Starkey v. U.S. Bank National Association et al
MEMORANDUM & ORDER granting 9 Motion to Dismiss. Case Dismissed. Signed by District Judge Avern Cohn. (CBet)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
LEWIS L. STARKEY,
Case No. 13-13786
U.S. BANK NATIONAL ASSOCIATION,
FEDERAL HOME LOAN MORTGAGE
CORPORATION, LASALLE BANK, NA,
n/k/a BANK OF AMERICA, NA,
MORTGAGE ELECTRONIC REGISTRATION
HON. AVERN COHN
MEMORANDUM AND ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
AND DISMISSING CASE
This is a case challenging a foreclosure following a default on a mortgage. The
property subject to the mortgage was sold at a foreclosure sale to defendant Federal
Home Loan Mortgage Corporation (Freddie Mac), the redemption period has expired,
and a judgment of possession has been entered in favor of Freddie Mac. Nevertheless,
plaintiff Lewis Starkey contends he has a right to the property. Plaintiff is suing U.S.
Bank National Association (US Bank), Freddie Mac, and Mortgage Electronic
Registration Systems (MERS).1 The complaint makes the following claims, phrased by
plaintiff as follows:
Plaintiff also sued Bank of America, but later dismissed his claims against them.
See Doc. 15.
Quiet Title Pursuant to MCL 600.2932
Violation of MCL 600.3205a
Wrongful Foreclosure, MCL 600.3204(3)
Wrongful Foreclosure, MCL 600.3204(1)(d)
Before the Court is U.S. Bank, Freddie Mac and MERS’s motion to dismiss under
Fed. R. Civ. P. 12(b)(6).. For the reasons that follow, the motion will be granted and the
case will be dismissed.
A. The Loan and Mortgage
On September 27, 2007, plaintiff obtained a $87,500 loan from LaSalle Bank,
N.A. (LaSalle Bank) to finance the purchase or real property at 25987 Cathedral street
in Redford, Michigan. To secure payment of the loan, plaintiff granted a mortgage in
favor of Mortgage Electronic Registration Systems, Inc. (MERS), acting solely as the
nominee for the LaSalle Bank and its successors and assigns. Plaintiff also executed a
promissory note in favor LaSalle Bank. On May 14, 2012, MERS assigned the
mortgage to U.S. Bank.
B. Default and Foreclosure Proceedings
At some point after obtaining the loan, plaintiff defaulted on the note and
mortgage by failing to make payments. On May 1, 2012, U.S. Bank informed plaintiff of
his default. On June 22, 2012, U.S. Bank informed plaintiff of his rights under Mich.
Count IV names only Bank of America. As Bank of America has been
dismissed, this count is DISMISSED.
Comp. Laws § 600.3205a to a loan modification. Plaintiff did not respond to U.S. Bank
regarding possible evaluation for a loan modification.
On July 30, August 6, August 13, and August 20, 2012, notice of the foreclosure
sale was published in the Detroit Legal News. On July 31, 2012, notice of the
foreclosure sale was posted on the property. On August 30, 2012, the property was
sold at a foreclosure sale to Freddie Mac for $87,038.56. The redemption period
expired on or about February 28, 2013. Plaintiff did not redeem the property before the
expiration of the redemption period.
Following the redemption period, on March 13, 2013, Freddie Mac initiated
eviction proceedings in the 17th District Court for the State of Michigan. On March 25,
2013, plaintiff, appearing pro se, filed a "Notice of Acceptance to Contract," demanding
$100,000 from Freddie Mac within "10 days." The district court set the matter for trial for
April 22, 2013. On April 19, 2013, plaintiff, through an individual named "Chenita
Farmer," filed an "Answer and Affirmative Defenses."
On April 22, 2013, the district court entered a judgment of possession by default
in favor of Freddie Mac. The order indicated that Freddie Mac could apply for an order
of eviction if plaintiff did not move out on or before May 2, 2013. On the same day,
"Chenita Farmer" filed a "Motion to Dismiss Action; Counterclaim; and Request Via
Affidavit for Removal to Circuit Court." On April 22, 2013, plaintiff filed an appeal of the
district court's judgment to the Wayne County Circuit Court; the district court ordered a
$200.00 bond on appeal.
On April 29, 2013, plaintiff filed an "Emergency Motion for an Injunction" in the
appeal. On June 3, 2013, the district court entered an order for plaintiff to escrow
$500.00 per month during the appeal. On July 9, 2013, the Wayne County Circuit Court
dismissed the appeal.
On August 12, 2013, the district court granted Freddie Mac's motion for eviction.
