Frank et al v. Mortgage Electronic Registration Systems, Inc. Assigned to Christiana Trust, a Division of Wilmington Savings Fund Society, FSB
Filing
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Memorandum and Order Granting Defendant's 3 Motion to Dismiss and Dismissing Case. Signed by District Judge Avern Cohn. (SCha)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
RICHARD AND LORELEI FRANK,
Plaintiff,
vs.
Case No. 14-13518
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC., assigned to CHRISTIANA
TRUST, a DIVISION OF WILMINGTON SAVINGS
FUND SOCIETY, FSB,
HON. AVERN COHN
Defendants.
______________________________________/
MEMORANDUM AND ORDER
GRANTING DEFENDANT’S MOTION TO DISMISS (Doc. 3)
AND DISMISSING CASE
I. Introduction
This case challenges a foreclosure following default on a mortgage obligation.
Plaintiffs Richard and Lorelei Frank are suing defendants Mortgage Electronic
Registration Systems, Inc. (MERS) and Christiana Trust, a division of Wilmington
Savings Fund Society, FSB (the Trust). Although foreclosure proceedings were
commenced, foreclosure has not yet taken place.
The complaint alleges the following claims:
Count I - Wrongful Foreclosure
Count II - Breach of Contract
Count III - Fraudulent Misrepresentation
Before the Court is defendants’ motion to dismiss on the grounds that the claims are
either barred by the statute of frauds, insufficiently plead, or otherwise fail to state a
plausible claim for relief. For the reasons that follow, the motion will be granted.
II. Background
On June 27, 2005, plaintiffs obtained a loan from Cranbrook Mortgage
Corporation in the amount of $139,447.00 to purchase real property located at 16899
Martin, Roseville, Michigan. Plaintiffs’ loan obligation is memorialized in a promissory
note. As security for the loan, plaintiffs granted MERS a mortgage “solely as nominee
for Cranbrook Mortgage Corporation.” On May 4, 2010, MERS assigned its interest in
the mortgage to BAC Home Loans Servicing, LP (BAC). On January 8, 2014, Bank of
America, N.A., successor by merger to BAC, assigned its interest in the mortgage to the
Trust.
Plaintiffs defaulted under the terms of the mortgage by failing to make their loan
payments when due. Foreclosure proceedings were initiated.
While foreclosure proceedings were pending and one day prior to the scheduled
sheriff’s sale, plaintiffs filed a complaint in state court on August 14, 2014. As noted
above, the complaint is in three counts and in broad terms challenges defendants’ right
to foreclose.
On September 10, 2014, defendants removed the case to this court and later
filed the instant motion to dismiss.
III. Legal Standard
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the sufficiency of a
complaint. To survive a Rule 12(b)(6) motion to dismiss, the complaint's "factual
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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, 545 (2007). See also Ass'n of Cleveland Fire Fighters v. City
of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir. 2007). The court is "not bound to
accept as true a legal conclusion couched as a factual allegation." Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (internal quotation marks and citation omitted). Moreover,
"[o]nly a complaint that states a plausible claim for relief survives a motion to dismiss."
Id. at 679. 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
citation omitted).
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 (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.
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IV. Analysis
Each count of the complaint will be addressed below.
A. Count I - wrongful foreclosure
Defendants contend that plaintiffs’ wrongful foreclosure claim should be
dismissed “for the simple reason that Plaintiffs’ Complaint is devoid of any factual
allegations of any kind illustrating what statute – if any – was violated, or how – if at all –
those unidentified statutes were violated.” The Court agrees.
Under Michigan law “[a]n eligible party can foreclose by advertisement when all
of these conditions are met:”
(1) the mortgagee has defaulted on a condition of the mortgage, triggering the
power to sell;
(2) no action has been instituted at law to recover the debt that the mortgage
secures;
(3) the mortgage with the power of sale has been recorded properly; and
(4) the foreclosing party 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). A foreclosing party is then required to provide notice of the
pending sale, including a calculation of the amount currently owed. See MCL 600.3208.
Plaintiffs’ wrongful foreclosure claim is alleged in the complaint as a “fail[ure] to
properly follow the requirements of the Foreclosure process set forth in MCL 600.3201,
et seq.” (Doc. 1, complaint at ¶ 23.) The complaint does not state with any degree of
particularity what any of the alleged violations are. The closest the complaint appears
to identify any wrongdoing is suggesting that the amount claimed to be due contained in
the foreclosure notice was somehow improper. (Id.) However, the complaint presents
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no facts or explanation for how the amount on the notice was improperly calculated,
why it is incorrect, or what the correct amount should have been.
