March 14, 2013
Michigan Appellate Court Holds that Party with Ownership of an Interest in the Note May Only Foreclose by Judicial Process
In Bakri v. MERS, No. 297962, 2011 WL 3476818 (Mich. Ct. App. Aug. 9, 2011), the Court of Appeals held that Defendants may only foreclose by judicial process since they only had an ownership interest in the note, and not an ownership interest in the indebtedness secured by the mortgage.
In 2004, Mortgagor Plaintiff entered into a loan with America’s Wholesale Lender and granted Defendant MERS a mortgage on the property. MERS assigned the mortgage to Defendant Bank of New York Mellon. Mortgagor Plaintiff defaulted and Defendant Trott & Trott served a Notice of Mortgage by Foreclosure Sale. Mortgagor Plaintiff filed an action to quiet title to the property and invalidate the mortgage it granted to MERS and the assignment of the mortgage to Defendant Bank of New York Mellon. Defendants moved for summary disposition. The trial court granted the motion and Plaintiff appealed.
The Court of Appeals reversed the Trial Court’s decision, which granted summary judgment in favor of the Defendants. The Court stated that the mortgage and the assignment thereof were valid, but Defendants only had the power to foreclose by judicial process and not by advertisement. The mortgage plaintiff granted to MERS stated that “MERS had the power to assign the mortgage and that MERS and its assigns had the power to sell the property…(and) MERS could foreclose on the property.” However, “[b]ecause defendant Bank of New York Mellon did not possess an interest in the indebtedness, it was not authorized to foreclose by advertisement on plaintiff’s property . . . . Instead, defendant Bank of New York Mellon must seek to foreclose by judicial process.” (citing Residential Funding Co., LLC v. Saurman, 292 Mich. App. 321 (2011).
Notes: (1) Duff v. Federal Nat. Mortg. Ass’n, No. 2:11-cv-12474, 2012 WL 692120 (E.D. Mich. Feb. 29, 2012) declined to follow this case. (2) Residential Funding Co., LLC v. Saurman, 292 Mich. App. 321 (2011), was cited by this case, but was overturned on appeal in Residential Funding v. Saurman, 805 N.W.2d 183 (Mich. 2011).
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