Kim v. Jpmorgan Chase Bank, Na
493 Mich. 98
| Mich. | 2012Background
- WaMu loan amount $615,000, secured by mortgage recorded in 2007.
- WaMu collapsed in 2008; FDIC appointed as receiver for WaMu’s assets.
- FDIC transferred WaMu’s assets to Chase under 12 U.S.C. 1821(d)(2) but did so via a P&A agreement.
- Chase foreclosed by advertisement in 2009 after acquiring WaMu’s assets.
- Court of Appeals held Chase’s foreclosure violated MCL 600.3204(3) and was void ab initio; majority reversed, holding sale voidable.
- Court remanded for proceedings and expedited decision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Chase acquire plaintiffs’ mortgage by operation of law? | Plaintiffs contend WaMu’s assets, including the mortgage, passed to Chase by operation of law. | Chase argues the transfer was a voluntary purchase under a P&A agreement, not by operation of law. | No; transfer was not by operation of law. |
| Does MCL 600.3204(3) apply to a foreclosure where the foreclosing party did not acquire by assignment? | Plaintiffs rely on 3204(3) to require recording if not the original mortgagee. | If the acquisition was by operation of law, 3204(3) does not apply. | 3204(3) applies where the foreclosing party is not the original mortgagee and there is an assignment; since here acquisition was voluntary, the provision applies. |
| Is the foreclosure sale void ab initio or voidable due to non-recordation under 3204(3)? | Defendant’s failure to record renders the sale void ab initio. | Defect objections should yield voidable foreclosure rather than void ab initio. | Foreclosure sale is voidable, not void ab initio; plaintiffs must show prejudice. |
Key Cases Cited
- Miller v Clark, 56 Mich 337 (1885) (foreclosure by advertisement requires recordation; operation-of-law transfers are not assignments)
- Davenport v HSBC Bank USA, 275 Mich App 344 (2007) (foreclosure not void ab initio when recordation is defective and prejudice shown)
- Kuschinski v Equitable & Central Trust Co, 277 Mich 23 (1936) (foreclosure voidable, not void ab initio where notice/recordation issues do not prejudice homeowner)
- Feldman v Equitable Trust Co, 278 Mich 619 (1937) (foreclosure not invalid if defect does not harm homeowner; voidable only when prejudicial)
- Sweet Air Investment, Inc v Kenney, 275 Mich App 492 (2007) (notice defects render foreclosure voidable, not void; prejudice standard)