Lucretia Holliday v. Wells Fargo Bank, N.A.

Filing

OPINION filed: AFFIRMED, decision not for publication. Jeffrey S. Sutton, Circuit Judge; Deborah L. Cook, Circuit Judge and Algenon L. Marbley, (authoring) U.S. District Judge for the Southern District of OH

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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 14a0436n.06
No. 13-2224
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
LUCRETIA D. HOLLIDAY,
Plaintiff-Appellant,
v.
WELLS FARGO BANK, NA,
Defendant-Appellee.

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FILED
Jun 16, 2014
DEBORAH S. HUNT, Clerk

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

Before: SUTTON and COOK, Circuit Judges, MARBLEY, District Judge.*
ALGENON L. MARBLEY, District Judge.
I. INTRODUCTION
Appellant Lucretia Holliday appeals the district court’s order granting Appellee Wells
Fargo’s motion to dismiss. Holliday also appeals the district court’s order denying her motion
for reconsideration. For the reasons set forth herein, we AFFIRM the district court’s decisions.
II. BACKGROUND
On September 6, 2006, Plaintiff Lucretia Holliday obtained a mortgage against the real
property located at 5269 Pond Bluff Drive, West Bloomfield, Michigan, from People’s Choice
Home Loan, Inc. in the amount of $360,000.00. As security for that loan, Plaintiff granted a
mortgage to Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee for lender in
the amount of $360,000. The mortgage was recorded on November 7, 2006. MERS then
assigned the mortgage to U.S. Bank Trust National Association, as trustee of the Sequoia
*

The Honorable Algenon L. Marbley, United States District Judge for the Southern District of Ohio, sitting by
designation.

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Funding Trust. That assignment was recorded on May 27, 2008. The mortgage was finally
assigned to Defendant Wells Fargo Bank, NA. The assignment was recorded on December 27,
2011.
Holliday became unable to make the required monthly payments, and the subject
mortgage went into default. Wells Fargo initiated foreclosure by advertisement proceedings
pursuant to the power of sale contained in the mortgage and Mich. Comp. Laws § 600.3201, et
seq. Holliday alleges that she commenced a loan modification process, but Wells Fargo claims
that it was never provided a financial package for a loan modification review. On September 14,
2011, Holliday received, and signed, notice of the pending sale, under Mich. Comp. Laws
§ 600.3205a.
A sheriff’s sale was held on June 26, 2012, and Wells Fargo purchased the property for
$175,000. The redemption period expired on December 26, 2012. On January 30, 2013,
Holliday filed a Complaint in Oakland County Circuit Court on four counts: quiet title; illegal
foreclosure by advertisement; lack of capacity/ownership/privity; and breach of Mich. Comp.
Laws § 600.3205. Wells Fargo removed the case to the Eastern District of Michigan, and
subsequently filed a Motion to Dismiss, which the district court granted on July 26, 2013.
Holliday filed a Motion for Reconsideration, which the district court denied on August 14, 2013.
Holliday timely appealed.
III. ANALYSIS
We review de novo a district court's decision to grant or deny a motion to dismiss under
Rule 12(b)(6) for failure to state a claim, using the same standards employed by the district court.
Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir. 2010). When considering a

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motion to dismiss, we must accept as true any well-pleaded factual allegations in the plaintiff's
complaint, JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 581 (6th Cir. 2007), but we
need not accept any legal conclusions or unwarranted factual inferences, Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). A complaint’s factual allegations “must be enough to raise a right to
relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Additionally, we review the lower court’s ruling on the motion for reconsideration of the motion
to dismiss de novo rather than for abuse of discretion. Streater v. Cox, 336 F. App’x 470, 474-75
(6th Cir. 2009) (citing Abnet v. Unifab Corp., No. 06-2010, 2009 WL 232998, at *3 (6th Cir.
Feb. 3, 2009) (internal citation omitted) (applying de novo standard of review to a motion for
reconsideration seeking review of a motion for judgment on the pleadings).
In Michigan, non-judicial foreclosures, or foreclosures by advertisement, are governed by
statute.

