Polk v. Countrywide Financial Corporation et al
Filing
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OPINION AND ORDER granting 9 Motion to Dismiss. Signed by District Judge Patrick J. Duggan. (MOre)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
LARRY R. POLK,
Plaintiff,
Case No. 12-10648
v.
Honorable Patrick J. Duggan
COUNTRYWIDE FINANCIAL
CORPORATION, COUNTRYWIDE
HOME LOANS, BAC HOME LOANS
SERVICING, LP, and BANK OF
AMERICA CORPORATION,
Defendants.
/
OPINION AND ORDER
At a session of said Court, held in the U.S.
District Courthouse, Eastern District
of Michigan, on July 19, 2012.
PRESENT:
THE HONORABLE PATRICK J. DUGGAN
U.S. DISTRICT COURT JUDGE
On December 29, 2011, Larry Polk (“Plaintiff”) filed this action, asserting violations
of state law in connection with the denial of his request for a loan modification. Presently
before the Court is a motion to dismiss the Complaint, filed on April 23, 2012 by Bank of
America, N.A. (“Defendant”) pursuant to Federal Rule of Civil Procedure 12(b)(6).1 The
matter has been fully briefed, and the Court heard oral argument on June 27, 2012. For
1
The Complaint misidentifies Bank of America, N.A. as “Bank of America Corporation.”
Bank of America, N.A. is the successor by merger to the remaining named defendants.
reasons set forth below, the Court grants Defendant’s motion.
I. Factual and Procedural Background
On April 25, 2005, Plaintiff obtained a loan in the amount of $216,000 from Argent
Mortgage Company, LLC. As security for this loan, Plaintiff executed a mortgage on real
property located at 19520 Stratford Road in Detroit, Michigan. Defendant serviced this
loan, which was eventually sold to another lender.
Plaintiff later began having difficulty making the scheduled payments. In a letter
dated April 9, 2010, Defendant offered Plaintiff a three-month trial loan modification
under the federal government’s Home Affordable Modification Program (“HAMP”). See
Pl.’s Br. Ex. 1, Dkt. #12. Under this plan, Plaintiff would make three monthly payments
of $1,860 instead of his regular monthly mortgage payments. He was also required to
provide Defendant with certain documents necessary to determine his eligibility for a
permanent loan modification. Id. Plaintiff signed the letter and returned it on or about
April 27, 2010. Plaintiff asserts that he submitted the requested documents and made each
of the three trial period payments by their respective due dates. Compl. ¶ 26.
Defendant subsequently informed Plaintiff that his loan would not be permanently
modified, based on Plaintiff’s failure to provide certain additional documents. Pl.’s Br. 5.
Foreclosure proceedings were instituted, and on July 27, 2011, the home was sold at a
sheriff’s sale to Wells Fargo Bank N.A., as trustee for the certificate holders of Park Place
Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WCW2. The
statutory redemption period expired on January 27, 2012, and Plaintiff has not redeemed
the property.
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Plaintiff filed this action on December 29, 2011 in Wayne County Circuit Court. His
Complaint asserts the following claims: breach of contract (Count I); breach of the implied
covenant of good faith and fair dealing (Count II); negligence (Count III); gross
negligence / intentional tort (Count IV); and “declaratory relief and injunction” (Count V).
Defendant removed the suit to this Court, and has now moved to dismiss the Complaint
pursuant to Rule 12(b)(6).
II. Standard of Review
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the
legal sufficiency of the complaint. RMI Titanium Co. v. Westinghouse Elec. Corp., 78
F.3d 1125, 1134 (6th Cir. 1996). Under Federal Rule of Civil Procedure 8(a)(2), a
pleading must contain a “short and plain statement of the claim showing that the pleader is
entitled to relief.” As the Supreme Court recently provided in Iqbal, “[t]o survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678,
129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127
S. Ct. 1955, 1974 (2007)). “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. at 678, 129 S. Ct. at 1949 (citing Twombly, 550
U.S. at 556, 127 S. Ct. at 1965). The plausibility standard “does not impose a probability
requirement at the pleading stage; it simply calls for enough fact to raise a reasonable
expectation that discovery will reveal evidence of illegal [conduct].” Twombly, 550 U.S.
at 556, 127 S. Ct. at 1965.
