Baker v. Bank of America, N.A., successor by Merger to BAC Home Loan Servicing, L.P. fka Countrywide Home Loans Servicing, L.P.
Filing
9
OPINION AND ORDER granting 6 Motion to Dismiss. Signed by District Judge Patrick J. Duggan. (MOre)
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
MICHAEL J. BAKER,
Plaintiff,
Case No. 13-12474
Hon. Patrick J. Duggan
v.
BANK OF AMERICA, N.A., successor
by merger to BAC HOME LOAN
SERVICING, L.P. f/k/a COUNTRYWIDE
HOME LOANS SERVICING, L.P.,
Defendant.
/
OPINION AND ORDER
Plaintiff Michael J. Baker, who is proceeding pro se, instituted this action
against Defendant Bank of America, N.A. (“BANA”), in state court seeking to
redress alleged improprieties in the foreclosure of his home. After removing the
action to this Court, BANA filed a motion seeking dismissal of Plaintiff’s
Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Having
determined that oral argument would not significantly aid the decisional process,
the Court dispensed with oral argument pursuant to Eastern District of Michigan
Local Rule 7.1(f)(2). For the reasons stated herein, the Court grants BANA’s
Motion and dismisses this action without prejudice.
I.
A.
FACTUAL AND PROCEDURAL BACKGROUND 1
The Note, Mortgage, and Eventual Foreclosure
On May 19, 2006, Plaintiff accepted a $111,853 loan from non-party Allen
Mortgage LC, and, in exchange, executed a promissory note secured by a mortgage
on a residential duplex located at 18740 and 18744 Moross Road, Detroit,
Michigan. (Compl. ¶ 4; Note, Def.’s Mot. Ex. B; Mortgage, Def.’s Mot. Ex. C.)
The mortgage, executed in favor of Mortgage Electronic Registration Systems, Inc.
(“MERS”) as the nominee for the originating lender and its successors and assigns,
was recorded in the Wayne County Register of Deeds at Liber 44807, pages 103232. (Mortgage, Def.’s Mot. Ex. C.)
MERS assigned the mortgage to BAC Home Loans Servicing LP 2 on
August 12, 2010. (Assignment, Def.’s Mot. Ex. D.) As assignment reflecting this
1
Plaintiff sets forth scant factual detail in his Complaint, although he does
provide that (1) Plaintiff claims the subject property in fee simple absolute by way
of an executed warranty deed; (2) Defendant claims the subject property in fee
simple by way of a sheriff’s sale and sheriff’s deed; (3) he purchased the property
and resides therein; (4) he attempted to get a loan modification for the subject
property; (5) despite never receiving notice of a sheriff’s sale, a sheriff’s sale was
conducted on August 23, 2012; (6) the redemption period has expired; and (7) that
since the sheriff’s sale, Plaintiff and “their” representatives have attempted in good
faith to continue with “a Loan Modification process to no avail.” (Compl. ¶¶ 313.)
2
On July 1, 2011, BAC Home Loans Servicing, LP, merged into Bank of
America, N.A., and is now known as Bank of America, N.A., as successor by
merger to BAC Home Loans Servicing LP. The Certificate of Merger is on file
with the Office of the Secretary of State of Texas, Document No. 374034630002.
2
transfer was recorded with the Wayne County Register of Deeds on August 27,
2010, at Liber 48708, page 863. (Id.) As a result of this assignment, BANA
became the loan servicer and mortgagee of record.
Plaintiff eventually defaulted on his loan obligations by failing to remit
timely payments. As a result, BANA, acting through its agent, the law firm of
Trott & Trott, accelerated the loan and commenced foreclosure proceedings. A
notice of foreclosure was initially published in the Detroit Legal News on August
12, 2010. (Aff. of Publication, attach. to Sheriff’s Deed, Def.’s Mot. Ex. E.)
Subsequent to the assignment from MERS to BANA, a new notice of foreclosure
was published in the Detroit Legal News over four consecutive weeks beginning
on September 9, 2010. (Second Aff. of Publication, attach. to Sheriff’s Deed,
Def.’s Mot. Ex. E.) A notice of the foreclosure was posted “in a secure manner to
the front door[]” on September 10, 2010. (Evidence of Sale, attach. to Sheriff’s
Deed, Def.’s Mot. Ex. E.)
