In this mortgage foreclosure action, the trial court declared the foreclosure judgment satisfied and ordered plaintiff to refund an overpayment to defendant. Plaintiff appealed, arguing the trial court abused its discretion in finding equitable redemption by a third-party which was not a borrower or guarantor of the loan, and had no property interest in the mortgaged premises. Plaintiff also argued the trial court abused its discretion by not enforcing the cross-collateralization clause and by not precluding redemption under the doctrine of unclean hands.
Pursuant to the merger doctrine, the panel held plaintiff is precluded from demanding payment of the aggregate loan balance under a cross-collateralization clause beyond the amount reflected in the foreclosure judgment. The merger doctrine also precluded enforcement of restrictions imposed in the note's prepayment clause.
Since plaintiff retained, deposited, and threatened to apply the allegedly unacceptable check to the balances owed on the other cross-collateralized loans in its sole discretion, rather than returning the check to the payor, the panel held plaintiff had accepted the payment, thereby satisfying the loan and foreclosure judgment. In light of this ruling, the panel did not reach the issue of whether the payor could redeem the property.
Finally, the panel held that defendants were not guilty of unclean hands merely because they had defaulted.