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In deciding whether the plaintiff has set forth a “plausible” claim, the court must
accept the factual allegations in the complaint as true. Id.; see also Erickson v. Pardus,
551 U.S. 89, 94, 127 S. Ct. 2197, 2200 (2007). This presumption, however, is not
applicable to legal conclusions. Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949. Therefore,
“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. at 678, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at
555, 127 S. Ct. at 1964-65). Ultimately, “[d]etermining whether a complaint states a
plausible claim for relief will . . . be a context-specific task that requires the reviewing
court to draw on its judicial experience and common sense.” Id. at 679, 129 S. Ct. at 1950.
In conducting this analysis, the Court may consider the pleadings, exhibits attached
thereto, and documents referred to in the complaint that are central to the plaintiff’s
claims. See Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th Cir. 1999).
III. Discussion
A. Breach of Contract
Count I, entitled “Breach of Contract,” asserts that Defendant is required to service
Plaintiff’s mortgage loan in a reasonable manner. Plaintiff cites a consent order published
by the Office of the Comptroller of the Currency indicating that Defendant had engaged in
unsafe and unsound banking practices related to loan servicing. Compl. ¶¶ 15-18. The
Complaint continues:
19. This action is brought to remedy unlawful acts and practices by Defendants
in servicing loans for borrowers who are seeking to save their homes.
20. Defendants have made various representations to borrowers about their
mortgage loans that are false or lack a reasonable basis.
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Id. ¶¶ 19-20.
“Under Michigan law, the elements of a breach of contract claim are the following:
(1) a contract existed between the parties, (2) the terms of the contract required
performance of certain actions, (3) a party breached the contract, and (4) the breach caused
the other party injury.” Green Leaf Nursery, Inc. v. Kmart Corp., 485 F. Supp. 2d 815,
818 (E.D. Mich. 2007) (citing Burton v. William Beaumont Hosp., 373 F. Supp. 2d 707,
718 (E.D. Mich. 2005)). Count I fails to identify a breach of the contract between the
parties in this case. Plaintiff has not indicated that this is a class action suit. Nor has he
alleged that he was harmed by Defendant’s conduct with respect to other borrowers.
Count I fails to assert a plausible basis for finding that Defendant is liable to Plaintiff for
its alleged misconduct.
In his response brief, Plaintiff argues that the allegations of Count I are sufficient to
support a claim of fraud. Pl.’s Br. 3-4. The Court disagrees. Fraud must be pleaded with
particularity. Fed. R. Civ. P. 9(b). “The Sixth Circuit interprets Rule 9(b) as requiring
plaintiffs to ‘allege the time, place, and content of the alleged misrepresentation on which
he or she relied; the fraudulent scheme; the fraudulent intent of the defendants; and the
injury resulting from the fraud.’” Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 563 (6th
Cir. 2003) (quoting Coffey v. Foamex L.P., 2 F.3d 157, 161-162 (6th Cir. 1993)). Count I
fails to identify any specific false representation concerning Plaintiff’s loan. The general
assertion that “Defendants have made various representations to borrowers about their
mortgage loans that are false or lack a reasonable basis,” Compl. ¶ 20, is insufficient to
satisfy Rule 9’s heightened pleading standard.
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B. Loan Modification
Plaintiff asserts that Defendant breached an agreement to modify his loan. He points
to a letter in which Defendant offered him a three-month trial loan modification, as well as
an accompanying document entitled “Home Affordable Modification Trial Period Plan.”
