Jovanovic v. The Bank of New York Mellon

Filing 9

OPINION AND ORDER granting Defendant's 5 Motion to Dismiss. Signed by District Judge Nancy G. Edmunds. (Ciesla, C)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

Neda Jovanovic,
Case No. 13-11851
Plaintiff,
Honorable Nancy G. Edmunds
v.
Bank of New York Mellon f/k/a The Bank of
New York,
Defendant.
/

OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO DISMISS [5]
I.

Introduction
This action comes to the Court on Defendant Bank of New York’s motion to dismiss.

(Dkt. 5.) Plaintiff Neda Jovanovic alleges fraudulent misrepresentation, silent fraud,
negligence, violation of the Michigan Consumer Protection Act (MCPA), Mich.Comp.Laws
§ 445.901 et seq., and violation of the Home Ownership and Equity Protection Act of 1994
(HOEPA), 15 U.S.C. § 1639, against Defendant as her claims relate to Plaintiff’s mortgage
loan origination, approval, and the eventual foreclosure on her home. Plaintiff seeks an
order setting aside the sheriff’s sale of her home and staying any and all proceedings
related to the home. Plaintiff additionally seeks to rescind the underlying mortgage or an
order granting reformation/modification of the loan agreement and money damages.
The Court GRANTS Defendant’s motion to dismiss because Plaintiff lost all legal
interest in the property once the redemption period expired and she has not alleged fraud
or irregularity in the foreclosure procedure to survive a motion to dismiss. Moreover,

Plaintiff’s additional claims of negligence, and violations of MCPA and HOEPA are barred
by the statute of limitations.
II.

Facts
In February, 2007, Plaintiff executed a note in favor of non-party IMPAC Funding

Corporation for $360,000.00. (Def.’s Mot., Ex. A.) She then executed a mortgage to
Mortgage Electronic Registration Systems, Inc. to secure the note on her property at 3263
Harvard, Royal Oak, Michigan 48073. (Id., Ex. B.) MERS assigned the mortgage to the
Bank of New York Mellon f/k/a The Bank of New York, as Trustee for the Certificateholders,
CWALT, Inc., Alternative Loan Trust 2007-OA9 Mortgage Pass-Through Certificates,
Series 2007-OA9 (“BNYM, as Trustee”). (Def.’s Mot., Ex. C).
Plaintiff eventually defaulted under the note and mortgage as her interest rate
adjusted and payments rose. As a result of Plaintiff’s default, a collection firm sent her a
letter on September 16, 2011, and advised her that she was in default, the amount
outstanding on the loan, and the opportunity to contact a housing counselor to work out a
loan modification. (Def.’s Mot., Ex. D). BNYM, as trustee, proceeded with a foreclosure. On
September 18, 2012, Defendant purchased the property at a foreclosure sale. The
statutory redemption period expired on March 18, 2013. On March 23, 2013, Plaintiff filed
this action in state district court. Defendant then removed the claim to this Court.
Plaintiff alleges that she did not understand the terms of the loan agreement and the
terms were never clearly explained to her. (Compl. ¶ 14.) She states that a bank employee
assisted her in completing the Uniform Residential Loan Application. (Id. ¶ 7.) Plaintiff
alleges that the bank employee never explained the terms of the application. (Id. ¶ 14.)

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Plaintiff adds that the bank employee filled out the application, although she provided some
of the answers. (Id. ¶ 8.) Plaintiff points out that section VIII of the application, entitled
“Declarations” includes a part where Plaintiff could indicate whether part of the down
payment was borrowed. (Id. ¶¶ 9-12.) Plaintiff states that she did borrow the majority of
the down payment, “as the funds came from a home equity line of credit[.]” (Id. ¶ 13.)
Plaintiff states that the bank employee set her up on a negative amortization loan,
requiring her to pay back a principal amount in excess of what she actually borrowed.
(Compl. ¶ 16.) She says that the only concept she took away from the mortgage was that
she would be paying less in her monthly payments than she previously paid. (Id. ¶ 17.)
Plaintiff maintains that, despite attempting to keep up with her monthly payments,
the monthly amounts due increased because her principal balance increased and the bank
stripped away the equity she had built in her home. (Compl. ¶ 19.) She states she was
forced to file for bankruptcy. (Id. ¶ 20.)
III.

