Janice Potter v. Wilmington Savings
682 F. App'x 408
6th Cir.2017Background
- Janice and David Potter mortgaged their home in 2007, defaulted in 2009, and received a Chapter 7 discharge; the mortgage remained a lien on the property.
- BAC foreclosed and purchased the property at sheriff’s sale in March 2010; title passed by quitclaim to Fannie Mae and then to Bank of America (BofA).
- In April 2012 BofA recorded an affidavit under M.C.L. § 565.451a declaring it would treat the 2010 sheriff’s sale as void and that the 2007 mortgage was "in full force and effect."
- Potters did not redeem or make payments after the affidavit; in 2014 BofA assigned the mortgage to Wilmington Savings Fund, which initiated a new foreclosure.
- The Potters sued to quiet title, arguing the §565.451a affidavit validly expunged the sheriff’s sale (Paragraph Four) but did not validly reinstate the mortgage (Paragraph Five), so they now own the house free of mortgage.
- The district court granted summary judgment to defendants; the Sixth Circuit affirmed, holding the affidavit can both expunge the sale and reinstate the mortgage, so quiet-title relief was unwarranted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can an affidavit recorded under M.C.L. §565.451a both expunge a sheriff’s sale and reinstate the mortgage? | The affidavit validly expunged the sale (Para. 4) but cannot unilaterally reinstate the mortgage (Para. 5); therefore Potters get title free of mortgage. | Michigan precedent supports that such affidavits may restore the pre-sale status quo by expunging the sale and reviving the mortgage. | The affidavit is effective to both expunge the sale and reinstate the mortgage; no quiet-title relief. |
| If the affidavit is invalid in part, can it be partially effective (expunge sale but not reinstate mortgage)? | Para. 4 is valid while Para. 5 is invalid, creating an unencumbered title in Potters' favor. | An affidavit cannot be ‘‘split’’ this way; either it restores both or is void in toto, and Michigan law supports restoration. | The affidavit cannot be split; the court applied cases treating expungement and reinstatement together. |
| Does Trademark Properties v. FNMA bar reinstatement by §565.451a affidavit? | Trademark suggests affidavits cannot set aside foreclosures generally, supporting Potters’ position. | Trademark was decided on a different, independent defect and does not establish a rule that affidavits may only expunge sales but not revive mortgages. | Trademark does not undermine the line of authority allowing affidavits to both expunge and reinstate; it was distinguishable. |
| If the affidavit were invalid, would quiet-title relief follow? | Potters argue they would own unencumbered title if reinstatement failed. | If affidavit were invalid, the sale would remain in effect and Potters would not have lawful title; quiet-title still fails. | Even if invalid, that outcome would not entitle Potters to quiet title; no authority supports their claimed result. |
Key Cases Cited
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938) (federal courts sitting in diversity apply state law as would the state’s highest court)
- Residential Funding Co. v. Saurman, 805 N.W.2d 183 (Mich. 2011) (Michigan Supreme Court reversing a Court of Appeals ruling about a foreclosure method)
- Trademark Props. of Mich., LLC v. Fed. Nat’l Mortg. Ass’n, 863 N.W.2d 344 (Mich. Ct. App. 2014) (addressing validity of an affidavit seeking to set aside foreclosure sale)
- Dunitz v. Woodford Apartments Co., 209 N.W. 809 (Mich. 1926) (foreclosure extinguishes mortgage where redemption not exercised)
- Markoff v. Tournier, 201 N.W. 888 (Mich. 1925) (statutory foreclosures should not be set aside absent strong reason)