See Pl.’s Br. Ex. 1. Plaintiff argues that Defendant entered into an enforceable agreement
to provide him with a permanent loan modification, so long as he: (1) timely made the
three payments required by the Trial Period Plan; and (2) submitted all of the documents
requested by Defendant. Plaintiff alleges that he satisfied both conditions. Compl. ¶ 26.
Defendant argues that Michigan’s statute of frauds bars this claim, because Plaintiff
has failed to present a signed writing containing the alleged promise to modify his loan.
The statute of frauds provides:
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 financial
accommodation.
(c) A promise or commitment to waive a provision of a loan, extension of credit, or
other financial accommodation.
Michigan Compiled Laws § 566.132(2). The closing of the trial modification letter reads:
“Loan Modification Team, Bank of America Home Loan Servicing, LP.” This could
arguably satisfy the statutory requirement of “an authorized signature by the financial
institution.” The Court need not resolve this question, however, because it does not appear
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that the agreement required Defendant to permanently modify Plaintiff’s loan.
Plaintiff argues that the trial loan modification agreement obligated Defendant to
permanently modify his loan once he made the three trial period payments and returned
the requested documents. Statements in the trial modification letter and in the
accompanying documents indicate otherwise. The third paragraph of the letter provides:
In the next few days, you will receive a package with additional details and
documents that we will need returned to us so we can complete the three-month
trial modification process and determine your eligibility for the permanent
modification of your loan. There are no fees associated with this program. If
we determine that you are not eligible for a permanent modification under the
Home Affordable Modification Program, we will contact you and review other
options.
Pl.’s Br. Ex. 1 at 1 (emphasis added). This plainly contemplates a review by Defendant to
determine whether Plaintiff qualifies for the requested loan modification. The four-page
document entitled “Home Affordable Modification Trial Period Plan” also indicates that
Defendant is entitled to review Plaintiff’s submissions and either approve or deny the
requested permanent loan modification. The second paragraph of this document provides
in pertinent part:
I understand that after I sign and return two copies of this Plan to the Servicer,
the Servicer will send me a signed copy of this Plan if I qualify for the Offer or
will send me written notice that I do not qualify for the Offer. This Plan will
not take effect unless and until both I and the Servicer sign it and Servicer
provides me with a copy of this Plan with the Servicer’s signature.
Pl.’s Br. Ex. 1 at 7. Furthermore, Section 2 of the “Home Affordable Modification Trial
Period Plan” includes the following provision:
F. If prior to the Modification Effective Date, (i) the Servicer does not provide
me a fully executed copy of this Plan and the Modification Agreement; (ii) I
have not made the Trial Period payments required under Section 2 of this
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Plan; or (iii) the Servicer determines that my representations in Section 1 are
no longer true and correct, the Loan Documents will not be modified and
this Plan will terminate. In this event, the Servicer will have all of the rights
and remedies provided by the Loan Documents, and any payment I make
under this Plan shall be applied to amounts I owe under the Loan
Documents and shall not be refunded to me; and
Pl.’s Br. Ex. 1 at 9. These statements all clearly indicate that Plaintiff’s submission of trial
period payments and documents does not obligate Defendant to permanently modify the
loan. Defendant is entitled to review these submissions and approve or deny the request.
Defendant denied Plaintiff’s request, Compl. ¶¶ 26-28, and it is undisputed that Defendant
did not return an executed copy of the Trial Period Plan to Plaintiff. The Court therefore
concludes that Plaintiff’s allegations fail to establish a breach of an enforceable contract.
At oral argument, Plaintiff cited a provision that he believes obligated Defendant to
permanently modify his loan. The first sentence of the “Home Affordable Modification
Trial Period Plan” reads as follows:
If I am in compliance with this Trial Period Plan (the “Plan”) and my
representations in Section 1 continue to be true in all material respects, then the
Servicer will provide me with a Home Affordable Modification Agreement
(“Modification Agreement”), as set forth in Section 3, that would amend and
supplement (1) the Mortgage on the Property, and (2) the Note secured by the
Mortgage.
