Opinion Date: 04/24/2007
Issues: Mortgage foreclosure; MCL 600.3204; Whether the foreclosure proceedings should be voided because the defendant published its first notice of foreclosure before it actually acquired its interest in the indebtedness; Whether the defendant was not obliged to follow MCL 600.3204(1)(d) because it had fulfilled the requirements of MCL 600.3204(3); Michigan Basic Prop. Ins. Ass’n v. Ware; Whether what was at issue was simply a notice defect; Arnold v. DMR Fin. Servs., Inc.
Court: Michigan Court of Appeals (Published)
Case Name: Davenport v. HSBC Bank USA
e-Journal Number: 35704
Judge(s): Jansen, Cavanagh, and Borrello
Since defendant did not yet own the indebtedness it sought to foreclose, it lacked the statutory authority to foreclose and the foreclosure proceedings were void ab initio. The trial court erred in ruling defendant’s noncompliance with the statutory requirements did not nullify the foreclosure proceedings. Plaintiff executed a mortgage on certain real property. It was assigned to another entity, which then assigned it to defendant on October 31, 2005, by which time plaintiff was in default on the mortgage. Defendant initiated foreclosure proceedings by publishing its first notice on October 27, 2005. Defendant was the successful bidder at the sheriff’s sale. Plaintiff sued to have the foreclosure proceedings voided and any continuing proceedings enjoined on the basis defendant published its first notice of foreclosure days before it actually acquired an interest in the indebtedness. The trial court granted defendant summary disposition. Defendant appeared to argue it was not obliged to follow MCL 600.3204(1)(d) since it fulfilled the requirements of MCL 600.3204(3). The court disagreed, concluding subsection (3) did not allow a successor mortgagee to disregard the requirements of subsection (1) for foreclosing by advertisement merely because he or she expects to have achieved a perfect chain of title by the time of sale. MCL 600.3204(1)(d) clearly requires a party own the indebtedness or an interest in the indebtedness prior to undertaking to foreclose a mortgage by advertisement. Thus, defendant was not eligible to initiate the foreclosure when it did because it did not yet own the indebtedness. Further, what was at issue here was "not a mere notice defect." Rather, it was "a structural defect that goes to the very heart of defendant’s ability to foreclose by advertisement in the first instance." The court vacated the foreclosure proceedings and remanded the case.
Full Text Opinion