A Michigan appeals court has affirmed a ruling in favor of a debt buyer that won a collection lawsuit to recover an unpaid debt, although a dissenting opinion contends the debt buyer did not have standing because a clear chain of title did not exist.
The background: The defendant obtained a $45,000 unsecured loan in October 2018. After repaying about $6,751, the defendant defaulted, leaving a charged‑off balance of $46,945.19.
- In January 2020 the debt was included in an agreement and bill of sale under which the creditor, “on behalf of” an investment vehicle, assigned the account to the plaintiff.
- The plaintiff filed a lawsuit in Michigan state court in February 2023, seeking the charged‑off balance plus costs and attorney fees. The defendant counter‑claimed, arguing the plaintiff lacked standing because the assignments were defective and the chain of title broken.
- A state court judge ruled that a clear chain of title existed and entered a judgment against the defendant in the amount of $48,394. The defendant appealed.
The ruling: Presiding Judge Christopher P. Yates, joined by Judge Anica Letica, upheld the trial court’s grant of summary disposition for the plaintiff.
- Standing & chain of title: The majority found “documentary evidence is sufficient to establish the chain of title,” pointing to the agreement, bill of sale, transfer certificate and an email notifying the defendant of the sale. Because each step showed an intent to transfer “a present right” in the debt, the court concluded the plaintiff had standing to sue.
- Answer to the dissent: Responding to arguments by Judge Noah P. Hood that the statute of frauds required a separate written assignment from the original creditor to the fintech that originated the loan, the majority wrote that an obligor “lacks standing to challenge an assignment where the parties to the assignment do not contest its validity,” adding that the case presented “a classic example … where no injustice or legal transgression will be visited upon the obligor.”
- In his dissent, Judge Hood argued that, because the actual written assignment from financial institution lending the money to the fintech that originated the loan was never produced, the plaintiff could not prove an unbroken chain of title, rendering the subsequent sale to the plaintiff void and depriving it of standing. Without that document, he said, “the assignment to [the debt buyer] is invalid, and it does not have standing to sue.”
Read the ruling. Read the dissent
