Herhold v. Green Tree Servicing LLC

Filing 10

OPINION AND ORDER Granting Defendant's 3 Motion to Dismiss, Denying 6 Motion to Amend and Dismissing Action With Prejudice. Signed by District Judge Denise Page Hood. (Monda, H)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

GAIL A. HERHOLD,
Plaintiff,
Case No. 13-14685
v.
HONORABLE DENISE PAGE HOOD
GREEN TREE SERVICING, LLC,
Defendant.
_____________________________________/

OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS, DENYING PLAINTIFF’S MOTION TO AMEND
AND DISMISSING ACTION WITH PREJUDICE
I.

BACKGROUND
On November 12, 2013, Defendant Green Tree Servicing, LLC (“Green Tree”)

removed this Third Party Complaint filed by Plaintiff Gail A. Herhold (“Herhold”)
before the 67-4th District Court, State of Michigan, alleging two counts: Illegal
Foreclosure in Violation of M.C.L. §§ 600.3204, 3205a and 3205c (Count I) and
Breach of Mortgage Contract (Count II).
Herhold obtained a mortgage from Quicken Loans, Inc. on November 16, 2004
for her home in Swartz Creek, Michigan in the amount of $116,000 which was
transferred to Green Tree. (Comp., ¶¶ 6-7) Herhold was granted a permanent

modification on her loan in May 2012. (Comp., ¶ 9) She made payments under the
modification agreement until September or October 2012, and has not since made any
payments. (Comp., ¶ 10) Green Tree began foreclosure proceedings on November 13,
2013, but Herhold did not learn of the proceedings until she saw a notice posted to her
door in January 2013. (Comp., ¶¶ 12-14)
Green Tree asserts it sent a statutory notice under M.C.L. § 600.3205a to
Herhold, but she did not respond to the notice or request a meeting with Green Tree.
(Motion, Exs. E and F) Foreclosure proceedings were commenced, the notice posted
on Herhold’s front door on January 2, 2013 and published the notice in the Legal
News for four consecutive weeks beginning December 19, 2012. (Motion, Ex. F)
Green Tree Servicing purchased the property at a sheriff’s sale on January 16, 2013
and recorded the sheriff’s deed with the Genesee County Clerk. (Motion, Ex. F)
Green Tree Servicing conveyed its interest in the property to Federal National
Mortgage Association (“Fannie Mae”), subject to Herhold’s statutory right of
redemption. (Motion, Ex. G) The redemption period expired on July 16, 2013 and
Herhold did not redeem the property. (Motion, Ex. F)
Fannie Mae filed summary eviction proceedings before the 67-4th District
Court on July 18, 2013. The instant Third-Party Complaint was then filed by Herhold
against Green Tree on August 15, 2013, collaterally attacking the foreclosure action.
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The district court bifurcated the third-party complaint and removed the case to the
Genesee County Circuit Court. Green Tree thereafter removed the action to this
Court.
This matter is now before the Court on Green Tree’s Motion to Dismiss and
Herhold’s Motion to Amend the Complaint. Response briefs have been filed to each
motion.
II.

ANALYSIS
A.

