Bleicher v. Chase Bank N.A. et al
Filing
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OPINION AND ORDER granting 8 Motion to Dismiss; denying 10 Motion to Amend/Correct. Signed by District Judge Patrick J. Duggan. (MOre)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
FREDERICK BLEICHER, as Trustee for Laura
Petrea Olsen Bleicher Revocable Trust,
Plaintiff,
Case No. 12-13357
Honorable Patrick J. Duggan
v.
CHASE BANK N.A. and ONEWEST
BANK FBS,
Defendants.
_____________________________________/
OPINION AND ORDER (1) DENYING PLAINTIFF’S MOTION TO
AMEND COMPLAINT AND (2) GRANTING DEFENDANTS’ MOTION TO
DISMISS
Presently before the Court are two motions in this lawsuit seeking to
challenge the foreclosure of property located at 941 North Melborn in Dearborn,
Michigan (“Property”). First is Defendants’ motion to dismiss Plaintiff’s
complaint, filed pursuant to Federal Rule of Civil Procedure 12(b)(6) on February
8, 2013. (ECF No. 8.) Second is Plaintiff’s “Ex-Parte Motion to Amend/Correct
Complaint Pursuant to Federal Rule of Civil Procedure 15(a)(2) and for Required
Joinder of a Party Pursuant to Federal Rule of Civil Procedure 19”, filed March 1,
2013 in response to Defendants’ motion to dismiss. (ECF No. 10.) Defendants
have filed a response to Plaintiff’s motion. No other responsive pleadings have
been filed. The Court concludes that oral argument will not aid in its disposition of
the motions and therefore dispenses with oral argument pursuant to Eastern District
of Michigan Local Rule 7.1(f). For the reasons that follow, the Court denies
Plaintiff’s motion, grants Defendants’ motion, and dismisses this action with
prejudice.
I.
Applicable Standards
A.
Motion to Amend
Plaintiff titles his motion as one brought pursuant to Federal Rule of Civil
Procedure 15(a)(2), although he also refers to subsection (a)(1) within the pleading.
Which subsection applies depends on when a plaintiff seeks leave to amend.
Under Rule 15, if the pleading to be amended “is one to which a responsive
pleading is required” the party may amend the “pleading once as a matter of course
within . . . 21 days after service of a responsive pleading or 21 days after service of
a motion under Rule 12(b), (e), or (f), whichever is earlier.” Fed. R. Civ. P.
15(a)(1). For “all other cases, a party may amend its pleading only with the
opposing party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2).
Defendants’ motion to dismiss is not a responsive pleading, Winget v. JP
Morgan Chase Bank, NA, 537 F.3d 565, 574 (6th Cir. 2008), and Plaintiff filed his
motion seeking leave to amend and proposed amended complaint within twenty2
one days after service of Defendants’ Rule 12(b)(6) motion. Thus Plaintiff could
have filed his amended complaint without first seeking leave of court. He did seek
leave, however, and the Sixth Circuit Court of Appeals has held that in that
instance a party waives its right to amend as a matter of course and invites the
court to review the amendment.1 Glazer v. Chase Home Finance LLC, 704 F.3d
453, 458 (2013) (citing Pure Country, Inc. v. Sigma Chi Fraternity, 312 F.3d 952,
956 (8th Cir. 2002) and Coventry First, LLC v. McCarty, 605 F.3d 865, 870 (11th
Cir. 2010)).
Leave to amend is to be freely given when justice so requires. Fed. R. Civ.
P. 15(a)(2). However, a district court may deny leave to amend a complaint if the
amendment would be futile. Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 569
(6th Cir. 2003) (citing Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230
(1962)). The district court should consider motions to dismiss in light of proposed
amendments to the complaint and determine whether the proposed amendments
would cure the identified deficiencies. Begala v. PNH Bank, 214 F.3d 776, 674
(6th Cir. 2000).
B.
Motion to Dismiss
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Even if the Court ignored the motion and Plaintiff filed the amended complaint as
a matter of course, the result in this case would be the same for, as discussed infra, the
amendment does not cure the deficiencies set forth in Defendants’ motion to dismiss.
