Duff v. Federal National Mortgage Association et al
OPINION AND ORDER GRANTING DEFENDANTS' 10 MOTION to Dismiss. Signed by District Judge Gerald E. Rosen. (RGun)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
Hon. Gerald E. Rosen
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, et al.,
OPINION AND ORDER GRANTING
DEFENDANTS’ MOTION TO DISMISS
At a session of said Court, held in
the U.S. Courthouse, Detroit, Michigan
February 29, 2012
PRESENT: Honorable Gerald E. Rosen
United States District Chief Judge
This mortgage foreclosure matter is presently before the Court on the August 11,
2011 Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) filed by
Defendants Federal National Mortgage Association (“Fannie Mae”) and JP Morgan
Chase Bank, N.A. (“Chase”).1 Plaintiff Damian Duff has responded and Defendants have
replied. Having reviewed the parties’ briefs and supporting evidence, the Court has
determined that oral argument is not necessary. Therefore, pursuant to Eastern District of
Defendant JP Morgan Chase Bank, N.A., was incorrectly identified in Plaintiff’s Complaint as “JP Morgan Chase
Michigan Local Rule 7.1(e)(2), the Court will decide this motion based on the briefs. For
the reasons stated below, the Court has concluded that dismissal is proper.
II. FACTUAL BACKGROUND
On June 28, 2007, Plaintiff Damien Duff refinanced his home in Detroit, Michigan
and obtained a $190,000 loan from non-party Quicken Loans, Inc. (“Quicken”). As
security for the loan, Plaintiff executed a promissory note that was secured by a mortgage
(“the Mortgage”). Mortgage Electronic Registrations Systems, Inc. (“MERS”) was the
mortgagee under the Mortgage, as nominee for the lender, Quicken. Two years later, on
July 28, 2009, Plaintiff applied for a loan modification through the Homes Affordable
Modification Program (“HAMP”). Plaintiff’s application for a HAMP modification,
however, was denied. On April 15, 2010, MERS assigned the Mortgage to Defendant JP
Morgan Chase Bank, N.A. The Assignment was duly recorded with the Wayne County
Register of Deeds.
Plaintiff subsequently failed to make his required Mortgage payments and
defaulted on his Loan and Mortgage obligations. As a result, Chase initiated foreclosure
by advertisement pursuant to Michigan law. On September 2, 2010, Plaintiff’s house was
sold at a Sheriff’s Sale to Defendant Fannie Mae for $208,075.82. A sheriff’s deed was
executed and recorded. The six-month redemption period provided under MCL §
600.3240(8) ended on March 2, 2011. After being served with a complaint to terminate
Plaintiff’s tenancy of the property, on May 18, 2011, Plaintiff instituted this action in
Wayne County Circuit Court. Defendants thereafter removed the case to this Court on
June 8, 2011 on diversity of citizenship grounds.
In his Complaint, Plaintiff alleges four counts. In Count I, he alleges that
Defendants violated MCL § 600.3212 by failing to include the names of the original
lender and mortgagee in every notice of foreclosure, and violated MCL § 600.3204(3) by
failing to establish a chain of title prior to the foreclosure. In Count II, Plaintiff alleges
that Defendants were negligent in that they failed to comply with the HAMP Servicing
Guide loan modification requirements and thereby failed to satisfy the duty they owed the
Plaintiff. In Count III, Plaintiff alleges a third-party beneficiary breach of contract claim
based upon Defendants alleged failure to comply the terms of their HAMP Participant
Servicing Agreement. In Count IV, Plaintiff claims that because of the statutory
violations, negligence, and breach of contract, Defendants must be estopped from
obtaining title to the property.
Defendants now move for dismissal for failure to state a claim and lack of subject
matter jurisdiction. Defendants argue that Plaintiff does not have standing to sue because
Plaintiff no longer had an interest in the property once the redemption period expired.
Fed. R. Civ. P. 12(b)(6) authorizes the Court to dismiss a complaint if it “fail[s] to
state a claim upon which relief can be granted . . . .” In deciding a motion brought under
Rule 12(b)(6), the Court must construe the complaint in the light most favorable to the
Plaintiff and accept all well-pled factual allegations as true. League of United Latin Am.
Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007). Yet, “the tenet that a court must
accept as true all of the allegations contained in a complaint is inapplicable to legal
conclusions.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). Moreover, “[w]hile a
complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief
requires more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 1964-65 (2007) (internal quotation marks, alteration, and citations omitted); see
also Ass'n of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th
Cir. 2007). Rather, to withstand a motion to dismiss, the complaint's factual allegations,
accepted as true, "must be enough to raise a right to relief above the speculative level,"
and to "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 555,
570, 127 S. Ct. at 1965, 1974. "A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Iqbal, 129 S. Ct. at 1949.
PLAINTIFF CANNOT OBTAIN THE RELIEF HE SEEKS
In his Complaint, Plaintiff seeks, under various theories, the reversal of the
foreclosure sale, an order requiring Defendants to grant Plaintiff a loan modification
pursuant to the HAMP guidelines, an order enjoining his eviction, as well as money
damages and costs. As set forth below, however, Plaintiff's claims fail because – once
the redemption period following foreclosure of a property has expired – the former
owner's rights in, and title to, the property are extinguished. At that point, the former
owner loses standing to assert claims with respect to the property. This principle is well
In Piotrowski v. State Land Office Board, 302 Mich. 179, 4 N.W.2d 514 (1942),
the Michigan Supreme Court held that the mortgagors had "lost all their right, title, and
interest in and to the property at the expiration of their right of redemption." Id. at 187, 4
N.W.2d at 517. Michigan courts and federal courts applying Michigan law have applied
the Piotrowski standard to bar former owners from making any claims with respect to
foreclosed property after the end of the redemption period. See e.g., Stein v. U.S.
Bancorp, No. 10-14026, 2011 WL 740537 (E.D. Mich. Feb. 24, 2011); Overton v. Mortg.
Elec. Registration Sys., No. 284950, 2009 WL 1507342, at *1 (Mich. App. May 28,
2009) (dismissing former owner's claim of fraud where redemption period had expired);
Kama v. Wells Fargo Bank, No. 10-10514, 2010 WL 4386974, *2 (E.D. Mich. Oct. 29,
2010) (dismissing plaintiff's claims for violation of the foreclosure statute, to quiet title,
and for promissory estoppel because the redemption period had expired); Moriarty v.
BNC Mortg., Inc., No. 10-13860, 2010 WL 5173830, at *1 (E.D. Mich. Dec. 15, 2010)
(dismissing action for declaratory judgment voiding foreclosure proceedings).
Furthermore, "[t]he 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." Schulthies v. Barron, 16 Mich. App. 246, 247-48, 167 N.W. 2d
784, 785 (1969); see also Sweet Air Inv., Inc. v. Kenney, 275 Mich. App. 492, 497, 729
N.W.2d 656 (2007) (quoting United States v. Garno, 974 F. Supp. 628, 633 (E.D. Mich.
1997) ("The Michigan Supreme Court has held that it would require a strong case of
fraud or irregularity, or some peculiar exigency, to warrant setting a forclosure sale
In the present case, the redemption period expired on March 2, 2010 – nearly two
months before Plaintiff commenced this lawsuit. Plaintiff has not pled any facts to show
that he timely attempted to redeem the property. Therefore, unless Plaintiff can make a
clear showing of irregularity, no equitable extension of the period to redeem his property
is allowed and Plaintiff will lack standing to challenge the foreclosure of, and his eviction
from, the property.
Plaintiff’s argument of irregularity rests upon his contention that the notices of
foreclosure were defective because they did not contain the names of the original lender
and mortgagee in every notice. Michigan law, however, does not require that foreclosure
notices provide the name of the original lender. Rather, all that is required is that the
notices contain “[t]he names of the mortgagor, original mortgagee, and the foreclosing
assignee, if any.” See MCL § 600.3212. The verified copies of the published notices
concerning the foreclosure of Plaintiff’s property attached to Defendants’ Brief at Ex. C
comport with these statutory requirements. They identify the mortgagor, Damian Duff;
the original mortgagee, MERS; and the foreclosing assignee, Chase.
