Etts et al v. Deutsche Bank National Trust Company et al
Filing
61
OPINION and ORDER Granting in Part and Denying in Part Defendants' Motion to Dismiss 47 . Signed by District Judge Mark A. Goldsmith. (CHad)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
TROY AND LEA ETTS,
Plaintiffs,
Civil Action No.
4:13-cv-11588
v.
HON. MARK A. GOLDSMITH
DEUTSCHE BANK NATIONAL
TRUST COMPANY, et al.,
Defendants.
_____________________________/
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION TO DISMISS (Dkt. 47)
I. INTRODUCTION
This is a mortgage foreclosure case. In their second amended complaint, Plaintiffs Troy
and Lea Etts accuse Defendants of fraudulent misrepresentation and promissory estoppel based
on alleged promises to (i) review Plaintiffs’ financial eligibility for a loan modification and
(ii) abstain from conducting a foreclosure sale during the review period, among other things.
Defendants have filed a joint motion to dismiss (Dkt. 47). Plaintiffs filed a response
(Dkt. 50), and Defendants filed a reply (Dkt. 51). The Court heard oral argument on July 1,
2015, and took the matter under advisement. As discussed below, the Court concludes that
Plaintiffs have failed to state a claim for fraudulent misrepresentation, and their claim for
promissory estoppel cannot proceed as to most of the alleged oral and written promises at issue.
However, the Court concludes that Plaintiffs have stated a claim sufficient to survive a motion to
dismiss regarding Defendant Ocwen Loan Servicing, LLC’s September 1, 2012 promise to
adjourn the foreclosure sale.
Accordingly, the Court grants in part and denies in part
Defendants’ motion to dismiss.
1
II. BACKGROUND
In November 2003, Plaintiffs obtained a loan from New Century Mortgage Corporation
(“New Century”) to refinance the purchase of their home located in Temperance, Michigan.
Second Am. Compl. ¶ 6 (Dkt. 46). Plaintiffs also executed a mortgage in favor of New Century,
which was recorded in the Monroe County Register of Deeds. Id. Plaintiffs and a representative
of Defendant Deutsche Bank National Trust Company (“Deutsche Bank”) subsequently signed a
loan modification agreement.1 The effective date of that agreement is unclear; Plaintiffs appear
to have signed the document in November 2006, but the Deutsche Bank representative appears
not to have executed it until February 21, 2008. See id.
In 2009, Plaintiffs faced financial difficulty due to Troy Etts’s health and employment
status.
Id. ¶ 7.
Plaintiffs requested that their then-loan-servicer, Litton Loan Servicing
(“Litton”), grant them a loan modification. Id. In response, Litton sent Plaintiffs a “Loan
Workout Plan” in May 2009. Id. ¶ 8. In the cover letter to that document, Litton informed
Plaintiffs that “[i]f [they] qualify for this modification and comply with the terms of the Workout
Plan, [Litton] will modify [their] mortgage loan and [they] can avoid foreclosure.”
See
5/11/2009 Cover Letter (Dkt. 46-4 (pages 2-3 of 16 (cm/ecf pages))). Litton also sent Plaintiffs a
list of documents they had to submit in support of their modification request, including recent
pay stubs, tax documents, etc. One of the documents — a financial hardship affidavit —
required Plaintiffs to acknowledge that they understood that “the Servicer will use this
information to evaluate [their] eligibility for a loan modification or other workout, but the
1
Neither the second amended complaint nor the documents currently before the Court reflect
how Deutsche Bank and/or the trust for which Deutsche Bank was the trustee obtained an
interest in the note and/or mortgage before the loan modification agreement was signed.
2
Servicer is not obligated to offer [them] assistance based solely on the representations in this
affidavit.” Hardship Aff. (Dkt. 46-4 (pages 5-6 of 16 (cm/ecf pages))).
