Priya Kumar, et al v. U.S. Bank National Associatio, et al

Filing

OPINION filed : AFFIRMED, decision not for publication. Karen Nelson Moore, Deborah L. Cook (AUTHORING), Circuit Judges and James S. Gwin, U.S. District Judge for the Northern District of Ohio, sitting by designation.

Case: 13-1651

Document: 006111950860

Filed: 01/30/2014

Page: 1

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 14a0087n.06
No. 13-1651
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
PRIYA KUMAR; MUKESH KUMAR,
Plaintiffs-Appellants,
v.
U.S. BANK NATIONAL ASSOCIATION, as
Trustee to Wachovia Bank NA as Trustree for the
Certificateholders of the MLMI Trust, Mortgage
Loan Asset-Backed Certificates Series 2005-08;
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC.; DOES 1-10,
Defendants-Appellees.

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FILED
Jan 30, 2014
DEBORAH S. HUNT, Clerk

ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF MICHIGAN

Before: MOORE and COOK, Circuit Judges; GWIN, District Judge*

COOK, Circuit Judge. In this diversity case, plaintiffs Priya and Mukesh Kumar appeal the
dismissal of their complaint seeking to set aside the foreclosure sale of their Michigan home. We
affirm because they failed to allege the requisite clear fraud or irregularity in the foreclosure process.

I.

“Because this appeal comes to us on a motion to dismiss, we construe the complaint liberally
in the plaintiffs’ favor and accept all its factual allegations and inferences as true.” Hudson v.

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The Honorable James Gwin, United States District Judge for the Northern District of Ohio,
sitting by designation.

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Hudson, 475 F.3d 741, 743 (6th Cir. 2007). The Kumars’ complaint explains that they borrowed
funds from GreenPoint Mortgage Funding, Inc., to purchase their home. As security, they granted
Mortgage Electronic Registration Systems, Inc. (“MERS”), the nominee for the lender, a mortgage
interest in the property. Years later, MERS purportedly assigned the mortgage to U.S. Bank
National Association (“USB”), as trustee of a securitized mortgage-loan trust. When the Kumars
defaulted on their loan, USB initiated foreclosure proceedings. USB purchased the property at the
foreclosure sale, and the Kumars failed to redeem the property within Michigan’s statutory
redemption period.

Instead, one day before the redemption period expired, the Kumars sued MERS and USB
in state court, seeking declaratory and injunctive relief for violations of Michigan law in the
foreclosure proceedings. In particular, the Kumars challenged the defendants’ authority to foreclose
in view of documents they claim forbade the assignment.

The defendants removed the case to federal court and moved to dismiss the Kumars’
amended complaint. In granting the motion, the district court concluded that the Kumars “were not
parties to either the assignment or [USB’s] Trust agreement, and consequently have no standing to
attack the validity of” the assignment. The court also dismissed without discussion the Kumars’
“meritless . . . underlying claims,” including a claim for conversion. The Kumars unsuccessfully
moved for reconsideration and then brought this appeal.

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II.

We review de novo the district court’s dismissal, Miller v. Currie, 50 F.3d 373, 377 (6th Cir.
1995), asking whether the complaint “contain[s] sufficient factual matter, accepted as true, to state
a claim to relief that is plausible on its face,” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal
quotation marks omitted).

The Kumars argue that because their complaint sufficiently challenged MERS’s authority
to assign the mortgage, the district court erred in dismissing their complaint. Courts set aside
foreclosure sales only upon a “clear showing of fraud, or irregularity” in the foreclosure procedure.
Conlin v. Mortg. Elec. Registration Sys., Inc., 714 F.3d 355, 359–60 (6th Cir. 2013); see also
Freeman v. Wozniak, 617 N.W.2d 46, 49 (Mich. Ct. App. 2000). The Kumars failed to allege facts
that would plausibly undermine MERS’s authority to assign the mortgage. Instead, the Kumars
point to a MERS document titled “Terms and Conditions” (apparently found on MERS’s website),
as supporting their contention that its terms “expressly preclude the use of the MERS system to
either create or transfer beneficial interests in mortgage loans.” But the copy of the mortgage
document attached to MERS’s motion to dismiss confirms MERS’s authority to assign its power to
sell. (R. 5-2, Mortg. (“[Signers] hereby mortgage, warrant, grant and convey to MERS . . . and to
the successors and assigns of MERS, with power of sale, the [Property].”).) The district court
therefore properly rejected this challenge to the assignment. See Carmack v. Bank of New York
Mellon, — F. App’x —, 2013 WL 4529871, at *5–6 (6th Cir. 2013) (affirming dismissal and

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rejecting plaintiff’s argument that MERS lacked authority to assign mortgage when the mortgage
expressly provided MERS such authority).

The Kumars pressed an additional claim in their response to the banks’ motion to
dismiss—that MERS could not assign the mortgage because it acted as nominee for a defunct lender.
Irrespective of its dubious merit, the Kumars’ failure to raise this claim in the amended complaint
or to seek leave to amend forecloses its consideration here. See, e.g., Guzman v. U.S. Dep’t of
Homeland Sec., 679 F.3d 425, 429 (6th Cir. 2012) (declining to review claim made for the first time
in response to the defendants’ motion to dismiss).

The Kumars next attack the district court’s decision as erroneously discounting their
allegations that, in accepting the mortgage, USB violated its governing trust documents. As the
district court properly concluded, however, the Kumars may not raise this claim, as they were
neither a party to nor a third-party beneficiary of those contracts. See Smith v. Litton Loan
Servicing, LP, 517 F. App’x 395, 397–98 (6th Cir. 2013) (applying Michigan law and holding that
a non-party plaintiff lacked standing to challenge an alleged breach of trust documents); see also
Yuille v. Am. Home Mortg. Servs., Inc., 483 F. App’x 132, 135 (6th Cir. 2012) (per curiam) (same,
with respect to an allegedly invalid assignment). In support of their argument, the Kumars highlight
an unpublished Michigan opinion that found a mortgage assignment invalid because the trust
accepted it in violation of its governing documents. See Hendricks v. U.S. Bank Nat’l Ass’n as
Successor Tr. to Bank of Am., No. 10-849-CH, at 5–7 (Washtenaw Cnty., Mich. Cir. Ct., June 6,

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2011). Yet that case never addressed the issue here: whether a non-party to a document can
challenge an alleged breach of that document. See Moss v. Wells Fargo Bank, N.A., No. 11-13429,
2012 WL 1050069, at *5–6 (E.D. Mich. Mar. 28, 2012) (recognizing Hendricks but rejecting
challenge by non-beneficiary plaintiffs).

We also uphold the district court’s dismissal of the Kumars’ conversion claim because
Michigan limits the tort of conversion to personal, not real, property. Embrey v. Weissman, 253
N.W.2d 687, 690 (Mich. 1977) (“[C]onversion is an act of dominion wrongfully exerted over
another’s personal property.”) (internal quotation marks omitted); see also Makridakis v.
Makridakis, No. 269685, 2007 WL 2404622, at *4 (Mich. Ct. App. Aug. 23, 2007). Finally, we
uphold the dismissal of the Kumars’ fraud claim because the Kumars failed to allege specific
misrepresentations made by MERS or USB. See Wiggins v. Argent Mortg. Co., 945 F. Supp. 2d
817, 824 (E.D. Mich. 2013) (concluding that allegations of fraud “must at a minimum allege the
time, place and contents of the representation upon which [the plaintiffs] relied”) (internal quotation
marks omitted).

III.

For the foregoing reasons, we AFFIRM the district court.

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