In their response, plaintiffs state that “MERS was not the proper party to
foreclose” on the property. Plaintiffs, however, offer no argument in support of this
assertion and the complaint contains no allegations to this effect. Moreover, the
Michigan Supreme Court has made clear that, under Michigan law, a mortgage granted
to MERS as nominee for lender and lender's successors and assigns, as was the case
here, is a valid and assignable mortgage. Residential Funding Co., LLC v. Saurman,
490 Mich. 909 (2011); see also Matthews v. Mortgage Electronic Registration Sys. Inc.,
No. 10–13740, 2011 WL 2560329 (E.D. Mich. Apr. 5, 2011). Under Saurman, MERS
can assign a mortgage, as it did here.1
The wrongful foreclosure claim is nothing more than the conclusory allegation
that defendants failed to follow the foreclosure process. This “formulaic recitation” fails
to meet the minimum pleading requirement. See Twombly, 550 U.S. at 555 (requiring
plaintiffs to allege “more than an unadorned, the-defendant-unlawfully-harmed-me
accusation.”).
Moreover, to the extent plaintiffs are alleging a violation of the loan modification
statute, such a claim fails. The complaint does not allege plaintiffs were entitled to a
1
Additionally, to the extent that plaintiffs contend that the “securitization” process
effectively split the mortgage from the note in breach of the mortgage, several courts
have rejected this argument. “[S]ecuritization does not impermissibly split the
promissory note and mortgage, nor does it invalidate the note or mortgage.”). Jones v.
Bank of America, No. 12-11608, 2012 U.S. Dist. LEXIS 158783, *8-9 (E.D. Mich. Nov.
6, 2012); Stafford v. Mortg. Elec. Regis. Sys., Inc., No. 12-10987, 2012 U.S. Dist. LEXIS
61413 at *13 (E.D. Mich. May 2, 2012) (citing cases).
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loan modification; it rather alleges that they attempted, unsuccessfully, to obtain a loan
modification. Section 600.3205c does not require the Trust to modify any specific loan,
and it does not provide any basis for unwinding the foreclosure. Rather, the statute
provides a borrower with an opportunity to enjoin the sale and force the foreclosure to
be conducted under the judicial foreclosure process if the foreclosure is conducted in
violation of the statute. See M.C.L. § 600.3205c(8).
Count I must be dismissed.
B. Count II - Breach of Contract
1.
Defendants argue that plaintiffs’ breach of contract claim under Count II should
be dismissed because it is insufficiently plead and barred by the statute of frauds. The
Court agrees.
To state a breach of contract claim under Michigan law, plaintiffs must plead that
“(1) that there was a contract, (2) that the other party breached the contract and, (3) that
the party asserting breach of contract suffered damages as a result of the breach.”
Miller-Davis Co. v. Ahrens Const., Inc., 296 Mich. App. 56, 71 (2012).
The complaint falls short. The complaint alleges that the note and mortgage are
a contract but it does not set forth what terms of the note and mortgage were breached.
Moreover, while the plaintiffs allege that the Trust (the complaint does not mention
MERS in this count) violated the “implied covenant of good faith and fair dealing,” this
fails to allege a plausible claim. “Michigan does not recognize a cause of action for
breach of the implied covenant of good faith and fair dealing.” Fodale v. Waste Mgmt.
of Mich., Inc., 271 Mich. App. 11, 35 (2006).
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To the extent plaintiffs claim that the Trust breached an obligation by not
modifying their loan, such a claim fails. Plaintiffs do not set forth any term in the note or
mortgage which obligates the Trust to modify their loan. Indeed, neither the note or
mortgage contains any term regarding loan modification.
As a result, at best the complaint alleges allege that the Trust made an oral
promise to modify the loan. However, as defendants point out, because the Trust is a
financial institution,2 Michigan law requires that any promise to modify the loan be in
writing or it is barred by the statute of frauds. The statute provides in relevant 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 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.
M.C.L. § 566.132(2) (emphasis added). Michigan courts have applied section
2
A “‘financial institution’ means a state or national chartered bank, a state or
federal chartered savings bank or savings and loan association . . . or an affiliate or
subsidiary thereof [and] a person licensed or registered under the mortgage brokers,
lenders, and servicers licensing act . . .” M.C.L. § 566.132(3). The Trust is a federal
savings association, which is publically available information of which the Court can take
notice. See Mills v Equicredit Corp., 294 F. Supp. 2d 903, 910 (E.D. Mich. 2003) (taking
judicial notice of a lender’s status as a regulated entity in the context of a motion to
dismiss for failure to state a claim); see also Federal Savings Association List, available
at http://www.occ.gov/topics/licensing/national-bank-lists/thrifts-by-name-pdf.pdf
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566.132(2) in holding that any agreement to modify a loan, waive a loan provision, or to
provide any other financial accommodation must be in writing and signed by the
financial institution. See Crown Technology Park v. D&N Bank, FSB, 242 Mich. App.
538, 549 (2000). See also Dingman v. OneWest Bank, FSB, 859 F. Supp. 2d 912, 919
(E.D. Mich. 2012) (allegations surrounding alleged promises of a loan modification
precluded).
The complaint does not allege that the Trust made a promise in writing and the
promise was signed by an authorized agent of the Trust agreeing to modify the loan.
Thus, the claim is barred by the statute of frauds.
2.