Standard of review
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the

sufficiency of a complaint. In a light most favorable to the plaintiff, the court must assume
that the plaintiff's factual allegations are true and determine whether the complaint states
a valid claim for relief. See Albright v. Oliver, 510 U.S. 266 (1994); Bower v. Fed. Express
Corp., 96 F.3d 200, 203 (6th Cir. 1996). To survive a Rule 12(b)(6) motion to dismiss, the
complaint's "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."
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and emphasis
omitted). See also Ass'n of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d
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545, 548 (6th Cir. 2007). "[T]hat a court must accept as true all of the allegations contained
in a complaint is inapplicable to legal conclusions. Threadbare recitals of all the elements
of a cause of action, supported by mere conclusory statements do not suffice." Ashcroft
v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949 (2009). The court is "not bound to accept as
true a legal conclusion couched as a factual allegation." Id. at 1950 (internal quotation
marks and citation omitted). Moreover, "[o]nly a complaint that states a plausible claim for
relief survives a motion to dismiss." Id. "Determining 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. But where 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 shown – that the pleader is entitled to relief." Id. (internal
quotation marks and citation omitted). Thus, "a court considering a motion to dismiss can
choose to begin by identifying pleadings that, because they are no more than conclusions,
are not entitled to the assumption of truth. While legal conclusions can provide the
framework of a complaint, they must be supported by factual allegations. When there are
well-pleaded factual allegations, a court should assume their veracity and then determine
whether they plausibly give rise to an entitlement to relief." Id. In sum, "[t]o survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to
state a claim for relief that is plausible on its face." Id. at 1949 (internal quotation marks
and citation omitted).
IV.

Analysis
A. Plaintiff failed to redeem the property within the statutory redemption
period, she therefore cannot raise any claims relating to the foreclosure
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Under Michigan law, “[a]ny person . . . who claims any right in, title to, equitable title
to, interest in, or right to possession of land, may bring action against any other person .
. . who claims [an inconsistent interest.]” Brezzel v. Bank of America,. 11-11467, 2011 WL
2682973, at *3 (E.D.Mich. July 11, 2011) (citing Mich. Comp. Laws §600.2932(1)). But
borrowers challenging foreclosures “lo[se] all their rights, title, and interest to the property
at the expiration of their right to redemption[.]” Piotrowski v. State Land Office Bd., 4
N.W.2d 514, 517 (1942). Plaintiff does not deny that the redemption period expired before
she filed the instant case. As a matter of law, then, Plaintiff’s case fails because her rights
and claims were extinguished and Plaintiff lacks a legal interest to bring claims with respect
to the property. See Snells v. Wells Fargo Bank, 11-12018, 2012 WL 1048576, at*2.
(E.D.Mich. Mar. 28, 2012) (holding that the plaintiffs could not assert a claim concerning
the foreclosure proceeding, because they did not redeem the property within the statutory
redemption period.).
B.

Plaintiff has not demonstrated any fraud or irregularity in the
foreclosure process to set aside the foreclosure

Once a foreclosure sale has taken place and the redemption period has expired,
only a strong showing of fraud or irregularity can undo the sale. Overton v. Mortg. Elec.
Registration Sys., No. 284950, 2009 WL 1507342, at *1 (Mich.Ct.App. May 28, 2009)
(citation omitted) (“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.”).

