Farnsworth et al v. Nationstar Mortgage LLC et al

Filing 26

ORDER GRANTING DEFENDANTS MOTION TO DISMISS [#8]. Signed by District Judge Gershwin A. Drain. (Bankston, T)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
TOM E. FARNSWORTH and
PAMELA J. FARNSWORTH,
Plaintiffs,
Case No. 13-11283
HON. GERSHWIN A. DRAIN
vs.

NATIONSTAR MORTGAGE LLC,
UNKNOWN TRUSTEE, as the trustee of the
asset-backed security in which the loan at
issue was pooled; and UNKNOWN TRUST,
the asset-backed security in which the loan at
issue was pooled,
Defendants.
__________________________________/
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS [#8]
I.

INTRODUCTION
Presently before the Court is Defendants’ Motion to Dismiss filed on April 19, 2013.

Rather than respond, Plaintiffs’ requested that the case be remanded to state court and requested
a stay of proceedings. Both requests were denied. Plaintiffs filed a Response on July 12, 2013.
Defendants filed a Reply on July 26, 2013. Upon review the Court concludes that oral argument
will not aid in the resolution of this matter, so the pending Motions are resolved on the briefs.
See E.D. Mich. L.R. 7.1(f)(2). For the reasons listed below, Defendants’ Motion is GRANTED.

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II.

PROCEDURAL AND FACTUAL HISTORY
Plaintiffs filed the instant action in the Wayne County Circuit Court on February 20,

2013. While the action was pending in the Wayne County Circuit Court, Plaintiffs filed a
Motion for Preliminary Injunction to restrain and enjoin the expiration of the redemption period,
including an injunction against the eviction of Plaintiffs and/or the conveyance or other transfer
of the Property to any third-party, pending a trial on the merits. A hearing was set for March 1,
2013. The court entered an order extending the redemption period to April 5, 2013 which will
expire on its own terms absent injunctive relief from this Court. The Order was entered on
March 22, 2013. Defendants removed this action to this Court on the same day pursuant to 28
U.S.C. § 1446(a) and 28 U.S.C. § 1332(a).
In their Complaint, Plaintiffs allege that on June 26, 2006, a mortgage was executed
between Plaintiffs and Centrex Home Equity Company, LLC to secure real property located in
Wyandotte, Michigan. The mortgage was recorded on July 12, 2006. Centrex subsequently
changed its name to Nationstar. Plaintiffs suffered financial hardship when Plaintiff, Tom
Farnsworth, lost his job. Plaintiffs thereafter contacted Nationstar and requested assistance with
their mortgage payments.
Nationstar sent Plaintiffs correspondence indicating that Plaintiffs were pre-approved or
eligible for a loan modification. Plaintiffs gathered and sent documents requested by Nationstar.
Plaintiffs claim that Nationstar put them through “Paperwork Hell” by repeatedly requesting
additional and/or different documentation. Eventually Plaintiffs received correspondence which
included a loan modification agreement. The letter indicated that Nationstar could not process
Plaintiffs’ modification unless Plaintiffs returned a signed and notarized copy of the loan
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modification agreement and made a qualifying payment of $1,100.00 to Nationstar. Plaintiffs
claim that they signed the agreement and sent the $1,100.00 qualifying payment to Nationstar.
Thereafter, Nationstar sent another letter enclosing a copy of a loan modification agreement, as
well as requiring payment of $1,100.00.

