Smith, Jr. v. Litton Loan Servicing, LP
OPINION AND ORDER granting 18 Motion for Summary Judgment. Signed by District Judge Patrick J. Duggan. (MOre)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
CHARLIE SMITH, JR.,
Case No. 10-14700
Honorable Patrick J. Duggan
LITTON LOAN SERVICING, LP, a foreign
corporation, and DEUTSCHE BANK
NATIONAL TRUST COMPANY, as
Trustee Under the Pooling and Servicing
Agreement Dated April 1, 2006, Fremont
Home Loan Trust 2006-2, Asset-Backed
Certificates, Series 2006-2,
OPINION AND ORDER
At a session of said Court, held in the U.S.
District Courthouse, Eastern District
of Michigan, on_February 28, 2012.
THE HONORABLE PATRICK J. DUGGAN
U.S. DISTRICT COURT JUDGE
On October 19, 2010, Charlie Smith, Jr. (“Plaintiff”) filed this suit in Wayne County
Circuit Court to quiet title to real property located in Romulus, Michigan. Defendants
Litton Loan Servicing, LP (“Litton”) and Deutsche Bank National Trust Company, as
Trustee Under the Pooling and Servicing Agreement Dated April 1, 2006, Fremont Home
Loan Trust 2006-2, Asset-Backed Certificates, Series 2006-2 (“Deutsche Trust”) have
filed a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. The
matter has been fully briefed, and on January 10, 2012, the Court indicated to the parties
that it was dispensing with oral argument pursuant to Eastern District of Michigan Local
Rule 7.1(f)(2). For the reasons stated below, the Court grants Defendants’ motion.
I. Factual and Procedural Background
On November 23, 2005, Plaintiff obtained a $200,000 mortgage loan from Fremont
Investment & Loan. He signed an adjustable rate note in connection with the transaction.
As security for the loan, he executed a mortgage on a home located at 39079 Buckingham
Drive, in Romulus, Michigan. The mortgagee was Mortgage Electronic Registration
Systems, Inc. (“MERS”), as nominee for the lender and the lender’s successors and
assigns. Litton eventually began servicing this loan.
In late 2009 and early 2010, Plaintiff failed to make the scheduled loan payments.
On March 13, 2010, MERS assigned the mortgage to Deutsche Trust.1 Deutsche Trust
initiated foreclosure by mailing written notice to Plaintiff pursuant to Michigan Compiled
Laws § 600.3205a(3) and publishing the notice in a newspaper pursuant to § 600.3205a(4).
Affidavit of Compliance, Defs.’ Br. Ex. E at 6. Neither Plaintiff nor a housing counselor
retained by Plaintiff contacted the designated party to negotiate a modification of the loan
pursuant to § 600.3205b. Affidavit of Compliance, Defs.’ Br. Ex. E at 6; Smith Dep. 16:917:12, Aug. 18, 2011. Deutsche Trust published four notices of foreclosure in the Detroit
Legal News. Affidavit of Publication, Defs.’ Br. Ex. E at 4. Notice was posted on the
property on April 17, 2010. Affidavit of Posting, Defs.’ Br. Ex. E at 3. The property was
This assignment was recorded on April 12, 2010.
sold to Deutsche Trust at a sheriff’s sale on May 12, 2010.
Plaintiff apparently hired Bloomfield Financial Services (“Bloomfield Financial”) to
attempt to negotiate a “short pay-off” of the loan.2 Bloomfield Financial did not attempt to
negotiate a loan modification. Malone Dep. 25:4-24, July 15, 2011. Litton agreed to work
with Plaintiff during the redemption period to try to negotiate the short sale. Litton
eventually agreed in principle to the proposal of a short sale, provided that the transaction
closed by a certain date and the second lienholder received no more than $3,000 of the sale
proceeds. Litton never agreed to postpone foreclosure proceedings. Pack Dep. 24:2325:7, June 3, 2011. Because the second lienholder was unwilling to agree to Litton’s
conditions, the proposed short sale never closed. The redemption period expired on
November 12, 2010.
Plaintiff filed this action in Wayne County Circuit Court. He asserts the following
claims: “Quiet Title” (Count I); “Unjust Enrichment” (Count II); “Breach of Implied
Agreement / Specific Performance” (Count III); “Innocent / Negligent Misrepresentation”
(Count IV); “Fraud, Based upon Silent Fraud and Bad Faith Promises” (Count V);
“Constructive Trust” (Count VI); “Breach of MCL 600.3205c” (Count VII); and
“Deceptive Act and/or an Unfair Practice” (Count VIII). Litton subsequently removed the
suit to this Court, and Defendants have now moved for summary judgment.
II. Standard of Review
Summary judgment is appropriate when “there is no genuine dispute as to any
Plaintiff’s deposition testimony suggests that his son was handling the negotiations with
Bloomfield Financial. Smith Dep. 14:23-16:24.
material fact and the moving party is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a). The central inquiry is “whether the evidence presents a sufficient disagreement
to require submission to a jury or whether it is so one-sided that one party must prevail as
a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S. Ct. 2505,
2512 (1986). After adequate time for discovery and upon motion, Rule 56 mandates
summary judgment against a party who fails to establish the existence of an element
essential to that party’s case and on which that party bears the burden of proof at trial. See
Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552 (1986).
