Hall v. U.S. Bank, National Association, as successor trustee to Bank of america, N.A. as successor by merger to LaSalle Bank N.A., as trustee for Merrill Lynch first Franklin Mortgage Loan Trust, Mortgage Lo
Filing
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ORDER granting 5 Motion to Dismiss. Signed by District Judge Lawrence P. Zatkoff. (MVer)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
NATHANIEL HALL,
Plaintiff,
v.
U.S. BANK, N.A., as successor trustee to Bank of
America, N.A., as successor by merger to LaSalle
Bank, N.A., as trustee for Merrill Lynch First
Franklin Mortgage Loan Trust, Mortgage Loan
Asset-Backed Certificates, Series 2007-3,
Case No. 13-15276
Hon. Lawrence P. Zatkoff
Magistrate Mona K. Majzoub
Defendant.
__________________________________________/
OPINION AND ORDER
AT A SESSION of said Court, held in the United States Courthouse,
in the City of Port Huron, State of Michigan, on September 16, 2014
PRESENT: THE HONORABLE LAWRENCE P. ZATKOFF
UNITED STATES DISTRICT JUDGE
I. INTRODUCTION
This matter is before the Court on Defendant U.S. Bank, N.A.’s Motion to Dismiss
pursuant to Fed. R. Civ. P. 12(b)(6) [Dkt. 5]. The motion has been fully briefed. The Court
finds that the facts and legal arguments are adequately presented in the parties’ papers such that
the decision process would not be significantly aided by oral argument. Therefore, pursuant to
E.D. Mich. L.R. 7.1(f)(2), it is hereby ORDERED that the motion be resolved on the briefs
submitted, without oral argument. For the following reasons, Defendant’s motion is GRANTED.
II. BACKGROUND
This matter involves real property located at 147 Sandbar Lane, Detroit, Michigan 48214
(the “Property”). On March 30, 2007, Nathaniel Hall (“Plaintiff”) received a loan in the amount
of $750,000.00 (the “Loan”) from non-party First Franklin Financial Corp (“Lender”). To secure
repayment of the Loan, Plaintiff granted a mortgage (the “Mortgage”) on the Property to
Mortgage Electronic Registration Systems, Inc. (“MERS”), solely as nominee for Lender and
Lender’s successors and assigns. MERS, its successors, and assigns of MERS are named as the
mortgagee pursuant to the Mortgage, which was recorded on April 7, 2007. On January 11,
2010, MERS assigned the Mortgage to U.S. Bank, N.A., as successor trustee to Bank of
America, N.A., as successor by merger to LaSalle Bank, N.A., as trustee for Merrill Lynch First
Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificates, Series 2007-3,
(“Defendant”). That assignment was recorded on January 19, 2010.
Plaintiff defaulted on his obligations under the Loan. As a result, Defendant commenced
foreclosure by advertisement proceedings. On March 15, 2010, Defendant served Plaintiff in
accordance with MCL § 600.3205a(1) with written notice of the default and Defendant’s intent
to foreclose. See Dkt. # 5, Ex. 3, p. 8. Plaintiff did not request a meeting under MCL §
600.3205b. Id. As a result, Defendant proceeded with foreclosure by advertisement. Notice of
the foreclosure sale was published for four consecutive weeks, and posted on the door of the
Property on April 16, 2011. Id. at 4-5. On August 31, 2011, Defendant purchased the Property
at a Sheriff’s Sale with a winning bid of $901,149.31. A Sheriff’s Deed was issued the same
day. The six-month redemption period expired on February 29, 2012. Plaintiff did not redeem
the Property.
Although Plaintiff initially filed suit against Defendant in Wayne County Circuit Court,
that action was dismissed without prejudice upon the stipulation of all parties on July 17, 2012
(“Stipulated Dismissal”). On December 2, 2013, Plaintiff initiated the instant litigation against
Defendant in Wayne County Circuit Court. In his eight-count “Complaint for Quiet Title,”
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Plaintiff brings an action to quiet title (Count I), alleges Defendant illegally foreclosed by
advertisement (Count II), argues Defendant lacked the legal authority, capacity or privity “to
maintain” the Property (Count III), asserts Defendant breached MCL § 600.3205 (Count IV),
alleges Defendant breached an implied agreement to consider Plaintiff for a loan modification
(Count V), contends Defendant innocently and/or negligently made the false representation that
Defendant would consider Plaintiff for a loan modification (Count VI), requests the Court to
enforce the aforementioned alleged implied agreement on the basis of promissory estoppel
(Count VII), and argues Plaintiff is entitled to have the foreclosure by advertisement converted to
a judicial foreclosure under MCL § 600.3205c(8) (Count VIII). Defendant timely removed the
matter to this Court under diversity jurisdiction on December 30, 2013, and now moves to
dismiss Plaintiff’s Complaint in its entirety pursuant to Fed. Rule Civ. P. 12(b)(6).
