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57506508-Hendricks-v-US-Bank-June-6-2011

57506508-Hendricks-v-US-Bank-June-6-2011

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Published by divinaw
Hendricks vs. US Bank
Hendricks vs. US Bank

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Published by: divinaw on Jun 14, 2011
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06/14/2011

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STATEOFMICIDGANWASHTENAWCOUNTYTRIALCOURT
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JAMESHENDRICKS,etal.,Plaintiffs,CaseNo.10-849-CHHon.ArchieC.Brown
Y.
USBANKNATIONALASSOCIATION-ASSUCCESSORTRUSTEETOBANKOFAMERICA,etal.,Defendants.
______________________________1
JamesFraser(P57297)AttorneyforPlaintiffsW.JeffreyBarnesCo-CounselforPlaintiffs,ProHacViceWilliamG.Asimakis,Jr.(P46155)MatthewR.Rechtien(P71271)AttorneysforDefendants
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OPINIONANDORDERDENYINGINPARTANDGRANTINGINPARTDEFENDANT'SMOTIONFORSUMMARYDISPOSITIONANDGRANTINGPLAINTIFF'SMOTIONFORSUMMARYDISPOSITION
Heldin
Ann
Arbor,MichiganonJune
6,
2011AfterreviewofthepleadingsandargumentinCourtbycounselfortheparties,andreviewofsupplementalpleadingsfiledbythePlaintiff,theCourtgrantsthePlaintiffs'MotionanddeniestheDefendants'Motionforthereasonssetforthbelow.PlaintiffsexecutedanAdjustableRateNoteandMortgageonOctober30,2006infavorofDefendantFirstFranklin,asLender,andtoMortgageElectronicRecordingSystems,Inc.("MERS"),asMortgagee,astotheirrealpropertycommonlyknownas5888ParViewDrive,YpsilantiTownship,Michigan.OnoraboutDecember15,2009,PlaintiffsreceivedaletterfromcounselrepresentingHomeLoanServices,Inc("HLS"),claimingtobetheserviceroftheloan,andthatthemortgageloanwas
in
defaultasofSeptember1,2009.
1
 