3
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.” To survive a motion to
dismiss, a complaint need not contain “detailed factual allegations,” but it must
contain more than “labels and conclusions” or “a formulaic recitation of the
elements of a cause of action . . .” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
555, 127 S. Ct. 1955, 1964-65 (2007). A complaint does not “suffice if it tenders
‘naked assertions’ devoid of ‘further factual enhancement.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 , 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 557,
127 S. Ct at 1966).
As the Supreme Court provided in Iqbal and Twombly, “[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.’” Id. (quoting Twombly,
550 U.S. at 570, 127 S. Ct. at 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.” Id. (citing
Twombly, 550 U.S. at 556, 127 S. Ct. at 1965). The plausibility standard “does not
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impose a probability requirement at the pleading stage; it simply calls for enough
facts to raise a reasonable expectation that discovery will reveal evidence of illegal
[conduct].” Twombly, 550 U.S. at 556, 127 S. Ct. at 1965.
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 668, 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. (citing Twombly,
550 U.S. at 555, 127 S. Ct. at 1965-66). While the court’s analysis generally is
restricted to the factual allegations within the complaint, the court also may
consider: (1) documents referenced in the pleadings that are central to the
plaintiff’s claims, (2) matters of which a court can properly take notice, (3) public
documents, and (4) decisions of government agencies. Tellabs, Inc. v. Makor
Issues & Rights Ltd., 551 U.S. 308, 322-23, 127 S. Ct. 2499, 2509 (2007); Amini v.
Oberlin College, 259 F.3d 493, 502 (6th Cir. 2001).
II.
Factual and Procedural Background
On or about March 20, 1995, Laura Bleicher (“Ms. Bleicher”) received a
loan in the amount of $80,000.00 from North American Financial Corporation to
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purchase the Property from her son and daughter-in-law, Frederick Bleicher (“Mr.
Bleicher”) and Marjorie Bleicher, respectively. (See Def.’s Mot. Exs. 1, 3.) To
secure the loan, Ms. Bleicher granted North American Financial Corporation a
mortgage on the Property. (Id. Ex. 1.) On March 24, 1995, the mortgage was
assigned to North American Mortgage Company. (Id. Ex. 2.) The assignment was
recorded with the Wayne County Register of Deeds on April 28, 1995. (Id.)
According to a Quit-Claim Deed filed with the Wayne County Register of
Deeds on April 6, 1995, Mr. Bleicher and his wife conveyed the Property to Ms.
Bleicher on March 21, 1995. (Id. Ex. 3.) A Quit-Claim Deed attached to
Plaintiff’s proposed amended complaint reflects that, also on March 21, 1995, Ms.
Bleicher conveyed the Property to Melborn Limited Partnership (“partnership” or
“Melborn”). (Pl.’s Mot. to Amend Ex. A.) This Quit-Claim Deed was not
recorded with the Wayne County Register of Deeds.2 Mr. Bleicher and Mr.
William Hu are the sole members of the partnership. (Id. Ex. B ¶ 16.)
In 2007, Ms. Bleicher passed away and Mr. Bleicher was appointed Trustee
of her estate. (Id. ¶¶ 18, 19.) Inconsistent with the transactions above, Ms.
Bleicher’s Living Revocable Trust Agreement, executed on December 1, 1995 and
again on October 31, 2000, states that the Property was transferred directly from
2
See https://www.waynecountylandrecords.com.
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the estate of Ms. Bleicher’s husband to Melborn, reserving a life estate to Ms.
Bleicher. (Def.’s Mot. Ex. 5 at 19.)
At some point in time, Chase Bank, N.A. (“Chase”), became the servicer of
Ms. Bleicher’s loan. (Compl. ¶ 13.) According to the complaint and proposed
amended complaint, in 2007, Mr. Bleicher notified Chase of Ms. Bleicher’s death.
