Robert Carmack v. The Bank of New York Mellon
534 F. App'x 508
6th Cir.2013Background
- In 2001 Carmack took out a mortgage on Woodhaven, MI property; mortgage recorded to MERS as nominee; note later transferred into CWALT trust.
- MERS assigned the mortgage in 2009 to BNYM as trustee for the CWALT trust; assignment recorded.
- Carmack defaulted; BNYM purchased the property at a 2011 sheriff’s sale and recorded the sheriff’s deed.
- Carmack sued (state court, removed to federal) seeking to void the assignment and set aside the foreclosure sale; district court dismissed for failure to plead timely redemption or clear fraud/irregularity.
- On appeal, Sixth Circuit reviewed Michigan law: redemption period lapsed (six months under Mich. Comp. Laws § 600.3240(8)), so to set aside sale Carmack had to make a clear showing of fraud or irregularity affecting the foreclosure process and show prejudice from any statutory defect.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether foreclosure sale may be set aside after statutory redemption period | Carmack: assignment to BNYM was invalid (e.g., trust/passive trust, defective assignment), so sale procedurally defective and should be set aside | Defendants: redemption period expired; absent clear fraud/irregularity and prejudice, sale cannot be set aside; assignments and foreclosure procedures were valid | Court: Affirmed dismissal — redemption period lapsed; Carmack failed to plausibly plead clear fraud/irregularity or prejudice |
| Whether assignment to BNYM violated Michigan statute on uses and trusts (passive trust) | Carmack: CWALT is a passive trust so assignment to BNYM as trustee did not vest security interest in BNYM | Defendants: § 555.5 applies to dispositions of land creating passive trusts; CWALT is an existing active trust with duties under pooling agreement, so § 555.5 does not void assignment | Court: CWALT is an active trust with trustee duties; § 555.5 does not void the assignment |
| Whether MERS had authority to assign and to foreclose by advertisement | Carmack: MERS lacked authority from the current principal (CWALT) to act as nominee/assignor | Defendants: Mortgage document granted MERS power as nominee to assign and exercise power of sale; Michigan precedent treats MERS-as-nominee mortgages as valid and assignable | Court: MERS had authority under the mortgage to assign and to foreclose as mortgagee of record; assignment to BNYM was valid |
| Whether challenger can attack assignment to show statutory noncompliance under § 600.3204 | Carmack: defects in assignment and lack of interest in indebtedness violated § 600.3204(1)(d) and (3) so foreclosure was improper | Defendants: Public record showed recorded assignment; post-Kim plaintiff must show prejudice (e.g., double liability) not mere technical defects | Court: Even under Kim standard, Carmack failed to allege prejudice or a meritorious assignment defect; challenge fails |
Key Cases Cited
- Conlin v. Mortgage Electronic Registration Sys., 714 F.3d 355 (6th Cir.) (sets standard that post-redemption attacks require clear fraud or irregularity)
- Kim v. JPMorgan Chase Bank, N.A., 825 N.W.2d 329 (Mich. 2012) (Michigan Supreme Court: noncompliance with foreclosure-by-advertisement statute makes sale voidable, not void; plaintiff must show prejudice)
- Residential Funding Co. v. Saurman, 805 N.W.2d 183 (Mich. 2011) (treats mortgage to MERS as nominee as valid and assignable; mortgagee of record can be considered to have interest permitting advertisement foreclosure)
- Piotrowski v. State Land Office Bd., 4 N.W.2d 514 (Mich. 1942) (explains extinction of mortgagor’s title after redemption period)
- Livonia Props. Holdings, LLC v. 12840-12976 Farmington Rd. Holdings, LLC, [citation="399 F. App'x 97"] (6th Cir.) (public-record chain-of-title review limits borrower’s challenge to recorded assignments; borrower must show risk of double liability to have broader standing)