Meanwhile, on July 8, 2013, plaintiff filed the instant complaint against
defendants in Wayne County Circuit Court. As noted above, the complaint is in five
counts, four of which are aimed at U.S. Bank, Freddie Mac, and MERS. Plaintiff
generally alleges that: (1) U.S. Bank refused the offer plaintiff a loan modification; (2)
the assignment from LaSalle Bank, NA to U.S. Bank was invalid; and (3) that Bank of
America fraudulently represented to him that it owned his mortgage.
On August 29, 2013, the state court issued an ex parte temporary restraining
order halting the eviction against plaintiff, to remain in effect until September 12, 2013.
Meanwhile, on September 5, 2013, defendants removed the case to federal court and
later filed the instant motion to dismiss.
III. Legal Standard
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 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, 556 U.S. 662, 678 (2009)
The court is “not bound to accept as true a legal conclusion couched as a factual
allegation.” Id. at 679 (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 contextspecific 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 678 (internal quotation marks and
In ruling on a motion to dismiss, the Court may consider the complaint as well as
(1) documents referenced in the pleadings and central to plaintiff's claims, (2) matters of
which a court may properly take notice, (3) public documents, and (4) letter decisions of
government agencies may be appended to a motion to dismiss. Tellabs, Inc. v. Makor
Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 2509 (2007). Here, the Court has
considered documents relating to the mortgage and the foreclosure which are
referenced in the complaint and central to plaintiffs’ claims.
A. Expiration of the Redemption Period
Before addressing plaintiff’s claims as to the foreclosure proceedings, it is
undisputed that he failed to exercise her statutory right to redeem the foreclosed
property before the six-month statutory redemption period expired. This fact has
"[U]nder Michigan's foreclosure statute, 'all the right, title and interest which the
mortgagor had at the time of the execution of the mortgage' vests in the entity that
purchased the foreclosed property in the sheriff's sale after the expiration of the
redemption period." El-Seblani v. IndyMac Mortg. Servs., No. 12-1046, 2013 WL
69226, *3 (6th Cir. Jan. 7, 2013) (quoting M.C.L.§ 600.3236 and citing Piotrowski v.
State Land Office Bd., 302 Mich. 179 (1942), as support). "A strict reading of the
statute suggests that once the redemption period expires, the homeowner has no legal
interest in the property that litigation might vindicate." Id.
Michigan courts do, however, "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 order to keep a plaintiff's suit viable, provided he
makes 'a clear showing of fraud, or irregularity' by the defendant." Id. (quoting
Schulthies v. Barron, 16 Mich. App. 246 (1969)). "The misconduct must relate to the
foreclosure procedure itself." Id. "Moreover, because the foreclosure statutes are
intended to create finality and certainty in property rights, an action challenging
foreclosure must be brought 'promptly and without delay.'" Id. (quoting Richard v.
Schneiderman & Sherman, PC, 294 Mich. App. 37 ( 2011), rev'd on other grounds, 490
Mich. 1001 (2012)). Thus, plaintiff can bring an action to challenge the foreclosure
proceedings after the expiration of the redemption period. The scope of relief, however,
is circumscribed, as explained below.
B. Setting Aside the Foreclosure
To the extent plaintiff says that the foreclosure sale of the property should be
declared void ab initio, the argument is not well-taken. In Kim, the Michigan Supreme
Court held that under Michigan law a failure to comply with the requirements of
Michigan's foreclosure by advertisement statute renders the foreclosure voidable, not
void ab initio. See Kim v. JPMorgan Chase Bank, N.A., 493 Mich. 98, 115–16 (2012)
(reviewing Davenport v. HSBC Bank USA, 739 N.W.2d 383, 384 (Mich. Ct. App. 2007),
the decision the Sixth Circuit relied upon for its contrary holding in Mitan v. Fed. Home
Loan Mortg. Corp., ___ F.3d ___, 2012 WL 6200257 (6th Cir. Dec. 12, 2012), and
holding that “Davenport’s holding was contrary to the established precedent of [the
Michigan Supreme] Court.”). Thus, under controlling Michigan law, the foreclosure sale
cannot be declared void ab initio. See Savedoff v. Access Group, Inc., 524 F.3d 754,
762 (6th Cir. 2008) (observing that federal courts must follow the decisions of the state's
highest court when applying state law). So, the issue this Court must now address is
whether, under Michigan law, the foreclosure sale on the property is voidable, or could
be set aside, on the facts alleged.
The Michigan Supreme Court’s decision in Kim instructs on this issue as well.
