Engels et al v. Seterus, Inc.

Filing 13

ORDER granting 8 Motion to Dismiss. Signed by District Judge Arthur J. Tarnow. (MLan)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ROSEMARIE E. ENGELS, et al.,
Case No. 14-14006
Plaintiffs,
SENIOR U.S. DISTRICT JUDGE
ARTHUR J. TARNOW

v.
SETERUS, INC.,

U.S. MAGISTRATE JUDGE
MONA K. MAJZOUB

Defendant.
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ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS [8]
Before the Court is Defendant Seterus, Inc.’s Motion to Dismiss [8], Plaintiffs’
Response [9], and Defendant’s Reply [10]. For the reasons that follow, Defendant’s
Motion to Dismiss [8] is GRANTED in its entirety.
STATEMENT OF FACTS
This case involves a dispute over a $254,700.00 mortgage secured by
residential real estate commonly known as 41851 Alberta Drive, Sterling Heights,
Michigan 48314 (“the Property”). In 2005, Plaintiffs1 received a loan from Cambridge
Mortgage Company and granted a mortgage in favor of Mortgage Electronic
Registration Systems, Inc. (MERS) as the lender’s nominee. On May 1, 2012, MERS
assigned the mortgage to the Federal National Mortgage Association (Fannie Mae).
Defendant is the servicer for Fannie Mae.
1

Plaintiff Jeanne Riesterer has been deceased since July 7, 2012.

On January 1, 2009, Plaintiffs and Defendant entered into a first loan
modification agreement. Subsequently, Plaintiffs defaulted on the loan under the
modified terms. On June 9, 2013, Plaintiffs and Defendant entered into a second loan
modification agreement. In March of 2014, Plaintiffs defaulted under the terms of the
second loan modification agreement by failing to make continuous and timely
payments. Defendant initiated foreclosure-by-advertisement proceedings in the middle
of 2014. The Sheriff’s sale occurred on January 16, 2015, after Defendant filed its
Motion to Dismiss [8].
STANDARD OF REVIEW
Defendant moves to dismiss Plaintiff’s Complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6). Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of a complaint. To survive a motion to dismiss or for judgment on the
pleadings, a complaint must “state a claim to relief that is plausible on its face.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.
When they are well-pleaded factual allegations, a court should assume their veracity
and then determine whether they plausibly give rise to an entitlement to relief.”
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009).

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ANALYSIS
Plaintiffs allege claims for breach of Michigan Compiled Laws §§ 600.3208,
600.3204, 600.3205, and the loan modification agreement. Plaintiffs also seek quiet
title specific performance, and other equitable relief.
When jurisdiction is based on diversity of citizenship as it is here, the Court
applies state law in accordance with the controlling decisions of the state supreme
court. Petroleum Enhancer, LLC v. Woodward, 690 F.3d 757 (6th Cir. 2012). The
Michigan legislature repealed Michigan Compiled Law § 600.3205 effective June 19,
2014. Accordingly, Plaintiffs’ claims under § 600.3205 in Count II are dismissed.
Defendant argues that Plaintiffs fail to state a claim under M.C.L. § 600.3208
in Count II because it published notice of the foreclosure sale for four consecutive
weeks in a local newspaper prior to the sale and posted a notice on a conspicuous
location on the Property within fifteen days of the first publishing.
Michigan law requires that
[n]otice that [a] mortgage will be foreclosed by a sale of the
mortgaged premises, or some part of them, shall be given by
publishing the same for 4 successive weeks at least once in each
week, in a newspaper published in the county where the premises
included in the mortgage and intended to be sold, or some part of
them, are situated. If no newspaper is published in the county, the
notice shall be published in a newspaper published in an adjacent
county. In every case within 15 days after the first publication of the
notice, a true copy shall be posted in a conspicuous place upon any
part of the premises described in the notice.
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M.C.L. § 600.3208. Defendant submitted an affidavit from an employee of the
Macomb County Legal News that it published a notice of the foreclosure sale on
September 5, 12, 19, and 26, of 2014. [10-1]. Defendant also submitted an affidavit
by Mark Zobel that he securely posted a notice of the foreclosure sale at the Property
on September 8, 2014. Plaintiff does not submit any evidence to the contrary.
Defendant did not breach M.C.L. § 600.3208.
Count III of Plaintiffs’ Complaint [1-2] alleges that Defendant breached the
loan modification agreement from December 20, 2008—the first loan modification
agreement. Defendant argues that Plaintiffs fail to state a claim that it breached the
first loan modification agreement because it was superceded by the second loan
modification agreement. Plaintiffs do not respond to this argument, but rather recite
general principles of contract law and refer to CitiMortgage, Inc., an entity that is
irrelevant to this case. The second loan modification agreement declared that any
instrument or document that “provide[s] for, implement[s], or relate[s] to, any change
or adjustment in the rate of interest payable under the Note” is “forever canceled, null
and void” as of June 9, 2013. As Plaintiffs declared the first loan modification
agreement null and void, they cannot not sue for breach thereof.
Next, in Count V Plaintiffs allege that Defendant violated M.C.L. § 600.3204,
Michigan’s foreclosure by advertisement statute. Section 600.3204 states:

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(1) A party may foreclose a mortgage by advertisement if all of the
following circumstances exist:
(a) A default in a condition of the mortgage has occurred, by
which the power to sell became operative.
(b) An action or proceeding has not been instituted, at law, to
recover the debt secured by the mortgage or any part of the
mortgage or, if an action or proceeding has been instituted,
either the action or proceeding has been discontinued or an
execution on a judgment rendered in the action or proceeding
has been returned unsatisfied, in whole or in part.
(c) The mortgage containing the power of sale has been properly
recorded.
(d) The party foreclosing the mortgage 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.
(2) If a mortgage is given to secure the payment of money by
installments, each of the installments mentioned in the mortgage after
the first shall be treated as a separate and independent mortgage. The
mortgage for each of the installments may be foreclosed in the same
manner and with the same effect as if a separate mortgage were given
for each subsequent installment. A redemption of a sale by the
mortgagor has the same effect as if the sale for the installment had been
made upon an independent prior mortgage.
(3) If the party foreclosing a mortgage by advertisement is not the
original mortgagee, a record chain of title must exist before the date of
sale under section 3216 evidencing the assignment of the mortgage to
the party foreclosing the mortgage.
In support of their allegations, Plaintiffs have submitted boilerplate language
containing unsupported legal conclusions that Defendant submitted affidavits that
have procedural defects. [1-2] at ¶ 36, 37. In contrast, Defendant has submitted

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documentation that Plaintiffs defaulted on the loan, that the mortgage delineating its
power of sale was properly recorded, and that its status as servicer of the mortgage
was properly recorded. Plaintiff has not alleged that Defendant instituted any legal
action to recover the indebtedness before foreclosing by advertisement. Defendant did
not violate M.C.L. § 600.3204.
As Plaintiffs have failed to state any claims, they are not entitled to any
equitable relief, including quiet title as recited in Count I, specific performance as
recited in Count IV, or injunction as recited in Count VI.
CONCLUSION
Accordingly, the Court being fully advised in the premises,
IT IS ORDERED Defendant’s Motion to Dismiss [8] is GRANTED.
IT IS FURTHER ORDERED that Plaintiff’s Complaint is DISMISSED with
prejudice.
SO ORDERED.
THIS CASE IS CLOSED.

Dated: August 18, 2015

s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge

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