Cavey et al v. Bank of America, N.A. et al
Filing
12
OPINION AND ORDER dismissing Defendant Scott Hope Pursuant to Fed. R. Civ. P. 21 and granting 3 Defendant Bank of America's Motion to Dismiss. Signed by District Judge Paul D. Borman. (DTof)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
RANDAL CAVEY and JENNY CAVEY,
Plaintiffs,
Case No. 13-11218
Paul D. Borman
United States District Judge
v.
BANK OF AMERICA, N.A. SUCCESSOR
IN INTEREST TO BAC HOME LOANS
SERVICING, L.P. BY MERGER and
SCOTT HOPE,
Mona K. Majzoub
United States Magistrate Judge
Defendants.
_____________________________________/
OPINION AND ORDER (1) DISMISSING DEFENDANT SCOTT HOPE PURSUANT TO
FED. R. CIV. P. 21; (2) GRANTING DEFENDANT BANK OF AMERICA’S MOTION TO
DISMISS (ECF NO. 3) and (3) DISMISSING PLAINTIFF’S COMPLAINT WITH
PREJUDICE
This matter is before the Court on Defendant Bank of America, N.A.’s (“BANA”) Motion
to Dismiss Complaint to Quiet Title and for Equitable Relief. (ECF No. 3.) Plaintiffs filed a
Response (ECF No. 6) and Defendant filed a Reply (ECF No. 8). BANA also filed a Response to
the Court’s Order Requiring Further Support for Fraudulent Joinder Claim. (ECF No. 10.) The
Court held a hearing on February 12, 2013. For the reasons that follow, the Court DISMISSES
fraudulently joined Defendant Scott Hope pursuant to Fed. R. Civ. P. 21, GRANTS Defendant’s
Motion to Dismiss and DISMISSES Plaintiff’s Complaint with prejudice.
INTRODUCTION
The heart of this case is Plaintiff’s challenge to the validity of an Affidavit that served to
correct a technical error in a Sheriff’s deed granted on February 17, 2010, more than three years
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prior to the filing of this action, foreclosing the mortgage on Plaintiff’s property. There is no dispute
that the original Sheriff’s Deed on Mortgage Sale incorrectly referenced a six month redemption
period rather than the statutorily-mandated twelve month redemption period that applied to
Plaintiff’s parcel of land. This error was discovered and corrected before the expiration of the six
month period by an Affidavit that was recorded with the register of deeds and delivered to Plaintiffs.
Despite this correction and extension of time to redeem the Property, Plaintiffs claim that
the failure to formally reform the deed “effectively clogged and/or fettered” Plaintiffs’ full twelve
month redemption right. It is undisputed that Plaintiffs had notice of the correct extended
redemption period before the six month period had expired and yet made no effort to redeem during
the remainder of the twelve month period and indeed made no effort to challenge the foreclosure sale
of their Property until the filing of this action, some two years after the expiration of the extended
redemption period. Neither law nor equity demands that Plaintiffs prevail.
I.
BACKGROUND
On or about August 7, 2008, Plaintiffs entered into a mortgage loan transaction with Mac-
Clair Mortgage Company (“the Lender”) in the amount of $188,028.00, secured by property located
at 4320 S. Duffield Rd., Lennon, MI 48449. (Compl. Ex. 2, Mortgage) (“the Mortgage”). The
Mortgage was granted in favor of Mortgage Electronic Systems, Inc. (“MERS”) solely as nominee
for the Lender. Id. The Mortgage was recorded with the Genesee County Register of Deeds on
August 13, 2008. Id. MERS assigned the Mortgage to BAC Home Loans Servicing, L.P., a
predecessor in interest to Bank of America, N.A. (“BANA”),1 on November 15, 2009. (Compl. Ex.
1
BANA states that it was “incorrectly sued as Bank of America, N.A., Successor in Interest to BAC
Home Loans Servicing, L.P. by Merger.” (ECF No. 3, Mot. 1.)
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3, Assignment of Mortgage.) Plaintiffs defaulted on their Mortgage, foreclosure proceedings were
instituted and the Property was sold to BANA at a Sheriff’s sale on February 17, 2010 for
$200,913.79. (Compl. Ex. 4, Sheriff’s Deed on Mortgage Sale.) The original Sheriff’s deed stated
that Plaintiffs were entitled to 6 months to redeem the Property, or until August 17, 2010. Id. In
fact, given the nature of the parcel of land, Plaintiffs were entitled under MCL§ 600.3240 to 12
months to redeem the Property. (Pls.’ Compl. ¶ 12.) Recognizing that the original Deed had recited
the incorrect statutory redemption period, BAC Home Loans Servicing, L.P. filed an Affidavit with
the Genesee County Register of Deeds on July 29, 2010, attesting that the statutory redemption
period for the Property was 12 months and extending the last date to redeem to February 17, 2011.
