Phillips v. Green Tree Servicing LLC

Filing 7

ORDER granting 3 defendant's Motion to Dismiss. Signed by District Judge George Caram Steeh. (MBea)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

SUSAN RAE PHILLIPS,
Plaintiff,
Case No. 15-13582
vs.
HON. GEORGE CARAM STEEH
GREEN TREE SERVICING LLC,

Defendant.
____________________________/
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS [DOC. 3]
Plaintiff Susan Rae Phillips filed this action against defendant Green Tree
Servicing LLC to challenge the foreclosure of the mortgage on her home. Plaintiff filed
her complaint, just before the expiration of the redemption period, on September 30,
2015 in the Oakland County Circuit Court. Among other relief, plaintiff requested that
the Sheriff’s Deed be set aside, and that she receive a fair evaluation for a loan
modification. Defendant removed the case to this court on October 13, 2015 based on
federal question and supplemental jurisdiction, 28 U.S.C. §§ 1331, 1367. The matter is
presently before the court on defendant’s motion to dismiss plaintiff’s complaint. The
court does not believe that it would benefit from oral argument, and so informed the
parties that it would make a determination on the briefs, pursuant to L.R. 7.1(f)(2).
FACTUAL BACKGROUND
Plaintiff and her then-husband Richard Phillips executed a mortgage securing
real property located at 2581 Pamela Ct. in Bloomfield Township, Michigan on August 4,
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2005. Plaintiff subsequently quit claimed her interest in the property to Richard Phillips
pursuant to a judgment of divorce in Oakland County Circuit Court. A quit claim deed
was recorded on November 30, 2006. On May 29, 2007, Richard Phillips gave a
second mortgage to Quicken Loans for $43,500.00. The second mortgage was
recorded July 2, 2007.
On June 14, 2013, the first mortgage was assigned to defendant Green Tree,
with an assignment recorded on June 17, 2013. At some point following the
assignment, Mr. Philips defaulted under the terms of the first mortgage by failing to
make payment. Mr. Phillips filed for Chapter 13 bankruptcy protection on November 7,
2014 in the Eastern District of Michigan. Schedules filed in the Chapter 13 case
identified Green Tree as the holder of the first mortgage, with a last active date of April
8, 2014. The Chapter 13 case was dismissed by the court prior to confirmation.
Richard Phillips died on January 17, 2015. Mr. Phillips’ obituary indicates that at the
time of his death he was living with and was married to the plaintiff. However, there is
no evidence in the record of this matter that the plaintiff and Mr. Phillips were ever
legally remarried following their divorce in 2006.
Defendant commenced foreclosure proceedings on February 27, 2015.
Defendant published notice of sale in the Oakland County Legal News four consecutive
weeks beginning February 27, 2015 and posted notice at the premises on March 4,
2015. Defendant identified the amount due on the mortgage as $232,636.51.
Plaintiff claims to be the fee simple owner of the property. (Compl. ¶ 10).
Plaintiff further alleges that she was making the payments under the Note and Mortgage
until Mr. Phillips’ illness and death. She contends that she watched diligently for notices
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with respect to the mortgage, but never received any from defendant. Furthermore,
plaintiff contends she never saw the notices of sale published in the legal newspaper.
Therefore, plaintiff asserts that she had no actual notice of the sheriff’s sale prior to its
completion, and therefore could not preserve her interests in the property.
In her complaint, plaintiff alleges that she was working with defendant on a
HAMP or other loan modification, and provided defendant with all information and
documents requested of her. However, upon receipt of documentation from plaintiff,
defendant claimed to have not received all of the requested documents or information,
or informed plaintiff that it needed more information and/or documents. Plaintiff
contends that she qualified for a loan modification, and defendant never notified her that
her application was denied. (Compl. ¶¶ 48-50).
On March 31, 2015, defendant purchased the property at sheriff’s sale and
recorded a sheriff’s deed. The statutory redemption period expired October 1, 2015.
On September 30, 2015, plaintiff initiated the present action in Oakland County Circuit
Court and filed an ex-parte motion for temporary restraining order. The court entered
an order denying the motion the same day. Defendant removed the action to this court
on October 13, 2015.
Plaintiff requests that the court rescind the sheriff’s sale, extinguish defendant’s
interest in the property, declare plaintiff to be the fee simple owner of the property, order
defendant to complete a loan modification, order the removal of any negative credit
reporting and award damages for wrongful foreclosure, breach of contract, fraud and
slander of title.