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The examples Plaintiff offers do not support “a strong case of fraud or irregularity.”
In order to demonstrate fraud, a plaintiff must demonstrate that (1) the defendant made a
material misrepresentation, (2) the representation was false, (3) the defendant knew when
(s)he made the representation that it was false or made it recklessly, without any
knowledge of its truth as a positive assertion ( 4) the defendant made the representation
with the intention that the plaintiff would act upon it; (5) the plaintiff acted in reliance upon
it and (6) the plaintiff suffered damaged. Coyer v. HBSC Mortg. Servs, Inc., 701 F.3d 1104,
1108 (6th Cir. 2012) (citations omitted). “[I]n order to prove a claim of silent fraud, a plaintiff
must show that some type of representation that was false or misleading was made and
that there was a legal or equitable duty of disclosure.” M&D, Inc. v. W.B. McConkey, 585
N.W.2d 33, 39 (Mich. Ct. App. 1998).

Plaintiff alleges in Count I that Defendant made representations that she would
lower her monthly payments by entering the loan agreement but failed to advise her that
her payments could very well increase substantially. (Compl. at 4) Additionally, Plaintiff
alleges Defendant, through its representative, made a declaration on Plaintiff’s application
for Plaintiff that none of the down payment was borrowed and that representation caused
Plaintiff’s application to be approved, where it otherwise may have not been approved.
Defendant states that Plaintiff cannot now challenge the mortgage origination and anything

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that occurred during the origination. Defendant is correct. In Michigan, “[i]n an eviction
proceeding, a mortgagor is limited to challenging the validity of the foreclosure sale
procedures, not the other ‘underlying equities,’ including those ‘bearing on the instrument.’”
Jackson v. Laker Group LLC, 261588, 2005 WL 2901787, at *2 (Mich.Ct.App. Nov. 3,
2005). (citations omitted).

Plaintiff’s allegations of misrepresentation relate to the

origination of the loan and not to the foreclosure proceedings. Plaintiff does not contest this
characterization, but asserts that the standard of fraud should not be limited to the
foreclosure proceedings because “banks would be able to escape the claims of fraud by
continuing the fraud through the Sheriff’s sale.” (Pl.’s Resp. at 7). Plaintiff cites no authority
to support this assertion. Plaintiff fails to make out a case for setting aside the sheriff’s sale.

C.

Plaintiff’s negligence claim fails because she has not shown that
Defendant had any legal duty to her outside of that duty the mortgage
documents created and because the statute of limitations bars her
claim

Plaintiff seeks monetary damages caused by Defendant’s alleged negligence.
Plaintiff asserts that Defendant owed Plaintiff a duty to allow her to complete her own loan
application and a duty to answer the questions on the application honestly. Plaintiff does
not seek an order to set the foreclosure sale aside as a result of the Defendant’s alleged
negligence, Plaintiff instead seeks monetary damages. Defendant contends that it did not

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owe Plaintiff a legal duty as the relationship arose out of a contract. Defendant further
contends that Plaintiff was not prevented from completing her own application or reading
the application before she signed it. (Def.’s Mot. at 9, 10.) The elements of a negligence
claim are duty, breach of that duty, causation, and damages. Duty is the legal obligation
to conform to a specific standard of conduct in order to protect others from unreasonable
risks of injury. Ahmed v. Wells Fargo Bank, NA, 861 F. Supp. 2d 818, 826 (E.D. Mich.
2012) (citation omitted). Plaintiff has not demonstrated that Defendant owed her a legal
duty, or that Defendant breached the duty. “The Michigan Supreme Court has held that in
tort actions based on a contract, courts should use a ‘separate and distinct mode of
analysis. [T]he threshold question is whether the defendant owed a duty to the plaintiff that
is separate and distinct from the defendant's contractual obligations. If no independent duty
exists, no tort action based on a contract will lie.” Warner v. Fed. Home Loan Mortg. Corp.,
12-15185, 2013 WL 1281932 (E.D. Mich. Mar. 26, 2013)(internal citations and quotations
omitted). Plaintiff has not shown or demonstrated any duty independent of those duties the
mortgage documents created. Her negligence claim fails on this basis alone.