(Id. ¶ 15; Pl.’s Mot. Ex. B ¶ 18.) Mr. Bleicher allegedly made the payments due on
the loan for five years after Ms. Bleicher’s death, as he and Mr. Wu were residing
at the Property. (Compl. ¶ 17; Pl.’s Mot. Ex. B ¶¶ 17, 20.) However, Mr. Bleicher
eventually suffered economic hardship, causing him to request a loan modification
from Chase. (Compl. ¶ 18; Pl.’s Mot. Ex. B. ¶ 22.) In the meantime, the mortgage
was assigned to IndyMac Federal Bank, FBS (Def.’s Mot. Ex. 6), which OneWest
Bank FSB (“OneWest”) thereafter acquired in its capacity as IndyMac’s receiver.
The assignment of the mortgage to IndyMac was recorded with the Wayne County
Register of Deeds on June 23, 2010. (Id.)
OneWest eventually initiated foreclosure proceedings with respect to the
Property. The housing counselor notice required under Michigan’s foreclosure by
advertisement statute, Mich. Comp. Laws § 600.3205a, was published in the
Detroit Legal News on June 1, 2011. (Def.’s Mot. Ex. 7 at 3.) Notice of a
foreclosure sale with respect to the Property was posted at the Property on October
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8, 2011, and published in the Detroit Legal News for four consecutive weeks
beginning September 26, 2011, in accordance with section 3208 of Michigan’s
foreclosure by advertisement statute, Mich. Comp. Laws § 600.3208. (Def.’s Mot.
Ex. 7 at 4, 5.) Mr. Bleicher was communicating with Chase about a loan
modification during this period and, according to the complaint and proposed
amended complaint, received applications and requests for documentation from
Chase. (Compl. ¶¶ 20-22, 24-27; Pl.’s Mot. Ex. B ¶¶ 23-26, 28-31.) According to
the complaint and proposed amended complaint, Mr. Bleicher completed and
returned the numerous loan modification applications he received from Chase and
provided Chase with all the information requested. (Id.)
Nevertheless, a sheriff’s sale with respect to the Property was held on
January 26, 2012, where the Property was sold to OneWest for $77,720.97.3
(Def.’s Mot. Ex. 7 at 2.) The Sheriff’s Deed was recorded with the Wayne County
Register of Deeds on February 14, 2012. The Six month statutory redemption
period for the Property expired on July 26, 2012, without redemption being made.
One day before the redemption period expired, Mr. Bleicher, as Trustee of
his mother’s estate, initiated this lawsuit in the Circuit Court for Wayne County,
3
According to a Statement of Compliance completed by Nakia Robinson, an
attorney for OneWest, Mr. Bleicher did not provide all of the financial documents
necessary to assess eligibility for a loan modification. (Def.’s Mot Ex. 7 at 7 ¶ 8.)
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Michigan. The complaint asserts inter alia that: “Plaintiff” did not receive a copy
of any promissory note with respect to the March 20, 1995 mortgage loan (Compl.
¶ 8); the mortgage was securitized and assigned numerous times and is part of a
pooling servicing agreement (id. ¶¶ 1-12); and “Plaintiff” did not receive notice of
the sheriff’s sale or a mediation meeting with a housing counselor. (Id. ¶¶ 30, 31.)
Plaintiff’s proposed amended complaint which seeks to add Melborn as a plaintiff
in addition to Mr. Bleicher as Trustee of his mother’s estate, asserts the same
allegations. (See Pl.’s Mot. Ex. B.) The complaint and proposed amended
complaint contain the following “counts”: (I) violations of Michigan foreclosure
laws; (II) breach of an agreement to provide a loan modification; (III) fraud in the
inducement; (IV) quiet title; (V) slander of title; (VI) violations of Michigan
Compiled Laws § 600.3205(c); (VII) promissory estoppel; (VIII) relief from
sheriff sale and/or set aside foreclosure; and (IX) declaratory and injunctive relief.
On July 31, 2012, Defendants removed the complaint to federal court based
on diversity jurisdiction. The parties thereafter stipulated to an extension of time
for Defendants to respond to the complaint and then to a stay of the litigation
pending settlement negotiations. (ECF Nos. 6, 7.) When no settlement could be
reached, Defendants filed their pending motion to dismiss on February 8, 2013.
III.
The Parties’ Arguments
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In their motion to dismiss, Defendants argue that Mr. Bleicher lacks standing
to bring this lawsuit because he (individually or as Trustee of his mother’s estate)
has no legal interest in the Property as it was transferred to Melborn upon Ms.