Pl.’s Br. Ex. 1 at 7. While this provision does not specifically describe further review by
Defendant, it refers to sections that do. It states that Defendant will provide a modification
agreement “as set forth in Section 3.” Section 3, which describes the process for executing
the permanent loan modification agreement, mandates Plaintiff’s compliance with “the
requirements in Section 2.” Pl.’s Br. Ex. 1 at 9. Section 2, in turn, includes paragraph F,
which is cited by the Court above and provides for a review by Defendant prior to granting
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a permanent loan modification. The Trial Period Plan may not be a model of clarity, but it
does not obligate Defendant to permanently modify Plaintiff’s loan without further review.
Even if the Court were to accept Plaintiff’s interpretation of the cited provision, his
reading of the contract as a whole does not accord with Michigan’s principles of contract
interpretation. “[C]ourts must . . . give effect to every word, phrase, and clause in a
contract and avoid an interpretation that would render any part of the contract surplusage
or nugatory.” Klapp v. United Ins. Grp. Agency, Inc., 468 Mich. 459, 468, 663 N.W.2d
447, 453 (Mich. 2003). Plaintiff’s reading of the agreement would nullify provisions that
allow Defendant to determine his eligibility for a permanent loan modification. The Court
must instead “strive to harmonize apparently conflicting terms or clauses.” Wonderland
Shopping Ctr. Ltd. P’ship v. CDC Mortg. Capital, Inc., 274 F.3d 1085, 1092 (6th Cir.
2001) (citing Fresard v. Mich. Millers Mut. Ins. Co., 414 Mich. 686, 694, 327 N.W.2d
286, 289 (Mich. 1982)). Here, the conflicting provisions could be harmonized by finding
that the loan would not be permanently modified unless: (1) Plaintiff complied with the
conditions of the Trial Period Plan; and (2) Defendant approved the request to modify the
loan. Under this interpretation of the agreement, Defendant’s actions would not constitute
a breach. The Court concludes that Plaintiff has failed to set forth a plausible breach of
contract claim relating to a permanent loan modification.
C. Breach of the Implied Covenant of Good Faith and Fair Dealing
In Count II, Plaintiff asserts that Defendant breached the implied covenant of good
faith and fair dealing by failing to modify Plaintiff’s loan under the HAMP program. In
his response brief, Plaintiff concedes that there is no private right of action under HAMP.
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Pl.’s Br. 7 (citing Hart v. Countrywide Home Loans, Inc., 735 F. Supp. 2d 741, 748 (E.D.
Mich. 2010)). It is not clear from Plaintiff’s response brief, however, whether he agrees to
dismiss Count II in its entirety. Count II does not cite a breach of an agreement other than
the HAMP agreement between Defendant and the government. To the extent that Plaintiff
alleges a breach of the “Home Affordable Modification Trial Period Plan,” the Court has
already concluded that this claim fails.
Plaintiff’s discussion of this count claims violations of Michigan’s loan modification
statute, Michigan Compiled Laws § 600.3205a et seq.2 See Pl.’s Br. 7. If Plaintiff claims
a breach of the implied covenant of good faith and fair dealing based on violation of
Michigan’s loan modification statute, his claim fails as a matter of law. The implied
covenant relates to the performance of contractual duties. See Flynn v. Korneffel, 451
Mich. 186, 213 n.8, 547 N.W.2d 249, 260 n.8 (Mich. 1996). The Court is unaware of any
authority indicating that a violation of a statute implicates the implied covenant of good
faith and fair dealing; such a violation would instead entitle a plaintiff to remedies under
the statute itself. The statute here creates a remedy for an aggrieved borrower, as it allows
the borrower to convert the proceeding into a judicial foreclosure. See Michigan
Compiled Laws § 600.3205c(8). Plaintiff did not avail himself of that remedy before the
sheriff’s sale was held, and courts in the Eastern District of Michigan have held that this
statute cannot be used to set aside a completed foreclosure sale. See Adams v. Wells Fargo
Bank, N.A., No. 11-10150, 2011 U.S. Dist. LEXIS 90226, at *12 (E.D. Mich. Aug. 10,
2
The Court notes that these allegations are not set forth anywhere in the Complaint.