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ANALYSIS
I. Dismissal Standard
Rule 12(b)(6) allows the Court to make an assessment as to whether the plaintiff
has stated a claim upon which relief may be granted. Under the Supreme Court’s
articulation of the Rule 12(b)(6) standard in Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 554-56 (2007), the Court must construe the complaint in favor of the plaintiff,
accept the allegations of the complaint as true, and determine whether plaintiff’s factual
allegations present plausible claims. “’[N]aked assertion[s]’ devoid of ‘further factual
enhancement’” are insufficient to “state a claim to relief that is plausible on its face”.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557, 570).
To survive a Rule 12(b)(6) motion to dismiss, plaintiff’s pleading for relief must provide
“more than labels and conclusions, and a formulaic recitation of the elements of a cause
of action will not do.” D’Ambrosio v. Marino, 747 F.3d 378, 383 (6th Cir. 2014) (quoting
Twombly, 550 U.S. at 555) (other citations omitted). Even though the complaint need
not contain “detailed” factual allegations, its “factual allegations must be enough to raise
a right to relief above the speculative level on the assumption that all the allegations in
the complaint are true.” New Albany Tractor, Inc. v. Louisville Tractor, Inc., 650 F.3d
1046, 1051 (6th Cir. 2011) (citing Twombly, 550 U.S. at 555).
II. Sheriff’s Sale Improper Due to Fraud
Plaintiff argues that defendant induced her to submit a loan modification
application with the intention of defrauding her by continuing to move forward with the
foreclosure. Plaintiff does allege that she was engaged in a loan modification attempt,
and that her modification application was under consideration by defendant at the same
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time defendant was pursuing foreclosure proceedings. However, plaintiff’s argument
suffers from the fundamental problem that she lacks an interest in the property. In this
case, plaintiff claims a fee simple ownership of the property, yet she does not dispute
that she conveyed her rights in the property by way of a quitclaim deed, pursuant to a
judgment of divorce in 2006. By virtue of the quitclaim deed, plaintiff has not held any
legal or equitable interest in the property since the conveyance was made on November
20, 2006. There is no allegation that plaintiff made any effort to redeem the property
prior to filing the present lawsuit on the eve of the date that the statutory redemption
period expired, nor could she have, given that she did not have a legal interest in the
property given as security for the mortgage.
In order to challenge the foreclosure, plaintiff must have an interest in the
property. Because she gave up her fee ownership in the property as part of her divorce,
this plaintiff no longer has an interest in the subject property. See Eastbrook Homes,
Inc. v. Treasury Dept., 296 Mich. App. 336, 349 (2012) (citing Roddy v. Roddy, 342
Mich. 66 (1955)). Without an interest in the property, plaintiff has no standing to pursue
a claim to set aside the foreclosure sale.
III. RESPA
Plaintiff alleges that defendant violated various provisions of the Real Estate
Settlement Procedures Act and corresponding regulations. However, the principal relief
sought by plaintiff - to set aside the sheriff’s sale - is unavailable to her under RESPA.
See 12 CFR 1024.41 (providing that the provisions of this section may be enforced
under 12 U.S.C. § 2605(f), which authorizes monetary damages only; specifically,
actual damages resulting from RESPA violation and, in the case of “a pattern or practice
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of noncompliance,” statutory damages not to exceed $2000). See Servantes v. Caliber
Home Loans, Inc., 2014 U.S. Dist. LEXIS 170667 (E.D. Mich. Dec. 10, 2014). In order
to seek monetary damages for a RESPA violation, plaintiff is required to make actual
damage allegations, resulting from the failure to respond to plaintiff’s Qualified Written
Request (“QWR”), which are absent in this plaintiff’s complaint. Drew v. Kemp-Brooks,
802 F. Supp.2d 889, 898 (E.D. Mich. 2011); Battah v. ResMAE Mortg. Corp., 746
F.Supp.2d 869, 876 (E.D. Mich. 2010).
Plaintiff fails to allege actual damages, instead requesting that the court set aside
the foreclosure sale and order defendant to complete a loan modification. RESPA does
not provide a basis to set aside a completed foreclosure sale. Therefore, plaintiff’s
claims under RESPA are dismissed as a matter of law.
IV. Truth in Lending Act
Plaintiff alleges that defendant violated the Truth in Lending Act, 15 U.S.C. §
1641(g)(1) by failing to give her notice that the mortgage loan had been sold or
transferred. Defendant argues that plaintiff has not sufficiently pled a Truth in Lending
Act violation, that the Act does not apply to mortgage servicers, and that the claim is
barred by the one year statute of limitations under 15 U.S.C. § 1640(e). Plaintiff has not
addressed any of these arguments in her responsive pleading. The court finds that the
statute of limitations on this claim expired one year from June 14, 2013, the date on
which the mortgage was assigned to defendant. Therefore, plaintiff cannot plead a
violation of the Truth in Lending Act.