Id. A copy of the Affidavit was affixed to the original Deed and mailed via certified mail return
receipt requested to Plaintiffs at the Property address. (Compl. Ex. 4, Affidavit and Statement
Affixed to Sheriff’s Deed.) Plaintiffs’ counsel acknowledged at the hearing that Plaintiffs did
receive the corrected Affidavit and were made aware that their redemption period had been extended
by six months.
Plaintiffs claim that Deputy Sheriff Scott Hope (a Michigan citizen whose presence in the
case defeats the Court’s diversity jurisdiction if he is not found to have been fraudulently joined)
was required to reform the original Sheriff’s Deed itself to reflect that the redemption period had
been extended. Plaintiffs assert that the Affidavit affixed to the Deed, although filed with the
Genesee County Register of Deeds and served on Plaintiffs before the expiration of the six month
period, was somehow insufficient to correct the error. (Compl. ¶ 12.) Plaintiffs claim that the
failure to institute an action to reform the Deed itself “clogged and/or fettered” Plaintiffs’ twelvemonth right to redeem. (Compl. ¶ 16.) Plaintiffs now file this action, two years after the expiration
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of the extended redemption period, having lived in the home without paying on their mortgage for
over four years, asking this Court to restart the twelve month redemption period. For the reasons
that follow, the Court GRANTS BANA’s motion to dismiss because (1) Plaintiffs have asserted no
colorable claim under Michigan law against Sheriff Scott Hope who is dismissed from this action
pursuant to Fed. R. Civ. P. 21 and (2) Plaintiffs have failed to state a claim against BANA upon
which relief can be granted.
II.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a case where the
complaint fails to state a claim upon which relief can be granted. When reviewing a motion to
dismiss under Rule 12(b)(6), a court must “construe the complaint in the light most favorable to the
plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff.”
DirectTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). But the court “need not accept as true
legal conclusions or unwarranted factual inferences.” Id. (quoting Gregory v. Shelby County, 220
F.3d 433, 446 (6th Cir. 2000)). “[L]egal conclusions masquerading as factual allegations will not
suffice.” Eidson v. State of Tenn. Dep’t of Children’s Servs., 510 F.3d 631, 634 (6th Cir. 2007).
In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court explained that
“a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.
Factual allegations must be enough to raise a right to relief above the speculative level . . . .” Id. at
555 (internal citations omitted). Dismissal is appropriate if the plaintiff has failed to offer sufficient
factual allegations that make the asserted claim plausible on its face. Id. at 570. The Supreme Court
clarified the concept of “plausibilty” in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009):
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To 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.” [Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 556, 570 (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 556. The
plausibility standard is not akin to a “probability requirement,” but it asks for more
than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a
complaint pleads facts that are “merely consistent with” a defendant's liability, it
“stops short of the line between possibility and plausibility of ‘entitlement to relief.’”
Id., at 557 (brackets omitted).
Id. at 1948-50. A plaintiff’s factual allegations, while “assumed to be true, must do more than create
speculation or suspicion of a legally cognizable cause of action; they must show entitlement to
relief.” LULAC v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (emphasis in original) (citing
Twombly, 127 S.Ct. at 1965). Thus, “[t]o state a valid claim, a complaint must contain either direct
or inferential allegations respecting all the material elements to sustain recovery under some viable
legal theory.” Bredesen, 500 F.3d at 527 (citing Twombly, 127 S.Ct. at 1969). While a “pro se
complaint . . . must be held to less stringent standards than formal pleadings drafted by lawyers,”
Erickson v. Pardus, 551 U.S. 89, 94 (2007), still under even this lenient standard pro se plaintiffs
must meet basic pleading requirements. Martin v. Overton, 391 F.3d 710, 714 (6th Cir. 2004). The
leniency granted to pro se plaintiffs “does not require a court to conjure allegations on a litigant’s
behalf.” Id. at 714 (internal quotation marks and citation omitted).
In ruling on a motion to dismiss, the Court may consider the complaint as well as (1)
documents that are referenced in the plaintiff’s complaint or that are central to plaintiff’s claims (2)
matters of which a court may take judicial notice (3) documents that are a matter of public record
and (4) letters that constitute decisions of a government agency. Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 322 (2007). See also Greenberg v. Life Ins. Co. Of Virginia, 177 F.3d
507, 514 (6th Cir. 1999) (finding that documents attached to a motion to dismiss that are referred
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to in the complaint and central to the claim are deemed to form a part of the pleadings). Where the
claims rely on the existence of a written agreement, and plaintiff fails to attach the written
instrument, “the defendant may introduce the pertinent exhibit,” which is then considered part of the
pleadings. QQC, Inc. v. Hewlett-Packard Co., 258 F. Supp. 2d 718, 721 (E.D. Mich. 2003).
“Otherwise, a plaintiff with a legally deficient claims could survive a motion to dismiss simply by
failing to attach a dispositive document.” Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir.
