567 F. App'x 362
6th Cir.2014Background
- Gardner executed a $215,200 note to Flagstar on May 18, 2007, with a mortgage securing the property at 7221 State Road, Burtchville, Michigan; MERS was the nominee for Flagstar and its successors.
- On March 4, 2013, the mortgage was assigned from MERS to Quicken and this assignment was recorded.
- Gardner defaulted; Potestivo, for Quicken, served a pre-foreclosure notice on February 11, 2013, stating an amount due of $207,350.35 and engaged in discussions about a modification process.
- Beginning March–May 2013, Potestivo repeatedly requested financial paperwork for modification and advised of a 90-day hold expiring May 13, 2013; notices and correspondence continued, including an explanation of assignment and Quicken’s status as mortgagee of record.
- Foreclosure sale scheduled for May 30, 2013; Quicken purchased the property at sheriff’s sale and Gardner’s redemption period extended to November 30, 2013.
- Gardner filed suit in state court on May 29, 2013 challenging the foreclosure; the case was removed to federal court, and the district court dismissed for failure to state a claim; Gardner appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Article 3 of the UCC apply to mortgage foreclosures? | Gardner argues presentment and instrument requirements attach to foreclosures. | Foreclosure by advertisement does not implicate Article 3; UCC does not govern foreclosures. | UCC Article 3 does not apply to mortgage foreclosures. |
| May Quicken/Potestivo foreclose without being the note holder? | They lack standing because they are not the note holder and did not endorse the note. | Michigan law permits foreclosure by mortgagees of record or parties with an interest in indebtedness, even if not the note holder. | Mortgagees of record may foreclose; holder of the mortgage can be different from the debt holder. |
Key Cases Cited
- Mox v. Jordan, 463 N.W.2d 114 (Mich. Ct. App. 1990) (mortgage not a negotiable instrument; mortgage secures payment of the note)
- Residential Funding Co. v. Saurman, 805 N.W.2d 183 (Mich. 2011) (mortgagee of record has an interest in indebtedness; foreclose by advertisement can be valid)
- Adams v. Niemann, 8 N.W. 719 (Mich. 1881) (historical support for mortgagee interests differing from debt owner)
- Hargrow v. Wells Fargo Bank N.A., 491 F. App’x 534 (6th Cir. 2012) (illustrates holder vs. mortgagee distinction in foreclosure)
- Erie R. Co. v. Tompkins, 304 U.S. 64 (S. Ct. 1938) (substantive choice-of-law framework for conflicts between state and federal procedures)
- Ashcroft v. Iqbal, 556 U.S. 662 (S. Ct. 2009) (pleading standard: plausibility required)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (S. Ct. 2007) (pleading standard: not just conclusory allegations)