III. LEGAL STANDARD
A. RULE 12(b)(6)
A motion brought pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon
which relief may be granted tests the legal sufficiency of a plaintiff’s claims. The Court must
accept as true all factual allegations in the pleadings, and any ambiguities must be resolved in the
plaintiff’s favor. See Jackson v. Richards Med. Co., 961 F.2d 575, 577–78 (6th Cir. 1992).
While this standard is decidedly liberal, it requires more than the bare assertion of legal
conclusions. See Advocacy Org. for Patients & Providers v. Auto Club Ins. Ass’n., 176 F.3d
315, 319 (6th Cir. 1999). A plaintiff must make “a showing, rather than a blanket assertion of
entitlement to relief” and “[f]actual allegations must be enough to raise a right to relief above the
speculative level” so that the claim is “plausible on its face.” Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 555, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual
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content that allows the court to draw the reasonable inference the defendant is liable for the
alleged misconduct.” Ashcroft v. Iqbal, 556 U.S. 662, 696-97 (2009).
In deciding a motion to dismiss pursuant to Rule 12(b)(6), this Court may consider “the
facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the
pleadings, and matters of which the [Court] may take judicial notice.” 2 James Wm. Moore et
al., Moore’s Federal Practice ¶ 12.34[2] (3d ed. 2000). Furthermore, a district court “may
consider matters of public record in deciding a motion to dismiss without converting the motion
to one for summary judgment.” Commercial Money Center, Inc. v. Ill. Union Ins. Co., 508 F.3d
327, 336 (6th Cir. 2007).
In the instant matter, the exhibits considered from outside the
pleadings are public records, and therefore the Court will consider Defendant’s Motion to
Dismiss without converting it to a motion for summary judgment under Rule 56.
IV. ANALYSIS
A.
Plaintiff Failed to State a Viable Claim in Counts I-IV and VIII
1.
The Redemption Period Expired on February 29, 2012
Plaintiff alleges that Defendant failed to comply with MCL §§ 600.3204 and 600.3205
with respect to foreclosing on the Property. Under Michigan law, Plaintiff had six months after
the sale (i.e., until February 29, 2012) to challenge the foreclosure. See MCL § 600.3240(8).
Plaintiff concedes he did not challenge the foreclosure before the expiration of the redemption
period. See Dkt. # 8, p. 13.
In Michigan, the clearly established applicable law is that a person such as Plaintiff
generally has no right to challenge a foreclosure sale after the expiration of the redemption
period. See, e.g., Piotrowski v. State Land Office Bd., 302 Mich. 179, 187-88 (1942); Overton v.
Mortg. Elec. Registration Sys., 2009 WL 1507342, at *1 (Mich. App. May 28, 2009); Spartan
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Distributors, Inc. v. Golf Coast Int’l, L.L.C., 2011 WL 1879722, at *3 (Mich. App. May 17,
2011). There are various exceptions to this rule, but as discussed below, Plaintiff only asserts the
exception based on alleged fraud or irregularity in the foreclosure sale process.
2.
No Fraud or Irregularities in the Foreclosure Sale Process
Under Michigan law, a plaintiff may challenge a foreclosure sale after the expiration of
the redemption period by alleging fraud or irregularity in the foreclosure sale process. See, e.g.,
Paige v. Kress, 80 Mich. 85, 89 (1890); Overton, 2009 WL 1507342, at *1; Stein v. U.S.
Bancorp, 2011 WL 740537 at *6 (E.D. Mich. Feb. 24, 2011) (“A court has no authority to set
aside a properly conducted foreclosure in the absence of a clear showing of fraud, accident, or
mistake in the foreclosure proceedings.”).
a. Plaintiff Failed to State a Viable Claim Under MCL § 600.3205c
In Counts I and IV of his Complaint, Plaintiff alleges that Defendant engaged in fraud or
irregularities with respect to the foreclosure sale process on the Property because:
1.