Plaintiffs again signed the agreement and sent

$1,100.00 to Nationstar. Plaintiffs’ Complaint fails to allege the dates that Nationstar sent the
purported letters, nor do they allege the date that Plaintiffs returned the signed loan modification
agreements along with the $2,200.00.
On July 17, 2012, Plaintiffs received yet another letter enclosing a proposed loan
modification agreement. The July 17, 2012 correspondence indicated that Nationstar could not
process the modification unless Plaintiffs made a “qualifying payment” of $1,449.36. Plaintiffs
did not sign the modification agreement nor remit the requested $1,449.36 to Nationstar.
Further, Plaintiffs claim that they requested a meeting pursuant to MICH. COMP. LAWS §
600.3205a, however they were never provided with a meeting. Plaintiffs’ Complaint fails to
allege the date upon which Plaintiff made this request. Plaintiffs assert that they qualify for a
traditional or in-house modification. Notwithstanding, Nationstar denied Plaintiffs a loan
modification.
A sheriff’s sale was conducted on August 30, 2012. Nationstar purchased the subject
property for $144,771.90. Plaintiffs raise the following claims in their Complaint: Breach of
Contract, Count I; Declaratory Relief that the Foreclosure Violates Mich. Comp. Laws §
600.3204(1) & (3), Count II; Declaratory Relief that the Foreclosure Violates Mich. Comp. Laws
§ 600.3205a and § 600.3205c and § 600.3204(4), Count III; Intentional Fraud, Count IV;
Constructive Fraud, Count V; Negligence against Nationstar, Count VI; Tortious Interference
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with Contractual Relations against the Trustee of the ABS, Count VII; and Civil Conspiracy,
Count VIII. On July 12, 2013, Plaintiffs voluntarily dismissed Counts II, VI, VII, and VIII.

III.

LAW AND ANALYSIS
1. Standard of Review
Federal Rule of Civil Procedure 12(b)(6) allows the court to make an assessment as to