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2011); Stein v. U.S. Bancorp, No. 10-14026, 2011 U.S. Dist. LEXIS 18357, at *29 (E.D.
Mich. Feb. 24, 2011).
Count II also includes the allegation that Defendant failed to provide Plaintiff with a
notice of the sheriff’s sale. Compl. ¶ 35. Even accepting this as true, the Court finds that
Plaintiff has failed to set forth a plausible claim for relief. Under Michigan law, a sheriff’s
sale may be set aside based on defective notice only if the plaintiff demonstrates prejudice.
Jackson Inv. Corp. v. Pittsfield Prods., Inc., 162 Mich. App. 750, 755-56, 413 N.W.2d 99,
101-02 (Mich. Ct. App. 1987). Plaintiff has failed to plead facts indicating that he was
harmed as a result of the defective notice. Allegations of defective notice have routinely
been held insufficient to set aside a foreclosure sale where the borrower has not tendered
payment to redeem the property. See Worthy v. World Wide Fin. Servs., 347 F. Supp. 2d
502, 510-11 (E.D. Mich. 2004); Sweet Air Inv. v. Kenney, 275 Mich. App. 492, 502-03,
739 N.W.2d 656, 662 (Mich. Ct. App. 2007). The Court therefore concludes that Count II
must be dismissed.
D. Negligence / Intentional Tort Claims
In Counts III and IV, Plaintiff asserts that Defendant’s conduct in servicing his loan
was negligent and grossly negligent. These counts include no supporting facts, and it is
clear that merely reciting the elements of a cause of action will not suffice to plead a claim
for relief. See Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949. Plaintiff clarifies in his response
brief that his claims are based on: (1) Defendant’s representations that loan modification
efforts were ongoing; and (2) Defendant’s subsequent refusal to modify his loan. Pl.’s Br.
8. A lender has no duty to modify a borrower’s loan under the HAMP program. Hart, 735
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F. Supp. 2d at 747-48; Houston v. U.S. Bank Home Mortg. Wis. Serv., No. 10-13780, 2011
U.S. Dist. LEXIS 46878, at *16-18 (E.D. Mich. May 2, 2011); Ahmad v. Wells Fargo
Bank, N.A., No. 11-15204, 2012 U.S. Dist. LEXIS 36300, at *17-24 (E.D. Mich. Feb. 27,
2012) (citing cases). Thus, Plaintiff cannot assert a plausible claim of negligence for
breach of this alleged duty.
E. Declaratory Relief and Injunction
Count V requests declaratory and injunctive relief based on the allegations set forth
in Counts I through IV. See Compl. ¶ 57-58. The Court has concluded, however, that
Counts I through IV fail to state plausible claims for relief. There is no basis for granting
the declaratory and injunctive relief sought by Plaintiff.
The Court also notes that to the extent that Plaintiff seeks to set aside the foreclosure
sale or the sheriff’s deed, his request is barred by the expiration of the redemption period.
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). 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). At
oral argument, Plaintiff suggested that this lawsuit might toll the redemption period, but
the Michigan Court of Appeals rejected this argument in Overton, holding that the filing of
a suit before the redemption period expired was “insufficent” to justify tolling. Id. The
Court therefore concludes that Count V must be dismissed.
IV. Conclusion
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Accordingly,
IT IS ORDERED that Defendant’s motion to dismiss the Complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6) is GRANTED.
s/PATRICK J. DUGGAN
UNITED STATES DISTRICT JUDGE
Copies to:
Larry R. Polk, Esq.
Joseph H. Hickey, Esq.
Laura C. Baucus, Esq.
Lauren Philips, Esq.
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