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V. Breach of Contract
Plaintiff alleges in her complaint that defendant breached the note, mortgage and
implied covenant of good faith and fair dealing. Specifically, plaintiff alleges that
defendant breached the terms of the mortgage by failing to give her notice of default,
including informing her what action was required to cure the default, prior to
acceleration. In her complaint, plaintiff cites to the first mortgage, taken on August 4,
2005, on which she is still named as a borrower. (Compl. ¶ 89). Plaintiff alleges that
the failure to send her notice of default is also a breach of the implied covenant of good
faith and fair dealing. Finally, plaintiff alleges that defendant disingenuously negotiated
loss mitigation assistance with her, and misled her about approval of loss mitigation, in
breach of contract and the implied covenant of good faith and fair dealing.
In Michigan, a prima facie breach of contract claim requires a plaintiff to allege:
(1) the existence of a valid contract, (2) establish the contract's terms, (3) evidence of a
breach to those terms, and (4) an injury causally related to that breach. Webster v.
Edward D. Jones & Co., 197 F.3d 815, 819 (6th Cir.1999).
The mortgage contract entered by the parties gives defendant the contractual
right to proceed with foreclosure by reason of plaintiff’s admitted non-payment. In fact,
plaintiff does not dispute her default under the terms of the mortgage. (Compl. ¶ 18).
However, the mortgage requires that the lender give notice of default to the borrower
prior to acceleration of the loan amount. (Mortgage ¶ 22). Defendant argues that
plaintiff’s admitted prior breach of the contract means that she cannot maintain a breach
of contract action against defendant for a subsequent breach or failure to perform.
While it is true that under Michigan law a party “who commits the first substantial breach
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of a contract cannot maintain an action against the other contracting party for failure to
perform,” Ehlinger v. Bodi Lake Lumber Co., 36 N.W.2d 311, 316 (Mich. 1949), plaintiff
falling behind on the mortgage payments was not a substantial breach for this purpose.
Jawad v. Hudson City Savings Bank, No. 15-1047 (6th Cir. January 29, 2016). The
basis for the Sixth Circuit’s holding is that in the contract’s notice provision, the parties
expressly contemplated breach by the borrower and agreed that if borrower breached
the contract, the lender would provide notice prior to acceleration. A substantial breach
is one where the breach effects such a change in the operation of the contract that
further performance by the other party is rendered ineffective or impossible. Id. (citing
McCarty v. Mercury Metalcraft Co., 127 N.W.2d 340, 343 (1964)). In this case, notice of
acceleration was required only if the borrower failed to pay. “A breach contemplated by
the language of the contract is unlikely to render performance impossible, especially
when the contract provides for a contingency in the event of that breach.” Id.
Defendant next argues that plaintiff fails to allege damages resulting from a
breach of contract. Plaintiff does little more in her breach of contract count than to cite
the section of the mortgage contract and conclude that defendant’s failure to provide
plaintiff with the required notice constitutes a breach of contract. The breach of contract
count concludes with a request for relief in the “Wherefore” clause, including invalidating
the foreclosure, setting aside the sheriff’s sale, rescinding the Sheriff’s Deed,
extinguishing any ownership interest in the subject property obtained by defendant,
declaring plaintiff to be the fee simple owner of the property, ordering defendant to
conduct a good faith evaluation of a loan modification, ordering defendant to remove
any negative information transmitted to a credit agency, and ordering any further relief
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the court deems just. Any damages relating to a loss of the property are of course
insufficient in this case where plaintiff does not have any legal interest in the property.
Furthermore, vague assertions contained in the “Wherefore” clause are not sufficient to
pass Rule 12(b)(6) muster. The court agrees with defendant that plaintiff has failed to
plead sufficient evidence of any damages to which she would be entitled due to a
breach of contract.