Although originally scheduled for October 7, 2010, the sheriff’s sale was
adjourned until August 23, 2012. This sale was held “without the knowledge of
the Plaintiff.” (Compl. ¶ 9; see also id. at ¶ 10 (“Although the Plaintiff was aware
of a possible Sheriff Sale, the Plaintiff[] never received notice of the August 23,
2012 Sheriff Sale.”).) At the sale, BANA purchased the premises for $148,536.04.
(Aff. of Purchaser, attach. to Sheriff’s Deed, Def.’s Mot. Ex. E.) The sheriff’s
3
deed was recorded with the Wayne County Register of Deeds on September 6,
2012, at Liber 50125, page 1383. (Sheriff’s Deed, Def.’s Mot. Ex. E.) Pursuant to
Michigan law, the six-month statutory redemption period expired on February 23,
2013. Mich. Comp. Laws § 600.3240(8). Plaintiff did not redeem but alleges that
“since the Sheriff Sale[,] the Plaintiff has attempted in good faith to continue with
a Loan Modification process to no avail.” (Id. at ¶ 12.)
B.
Previous Court Proceedings
Plaintiff previously filed two complaints, one on March 22, 2011 and the
other on December 12, 2011, against BANA in the Third Judicial Circuit Court of
Wayne County. (Complaints, Def.’s Mot. Exs. F, H.) Both cases were dismissed
without prejudice for lack of service. (Dismissals, Def.’s Mot. Exs. G, I.)
On March 29, 2013, Plaintiff filed for Chapter 13 bankruptcy with the
United States Bankruptcy Court in the Eastern District of Michigan.3 One month
later, the Bankruptcy Court granted BANA relief from the automatic stay, thus
allowing BANA to resume enforcing its rights against Plaintiff and the property.
(Order, Def.’s Mot. Ex. J.) The case was terminated in July of 2013.
On May 17, 2013, the 36th Judicial District Court located in Detroit,
Michigan, entered a judgment of possession by default in favor of BANA, giving
3
Case No. 13-46430.
4
BANA the right to apply for an order of eviction after May 29, 2013.4 (Def.’s Mot.
Ex. K.) Plaintiff’s request to set aside the default judgment of possession was
denied. (Id.)
C.
The Instant Action
On May 13, 2013, just days before the 36th District Court entered of
judgment of possession in favor of BANA, Plaintiff filed the instant four-count
Complaint against BANA in the Circuit Court for the County of Wayne, seeking to
quiet title and requesting damages, costs and fees, and an order requiring BANA to
process a loan modification.5 (Compl.) BANA, invoking federal diversity
jurisdiction, removed the action to this Court on June 6, 2013. 28 U.S.C. §§ 1332,
1441, 1446. After twice receiving extensions of the time to file a responsive
pleading, BANA filed a Motion to Dismiss Plaintiff’s Complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6) on August 30, 2013. Despite apprising
the parties of the Court’s motion practice guidelines, Plaintiff did not respond to
BANA’s Motion and the time for doing so has expired.
Plaintiffs’ Complaint sets forth four counts: Count I – Quiet Title; Count II –
Unjust Enrichment; Count III – Breach of Implied Agreement/Specific
4
Case No. 13312734.
5
Case No. 13-006181-CH.
5
Performance; and Count IV 6 – Breach of Michigan Compiled Laws § 600.3205(c).
Each count generally alleges wrongdoing with the foreclosure by advertisement
process based on allegations that BANA did not modify Plaintiff’s loan.
II.
STANDARD OF REVIEW
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6)
allows a court to make an assessment as to whether a plaintiff’s pleadings have
stated a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). Under
the Supreme Court's articulation of the Rule 12(b)(6) standard in Bell Atlantic
Corporation v. Twombly, 550 U.S. 544, 555-56, 570, 127 S. Ct. 1955, 1964-65,
1974 (2007), a court must construe the complaint in favor of the plaintiff and
determine whether the plaintiff’s factual allegations present claims plausible on
their face. This standard requires a claimant to put forth “enough fact[s] to raise a
reasonable expectation that discovery will reveal evidence of” the requisite
elements of their claims. Id. at 557, 127 S. Ct. at 1965. 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.” Ass’n of Cleveland
Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007) (citing
Twombly, 550 U.S. at 555, 127 S. Ct. at 1965) (internal citations omitted); see also
Fed. R. Civ. P. 8(a)(2) (“A pleading that states a claim for relief must contain . . . a
6
Plaintiff’s Complaint erroneously labeled this count as Count VII.
