White, Jr. et al v. Wells Fargo Bank, NA as Trustee for the Certificate Holders of Park Place Securities, Inc. Asset-Backed Pass Through Certificates Series 2005-WCW3 et al

Filing 23

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS MOTIONS 13 14 TO DISMISS - and DISMISSES Counts I, III, IV, and V of the present case. Signed by District Judge Marianne O. Battani. (KDoa)

UNTIED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

MARTIN WHITE JR. and
TARANTA M. GASTON-WHITE,
Plaintiffs,
v.

CASE NO. 2:14-cv-12506
HON. MARIANNE O. BATTANI

WELLS FARGO BANK, N.A., AS
TRUSTEE FOR THE CERTIFICATE
HOLDERS OF PARK PLACE
SECURITIES, INC. ASSET-BACKED
PASS THROUGH CERTIFICATES
SERIES 2005-WCW3; BANK OF
AMERICA, N.A., and SELECT
PORTFOLIO SERVICING, INC.,
Defendant.
_______________________ __________/

OPINION AND ORDER GRANTING IN PART
AND DENYING IN PART DEFENDANTS’ MOTIONS TO DISMISS

I.

INTRODUCTION
This matter is before the Court on motions by Defendants to dismiss the claim

pursuant to Fed. R. Civ. P. 12(b)(6). (Docs. 13, 14.) Plaintiffs have brought the present
action challenging the foreclosure of their mortgaged home and alleging violation of
Michigan’s statutory foreclosure procedures, violation of the Real Estate Settlement
Procedures Act (RESPA), breach of contract, and violation of the Fair Housing Act
(FHA). For the following reasons, the Court GRANTS IN PART AND DENIES IN PART
Defendants’ motions to dismiss.
II.

STATEMENT OF FACTS

On May 6, 2005, Plaintiffs entered into a mortgage and loan agreement with
Argent Mortgage Company, LLC, in the amount of $159,000, secured by a home
located at 2115 Seminole Street, Detroit, Michigan (“the Property”). (Doc. 13, Exs. A,
B.) On May 11, 2005, Argent assigned the mortgage to Defendant Wells Fargo. (Id. at
Ex. C.) Initially, the mortgage was serviced by Defendant Bank of America (BANA) but
was transferred on September 6, 2012, to Defendant Select Portfolio Servicing (SPS)
for servicing. (Compl., Ex. 7.) In August 2007, Plaintiffs defaulted on their mortgage
payments and, consequently, entered into a loan modification agreement with
Countrywide Home Loans Servicing, LP, in 2008. (Doc. 14, Ex. D.) Plaintiffs then
defaulted on the modification agreement by making a late payment. Accordingly, Wells
Fargo foreclosed on the Property, which was sold at a sheriff’s sale conducted on
March 27, 2014. At the sheriff’s sale, Wells Fargo purchased the Property for
$107,152.23 pursuant to a Sheriff’s Deed on Mortgage Sale, subject to Plaintiff’s sixmonth statutory right to redeem. (Doc. 14, Ex. E.)
Plaintiffs made no effort to redeem the Property before their right expired on
September 27, 2014. However, on March 27, 2014, the day of the sheriff’s sale,
Plaintiffs filed the present action in Wayne County Circuit Court. The complaint states
the following causes of action: (1) violation of Mich. Comp. Laws §§ 600.3205c(1) and
600.3205c(3), (2) violation of RESPA, (3) breach of contract, (4) violation of the FHA,
and (5) exemplary damages. Defendants removed the action to this Court, and on
October 20, 2014, filed the instant motions to dismiss. On December 4, 2014, the Court
notified the parties that Defendants’ motions would be decided without oral argument.
III.

STANDARD OF REVIEW

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In order to survive a motion to dismiss pursuant to Rule 12(b)(6), 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, 570 (2007)). A claim that is plausible “pleads factual
content that allows the court to draw the reasonable inference” and demonstrates “more
than a sheer possibility” that the plaintiff’s claim has merit. Id. A complaint that offers
“‘labels and conclusions’ or a ‘formulaic recitation of the elements of a cause of action
will not do.’” Id. While a court must accept as true all factual allegations set forth in a
plaintiff’s complaint, it is not bound to accept as true a legal conclusion or a legal
conclusion couched as a factual allegation. Id. All legal conclusions must be supported
by the factual allegations. Id. at 679.
In deciding a motion to dismiss, “courts must consider the complaint in its entirety,
as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions
to dismiss, in particular, documents incorporated into the complaint by reference, and
matters of which a court may take judicial notice.” Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 322 (2007). Further, the Sixth Circuit has found that courts
may consider documents not formally incorporated by reference but that are referred to
in the complaint and are central to the plaintiff’s claim. See Greenberg v. Life Ins. Co.,
177 F.3d 507, 514 (6th Cir. 1999).

