Schare v. Mortg. Elec. Registration Sys., Inc.
| Decision Date | 06 June 2012 |
| Docket Number | No. 11-CV-11889,11-CV-11889 |
| Parties | MARK B. SCHARE, et al., Plaintiffs, v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
This wrongful foreclosure action is presently before the Court on the Plaintiff's Response and Supplemental Response to the Court's Order to Show Cause in which Plaintiff was directed to show cause in writing why this case should not be dismissed in light of the Michigan Supreme Court's decision in Residential Funding Co., LLC v. Saurman, 490 Mich. 909, 805 N.W.2d 183 (2011), which reversed the Court of Appeals' decision upon which Plaintiff's action was predicated. The Court of Appeals had held that MERS, as a mortgagee, but not a noteholder, could not exercise its contractual right to foreclose by means of advertisement pursuant to M.C.L. § 600.3204(1)(d) because itwas not the owner of the indebtedness, the servicing agent of the mortgage, nor the owner of an interest in the indebtedness secured by the mortgage, the only three parties authorized pursuant to §3204(1)(d) to foreclose by advertisement. See Residential Funding Co., LLC v. Saurman, 292 Mich. App. 321, 807 N.W.2d 412 (2011). The Supreme Court found that the Court of Appeals had erroneously construed M.C.L. §600.3204(1)(d) and, reversing the Court of Appeals ruling, determined that MERS is statutorily authorized to foreclose by advertisement as "the owner of an interest in the indebtedness secured by the mortgage." 490 Mich. at 909
Having reviewed and considered Plaintiff's Response and Supplemental Response to the Show Cause Order, the Court concludes that Plaintiff has failed to show good cause why this case should not be dismissed in light of the Michigan Supreme Court's Saurman ruling.1
Relying entirely on decisions from states other than Michigan and pre-Saurman cases and journal articles, Plaintiff argues in responding to the Show Cause Order that dismissal is not warranted because the Michigan Supreme Court failed to recognize thatto allow MERS to foreclose by advertisement would violate the UCC because the UCC requires that a party seeking to enforce a note be in possession of the note endorsed in blank or to bearer. However, as the Court previously reminded Plaintiff, inasmuch as this Court is sitting in diversity, where, as here, the state's highest court has spoken to an issue, this Court is bound by that decision. Kurczi v. Eli Lilly and Co., 113 F.3d 1426, 1429 (6th Cir. 1997). See also Ziegler v. IBP Hog Market, Inc., 249 F.3d 509, 517 (6th Cir. 2001) (federal courts must apply state law "'in accordance with the then controlling decision of the highest state court.'" Id. (). Plaintiffs' opinion as to the correctness of the decision notwithstanding, this Court is bound by that decision.
Furthermore, the very argument that Plaintiff makes here -- i.e., that MERS does not meet the UCC requirements to enforce a negotiable instrument note and, hence, is not entitled to foreclose by advertisement -- was one that was explicitly presented to the Michigan Supreme Court in Saurman. See Saurman, Mich. S. Ct. No. 143178, Dkt. # 108, Brief of Amici Curiae Legal Services of Michigan, Michigan Poverty Loan Program, et al., 2011 WL 5145681 at **24-29. As the argument was not addressed in the Michigan Supreme Court's opinion, the Court assumes that the Michigan Court rejected it sub silentio.
