Trademark Props. of Mich., LLC v. Fed. Nat'l Mortg. Ass'n

Decision Date18 November 2014
Docket NumberDocket No. 313296.
Citation308 Mich.App. 132,863 N.W.2d 344
PartiesTRADEMARK PROPERTIES OF MICHIGAN, LLC v. FEDERAL NATIONAL MORTGAGE ASSOCIATION.
CourtCourt of Appeal of Michigan — District of US

Sotiroff & Bobrin, PC (by Keith A. Sotiroff ), for Trademark Properties of Michigan, LLC.

Dykema Gossett PLLC (by Thomas M. Schehr and Nasseem S. Ramin ) for Federal National Mortgage Association and Mortgage Electronic Registration Systems, Inc.

Before: HOEKSTRA, P.J., and WILDER and FORT HOOD, JJ.

Opinion

Wilder, J.

In this action to quiet title to a condominium unit, plaintiff, Trademark Properties of Michigan, LLC, appeals as of right an order granting summary disposition in favor of defendants, Federal National Mortgage Association (Fannie Mae), Mortgage Electronic Registration Systems, Inc. (MERS), and Bank of America (BOA). We reverse.

I. FACTS AND PROCEDURAL HISTORY

On August 16, 2003, Earl F. Strickfaden obtained a mortgage loan from GMAC Mortgage Corporation. MERS was the mortgagee under the security instrument (the MERS mortgage). The lender's interest was subsequently transferred to MERS. Strickfaden defaulted on his obligation. The MERS mortgage was foreclosed by advertisement and Fannie Mae purchased the property at a sheriff's sale on May 11, 2010. The sheriff's deed was recorded with the register of deeds on May 20, 2010. It is undisputed that the property was never redeemed. The MERS mortgage was extinguished.1

On December 6, 2010, the association where the condominium unit was located, Manor Homes of Troy Association (MHTA), filed a notice of lien for nonpayment of condominium assessments. The lien was not satisfied and MHTA foreclosed by advertisement. On February 15, 2011, plaintiff purchased the property at a sheriff's sale for $6,761.45, and then recorded the sheriff's deed with the register of deeds on February 22, 2011. The last day to redeem the property was August 15, 2011.

On August 9, 2011, before the redemption period for the MHTA foreclosure expired, an attorney for GMAC Mortgage Corporation, the lender for the MERS mortgage, recorded an affidavit purporting to expunge the May 11, 2010 sheriff's sale to Fannie Mae. The affiant averred that, by virtue of this Court's decision in an unrelated case, Residential Funding Co., LLC v. Saurman, 292 Mich.App. 321, 807 N.W.2d 412 (2011) (Saurman I ), the May 11, 2010 sheriff's deed was void ab initio, thereby leaving the MERS mortgage in full force and effect.2

Plaintiff thereafter filed this action to quiet title to the property, alleging that the MERS affidavit could not effectively revive the previously extinguished MERS mortgage and thereby invalidate plaintiff's interest in the property. The parties filed cross-motions for summary disposition. On October 31, 2012, the trial court denied plaintiff's motion and granted summary dispositionin favor of defendants under MCR 2.116(C)(10). The trial court reasoned that, by filing the affidavit before the redemption period for the MHTA foreclosure had expired, the MERS foreclosure was expunged and MERS's interest was superior to plaintiff's interest. The trial court also ruled that plaintiff failed to establish it was a bona fide purchaser, reasoning that plaintiff had notice because the affidavit was filed before the redemption period ended and plaintiff had failed to pay sufficient value. Plaintiff appealed this order.

II. ANALYSIS
A. STANDING

As an initial matter, plaintiff contends that defendants lack standing to assert an interest in the property. We disagree. Whether a party has standing presents a question of law that this Court reviews de novo. Manuel v. Gill, 481 Mich. 637, 642, 753 N.W.2d 48 (2008). “The purpose of the standing doctrine is to assess whether a litigant's interest in the issue is sufficient to ‘ensure sincere and vigorous advocacy.’ Lansing Sch. Ed. Ass'n v. Lansing Bd. of Ed., 487 Mich. 349, 355, 792 N.W.2d 686 (2010), quoting Detroit Fire Fighters Ass'n v. Detroit, 449 Mich. 629, 633, 537 N.W.2d 436 (1995). That is, the objective of the standing requirement is to ensure that “only those who have a substantial interest” will be allowed to come in to court to complain. White Lake Improvement Ass'n v. City of Whitehall,

22 Mich.App. 262, 273, 177 N.W.2d 473 (1970). When a party's standing is challenged in a case, the question is whether that person is a proper party to request adjudication of the issue, not whether the issue is justiciable. Lansing Sch., 487 Mich. at 355, 792 N.W.2d 686 ; White Lake Improvement Ass'n, 22 Mich.App. at 273 n. 13, 177 N.W.2d 473. “Standing in no way depends on the merits of the case.”

