Edwards, Jr. et al v. Wells Fargo Bank, N.A.
Filing
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OPINION AND ORDER granting 2 Defendants' Motion to Dismiss. Signed by District Judge Gerald E. Rosen. (LWag)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
OMEGA L. EDWARDS, JR. and
ADRIAN EDWARDS,
Plaintiffs,
No. 2:12-cv-13413
Hon. Gerald E. Rosen
vs.
WELLS FARGO BANK, N.A.,
Defendant.
___________________________________/
OPINION AND ORDER
GRANTING DEFENDANT’S MOTION TO DISMISS
I. INTRODUCTION
In this mortgage foreclosure action, Plaintiffs Omega and Adrian
Edwards seek to challenge Defendant Wells Fargo’s foreclosure and
subsequent sale of their home to Fannie Mae. Plaintiffs filed their Complaint
in Wayne County Circuit Court on July 17, 2012, stating three causes of
action: Count I - Injunctive Relief; Count II - Wrongful Foreclosure by Wells
Fargo Bank, N.A., in Violation of MCL 600.3204(3) & (4); and Count III Action to Set Aside Foreclosure and Quiet Title.
Defendant removed the action pursuant to 28 U.S.C. § 1332 on August
2, 2012, and filed its Motion to Dismiss and / or for Summary Judgment on
August 6, 2012. Twenty-one weeks later, Plaintiffs filed their response to
Defendant’s motion. Defendant replied on January 14, 2013.
II. FACTUAL BACKGROUND
On March 14, 2008, Plaintiff Omega Edwards obtained a $96,050
mortgage from “We Are Finance Corp.,” which named Mortgage Electronic
Registration Systems, Inc. (“MERS”) as the nominee. The mortgage named
Omega as the “borrower” and was co-signed by his wife, Adriana, who was
designated a “non-obligated spouse.”
Plaintiffs defaulted on the mortgage. MCL § 600.3205(a)(1) requires
that a borrower in default be provided with written notice of her rights and
options prior to the commencement of foreclosure proceedings. Defendant
Wells Fargo has submitted an affidavit stating that it sent Plaintiffs a letter - dated July 8, 2009 -- in which it provided Plaintiffs with the written notice
required by § 600.3205(a)(1). Plaintiffs claim they never received this notice.
On November 2, 2009, MERS assigned Plaintiffs’ mortgage to
Defendant (“The Assignment”).
Defendant advertised the foreclosure of
Plaintiffs’ property in the Detroit Legal News on November 3, 2009. The
assignment of Plaintiffs’ mortgage from MERS to Defendant was recorded
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with the Wayne County Register of Deeds on November 6, 2009. Defendant
further advertised the foreclosure in the Detroit Legal News on November 10,
17, and 24, 2009.
Fannie Mae purchased Plaintiffs’ property at a sheriff’s sale on March
10, 2010. The property was deeded to Fannie Mae on March 11, 2010. Under
Michigan law, the six-month statutory redemption period following a
foreclosure sale began on March 10, 2010 and was set to expire on September
10, 2010. Plaintiffs did not redeem the property during this period.
Fannie Mae deeded the property back to Defendant on February 3,
2012. On July 17, 2012 -- twenty-two months after the redemption period
expired -- Plaintiffs filed this action in Wayne County Circuit Court.
III. DISCUSSION
Defendant has moved to dismiss Plaintiffs’ claims under both Fed. R.
Civ. P. 12(b)(6) and Fed. R. Civ. P. 56. The Court will first address the counts
in Plaintiffs’ Complaint through the lens of Rule 12(b)(6), and then, if
necessary, apply Rule 56.
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A.
Rule 12(b)(6) Standard
In deciding a motion brought under Rule 12(b)(6), the Court must
construe the complaint in the light most favorable to Plaintiffs 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).
To withstand a motion to
dismiss, however, a complaint “requires more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action will not do.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The factual allegations
in the complaint, accepted as true, “must be enough to raise a right to relief
above the speculative level,” and must “state a claim to relief that is plausible
on its face.” Id. at 570. “A claim has facial plausibility when the [Plaintiffs]
plead[] factual content that allows the court to draw the reasonable inference
that the [D]efendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). The Court must “construe the complaint in the
light most favorable to the [Plaintiffs], accept [their] allegations as true, and
draw all reasonable inferences in favor of the [Plaintiffs].” DirecTV, Inc. v.
