Hargrow et al v. Wells Fargo Bank, N.A. et al

Filing 8

OPINION AND ORDER granting 2 Motion to Dismiss. Signed by District Judge Sean F. Cox. (JHer)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Mary K. Hargrow and M.L. Hargrow,
Plaintiffs,
v.

Case No. 11-10465

Wells Fargo Bank, N.A., et al.,

Honorable Sean F. Cox

Defendants.
_________________________________/
OPINION & ORDER
GRANTING DEFENDANTS’ MOTION TO DISMISS
In this action, Plaintiffs allege that Defendant Wells Fargo Bank (“Wells Fargo”) failed
to comply with a specific provision of Michigan’s foreclosure by advertisement statute – M.C.L.
§ 600.3204(3). The matter is currently before the Court on Defendants’ Motion to Dismiss,
brought pursuant to FED. R. CIV. P. 12(b)(6). The parties have briefed the issues and the Court
heard oral argument on June 2, 2011. For the reasons set forth below, the Court shall GRANT
Defendants’ Motion to Dismiss.
BACKGROUND
According to the allegations in the complaint and the attachments to it, the facts alleged
are as follows. In January of 2006, Plaintiffs acquired property located at 8551 Glendale Drive
in Ypsilanti, Michigan (“the Property”).
On August 10, 2006, Plaintiffs borrowed $164,000 from MHA Financial Services. That
transaction involved loan documentation (“the Note”) and a mortgage security instrument (“the
Mortgage”) (Compl. at ¶ 9; D.E. 1 at ¶¶ 26 & 29).

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The Note identified MHA as the Lender and provided for the amount of the loan, the
interest rate, and methods and requirements of repayment. (D.E. 1 at 26).
The Mortgage provided for rights of foreclosure of the Property by the mortgagee in the
event of a default on the loan. (D.E. 1 at 29). The lender, though named as the lender in the
Mortgage, was not designated therein as the mortgagee. Instead, the Mortgage stated that
Mortgage Electronic Registration Systems, Inc. (“MERS”) is “the mortgagee under this Security
Instrument” and it contains a provision stating:
“MERS” is Mortgage Electronic Registration Systems, Inc. MERS is a separate
corporation that is acting solely as nominee for Lender and Lender’s successors
and assigns. MERS is the mortgagee under this Security Instrument.
(Id.).
Attached to Plaintiffs’ complaint is a “Notice of Assignment, Sale or Transfer of
Servicing Rights” that became effective October 1, 2006, which notified Plaintiffs that “the
servicing of [their] mortgage loan, that is, the right to collect payments from [them], [was] being
assigned, sold or transferred from MHA” to Ohio Savings Bank. (D.E. 1 at 45).
Plaintiffs allege that Ohio Savings Bank serviced the loan until it was transferred to
Wells Fargo. (Compl. at ¶ 10).
On August 17, 2009, an “Assignment of Mortgage” was drafted by MERS and that
document was recorded on September 4, 2009. That Assignment of Mortgage states that MERS
is assigning and transferring the Mortgage to Wells Fargo. (D.E. 1 at 46).
Plaintiffs allege that “in September 2009 the Defendants started foreclosure by
advertisement proceedings with a notice of intent to foreclose from the Defendants foreclosing
Attorney.” (Compl. at ¶ 12). Attached to Plaintiffs’ Complaint is the “Affidavit of MCL

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600.3205 Notice” from Wells Fargo’s counsel, which indicates that Plaintiffs were given the
notice of intent to start the foreclosure proceedings, in the manner required by M.C.L. §
600.3205a(3), on September 22, 2009. (D.E. 1 at 54).
Plaintiffs allege that a sheriff’s sale was held on August 26, 2010 and that Wells Fargo
was the highest bidder. (Compl. at ¶ 14). A “Sheriff’s Deed on Mortgage Sale” dated August
26, 2009, conveyed the Property to Wells Fargo. (D.E. 1 at 47).
Wells Fargo subsequently conveyed the Property to Defendant Federal National
Mortgage Association by a quit claim deed. (Compl. at ¶ 14).
Plaintiffs filed this action on or about January 19, 2011.
ANALYSIS
Under Michigan law, a “party may foreclose a mortgage by advertisement if all of the
following circumstances exist:”
(a) A default in a condition of the mortgage has occurred, by which the power to
sell became operative.
(b) An action or proceeding has not been instituted, at law, to recover the debt
secured by the mortgage or any part of the mortgage; or, if an action or
proceeding has been instituted, the action or proceeding has been discontinued; or
an execution on a judgment rendered in an action or proceeding has been returned
unsatisfied, in whole or in part.
(c) The mortgage containing the power of sale has been properly recorded.
(d) The party foreclosing the mortgage is either the owner of the indebtedness or
of an interest in the indebtedness secured by the mortgage or the servicing agent
of the mortgage.
M.C.L. § 600.3204(1). Pursuant to M.C.L. § 600.3204(3), “[i]f the party foreclosing a mortgage
by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date
of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing
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the mortgage.”
Plaintiffs’ complaint alleges that Wells Fargo may not foreclose by advertisement
because it has not complied with M.C.L. § 600.3204(3).1
In their Motion, Defendants contend that it is undisputed that MERS assigned the
Mortgage to Wells Fargo and that assignment was recorded prior to the time that Wells Fargo
foreclosed by advertisement and, therefore, there was no violation of M.C.L. § 600.3204(3).
The Court agrees that Plaintiffs’ complaint, challenging Wells Fargo’s authority to
foreclose by advertisement by virtue of not having complied with M.C.L. § 600.3204(3), must be
dismissed for failure to state a claim. That subsection provides that if the party foreclosing by
advertisement is not the original mortgagee, then the assignment from the original mortgagee to
the party seeking to foreclose must be recorded prior to foreclosure.
Here, Plaintiffs’ complaint and the attachments to it acknowledge that: 1) MERS is the
original mortgagee; 2) Wells Fargo is the party that foreclosed by advertisement; and 3) the
assignment of the mortgage from MERS to Wells Fargo was recorded prior to the foreclosure.
Thus, Plaintiffs’ complaint fails to state a claim.2

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At oral argument on June 2, 2011, Plaintiffs’ Counsel confirmed that is Plaintiffs’ only
claim and that Plaintiffs do not allege that Wells Fargo failed to comply with any other
subsections of M.C.L. § 600.3204.
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To the extent that Plaintiffs are asserting that every transfer of the note must also be
recorded in order to comply with M.C.L. § 600.3204(3), that claim has no support in the statute.
Subsection 3, by its express terms, only requires that the assignment of the mortgage from the
original mortgagee to the party foreclosing the mortgage be recorded. The note and the
mortgage “are two different things.” Residential Funding Co, LLC v. Saurman, __ N.W.2d __,
2011 WL 1516819 at 4 (Mich. App. April 21, 2011). If the Legislature intended to impose a
similar requirement regarding the recording of assignments of the note, it could have easily
included language imposing such a requirement in the statute. Saurman, supra, at 6.
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CONCLUSION & ORDER
For the reasons set forth above, IT IS ORDERED that Defendants’ Motion to Dismiss is
GRANTED and Plaintiffs’ complaint is DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.
S/Sean F. Cox
Sean F. Cox
United States District Judge
Dated: June 13, 2011
I hereby certify that a copy of the foregoing document was served upon counsel of record on
June 13, 2011, by electronic and/or ordinary mail.
S/Jennifer Hernandez
Case Manager

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