6
short and plain statement of the claim showing that the pleader is entitled to
relief[.]”).
In determining whether a plaintiff has set forth a “claim to relief that is
plausible on its face,” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949
(2009) (quoting Twombly, 550 U.S. at 570, 127 S. Ct. at 1974), courts must accept
the factual allegations in the complaint as true, Twombly, 550 U.S. at 556, 127 S.
Ct. at 1965. This presumption, however, does not apply to legal conclusions.
Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949. Therefore, to survive a motion to
dismiss, a 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.” Ass’n of Cleveland Fire Fighters, 502 F.3d at 548 (quoting Twombly, 550
U.S. at 555, 127 S. Ct. at 1964-65) (internal citations and quotations omitted).
Ultimately, “[d]etermining 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 [a legal
transgression], the complaint has alleged – but it has not ‘show[n]’ – ‘that the
pleader is entitled to relief.’” Iqbal, 556 U.S. at 679, 129 S. Ct. at 1950 (quoting
Fed. R. Civ. P. 8(a)(2)) (internal citations omitted). In conducting its analysis, the
Court may consider the complaint and any exhibits attached thereto, public
7
records, items appearing in the record of the case, and exhibits attached to
defendant’s motion to dismiss so long as they are referred to in the complaint and
are central to the claims contained therein. Bassett v. NCAA, 528 F.3d 426, 430
(6th Cir. 2008) (citing Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001)).
In the case at bar, the Court has considered documents, all of which are public,
relating to the mortgage, the loan modification process, and the foreclosure.
Compared to formal pleadings drafted by lawyers, a generally less stringent
standard is applied when construing the allegations pleaded in a pro se complaint.
Haines v. Kerner, 404 U.S. 519, 520-21, 92 S. Ct. 594, 596 (1972); see also
Erickson v. Pardus, 551 U.S. 89, 94, 127 S. Ct. 2197, 2200 (2007) (reaffirming
rule of more liberal construction with pro se complaints less than two weeks after
issuing Twombly). The leniency with which courts construe pro se plaintiffs’
complaints, however, does not abrogate the basic pleading requirements designed
to ensure that courts do “not have to guess at the nature of the claim asserted.”
Wells v. Brown, 891 F.2d 591, 594 (6th Cir. 1989). Pro se plaintiffs still must
provide more than bare assertions of legal conclusions to survive a motion to
dismiss. Grinter v. Knight, 532 F.3d 567, 577 (6th Cir. 2008) (citing Scheid v.
Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988)). However,
because deficiencies in a pro se plaintiff’s complaint are likely attributable to a
lack of training, “courts typically permit the losing party leave to amend[,]” even in
8
the absence of a specific request by the non-moving party. Brown v. Matauszak,
No. 09-2259, 415 F. App’x 608, 614-615 (6th Cir. Jan. 31, 2011) (McKeague, J.)
(quotation omitted).
III.
ANALYSIS
BANA seeks dismissal of Plaintiff’s Complaint on the basis (1) that Plaintiff
has failed to plead facts regarding a fraud or irregularity sufficient to justify the
equitable extension of the statutory redemption period and (2) that each of
Plaintiff’s individual counts fails to state a claim upon which relief can be granted.
A.
General Principles Pertaining to Michigan’s Foreclosure by
Advertisement Statute
Foreclosures by advertisement, such as the foreclosure at issue in this case,
as well as the rights of both the mortgagor and mortgagee after a foreclosure sale
has occurred, are governed by Michigan statutory law. See, e.g., Senters v. Ottawa
Sav. Bank, F.S.B., 443 Mich. 45, 50, 503 N.W.2d 639, 641 (1993); Conlin v.
Mortgage Elec. Registration Sys., Inc., 714 F.3d 355, 359 (6th Cir. 2013) (applying
Michigan law) (citation omitted).