Treesh, 487 F.3d 471, 476 (6th Cir. 2007). However, the Court “need not
accept as true legal conclusions or unwarranted factual inferences.”
(quoting Gregory v. Shelby Cnty., 220 F.3d 433, 446 (6th Cir. 2000)).
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Id.
If the well-pled facts in Plaintiffs’ Complaint -- accepted as true -- are
insufficient to for Plaintiffs to recover on a claim, that claim must be
dismissed. Iqbal, 556 U.S. at 680 (“Because the well-pleaded fact of parallel
conduct, accepted as true, did not plausibly suggest an unlawful agreement,
the Court held the plaintiffs' complaint must be dismissed.”).
B.
Plaintiffs’ Claims
1.
Injunctive Relief
Count 1 of Plaintiffs’ Complaint alleges “injunctive relief” on the basis
that Defendant lacked standing to “commence[] and to proceed with any
foreclosure due to the illegal sheriff sale done in fatal violations of MCL
600.3204 and MCL 600.3205 rendering the foreclosure void ab initio.”
However, “injunctive relief” is not a cause of action. Terlecki v. Stewart, 278
Mich. App. 644, 663, 754 N.W.2d 899, 912 (2008) (“It is well settled that an
injunction is an equitable remedy, not an independent cause of action.”).
Because no set of facts could support a finding of “injunctive relief” against
Defendant, Count 1 is DISMISSED.
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2.
Wrongful Foreclosure by Wells Fargo Bank, N.A. in
Violation of MCL 600.3204(3) & (4)
Count 2 of Plaintiffs’ Complaint alleges that Defendant’s foreclosure is
void, ab initio, because Defendant: (i) failed to provide proper Notice of
Plaintiffs’ statutory rights under MCL § 600.3204(4)(a) and § 600.3205(a);
and (ii) advertised the foreclosure of Plaintiffs’ property before it recorded the
assignment. Defendant argues that Plaintiffs lack standing to challenge the
foreclosure of their property, because Michigan’s six-month redemption
period -- which expired twenty-two months before Plaintiffs filed this suit -extinguished their rights and title to the property.
The rights and obligations of parties to a foreclosure are governed by
Michigan statute. MCL § 600.3236 vests the purchaser of a sheriff’s deed
with “all the right, title, and interest which the mortgagor had” in the
property, unless the property is redeemed within the six-month statutory
period. Nafso v. Wells Fargo Bank, NA, 11-10478, 2011 WL 1575372 (E.D.
Mich. Apr. 26, 2011). Plaintiffs’ property was sold to Fannie Mae on March
10, 2010, and was not redeemed by Plaintiffs. Thus, when the sixth-month
redemption period expired on September 10, 2010, Fannie Mae became
vested with “all the right, title, and interest” in Plaintiffs’ property. Id. See
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also Overton v. Mortgage Electronic Registration Sys., Inc., No. 284950, 2009
WL 1507342, at * 1 (Mich. Ct. App. May 28, 2009); Kama v. Wells Fargo
Bank, No. 10-10514, 2010 WL 4386974, at *2 (E.D. Mich. Oct. 29, 2010);
Smith v. Wells Fargo Home Mortgage, Inc., No. 09-13988 (E.D. Mich. Aug. 16,
2010); Moriarty v. BNC Mortgage, et al, No. 10-13860 (E.D. Mich. Dec. 15,
2010).
Absent a valid legal interest in the property, Plaintiffs lack standing to
challenge the foreclosure sale unless they make a clear “showing of fraud or
irregularity.” Brezzell v. Bank of Am., N.A., 11-11467, 2011 WL 2682973, at
*5 (E.D. Mich. July 11, 2011); Sweet Air Investment Inc. v. Kenney, 275 Mich.
App. 492, 497, 739 N.W.2d 656 (2007) (“it would require a strong case of
fraud or irregularity, or some peculiar exigency, to warrant setting a
foreclosure sale aside.”).
However, Count 2 does not allege any fraud or
irregularity. Consequently, Count 2 is DISMISSED because Plaintiffs lack
standing to challenge the foreclosure sale.
3.