Plaintiff cannot state a claim for breach of an implied covenant of good faith
where the parties have expressed their respective rights in a written agreement, that
being the mortgage in this case. There is no dispute that plaintiff’s mortgage does not
require defendant to engage in loss mitigation assistance. Plaintiff does not provide any
details regarding the alleged loan modification she was promised by defendant.
(Compl. ¶ 41). Nor does plaintiff refer to or attach any written agreement or promise of
a loan modification to her complaint. To the extent that plaintiff seeks to enforce an oral
promise for a loan modification, the statute of frauds would bar her claim. Finally,
Michigan does not recognize an independent claim for breach of the implied covenant of
good faith and fair dealing. Triplett v. Perry, 797 N.W.2d 673, 683 (Mich. Ct. App.
2010).
Defendant’s motion to dismiss plaintiff’s breach of contract claim is granted.
V. Fraudulent Misrepresentation
Plaintiff’s fraudulent misrepresentation claim is based on defendant’s alleged
representations that “it would not begin foreclosure proceedings while the parties were
actively pursuing loan modification or other financial assistance options.” (Compl. ¶ 95).
A party bringing a fraud claim must “allege the time, place, and content of the alleged
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misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent
intent of the defendants; and the injury resulting from the fraud.” Bennett v. MIS Corp,
607 F.3d 1076, 1100 (6th Cir. 2010) (quotation omitted). Plaintiff has not identified the
content of the allegedly fraudulent statements, when the representations occurred, who
made them, or where they were made. Therefore, plaintiff’s fraudulent
misrepresentation claim falls short of the specificity required under Federal Rule of Civil
Procedure 9(b) and is dismissed.
VI. Slander of Title
In Count IV of her complaint, plaintiff alleges that defendant slandered title to her
home in violation of statutory and common law. Incredibly, plaintiff asserts that she took
title to the subject property by Quit Claim Deed. (Compl. ¶ 103). The exhibit attached
to the complaint, and cited in support of this proposition, is a quit claim deed whereby
plaintiff quit claims the property to “Richard J. Phillips, a single divorced man,” pursuant
to a judgment of divorce. (Doc. 1, Pg ID 52). Plaintiff’s own evidence refutes her claim
to title ownership of the subject property.
“Slander of title claims in Michigan ‘have both a common-law and statutory
basis.’ A plaintiff must prove the same three elements for both a common-law slander
of title claim and a claim under Michigan Compiled [L]aws § 565.109: ‘falisity, malice,
and special damages.’” Goodman v. CitiMortgage, 2015 WL 6387451 (October 22,
2015) (citing Keyes v. Deutche Bank Nat. Trust Co, 921 F. Supp. 2d 749, 762 (E.D.
Mich. 2013) (quotations and citations omitted)). Plaintiff has failed to state a claim that
would establish the predicate to a slander of title claim, that the foreclosure was invalid.
Furthermore, there is no allegation of malice, which requires plaintiff to “show that the
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defendant knowingly filed an invalid lien with the intent to cause the plaintiff injury.” Id.
(citation omitted).
Defendant’s motion to dismiss the slander of title claim is granted.
VII. Declaratory and Injunctive Relief
Plaintiff asserts claims for declaratory and injunctive relief, which are remedies
rather than causes of action. These “claims” are therefore dismissed.
VIII. Equitable Mortgage
In Count VII, plaintiff requests the court to “exercise its authority to impose an
equitable mortgage . . . .” (Compl. ¶ 127). “A court of equity may impose . . . an
equitable mortgage on a parcel of real property when no valid mortgage exists . . . .”
Goodman, 2015 WL 6387451 (citing Eastbrook Homes, Inc. v. Treasury Dep’t, 820
N.W.2d 242, 251 (Mich. Ct. App. 2012)). Here, there is no basis for the court to impose
an equitable mortgage because the parties’ relationship is governed by a valid
mortgage. Accordingly, Count VII is dismissed.
CONCLUSION
In accordance with this opinion and order, defendant’s motion to dismiss is
GRANTED.
Dated: February 16, 2016
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
February 16, 2016, by electronic and/or ordinary mail.
s/Marcia Beauchemin
Deputy Clerk

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