1997).
III.
ANALYSIS
A.
Subject Matter Jurisdiction - BANA Has Established Fraudulent Joinder and
Sheriff Scott Hope is Dismissed From the Case as a Non-Diverse Dispensable
Party Pursuant to Fed. R. Civ. P. 21
As an initial matter, the Court must determine whether or not it has subject matter diversity
jurisdiction over this action. Defendant Scott Hope is a Michigan citizen, as are Plaintiffs, and his
presence in the case defeats this Court’s diversity jurisdiction if BANA cannot sustain its burden of
establishing that Sheriff Hope was fraudulently joined. For the reasons that follow, the Court
concludes that BANA has met that burden because Plaintiffs have failed to state a colorable claim
against Sheriff Hope under Michigan law. The Court therefore drops Sheriff Hope as a dispensable
non-diverse party pursuant to Fed. R. Civ. P. 21.
1.
The standards for analyzing a claim of fraudulent joinder.
The burden of establishing federal jurisdiction, and in this case, therefore, proving fraudulent
joinder, is on the removing party. Alexander v. Electronic Data Sys. Corp., 13 F.3d 940, 948-49 (6th
Cir. 1994). A removing defendant can establish fraudulent joinder by demonstrating that plaintiff
has “no colorable claim” against the non-diverse defendant under applicable state law. Coyne v.
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American Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999). Plaintiff’s motive in joining a nondiverse defendant is immaterial to the Court’s determination. Jerome-Duncan, Inc. v. Auto-By-Tel,
L.L.C., 176 F.3d 904, 907 (6th Cir. 1999). Whether the matter is properly removed is based upon
the claims as pled in plaintiff’s complaint. Coyne, 183 F.3d at 493. See also Pichler v. U.S. Steel
Corp., No. 09-10843, 2009 WL 3199698, at *3 n.1 (E.D. Mich. Sept. 30, 2009) (following Sixth
Circuit precedent limiting review of plaintiff’s claims in a fraudulent joinder analysis to the facts
alleged in plaintiff’s pleadings). All doubts as to the propriety of removal and any ambiguities in
state law are resolved in favor of the party seeking remand. Coyne, 183 F.3d at 493.
The Sixth Circuit summarized these standards in Casias v. Wal-Mart Stores, Inc., 695 F.3d
428 (6th Cir. 2012):
We review a district court's ruling on the issue of jurisdiction de novo, but the district
court's factual findings are reviewed for clear error. Coyne v. American Tobacco Co.,
183 F.3d 488, 492 (6th Cir. 1999). “When a non-diverse party has been joined as a
defendant, then in the absence of a substantial federal question the removing
defendant may avoid remand only by demonstrating that the non-diverse party was
fraudulently joined.” Jerome–Duncan, Inc. v. Auto–By–Tel, L.L.C., 176 F.3d 904,
907 (6th Cir. 1999) (citation omitted). Fraudulent joinder is “a judicially created
doctrine that provides an exception to the requirement of complete diversity.” Coyne,
183 F.3d at 493 (quoting Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287
(11th Cir. 1998) (alteration in original)). A defendant is fraudulently joined if it is
“clear that there can be no recovery under the law of the state on the cause alleged
or on the facts in view of the law . . .” Alexander v. Elec. Data Sys. Corp., 13 F.3d
940, 949 (6th Cir. 1994) (citation omitted). The relevant inquiry is whether there is
“a colorable basis for predicting that a plaintiff may recover against [a defendant].”
Coyne, 183 F.3d at 493. “The removing party bears the burden of demonstrating
fraudulent joinder.” Alexander, 13 F.3d at 949 (citation omitted).
When deciding a motion to remand, including fraudulent joinder allegations, we
apply a test similar to, but more lenient than, the analysis applicable to a Rule
12(b)(6) motion to dismiss. See Walker v. Philip Morris USA, Inc., 443 Fed. Appx.
946, 952–54 (6th Cir. 2011). As appropriate, we may “pierce the pleading” and
consider summary judgment evidence, such as affidavits presented by the parties. Id.
The court may look to material outside the pleadings for the limited purpose of
determining whether there are “undisputed facts that negate the claim.” Id. at 955–56
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695 F.3d at 432-33.
This test was recently discussed in Kent State University Bd. of Trustees v. Lexington Ins.
