March 31, 2013
The Michigan Court of Appeals Holds that Sheriff’s Sale was Invalid because MERS Foreclosed on Homeowner’s Property using Nonjudicial Foreclosure by Advertisement even though MERS was only a Mortgagee
In Richard v. Schneiderman & Sherman, PC, 294 Mich. App. 37, 818 N.W.2d 334 (2011), the Michigan Court of Appeals held that MERS foreclosure by Advertisement was void ab initio.
Aaron Richard, homeowner, appealed an order granting summary disposition in favor of Schneiderman & Sherman, P.C., GMAC Mortgage, and MERS. Richard purchased the property in question through a $50,000 loan from Homecomings Financial network, Inc. The loan was secured by a May 4, 2006 mortgage with MERS, as nominee of Homecomings. On October 9, 2009, Schneiderman, acting as GMAC’s agent, mailed Richard a notice stating that his mortgage was in default and explained his right to request mediation. Ultimately, MERS began nonjudicial foreclosure by advertisement and purchased the property subsequent to the sheriff’s sale.
The court noted that in Residential Funding Co., LLC v. Saurman, the court held that MERS was not entitled to use a foreclosure by advertisement when it does not own the underlying note. The question here was whether Saurman should be granted full or limited retroactivity. The general rule is that judicial decisions are to be given complete retroactive effect. Cases given limited retroactivity apply in pending cases where the issue had been raised and preserved. Cases with full retroactivity apply to all cases then pending. Here, plaintiff contested the foreclosure, but he did not specifically raise and preserve the issue of whether MERS had the authority to foreclose by advertisement. Further, the court stated that the decision in Saurman was not tantamount to a new rule of law because it did not overrule a law or statute. Therefore, the court held that Saurman should be given full retroactive effect.
Thus, because MERS did not own the underlying note prior to the foreclosure by advertisement; Richard filed his claim during the redemption period; and since there was no evidence of a bona fide purchaser, Richard was entitled to relief under Saurman. The court reversed the trial court’s grant of summary disposition, vacated the foreclosure proceeding, and remanded the case for further proceedings.
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