Action to Set Aside Foreclosure and Quiet Title
Despite the underlying difference in the legal claim asserted, Count 3 is
essentially identical to Count 2, with one crucial exception: it alleges that
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Defendant’s failure to provide notice was fraudulent and / or irregular, and
therefore allows Plaintiffs to challenge the foreclosure.1 When alleging fraud
or mistake, Fed. R. Civ. P. 9(b) requires that “a party must state with
particularity the circumstances constituting fraud or mistake.” The Sixth
Circuit has interpreted Rule 9(b) as requiring that Plaintiffs describe specific
statements, identify the speaker, specify when and where the statements
were made, and explain why the statements were fraudulent. Frank v. Dana
Corp., 547 F.3d 564, 569-70 (6th Cir. 2008). “The threshold test is whether
the
complaint
places
the
[D]efendant
on
sufficient
notice
of
the
misrepresentation, allowing the [Defendant] to answer, addressing in an
informed way the [Plaintiffs’] claim of fraud.” Kashat v. Paramount Bancorp,
Inc., No. 09-10863, 2010 WL 538295, at *4 (E.D. Mich. Feb. 10, 2010). When
a party fails to meet its Rule 9(b) burden, dismissal is warranted.
Thus, “because the redemption period has expired, Plaintiff[s] must
make a clear showing of fraud or irregularity to set aside the foreclosure sale
and succeed in [their] claim.” Brezzell, 2011 WL 2682973, at *5. To meet this
burden, Plaintiffs claim that Defendant commenced foreclosure proceedings
1 To the extent that Count 3 challenges the foreclosure on any ground besides fraud or irregularity, it
is DISMISSED for the reasons stated in Count 2.
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without notifying Plaintiffs of their rights in the manner required by MCL
§§ 600.3204(4) and 3205(a), which mandate notice by both regular and
certified, return receipt, mail. This failure, Plaintiffs argue, constitutes a
fraud or irregularity which deprived Plaintiffs of an opportunity to take
actions that would have prevented the foreclosure of their property.
Count 3 cannot survive Defendant’s motion to dismiss because, even if
Defendant violated the statute in precisely the manner alleged by Plaintiffs,
that violation is insufficient to set aside the foreclosure sale. Id. (“Even if
Defendants violated [MCL § 600.3205(a)], that is not enough to set aside the
foreclosure sale.”).
This Court has repeatedly held that allegations of
defective notice under MCL § 600.3205(a) are “insufficient to justify an
equitable extension of the redemption period.” Benford v. CitiMortgage, Inc.,
No. 11-12200, 2011 WL 5525942, at *5 (E.D. Mich. Nov. 14, 2011); see also,
e.g., Nafso v. Wells Fargo Bank, N.A., No. 11-10478, 2011 WL 1575372, at *3
(E.D. Mich. Apr. 26, 2011); Galati v. Wells Fargo Bank, No. 11-11487, 2011
WL 5178276, at *10-12 (E.D. Mich. Nov. 1, 2011); Brezzell, 2011 WL 2682973,
at *5. This is particularly true in cases, such as this one, where Plaintiffs
waited several months -- in this case, twenty-two months -- after the
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redemption period to file suit. See Brezzell, 2011 WL 2682973, at *6; Nafso,
2011 WL 1575372, at *3.
The Supreme Court of Michigan has held that it would require a
“strong case of fraud or irregularity, or some peculiar exigency, to warrant
setting a foreclosure sale aside.” United States v. Garno, 974 F. Supp. 628,
633 (E.D. Mich. 1997) (citing Detroit Trust Co. v. Agozzinio, 280 Mich. 402,
405-06, 273 N.W. 747 (1937)).
Because the facts alleged in Plaintiffs
Complaint -- which Defendant contests -- cannot satisfy this standard even if
they are accepted as true, Count 3 fails as a matter of law. Consequently,
Count 3 of Plaintiffs’ Complaint is DISMISSED for the same reasons as
Count 2.
IV. CONCLUSION
For all of the foregoing reasons,
IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss is
GRANTED on all counts.
IT IS SO ORDERED.
s/Gerald E. Rosen
Gerald E. Rosen
Chief Judge, United States District Court
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Dated: February 22, 2013
I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, February 22, 2013, by electronic and/or ordinary mail.
s/Lisa Wagner for Julie Owens
Case Manager and Deputy Clerk
(313) 234-5137
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