Defendant failed to send or Plaintiff never received a 14-day letter from
Defendant, as required by Michigan law;
2.
Defendant failed to complete the loan modification process and denied
Plaintiff a loan modification; and
3.
Defendant failed to send Plaintiff a denial letter with the calculations.
In other words, Plaintiff contends that Defendant engaged in fraud or irregularities in conjunction
with the foreclosure sale process because Plaintiff believes Defendant did not comply with
Michigan foreclosure laws. The Court concludes otherwise.
First, Plaintiff alleges Defendant did not send him a 14-day letter, and that he did not
receive a 14-day letter from Defendant. The Court finds these claims meritless. Plaintiff does
not offer any evidence that Defendant failed to send him a 14-day letter. As Exhibit 3 to
Defendant’s motion demonstrates, Defendant sent Plaintiff a 14-day letter, dated March 15,
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2010. See Dkt. # 5, Ex. 3, p. 8. As for the second aspect of Plaintiff’s claim, Defendant was
only required to send a 14-day letter; there is no statutory requirement that Plaintiff receive the
letter. See MCL § 600.3205a(1).
Plaintiff next alleges Defendant failed to complete the loan modification process and
denied Plaintiff a loan modification, and also that Defendant failed to send Plaintiff a denial
letter with calculations. In order to obtain a loan modification for the purpose of avoiding
foreclosure, Plaintiff was required to request a meeting either with Defendant’s designated agent
or with one of the approved housing counselors on the Michigan State Housing Development
Authority list sent to Plaintiff with the written notice provided by Defendant under MCL §
600.3205a(1).
Plaintiff neither alleges nor offers any evidence that he contacted Defendant’s designated
agent or one of the approved housing counselors as required under the statute. Conversely,
Defendant provided an affidavit claiming no such request was made. See Dkt. # 5, Ex. 3, p. 8.
As the undisputed evidence shows that Plaintiff failed to request a meeting as required by the
statute, Defendant was under no obligation to follow the modification requirements under MCL
§§ 600.3205a – 600.3205c—including any requirement that Defendant send Plaintiff a denial
letter with calculations. See, e.g., Talton v. BAC Home Loans Servicing, L.P., 839 F.Supp.2d
896, 909 (E.D. Mich., 2012); Tawfik v. BAC Home Loans Servicing, L.P., 2011 WL 6181441, at
*4 (E.D. Mich., Dec. 13, 2011); Galati v. Wells Fargo Bank, 2011 WL 5178276, at *5 (E.D.
Mich., Nov. 1, 2011); Carl v. BAC Home Loans Servicing, L.P., 2011 WL 3203086, at *3 (E.D.
Mich., July 27, 2011).
As these cases make clear, a plaintiff cannot seek to challenge a
foreclosure based on a defendant’s alleged failure to comply with MCL §§ 600.3205a -
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600.3205c if the plaintiff does not first complete the modification requirements applicable to the
plaintiff under those sections.
For the reasons set forth above, the Court concludes: (a) Plaintiff failed to demonstrate
that he satisfied the statutory preconditions for consideration for a loan modification, and, as a
result, (b) Plaintiff cannot, as a matter of law, prove the allegations in Counts I and IV of his
Complaint.
b. Plaintiff Lacks Standing to Challenge the Validity of the Mortgage Assignment
In Counts II and III of his Complaint, Plaintiff challenges Defendant’s authority to
foreclose on the Property based on an allegedly invalid assignment of the Mortgage. Plaintiff
appears to argue that (1) Defendant lacks the capacity to foreclose under MCL § 600.3204
because the Mortgage on the Property was assigned to a trust after the trust’s closing date, and
(2) Defendant’s lack of capacity to foreclose equates to an irregularity that requires the setting
aside of the foreclosure and Sheriff’s Sale. The Court finds Plaintiff’s claims lack merit.
