Nelson et al v. BAC Home Loans Servicing, L.P. dba Bank of America, NA et al
ORDER Granting 19 defendants' Motion for Judgment on the pleadings. Signed by District Judge George Caram Steeh (MBea)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SHAUN NELSON, and
Case No. 11-cv-14433
HON. GEORGE CARAM STEEH
BAC HOME LOANS SERVICING, L.L.P.,
d/b/a BANK OF AMERICA, N.A., et al.,
ORDER GRANTING DEFENDANTS’ MOTION FOR JUDGMENT ON THE PLEADINGS
Plaintiffs, Shaun Nelson and Kimberly Nelson, filed the instant action in the Oakland
County Circuit Court, Pontiac, Michigan on September 8, 2011 seeking equitable relief,
specifically the setting aside of the sheriff’s sale and to quiet title in certain real property in
plaintiffs’ names. Defendants removed this matter on October 7, 2011 based on diversity
of citizenship of the parties. On November 22, 2011, plaintiffs filed a first amended
complaint asserting (1) breach of contract; (2) fraud; (3) quiet title pursuant to Michigan
Compiled Laws § 600.2932; (4) wrongful foreclosure; (5) conversion; (6) defendants do not
hold the original note; and (7) defendants are not true parties in interest. Before the court
is defendants’ motion for judgment on the pleadings. The parties have briefed their
respective positions and oral argument was held on April 20, 2012.
On August 13, 2007, plaintiffs obtained a $293,500.00 loan from Quicken Loans, Inc.
to purchase real property located at 35819 Jamestown Road, Farmington Hills, Michigan,
48335. The loan was evidenced by a promissory note signed by plaintiffs. To secure
repayment of the loan, plaintiffs granted a mortgage to Quicken Loans as the Lender and
MERS as the nominee for the Lender, its successors and assigns. MERS assigned the
mortgage to defendant BAC Home Loans Servicing, LP (“BACHLS”) on September 8,
2010. Plaintiffs allege that this assignment was invalid because the mortgage requires that
it be assigned along with the note. Specifically, the mortgage states: “The note or a partial
interest in the Note (together with this Security Instrument) can be sold one or more times
without prior notice to Borrower.”
Plaintiffs defaulted on their obligations under the terms of the mortgage and note.
To avoid foreclosure, plaintiffs entered into a loan modification with BACHLS on November
23, 2009. Plaintiffs again defaulted less than one year later.
On September 14, 2010, a Mich. Comp. Laws § 600.3205a notice was sent to
plaintiffs informing them of the procedure to request another loan modification. A notice
was also published in the Oakland County Legal News on September 15, 2010. Plaintiffs
did not respond to the September 14, 2010 correspondence. Foreclosure by advertisement
commenced with notices published in the Oakland County Legal News on October 12, 19,
26 and November 2, 2010 and posted on the property on October 14, 2010. The property
was sold at a sheriff’s sale on March 8, 2011 to BACHLS which obtained a sheriff’s deed.
Plaintiffs did not redeem the property within the redemption period, which expired on
September 8, 2011. BACHLS quit claimed the property to Fannie Mae on April 15, 2011.
Law & Analysis
Standard of Review
A motion for judgment on the pleadings under Rule 12© of the Federal Rules of Civil
Procedure is reviewed under the same standard as a motion brought pursuant to Rule
12(b)(6) for failure to state a claim upon which relief can be granted. See Grindstaff v.
Green, 133 F. 3d 416, 421 (6th Cir. 1998). Federal Rule of Civil Procedure12(b)(6) allows
the court to make an assessment as to whether the plaintiff has stated a claim upon which
relief may be granted. See Fed. R. Civ. P. 12(b)(6). “Federal Rule of Civil Procedure
8(a)(2) requires only ‘a short and plain statement of the claim showing that the pleader is
entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the
grounds upon which it rests.’” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(citing Conley v. Gibson, 355 U.S. 41, 47 (1957)). Even though the complaint need not
contain “detailed” factual allegations, its “factual allegations must be enough to raise a right
to relief above the speculative level on the assumption that all of the allegations in the
complaint are true.” Ass’n of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545,
548 (6th Cir. 2007) (quoting Bell Atlantic, 550 U.S. at 555).