Bleicher’s death. Defendants further argue that Mr. Bleicher lacks any basis to
state claims against Chase for its alleged failure to authorize him to assume Ms.
Bleicher’s loan or modify the loan. Lastly, Defendants argue that all of the claims
in the complaint fail as a matter of law.
Apparently to cure the standing issue raised in Defendants’ motion, Plaintiff
filed the motion to amend the complaint to add Melborn as a plaintiff. Plaintiff
contends that Melborn is a party that must be joined under Federal Rule of Civil
Procedure 19. Defendants oppose the joinder of Melborn as a plaintiff, arguing
that the certificate required under Michigan law to grant the partnership the
capacity to sue has not been filed. Defendants also argue that the claims alleged
are futile even when brought by Melborn and that Melborn is not a party that must
be joined under Rule 19.
IV.
Applicable Law and Analysis
A.
Michigan’s Relevant Foreclosure Law
Statutory law governs foreclosure sales by advertisement in Michigan, such
as the sale of the subject Property. Conlin v. Mortg. Elec. Registration Systems,
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Inc., 714 F.3d 355 (6th Cir. 2013) (citations omitted); see also Senters v. Ottawa
Sav. Bank, FSB, 443 Mich. 45, 50, 503 N.W.2d 639, 641 (1993). “While the
statutory scheme provides certain steps that the mortgagee must go through in
order to validly foreclose, . . . it also controls the rights of both the mortgagee and
the mortgagor once the sale is completed.” Conlin, 714 F.3d at 359 (citations
omitted). Pursuant to the statute, once a foreclosure sale has taken place, the
mortgagor has six months to redeem the foreclosed property. Mich. Comp. Laws
§ 600.3240(8). If no redemption is made by the time the redemption period lapses,
the mortgagor’s “right, title, and interest in and to the property” are extinguished.
Id. § 600.3236; see also Conlin, 2013 WL 1442263, at *2 (citing Piotrowski v.
State Land Office Bd., 302 Mich. 179, 187, 4 N.W.2d 514, 517 (Mich. 1942)).
Michigan’s foreclosure-by-advertisement scheme was designed to “impose
order on the foreclosure process while still giving security and finality to
purchasers of foreclosed properties.” Conlin, 714 F.3d at 359 (citations omitted).
To effectuate the latter priority, the ability for a court to set aside a foreclosure sale
is “drastically circumscribed.” Id. (citing Schulthies v. Barron, 16 Mich. App. 246,
247-48, 167 N.W.2d 784, 785 (1969) and Senters, 443 Mich. at 54, 503 N.W.2d at
643). Once the statutory redemption period has expired, a court may set aside a
sheriff’s sale only where the mortgagor makes “a clear showing of fraud, or
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irregularity.” Id. (citing Schulthies, 16 Mich. App. at 247-48, 167 N.W. at 49); see
also Freeman v. Wozniak, 241 Mich. App. 633, 637, 617 N.W.2d 46, 49 (2000)
(“[I]n the absence of fraud, accident or mistake, the possibility of injustice is not
enough to tamper with the strict statutory requirements.”) (citing Senters, 443
Mich. at 55, 503 N.W.2d at 643). Notably, the purported fraud or irregularity must
relate to the foreclosure process itself. Conlin, at 360 (citing Freeman, 241 Mich.
App. at 636-38, 617 N.W.2d at 49); see also Reid v. Rylander, 270 Mich. 263, 267,
258 N.W. 630, 631 (1935) (holding that only the foreclosure proceeding may be
challenged after a sale).
The redemption period expired with respect to the subject Property on July
26, 2012. The filing of this lawsuit one day earlier did not toll the redemption
period. See Conlin, 714 F.3d at 360 (indicating that “the filing of a lawsuit is
insufficient to toll the redemption period”) (internal quotation marks and citation
omitted). Thus “a clear showing of fraud, or irregularity” in the foreclosure
proceeding is required to set aside the sheriff’s sale or to present a valid defense to
any action brought to evict Mr. Bleicher and/or Mr. Hu from the Property.