Pursuant to Michigan law, a mortgagor has six months from the date of the
sheriff’s sale to redeem a foreclosed property. Mich. Comp. Laws § 600.3240(8).
Significant consequences flow from a mortgagor’s failure to redeem prior to the
expiration of this six-month period: the mortgagor’s “right, title, and interest in and
to the property” are extinguished, Piotrowski v. State Land Office Board, 302
9
Mich. 179, 4 N.W.2d 514, 517 (1942), and the deed issued at the sheriff’s sale
“become[s] operative, and [] vest[s] in the grantee named therein . . . all the right,
title, and interest [] the mortgagor had[,]” Michigan Compiled Laws § 600.3236.
This rule of law – holding that absolute title vests in the purchaser at the
foreclosure sale upon expiration of the redemption period – has been applied
consistently by state and federal courts alike to bar former owners from making
any claims with respect to a foreclosed property after the statutory redemption
period has lapsed.
There is, however, one caveat to the general rule described above. Once a
foreclosure sale has taken place and the redemption period has run, a court may
allow “an equitable extension of the period to redeem” if a plaintiff-mortgagor
makes “a clear showing of fraud, or irregularity[.]” Schulthies v. Barron, 16 Mich.
App. 246, 247-48, 167 N.W.2d 784, 785 (1969); 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
procedure. Reid v. Rylander, 270 Mich. 263, 267, 258 N.W. 630, 631 (1935)
(holding that only the foreclosure procedure may be challenged after a sale);
10
Freeman, 241 Mich. App. at 636-38, 617 N.W.2d at 49 (reversal of sheriff’s sale
improper without fraud, accident, or mistake in foreclosure procedure).
If a plaintiff seeking to set aside the sheriff’s sale demonstrates fraud or
irregularity in connection with the statutory foreclosure procedure, the result is “a
foreclosure that is voidable, not void ab initio.” Kim v. JPMorgan Chase Bank,
N.A., 493 Mich. 98, 115, 825 N.W.2d 329, 337 (2012). In order “to set aside the
foreclosure sale, plaintiffs must show that they were prejudiced by defendant’s
failure to comply” with Michigan’s foreclosure by advertisement statute. Id. “To
demonstrate such prejudice, [plaintiffs] must show that they would have been in a
better position to preserve their interest in the property absent defendant’s
noncompliance with the statute.” Id. at 115-16, 825 N.W.2d at 337 (footnote
omitted).
Although the redemption period has expired in the instant case, Plaintiff asks
the Court to quiet title in his favor. In asking for this relief, Plaintiff implicitly
requests that the Court rescind the sheriff’s sale. The posture of this case therefore
requires that the Court assess whether Plaintiff’s Complaint states a claim upon
which relief may be granted within the fraud or irregularity framework outlined
above. In other words, the Court must determine whether, under Michigan law, the
foreclosure sale is voidable, or could be set aside, on the facts alleged. See
Savedoff v. Access Group, Inc., 524 F.3d 754, 762 (6th Cir. 2008) (observing that
11
the Erie doctrine requires federal courts hearing state law claims to apply the
decisions of the state’s highest court).
B.
Setting Aside the Foreclosure Sale
1.
Fraud
The word fraud appears twice in Plaintiff’s Complaint. In Count III,
Plaintiff alleges that he has a superior claim in the property because of the “Fraud .
. . on the part of the Defendant[.]” (Compl. ¶ 29.) Plaintiff also alleges “[t]hat on
December 31, 2012, Plaintiff, believing that he has been a victim of foreclosure
fraud[,] applied for an Independent Foreclosure Review with the Office of the
Comptroller of the Currency (OCC).” (Id. at ¶ 31.)
Plaintiff’s threadbare and conclusory allegations of fraud do not suffice to
state a claim. Claims of fraudulent conduct must adhere to the heightened pleading
requirements of Federal Rule of Civil Procedure 9(b), which provides that “[i]n
alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake.” To satisfy Rule 9(b)’s particularity requirement, a
complaint must “(1) specify the statements that the plaintiff contends were
fraudulent, (2) identify the speaker, (3) state where and when the statements were
made, and (4) explain why the statements were fraudulent.” Frank v. Dana Corp.,
547 F.3d 564, 569-70 (6th Cir. 2008) (internal quotation marks and citation
omitted); see also Sanderson v. HCA-The Healthcare Co., 447 F.3d 873, 877 (6th
12
Cir. 2006) (“As a sister circuit has phrased it,” Rule 9(b) requires a plaintiff to
“specify the ‘who, what, when, where, and how’ of the alleged fraud.”) (quoting
United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899,
903 (5th Cir. 1997)).