Co., 512 F. App’x. 485 (6th Cir. 2013) (Table Case):
The combination of the “colorable” standard with the requirement that all
ambiguities of state law are to be resolved in favor of the non-removing party
presents a significant hurdle. A defendant attempting to prove fraudulent joinder thus
faces a particularly heavy burden. See Casias, 695 F.3d at 433 (applying a test that
is “similar to, but more lenient than, the analysis applicable to a Rule 12(b)(6)
motion to dismiss”); see also Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752,
764 (7th Cir. 2009) (“A defendant faces a ‘heavy burden’ to demonstrate that the
joinder is fraudulent, and some courts ... have suggested that the burden is even more
favorable to the plaintiff than the standard that applies to a motion to dismiss under
[Fed.R.Civ.P.] 12(b)(6).”); Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 574
(5th Cir. 2004) (“The party seeking removal bears a heavy burden of proving that the
joinder of the in-state party was improper.”); Hartley v. CSX Transp., 187 F.3d 422,
424 (4th Cir. 1999) (“The party alleging fraudulent joinder bears a heavy burden—it
must show that the plaintiff cannot establish a claim even after resolving all issues
of law and fact in the plaintiff's favor.”).
512 F. App’x. at 489-90.
2.
Plaintiffs fail to identify a colorable claim against Sheriff Hope.
Plaintiffs claim that they are suing Sheriff Scott Hope “as a necessary defendant to reform the
wrongly abridged sheriff’s deed executed by him as the authorized officer pursuant to MCL
600.3232.” (ECF No. 6, Plaintiff’s Answer and Brief in Support of Show Cause to Remand at 1.)
Plaintiffs assert that Sheriff Hope is a necessary party to a quiet title action and an action to reform
the Deed. In support of this assertion, Plaintiffs rely solely on Pizzo v. Michigan Dept. of Treasury,
No. 305033, 2012 WL 4039351 (Mich. Ct. App. Sept. 13, 2012). As discussed infra, this
unpublished decision has no relevance to the issue of whether an equitable action to reform the Deed
was a necessary prerequisite to validly extend the redemption period. The case also does not speak
to the issue of whether Sheriff Hope would be a necessary party under Michigan law to an action to
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reform the Deed. The court in Pizzo expressed no opinion whatsoever on who would be a necessary
party to an equitable action for reformation.
Plaintiffs also make reference to Mich. Comp. Laws § 600.3232 in support of their argument
that Sheriff Hope is a necessary party. This statutory section, as discussed infra, spells out duties of
an officer conducting a foreclosure sale by advertisement and does not dictate that the Sheriff would
be a necessary party to an action to reform a deed. Plaintiffs thus cite no authority to support the
proposition that under Michigan law, Sheriff Scott Hope would be a necessary party even assuming
that an action to reform the Deed would be necessary or appropriate on the facts of this case.
“In an action to reform a deed, all parties claiming an interest in the land or any part thereof,
purported to have been conveyed by the instrument sought to be reformed, and whose interests will
be affected by the reformation of the instrument, are necessary parties to the action.” 76 C.J.S.
Reformation of Instruments § 85 (2013). “Accordingly, a purchaser at a sheriff’s sale is entitled to
reformation, as the sheriff does not take title, and the purchaser is in privity with the predecessors in
title.” 66 Am. Jur. 2d Reformation of Instruments § 60 (May 2013). See also Steele v. REO
Properties Corp., No. 07-14479, 2009 WL 136884 (E.D. Mich. Jan. 16, 2009) (reforming a sheriff’s
deed that misstated the purchase price of the property without necessity of joining the sheriff as
party). Sheriff Hope claims no interest in the property, title never passed to him and Plaintiffs have
failed to establish that he would be a necessary party to any action, even if one was required, to
reform the Deed.
Plaintiffs have not established that they have a colorable claim against Sheriff Hope under
Michigan law or that he is a necessary party to this action. This is not a case where Michigan law
is “unsettled” such that resolving any ambiguities in the law might favor remand. Here, Plaintiffs cite
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no relevant Michigan law at all to support their claim that Sheriff Hope is a necessary party to this
action, or even to support their claim that an action for reformation of the original Deed would be
necessary or appropriate. See discussion infra. Accordingly, BANA has carried its burden and
established fraudulent joinder. Sheriff Hope is dismissed from this action pursuant to Fed. R. Civ.
P. 21. See Yuille v. American Home Mtg. Servs., Inc., 483 F. App’x 132, 134 n. 1 (6th Cir. 2012)
(finding that district court should have dismissed a non-diverse fraudulently joined party and
dismissing that party pursuant to Fed. R. Civ. P. 21 as a non-diverse dispensable party). This matter
is properly before the Court on the basis the diversity of citizenship of the remaining parties.
B.
Plaintiffs Fail to State a Claim Against BANA
There is no dispute in this case that the original Sheriff’s Deed incorrectly advised that the
redemption period for the Property was six months, and stated that the final date to redeem was
August 17, 2010. There is likewise no dispute that the July 29, 2010 Affidavit noting the mistake and
extending the redemption period by six months, setting forth a revised last date to redeem of February
17, 2011, was recorded with the Genesee County Register of Deeds on August 9, 2010 and mailed
to Plaintiffs via certified mail on July 29, 2010 and received by them. (ECF No. 3, Def.’s Mot. Ex.