Furthermore, even if Plaintiff could make a clear showing that the foreclosure
notices were defective, Plaintiff still could not set aside the sheriff's deed. "[A] defect in
notice renders a foreclosure sale voidable and not void." Jackson Inv. Corp. v. Pittsfield
Prod., Inc., 162 Mich. App. 750, 755, 413 N.W.2d 99, 101 (1987). In so ruling, the court
reasoned that such a holding (1) gives security "to the title of real property" and (2)
"allows for an examination of whether any harm was caused by the defect." Id. at 756.
The sale should not be automatically nullified without considering the harm suffered by
the mortgagor or the interests of intervening third parties. Id. This is especially true in a
case where "the mortgagor would have been in no better position had notice been fully
proper and the mortgagor lost no potential opportunity to preserve some or any portion of
his interest in the property." Id. See also Sweet Air Inv., Inc, 275 Mich. App. at 502
(quoting Jackson Inv. Corp., 162 Mich. App. at 511) (holding that a defect in the
foreclosure notice is "[in]sufficient grounds to invalidate the foreclosure sale, because of
a lack of prejudice"). In Sweet Air Investments, the defendants waited until the plaintiff
instituted eviction proceedings against them to challenge the foreclosure sale. Id. at 496.
There was no effort to timely challenge the validity of the foreclosure sale, or to redeem
the property within the redemption period. Id. at 503. Based on these facts, no prejudice
was shown. Id.
Plaintiff also challenges the assignment of his mortgage by MERS to Chase and
argues that the assignment results in a violation of MCL § 600.3204. Complaint ¶¶ 3134. Specifically, he contends that the assignment is not sufficient to establish a record
chain of title as required by MCL § 600.32042 because MERS did not have an interest to
assign to Chase. According to Plaintiff, because the assignment was invalid, Chase was
Plaintiff mistakenly identifies the relevant statute as MCL § 600.3404(3) in his complaint. See Complaint ¶ 32. In
their motion to dismiss, Defendants mistakenly refer to MCL §600.6204(3). Motion to Dismiss ¶ 11. MCL
600.3204(3) states, "If 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 the mortgage."
not the owner of the indebtedness and thus could not foreclose. In so arguing, the
Plaintiff relies on the Michigan Court of Appeals’ decisions in Residential Funding Co.,
LLC v. Saurman, et al., 292 Mich. App. 321, 807 N.W.2d 412 (2011), and Bakri v.
Mortg. Elec. Registration Sys., et al., No. 297962, 2011 WL 3476818 (Mich. Ct. App.
Aug. 9, 2011) (unpublished decision). In Saurman, the Court of Appeals held that
MERS lacked the authority to foreclose by advertisement and in Bakri, relying on
Saurman, the court held that a MERS assignee stands in the shoes of MERS and, as such,
has no authority to foreclose by advertisement, either.
However, the Michigan Supreme Court REVERSED the Court of Appeals' ruling
in Saurman. See Residential Funding Co., L.L.C. v. Saurman, 490 Mich. 909, 805
N.W.2d 183 (2011). The Supreme Court found that the Court of Appeals erroneously
construed the Michigan foreclosure by advertisement statute and determined that MERS
is authorized under MCL § 600.3204(d)(1) 3 to foreclose by advertisement as the owner
of “an interest in the indebtedness secured by a mortgage.” That reversal also sub silentio
reversed Bakri. Therefore, the Court of Appeals’ decisions in Bakri and Saurman
provide no legal basis for Plaintiff to challenge MERS’ assignment of the mortgage to
Chase or Chase's foreclosure of the mortgage. Accordingly, Defendants’ motion to
dismiss will be granted on Count I of Plaintiff’s Complaint.
Plaintiff also alleges that Defendants violated the Home Affordable Modification
Program ("HAMP"), under both a negligence theory (Count II) and a breach of contract
MCL 600.3204(d)(1) requires that "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."
theory (Count III). These claims fail because, as recognized by in this and other federal
courts, there is no private right of action under HAMP. See, e.g., Hart v. Countrywide
Home Loans, Inc., 735 F. Supp. 2d 741 (E.D. Mich. 2010):
[A]ssuming Plaintiff is eligible for modification (which she is not) and assuming
that the Lending Statutes impose a duty on Defendant to modify Plaintiff's
mortgage (which they do not), the statutes do not create a private right of action
under which Plaintiff may seek relief. “There is no express or implied right to sue
fund recipients . . . under TARP or HAMP.”