In any event, the foreclosure by advertisement statute simply requires that theparty instituting the foreclosure have an interest in the indebtedness. There is no Michigan statutory requirement that to foreclose by advertisement the underlying note evidencing the indebtedness had to be endorsed to MERS or that MERS be a holder or holder-in-due-course of the note. See Crews v. Fannie Mae, 2012 642067 at *5 (E.D. Mich., Feb. 8, 2012) Komives, M.J.), report and recommendation adopted, 2012 W.L. 639327 (E.D. Mich., Feb. 28, 2012 (Edmunds, J.); Smith v. MERS, 2011 WL 4469148, at *9 (E.D.Mich. Aug.4, 2011) (Hluchaniuk, M.J.), report and recommendation adopted, 2011 WL 4479481 (E.D. Mich. Sept.27, 2011) (O'Meara, J.); Hilmon v. MERS, 2007 WL 1218718 (E,D. Mich, April 23, 2007) (Duggan, J.). Furthermore, the UCC provisions Plaintiff relies upon are part of Article 3 of the UCC and this section of the UCC is inapplicable to mortgages. See Jaboro v. Wells Fargo Bank, N.A., 2010 WL 5296939 at * 6 (E.D. Mich. Dec. 20, 2010) ; Howze v. New Century Mortgage Corp., 2008 WL 5110521, at *1 n. 1 (E.D.Mich. Dec, 2, 2008) (citing Mox v. Jordan, 186 Mich. App. 42, 46, 463 N.W.2d 114, 115 (1990)); Hilmon v. MERS, supra.
Plaintiff also argues that MERS's "successors and assigns" had no authority toforeclose by advertisement and posits that the Court should allow this case to go forward to challenge the assignment based upon the Michigan Court of Appeals ruling in Bakri v. Mortgage Electronic Registration System, et al., No. 297962, 2011 WL 3476818 (Mich. App., Aug. 9, 2011) (unpublished decision). Notwithstanding that there was no assignment of Plaintiff Schare's mortgage (MERS foreclosed and then successfully bid on the property at the sheriff's sale "as nominee for the lender and the lender's successors and/or assigns," and after the expiration of the redemption period, transferred the property by quit claim deed to the lender),2 the Bakri decision was based upon the now overruled Court of Appeals decision in Saurman.
In Bakri, the appellate court determined that the Bank of New York Mellon, as MERS's assignee of the mortgage, held no greater interest than its assignor, MERS, i.e., an interest in the property as security for the note, but not an interest in the note. Therefore, in accordance with the (now overruled) Court of Appeals' decision in Saurman, the Bakri court held that the trial court's summary disposition in favor of the defendants was improper. (Slip op at 5).
The "successors and assigns" issue, however, has not reached the Michigan Supreme Court.3 Where a state's highest court has not spoken on a precise issue, afederal court must determine what the state's highest court would decide. See Ziegler, 249 F.3d at 517 (citing Bailey v. V. & O Press Co, 770 F.2d 601, 604 (6th Cir.1985)). The task of the federal court is to ascertain from all available data what the state's highest court would decide on the issue. Am. and Foreign Ins. Co. v. Bolt, 106 F.3d 155, 158 (6th Cir.1997). In so doing, the federal court may not disregard a decision of the state appellate court on point -- whether published or unpublished -- "'unless it is convinced by other persuasive data that the highest court of the state would decide otherwise.'" Ziegler, 249 F.3d at 517 (quoting Puckett v. Tennessee Eastman Co., 889 F.2d 1481, 1485 (6th Cir.1989)); accord Northland Ins. Co. v. Guardsman Products, Inc., 141 F.3d 612, 617 (6th Cir.1998).
As indicated, the Bakri decision was based entirely upon the Court of Appeals' earlier decision in Saurman. In light of the Michigan Supreme Court's reversal of that decision, if the "successors and assigns" issue were to reach the Michigan Supreme Court, the Court believes that the Supreme Court would likewise reverse Bakri and, consistent with its decision in Saurman, would hold that a MERS assignee has a sufficient ownership interest in the indebtedness secured by the mortgage to authorize the assignee to foreclose by advertisement. Indeed, several courts have found that the Michigan Supreme Court's decision in Saurman abrogated Bakri. See e.g., Bowden v.American Home Loan Mtg. Servicing, Inc., 2012 WL 628543 (E.D. Mich., Feb. 27, 2012) (Cook, Jr. J.); Smith v....
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