See Mich. Comp. Laws Ann. § 600.3204.

Pursuant to Michigan law, “once a

foreclosure is complete and the redemption period following the foreclosure has expired, a
former owner loses all right, title, and interest in and to the mortgaged property.” Munaco v.
Bank of America, 513 F. App’x 508, 510 (6th Cir. 2013) (citing Piotrowski v. State Land Office
Board, 302 Mich. 179, 187-88 (1942); Mich. Comp. Laws § 600.3236). Mortgagors, however,
can set aside the foreclosure sale if they can demonstrate “a clear showing of fraud or
irregularity, but only as to the foreclosure procedure itself.” Vanderhoof v. Deutsche Bank
National Trust, 554 F. App’x 355, No. 13-1397, 2014 WL 211819, at *2, (6th Cir. Jan. 17, 2014)
(citing Carmack v. Bank of New York Mellon, 534 F. App’x 508, 510-11 (6th Cir. 2013); Conlin
v. Mortgage Electronic Registration Systems, Inc., 714 F.3d 355, 359-60 (6th Cir. 2013)). The
standard is a high one. Id. (citing Conlin, 714 F.3d at 360). The question, then, “becomes
whether [Plaintiff] made a sufficient showing of fraud or irregularity in the foreclosure sale to
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warrant its rescission.” Id. (citing El-Seblani v. IndyMac Mortgage Services, 510 F. App’x 425,
429-30 (6th Cir. 2013)).
A. Statutory Prerequisites
As a threshold matter, Holliday addresses the issue of whether she has authority, under
Michigan law, to bring her claims. Holliday argues that she does; though she recognizes that she
failed to act on the Pond Bluff property within the redemption period, Holliday insists that she
need not have exercised her right of redemption when there is fraud or irregularities woven
throughout the foreclosure process. Holliday alleges that, based on the fraud and irregularities,
she has sufficiently established the requirements of the cause of action. Holliday asserts that her
lost title to the property is an obvious injury. Holliday also contends that, under Michigan law,
“the mortgagor may hold over after foreclosure by advertisement and test the validity of the sale
in the summary proceeding.” (Appellant’s Br., Doc. 25 at 19) (quoting Manufacturers Hanover
Mortgage Corp. v. Snell, 142 Mich. App. 548, 553 (1985) (internal citation omitted)). Finally,
Holliday notes that the court has the authority to rescind a foreclosure sale if the sale involved
fraud or irregularity, and was subsequently invalid.
Wells Fargo claims that, pursuant to Michigan law, Holliday does not have authority to
challenge the assignment at issue.