D.) It is further undisputed that in the three years since their Property was sold at the Sheriff’s sale
on February 17, 2010, Plaintiffs have taken no action whatsoever to redeem their Property until filing
this “clogging” action in February, 2013 and have made no payments to BANA on their mortgage
obligation.
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1.
Plaintiffs fail to support their claim that the Affidavit was insufficient to extend
the redemption period and have failed to state a claim that their right to redeem
was “clogged” or “fettered.”
In support of their assertion that the July 29, 2010 Affidavit was insufficient to extend the
redemption period, Plaintiffs rely solely on Pizzo, supra. This unpublished decision does not
determine the issue of whether an equitable action to reform the Deed was necessary to extend the
statutorily-defined redemption period in this case. In Pizzo, the court was called upon to review an
order of the Michigan Tax Tribunal (“MTT”) involving the revocation of Salvatore and Francesca
Pizzo’s Principal Residence Exemption (“PRE”). The MTT had concluded that neither of the Pizzos
was entitled to the PRE because Salvatore Pizzo owned the property during the time frame relevant
to the tax inquiry but was not its principal resident and Francesca Pizzo was the principal resident but
did not own the property. 2012 WL 4039351, at *2. It was undisputed that the original deed,
executed on August 14, 2007, conveyed Francesca’s entire interest in the property to Salvatore. It
was also undisputed that from 2004 through 2007, Francesca occupied the property as her principal
residence and Salvatore did not reside there. Id. Thus, when a delinquent tax notice was sent on
December 13, 2007, Salvatore was the owner of the property but did not live there and Francesca was
the principal resident but did not own the property, thus disqualifying either individual from claiming
the PRE. The Pizzos argued, however, that a March 31, 2008 quitclaim deed that conveyed the
property to Salvatore and Francesca as joint tenants with rights of survivorship should have
retroactive effect because it expressed the parties’ actual intent at the time the 2007 deed was
executed. The Pizzos argued that the 2008 deed had the legal effect of automatically reforming the
2007 deed. Id.
The Court held that the parties could not reform a deed simply by their subsequent actions and
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further held that the Pizzos would be required to proceed by an action for reformation of the deed,
which could only be conducted in a court of equity and therefore was beyond the jurisdiction of the
MTT. The court noted that an action to reform a deed could lie “if, by reason of fraud, mistake or
accident or surprise, an instrument does not express the true intent and meaning of the parties.” Id.
The court declined to grant the Pizzos such equitable relief and expressly declined to decide whether
a self-correcting deed would be permitted to reform an original deed in the absence of ambiguity,
inconsistency or legal impossibility. Id. at *2, n. 13.
This is not a case, like Pizzo, where the parties are attempting to “correct” a deed to reflect
the alleged “true intent and meaning of the parties” based solely upon the conduct of the parties
subsequent to execution of that deed. The case involves a technical error, the correction of which
served only to reflect what the controlling statute demanded. If Pizzo is relevant here at all, this case
falls within the factual scenario which the court in Pizzo expressly declined to consider - a correction
that does not address an ambiguity, inconsistency or legal impossibility on the face of the deed.
There is no question here of the parties’ intent - the statute controls the length of the redemption
period and the Affidavit seeks to correct a technical, clerical error that incorrectly stated the statutory
redemption period. Not unimportantly, the correction was noted in ample time for Plaintiffs to have
availed themselves of the extended period in which to take action to redeem their Property.
Apart from Pizzo, Plaintiffs provide no authority to support their argument that the July 29,
2010 Affidavit, recorded on August 9, 2010, extending the redemption period from six to twelve
months, was insufficient to extend the redemption period. It is undisputed that Plaintiffs received
notice of this correction and of the extension of the redemption period before expiration of the six
month period. Moreover, the redemption period is set by statute and the Sheriff’s misstatement of
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the redemption period does not affect the validity of the Deed. In United States v. Garno, 974 F.
Supp. 628 (E.D. Mich. 1997), the court found that the sheriff’s failure to include any redemption date
on the deed of sale did not affect the validity of the foreclosure sale:
The fact that a sheriff's deed does not list a redemption period is not crucial to the
validity of a foreclosure sale, as the foreclosure statutes are not to be construed as
specifically prescribing the form of the sheriff's deed. Reading v. Waterman, 46 Mich.
107, 111–12, 8 N.W. 691, 692–93 (1881). Furthermore, the provision in M.C.L. §
600.3232, which requires the officer conducting the sale to endorse upon the deed
when it will become operative, has been held to be merely directory in nature, not
altering the legal period of redemption and not voiding the foreclosure. Johnstone v.
Scott, 11 Mich. 232, 244 (1863); see also Doyle v. Howard, 16 Mich. 261, 267 (1867).
974 F. Supp. at 633. Garno suggests that Sheriff Hope’s error did not, could not, affect the statutorily
mandated period of redemption and therefore there would be no need for an action to reform the
Deed.