IV.

DISCUSSION

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A. Claims Under Mich. Comp. Laws §§ 600.3205c(1) and 600.3205c (3)
(Count I)
After a sheriff’s sale, a mortgagor has a statutory right to redeem the property by
paying a requisite amount within six months of the sale. Mich. Comp. Laws § 600.3240.
If the mortgaged property is not redeemed within six months, the mortgagor’s rights in
the property are extinguished, and the sheriff’s deed vests with the purchaser all rights,
title, and interest. Yono v. Deutsche Bank Nat’l Trust Co., No. 13-13218, 2014 U.S.
Dist. LEXIS 25826 at *6 (E.D. Mich. February 28, 2014). Filing a lawsuit prior to the
expiration of the redemption period does not toll the redemption period. Id. Once the
statutory deadline for redeeming a foreclosed property has expired – as it has in this
case – the redemption period may be equitably extended only by a clear showing of
fraud or irregularity in the foreclosure proceedings. See Overton v. Mortg. Elec.
Registration Sys., No. 284950, 2009 Mich. App. LEXIS 1209 at *3 (Mich. Ct. App. May
28, 2009). In order to show fraud or irregularity, plaintiffs must plead that they were
prejudiced by a defendant’s failure to comply with foreclosure regulations. Yono, 2014
U.S. Dist. LEXIS 25826 at *9.
Plaintiffs cite to Mitan v. Federal Home Loan Mortgage Corp., 703 F.3d 949 (6th Cir.
2012), for the proposition that a violation of the statutory foreclosure procedures results
in a void foreclosure sale and a redemption period that never began. This reliance on
Mitan is misplaced, as the case is recognized to have been overruled by the Michigan
Supreme Court in Kim v. JPMorgan Chase Bank, N.A., 493 Mich. 98 (2012). Yono,
2014 U.S. Dist. LEXIS 25826 at *11. According to Kim, “defects or irregularities in a
foreclosure proceeding result in a foreclosure that is voidable, not void ab initio.” 493
Mich. at 115. Accordingly, Plaintiff’s argument is unavailing.
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Plaintiffs allege several irregularities in the foreclosure process violating Mich. Comp.
Laws § 600.3205c. Specifically, they contend that Defendants failed to conduct a
personal meeting with Plaintiffs in spite of their request for a loan modification; that
Defendants failed to determine whether Plaintiffs qualified for a modification and failed
to provide the calculations relating to Plaintiffs’ eligibility; and that Defendants
improperly proceeded with a foreclosure by advertisement rather than a judicial
foreclosure. However, as argued by Defendants, the statute Plaintiff relies upon, Mich.
Comp. Laws § 600.3205c, was repealed effective June 30, 2013, see Mich. Comp.
Laws § 600.3205e (2012), and was later superseded by § 600.3204 (2014). The
foreclosure proceedings at issue in the present case were initiated on February 26,
2014. (See Compl., Ex. 11.) Courts have declined to apply Mich. Comp. Laws §§
600.3205a-d where, as here, the foreclosure proceedings took place after the repeal.
See, e.g., Selakowski v. Fed. Home Loan Mortg. Corp., No. 13-12335, 2014 U.S. Dist.
LEXIS 37966 at *31, n.13 (E.D. Mich. March 24, 2014) (“Michigan recently enacted
legislation under which § 600.3205c and other related statutory provisions are repealed
as of June 30, 2014, and the terms of § 600.3205c no longer apply to foreclosure
proceedings in which the first notice is published after January 9, 2014.”); Hardwick v.
HSBC Bank United States, No. 310191, 2013 Mich. App. LEXIS 1278 at *4-5 (Mich. Ct.
App. July 23, 2013) (“[T]he Michigan Legislature has repealed the mortgagemodification statutes relied on by plaintiffs in this case, effective June 30, 2013. Thus . .
. the issues presented in this case are now moot because neither the circuit court nor
this Court can fashion the relief that plaintiffs seek on appeal.” (citations omitted)).
Accordingly, Plaintiffs’ claims under § 600.3205c must be dismissed.