Neither the Complaint nor proposed amended complaint allege a single fact
in support of the “strong case of fraud” required to set aside the foreclosure sale. In
fact, the record shows that Defendants complied with Michigan’s foreclosure by
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advertisement statute. For the reasons outlined below, without a basis to set aside
the foreclosure sale, Melborn has no standing to assert the claims raised in this
action.4
Under Michigan law, Ms. Bleicher’s transfer of the Property to Melborn had
no impact on OneWest’s lien on the Property pursuant to the Mortgage. United
States v. Big Value Supermarkets, Inc., 898 F.2d 493, 497 (6th Cir. 1990) (citing
Bess, 357 U.S. 51, 57, 78 S. Ct. 1054, 1058 (1990) (explaining that “[t]he transfer
of property subsequent to the attachment of the lien does not affect the lien, for it is
of the very nature and essence of a lien, that no matter into whose hands the
property goes, it passes cum onere . . .”) (internal quotation marks and citation
omitted)). Pursuant to that lien, OneWest had the power to sell the Property at a
foreclosure sale in the event of an uncured default, which it did. OneWest
purchased the Property at the sheriff’s sale and the Sheriff’s Deed reflecting the
transaction subsequently was recorded in the chain of title. The purported
conveyance to Melborn was not recorded and Plaintiff does not allege that
OneWest otherwise was aware of the transfer. As such, OneWest was a bona fide
4
As argued by Defendants, Mr. Bleicher, individually or as Trustee of Ms.
Bleicher’s estate, has no standing to raise the claims asserted because the conveyance to
Melborn left Ms. Bleicher with only a life interest in the Property which extinguished
upon her death.
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purchaser of the Property and any prior interest of Melborn was voided upon the
recording of OneWest’s deed. See Mich. Comp. Laws § 565.29 (“Every
conveyance in real estate within the state . . . which shall not be recorded . . . , shall
be void as against any subsequent purchaser in good faith and for valuable
consideration, of the same real estate or any portion thereof, whose conveyance
shall be first duly recorded.”).
Counts I, IV, V, VI, VIII, and IX of the complaint and proposed amended
complaint therefore fail to state a claim upon which relief may be granted.
B.
Breach of Contract, Fraud in the Inducement, and Promissory
Estoppel
Mr. Bleicher alleges that Chase’s representatives informed him that if he
supplied all the documentation requested to determine if he was eligible to receive
a loan modification and he was eligible for a modification, the loan made to Ms.
Bleicher would be modified. Plaintiff’s breach of contract, fraud in the
inducement, and promissory estoppel claims are premised on Chase’s failure to
modify the loan. Even if Mr. Bleicher had standing to assert these claims, they fail
as a matter of law.
First, Michigan’s statute of frauds precludes a party from bringing a claim–
no matter its label– against a financial institution to enforce the terms of an oral
promise to modify a loan. Mich. Comp. Laws § 566.132(2); Goryoka v. Quicken
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Loan, Inc., No. 11-2178, 2013 WL 1104991, at *2 (6th Cir. Mar. 18, 2013) (citing
Crown Tech. Park v. D & N Bank, FSB, 242 Mich. App. 538, 619 N.W.2d 66, 72
(2000)). Second, neither Mr. Bleicher nor Melborn was a party to the mortgage
and thus there is no basis for them to claim that they were entitled to a loan
modification under Michigan law or the mortgage loan agreement.
Counts II, III, and VII thus also fail to state a claim upon which relief may
be granted.
V.
Conclusion
For the reasons set forth above, the Court concludes that the claims alleged
in the initial and proposed amended complaints fail to state a claim upon which
relief may be granted.
Accordingly,
IT IS ORDERED, that Plaintiff’s motion requesting leave to file an
amended complaint is DENIED;
IT IS FURTHER ORDERED, that Defendants’ motion to dismiss is
GRANTED.
Dated: July 12, 2013
s/Patrick J. Duggan
United States District Judge
Brian Dailey, Esq.
Justin G. Grove, Esq.
Joseph H. Hickey, Esq.
Kyle R. Dufrane, Esq.
Thomas H. Trapnell, Esq.
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