Although Plaintiff’s Complaint does use the word “fraud,” the Complaint
fails provide the “who, what, when, where, and how” of the alleged fraud and
therefore lacks the factual enhancement necessary to put BANA on notice of the
claims asserted against it. Perhaps more fatal to his ability to withstand
Defendant’s Motion is that Plaintiff’s allegations of fraud do not appear to pertain
to the foreclosure procedure; rather, the allegations apply only to the loan
modification process. See, e.g., Reid, 270 Mich. at 267, 258 N.W. at 631. Even if
fraudulent conduct in the loan modification process is deemed part of the
foreclosure procedure, Plaintiff’s Complaint still fails to state a claim as Plaintiff
has not alleged actionable prejudice as required by Kim. The Complaint does not
allege that the purported fraud impacted his ability to make timely mortgage
payments and it does not contain allegations “show[ing] that [he] would have been
in a better position to preserve [his] interest in the property.” Kim, 493 Mich. at
115-16, 825 N.W.2d at 337.
Accordingly, Plaintiff has failed to set forth a plausible claim of fraud to
justify the rescission of the sheriff’s deed.
13
2.
Irregularity
The Complaint contains two suggestions of an irregularity. First, Plaintiff
alleges that he “never received notice of the August 23, 2012 Sheriff Sale.”
(Compl. ¶ 10.) Even assuming that Plaintiff never received formal notice, his
Complaint does provide that “Plaintiff was aware of a possible Sheriff Sale[.]”
(Id.) To the extent Plaintiff suggests that the prolonged adjournment of the
sheriff’s sale resulted in a notice defect, any such defect does not render the
resulting foreclosure void. Under Michigan law, “a defect in notice renders a
foreclosure sale voidable[,]” not void ab initio, meaning that a court must examine
“whether any harm was caused by the defect” such that the mortgagor lost the
“potential opportunity to preserve some or any portion of his interest in the
property[.]” Jackson Inv. Corp. v. Pittsfield Prod., Inc., 162 Mich. App. 750, 755,
756, 413 N.W.2d 99, 101 (1987). Plaintiff has not alleged any such harm here.
The second possible irregularity is that Plaintiff was attempting to negotiate
a loan modification before and after the sheriff’s sale but that BANA’s actions
were “intentionally designed to preclude the Plaintiff f[ro]m entering into a Loan
Modification to keep possession of his home[]” in violation of Michigan Compiled
Laws § 600.3205(c). (Compl. ¶ 16; see also id. at ¶ 17 (“Defendant[] did
undertake to foreclose on the subject property without allowing the Plaintiff to
Modify the Loan.).) The Complaint provides no factual basis to support this
14
assertion and such conclusory allegations do not suffice to survive a Rule 12(b)(6)
motion.
Because Plaintiff has not alleged sufficient facts showing the existence of an
irregularity in the foreclosure procedure, he has failed to show an entitlement to
rescission.
C.
Individual Counts
1.
Count I – Quiet Title
In Count I, Plaintiff seeks to set aside the sheriff’s sale and have the Court
declare that he has legal title to the property. As an initial matter, the Court notes
that quiet title actions are remedies, not independent causes of action. Goryoka v.
Quicken Loan, Inc., No. 11-2178, 2013 U.S. App. LEXIS 5524, at * 7 (6th Cir.