The movant has an initial burden of showing “the absence of a genuine issue of
material fact.” Id. at 323, 106 S. Ct. at 2553. Once the movant meets this burden, the
non-movant must come forward with specific facts showing that there is a genuine issue
for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct.
1348, 1356 (1986). To demonstrate a genuine issue, the non-movant must present
sufficient evidence upon which a jury could reasonably find for the non-movant; a
“scintilla of evidence” is insufficient. Liberty Lobby, 477 U.S. at 252, 106 S. Ct. at 2512.
The court must accept as true the non-movant’s evidence and draw “all justifiable
inferences” in the non-movant’s favor. Id. at 255, 106 S. Ct. at 2513. “A party asserting
that a fact cannot be or is genuinely disputed must support the assertion by: (A) citing to
particular parts of materials in the record . . . or (B) showing that the materials cited do not
establish the absence or presence of a genuine dispute, or that an adverse party cannot
produce admissible evidence to support the fact.” Fed. R. Civ. P. 56(c)(1).
A. Promise to Postpone Foreclosure
Counts I through VI seek to enforce an alleged promise to adjourn the foreclosure
proceedings while Plaintiff attempted to negotiate a loan modification or short sale. The
Court is unaware of any evidence of this alleged promise. Kendra Pack, a Bloomfield
Financial employee, stated that Litton never agreed to postpone foreclosure proceedings.
Pack Dep. 24:23-25:7. Plaintiff does not point to any evidence of the alleged promise.
Rather, he seems to argue that Defendants’ obligation to postpone foreclosure arose by
operation of law pursuant to Michigan Compiled Laws § 600.3205c. Pl.’s Resp. Br. 3.
The Court is unaware of any legal authority holding that the requirements of this statute
may be enforced in the same way as a promise. The statute provides remedies to allow an
aggrieved borrower to enforce its provisions.3 As there is no evidence of a promise to
adjourn foreclosure proceedings, the claims in Counts I through VI fail as a matter of law.
Plaintiff’s claims to enforce the alleged promise also fail under the statute of frauds,
An action shall not be brought against a financial institution to enforce any of
the following promises or commitments of the financial institution unless the
promise or commitment is in writing and signed with an authorized signature
by the financial institution:
(a) A promise or commitment to lend money, grant or extend credit, or
make any other financial accommodation.
(b) A promise or commitment to renew, extend, modify, or permit a delay
in repayment or performance of a loan, extension of credit, or other
(c) A promise or commitment to waive a provision of a loan, extension of
As noted below, the statute provides for conversion to judicial foreclosure. Michigan
Compiled Laws § 600.3205c(8).
credit, or other financial accommodation.
Michigan Compiled Laws § 566.132(2). “[A] party is precluded from bringing a claim no matter its label - against a financial institution to enforce the terms of an oral promise to
waive a loan provision.” Crown Tech. Park v. D&N Bank, F.S.B., 242 Mich. App. 538,
550, 619 N.W.2d 66, 72 (Mich. Ct. App. 2000). The alleged promise to delay enforcement
of the lender’s rights plainly falls within the statute’s scope. It is undisputed that there was
no written agreement requiring Litton to postpone foreclosure. Thus, the statute of frauds
bars Plaintiff’s claims to enforce the alleged promise.
Plaintiff argues that the promise to postpone foreclosure does not fall within the
scope of the statute of frauds, relying on Schering-Plough Healthcare Products v. NBD
Bank, N.A., 98 F.3d 904 (6th Cir. 1996). Schering-Plough held that a promise to certify a
check was a “financial accommodation” under the statute, and thus, an oral agreement to
certify a check was unenforceable. Id. at 911-12. Plaintiff points to language in ScheringPlough indicating that a “financial accommodation” is limited to transactions where the
bank takes on a risk of loss. It defies reason to assert that the lender takes no risk of loss
by postponing the exercise of its rights against the collateral. Schering-Plough cannot
excuse the lack of a written promise in this case.
B. Standing to Challenge the Sheriff’s Sale
Counts VII and VIII seek to set aside the sheriff’s sale. Defendants argue that
Plaintiff lacks standing to challenge the sheriff’s sale because the statutory redemption
period has expired. Under Michigan law, once the redemption period has expired, the
former owner’s rights in and title to the property are extinguished. Piotrowski v. State
Land Office Bd., 302 Mich. 179, 187, 4 N.W.2d 514, 517 (Mich. 1942); see also Michigan
Compiled Laws § 600.3236. At that point, the former owner loses standing to assert
claims with respect to the property. Overton v. Mortg. Elec. Registration Sys., Inc., No.