whether the plaintiff has stated a claim upon which relief may be granted. See FED. R. CIV. P.
12(b)(6). “Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement of
the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice
of what the ... claim is and the grounds upon which it rests.’” Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 555 (2007) (citing Conley v. Gibson, 355 U.S. 41, 47 (1957). Even though the
complaint need not contain “detailed” factual allegations, its “factual allegations must be enough
to raise a right to relief above the speculative level on the assumption that all of the allegations in
the complaint are true.” Ass’n of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545,
548 (6th Cir. 2007) (quoting Bell Atlantic, 550 U.S. at 555).
The court must construe the complaint in favor of the plaintiff, accept the allegations of
the complaint as true, and determine whether plaintiff’s factual allegations present plausible
claims. To survive a Rule 12(b)(6) motion to dismiss, plaintiff’s pleading for relief must provide
“more than labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do.” Id. (citations and quotations omitted). “[T]he tenet that a court must accept as true
all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v.
Iqbal, 556 U.S. 662, 668 (2009). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’
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devoid of ‘further factual enhancement.’” Id. “[A] complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. The
plausibility standard requires “more than a sheer possibility that a defendant has acted
unlawfully.” Id. “[W]here the well-pleaded facts do not permit the court to infer more than the
mere possibility of misconduct, the complaint has alleged–but it has not ‘show[n]’– ‘that the
pleader is entitled to relief.’” Id.
2. Expiration of Redemption Period
Defendants argue that Plaintiffs’ claims are subject to dismissal because the redemption
period has expired and Plaintiffs have failed to demonstrate a clear showing of fraud or
irregularity in the foreclosure process sufficient to justify setting aside the Sheriff’s sale.
Defendants rely on the Michigan Court of Appeals’ unpublished decision in Overton v.
Mortgage Electronic Registration Systems, No. 07-725429, 2009 WL 1507342 (Mich. App. May
28, 2009). In Overton, the court held that once the redemption period following a foreclosure of
a parcel of real property has expired, the former owner’s rights in and title to the property are
extinguished. See Overton, 2009 WL 1507342, at *1. “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.” Id. (emphasis added) (citing Schulthies v. Barron, 16 Mich. App. 246,
247-248 (1969)).
Relying on Overton, Defendants argue that Plaintiffs no longer have standing to assert
their claims in the Complaint because they have lost all rights in and title to the property. The
Sheriff’s sale occurred on August 30, 2012, thus the redemption period expired on March 2,
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2013. Plaintiffs counter that Defendants’ reliance on Overton is misplaced because the decision
in Overton is not based on standing. Plaintiffs rely on Langley v. Chase Home Finance, LLC,
No. 1-10-cv-604, 2011 U.S. Dist. LEXIS 32845, at *7-9, n. 2 (W.D. Mich. Mar. 28, 2011). The
court in Langley stated that Overton does not stand for the proposition that homeowners are
divested of standing once the redemption period has ended. Id.
A similar decision was reached in Lamie v. Fed. Home Loan Mortg. Corp., No. 11-cv156, 2012 U.S. Dist. LEXIS 70091, at *9. In Lamie, the court held that the defendant-purchaser,
Federal Home Mortgage Corporation was not entitled to dismissal based on a lack of standing.
Lamie, 2012 U.S. Dist. LEXIS 70091, at *9-10. The Lamie court concluded that “the standing
discussion in Overton that many defendants raise is a bit of a red herring, and that courts should
view Overton as a merits decision and not a standing decision.” Lamie, 2012 U.S. Dist. LEXIS
70091, at *9 (quoting Langley v. Chase Home Fin., LLC, No. 10-cv-604, 2011 U.S. Dist. LEXIS
32845, at *2 (W.D. Mich. Mar. 28, 2011)). The Lamie court ultimately found that the plaintiff
failed to demonstrate any fraud or irregularity in the foreclosure process, thus there was no basis
for setting aside the foreclosure sale. Lamie, 2012 U.S. Dist. LEXIS 70091, at *10-14.
While Plaintiffs may be correct that Defendants are not entitled to dismissal based on
lack of standing, Plaintiffs must still demonstrate that their invalid foreclosure and other claims
have merit. Here, Plaintiffs fail to allege any irregularity or fraud sufficient to justify setting
aside the Sheriff’s sale.
Plaintiffs state that Defendants’ breaches of loan modification agreements and violations
of MICH. COMP. LAWS § 600.3205c are sufficiently plead irregularities, while Defendants
misrepresentations about escrow funds for Plaintiffs represents fraud. Defendants are correct
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that the allegations of irregularity and fraud must relate to the foreclosure process itself. See,
e.g., Stein v. U.S. Bancorp, No. 10-cv-14026, 2011 WL 740537, at *6 (E.D. Mich. Feb. 24,
2011) (“[T]he fraud, accident, or mistake must relate to the foreclosure proceeding itself.”).
Additionally, Defendants are also correct only the alleged violation of MICH. COMP. LAWS §
600.3205c is about the foreclosure process. Negotiations regarding loan modification are simply
not part of the foreclosure process and Plaintiffs did not make any allegations regarding an
escrow agreement in their Complaint and may not now. Thus, the only instance of irregularity
properly considered by the Court is whether Defendants violated MICH. COMP. LAWS §
600.3205c.
The record demonstrates there was no violation of MICH. COMP. LAWS § 600.3205c. The
specific allegations are that Defendants’ failed to “provide Plaintiffs with the proper calculations
made to determine their eligibility for modification . . . .” Compl. ¶ 76. Defendants contend that
Plaintiffs failed to request a 3205b meeting within 14 days as required by Section 3205c, so there
was no violation. In their Complaint, Plaintiffs claim that they had requested a meeting, but fail
to specify when it was requested or provide any other factual allegations about the request. Id. at
¶ 35.

Defendants, however, offer an Affidavit of Compliance that states Plaintiffs never

requested a meeting. Defs.’ Mot. to Dismiss Ex. B, at 10. In the face of Defendants’ affidavit,
Plaintiffs’ conclusory statement is clearly insufficient. Since Plaintiffs failed to raise any other
allegations of irregularities or fraud regarding the foreclosure process, Plaintiffs’ remaining
claims must be dismissed.

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IV.

CONCLUSION
For the reasons stated, Defendants’ Motion to Dismiss [#8] is GRANTED.

SO ORDERED.
Dated: July 31, 2013
S/Gershwin A. Drain
GERSHWIN A. DRAIN
UNITED STATES DISTRICT JUDGE
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
July 31, 2013, by electronic and/or ordinary mail.
S/Tanya Bankston
Deputy Clerk

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