Standard of Review

Rule 12(b)(6) of the Rules of Civil Procedure provides for a motion to dismiss
based on failure to state a claim upon which relief can be granted. Fed. R. Civ. P.
12(b)(6). 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). Although not outright overruling the “notice pleading” requirement under
Rule 8(a)(2) entirely, Twombly concluded that the “no set of facts” standard “is best
forgotten as an incomplete negative gloss on an accepted pleading standard.” Id. at
563. To survive a motion to dismiss, a complaint must contain sufficient factual
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matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id. at
570. 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. Such allegations are not to be discounted because they
are “unrealistic or nonsensical,” but rather because they do nothing more than state a
legal conclusion–even if that conclusion is cast in the form of a factual allegation.
Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009). In sum, for a complaint to survive a
motion to dismiss, the non-conclusory “factual content” and the reasonable inferences
from that content, must be “plausibly suggestive” of a claim entitling a plaintiff to
relief. Id. 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. Fed. R. Civ. P. 8(a)(2). The court primarily considers
the allegations in the complaint, although matters of public record, orders, items
appearing in the record of the case, and exhibits attached to the complaint may also
be taken into account. Amini v. Oberlin College, 259 F.3d 493, 502 (6th Cir. 2001).
Rule 15(a) provides that a party may amend its pleading once as a matter of
course within 21 days after a responsive pleading is served. Fed. R. Civ. P. 15(a)(1).
Rule 15(a)(2) further provides that a party may amend its pleading on leave of court.
Leave shall be freely given when justice so requires. Fed. R. Civ. P. 15(a)(2). A
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district court may deny leave to amend in cases of undue delay, undue prejudice to the
opposing party, repeated failure to cure deficiencies by amendment previously
allowed or futility. Foman v. Davis, 371 U.S. 178, 184 (1962). Delay alone,
regardless of its length is not enough to bar amendment if the other party is not
prejudiced. Duggins v. Steak ‘N Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999).
Allowing an amendment after the close of discovery and dispositive motion deadline
has passed creates significant prejudice because discovery would have to be reopened
and the defendant must now prepare a defense for a claim quite different than the
claim that was before the court. Id. When an amendment is sought at a late state of
litigation, there is an increased burden on the moving party to show justification for
failing to move earlier. Bridgeport Music, Inc. v. Dimension Films, 401 F.3d 647, 662
(6th Cir. 2004). If a complaint cannot withstand a motion to dismiss under Rule
12(b)(6), the motion to amend should be denied as futile.

Rose v. Hartford

Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir. 2000).
B.

Count I, Michigan Foreclosure by Advertisement Statute

Green Tree asserts that Herhold’s requested relief to set aside the foreclosure
is not available under M.C.L. § 600.3205 or the case law. Herhold responds that she
has stated a claim in that Green Tree admits certain payments were not applied to her
account.
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In Michigan, once the redemption period following foreclosure of a parcel real
property has expired, the former owners’ rights in and title to the property are
extinguished. Piotrowski v. State Land Office Bd., 302 Mich. 179, 187 (1942);
Goryoka v. Quicken Loan, Inc., 2013 WL 1104991, * 1 (6th Cir. Mar. 18,
2013)(citing, Overton v. Mortgage Electronic Registration Systems, 2009 WL
1507342, *1 (Mich. App. 2009)). “The right to redeem from a foreclosure sale is a
statutory right that ... can neither be enlarged nor abridged by the courts.” Houston
v. U.S. Bank Home Mortg. Wisconsin Servicing, 2012 WL 5869918, * 5 (6th Cir. Nov.
20, 2012)(quoting Detroit Trust Co. v. Detroit City Serv. Co., 262 Mich. 14 (1933)).
Filing of a lawsuit does not toll the redemption period and once that period expired,
the plaintiff lacked standing to challenge the foreclosure proceedings. Overton, 2009
WL 1507342 at *1. A court may consider equitable remedies only if there is a clear
showing of fraud or irregularity as to the foreclosure proceeding itself, and not simply
as to any conduct by a defendant. Houston, 2012 WL 5869918 at *5 (citing, Freeman
v. Wozniak, 241 Mich. App. 633 (2000)). Michigan’s foreclosure by advertisement
scheme was meant to impose order on the foreclosure process while still giving
security and finality to purchasers of foreclosed properties. Conlin v. Mortg. Elec.
Registration Sys., Inc., 714 F.3d 355, 359 (6th Cir. 2013). A plaintiff must make two
showings to set aside a foreclosure action, the first being a strong case of fraud or
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irregularity relating to the foreclosure proceedings itself and that the plaintiff suffered
prejudice by the defendant’s failure to comply with the statute, M.C.L. § 600.3204.
Id. at 360; Sweet Air Inv., Inc. v. Kenney, 739 N.W.2d 656, 659 (Mich. Ct. App.
2007); Kim v. JP Morgan Chase Bank, N.A., 825 N.W.2d 329, 339 (Mich. 2012).
A review of Herhold’s Complaint shows no allegations of fraud, nor a strong
case of fraud or any irregularity relating to the foreclosure proceedings. She does not
allege that she was prejudiced because of Green Tree’s failure to comply with the
statute. Herhold only claims that she had no pre-foreclosure notice or that the notice
was not published. As part of the record, Green Tree submitted evidence that the
notice was published in the Legal News for four consecutive weeks. Under the statute
and the cases set forth above, Herhold has failed to allege a strong case of fraud or
irregularity to set aside the foreclosure action. Herhold’s claim under the statute,
M.C.L. § 600.3204, 3205 et seq. must be dismissed for failure to state a claim upon
which relief may be granted.
C.