Importantly, as discussed infra, Plaintiffs fail to establish that they were actually prejudiced
by Sheriff Hope’s mistaken identification of the correct statutory redemption period in the original
Deed. Nothing prevented Plaintiffs from acting to redeem the Property either during the first six
months following the foreclosure or the next six months following the filing of the corrected
Affidavit.2 There is simply no evidence of prejudice, which would be necessary in any action postredemption to contest the validity of the foreclosure sale. Thus, not only have Plaintiffs failed to
2
At the hearing on this matter, Plaintiffs’ counsel mentioned to the Court for the first time that the
Plaintiffs allegedly attempted to obtain refinancing of their home armed with the correcting Affidavit
and were questioned by the potential lender about the expiration date on the Original Deed. There
is absolutely no allegation or even a suggestion in the Plaintiffs’ Complaint that Plaintiffs tried
unsuccessfully to obtain refinancing of their home and Plaintiffs never moved to amend their
Complaint to allege these late-breaking facts. “To state a valid claim, a complaint must contain
either direct or inferential allegations respecting all the material elements to sustain recovery under
some viable legal theory.” Bredesen, 500 F.3d at 527. The Court will not consider any claim or
legal theory based upon an alleged denial of refinancing due to the error on the Original Deed, a
factual premise that was never referenced or pled in Plaintiffs’ Complaint.
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establish that Sheriff Hope would be a necessary party to an equitable action to reform the original
Deed, they have failed to establish that an action to reform the original Deed would be necessary at
all. The Court concludes that the July 29, 2010 Affidavit served to extend the redemption period to
February 17, 2011.
Plaintiffs “clogging” argument asserts that the misstated redemption period resulted in a
“subtle impairment” of their ability to redeem their home, thus “clogging the equity.” (Pls.’ Resp.
4-5.) Plaintiffs argue that only a formal reformation of the Deed would serve to correct the
redemption period. As noted above, Garno seems to suggest otherwise and Plaintiffs cite no relevant
Michigan law in support of this proposition. Plaintiffs assert, again without evidentiary support, that
“nowadays institutional lenders do not re-finance prima facie expired Sheriff’s Deeds.” (ECF No.
7, Pls.’ Resp. 5.) Plaintiffs assert that without reforming the Deed itself, the Affidavit “was really
no more useful for plaintiffs than King Midas’ touch was for him.” (Id. at 5-6.) Despite this crafty
mythologic reference, Plaintiffs did not identify in their Complaint, or even suggest that, any financial
institutions refused to refinance their loan or refused to deal with them because of the error in the
original Deed or refused to honor their rights in the Property based upon the extended redemption
period established by the July 29, 2010 Affidavit. Apparently the impairment was so “subtle” as to
be incapable of definition. Plaintiffs’ factually vacant “clogging” argument simply fails to carry the
day. A plaintiff’s factual allegations, while “assumed to be true, must do more than create speculation
or suspicion of a legally cognizable cause of action; they must show entitlement to relief.” Bredesen,
500 F.3d at 527 (emphasis in original) (citing Twombly, 127 S.Ct. at 1965). Plaintiff’s “clogging”
claim falls far short of meeting this pleading standard. The July 29, 2010 Affidavit served to extend
the redemption period to February 17, 2011, which was the last day on which Plaintiffs could have
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redeemed the Property. They failed to do so.
2.
Plaintiffs’ post-redemption period challenge to the foreclosure sale fails.
When the redemption period expired on February 17, 2011, BANA became vested with all
right, title and interest in the Property. It is well established under Michigan law that, absent a clear
showing of fraud or irregularity in the foreclosure proceedings, and resulting prejudice, Plaintiff
cannot challenge BANA’s full right, title and interest in the Property.
Michigan courts have long held that a plaintiff is barred from challenging a foreclosure sale
after the right to redemption has passed. See Piotrowski v. State Land Office Bd., 302 Mich. 179, 187
(1942) (holding that “plaintiffs did not avail themselves of their right to redemption in the foreclosure
proceedings and at the expiration of such right . . . all plaintiffs’ rights in and title to the property
were extinguished.”) The fact that an action challenging a foreclosure is filed before the expiration
of the redemption period does not toll the running of the redemption period and does not change this
result. See Overton v. Mortgage Electronic Registration Systems, No. 284950, 2009 WL 1507342,
at *1 (Mich. Ct. App. May 28, 2009) (citing Piotrowski and noting that once the redemption period
expired, all of plaintiff’s rights in and title to the property were extinguished and further holding that
filing suit before the redemption period expired was insufficient to toll the redemption period).