Even if Plaintiff had a prima facie negligence claim, the statute of limitations would
still bar her claim. Defendant’s alleged negligence occurs when Defendant completed
Plaintiff’s loan agreement sometime before February, 2003. Plaintiff does not deny that the

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negligence claim relates to the Defendant’s action when the loan application was
completed. Instead, Plaintiff mistakenly argues that the statute of limitations has not started
to run because every time she sent in a payment, the alleged negligence continued.
Plaintiff, again, has cited no authority to support this assertion. In Coyer, the Sixth Circuit
found that the plaintiffs’ negligence claim was barred by the applicable three-year statute
of limitation (Mich. Comp. Laws § 600.5805) because their claims stemmed from the terms
of the loan agreement. 701 F.3d at 1108-09. As in Coyer, Plaintiff’s claim stems from the
original loan agreement. In Coyer, the court did not toll the statute of limitations from the
time of the last payment, rather the statute of limitations began when the parties entered
into the loan agreement.

Here, Plaintiff entered into the agreement in 2003, and filed this action ten years
later. Plaintiff’s claim is barred by the relevant three-year statute of limitation.

D.

Plaintiff’s MCPA claim fails because the MCPA does not apply to
residential home mortgages and because the statute of limitations bars
Plaintiff’s claim

Plaintiff’s MCPA claim, like the other claims, does not relate to the foreclosure sale, but
rather the original loan application, filed in 2003. Plaintiff’s MCPA claim fails because the
MCPA does not apply to residential home mortgages. See Pettiford v. J.P.Morgan Chase

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Bank, N.A., 12-11349, 2013 WL 3724788, at *5 (E.D.Mich. July 15, 2013) (Duggan, J.)
(“Both Michigan courts and federal courts applying Michigan law have consistently held that
the MCPA does not apply to claims arising out of residential mortgage transactions.”)
(citations omitted).

Even if the MCPA did apply to residential home mortgages, the statute of limitations
bars Plaintiff’s MCPA claims. Michigan Compiled Law §445.911 states that “an action
under [the MCPA] shall not be brought more than six years after the occurrence of the
method, act, or practice which is the subject of the action.” As stated above, Plaintiff
commenced this action ten years after the origination and completion of the loan
application.

E.

The statute of limitations bars Plaintiff’s HOEPA claim

Plaintiff alleges that the note’s provision violates HOEPA, 15 U.S.C. § 1639(f).1

(Compl. ¶¶ 55, 56.) Her claim fails.

1

15 U.S.C. § 1639(f) provides that “[a] mortgage referred to in section 1602(aa) of this
title may not include terms under which the outstanding principal balance will increase at
any time over the course of the loan because the regular periodic payments do not cover
the full amount of interest due.” Plaintiff additionally has not shown that her mortgage falls
under 15 U.S.C. § 1602(aa).
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HOEPA has a one-year statute of limitations. Thielen v. GMAC Mortg. Corp., 671
F.Supp.2d 947, 953 (E.D.Mich. 2009) (citing 15 U.S.C. §§ 1639, 1640(e)). “[T]he statute
of limitations begins to run ‘when the plaintiff has a complete and present cause of action’
and thus ‘can file suit and obtain relief.’” Id. (citations omitted) (holding that the statute of
limitations barred the plaintiff from raising a HOEPA claim when they obtained the loan on
January 13, 2004 and did not file suit until August 13, 2009.).

Here, the statute of limitations began to run the day she signed her mortgage and
note. She is therefore nine years too late to file suit.

V.

Conclusion
For the aforementioned reasons, the Court GRANTS Defendant’s motion to dismiss

and DISMISSES this case with prejudice.
So ordered.
s/Nancy G. Edmunds
Nancy G. Edmunds
United States District Judge
Dated: August 9, 2013

I hereby certify that a copy of the foregoing document was served upon counsel of record on
August 9, 2013, by electronic and/or ordinary mail.
s/Johnetta M. Curry-Williams
Case Manager
Acting in the Absence of Carol A. Hemeyer

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