Count II, Breach of Mortgage Contract

Green Tree seeks to dismiss Herhold’s breach of contract claim asserting that
there is nothing in the mortgage contract which requires Green Tree to accept partial
payment of past amount due in order to avoid a sheriff’s sale. Green Tree claims that
the mortgage contract allows for acceleration of the amounts due if a party is in
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default. Herhold responds that Green Tree failed to work with her in good faith when
she attempted to reinstate the mortgage loan prior to the sheriff’s sale.
A plaintiff must establish the following to state a breach of contract claim: 1)
that the parties entered into a valid enforceable contract that included the terms and
conditions claimed by plaintiff; 2) that the defendant breached the contract; and, 3)
that the defendant’s breach caused a loss to the plaintiff. Platsis v. E.F. Hutton & Co.,
642 F.Supp. 1277 (W.D. Mich. 1986); Pittsburgh Tube Co. v. Tri-Bend, Inc., 185
Mich. App. 581 (1990). In Michigan, the paramount goal when interpreting a contract
is to give effect to the intent of the contracting parties. Old Kent Bank v. Sobczak, 243
Mich. App. 57, 63-64 (2000). The court is to read the agreement as a whole and
attempt to apply the plain language of the contract itself. Id. If the intent is clear from
the language of the contract itself, there is no place for further construction or
interpretation of the agreement. Farm Bureau Mut. Ins. Co. v. Nikkel, 460 Mich. 558,
566 (1999). A contract provision that is clear and unambiguous must be “taken and
understood in [its] plain, ordinary, and popular sense.” Mich. Mut. Ins. Co. v. Dowell,
204 Mich. App. 81 (1994). Unambiguous contract provisions are not subject to
interpretation and must be enforced as written. Id.
In this case, the mortgage contract at issue expressly allows the lender to
accelerate the payments due prior to reinstating the mortgage. (Motion, Ex. A, ¶ 19)
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Based on the mortgage contract, Green Tree was not required to accept partial
payment in order to reinstate the mortgage and to not go forward with the sheriff’s
sale. Herhold has failed to sufficiently allege a plausible breach of contract claim
against Green Tree.
D.

Motion to Amend by Plaintiff

Herhold seeks to amend the Complaint to add claims that the default was not
valid and that Green Tree breached the mortgage contract by providing inaccurate
reinstatement amount. Herhold also seeks to amend the Complaint to add an allegation
that the notice was not sent in the manner required by statute. Green Tree responds
that any amendment would be futile in that the foreclosure action is complete and the
redemption period has expired.
Based on the analysis above, the Court finds any amendment to the Complaint
seeking to set aside the foreclosure action is futile. The redemption period has expired
and Herhold has failed to allege a strong showing that fraud or any irregularity was
involved in the foreclosure process.
III.

CONCLUSION
For the reasons set forth above,
IT IS ORDERED that Defendant’s Motion to Dismiss (Doc. No. 3) is

GRANTED.
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IT IS FURTHER ORDERED that Plaintiff’s Motion to Amend the Complaint
(Doc. No. 6) is DENIED.
IT IS FURTHER ORDERED that this action is DISMISSED with prejudice.

s/Denise Page Hood
Denise Page Hood
United States District Judge
Dated: February 28, 2014
I hereby certify that a copy of the foregoing document was served upon counsel of
record on February 28, 2014, by electronic and/or ordinary mail.
s/LaShawn R. Saulsberry
Case Manager

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