Love v. Lew et al
Filing
37
ORDER Granting Defendant Wells Fargo Bank, N.A.'s 18 Amended MOTION to Dismiss. Signed by District Judge Matthew F. Leitman. (Monda, H)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DAEMON LOVE, et al.,
Plaintiffs,
Case No. 13-cv-14946
Hon. Matthew F. Leitman
v.
JACOB J. LEW, et al.,
Defendants.
_________________________________/
ORDER GRANTING DEFENDANT WELLS FARGO BANK, N.A.’S
AMENDED MOTION TO DISMISS (ECF #18)
In this action, Plaintiff Daemon Love (“Love”) challenges certain federal
regulations that, in his view, unlawfully prevent homeowners from redeeming their
homes for fair market value following a foreclosure sale. (See the “Complaint,”
ECF #6 at ¶2.)
Although Love acknowledges that his “Complaint is chiefly
against the [federal] government” (Resp. Br., ECF #24 at 13, Pg. ID 309), Love
also names Wells Fargo Bank, N.A. (“Wells Fargo”), as a defendant.
Love
contests Wells Fargo’s foreclosure of his real property on the grounds that Wells
Fargo (1) violated various federal regulations governing foreclosure proceedings,
and (2) unfairly submitted a so-called “full-credit bid” – rather than a fair market
price bid – at the sheriff’s sale. Wells Fargo has now moved to dismiss Love’s
Complaint. (See ECF #18.) For the reasons explained below, the Court GRANTS
Wells Fargo’s motion.
FACTUAL BACKGROUND
On or about March 26, 2004, Love obtained a $98,055 loan from First Class
Financial Corporation (“First Class”) to purchase real property located at 20060
Conley Street in Detroit, Michigan (the “Property”). (See ECF #18-2.) As security
for the loan, Love granted a mortgage to First Class. (See the “Mortgage,” ECF
#18-3 at 2, Pg. ID 210.) Through a series of assignments, Wells Fargo acquired
the Mortgage on or about December 8, 2006. (See ECF #18-4.) Love eventually
defaulted on the Mortgage, and Wells Fargo initiated foreclosure proceedings.
(See ECF #18-5 at 6, Pg. ID 229.) Wells Fargo purchased the Property at a
sheriff’s sale on January 12, 2011, with a bid of $101,316.28 (the “Sheriff’s Sale”).
(See id. at 2, Pg. ID 225.) The $101,316.28 bid by Wells Fargo represented the full
outstanding balance on Love’s mortgage and did not necessarily represent the
actual fair market value of the Property at that time. (See Resp. Br. at 2-3, Pg. ID
298-99.) Pursuant to M.C.L. § 600.3240, Love’s right to redeem the Property
expired on July 12, 2011.
STATE COURT EVICTION PROCEEDINGS, PROCEDURAL HISTORY
OF THIS ACTION, AND LOVE’S REQUESTS FOR RELIEF
A. State Court Eviction Proceedings
On October 28, 2011, Wells Fargo initiated a summary proceeding in
Michigan’s 36th District Court to evict Love from the Property. (See ECF #18-6.)
Love filed a counter-complaint against Wells Fargo seeking, inter alia, injunctive
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relief tolling the statutory redemption period. (See the “Counter-Complaint,” ECF
#18-7 at 13, Pg. ID 248.) Love alleged that Wells Fargo “submitted a full credit
bid at the Sheriff[‘s] Sale … which was 90% greater than the current fair market
value of the Property,” thereby “preventing Love from having any realistic
opportunity to redeem.” (Id. at 11, 13; Pg. ID 246, 248.) Love asserted that Wells
Fargo’s full-credit bid violated M.C.L. § 600.3228, which provides that a
mortgagee may purchase foreclosed property “fairly and in good faith.” (Id. at 11,
Pg. ID 246.) Wells Fargo moved for summary disposition, and the state district
court denied Wells Fargo’s motion.
On appeal, the Wayne County Circuit Court reversed the district court’s
ruling. (See the “Circuit Court Opinion,” ECF #18-8 at 2-4, Pg. ID 255-57.) The
circuit court found “no support in the law for [Love’s] position that bidding the
amount of the indebtedness is not fair or in good faith.” (Id. at 8, Pg. ID 261.)
Further, the circuit court specifically held that Wells Fargo’s full-credit bid was
“not by definition … unfair.” (Id.) Accordingly, the circuit court remanded the
case to the district court. (Id.) The district court thereafter granted Wells Fargo’s
motion for summary disposition and entered a judgment of possession in Wells
Fargo’s favor. (See the “Judgment of Possession,” ECF #18-9.)