Relying on this court’s decision in Livonia Properties

Holdings, LLC v. 12840-12976 Farmington Road Holdings, LLC, 399 F. App’x 97 (6th Cir.
2010), Wells Fargo rebuffs Holliday’s contention that the assignment of the mortgage was
invalid due to the allegedly closed trust of which it was part. Wells Fargo contends that the
Livonia Properties court rejected the very challenge to an assignment of a mortgage that
Holliday presents here. Wells Fargo further asserts that Holliday’s argument can be rejected in
part for the same reason we rejected plaintiff’s argument in Conlin v. Mortgage Electronic
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Registration Systems, Inc, 714 F.3d 355 (6th Cir. 2013), where we held that the mortgagor did
not show that he had been prejudiced by alleged defects in the assignment of the mortgage. Id. at
361-62. Wells Fargo concludes that, like the appellant in Conlin, Holliday has failed to show
prejudice, and thus does not have an actionable claim.
At issue is “a Michigan state-law requirement that is functionally similar to a statute of
limitations.” Smith v. Litton Loan Servicing, LP, 517 F. App’x 395, 397 (6th Cir. 2013). As we
have previously explained, Michigan courts allow “‘an equitable extension of the period to
redeem from a statutory foreclosure sale in connection with a mortgage foreclosed by
advertisement and posting of notice’ in order to keep a plaintiff’s suit viable.” El-Seblani, 510 F.
App’x at 428 (quoting Schulthies v. Barron, 16 Mich. App. 246, 248 (1969)). A plaintiff must
meet the stringent standard of demonstrating fraud or irregularity directly related to the
foreclosure procedure to merit such an extension. Id. at 429; see also Conlin, 714 F.3d at 360.
A plaintiff’s showing of fraud or irregularity alone, however, is insufficient to warrant the
rescission of a foreclosure sale. Elsheick v. Select Portfolio Servicing, Inc., --- F. App’x ---, No.
13-2100, 2014 WL 2139140, at *5 (6th Cir. May 22, 2014). If a plaintiff is able to prove defect
or irregularity, it renders the foreclosure sale voidable, not void ab initio. Kim v. JPMorgan
Chase Bank, N.A., 825 N.W.2d 329, 337 (2012). For the foreclosure sale to be set aside, then,
“[a] plaintiff[] must show that [she was] prejudiced by defendant’s failure to comply with [Mich.
Comp. Laws § 600.3204]. To demonstrate such prejudice, [she] must show that [she] would
have been in a better position to preserve [her] interest in the property absent defendant’s
noncompliance with the statute.” Spadafore v. Aurora Loan Services, LLC, --- F. App’x ---, No.
13-1812, 2014 WL 1622771, at *2 (6th Cir. April 23, 2014); see also Conlin, 714 F.3d at 362

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(“Post-Kim, Michigan mortgagors seeking to set aside a sheriff’s sale under § 600.3204 will have
to demonstrate prejudice (e.g., double liability)”).
Holliday has failed to meet the stringent standard of showing fraud or irregularity
required to grant the necessary extension. As the district court correctly noted, Holliday’s vague
allegations of fraud or irregularities simply do not meet the well-established pleading standards
required by Iqbal. 556 U.S. at 678-79. Moreover, Holliday does not make any mention of
prejudice in this section of her argument, despite the necessity of establishing prejudice in order
to have the sheriff’s sale set aside. As such, the district court correctly dismissed Holliday’s
complaint.
B. Alleged Violation of Mich. Comp. Laws § 600.3205
Holliday challenges Wells Fargo’s actions regarding the foreclosure proceedings.
Holliday claims that Wells Fargo wrongfully proceeded with the foreclosure process despite
Holliday’s alleged attempts to modify her loan. According to Holliday, her complaint clearly
states Wells Fargo’s specific violations of Mich. Comp. Laws § 600.3205c: Holliday never
received the 14-day letter required under the statute, but she contacted Wells Fargo to obtain a
loan modification; Wells Fargo did not complete the loan modification process, and subsequently
denied Holliday’s loan modification; and Wells Fargo did not send Holliday a denial letter with
calculations. (Appellant’s Br., Doc. 25 at 10). Holliday insists that, based on her allegations,
“the reasonable inference this court must draw from the allegations is that Defendant has not
complied with [Mich. Comp. Laws § 600.3205].” (Id. at 13).
Wells Fargo counters that Holliday’s vague allegations of violations are insufficient to
demonstrate that Wells Fargo violated the loan modification statute. Though Holliday maintains