Mar. 18, 2013) (per curiam). Michigan law does, however, provide a statutory
mechanism for quieting title, which the Court addresses in the interest of
completeness. Mich. Comp. Laws § 600.2932(1) (“Any person . . . who claims
any right in, title to, equitable title to, interest in, or right to possession of land,
may bring an action . . . against any other person who claims . . . [an inconsistent
interest.]”). The statutory language requires a plaintiff seeking to quiet title to
establish a substantive right in the property superior to others claiming an
inconsistent interest. Beach v. Twp. of Lima, 489 Mich. 99, 110, 802 N.W.2d 1, 8
(2011). Plaintiff bears the initial burden of proof and must establish a prima facie
15
case of title. Stinebaugh v. Bristol, 132 Mich. App. 311, 316, 347 N.W.2d 219,
221 (1984) (citation omitted). “Establishing a prima facie case of title requires a
description of the chain of title through which ownership is claimed.” Sembly v.
U.S. Bank, N.A., No. 11-12322, 2012 U.S. Dist. LEXIS 1440, at *9 (E.D. Mich.
Jan. 6, 2012) (Rosen, C.J.).
Here, Plaintiff has not alleged facts establishing a prima facie case of title.
Plaintiff merely asserts, without further documentation or supporting facts, that he
acquired title to the property by way of an executed warranty deed and that
Defendant claims an interest pursuant to the sheriff’s deed. (Compl. ¶¶ 5-6, 18.)
These allegations do not describe a chain of title nor do the allegations demonstrate
a superior chain of ownership in Plaintiff’s favor. As in Rydzewski v. Bank of N.Y.
Mellon, “Plaintiff does not contest that he failed to pay and defaulted on the loan.
He provides no allegations to indicate that he has a plausible claim of ownership
superior to the Bank’s.” No. 12-12047, 2012 U.S. Dist. LEXIS 129955, at *10
(E.D. Mich. Sept. 12, 2012) (Cohn, J.). In fact, Plaintiff’s Complaint supports a
finding that BANA has a superior title to the property based on the sheriff’s sale
and expiration of the redemption period. (See Compl. ¶ 9 (“[T]he redemption
period . . . expired[.]”)); Piotrowski, 302 Mich. at 186, 4 N.W.2d at 516
(explaining that mortgagors lose “all their right, title, and interest in and to the
16
property at the expiration of their right of redemption”). Therefore, the Court
dismisses Count I for failure to state a claim upon which relief can be granted.7
2.
Count II – Unjust Enrichment
Count II seeks to state a cause of action for unjust enrichment. In Michigan,
a claim for unjust enrichment requires a plaintiff to show a “(1) receipt of a benefit
by Defendant from Plaintiff, and (2) an inequity resulting to Plaintiff because of
Defendant’s retention of the benefit.” Belle Isle Grill Corp. v. Detroit, 256 Mich.
App. 463, 478, 666 N.W.2d 271, 280 (2003) (citation omitted). If both elements
are shown, courts will imply a contract to prevent unjust enrichment. Fodale v.
Waste Mgmt. of Mich., Inc., 271 Mich. App. 11, 36, 718 N.W.2d 827, 841 (2006).
Importantly, however, a contract will not be implied where there is an express
contract governing the same subject matter. Id.
Plaintiff alleges that BANA prevented him from receiving a loan
modification prior to foreclosure and that BANA has been “unjustly enriched in
excess of $25,000 and Plaintiff would suffer a loss in that amount, plus the loss of
the subject property as a result of attempting in good faith to Modify the Loan in
order to keep possession of his home.” (Compl. ¶ 22.) These allegations fail to
state a claim for two reasons.
7
Because Plaintiff has not demonstrated superior title, the Court declines to
address BANA’s argument that the quiet title action is barred by the doctrine of
unclean hands.
17
First, the purported “unjust enrichment” is factually frivolous as Plaintiff
borrowed funds to purchase the property and failed to repay them. “There is
nothing inequitable about a bank’s decision to exercise a standard, statutory
foreclosure remedy when a borrower stops making payments on a loan secured by
a mortgage.” Smith v. Litton Loan Servicing, L.P., No. 12-1684, 2013 U.S. App.
LEXIS 5058, at * 9 (6th Cir. Mar. 12, 2013) (unpublished). Although Plaintiff has
technically alleged an inequity, this Court is “not bound by allegations that are
clearly unsupported or unsupportable[.]” Blackburn v. Fisk Univ., 443 F.2d 121,
123 (6th Cir. 1971) (citations omitted).