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B. Procedural History of This Action and Love’s Requested Relief
On January 10, 2014, Love filed his Complaint in this Court.1 Most of the
allegations in the Complaint relate to claims against federal government officials
for their adoption and enforcement of certain regulations. (See Compl. at ¶¶1-6,
18-30.) These allegations do not apply to Wells Fargo.2 However, Love does
allege that Wells Fargo failed to comply with certain regulations and policies of the
United States Department of Housing and Urban Development (“HUD”) during
the foreclosure process. (See Compl. at ¶¶31-34, 36.) In addition, Love alleges
that Wells Fargo “made a full credit bid … which was far in excess of the actual
market value making it impossible for [Love] to redeem the [P]roperty.” (Id. at
¶35.) Love asserts that Wells Fargo’s bid at the Sheriff’s Sale (1) violated M.C.L.
§ 600.3228 and (2) breached an implied covenant of good faith and fair dealing in
the Mortgage. (Id. at ¶37.)
1
Love’s co-plaintiffs in this action, Gary and Beth Marshall, do not bring claims
against Wells Fargo.
2
As noted above, Love acknowledges that his “Complaint is chiefly against the
[federal] government.” (Resp. Br. at 13, Pg. ID 309.) In his Response Brief and at
oral argument, Love conceded that nearly all of the requests for relief in his
Complaint (other than the two claims described below) are directed against the
federal government defendants (i.e., Jacob Lew and Shaun Donovan) or Defendant
Taylor Bean & Whitaker Mortgage Corporation – not Wells Fargo. (See id. at 11,
13; Pg. ID 307, 309.)
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Love requests two types of relief against Wells Fargo. First, Love “asks this
Court to set aside the [foreclosure and Sheriff’s Sale] and allow him to either seek
a loan modification pursuant to statute and/or to purchase or redeem the property
for the fair market value.” (Id. at 12, Pg. ID 31.) Second, Love “ask[s] this Court
to award [him] damages against [Wells Fargo] for the contractual breach of the
implied covenant of good faith and fair dealing.” (Id. at 14, Pg. ID 33.)
On June 4, 2014, Wells Fargo filed its Amended Motion to Dismiss pursuant
to Federal Rule of Civil Procedure 12(b)(6). (See the “Motion,” ECF #18.) The
Court heard oral argument on the Motion on September 18, 2014.
GOVERNING LEGAL STANDARD
Rule 12(b)(6) provides for dismissal of a complaint when a plaintiff fails to
state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). “To
survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678, (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007)). A claim is facially plausible when a plaintiff pleads factual
content that permits a court to reasonably infer that the defendant is liable for the
alleged misconduct. Id. (citing Twombly, 550 U.S. at 556). When assessing the
sufficiency of a plaintiff’s claim, a district court must accept all of a complaint's
factual allegations as true. See Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 512
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(6th Cir. 2001). “Mere conclusions,” however, “are not entitled to the assumption
of truth. While legal conclusions can provide the complaint's framework, they
must be supported by factual allegations.” Iqbal, 556 U.S. at 664. A plaintiff must
therefore provide “more than labels and conclusions,” or “a formulaic recitation of
the elements of a cause of action” to survive a motion to dismiss. Twombly, 550
U.S. at 556. “Threadbare recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice.” Id.3
ANALYSIS
A. This Court Lacks Jurisdiction to Set Aside the Foreclosure and Sheriff’s
Sale Under the Rooker-Feldman Doctrine
Under the Rooker-Feldman doctrine, “lower federal courts are precluded
from exercising appellate jurisdiction over final state-court judgments.” Lance v.
Dennis, 546 U.S. 359, 463 (2006) (discussing Rooker v. Fidelity Trust Co., 263
U.S. 413 (1923) and Dist. of Columbia Ct. of App. v. Feldman, 460 U.S. 462
(1983)). Stated another way, federal district courts lack subject-matter jurisdiction
over “cases brought by state-court losers complaining of injuries caused by statecourt judgments rendered before the district court proceedings commenced and
3
“In ruling on a motion to dismiss, the Court may consider the complaint as well
as (1) documents that are referenced in the plaintiff's complaint or that are central
to plaintiff's claims, (2) matters of which a court may take judicial notice, and (3)
documents that are a matter of public record.” Holliday v. Wells Fargo Bank, NA,
No. 13-cv-11062, 2013 WL 3880211, at *2 (E.D. Mich. July 26, 2013) (citing
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).
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inviting district court review and rejection of those judgments.” Exxon Mobil
Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005). Thus, RookerFeldman precludes jurisdiction where “the relief that [plaintiff] request[s] c[an] not
be granted without overturning the judgment of the state court.”
Durham v.
Haslam, 528 Fed. App’x 559, 564 (6th Cir. 2013).
The Rooker-Feldman doctrine deprives this Court of subject-matter
jurisdiction to grant Love the first form of relief he seeks: the setting-aside of the
foreclosure and Sheriff’s Sale to allow him to seek a loan modification or
repurchase the Property at its fair market value.
