025. The mortgagors stopped making payments in 2006, but it was not until 2015 lender sent a letter to the mortgagors requiring immediate payment in full. The Mortgagors did not meet the demand. However, foreclosure by advertisement proceedings were not commenced until about four years later, in 2019.

The mortgagors argued that any action was unenforceable under MCL 600.5807(1) and MCL 600.5807(9), because the default occurred in 2006 but the foreclosure proceeding was not initiated until 2019, 13 years later, and therefore more than the 6 years permitted for collection on a Note. They further argued that therefore, without an enforceable HELOC, the lender also lost the right to enforce the  mortgage. Alternatively, the lender argued that it had not accelerated the balance due until 2015, and the foreclosure proceeding was initiated only 4 years later in 2019.  Thus, even if the statute of limitations began running in 2006 when plaintiffs first defaulted, defendant still initiated the foreclosure proceeding well within the 15-year statutory limitations period for foreclosure of a mortgage. The lower court agreed, and the mortgagors appealed.

 MCL 600.5807 holds that “The period of limitations is 6 years for an action to recover damages or money due for breach of contract[.]” In tandem with this,  MCL 600.5803 further provides, “No person shall bring or maintain any action or proceeding to foreclose a mortgage on real estate unless he commences the action or proceeding within 15 years after the mortgage becomes due or within 15 years after the last payment was made on the mortgage.”

The court confirmed that the timing of acceleration of the debt was solely within lender’s discretion.  While the mortgagors’  2006 default was sufficient to warrant acceleration, the option was not exercised until 2015. It wasn’t until the mortgagors failed to pay the entire balance due after receipt of the acceleration letter that the statute of limitations began to run under MCL 600.5807. Only 4 years later, the mortgagor opted to pursue the remedy of foreclosure.   The Court of appeals determined that the lender could have filed a breach of contract action on the amount due of  $125,271.95 under MCL 600.5807 and/or the foreclosure of the mortgage against plaintiffs’ real property under MCL 600.5803 and neither would have been outside of the applicable statute of limitations.  Accordingly, the foreclosure proceeding was not barred by the statute of limitations.

​The above information provided by PLG attorney, Ellen Fornash, licensed in OH, KY and MI.