OnoraboutDecember22,2009,inresponsetoalettersentbyPlaintiffs,FirstFranklinsentalettertoPlaintiffssayingthatPlaintiffsinquiryhadbeenreceivedandtheywouldreceiveananswershortly.OnoraboutDecember30,2009PlaintiffsreceivedaletterfromcounselrepresentingFirstFranklinLoanServicesofPittsburgh,Pennsylvania,claimingtobetheserviceroftheloan,informationinconsistentwiththeearlierDecember15,2009letterfromHLS.FirstFranklinLoanServicesclaimedthatitassigned,throughanassignmentdocument,themortgageloan
to
Defendant,U.S.Bank,N.A(''USB'').TheassignmentdocumentstatedthatMERSassignedtheMortgageandPromissoryNotetoUSBonOctober30,2006,however,itwasrecordedwiththeRegisterofDeedsonDecember30,2009.SubsequentlyonJanuary21,2010,counselforHLSwroteanotherlettertoPlaintiffsagainclaimingtobetheserviceroftheloan.USBproceededtoforecloseonthePlaintiffs'property,andUSBpurchasedthepropertyattheSheriffssaleonFebruary1,2010.TheCourtin
ResidentialFundingCo.,LLe.VGeraldSaurman,--NW2d,2011WL1516819,Mich.App.,April
21,
2011
(No.
290248,291443)C'RFC")
wasdecidedbya2-1majorityandisbindingprecedentonthisCourtatthispointintime.MERSTheRFCCourtexplainedthatMERSwasdevelopedasamechanismtoprovideforthefasterandlowercostbuyingandsellingofmortgagedebt.ByoperatingthroughMERS,thesefinancialentitiescouldbuyandsellloanswithouthavingtorecordamortgagetransferforeachtransactionbecausethenamedmortgageewouldneverchange;itwouldalwaysbe11ERSeventhoughtheloanswerechanginghands.MERSwouldpurportedlytrackthemortgagesalesinternallysoastoknowforwhichentityitwasholdingthemortgageatanygiventimeand,ifforeclosurewasnecessary,afterforeclosingontheproperty,wouldquitclaimthepropertytowhateverlenderownedtheloanatthetimeofforeclosure.AsdescribedbytheCourtofAppealsofNewYork,in
MERSCORP,Inc
v.
Romaine.
8NY3d90,96;861N.E.2d81(2006):In1993,theMERSsystemwascreatedbyseverallargeparticipantsintherealestatemortgageindustrytotrackownershipinterestsinresidentialmortgages.Mortgagelendersandotherentities,knownas11ERSmembers,subscribetotheMERSsystemandpayannualfeesfortheelectronicprocessingandtrackingofownershipandtransfersofmortgages.MemberscontractuallyagreetoappointMERStoactastheircommonagentonallmortgagestheyregisterintheMERSsystem.TheinitialMERSmortgageisrecordedintheCountyClerk'sofficewith"MortgageElectronicRegistrationSystems,Inc."namedasthelender'snomineeormortgageeofrecordon
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theinstrument.Duringthelifetimeofthemortgage,thebeneficialownershipinterestorservicingrightsmaybetransferredamongMERSmembers(MERSassignments),buttheseassignmentsarenotpubliclyrecorded;insteadtheyaretrackedelectronicallyinMERS'sprivate'system.IntheMERSsystem,themortgagorisnotifiedoftransfersofservicingrightspursuanttotheTruthinLendingAct,butnotnecessarilyofassignmentsofthebeneficialinterestinthemortgage.[Footnotesomitted.]ThesoleissueinRFCwaswhetherMERS,asmortgagee,butnotnoteholder,couldexerciseitscontractualrighttoforeclosebymeansofadvertisement.ForeclosurebyadvertisementisgovernedbyMCL600.3204(1)(d),whichprovides,inpertinentpart:[A]partymayforecloseamortgagebyadvertisementifallofthefollowingcircumstancesexist:
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(d)Thepartyforeclosingthemortgageiseithertheowneroftheindebtednessorofaninterestin.theindebtednesssecuredbythemortgageortheservicingagentofthemortgage.ThepartiesinRFCagreedthatMERSwasneithertheowneroftheindebtedness,northeservicingagentofthemortgage.Therefore,MERSlackedtheauthoritytoforeclosebyadvertisementondefendants'propertiesunlessitwas"theowner...ofaninterestintheindebtednesssecuredbythemortgage."Thequestion,then,waswhatbeingthe"owner...ofaninterestintheindebtednesssecuredbythemortgage"requires.InRFCthedefendants'indebtednesswassolelybaseduponthenotesbecausedefendantsowedmoniespursuanttothetermsofthenotes.Consequently,inorderforapartytoownaninterestintheindebtedness,itmusthavealegalshare,title,orrightinthenote.ThecourtinRFCdeterminedthatPlaintiffs'suggestionthatan"interestinthemortgage"issufficientunderMCL600.3204(d)(1)iswithoutmerit.Thisisnecessarilyso,astheindebtedness,i.e.,thenote,andthemortgagearetwodifferentlegaltransactionsprovidingtwodifferentsetsofrights,eventhoughtheyaretypicallyemployedtogether.A"mortgage"is"[aJ,conveyanceoftitletopropertythatisgivenassecurityforthepaymentofadebtortheperformanceofadutyandthatwillbecomevoiduponpaymentorperformanceaccordingtothestipulatedterms."Themortgageehasaninterestinthe
property.
Themortgagorcovenants,pursuanttothemortgage,thatifthemoneyborrowedunderthenoteisnotrepaid,themortgageewillretainaninterestinthe
property.
Thus,unlikeanote,whichevidencesadebtandrepresentstheobligationtorepay,amortgagerepresentsaninterestinrealpropertycontingentonthefailureoftheborrowertorepaythelender.Theindebtedness,i.e.,thenote,andthemortgagearetwodifferentthings.AstheCourtdeterminedinRFC,thisCourtfindsthatMERSdidnothavetheauthoritytoforeclosebyadvertisementonPlaintiffs'property.Pursuanttothemortgages,PlaintiffswerethemortgagorsandMERSwasthemortgagee.However,itwastheDefendantlendersthatlentPlaintiffsmoneypursuanttothetermsofthenotes.MERS,asmortgagee,onlyheldaninterestin
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