Granting this relief would
effectively overturn the Judgment of Possession, which conclusively established
Wells Fargo’s right to possession of the Property. Because Love’s request that the
Court undo the foreclosure and Sheriff’s Sale is “effectively … [an] appeal from
the state order granting possession” to Wells Fargo, Rooker-Feldman precludes
this Court from granting relief. Givens v. Homecomings Financial, 278 Fed.
App’x 607, 608 (6th Cir. 2008).
Moreover, even if this Court did have jurisdiction to consider Love’s request
for relief, his claim would still fail. After the redemption period lapses – as it has
in this case – a mortgagor may invalidate or set aside a foreclosure and sheriff’s
sale “only by demonstrating fraud or irregularity in the foreclosure proceedings.”
Kopko v. Bank of N.Y. Mellon, No. 12-13941, 2012 WL 5265758, at *8 (E.D.
7
Mich. Oct. 23, 2012) (collecting authority). The fraud or irregularity “must relate
to the foreclosure proceeding itself.” Conlin v. Mortg. Elec. Registration Sys., 714
F.3d 355, 359 (6th Cir. 2013). Further, “courts may only set aside the foreclosure
if the mortgagor shows that he or she was prejudiced by the fraud or irregularity.”
Bernard v. Fed. Nat. Mortg. Ass’n, No. 13-1477, slip op. at 5 (6th Cir. Sept. 29,
2014). In this case, Love has cited no authority to support his assertion that Wells
Fargo’s alleged violations of HUD regulations and policies and/or Wells Fargo’s
“full-credit bid” constitute fraud or irregularity in the foreclosure proceedings.
Moreover, Love has not pleaded that he suffered prejudice – i.e., “that he would
have been in a better position to preserve his interest in the property absent [Wells
Fargo’s] actions.” Thompson v. JPMorgan Chase Bank, N.A., 563 Fed. App’x
440, 442 (6th Cir. 2014)). Accordingly, Love has failed to state a viable claim for
the setting aside of the foreclosure and Sheriff’s Sale.
B. Love’s Claim for Breach of a Covenant of Good Faith and Fair Dealing
is Not Viable Under Michigan Law and, Even if Re-Pleaded, Relief
Would Be Barred by Collateral Estoppel
Love’s second request for relief – contractual damages for Wells Fargo’s
alleged breach of an implied covenant of good faith and fair dealing by
“overbidding” at the Sheriff’s Sale – fails as a matter of law because Michigan
does not recognize an independent claim for breach of a covenant of good faith and
fair dealing. See, e.g., Burrell v. CitiMortgage, Inc., No. 12-cv-14081, 2014 WL
8
1464441, at *7 (E.D. Mich. Apr. 15, 2014) (citing Fodale v. Waste Mgmt. of Mich.,
Inc., 271 Mich. App. 11, 35 (2006)). Love recognizes as much. He acknowledges
that his “claim should have been pled [sic] as a breach of contract claim whereby
[Wells Fargo] breached the contract by breaching the implied covenant of good
faith and fair dealing.” (Resp. Br. at 16, Pg. ID 312.) He therefore informally
requests leave to “amend the Complaint to comply with the existing caselaw.”
(Id.) The Court will not permit Love to amend his Complaint because, even if repleaded, his request for contractual damages based on Wells Fargo’s alleged bad
faith would be barred by collateral estoppel. See Foman v. Davis, 371 U.S. 178,
182 (1962) (denial of leave to amend is appropriate if amendment would be futile).
Under Michigan law, collateral estoppel generally prevents a party from relitigating an issue when “(1) a question of fact essential to the judgment [was]
actually litigated and determined by a valid and final judgment; (2) the same
parties … had a full and fair opportunity to litigate the issue; and (3) there [was]
mutuality of estoppel.” McCormick v. Braverman, 451 F.3d 382, 397 (6th Cir.
2006) (citing Monat v. State Farm Ins. Co., 677 N.W.2d 843, 845-46 (2004))
(internal punctuation omitted).4 In this case, the issue of whether Wells Fargo
4
Because the Judgment of Possession was issued by a Michigan district court, this
Court considers the preclusive effect of that judgment under Michigan law. See
Hamilton’s Bogarts, Inc. v. Michigan, 501 F.3d 644, 650 (6th Cir. 2007) (“when
considering the preclusive effect of a state court judgment, [a federal court] must
look to the law of that state”) (citing Allen v. McCurry, 449 U.S. 90, 96 (1980)).
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acted in bad faith or unfairly by submitting a “full-credit bid” was actually litigated
and decided in the state-court eviction proceedings.5 Indeed, the circuit court
found “no support in the law for [Love’s] position that bidding the amount of the
indebtedness is not fair or in good faith.” (Circuit Court Opinion at 8, Pg. ID 261.)