“[T]o 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, they 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. The concurring opinion by Justice Markman provides further guidance
"concerning the nature of the ‘prejudice’ that plaintiffs must demonstrate in order to set
aside the foreclosure;” and, in that regard, provides a nonexhaustive list of factors to be
considered. Id. at 120–21. These include: (1) “whether plaintiffs were misled into
believing that no sale had been had;” (2) “whether plaintiffs act[ed] promptly after
[becoming] aware of the facts on which they based their complaint;” (3) “whether
plaintiffs made an effort to redeem the property during the redemption period;” (4)
“whether plaintiffs were represented by counsel throughout the foreclosure process;”
and (5) “whether defendant relied on the apparent validity of the sale by taking steps to
protect its interest in the subject property.” Id. (Markman, J. concurring) (internal
quotation marks and citations omitted).
Applying Kim, plaintiff cannot establish the prejudice required to set aside the
foreclosure sale of the property. This is so because none of plaintiff’s claims relating to
the mortgage and the foreclosure proceedings are viable, as explained below.
C. Plaintiff’s Claims
1. Count I - Quiet Title
In Count I, plaintiff seeks to quiet title. This claim fails to state a claim upon
which relief may be granted. In order to properly make a quiet title claim, plaintiff must
meet the requirements set forth in M.C.R. § 3.411, or, for a federal cause of action, 28
U.S.C. § 2409a(d). These provisions require that plaintiff properly allege her ownership
interest in the property. M.C.R. § 3.411(B) states, “(2) The complaint must allege, (a)
the interest the plaintiff claims in the premises; (b) the interest the defendant claims in
the premises; and (c) the facts establishing the superiority of the plaintiff's claim.” 28
U.S.C. § 2409a(d) states,”[t]he complaint shall set forth with particularity the nature of
the right, title, or interest which the plaintiff claims in the real property, the
circumstances under which it was acquired, and the right, title, or interest claimed by the
United States.” Moreover, plaintiff must show that he has title to the property superior to
claims by others with an interest in the property. Beaulah Hoagland Appelton Qualified
Pers. Residence Trust v. Emmet County Road Comm’n, 236 Mich. App. 546, 550
(1999) (“In an action to quiet title, the plaintiff have the burden of proof and must make
out a prima facie case of title”)
Here, plaintiff has not alleged how he has a greater interest in the property than
any of the defendants. Indeed, Freddie Mac is the record owner of the property and
exercised its right to possession in a successful eviction action. These facts
demonstrate U.S. Bank’s superior interest in the property. Moreover, plaintiff has not
denied that he failed to make timely payments under the note and mortgage. This
militates against quieting title to him. See Yuille v. American Home Mortgage Serv’s.
Inc., 483 F. App’x 132, at *2 (6th Cir. May 29, 2012) (finding that a borrowers failure to
make timely payments precluded a quiet title claim). Finally, the Sixth Circuit has held
that a quiet title claim is a remedy, and not a separate cause of action. Goryoka v.
Quicken Loan, Inc., 2013 WL 1104991, at *3 (6th Cir. March 18, 2013). Overall, plaintiff
is not entitled to any relief under Count I.
2. Count II - Violation of Loan Modification Statute
In Count II, plaintiff claims a violation of Michigan’s loan modification statute,
M.C.L. § 600.3205a. The Sixth Circuit, however, has held that the loan modification
statute provides a remedy which must be exercised prior to a foreclosure by
advertisement. See Smith v. Bank of Am. Corp., 485 F. App’x 749, 751 (6th Cir. 2012)
(stating that plaintiff’s “appear to have missed the boat regarding the applicability of this
statute which, when triggered, allows plaintiffs to enjoin a foreclosure by advertisement
and convert it to a judicial foreclosure: they brought this action after the foreclosure sale
occurred, and so there is no foreclosure to enjoin or convert.” Id. (citing M.C.L.§
600.3205c). The holding in Smith is consistent with the opinions of courts in this district
that have considered the issue. See, e.g., Benford v. CitiMortgage, Inc., 2011 WL
5525942, at *5 (E.D. Mich. Nov. 14, 2011) (“The statute plainly requires the borrower to
seek his remedy prior to the completion of the foreclosure sale, as it merely converts the
proceeding into one of judicial foreclosure. A borrower may not challenge a completed
foreclosure sale under this statute.”); Evan v. BAC Home Loan Servicing LP, 2012 WL
4867753, at *2 (E.D. Mich. Oct. 15, 2012) (“Failure to comply with Mich. Comp. Laws. §
600.3205(a) does not invalidate a Sheriff’s Sale.”); Smith v. Fannie Mae, 2012 WL
3758087, at *6 (E.D. Mich. Aug. 30, 2012) (“Under 600.3205(c)(1)-(3), [plaintiff] was
required to act before the foreclosure by Sheriff’s Sale commenced in order to convert
the proceedings to a judicial foreclosure.”); Dingman v. OneWest Bank, FSB, 859 F.