The court must construe the complaint in favor of the plaintiff, accept the allegations
of the complaint as true, and determine whether plaintiff’s factual allegations present
plausible claims. To survive a Rule 12(b)(6) motion to dismiss, plaintiff’s pleading for relief
must provide “more than labels and conclusions, and a formulaic recitation of the elements
of a cause of action will not do.” Id. (citations and quotations omitted). “[T]he 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).
“Nor does a
complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’”
Id. “[A] complaint must contain sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’” Id. The plausibility standard requires “more than a
sheer possibility that a defendant has acted unlawfully.” Id. “[W]here the well-pleaded
facts do not permit the court to infer more than the mere possibility of misconduct, the
complaint has alleged–but it has not ‘show[n]’– ‘that the pleader is entitled to relief.’” Id. at
Defendant’s Motion for Judgment on the Pleadings
Plaintiffs’ claims are subject to dismissal because the redemption period has
expired. Once the redemption period following a foreclosure of a parcel of real property
has expired, the former owner’s rights in and title to the property are extinguished. See
Overton v. Mortgage Electronic Registration Systems, No. 07-725429, 2009 WL 1507342,
*1 (Mich. App. May 28, 2009). After redemption expires, the former owner has no standing
to make claims with respect to the property. Id.; Kama v. Wells Fargo Bank, No. 10-10514,
2010 WL 4386974, *2 (E.D. Mich. Oct. 29, 2010); Moriarty v. BNC Mortgage, No. 1013860, 2010 WL 5173830, *2 (E.D. Mich. Dec. 15, 2010).
Here, all of plaintiffs’ rights in the property were extinguished when the redemption
period expired on September 8, 2011, and they lack standing to bring any claim with
respect to the property. “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.” Overton, 2009 WL 1507342, at *1(emphasis added)(citing Schulthies
v. Barron, 16 Mich.App 246, 247-248; 167 N.W.2d 784 (1969)).
While it is true that the Michigan Supreme Court in Reid v. Rylander, 270 Mich. 263,
267, 258 N.W. 630 (1935) held the validity of a foreclosure sale could be tested during a
summary proceeding, this is not a summary proceeding. Even under Reid, the only
matters that may be challenged during a summary proceeding are purely procedural
matters. Id. Specifically, the Reid court held that:
We again hold that validity of the sale may be tested in a summary
proceeding based thereon, in so far as invalidity thereof appears in the
procedure, but underlying equities, if any, bearing on the instrument, legal
capacity of the mortgagee or trustee, and other matters . . . cannot be made
triable issues in a summary proceeding.
Id. Therefore, plaintiffs are not permitted, as they try to do here, to challenge the capacity
of the foreclosing mortgagee or to raise any other challenges.
Further, plaintiffs have not made a clear showing of fraud or irregularity sufficient to
justify extension of the redemption period. Plaintiffs argue that they have alleged fraud
concerning the foreclosure based upon BACHLS’s representations regarding its status as
a note holder and mortgage holder. Plaintiffs’ fraud pleading does not include sufficient
facts “to state a claim that is plausible on its face.” Iqbal, 129 S. Ct. at 1949. “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.” Id. Here,
plaintiffs’ fraud claim is facially implausible.
The court cannot draw the reasonable
inference that plaintiffs relied on this alleged misrepresentation to their detriment.
Plaintiffs are incorrect in their assertion that a non party has standing to challenge
a mortgage assignment. Livonia Properties Holdings, LLC v. 12840-12976 Farmington
Road Holdings, LLC, 2010 WL 4275305, No. 10-1782, 2010 WL 4275305, *4 (6th Cir. Oct.
28, 2010). While the Livonia Properties Holdings court held that “[a]n obligor may assert
as a defense any matter which renders the assignment absolutely invalid[, such as]
nonassignability of the instrument, assignee’s lack of title, and a prior revocation of the
assignment.” Id. This exception to the rule occurs when an obligor has no protection “from
having to pay the same debt twice.” Id. Here, similar to the assignee in Livonia Properties
Holdings, BACHLS has produced documentation that it is the rightful owner of the loan and
had been assigned all rights therein prior to the initiation of foreclosure proceedings. See
Def.’s Mot., Ex. C. Plaintiffs cannot claim that BACHLS was not the rightful owner
subjecting plaintiffs to double liability on the debt, therefore they have no standing to
challenge the assignment to BACHLS. Id.