Plaintiffs’ response contains some additional details which they admit are not in
the complaint but appear to be directed at their breach of contract and fraud claims.
Plaintiffs say that they brought money to a Bank of America which would have brought
their account current but the bank would not accept it because “their loan was under
review.” Plaintiffs also say that they “worked with” a counselor at “Michigan Sate
Extension Services” and were denied a loan because “their income was short $14 a
month.”3 Even if these factual allegations were folded into the complaint, they do not
3
At the hearing, plaintiffs’ counsel submitted a letter from Trott & Trott, a law firm
apparently handling a possible loan modification and/or foreclosure proceedings. The
letter states in part: “Please be advised these calculations have been provided by your
Lender in regards to your Loan Modification request.” It goes on to list plaintiffs’
monthly income and expenses, resulting in a $14.07 monthly deficit. Plaintiffs’ counsel
argued that this letter demonstrates the unreasonableness of plaintiffs being denied a
loan modification. Putting aside that nowhere in the letter does it state that plaintiffs are
being denied a loan modification, as explained above, defendants are not obligated to
give plaintiffs a loan modification.
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establish a viable claim the Trust breached an agreement to modify plaintiffs’ loan.
In the end, neither the complaint nor these additional details allege that the Trust
made a promise in writing, which was signed by an authorized agent, to modify
plaintiffs’ loan. Plaintiffs’ breach of contract claim must therefore be dismissed.
C. Count III - Fraudulent Misrepresentation
Defendants say that this count must be dismissed because it is not plead with the
requisite particularity and is barred by the statute of frauds. Defendants are correct.
A claim sounding in fraud is subject to the heightened pleading requirements
under Fed. R. Civ. P. 9(b). Fed. R. Civ. P. 9(b) provides that "[iln alleging fraud or
mistake, a party must state with particularity the circumstances constituting fraud or
mistake. Fed. R. Civ. P. 9(b); see also Bender v. Southland Corp., 749 F.2d 1205, 1216
(6th Cir. 1984). In general, "[a] complaint is sufficient under Rule 9(b) if it alleges ‘the
time, place, and content of the alleged misrepresentation on which [the deceived party]
relied; the fraudulent scheme; the fraudulent intent of the defendants; and the injury
resulting from the fraud,' and enables defendants to ‘prepare an informed pleading
responsive to the specific allegations of fraud."‘ United States ex rel. Bledsoe v. Cmty.
Health Sys., Inc., 501 F.3d 493, 509 (6th Cir. 2007) (citations omitted). The purpose of
the additional pleading requirements of Rule 9(b) is to "provide defendants with a more
specific form of notice as to the particulars of their alleged misconduct." Brown v. Bank
of New York Mellon, 2011 WL 206124 at *3 (W.D. Mich. 2011).
In order to state a claim for fraud, plaintiffs must plead: (1) that defendants made
a material misrepresentation; (2) that it was false; (3) that when they made it they knew
that it was false, or made it recklessly, without any knowledge of its truth, and as a
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positive assertion; (4) that they made it with the intention that it should be acted upon by
plaintiffs; (5) that plaintiffs acted in reliance upon it; and (6) that they thereby suffered
injury. Hi-Way Motor Co. v. Int’l Harvester Co., 398 Mich. 330, 336 (Mich. 1976). The
absence of any one of these elements is fatal to recovery. Under Rule 9(b), plaintiffs
“must at a minimum allege the time, place and contents of the misrepresentation(s)
upon which [they] relied.”
Here, the complaint does not state what statements, who made them, when and
how they were made, and how plaintiffs relied on the statements. As discussed above
with respect to plaintiffs’ breach of contract claim, the additional statements in their
response - that they brought money to a Bank of America which was not accepted and
worked with a counselor at “Michigan Sate Extension Services” and being denied a loan
modification – do not make out a viable misrepresentation claim as they fail to fit within
the required elements. These additional details do not pertain to any action by the Trust
which would make out a viable fraud claim.
Moreover, like plaintiffs’ breach of contract claim, any misrepresentation arising
out of an oral promise of a loan modification is barred by the statute of frauds as such
promises must be in writing. See Polidori v. Bank of Am., N.A., 977 F. Supp. 2d 754,
763 (E.D. Mich. 2013) (dismissing fraud claim based on an alleged oral promise to
modify a loan because the plaintiff “failed to plead facts or present evidence tending to
show that BANA signed a loan modification document embodying the oral promise
alleged.”).
V. Conclusion
For the reasons stated above, the complaint does not plead plausible claims for
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relief arising out of the pending foreclosure proceedings. Defendants’ motion to dismiss
is GRANTED. This case is DISMISSED.
SO ORDERED.
S/Avern Cohn
AVERN COHN
UNITED STATES DISTRICT JUDGE
Dated: December 4, 2014
Detroit, Michigan
I hereby certify that a copy of the foregoing document was mailed to the attorneys of
record on this date, December 4, 2014, by electronic and/or ordinary mail.
S/Sakne Chami
Case Manager, (313) 234-5160
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