Livonia Properties Holdings, LLC v. 12840-12976 Farmington Road Holdings, LLC
399 F. App'x 97
6th Cir.2010Background
- Livonia sought a preliminary injunction to halt foreclosure by advertisement on four Livonia properties; the district court denied the injunction after finding no strong likelihood of success on the merits, no irreparable harm, and unfavorable balance of harms and public policy.
- The four properties secured a December 2004 mortgage for $16.3 million with Lehman Brothers Bank; the loan was subsequently assigned to the LB-UBS Trust via a First Assignment recorded Nov 17, 2005.
- Interim, unrecorded transfers in early 2005 (Lehman Brothers Holdings Inc. to LBHI; LBHI to SASCI; SASCI to the Trust) established a chain of title that Livonia contends failed to satisfy the record-chain requirement; the Trust later formed Farmington to foreclose.
- Farmington began foreclosure by advertisement in 2010 after a March 2010 Second Assignment transferring the loan from the Trust to Farmington; Livonia challenged whether Farmington held proper record chain of title.
- Livonia argued that the PSA-created interim transfers were not properly recorded, but the district court and appellate panel held that substantial compliance with the statute suffices and that Livonia lacked standing to challenge the interim assignments; three properties were sold prior to appeal, with Michigan’s redemption rights present.
- The district court weighed the remaining preliminary injunction factors and concluded the public policy favoring contract enforcement weighed against injunctions in foreclosure by advertisement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Record chain of title requirement | Livonia argues unrecorded interim transfers defeat the chain. | Farmington complied, substantial compliance suffices; Arnold controls. | No reversible error; substantial compliance sufficient; Farmington valid chain. |
| Standing to challenge assignments | Livonia has standing to challenge the record chain. | Only parties to the assignment have standing to challenge it. | Livonia lacks standing to challenge the assignments. |
| Effect of prior foreclosures and irreparable harm | Foreclosure by advertisement causes irreparable harm and should be enjoined. | Foreclosure harms stem from borrower default; redemption rights exist; irreparable harm not shown. | No irreparable harm; injunction not warranted. |
| Public policy and contract enforcement | Public policy favors preventing foreclosure despite contract terms. | Public policy favors enforcing foreclosure contracts when other factors do not favor injunctions. | Public policy weighed against granting injunction. |
| Mootness/relief scope given sales | Some properties already sold; injunction relief required to set aside sales. | Appeal can address the merits; mootness not warranted. | Relief appropriate on merits; not available to set aside already completed sales; affirmed denial. |
Key Cases Cited
- Arnold v. DMR Financial Services, Inc., 532 N.W.2d 852 (Mich. 1995) (unrecorded security assignments irrelevant to foreclosure validity)
- Bowles v. Oakman, 225 N.W.613 (Mich. 1929) (maker cannot challenge assignment where he has no defense to the note)
- Peterson v. Jacobs, 6 N.W.2d 533 (Mich. 1932) (substantial compliance suffices for record-chain-of-title; historical context)