805 N.W.2d 183
Mich.2011Background
- Michigan Supreme Court considers whether MERS could foreclose by advertisement under MCL 600.3204(1)(d) in consolidated cases involving Residential Funding and Bank of New York Trust Company.
- Court reverses Court of Appeals, clarifying MERS is owner of an interest in the indebtedness but not ownership of the note.
- Record title holder of the mortgage has a security lien; foreclosure power follows from the mortgage, not necessarily the note.
- Legislative amendment to MCL 600.3204(1) in 1994 is not read to create a new framework excluding undisputed mortgage record holders from foreclosing.
- Court emphasizes that mortgage and note are construed together and the lien remains contingent on satisfaction of indebtedness.
- Oral argument occurred on November 10, 2011; the order reverses the Court of Appeals’ decision on leave to appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can MERS foreclose by advertisement under MCL 600.3204(1)(d)? | Residential Funding: MERS fits 'owner of an interest in the indebtedness' and may foreclose. | Saurman: Foreclosure authority rests with the record mortgage holder; ownership of note not required. | Yes; MERS may foreclose by advertisement as an owner of an interest in indebtedness. |
| Does 'interest in the indebtedness' include entities with the mortgage lien but without note ownership? | Residential Funding: Broad inclusion under 'interest in the indebtedness' incl. MERS. | Saurman: Foreclosure power derives from mortgage lien; note ownership not necessary. | Yes; it includes the security lien holder necessary to foreclose by advertisement. |
| Is the 1994 amendment to MCL 600.3204(1) a shift to require direct ownership of the note for foreclosure? | Residential Funding: Legislature intended broader foreclose-by-advertisement rights. | Saurman: No shift; 'interest in the indebtedness' includes mortgagees of record. | No; amendment does not exclude undisputed record holders from foreclosing. |
| Is the mortgagee entitled to foreclose by advertisement even when the note may be owned separately? | Residential Funding: Foreclosure authority hinges on mortgage record title. | Saurman: Foreclosure tied to lien secured by mortgage. | Yes; the mortgagee with a security lien may foreclose. |
Key Cases Cited
- Guardian Depositors Corp v Wagner, 287 Mich 202 (1939) (mortgage and note construed together; mortgagee has lien to secure debt)
- McKeighan v Citizens Commercial & Sav Bank, 302 Mich 666 (1942) (security may be in trust; mortgagee selection is a matter of convenience)
- Adams v Niemann, 46 Mich 135 (1881) (security kept in trust; mortgagee unnecessary to be the beneficiary's holder)
- Arnold v DMR Financial, 448 Mich 671 (1995) (only record holder of the mortgage may foreclose; unrecorded assignments do not affect validity)
- Feldman v Equitable Trust Co, 278 Mich 619 (1937) (foreclosure under predecessor statute; interest held for security)