Residential Funding Co. v. Saurman.Bank of New York Trust Co.

• Citation: 292 Mich.App. 321,807 N.W.2d 412
• Decision Date: 21 April 2011
• Docket Number: Docket Nos. 290248,291443.
• Parties: RESIDENTIAL FUNDING CO., LCC v. SAURMAN.Bank of New York Trust Company v. Messner.
• Court: Court of Appeal of Michigan (US)

292 Mich.App. 321

807 N.W.2d 412

RESIDENTIAL FUNDING CO., LCC

v.SAURMAN.Bank of New York Trust Company

v.Messner.

Docket Nos. 290248

291443.

Court of Appeals of Michigan.

Submitted Oct. 7, 2010, at Detroit.Decided April 21, 2011, at 9:00 a.m.

Orlans Associates, P.C., Troy (by Timothy B. Myers), for Residential Funding Co., LLC, and Bank of New York Trust Company.

Tripp & Tagg, Attorneys at Law, Hastings (by David H. Tripp), for Gerald Saurman.

Jackson Legal, PLLC, Jackson (by Lysle G. Hall), for Corey Messner.Michigan Poverty Law Program (by Lorray S.C. Brown) and Legal Services of South Central Michigan (by Robert F. Gillett, Detroit) for the Legal Services Association of Michigan, the Michigan Poverty Law Program, the State Bar of Michigan Consumer Law Section Council, and the National Consumer Law Center.

Reinhart Boerner Van Deuren S.C. (by Robert S. Driscoll and J. Bushnell Nielsen) for the American Land Title Association.

Before: WILDER, P.J., and SERVITTO and SHAPIRO, JJ.

SHAPIRO, J.

These consolidated appeals each involve a foreclosure instituted by Mortgage Electronic Registration Systems, Inc. (MERS), the mortgagee in both cases. The sole question presented is whether MERS is an entity that qualifies under MCL 600.3204(1)(d) to foreclose by advertisement on the subject properties, or if it must instead seek to foreclose by judicial process. We hold that MERS does not meet the requirements of MCL 600.3204(1) (d) and, therefore, may not foreclose by advertisement.

I. BASIC FACTS AND PROCEDURAL HISTORY

In these cases, each defendant purchased property and obtained financing for their respective properties from a financial institution. The financing transactions involved loan documentation (“the note”) and a mortgage security instrument (the “mortgage instrument”). The original lender in both cases was Homecomings Financial, LLC.

Each note stated, in part, the amount of the loan, the interest rate, methods and requirements of repayment, and the identity of the lender and the borrower. Each mortgage instrument provided the mortgagee the right to foreclosure on the property in the event of default on the loan. The lender, though named as the lender in the mortgage instrument, was not designated therein as the mortgagee. Instead, the mortgage instrument stated that MERS “is the mortgagee under this Security Instrument” and it contained several provisions addressing the relationship between MERS and the lender, including:

“MERS” is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns. MERS is the mortgagee under this Security Instrument.

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This Security Instrument secures to Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower's covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower does hereby mortgage, warrant, grant and convey to MERS (solely as nominee for Lender and Lender's successors and assigns) and to the successors and assigns of MERS, with power of sale, the following described property....

... Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.

Defendants defaulted on their respective notes. Thereafter, MERS began nonjudicial foreclosures by advertisement as allegedly permitted under MCL 600.3201 et seq. , purchased the property at the subsequent sheriff's sales, and then quitclaimed the property to plaintiffs as respective successor lenders. When plaintiffs subsequently began eviction actions, defendants challenged the respective foreclosures as invalid, asserting, inter alia, that MERS did not have authority under MCL 600.3204(1)(d) to foreclose by advertisement because it did not fall within any of the three categories of mortgagees permitted to do so under that statute. The district courts denied defendants' assertions that MERS lacked authority to foreclose by advertisement and their conclusions were affirmed by the respective circuit courts on appeal. We granted leave to appeal in both cases.¹

II. ANALYSIS

A. STANDARD OF REVIEW

We review de novo decisions made on motions for summary disposition,² Coblentz v. City of Novi, 475 Mich. 558, 567, 719 N.W.2d 73 (2006), as well as a circuit court's affirmance of a district court's decision on a motion for summary disposition. First of America Bank v. Thompson, 217 Mich.App. 581, 583, 552 N.W.2d 516 (1996). We review all affidavits, pleadings, depositions, admissions, and other evidence submitted by the parties in the light most favorable to the party opposing the motion, in this case, defendants. Coblentz, 475 Mich. at 567–568, 719 N.W.2d 73.