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B. RESPA Claims (Count II)
Count II of the complaint concerns Plaintiffs’ allegations that Defendants violated
RESPA (Regulation X) (12 U.S.C. § 2605; 12 C.F.R. § 1024.1 et seq.) by commencing
foreclosure proceedings on the Property while still reviewing Plaintiffs’ application for a
loan modification and requesting a new application for modification review without
making a decision on an initial application. The RESPA regulations did not become
effective until January 10, 2014. See Mortgage Servicing Rules Under the Real Estate
Procedures Act (Regulation X), 78 Fed. Reg. 10696 (Feb. 14, 2013) (codified at 12
C.F.R. § 1024.41). Defendants argue that because Plaintiffs did not request a loan
modification after the effective date, the statute is inapplicable. Indeed, other courts in
this District have declined to apply RESPA retroactively. See Ray v. US Bank, N.A.,
No. 14-cv-11831, 2015 U.S. Dist. LEXIS 9424 at *9-10 (E.D. Mich. Jan. 28, 2015);
Campbell v. Nationstar Mortg., No. 14-cv-10645, 2014 U.S. Dist. LEXIS 107910 at *1415 (E.D. Mich. May 19, 2014). These cases, however, are factually distinguishable from
the present case. While Ray and Campbell concern foreclosures occurring prior to
RESPA’s effective date, the present case involves foreclosure proceedings that began
after RESPA became effective. A factually similar case from the Southern District of
Florida draws the same factual distinction. See Lage v. Ocwen Loan Servicing LLC,
No. 14-CIV-81522, 2015 U.S. Dist. LEXIS 17299 at *7-8 (S.D. Fla. Feb. 12, 2015).
Defendants maintain that RESPA does not apply because Plaintiffs did not
request a loan modification after the date RESPA became effective. The same
argument was presented and rejected in Lage. Id. at *9. The court reasoned that as a
consumer protection statute, RESPA should be “‘construed liberally in order to best

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serve Congress’ intent.’” Id. (quoting McLean v. GMAC Mortg. Corp., 398 F. App’x 467,
471 (11th Cir. 2011)). Accordingly, the court found that the defendants’ “harsh
interpretation appears to conflict with the nature and purpose of the statute.” Id.
Perhaps most persuasively, Lage cites to a non-binding consumer guide published by
the Consumer Financial Protection Bureau, which states:
These new rules became effective on January 10, 2014. Any borrower
who files a complete loss mitigation application on or after January 10,
2014 and more than 37 days before a foreclosure sale is entitled to an
evaluation of the complete loss mitigation application for all available loss
mitigation options (so long as the conditions of 12 C.F.R. 1024.41 are
met). The servicer must conduct this evaluation even if the borrower
previously filed for, was granted, or was denied a loss mitigation plan
before January 10, 2014.
CFPB, Help for Struggling Borrowers: A guide to the mortgage servicing rules effective
on January 10, 2014, at 8 (January 28, 2014) (available at
http://files.consumerfinance.gov/f/201402_cfpb_mortgages_help-for-strugglingborrowers.pdf) (emphasis added). The Court agrees with the conclusions set forth in
Lage and declines to find that RESPA is inapplicable in a case where the loan
modification request was made prior to the effective date and the foreclosure took place
after the effective date. Accordingly, dismissal is inappropriate as to Plaintiffs’ RESPA
claim.
C. Breach of Contract Claim (Count III)
"The rule in Michigan is that one who first breaches a contract cannot maintain
an action against the other contracting party for his subsequent breach or failure to
perform." Michaels v. Amway Corp., 206 Mich. App. 644, 650 (Mich. Ct. App. 1994).
However, this rule "only applies when the initial breach is substantial." Id.

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Plaintiffs assert that Wells Fargo and BANA breached the modification contract
by “failing to provide Plaintiff[s] with a stable permanent modification, refusing payments
and subsequently referring Plaintiffs’ mortgage loan for foreclosure.” (Compl., ¶ 62.)
According to the terms of the modification agreement, Plaintiffs were to begin making
monthly payments of $1,633.28 beginning on April 1, 2008. (Doc. 14, Ex. D at ¶ 2.)
Plaintiffs also agreed that they would comply with all other terms and covenants made
in the original mortgage agreement (id. at ¶ 5), including the term that failure to pay the
full amount of each monthly payment on the date it is due would result in default (Doc.
16, Ex. A at ¶ 7(B).) The evidence reflects that Plaintiffs made their April payment on
April 15, 2008, two weeks after it was due. (Compl., Ex. 3.) Because Plaintiffs’ first
regular payment was late, Defendants were under no obligation to accept the payment.
Consequently, Plaintiffs were the first to breach the modification agreement, and this
breach was substantial. See Nowicki-Hockey v. Bank of America, No. 11-cv-10482,
2014 U.S. Dist. LEXIS 11865 at *9-10 (E.D. Mich. Jan. 31, 2014) (finding plaintiff’s
payment, late by two weeks, to be a substantial breach of the mortgage agreement),
vacated and remanded on other grounds, 593 F. App’x 420 (6th Cir. 2014).
In support of their breach of contract claim, Plaintiffs rely on Slorp v. Lerner,
Sampson & Rothfuss, 587 F. App’x 249 (6th Cir. 2014). This case does nothing to
strengthen Plaintiffs’ position, as it is entirely inapposite to the present set of facts.
First, Slorp concerns Ohio law, not Michigan law. See id. at 252. Second, Slorp
involved damages in the form of attorney fees expended in defending a foreclosure
action filed by BANA, which had claimed an interest in the mortgage based on an
allegedly invalid assignment. Id. at 251-52. Third, the claims advanced concerned debt