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that she never received notice pursuant to Mich. Comp. Laws § 600.3205a, the record clearly
shows that Holliday signed for the certified mailing. Wells Fargo contends that Holliday has
neither alleged, nor offered evidence to show, that she submitted the requisite financial
documents to Wells Fargo for a loan modification review. Moreover, Wells Fargo asserts that
Holliday has failed to demonstrate that she would have qualified for a loan modification under
Mich. Comp. Laws § 600.3205.1
Under Mich. Comp. Laws § 600.3205c(1), “if a borrower has contacted [the mortgage
holder] but the process has not resulted in an agreement to modify the mortgage loan, the
[mortgage lender] shall work with the borrower to determine whether the borrower qualifies for a
loan modification.” Thompson v. JPMorgan Chase Bank, N.A., --- F. App’x --- No. 13-2230,
2014 WL 1586992, at *3 (6th Cir. Apr. 22, 2014). Subsequently, the mortgage holder “shall
provide the borrower with a copy of any calculation made.” Smith v. Bank of America Corp.,
485 F. App’x 749, 756 (6th Cir. 2012); Mich. Comp. Laws § 600.3205c(5). As this court has
previously stated, “Michigan’s statutory loan modification process does not require that the
lender modify a loan, but requires only that the lender give notice and an opportunity for loan
modification.” Thompson, 2014 WL 1586992, at *3.
Pursuant to Mich. Comp. Laws § 600.3205c(8), the sole remedy for a mortgage holder’s
failure to follow the loan modification process is converting the foreclosure by advertisement to
a judicial foreclosure. See Elsheick, 2014 WL 2139140, at *6. That remedy, however, can only

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Wells Fargo spends the latter portion of this section arguing that Holliday wrongfully raises issues
concerning discovery. Wells Fargo contends that Holliday’s insistence on discovery is in conflict with this court’s
finding in New Albany Tractor, Inc. v. Louisville Tractor, Inc., in which we stated that “plaintiff must allege specific
facts [of his claim] even if those facts are only within the heads or hands of the defendants. The plaintiff may not
use the discovery process to obtain these facts after filing suit.” 650 F.3d 1046, 1051 (6th Cir. 2011). Holliday,
however, does not address discovery until Section IV of her argument. Thus, we reserve discussion of discovery
issues for Section IV.D.

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apply when the foreclosure itself is still pending. See Smith, 485 F. App’x at 756 (“[the]
statute…when triggered, allows plaintiffs to enjoin a foreclosure by advertisement and convert it
to a judicial foreclosure. [Plaintiffs] brought this action after the foreclosure sale occurred, and
so there is no foreclosure to enjoin or convert.”). Thus, judicial foreclosure is inapplicable as a
remedy after a foreclosure unless plaintiff has sufficiently stated the requisite fraud or
irregularities.
The district court correctly dismissed Holliday’s claim that Defendant failed to comply
with Mich. Comp. Laws § 600.3205c. Despite Holliday’s insistence that this court reasonably
must infer that she has sufficiently alleged violations of Mich. Comp. Laws § 600.3205c, she has
not done so. The record reflects that Holliday received notice of the foreclosure, indicated by her
signature on the receipt line. Holliday has failed to provide this court with any evidence to
demonstrate a factual basis to state adequately a claim for relief, as required under Rule 12(b)(6).
Insofar as Holliday indirectly seeks a conversion of the foreclosure by advertisement to a judicial
foreclosure, it cannot be done. Holliday brought her claim only after the foreclosure sale had
taken place; hence, there is no foreclosure to convert. Id.
C. Foreclosure by Advertisement and Compliance with Mich. Comp. Laws § 600.3204
Holliday also maintains that the assignment of the mortgage is invalid because it was part
of a trust that was closed following the assignment. Holliday challenges Wells Fargo’s authority
to initiate foreclosure proceedings, and alleges that Wells Fargo was not the owner of the debt or
interest in the mortgage, or the servicing agent, as required under Mich. Comp. Laws
§ 600.3204(1)(d). As in earlier arguments, Holliday again insists that the assignment was invalid
due to the condition of the trust at the time of the assignment: “It is Plaintiff’s position that
Plaintiff’s Verified Complaint successfully attacks the foreclosure on the ground that the
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assignment was not valid or authorized, nor was the resulting foreclosure [on the property].”
(Appellant’s Br., Doc. 25 at 17). Seemingly overlooking current case law, Holliday asserts that
the foreclosure sale is void ab initio. See Kim, 825 N.W.2d at 337 (finding that failure to follow
the procedures set forth in Michigan’s foreclosure by advertisement statute renders flawed
foreclosures voidable, not void ab initio). While recognizing that her challenge to the loan
modification process and subsequent foreclosure proceedings happened after the completion of
the foreclosure by advertisement proceedings, Holliday maintains that her timing does not
“negate the validity of her claim.” (Appellant’s Br., Doc. 25 at 19).
Wells Fargo responds that, even if Holliday had shown that Wells Fargo had violated the
foreclosure by advertisement, she has still not demonstrated a claim for relief. The only relief
available through the statute is the conversion of a foreclosure by advertisement to a judicial
foreclosure, a remedy that Wells Fargo insists “does not provide a party with an avenue to set
aside a completed foreclosure and sheriff’s sale.” (Appellee’s Br., Doc. 26 at 12) (citing Mich.
Comp. Laws § 600.3205c(8)). Wells Fargo asserts that, because Holliday is only entitled to the
relief which the statute allows, and the statute does not permit a completed foreclosure to be set
aside, Holliday has failed to plead a plausible cause of action.
In Conlin, this court explained that, pursuant to the holding in Kim, “[Mich. Comp. Laws]
§ 600.3204 defects [are] actionable…only on a showing of prejudice.” Conlin, 714 F.3d at 36162. Though neither party sets forth an argument specifically discussing prejudice, Holliday has
failed to show the prejudice this court requires to demonstrate a defect in the foreclosure process.
Without such a showing, this court cannot set aside the sheriff’s sale. See id. at 362. Thus, the
district court properly dismissed Holliday’s claim.