Litton also sent Plaintiffs a list of frequently asked questions. One of those questions
addressed the effect of the Loan Workout Plan on foreclosure proceedings:
As long as you comply with the terms of the Workout Plan, we
will not start foreclosure proceedings or conduct a foreclosure sale
if foreclosure proceedings have started. If you fail to comply with
the terms of the Workout Plan and do not make other
arrangements, your loan will be enforced according to its original
terms, which could include foreclosure.
FAQs (Dkt. 46-4 (9 of 16 (cm/ecf page))).
Plaintiffs allege that they provided all of the requested documents, including two signed
copies of the Loan Workout Plan, thereafter. Second Am. Compl. ¶ 12. Plaintiffs also claim that
they made the required monthly trial period payments. Id. ¶ 13. However, Plaintiffs maintain
that Litton repeatedly requested additional documentation, falsely claiming that the original
documents had not been received, were outdated, or were incomplete. Id. ¶¶ 14-17. According
to Plaintiffs, these requests for additional documents continued until October 2010. Id. ¶ 17.
In January 2011, Litton sent Plaintiffs a letter advising them that a modification could not
be offered, because Plaintiffs had received an earlier modification in 2006. Id. ¶ 26. Plaintiffs
maintain that in denying them the requested modification, Litton never considered Plaintiffs’
financial eligibility for a modification, nor did it try and obtain a waiver of the investor
restriction prohibiting second modifications. Id.; see also 1/12/2011 Letter (Dkt. 46-7 (page 2 of
5 (cm/ecf page))); 4/29/2011 Letter (Dkt. 46-7 (pages 4-5 of 5 (cm/ecf pages))).2
2
In April 2011, Litton sent a letter to the State of Michigan’s Office of Financial and Insurance
Regulation regarding Plaintiffs’ requests to modify their loan. See 4/29/2011 Letter. The letter
explained that: (i) Plaintiffs’ loan had been modified on December 11, 2006; (ii) Litton initiated
a review of the loan for a second modification in April 2009 based on Plaintiffs’ request;
3
Nevertheless, Plaintiffs claim that despite being denied due to investor restrictions, Litton
— and ultimately Defendant Ocwen, as successor to Litton as servicer for the loan — continued
to solicit documents from Plaintiffs to determine whether some type of modification was
possible. Second Am. Compl. ¶¶ 27-29. Plaintiffs allege that they submitted the required
documents for a review. See id. ¶ 37. Plaintiffs also assert that they were promised that the
foreclosure sale would be adjourned during the review process. Id. ¶¶ 29, 37. For example,
Plaintiffs identify a letter from Ocwen sent in September 2012, which contains the following
statement:
While we consider your request [for a modification], we will not
initiate a new foreclosure action and we will not move ahead with
the foreclosure sale on an active foreclosure as long as we have
received all required documents and you have met the eligibility
requirements.
9/1/2012 Letter (Dkt. 50-4); see also Second Am. Compl. ¶¶ 29, 37. However, according to
Plaintiffs, Defendants “proceeded to foreclose on Plaintiffs [sic] property, executing a sale and
‘purchasing’ Plaintiffs’ property through a credit bid on October 25, 2012.” Id. ¶ 29.
Plaintiffs originally alleged that Defendants: (i) did not have the right to foreclose, given
the bankruptcy of the original mortgagee; (ii) promised Plaintiffs a loan modification via the
Loan Workout Plan; and (iii) acted wrongfully under the Fair Debt Collection Practices Act, 15
U.S.C. §§ 1692e, 1692f (“FDCPA”), by posting an affidavit of abandonment during the
redemption period. Am. Compl. (Dkt. 11). After Defendants filed motions to dismiss (Dkts. 14,
15), the Court dismissed these claims, finding that Plaintiffs: (i) had not alleged prejudice;
(iii) Litton did not receive all of the required documentation, resulting in a denial of the loan
modification request in September 2009; and (iv) Litton initiated new reviews in October 2010
and January 2011 based on updated documents it received from Plaintiffs, but Litton concluded
that a modification could not be granted because the investor only allowed the loan to be
modified once after April 1, 2004. Id.
