Opinion ID: 2982927
Heading Depth: 2
Heading Rank: 1

Heading: The 2011 Assignment

Text: The Plaintiffs first argue that, pursuant to the terms of the 2011 assignment, Huntington assigned to Fourteen all debt that Baker Lofts owed to Huntington. As a result, following the assignment, Baker Lofts’ obligations to Huntington were satisfied and the actions Huntington took against Baker Lofts’ personal property were improper. The district court found that the Plaintiffs do not have standing to challenge the terms of the 2011 assignment because neither 10 No. 14-1853 DAGS II, LLC et al. v. Huntington Nat’l Bank et al. Plaintiff is a party nor third-party beneficiary to the assignment. R. 50 (D. Ct. Am. Op. at 11‒12) (Page ID #935‒36). The cases cited by the district court support the general proposition that a third party may not challenge the validity of an assignment. See id. (citing Woods v. Ayres, 39 Mich. 345 (1878); Bowles v. Oakman, 225 N.W. 613 (Mich. 1929); Livonia Prop. Holdings, L.L.C. v. 12840–12976 Farmington Rd. Holdings, L.L.C., 717 F. Supp. 2d 724, 736 (E.D. Mich. 2010), aff’d, 399 F. App’x 97 (6th Cir. 2010)). As the Michigan Supreme Court explained in Bowles, “[t]he maker of a promissory note cannot, in an action brought against him by the indorsee or transferee thereof, litigate questions that can properly arise only between the holder and his immediate indorser.” Bowles, 225 N.W. at 614 (quoting Gamel v. Hynds, 125 P. 1115, 1116 (Okla. 1912)); see also Pashak v. Interstate Highway Const., Inc., No. 189886, 1998 WL 2001203, at  (Mich. Ct. App. Mar. 20, 1998) (“Although IHC challenges the validity of the assignment as between [assignor] and [assignees], we find that it lacks standing to do so where the parties to the assignment . . . do not contest its validity.”). This court has recently addressed the bounds of this rule in a series of cases applying Michigan law. In Livonia, this court noted that “there is ample authority to support the proposition that a litigant who is not a party to an assignment lacks standing to challenge that assignment.” 399 F. App’x at 102 (internal quotation marks omitted). We have since cautioned, however, “that Livonia’s statement on standing should not be read broadly to preclude all borrowers from challenging the validity of mortgage assignments under Michigan law.” Carmack v. Bank of New York Mellon, 534 F. App’x 508, 511‒12 (6th Cir. 2013). Rather, “[a]n 11 No. 14-1853 DAGS II, LLC et al. v. Huntington Nat’l Bank et al. obligor ‘may assert as a defense any matter which renders the assignment absolutely invalid or ineffective, or void.’” Id. (quoting Livonia, 399 F. App’x at 102) (internal quotation marks omitted). “These defenses include nonassignability of the instrument, assignee’s lack of title, and a prior revocation of the assignment.” Livonia, 399 F. App’x at 102. “Obligors have standing to raise these claims because they cannot otherwise protect themselves from having to pay the same debt twice.” Id. Based on this, a borrower does not lack standing to challenge an assignment “where the borrower has a valid claim that he will face double liability.” Carmack, 534 F. App’x at 512; Smith v. Litton Loan Servicing, LP, 517 F. App’x 395, 398 (6th Cir. 2013) (“[A]s explained in Livonia, the purpose of an obligor’s defenses [to an assignment to which the obligor is not a party] is to avoid the risk of paying the same debt twice.”). Here, the Plaintiffs do not argue that they risk double liability based on the terms of the 2011 assignment. Instead, the Plaintiffs ask us to hold that Huntington assigned all of Baker Lofts’ debts to Fourteen based on the Plaintiffs’ interpretation—rather than the interpretation of the actual parties to the assignment—of the assignment’s terms. But, absent some claim that the Plaintiffs may be on the hook for double payment, this is precisely what courts do not permit. See Bowles, 225 N.W. at 614; Slorp v. Lerner, Sampson & Rothfuss, 587 F. App’x 249, 254 (6th Cir. 2014) (“A person who is neither a party to the contract nor in privity with the parties, and who is not a third-party beneficiary of the contract, is said to lack ‘standing’ to enforce the contract’s terms and to challenge its validity.”); Smith, 517 F. App’x at 397 (“Smith was neither a party nor a third-party beneficiary to the Pooling and Service Agreement, so even if its terms were violated, Smith may not challenge compliance with the Pooling and Service Agreement.”); 12 No. 14-1853 DAGS II, LLC et al. v. Huntington Nat’l Bank et al. Livonia, 399 F. App’x at 102 (“Without a genuine claim that [the assignee] is not the rightful owner of the loan and that [the borrower] might therefore be subject to double liability on its debt, [the borrower] cannot credibly claim to have standing to challenge the First Assignment.” (emphasis added)). Because the Plaintiffs do not attempt to make that argument here, they have no standing to enforce the terms of the 2011 assignment.