We also review de novo questions of statutory interpretation and the proper application of statutes. Id. at 567, 719 N.W.2d 73.

The primary goal of statutory interpretation is to give effect to the intent of the Legislature. This determination is accomplished by examining the plain language of the statute. Although a statute may contain separate provisions, it should be read as a consistent whole, if possible, with effect given to each provision. If the statutory language is unambiguous, appellate courts presume that the Legislature intended the meaning plainly expressed and further judicial construction is neither permitted nor required. Statutory language should be reasonably construed, keeping in mind the purpose of the statute. If reasonable minds could differ regarding the meaning of a statute, judicial construction is appropriate. When construing a statute, a court must look at the object of the statute in light of the harm it is designed to remedy and apply a reasonable construction that will best accomplish the purpose of the Legislature. [ ISB Sales Co. v. Dave's Cakes, 258 Mich.App. 520, 526–527, 672 N.W.2d 181 (2003) (citations omitted).]

B. MERS BACKGROUND

The parties, in their briefs and at oral argument, explained that MERS was developed as a mechanism to provide for the faster and lower-cost buying and selling of mortgage debt. Apparently, over the last two decades, the buying and selling of loans backed by mortgages after their initial issuance had accelerated to the point that those operating in that market concluded that the statutory requirement that mortgage transfers be recorded was interfering with their ability to conduct sales as rapidly as the market demanded. By operating through MERS, these financial entities could buy and sell loans without having to record a mortgage transfer for each transaction because the named mortgagee would never change; it would always be MERS even though the loans were changing hands. MERS would purportedly track the mortgage sales internally so as to know for which entity it was holding the mortgage at any given time and, if foreclosure was necessary, after foreclosing on the property, would quitclaim the property to whatever lender owned the loan at the time of foreclosure.

As described by the New York Court of Appeals in MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 96, 828 N.Y.S.2d 266, 861 N.E.2d 81 (2006):

In 1993, the MERS system was created by several large participants in the real estate mortgage industry to track ownership interests in residential mortgages. Mortgage lenders and other entities, known as MERS members, subscribe to the MERS system and pay annual fees for the electronic processing and tracking of ownership and transfers of mortgages. Members contractually agree to appoint MERS to act as their common agent on all mortgages they register in the MERS system.

The initial MERS mortgage is recorded in the County Clerk's office with “Mortgage Electronic Registration Systems, Inc.” named as the lender's nominee or mortgagee of record on the instrument. During the lifetime of the mortgage, the beneficial ownership interest or servicing rights may be transferred among MERS members (MERS assignments), but these assignments are not publicly recorded; instead they are tracked electronically in MERS's private system. In the MERS system, the mortgagor is notified of transfers of servicing rights pursuant to the Truth in Lending Act, but not necessarily of assignments of the beneficial interest in the mortgage.

The sole issue in this case is whether MERS, as a mortgagee, but not a noteholder, could exercise its contractual right to foreclose by means of advertisement.

C. MCL 600.3204(1)(d)

Foreclosure by advertisement is governed by MCL 600.3204(1)(d), which provides, in pertinent part:

[A] party may foreclose a mortgage by advertisement if all of the following circumstances exist:

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(d) The party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage.

The parties agree that MERS was neither the owner of the indebtedness nor the servicing agent of the mortgage. Therefore, MERS lacked the authority to foreclose by advertisement on defendants' properties unless it was “the owner ... of an interest in the indebtedness secured by the mortgage....” MCL 600.3204(1)(d).

The question, then, is what is required to be the “owner ... of an interest in the indebtedness secured by the mortgage.” According to Black's Law Dictionary, to “own” means “[t]o have a good legal title; to hold as property; to have a legal or rightful title to....” Black's Law Dictionary (6th ed.), p. 1105. The dictionary defines an “interest” as “[t]he most general term that can be...