4
(ii) had abandoned the claim of a promise for a loan modification, instead turning it into a claim
that Defendants promised to review Plaintiffs for a loan modification; and (iii) had no basis for
relief under the FDCPA for the posting of the affidavit. See 2/19/2014 Op. & Order (Dkt. 34).
However, the Court allowed Plaintiffs to seek leave to file an amended complaint to cure some
of these defects. Id.
Plaintiffs now bring two claims in their second amended complaint: promissory estoppel
and fraudulent misrepresentation (Dkt. 46).
The underlying focus of these claims is:
(i) purported promises to review Plaintiffs’ financial eligibility for a loan modification, see id.
¶¶ 36, 42-43, 50-52, and (ii) alleged promises not to hold a foreclosure sale during the review
process, id. ¶¶ 29, 37, 51. Defendants responded by filing the instant motion to dismiss.
III. STANDARD FOR MOTION TO DISMISS
The Court set forth the standard for reviewing a motion to dismiss brought under Federal
Rule of Civil Procedure 12(b)(6) in an earlier decision in this case:
Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss
a complaint for “failure to state a claim upon which relief can be
granted.” In evaluating a motion to dismiss pursuant to Rule
12(b)(6), “[c]ourts must construe the complaint in the light most
favorable to plaintiff, accept all well-pled factual allegations as
true, and determine whether the complaint states a plausible claim
for relief.” Albrecht v. Treon, 617 F.3d 890, 893 (6th Cir. 2010)
(internal brackets, quotation marks, and citations omitted). To
survive a motion to dismiss, a complaint must plead specific
factual allegations, and not just legal conclusions, in support of
each claim. Ashcroft v. Iqbal, 556 U.S. 662, 678-679 (2009). A
complaint will be dismissed unless, when all well-pled factual
allegations are accepted as true, the complaint states a “plausible
claim for relief.” Id. at 679.
In ruling on a motion to dismiss, the Court may consider
the entire complaint, documents incorporated by reference in the
complaint and central to the claims, and matters on which a court
may take judicial notice. Tellabs, Inc. v. Makor Issues & Rights,
Ltd., 551 U.S. 308, 322 (2007). “[I]f a factual assertion in the
5
pleadings is inconsistent with a document attached for support, the
Court is to accept the facts as stated in the attached document.”
Williams v. CitiMortgage, Inc., 498 F. App’x 532, 536 (6th Cir.
2012) (citation omitted).
2/19/2014 Op. & Order at 4-5 (Dkt. 34).
IV. ANALYSIS
The Court addresses each of Plaintiffs’ causes of action — for fraudulent
misrepresentation and promissory estoppel — in turn.
A. Fraudulent Misrepresentation
With respect to their claim for fraudulent misrepresentation, Plaintiffs allege that
Defendants made “false, fraudulent and misleading representations of material fact and/or made
the representations in utter disregard of the truth, verbally and in writing when it [sic] promised
to review the Plaintiffs [sic] eligibility for a loan modification.” Second Am. Compl. ¶ 50.
Plaintiffs also allege that Defendants promised not to hold a foreclosure sale while the loan
modification review was underway. Id. ¶ 51; see also Pls. Resp. at 18 (“[D]efendant made a
material representation (i.e. evaluation of the eligibility of the Plaintiffs for a loan modification
or other workout would be undertaken, . . . [and] that no foreclosure proceedings would be
commenced if Plaintiffs complied with the Plan”).
Defendants argue that a claim for fraudulent misrepresentation based on these statements
cannot stand, because the statements constitute future promises, not statements about present or
past fact. Therefore, Defendants suggest that this cause of action is really just another claim for
promissory estoppel. Defs. Br. at 5-6. Plaintiffs respond that the “bad-faith exception to
fraudulent misrepresentation applies.” Pls. Resp. at 19-20.
A claim for fraudulent misrepresentation under Michigan law “must be predicated upon a
statement relating to a past or an existing fact. Future promises are contractual and do not
6
constitute fraud.” Hi-Way Motor Co. v. Int’l Harvester Co., 247 N.W.2d 813, 816 (Mich. 1976).