A foreclosure completed by MERS or an assignee of MERS is permitted under the
foreclosure by advertisement statute. See Residential Funding Co., LLC v. Saurman, 490
Mich. 909, 909; 805 N.W. 2d 183 (2011). The Saurman court held that MERS or an
assignee of MERS can complete a foreclosure by advertisement because “it is the owner
. . . of an interest in the indebtedness secured by the mortgage.” Id. A mortgage
assignment by MERS and eventual foreclosure sale by the assignee is consistent with the
foreclosure by advertisement statute. See Bakri v. Mortgage Electronic Registration
System, No. 297962, 2011 WL 3476818, *4 (Mich. App. Aug. 9, 2011). Here, MERS
assigned the mortgage and note to BACHLS, which enforced its contractual rights by
foreclosing its mortgage interest when plaintiffs defaulted under the loan. Plaintiffs’
argument that defendant falsely represented it was the owner and/or servicer is inaccurate.
The evidence presented shows that BACHLS owned the note and mortgage. In any event,
Mich. Comp. Laws § 600.3204(1)(d) authorizes any owner of the indebtedness, or the
servicer of the mortgage to foreclose.
Plaintiffs’ argument that MERS assigned the note to “a securitized Real Estate
Mortgage Investment Conduit (REMIC) trust,” which extinguished MERS ability to assign
the mortgage is unsupported with any documentation other than the affidavit of Gregory
Tyll, who supposedly performed an investigation of the mortgage and note concerning the
subject property. See Plf.’s Resp., Ex. 2. Mr. Tyll claims that “[a]s per the MERS loan
registration system, the note was securitized by FannieMae meaning the note and
mortgage were sold to a REMIC trust.” Id.
Mr. Tyll does not indicate what document he relies on in support of his bare
assertion that MERS assigned the mortgage to a REMIC trust. The documentary evidence
produced shows that the mortgage was assigned to BACHLS. Therefore, plaintiffs’
argument that the assignment to the REMIC trust extinguished any lien or interest in the
property is without merit.
Plaintiffs’ contention that defendants violated paragraph 20 of the mortgage because
the mortgage and note were separated is similarly without merit. That section provides, in
relevant part: “The Note or a partial interest in the Note (together with the Security
Instrument) can be sold one or more times without prior notice to the Borrower . . .”
Plaintiffs expressly authorized the assignment with language in the mortgage that was
identical to language the Michigan Court of Appeals found authorized and validated the
assignment by MERS in Bakri v. Mortgage Electronic System, No. 297962, 2011 WL
3476818, *4 (Mich. App. Aug. 9, 2011).
In any event, the Michigan Supreme Court appears to reject plaintiffs’ contention
that separation of the note from the mortgage invalidates the assignee’s rights to foreclose:
Under the settled law of this State, the mortgage and the note are to be
construed together. The rule is well-settled that the mortgagee has a lien on
the land to secure the debt. It has never been necessary that the mortgage
should be given directly to the beneficiaries. The security is always made in
trust to secure obligations, and the trust and the beneficial interest need not
be in the same hands. The choice of a mortgagee is a matter of
Indeed, in interpreting predecessor foreclosure-byadvertisement statutes, in cases in which the mortgagee had transferred a
beneficial interest, but retained record title, this Court has unanimously held
that only the record holder of the mortgage has the power to foreclose; the
validity of the foreclosure is not affected by any unrecorded assignment of
interest held for security.
Saurman, 490 Mich. at 909-10. Consistent with the Saurman decision, BACHLS had the
right to receive the assignment of plaintiffs’ former mortgage, and to foreclose upon it when
plaintiffs defaulted under the loan. The separation of the note and the mortgage, if true, did
not extinguish BACHLS’s mortgage on the subject property.
Defendant’s motion for judgment on the pleadings [#19] is GRANTED.
This cause of action is dismissed.
Dated: June 7, 2012
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
June 7, 2012, by electronic and/or ordinary mail.
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