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collection practices and not loan modification statutes or breach of contract. Id. Lastly,
the portions of the case highlighted by the Plaintiffs concern Article III standing, which is
not at issue in the present case. See id. at 254, 263-64. To the extent that Plaintiffs
rely on Slorp for the proposition that the Court is obligated to assume the veracity of the
allegations contained in the complaint, the Court has done so with reference to the
exhibits attached to the complaint and mortgage documents cited therein. As a result,
Plaintiffs’ breach of contract claim must be dismissed.
D. FHA Claim (Count IV)
Count IV of Plaintiffs’ complaint advances a claim of racial discrimination in
violation of the FHA. Specifically, Plaintiffs allege discrimination based on Defendants’
noncompliance with the Home Affordable Modification Program (HAMP) and denial of
an opportunity to refinance or modify the mortgage agreement. Defendants maintain
that this claim must be dismissed because it was made in an effort to circumvent
HAMP’s lack of a privately enforceable cause of action. Defendants are correct in
stating there is no private right of action pursuant to HAMP. See Hart v. Countrywide
Home Loans, Inc., 735 F. Supp. 2d 741, 748 (E.D. Mich. 2010). Yet, the Sixth Circuit
has found that federal laws providing no private right of action may nevertheless be
used “offensively” in order to assert claims arising under alternative authority. Mik v.
Fed. Home Loan Mortg. Corp., 743 F.3d 149, 166 (6th Cir. 2014) (“The absence of a
private right of action from a federal statute provides no reason to dismiss a claim under
a state law just because it refers to or incorporates some element of the federal law. To
find otherwise would require adopting the novel presumption that where Congress
provides no remedy under federal law, state law may not afford one in its stead."

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(internal citations and quotations omitted)). In the present case, the complaint quotes
from various HAMP provisions but ultimately sets forth a racial discrimination claim
arising under the FHA – accordingly, the Court’s analysis focuses on the legal authority
applicable to FHA claims.
In order to state a claim under § 3605 of the FHA, plaintiffs must plead the
following four factors: (1) they were members of a protected class; (2) they attempted to
engage in a real estate-related transaction with the defendants and met all relevant
qualifications for doing so; (3) the defendants refused to transact business with the
plaintiffs despite their qualifications; and (4) the defendants continued to engage in that
type of transaction with other parties with similar qualifications. Mich. Protection &
Advocacy Serv. v. Babin, 18 F.3d 337, 342 (6th Cir. 1994). Plaintiffs’ complaint fails
sufficiently to allege each of these essential elements. Plaintiffs have not alleged that
they met all relevant qualifications for engaging in a loan modification or that
Defendants continued to engage in loan modifications with individuals with similar
qualifications outside of Plaintiffs’ class. Moreover, Plaintiffs’ allegations that
Defendants’ actions were motivated by racial animus are speculative conclusions
unsupported by the factual allegations. Therefore, Plaintiffs’ FHA claim must be
dismissed.
E. Exemplary Damages (Count V)
The Court briefly notes that because exemplary damages are a form of
compensation and not a cause of action, Count V of Plaintiffs’ complaint fails to state a
claim and must be dismissed. See Bernard v. Fannie Mae, No. 12-14680, 2013 U.S.
Dist. LEXIS 42867 at *24 (E.D. Mich. March 27, 2013).

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V. CONCLUSION
For the reasons discussed above, the Court GRANTS IN PART AND DENIES IN
PART Defendants’ motions to dismiss and DISMISSES Counts I, III, IV, and V of the
present case.
IT IS SO ORDERED.
Date:

April 22, 2015

s/Marianne O. Battani
MARIANNE O. BATTANI
United States District Judge

CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing Order was served upon counsel of record via the Court's ECF System to
their respective email addresses or First Class U.S. mail to the non-ECF participants on April 22, 2015.
s/ Kay Doaks
Case Manager

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