Supp. 2d 912, 922 (E.D. Mich. 2012) (“[A] failure to comply with these statutes would
not invalidate a Sheriff’s sale. The statutes include a specific enforcement mechanism
that provides the borrowers with an opportunity to request judicial foreclosure if the
foreclosing party does not comply with the loan modification provisions.”) (citation
omitted). See also Jonathan L. Engman, Challenging the Loan Modification Process
Under Michigan’s Foreclosure Statute, LACHES, June 2013, at 23.
Thus, because plaintiff failed to exercise his rights under the loan modification
statute prior to the foreclosure by advertisement, he cannot plausibly maintain a claim
for relief under the loan modification statute. Count II must be dismissed.
3. Counts III and V - Violation of Michigan’s Foreclosure Statute
In Counts III and V, plaintiff alleges defects in the foreclosure process. In both
counts, plaintiff essentially contends that the assignment from MERS to U.S. Bank was
invalid because the lender, LaSalle Bank, was not “in existence” and “was merged
and/or purchased by” Bank of America at the time the assignment was made. This
assertion is not tenable.
Under Michigan's foreclosure by advertisement statute, a party may foreclose by
advertisement, if is "either the owner of the indebtedness or of an interest in the
indebtedness secured by the mortgage or the servicing agent of the mortgage." M.C.L.
§ 600.3204(1)(d). Furthermore, "[i]f the party foreclosing a mortgage by advertisement
is not the original mortgagee, a record chain of title shall exist prior to the date of sale
under section 3216 evidencing the assignment of the mortgage to the party foreclosing
the mortgage." M.C.L. § 600.3204(3).
Here, both conditions existed at the time of the foreclosure by advertisement.
U.S. Bank held the mortgage at the time of the foreclosure. The Michigan Supreme
Court has held that a record interest in a mortgage satisfies § 600.3204(1)(d). See
Residential Funding Co. v. Saurman, 490 Mich. 909, 910 (2011). Furthermore, a record
chain of title existed in the Wayne County Register of Deeds evidencing the assignment
of the original mortgage from MERS to U.S. Bank.
Even if there was a defect in the assignment, plaintiff has no ability to challenge
it. Under Michigan law, a non-party to a mortgage assignment lacks the standing to
challenge its validity unless there is some risk of double-payment on the obligation or
the like. See, e.g., Livonia Property Holdings, LLC v. 12840-12976 Farmington Rd.
Holdings, LLC, 399 F. App'x 97, 102-03 (6th Cir. 2010) (unpublished). Plaintiff alleges
no reason why he would risk double-payment on the underlying obligation.
Moreover, to the extent that plaintiff alleges a defect in the process because the
mortgage and note were “split,” this too fails to state a plausible claim for relief. In
Saurman, supra, the Michigan Supreme Court rejected the theory that separating a note
from the mortgage extinguishes the right to foreclose. “[T]he security is always made in
trust to secure obligations, and the trust and the beneficial interest need not be in the
same hands.” Id. See also Leone v. Citigroup, Inc., No. 12-10597, 2012 WL 1564698,
at *3 (E.D. Mich. May 2, 2012) (holding that the securitization process does not
invalidate or otherwise affect a borrower’s obligations under a mortgage. Indeed, The
mortgage itself demonstrates that MERS is the nominee both for the originating lender
and its successors and assigns. Therefore, if the note is sold, there is no “split”. See,
e.g., Golliday v. Chase Home Fin., LLC, No. 1:10-cv-532, 2011 WL 4352554, at *7
(W.D. Mich. Aug. 23, 2011). Therefore, any “note-splitting” argument fails.
In short, defendants complied with §§ 600.3204(1)(d) and 600.3204(3) and
plaintiff otherwise lacks standing to challenge the assignment. Thus, Counts III and V
fail to state claims upon which relief can be granted.
For the reasons stated above,3 plaintiff has not stated a plausible claim for relief
against defendants. Accordingly, defendants’ motion to dismiss is GRANTED. This
case is DISMISSED.
UNITED STATES DISTRICT JUDGE
Dated: January 13, 2014
I hereby certify that a copy of the foregoing document was mailed to the attorneys of
record on this date, January 13, 2014, by electronic and/or ordinary mail.
s/Carol Bethel for Sakne Chami
Case Manager, (313) 234-5160
Defendants also argue that any claim for possession of the property is barred by
res judicata due to the state court eviction action and that plaintiff is barred from any
relief due to unclean hands. The Court declines to address these arguments, however
well taken they may be, in light of finding that none of the counts of the complaint state
a viable claim for relief.
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