Residential Funding Co. v. Saurman
292 Mich. App. 321
Mich. Ct. App.2011Background
- MERS served as mortgagee under the security instruments while Homecomings Financial, LLC was the original lender and noteholder in both cases.
- The notes documented the loan terms and identified the lender and borrower; the mortgage instrument named MERS as the mortgagee but not as the noteholder.
- Defendants defaulted, and MERS conducted nonjudicial foreclosures by advertisement, purchasing the properties at sheriff’s sales and quitclaiming to plaintiffs as successor lenders.
- Defendants challenged the foreclosures, arguing MERS lacked authority to foreclose by advertisement under MCL 600.3204(l)(d) because it did not own, service, or have an interest in the indebtedness.
- Lower courts upheld MERS’s authority; the supreme court granted leave to determine whether MERS qualifies under the statute.
- The court held that MERS did not meet the statutory requirements and foreclosures by advertisement were void ab initio; the circuit courts’ affirmances were reversed and cases remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does MERS own an interest in the indebtedness under MCL 600.3204(l)(d)? | MERS owns an interest in the debt via the mortgage documents. | MERS only holds title to the property security and not the debt itself. | No; ownership of the indebtedness required by statute was not shown. |
| Can a mortgagee who is not the noteholder foreclose by advertisement under MCL 600.3204(l)(d)? | MERS, as mortgagee and nominee, should qualify to foreclose by advertisement. | Only the owner of the indebtedness, servicing agent, or owner of an interest in the indebtedness may foreclose by advertisement. | No; the statute limits foreclosing by advertisement to those three categories, and MERS does not fit them. |
| Is foreclosure by advertisement valid where the mortgagee lacks the debt ownership necessary under the statute? | Foreclosure by advertisement should be permitted through the mortgagee’s status and contract rights. | Foreclosure requires ownership or a servicing role in the debt; otherwise, it risks double recovery and statutory conflict. | Invalid; foreclosure by advertisement was void ab initio for lack of requisite entitlement. |
Key Cases Cited
- Arnold v DMR Fin Servs, Inc (After Remand), 448 Mich 671 (1995) (historic interpretation of MCL 600.3204; relevance to noteholder vs mortgagee)
- Church & Church, Inc v A-1 Carpentry, 281 Mich App 330 (2008) (election of remedies; foreclosure context; double recovery considerations)
- Davenport v HSBC Bank USA, 275 Mich App 344 (2007) (only the record holder of the mortgage has power to foreclose under MCL 600.3204)
- Calaveras Timber Co v Michigan Trust Co, 278 Mich 445 (1936) (foreclosures by advertisement are contractual; emphasis on statutory purpose)
- Meagher v Wayne State Univ, 222 Mich App 700 (1997) (contract interpretation principles and avoidance of surplusage)
- Bush v Shabahang, 484 Mich 156 (2009) (statutory interpretation requires giving effect to every phrase and word)
- Atwood v Schlee, 269 Mich 322 (1934) (mortgagee's rights and security interests; historical context on mortgage instruments)
- Aiton v Slater, 298 Mich 469 (1941) (equitable interests in mortgages and lender rights)