284950, 2009 Mich. App. LEXIS 1209, at *3 (Mich. Ct. App. May 28, 2009). The filing
of a lawsuit does not toll the redemption period. Id. “‘The law in Michigan does not
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 the
absence of a clear showing of fraud, or irregularity.’” Id. (quoting Schulthies v. Barron,
16 Mich. App. 246, 247-248, 167 N.W.2d 784, 785 (Mich. Ct. App. 1969)).
The statutory redemption period expired on November 12, 2010, and Plaintiff has
failed to justify an equitable extension. Plaintiff contends that the alleged violation of
Michigan Compiled Laws § 600.3205c would be sufficient to set aside the sheriff’s sale.
Plaintiff is mistaken, as § 600.3205c(8) limits the borrower’s relief to conversion of the
foreclosure into a judicial foreclosure. Adams v. Wells Fargo Bank, N.A., No. 11-10150,
2011 U.S. Dist. LEXIS 90226, at *12 (E.D. Mich. Aug. 10, 2011); Stein v. U.S. Bancorp,
No. 10-14026, 2011 U.S. Dist. LEXIS 18357, at *29 (E.D. Mich. Feb. 24, 2011).
Plaintiff asserts that the assignment to Deutsche Trust was defective because the
Trust closed in 2006. This argument lacks merit. “‘[A] litigant who is not a party to an
assignment lacks standing to challenge that assignment.’” Livonia Props. Holdings, LLC
v. 12840-12976 Farmington Rd. Holdings, LLC, 399 Fed. App’x 97, 102 (6th Cir. 2010)
(citation omitted). Plaintiff therefore cannot challenge the assignment of the mortgage.4
Plaintiff asserts that Deutsche Trust could not foreclose by advertisement because it
was not the owner of the indebtedness or an interest in the indebtedness, relying on Bakri
v. Mortgage Electronic Registration Systems, No. 297962, 2011 Mich. App. LEXIS 1455
(Mich. Ct. App. Aug. 9, 2011). Bakri is no longer good law, as the decision upon which it
was based, Residential Funding Co., LLC v. Saurman, 292 Mich. App. 321 (Mich. Ct.
App. 2011), has been reversed by the Michigan Supreme Court. See Residential Funding
Co., LLC v. Saurman, 490 Mich. 909, 805 N.W.2d 183 (Mich. 2011). In Saurman, the
Michigan Supreme Court stated that the holder of a mortgage contingent on satisfaction of
a debt is “the owner of . . . an interest in the indebtedness secured by the mortgage,” and
may therefore foreclose by advertisement under Michigan law. Id. at 909, 805 N.W.2d at
183 (citing Michigan Compiled Laws § 600.3204(1)(d)). Plaintiff has failed to show any
irregularity sufficient to justify extension of the redemption period. The Court therefore
concludes that Plaintiff lacks standing to challenge the sheriff’s sale.
C. Violation of Michigan Compiled Laws § 600.3205c
Count VII alleges that Defendants failed to follow the loan modification process set
forth in Michigan Compiled Laws § 600.3205c. Plaintiff has failed to present evidence
indicating that he requested a loan modification within the time period provided by the
statute. There is also no indication that a housing counselor working on Plaintiff’s behalf
Plaintiff’s claim relating to the assignment also appears to lack merit. Deutsche Trust
owned the note and a beneficial interest in the mortgage. Assignment of the mortgage
simply allowed enforcement of Deutsche Trust’s interest against the property.
requested a loan modification. Bloomfield Financial proposed a short sale, but the statute
applies only to “negotiations to attempt to work out a modification of a mortgage loan.”
Michigan Compiled Laws § 600.3205b(1). The statute’s language is clear, and does not
include efforts to sell the property. Thus, Plaintiff’s claim fails as a matter of law.
Even if Plaintiff could establish that he requested a loan modification, the statute
applies only to a property that is claimed as the borrower’s principal residence.5 Michigan
Compiled Laws § 600.3205a(1). Plaintiff admitted that he never resided at the property
and that his son was living there instead. Smith Dep. 8:3-9. Thus, Plaintiff is not entitled
to loan modification pursuant to § 600.3205c.
D. Deceptive Act / Unfair Practice
Plaintiff also seeks to set aside the sheriff’s sale because documents supporting the
foreclosure “appear to have procedural defects.” Compl. ¶ 72. Plaintiff has only pointed
to the allegedly defective assignment of the mortgage, and the Court has already
concluded that Plaintiff lacks standing to challenge this assignment. Because no other
“procedural defects” have been identified, Defendants must be granted summary judgment
with respect to this claim.
For the reasons set forth above, the Court concludes that Defendants are entitled to
This requirement has since been eliminated by amendments to the statute, but the
amended statute does not apply to foreclosures where the first notice was sent to the
borrower prior to February 1, 2012.
IT IS ORDERED that Defendants’ motion for summary judgment is GRANTED.
s/PATRICK J. DUGGAN
UNITED STATES DISTRICT JUDGE
Darwyn P. Fair, Esq.
Andrew J. Kolozsvary, Esq.
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