The second reason the unjust enrichment claim fails is that the mortgage and
note establish the rights and obligations of the parties relative to the property,
including the right to foreclose in the event Plaintiff defaults upon the payment
terms set forth in the note. See, e.g., Rydzewski, No. 12-12047, 2012 U.S. Dist.
LEXIS 129955, at *12-13 (rejecting claim for unjust enrichment when the rights
and obligations of the parties were governed by a mortgage and note). Plaintiff
defaulted on the loan obligations and BANA, the foreclosing party, acted in
accordance with its rights under the terms of the note. Because an express contract
governs the rights and obligations of the parties with respect to the property,
Plaintiff cannot state a plausible unjust enrichment claim. Therefore, the Court
dismisses Count II.
18
3.
Count III – Breach of Implied Agreement/Specific Performance
In Count III, Plaintiff appears to make allegations concerning an alleged
implied agreement to modify his loan. Plaintiff also makes reference to his
application “for an Independent Foreclosure Review [(“IFR”)] with the Office of
the Comptroller of the Currency[.]” (Compl. ¶ 31.) The Court addresses these
allegations separately.
In Count III, Plaintiff seeks an order requiring Defendant to “continue the
processing of a Loan Modification on the subject property so that the Plaintiff can
keep possession of his home.” (Id. at ¶ 30.) Although Plaintiff acknowledges that
he “did not Modify a Loan with” BANA, since the sheriff’s sale, he has “attempted
in good faith to continue with the Loan Modification process to no avail.” (Id. at ¶
24, 27.) Based on these allegations, it appears that Plaintiff’s claim for a breach of
an implied agreement is premised on statements (or hopes) pertaining to a loan
modification. This claim, however, is expressly precluded by Michigan’s statute
of frauds.
Under Michigan’s statute of frauds, any alleged promise by a financial
institution to renew, extend, modify, or permit a delay in repayment or
performance of loan must be reduced to a writing and signed by the financial
institution to be enforceable. Mich. Comp. Laws § 566.132(2)(b). As the
Michigan Court of Appeals has explained, this statute precludes a party “from
19
bringing a claim--no matter its label--against a financial institution to enforce the
terms of an oral promise[.]” Crown Tech. Park v. D&N Bank, F.S.B., 242 Mich.
App. 538, 550, 619 N.W.2d 66, 72 (2000). Plaintiff does not allege that BANA
made any representations regarding a loan modification. However, even assuming
that Plaintiff’s Complaint contains sufficient factual allegations to establish the
existence of an oral promise to modify the loan, Plaintiff has not alleged the
existence of a writing signed by BANA confirming any such loan modification.
As such, Count III must be dismissed as barred by Michigan’s statute of frauds.
Rydzewski, No. 12-12047, 2012 U.S. Dist. LEXIS 129955, at *13.
Count III also appears to suggest that Plaintiff’s application for an IFR
formed the basis of an implied agreement. However, the IFR pertains to consent
agreements between regulators and mortgage servicers, including BANA. The
agreements came to fruition as a result of problematic practices pervading the
mortgage industry. After applying for an IFR, the application is reviewed and if
the application satisfies certain criteria, the applicant may receive anywhere from
“hundreds of dollars up to $125,000[.]” (Compl. ¶ 33.) Plaintiff was informed in
“late January 2013[]” that he qualified and would receive compensation
somewhere within the aforementioned range. (Id.) In April of 2013, “Plaintiff
received a check for $500.00 from Rust Consulting, Inc.,” an entity “retained to
20
administer payments to borrowers on behalf of the servicers.” (Id. at ¶ 34.)
Plaintiff believes that the amount he received “was an insult.” (Id.)
It is not entirely clear what forms the basis for Plaintiff’s claim regarding the
IFR. His Complaint indicates that he received monetary compensation in an
amount described in the postcard he received, albeit an amount on the low end of
the range. In any event, Plaintiff does not allege that BANA breached any
agreement under the IFR. As BANA argues, even if Plaintiff had alleged some
breach of the IFR, Plaintiff is a non-party to the consent agreements related to the
IFR and therefore lacks standing to enforce any terms contained therein. Plaintiff
offers no legal authority or argument in support of his attempt to act as a thirdparty beneficiary to the consent order. See Vogel v. City of Cincinnati, 959 F.2d
594, 598 (6th Cir. 1992) (“A consent decree is not enforceable . . . by those who
are not parties to it.”) (quotation omitted).