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D. Prejudice Against Plaintiff by Foreclosure and Loan Modification
Holliday’s final argument concerns prejudice and Holliday’s desire for discovery to
bolster her claims. Holliday alleges that she was prejudiced in the foreclosure process but is
unable to articulate it because of the lack of discovery at the time Wells Fargo filed its motion to
dismiss.

She insists that “it is undisputed that Plaintiff was going to challenge the

foreclosure/loan modification.” (Appellant’s Br., Doc. 25 at 21). Relying on Roller v. Federal
National Mortgage Association, 2012 WL 5828625 (E.D. Mich. June 4, 2012), Holliday argues
that any prejudice related to the foreclosure, assignment, and loan modification, can only be
“borne out through depositions or requests for other forms of discovery.” (Appellant’s Br., Doc.
25 at 21).
Wells Fargo responds that, even if Holliday had demonstrated that an irregularity in the
foreclosure process by clear and convincing evidence, the sale is simply voidable and Holliday
must still show how she was prejudiced by any alleged defect. Wells Fargo cites the various
examples of prejudice that Holliday has been unable to support or to defend adequately,
including the ability or intent to redeem the property; exposure to double liability; lack of
documentation regarding Holliday’s alleged loan modification review; and facts about her
income to support the assertion that she would have qualified for a loan modification.
(Appellee’s Br., Doc. 26 at 14). As such, Holliday once again has been unable to demonstrate
any prejudice to support her claims.
We agree with the district court’s finding that Holliday has not sufficiently shown
prejudice. It is well settled that a party cannot “use the discovery process to obtain [the facts it
needs to support its claim] after filing suit.” New Albany Tractor, Inc. v. Louisville Tractor, Inc.,
650 F.3d 1046, 1051 (6th Cir. 2011). Regarding Holliday’s reliance on Roller, the district court

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properly determined that such reliance is misplaced: “the only remedy for a breach of section
600.3205c is conversion of the foreclosure by advertisement to a judicial foreclosure. But the
time for that has passed and showing prejudice cannot change that.” Holliday v. Wells Fargo
Bank, NA, No. 13-11062, at 13 n. 3 (E.D. Mich. July 26, 2013). As the district court determined,
Holliday has insufficiently alleged any showing of fraud or defect, in addition to failure to show
prejudice suffered as a result of the foreclosure procedure. Thus, we uphold the district court’s
decision to dismiss Holliday’s claims.
IV. CONCLUSION
For the reasons set forth above, we affirm the district court’s dismissal of Plaintiff’s
complaint.

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