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SBM Real Property Law Section eNewsletter

December 2011

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Co-Editors:
Howard A. Lax, Lipson, Neilson, Cole, Seltzer & Garin, PC

Patricia Paruch, Kemp Klein Law Firm

Supreme Court Reverses and Validates MERS Foreclosures

By Justin F. Carter, Orlans Associates, PC

In Residential Funding Co. v. Saurman, (Mich. Docket Nos.143178, 143179; November 16, 2011), the Michigan Supreme Court reversed an April 21, 2011, Michigan Court of Appeals decision which held that non-judicial foreclosures conducted in the name of Mortgage Electronic Registration Systems, Inc. (MERS) were void. The Court of Appeals previously determined that MERS was not the "owner of an interest in the indebtedness secured by the mortgage" as required by MCL 600.3204(1)(d). The Michigan Supreme Court held that MERS' interest in the indebtedness included its ownership of legal title to a security lien whose existence was wholly contingent on the satisfaction of the indebtedness which authorized MERS to foreclose by advertisement under MCL 600.3204(1)(d). The Michigan Supreme Court's two-page decision comes only seven months after the Michigan Court of Appeals decision and less than a week after hearing oral arguments on Residential Funding's application for leave to appeal to the Michigan Supreme Court. The speed at which the Michigan Supreme Court acted speaks to level of uncertainty left in the wake of the Michigan Court of Appeals decision. Barring any Motion for Reconsideration, all MERS foreclosures previously held void are now valid and in compliance with MCL 600.3204(1)(d). Any foreclosure sales already rescinded should still be completed. Moving forward, it is still best practice to foreclose in the name of the owner of the indebtedness or servicer to avoid further challenges. The Section will have a more extensive article forthcoming in the RPLS Review which will examine the specific language of the opinion and whether it leaves room for further challenges to non-judicial foreclosures.

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January 19, 2012
"Groundbreaker" Breakfast Roundtable
The Lawyer's Role in New Commercial Financing
Breakfast at 7:30 a.m.;
Rountables 8:00–9:30 a.m.
Townsend Hotel, 100 Townsend St., Birmingham

February 2, 2012
2011–2012 Homeward Bound Series
"Title Insurance in Turbulent Times"
2:00 p.m.–5:00 p.m.
Inn at St. John's 'S, 44045 Five Mile Road, Plymouth

Save the Date
March 15–17, 2012
Winter Conference 2012
Loews Portofino Universal, Orlando, Florida

July 18-21, 2012
Summer Conference 2012
Boyne Mountain, Mountain Grand Lodge & Spa, Boyne Falls

Interested in writing a future article for the e-Newsletter?
Please contact co-editors:
Howard Lax at HLax@lipsonneilson.com or Patricia Paruch at Pat.Paruch@kkue.com.

Case Law Alert: IRS with Claim Only Against One Spouse Can Force Sale of Entireties Property

By Judy B. Calton, Honigman, Miller, Schwartz & Cohn LLP

At the September 22, 2011, meeting of the Consumer Bankruptcy Association, Judge Phillip Shefferly (U.S. Bankruptcy Court, ED Mich.) called the attendees' attention to a nonbankruptcy case, United States v. Barczyk, 2011 WL 3624947, C.A.6 (Mich.), Aug. 17, 2011 (unpublished). In Barczyk, the IRS was owed money only by Mr. Barczyk. Pursuant to United States v. Craft, 535 U.S. 274 (2002), a tax lien attached to the marital home held by Mr. and Mrs. Barczyk in tenancy by the entireties. The trial court held, and the Sixth Circuit affirmed, that the IRS can force a judicial sale of the entireties property. The Court further held the proceeds should be divided fifty-fifty between the spouses under United States v. Barr, 617 F.3d 370 (C.A.6 2010), unless Mrs. Barczyk could avoid the presumption of equal division of the foreclosure sale proceeds. The argument that, actuarially, she should outlive her husband did not overcome the presumption.

Editors' Note: RPLS thanks Ms. Calton and the Debtor/Creditor Rights Committee of the Business Law Section for permitting the republication of this Case Note.