The Sixth Circuit has recognized that Michigan law requires a strong showing of fraud or
irregularity to set aside a completed foreclosure sale once the redemption period has expired and that
defects under the Michigan foreclosure statute are actionable only on a showing of prejudice. Conlin
v. Mtg. Elec. Registration Sys., Inc, 714 F.3d 355, 360 (6th Cir. 2013) (holding that plaintiffs failed
to demonstrate the requisite prejudice or fraud necessary to set aside a completed foreclosure sale
once the redemption period has expired). This high burden of proof, recognized by the Sixth Circuit
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in Conlin, that is required to set aside a completed foreclosure following expiration of the redemption
period, has strong roots in Michigan law. See Piotrowski, supra. Several Michigan state and federal
courts have applied Piotrowski to bar claims by former property owners on their foreclosed properties
after the period of redemption has passed, some concluding that plaintiffs lack Article III standing
after the redemption period has expired and others concluding that while plaintiffs have standing to
bring the claims, their claims fail on the merits. In Conlin, supra, the Sixth Circuit noted the
standing/merits controversy but found it unnecessary to finally resolve the issue. Conlin, 714 F.3d
at 359-60 (“Whether the failure to make [a showing of fraud or irregularity] is best classified as a
standing issue or as a merits determination, one thing is clear: a plaintiff-mortgagor must meet this
“high standard” in order to have a foreclosure set aside after the lapse of the statutory redemption
period.”) (Footnotes and citations omitted.)
As noted by the Sixth Circuit in Conlin, the only possible exception to the rule that such
claims are absolutely barred post-redemption applies when the mortgagor makes a strong showing
of “fraud or irregularity.” “‘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 foreclosure sale aside.’” 714
F.3d at 359 (quoting Sweet Air Inv. Inc. v. Kenney, 275 Mich. App. 492, 497 (2007) (quoting United
States v. Garno, 974 F. Supp. 628, 633 (E.D. Mich. 1997)). See also Schulthies v. Barron, 16 Mich.
App. 246, 247-48 (1969) (“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.”).
Importantly, the Sixth Circuit in Conlin took the opportunity to reaffirm that under Michigan
law, the showing of fraud or irregularity required to set aside a completed foreclosure sale after the
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expiration of the redemption period must satisfy a very “high standard” of proof:
Michigan’s foreclosure-by-advertisement scheme was meant to, at once, impose order
on the foreclosure process while still giving security and finality to purchasers of
foreclosed properties. See Mills v. Jirasek, 255 N.W. 402, 404 (Mich. 1934) (citing
Reading v. Waterman, 8 N.W. 691, 692 (Mich. 1881)); see also Gordon Grossman
Bldg. Co. v. Elliott, 171 N.W.2d 441, 445 (Mich. 1969). To effectuate this interest in
finality, the ability for a court to set aside a sheriff's sale has been drastically
circumscribed. See Schulthies v. Barron, 167 N.W.2d 784, 785 (Mich. Ct. App. 1969);
see also Senters [v. Ottawa Sav. Bank, FSB], 503 N.W.2d [639] at 643 [(Mich.
1993)]. Michigan courts have held that once the statutory redemption period lapses,
they can only entertain the setting aside of a foreclosure sale where the mortgagor has
made “a clear showing of fraud, or irregularity.” Schulthies, 167 N.W.2d at 785; see
also Sweet Air Inv., Inc. v. Kenney, 739 N.W.2d 656, 659 (Mich. Ct. App. 2007)
(“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 foreclosure sale aside.”
(internal quotation marks omitted)).
714 F.3d at 359.
Not only must there be an extraordinarily strong showing of fraud or irregularity but the
alleged fraud must relate to the actual foreclosure process. Id. at 360 (“It is further clear that not just
any type of fraud will suffice. Rather, the misconduct must relate to the foreclosure procedure
itself.”) (quotation marks, citation and alteration omitted).
Further, the Michigan Supreme Court, in Kim v. JP Morgan Chase Bank, N.A., 493 Mich.
98 (2012), clarified that a defect in the Michigan statutory foreclosure proceedings renders a
foreclosure sale voidable, not void ab initio, and that such defects are actionable only upon a showing
of prejudice, i.e. a showing that the mortgagor would have been in a better position had the defect
not occurred. A foreclosure that fails to comport with Michigan statutory foreclosure laws will be
voidable only if plaintiffs demonstrate that “they were prejudiced by defendant's failure to comply
with MCL 600.3204.” Id. at 115. “To demonstrate such prejudice, they must show they would have
been in a better position to preserve their interests in the property absent defendant’s noncompliance
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with the statute.” Id. at 116. See Conlin, 714 F.3d at 362 (recognizing that Kim made clear that
failures to comply with Michigan’s foreclosure by advertisement statute render foreclosures voidable,
not void ab initio, and noting that after Kim, such failures are actionable only upon a showing of
prejudice, i.e. that plaintiffs would have been in a better position to keep the property absent the
alleged defect in the foreclosure process).