“While a plaintiff in a foreclosure case can challenge the existence of a record chain of
title, the record chain of title is distinct from the validity of each underlying agreement in the
chain of title.” Smith v. Litton Loan Servicing, LP, 517 Fed. Appx. 395, 397-98 (6th Cir. 2013)
(citing Livonia Properties Holdings, LLC v. 12840–12976 Farmington Road Holdings, LLC, 399
Fed. Appx. 97, 102–03 (6th Cir. 2010)). Although the Sixth Circuit has articulated exceptions to
the general rule stated above, Plaintiff does not allege any of those exceptions apply in this case.
Therefore, although Plaintiff had standing to challenge the existence of record chain of title
under MCL § 600.3204(3), he lacks standing to challenge the validity of the assignment at issue
because he was not a party to that assignment. See Livonia Properties Holdings, L.L.C., 399
Fed. Appx. at 102-03. As required by the statute, record chain of title existed from the original
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mortgagee to the foreclosing party prior to the instant Sheriff’s Sale. Moreover, even if the
Court were to assume record chain of title did not exist, Plaintiff failed to allege the manner in
which he was prejudiced by the alleged irregularity as required under Kim v. JPMorgan Chase
Bank, N.A., 493 Mich. 98, 115-16 (2012). 1
For the reasons set forth above, the Court concludes: (a) Plaintiff lacks standing to
challenge the assignment of the mortgage, and (b) Counts II and III of Plaintiff’s Complaint fail
as a matter of law and must be dismissed.
c. The Statutory Remedy of Judicial Foreclosure is Unavailable to Plaintiff
In Count VIII of his Complaint, Plaintiff argues that because a loan modification was not
reached as a result of Defendant having allegedly violated MCL §§ 600.3205a – 600.3205c, he is
entitled to have the foreclosure by advertisement converted to a judicial foreclosure. Even if
Plaintiff demonstrated that Defendant failed to comply with MCL §§ 600.3205a – 600.3205c—a
burden he has not satisfied—his sole relief under Michigan law for a purported violation of the
loan modification statutes is to seek to convert the foreclosure by advertisement to a judicial
foreclosure prior to the completion of the foreclosure sale. See MCL § 600.3205c(8). See also
Smith v. Bank of America Corp., 485 Fed. Appx. 749, 756 (6th Cir. 2012) (“Moreover, the
[borrowers] appear to have missed the boat regarding the applicability of [MCL § 600.3205(c)]
which, when triggered, allows plaintiffs to enjoin a foreclosure by advertisement and convert it
to a judicial foreclosure: [the borrowers] brought this action after the foreclosure sale occurred,
1
Plaintiff relies on Roller v. FNMA, BAC Home Loans Servicing, L.P., 2012 WL 5828625 (E.D
Mich. Feb. 14, 2012), for the proposition that further discovery is necessary to determine
whether Plaintiff was prejudiced by the alleged defects in the foreclosure process. Plaintiff’s
reliance on Roller—an unpublished decision from June 2012—is misplaced. The Sixth Circuit
subsequently held in a published decision that borrowers must allege they were prejudiced as a
result of defects in the foreclosure process and that they “would have been in a better position to
preserve their interest in the property absent defendant’s noncompliance with the statute.” See
Conlin v. Mortg. Elec. Registration Sys., Inc., 714 F.3d 355, 361 (6th Cir. 2013) (citing Kim, 493
Mich. at 116).
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and so there is no foreclosure to enjoin or convert.”). Because Plaintiff failed to pursue his sole
statutory remedy prior to the August 31, 2011 foreclosure sale, the Court concludes this claim
fails as a matter of law.
3.
Conclusion
For the reasons set forth above, the Court concludes: (a) Plaintiff lacks standing to
challenge the foreclosure of the Property, and (b) Plaintiff cannot, as a matter of law, prove
Defendant engaged in fraud or irregularities with respect to the foreclosure sale process
involving the Property. As a result, Counts I-IV and VIII of Plaintiff’s Complaint must be
dismissed.
B.
The Claims Asserted in Counts V-VII are Barred by the Statute of Frauds
Plaintiff claims Defendant agreed to consider Plaintiff for a loan modification in 2012
when the parties stipulated to the dismissal of the previous Wayne County Circuit Court case. In
his Complaint, Plaintiff alleges Defendant breached this implied agreement to consider Plaintiff
for a loan modification (Count V), contends Defendant innocently and/or negligently made the
false representation that it would consider Plaintiff for a loan modification (Count VI), and
requests the Court to enforce this alleged implied agreement on the basis of promissory estoppel
(Count VII). Defendant counters that Plaintiff neither alleges nor provides a written agreement
to modify the Loan in connection with the 2012 Wayne County Circuit Court case, and thus any
agreement to modify the Loan—which Defendant denies exists—is barred by the statute of
frauds. The Court agrees with Defendant.