For the reasons set forth above, the Court dismisses Count III.
4.
Count IV – Violation of Michigan Compiled Laws § 600.3205(c)
Plaintiff’s last count is that BANA violated Michigan Compiled Laws §
600.3205c, which establishes procedures for the parties to a mortgage to engage in
loan modification discussions. The Complaint recites the pertinent statutory
language and in a wholly conclusory fashion devoid of any factual enhancement
21
alleges that BANA violated the statute by “fail[ing] to modify Plaintiff’s
mortgage.” (Compl. ¶ 37.)
The Court first notes that Plaintiff has not alleged that he complied with his
obligations under Michigan’s loan modification statute. Plaintiff has not alleged
that he contacted a housing counselor nor has he alleged that he submitted the
documentation required to facilitate a loan modification. See Mich. Comp. Laws §
600.3205b(1)-(2). Without these facts, the Court has no way of determining
whether BANA’s obligation to commence the loan modification process was ever
triggered. Id. § 600.3205c(1).
Plaintiff fails to state a claim for additional reasons. First, the statute does
not require mortgage holders or servicers to modify a loan and therefore, the
failure to modify does not provide an independent basis for finding a statutory
violation. Dingman v. One West Bank, FSB, 899 F. Supp. 2d 912, 922 (E.D. Mich.
2012); see also Ellison v. JPMorgan Chase, N.A., No. 12-12629, 2012 U.S. Dist.
LEXIS 142386, at *13 (E.D. Mich. Oct. 2, 2012) (Cohn, J.) (explaining that the
loan modification statute “does not require [banks] to modify any specific loan[]”).
Second, the statute “does not provide any basis for unwinding the foreclosure.”
Ellison, No. 12-12629, 2012 U.S. Dist. LEXIS 142386, at *13; see also Benford v.
CitiMortgage, Inc., No. 11-12200, 2011 U.S. Dist. LEXIS 130935, at *5 (E.D.
Mich. Nov. 14, 2011) (Duggan, J.) (“[T]he statute does not permit the Court to set
22
aside a completed foreclosure sale.”). Rather, the statute provides for a specific
remedy in cases where a foreclosure by advertisement is commenced in violation
of the loan modification statute: “the borrower may file an action in the circuit
court for the county where the mortgaged property is situated to convert the
foreclosure proceeding to a judicial foreclosure.” Mich. Comp. Laws §
600.3205c(8); see also Block v. BAC Home Loans Serv., L.P., No. 12-1955, 2013
U.S. App. LEXIS 6393, at *4-5 (6th Cir. Mar. 26, 2013) (“Even if the Blocks’
[loan modification] claim had merit, they could not receive what their complaint
asks for: ‘all legal title to’ the foreclosed home. . . . Instead, the remedy for a
breach of the loan-modification statute is to ‘convert the foreclosure proceeding to
a judicial foreclosure.’”) (citations omitted).
In the instant case, the foreclosure is complete and a judgment of possession
has been entered in favor of BANA. Even assuming Plaintiff was entitled to a loan
modification, which he has not pled, he cannot obtain the relief he seeks because
the Court is without authority to set aside the foreclosure sale and order BANA to
modify the loan. Count IV of Plaintiff’s Complaint is therefore dismissed for
failure to state a claim.
IV.
CONCLUSION AND ORDER
For the reasons set forth above, BANA’s Motion to Dismiss is GRANTED
and Plaintiff’s claims are DISMISSED WITHOUT PREJUDICE. If Plaintiff
23
would like to file an amended complaint, it must comply with Federal Rules of
Civil Procedure 8 and 9. Should Plaintiff elect to amend, he must file an amended
complaint within 21 DAYS of receiving this Opinion and Order.
IT IS SO ORDERED.
Date: November 6, 2013
s/PATRICK J. DUGGAN
UNITED STATES DISTRICT JUDGE
Copies to:
Michael J. Baker
18740 Moross Road
Detroit, MI 48224-1026
Trevor M. Salaski, Esq.
Brian C. Summerfield, Esq.
24
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?