Id. at 748 (quoting Aleem v. Bank of America, 2010 WL 532330, at *4 (C.D. Cal. Feb. 9,
2010)); see also Melton v. Suntrust Bank, 780 F.Supp.2d 458, 459 (E.D.Va. 2011) (“It is
well established that there is no private right of action under HAMP.”); Luster v.
Mortgage Electronic Registration Systems, 2012 WL 124967, at * 3 (E.D. Mich., Jan. 17,
2012) (same); Yunanova v. BAC Home Loans Servicing, 2012 WL 441161, at * 6 (E.D.
Mich., Feb. 10, 2012) (same).
Thus, plaintiffs may not establish liability by relying on alleged violations of the
servicing guidelines promulgated by the U.S. Department of the Treasury in connection
with HAMP. Coulibaly v. JP Morgan Chase, supra. Indeed, HAMP imposes no duty on
mortgage lender to modify mortgage even if the borrower meets modification
requirements. Meyer v. Citimortgage Inc., 2012 WL 511995, at **5-6 (E.D. Mich., Feb.
16, 2012); see also Escobedo v. Countrywide Home Loans, Inc., 2009 WL 4981 618, at
*3 (S.D.Cal. Dec. 15, 2009).
Furthermore, the overwhelming majority of courts have held that borrowers are
not third-party beneficiaries to the servicing contracts between entered into between loan
servicers and Fannie Mae. See, e.g., Acuna v. Chase Home Fin., LLC, 2011 WL
1883089, at *4 (E.D.Va. May 17, 2011) (listing cases); Zendejas v. GMAC Wholesale
Mtg. Corp., 2010 WL 2490975 (E.D. Cal. 2010) (concluding third party beneficiaries
cannot enforce government contracts “absent a clear intent to the contrary” and finding
that HAMP expresses no such intent); see also Federal Nat. Mortg. Ass’n v. LeCrone,
868 F.2d 190, 193 (6th Cir.1989) (no express or implied right of action in favor of the
mortgagor exists for violation of HUD mortgage servicing requirements). As the court in
Coulibaly observed, the cases finding that mortgagors are not third-party beneficiaries to
HAMP servicing agreements fall in line with a recent decision of the Supreme Court,
Astra USA, Inc. v. Santa Clara County, ___ U.S.___, 131 S.Ct. 1342, 1348, 179 L.Ed.2d
457 (2011). In Astra, the Court emphasized that breach of contract actions should not be
used to create constructive private rights of action where none otherwise exist. Id. at
The foregoing authorities make clear that mortgagors have no right to sue
mortgage servicers or Fannie Mae under HAMP. Therefore, to the extent Plaintiff alleges
a negligence claim based upon Defendant Chase’s alleged violations of HAMP
regulations or procedures, or a third-party breach of contract claim based upon Chase’s
alleged breach of the HAMP Servicer Participation Agreement it entered into with Fannie
Mae, those claims fail as a matter of law. Therefore, Defendants’ motion to dismiss will
be granted on both Counts II and III of Plaintiff’s Complaint.
Finally, the estoppel claim asserted by Plaintiff in Count IV of his Complaint also
fails. As a general matter, "equitable estoppel . . . is available as protection from a
defense raised by a defendant[,]" but "is not available to the plaintiff in stating a cause of
action." Hoye v. Westfield Ins. Co., 194 Mich. App. 696, 705, 487 N.W.2d 838 (1992)
(quoting Harrison Twp. v. Calisi, 121 Mich. App. 777, 787, 329 N.W.2d 488 (1982)).
Furthermore, as stated above, Plaintiff's claims of statutory violations, negligence, and
breach of contract are without merit, therefore he cannot rely on those bases to support
his theory of estoppel.
The foregoing discussion makes clear that Plaintiffs have failed to state any claim
in their Complaint upon which relief may be granted. Therefore,
IT IS HEREBY ORDERED that Defendants' Motion to Dismiss is GRANTED.
IT IS FURTHER ORDERED that Plaintiff's Complaint be, and hereby is,
DISMISSED in its entirety, with prejudice.
Dated: February 29, 2012
s/Gerald E. Rosen
Chief Judge, United States District Court
I hereby certify that a copy of the foregoing document was served upon counsel of record on
March 1, 2012, by electronic and/or ordinary mail.
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