MCL § 566.132(2), the section of the statute of frauds governing contracts with financial
institutions, provides in part:
An action shall not be brought against a financial institution to enforce any of the
following promises or commitments of the financial institution unless the promise
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or commitment is in writing and signed with an authorized signature by the
financial institution:
(a) A promise or commitment to lend money, grant or extend credit, or
make any other financial accommodation.
(b) A promise or commitment to renew, extend, modify, or permit a delay
in repayment or performance of a loan, extension of credit, or other
financial accommodation.
(c) A promise or commitment to waive a provision of a loan, extension of
credit, or other financial accommodation.
Plaintiff provides zero evidence of any written agreement for a loan modification.2 Plaintiff’s
failure to produce a written agreement to modify the Loan is fatal to the contractual claims in
Counts V-VII of his Complaint; any alleged oral agreement to modify the Loan is not
enforceable as a matter of law. See Crown Tech. Park v. D & N Bank, FSB, 242 Mich.App. 538,
549-51 (2000) (ZAHRA, J.) (holding that MCL § 566.132(2) bars promissory estoppel claims
against a financial institution based on an alleged oral agreement on the grounds that “the
Legislature used the broadest possible language . . . to protect financial institutions by not
specifying the types of ‘actions’ it prohibits, eliminating the possibility of creative pleadings to
avoid the ban,” and also that the statute precludes any claim “no matter its label” that is “at its
core, an action to enforce an oral promise.”); see also Wargelin v. Bank of America, N.A., 2013
WL 5587817, at *7-8 (E.D. Mich. Oct. 10, 2013) (rejecting a claim identical to Plaintiff’s
innocent/negligent misrepresentation claim as barred by the statute of frauds).
The innocent/negligent misrepresentation claim in Count VI of Plaintiff’s Complaint fails
for additional reasons. Innocent misrepresentation and negligent misrepresentation are two
separate claims, with distinct elements, and therefore cannot be conflated into a single claim.
2
Plaintiff merely cites to the Stipulated Dismissal relating to the 2012 Wayne County Circuit
Court case as evidence of Defendant’s alleged promise to consider Plaintiff for a loan
modification. The Stipulated Dismissal, however, is nothing more than a boilerplate order
dismissing the case without prejudice and without costs, and makes no mention of a loan
modification or any further obligation of either party relating to the Loan or the Property.
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See Wargelin, 2013 WL 5587817 at *7. Moreover, Plaintiff failed to set forth the facts relating
to the misrepresentation claims with the particularity required by Fed. R. Civ. P. 9(b). Just as in
Wargelin,
it is unclear what facts pertain to which [misrepresentation] claim. Further,
Plaintiff’s allegations fail to set forth who made the ‘misrepresentations,’ when
they were made, or really any detail that could enlighten the Court as to their
significance. These bare facts fail to set forth a claim that is plausible on its face,
let alone state a claim that can satisfy the heightened standard demanded by Rule
9(b).
Id. at *8. As a result, the Court finds the misrepresentation claims in Count VI of Plaintiff’s
Complaint are without merit.
For the reasons set forth above, the Court concludes: (a) Plaintiff’s claims relating to
promises and misrepresentations not evinced in a written document signed by an authorized
representative of Defendant are not enforceable under the statute of frauds, and therefore (b)
Counts V-VII of Plaintiff’s Complaint must be dismissed.
V. CONCLUSION
Accordingly, and for the reasons set forth above, IT IS HEREBY ORDERED that
Defendant’s Motion to Dismiss [Dkt. 5] is GRANTED.
IT IS FURTHER ORDERED that Plaintiffs’ cause of action is DISMISSED WITH
PREJUDICE. Judgment shall be entered accordingly.
IT IS SO ORDERED.
S/Lawrence P. Zatkoff_
HON. LAWRENCE P. ZATKOFF
UNITED STATES DISTRICT JUDGE
DATED: September 16, 2014
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