Rogan v. Morton, 167 Mich.App. 483, 486, 423 N.W.2d 237 (1988) ; see also Lansing Sch., 487 Mich. at 357, 792 N.W.2d 686. When a cause of action exists under law, or when the Legislature has expressly conferred standing, those circumstances are sufficient to establish standing. Lansing Sch., 487 Mich. at 357, 792 N.W.2d 686.

In Lansing Sch., 487 Mich. at 372, 792 N.W.2d 686, our Supreme Court delineated the following approach to determine whether a litigant has standing:

We hold that Michigan standing jurisprudence should be restored to a limited, prudential doctrine that is consistent with Michigan's longstanding historical approach to standing. Under this approach, a litigant has standing whenever there is a legal cause of action. Further, whenever a litigant meets the requirements of MCR 2.605, it is sufficient to establish standing to seek a declaratory judgment. Where a cause of action is not provided at law, then a court should, in its discretion, determine whether a litigant has standing. A litigant may have standing in this context if the litigant has a special injury or right, or substantial interest, that will be detrimentally affected in a manner different from the citizenry at large or if the statutory scheme implies that the Legislature intended to confer standing on the litigant.

MCL 600.2932(1) reflects the Legislature's intent to confer standing on individuals claiming an interest in real property. The statute authorizes “suits to determine competing parties' respective interests in land [.] Republic Bank v. Modular One LLC, 232 Mich.App. 444, 448, 591 N.W.2d 335 (1998), overruled in part on other grounds in Stokes v. Millen Roofing Co., 466 Mich. 660, 649 N.W.2d 371 (2002). This litigation involves an action to quiet title filed by plaintiff because the parties dispute their respective interests in the condominium unit. Plaintiff's assertion that defendants cannot establish a superior interest in the property is premised on the merits of the litigation. Whether a party can succeed on the merits of the substantive claim is not the appropriate inquiry when reviewing standing. Lansing Sch., 487 Mich. at 357, 359, 792 N.W.2d 686. Accordingly, we reject plaintiff's argument regarding standing.

B. EFFECT OF THE MERS AFFIDAVIT

Plaintiff maintains its claim to the property was superior to any claim of defendants, and contends that the trial court erred by ruling that the MERS affidavit expunged the prior sheriff's sale to Fannie Mae and revived the previously extinguished MERS mortgage. We agree.

Questions of law, actions to quiet title in equity, as well as decisions to grant or deny summary disposition, are reviewed de novo. Ter Beek v. City of Wyoming, 495 Mich. 1, 8, 846 N.W.2d 531 (2014) ; Book–Gilbert v. Greenleaf, 302 Mich.App. 538, 542, 840 N.W.2d 743 (2013) ; Beach v. Lima Twp., 489 Mich. 99, 106, 802 N.W.2d 1 (2011). Summary disposition is proper under MCR 2.116(C)(10) when “there is no genuine issue as to any material fact, and the moving party is entitled to judgment or partial judgment as a matter of law.” [T]he plaintiff in a quiet-title action has the initial burden of establishing a prima facie case of title, [but] summary disposition in favor of the defendant is properly entered if the plaintiff fails to carry this burden.” Special Prop. VI LLC v. Woodruff, 273 Mich.App. 586, 590, 730 N.W.2d 753 (2007) (citations omitted).

Foreclosure of a mortgage containing a power of sale is permissible by advertisement, provided the proceedings are instituted in accordance with the foreclosure statutes. See Masella v. Bisson, 359 Mich. 512, 515, 102 N.W.2d 468 (1960). “A foreclosure of a mortgage extinguishes it.... [A]nd the purchaser becomes the owner of an equitable interest in the mortgaged premises which ripens into a legal title if not defeated by redemption as provided by law.” Dunitz v. Woodford Apartments Co., 236 Mich. 45, 49, 209 N.W. 809 (1926) ; see also Senters v. Ottawa Savings Bank, FSB, 443 Mich. 45, 50, 503 N.W.2d 639 (1993), and MCL 600.3236. “Statutory foreclosures should not be set aside without some very good reasons therefor.” Markoff v. Tournier, 229 Mich. 571, 575, 201 N.W. 888 (1925). A “strong case of fraud,” irregularity, or “some peculiar exigency” is required to set aside a statutory foreclosure sale. Kubicki v. Mtg. Electronic Registration Sys., 292 Mich.App. 287, 289, 807 N.W.2d 433 (2011) (citations and quotation marks omitted).

It is undisputed that the MERS mortgage was foreclosed by advertisement, that Fannie Mae purchased the property at a foreclosure sale and received a sheriff's deed for the property, and that the property was never redeemed. The foreclosure extinguished the MERS mortgage and, because the property was not redeemed, all right, title, and interest in the property vested in Fannie Mae. Dunitz, 236 Mich. at 49–50, 209 N.W. 809 ; MCL 600.3236. Afterward, plaintiff purchased and recorded Fannie Mae's interest in the property. Months later, in an affidavit recorded under MCL 565.451a, MERS claimed the foreclosure by advertisement of its mortgage interest was void ab initio following Saurman I. MCL 565.451a, in part, provides:

An affidavit stating facts relating to any of the following matters that may affect the title to real property in this state and made by any person having
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