The circuit court also determined that Wells Fargo’s full-credit bid was “not by
definition … unfair.” (Id.) Moreover, Love and Wells Fargo were both parties to
the state-court proceedings; in those proceedings Love had a full and fair
opportunity to litigate the issue of whether Wells Fargo’s full-credit bid was unfair
and/or in bad faith; and the proceedings resulted in valid and final judgment.
Accordingly, Love is collaterally estopped from establishing that Wells Fargo’s bid
at the Sheriff’s Sale was unfair or in bad faith.
Love argues that collateral estoppel does not bar his request for relief
because the Judgment of Possession has limited preclusive effect. (See Resp. Br.
at 7-9, Pg. ID 303-05.) Love cites to M.C.L. § 600.5750, which provides that a
5
It is of no help to Love that the claim before the circuit court (Wells Fargo’s
alleged breach of M.C.L. § 600.3228, which required Wells Fargo’s bid at the
Sheriff’s Sale to be “fair[] and in good faith”) is different from the claim before
this Court (Wells Fargo’s alleged breach of an implied covenant of good faith and
fair dealing). Indeed, collateral estoppel bars re-litigation of an issue (in this case,
whether Wells Fargo acted unfairly or in bad faith) “even if the issue recurs in the
context of a different claim.” Arkansas Coals, Inc. v. Lawson, 739 F.3d 309, 320
(6th Cir. 2014) (quoting Taylor v. Sturgell, 553 U.S. 880, 891 (2008)) (emphasis
added).
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judgment obtained via a summary proceeding – like the Judgment of Possession –
“does not merge or bar any other claim for relief.” M.C.L. § 600.5750. However,
the Michigan Supreme Court’s decision in Sewell v. Clean Cut Mgmt., Inc., 621
N.W.2d 222 (Mich. 2001), which interpreted M.C.L. § 600.5750, makes clear that
the Judgment of Possession does preclude Love from re-litigating the specific issue
of whether Wells Fargo acted unfairly or in bad faith. In Sewell, a tenant sued her
landlord for unlawful eviction, and the landlord moved for a directed verdict on the
ground that the tenant’s claims were precluded by a judgment of possession he
previously obtained in a summary proceeding. See id. at 222. The Michigan
Supreme Court held that although a judgment obtained in a summary proceeding
does not bar claims that “could have been brought” during summary proceedings,
“but were not,” it does bar the re-litigation of “the issues actually litigated in the
summary proceedings.” Id. at 225 (emphasis added). Thus, the Sewell court held
that the landlord’s prior judgment of possession obtained in the summary
proceeding was “conclusive on the narrow issue whether the eviction was proper.”
Id. at 225-26. Similarly, in this case, the Judgment of Possession precludes Love
from attacking the foreclosure and Sheriff’s Sale on the ground that Wells Fargo’s
full-credit bid was unfair or in bad faith.
Finally, even if Love’s request for damages based upon Wells Fargo’s
alleged unfairness and/or bad faith was not barred by collateral estoppel, he still
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would not be entitled to relief. Indeed, the United States Court of Appeals for the
Sixth Circuit and other courts in this District have held that a foreclosing bank’s
full-credit bid does not violate the bank’s duty to act fairly and in good faith. See
Rubin v. Fannie Mae, No. 13-1010, slip op. at 5-6 (6th Cir. Sept. 29, 2014); Letvin
v. Lew, No. 13-cv-12015, 2014 WL 2865143 at *7-8 (E.D. Mich. June 24, 2014);
In re Hopkins, 13-cv-14757, 2014 922773 at *4 (E.D. Mich. March 10, 2014);
Bank of America v. Dennis, No. 12-cv-11821, 2013 WL 1212602 (E.D. Mich.
March 25, 2013). Moreover, “[s]uch bids actually help a borrower because in such
[a] situation the borrower is no longer liable for the debt.” Washington v. BAC
Home Loans Servicing, L.P., No. 12-cv-12940, 2013 WL 5476023, at *5 (E.D.
Mich. Oct. 2, 2013) (internal citation omitted). Love has failed to demonstrate that
a bid that “actually help[s] a borrower” is somehow unfair or in bad faith.
CONCLUSION
For all the reasons stated in this Opinion and Order, IT IS HEREBY
ORDERED that Wells Fargo’s Amended Motion to Dismiss (ECF #18) is
GRANTED.
s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE
Dated: October 3, 2014
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I hereby certify that a copy of the foregoing document was served upon the parties
and/or counsel of record on October 3, 2014, by electronic means and/or ordinary
mail.
s/Holly A. Monda
Case Manager
(313) 234-5113
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