In this case, Plaintiffs have failed to plausibly plead fraud or prejudice. As discussed infra,
Plaintiffs have failed to state a “clogging” claim and have failed to plausibly plead that the error on
the original Deed prevented them from obtaining financing or from otherwise pursuing their rights
to redeem. Plaintiffs, who assert this claim more than two years after the expiration of the
redemption period, having occupied the Property for over four years without making any payments
to BANA, have demonstrated neither fraud nor sufficient procedural irregularity relating to the
foreclosure process, and have failed even to plead prejudice. They have not stated a plausible claim
to set aside the foreclosure sale of the Property.
3.
Plaintiffs fail to state a claim for quiet title.
Plaintiffs assert that “Plaintiffs have properly stated a quiet title action pursuant to MCL
600.2932(1) and (5) in which Defendant Sheriff Deputy Scott Hope is a necessary party to afford
complete relief inasmuch as he is the officer authorized by law - MCL 600.3232 - that executed the
Sheriff’s Deed and is therefore the proper person to now reform the instrument to restore to Plaintiffs
the proper time in which to redeem their home - time that they have been entitled to all along.” (ECF
No. 6, Pls.’ Resp. in Support of Show Cause 6-7.) First, the Court notes that several unpublished
opinions in this district and in the Sixth Circuit have suggested that “quiet title” is “not a separate
cause of action, but rather, it is a remedy.” Goryoka v. Quicken Loan, Inc., 519 F. App’x 926, 928
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(6th Cir. 2013) (noting that district court properly dismissed plaintiff’s quiet title which sought a
remedy and was not a separate cause of action); Shaya v. Countrywide Loans, Inc., 489 F. App’x.
815, 819–20 (6th Cir. 2012) (“As the district court noted, “quiet title” is not a separate cause of
action, but rather, it is a remedy.”); Steinberg v. Federal Home Loan Mtg. Corp., 901 F. Supp. 2d
945, 954-55 (E.D. Mich. 2012) ( “Although styled as a separate claim for relief, quiet title is a remedy
and not a separate cause of action.”) (citing Shaya, 489 F. App’x. at 819–20).
Even assuming that quiet title can be pleaded as separate cause of action, Plaintiffs have failed
to state such a claim here. In an action seeking quiet title relief, plaintiff has the initial burden of
proof, which then shifts to the defendant to prove that it has superior title in the property at issue.
Beulah Hoagland Appleton Qualified Personal Residence Trust v. Emmet County Road Com’n, 236
Mich. App. 546 (1999). See also Estate of Malloy v. PNC Bank, No. 11-12922, 2012 WL 176143,
at *8 (E.D. Mich. Jan. 23, 2012) (“Under Michigan law, the plaintiff has the burden of proof in an
action to quiet title and must make out a prima facie case of title.”) (citing Stinebaugh v. Bristol, 132
Mich. App. 311 (Mich. Ct. App.1984)). The elements of a prima facie case include establishing the
superiority of the plaintiff’s claim based upon public records. MCR 3.411. In this case, Plaintiffs,
who concede that they entered into a mortgage and have not repaid the debt, have at best a possessory
interest and cannot claim superior title to BANA who holds all right, title and interest in the Property
following expiration of the redemption period. See Leone v. Citigroup, Inc., No. 12-10597, 2012 WL
1564698, at *3 (E.D. Mich. May 2, 2012) (“Because the indebtedness has not been fully paid, the
mortgage remains a valid encumbrance on the property. Thus, plaintiff cannot state a plausible claim
for relief to quiet title. . . . At best, plaintiff has a possessory interest if he is living at the property.
That is not sufficient to trump the valid interests of CMI and BOA. Therefore, he has not pleaded a
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plausible claim for relief to quiet title.”). “A Plaintiff's failure to provide [any] legal or factual
justification for [his] quiet title claim other than the conclusory allegation that the foreclosure was
wrongful, invalid, and voidable necessitates dismissal of his quiet title claim.” Bond v. Federal Nat’l
Mtg. Ass’n, No. 12-cv-517, 2012 WL 4754967, at *7 (W.D. Mich. Oct. 4, 2012). Plaintiffs have
failed to allege a valid quiet title claim.
IV.
CONCLUSION
For the foregoing reasons, the Court concludes that BANA has carried its burden to establish
the fraudulent joinder of Sheriff Scott Hope and DISMISSES Sheriff Hope as a non-diverse
dispensable party pursuant to Fed. R. Civ. P. 21. The Court further concludes that Plaintiffs’
Complaint fails to state a claim upon which relief can be granted, GRANTS Defendant’s BANA’s
Motion to Dismiss to DISMISSES Plaintiffs’ Complaint.
s/Paul D. Borman
PAUL D. BORMAN
UNITED STATES DISTRICT JUDGE
Dated: March 28, 2014
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by
electronic means or first class U.S. mail on March 28, 2014.
s/Deborah Tofil
Case Manager
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