There is a “bad-faith exception” to this rule, however, if the “promise [was] made in bad faith
without intention of performance.” Id.
Promises to review a loan for modification and not to foreclose during this review
constitute future promises, rather than statements relating to a past or an existing fact. Therefore,
these statements cannot support a claim for fraudulent misrepresentation, absent the application
of the bad-faith exception. See Davis v. PNC Mortg., No. 13-11737, 2014 WL 4801968, at *7-8
(E.D. Mich. Sept. 23, 2014) (allegation that the plaintiff was promised a future loan modification
not actionable as fraud, unless the bad-faith exception applied); Maltbie v. Bank of Am., No. 121002, 2013 WL 6078945, at *5 (W.D. Mich. Nov. 19, 2013); Barter v. U.S. Bank, N.A., No. 1011476, 2011 WL 124502, at *3 (E.D. Mich. Jan. 13, 2011) (statement that home was not being
foreclosed upon during loan modification process could not support claim for fraudulent
misrepresentation, because it was a “future promise[] regarding what [the servicer] will or will
not do”); Lessl v. CitiMortgage, Inc., 515 F. App’x 467, 470 (6th Cir. 2013). Although Plaintiffs
argue in response to Defendants’ motion that Defendants had no intention of reviewing Plaintiffs
for a modification or abstaining from foreclosing at the time these purported promises were
made, Pls. Resp. at 19-20, no such allegation appears in the second amended complaint. Indeed,
the words “intent,” “intention,” “bad faith,” or some variant thereof are not contained anywhere
in the governing pleading.3 Therefore, the Court finds that Plaintiffs have not sufficiently pled
that this exception applies.
3
Notably, although Plaintiffs highlight purported facts that they claim support an inference of
Defendants’ intention not to perform, see Pls. Resp. at 19-20, Plaintiffs cite no paragraph of their
second amended complaint specifically alleging that Defendants had this intention.
7
This is Plaintiffs’ third complaint in this case; the Court has given Plaintiffs two previous
opportunities to amend over the course of this litigation.
See 5/28/2013 Order (Dkt. 6);
2/19/2014 Op. & Order (Dkt. 34). The Court is not inclined to give Plaintiffs a third bite at the
apple. Plaintiffs have not sufficiently set forth in their pleading a claim that the bad-faith
exception applies to Defendants’ alleged promises to review Plaintiffs’ financial eligibility for a
loan modification and to abstain from foreclosing while doing so. Consequently, the claim for
fraudulent misrepresentation cannot stand to the extent it is based on these purported future
promises.
Although the above future promises form the bulk of Plaintiffs’ second amended
complaint, Plaintiffs cursorily mention three other statements that they suggest support a claim
for fraudulent misrepresentation: (i) that their loan had been “previously modified under the
Home Affordable Modification Program [“HAMP”],” Second Am. Comp. ¶¶ 51, 53; (ii) that
investor restrictions precluded granting an additional or second modification, id. ¶ 51-52; and
(iii) that Defendants had not received the required documents for the review, despite
documentation to the contrary, id. ¶ 49.
To state a claim for fraudulent misrepresentation under Michigan law, Plaintiffs must
sufficiently allege the following: “(1) That defendant made a material misrepresentation; (2) that
it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any
knowledge of its truth, and as a positive assertion; (4) that he made it with the intention that it
should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6) that he
thereby suffered injury.” Hi-Way Motor Co., 247 N.W.2d at 816.
The Court is not persuaded that Plaintiffs have sufficiently set forth these factors to
survive a motion to dismiss.
Regarding the statements about the reasons for the loan-
8
modification denial — namely the prior modification — although Litton may have been
incorrect that Plaintiffs had previously been granted a HAMP modification (as opposed to
another type of modification), see 4/29/2011 Letter (acknowledging this error), Plaintiffs do not
explain how they relied on this misstatement. Nor do Plaintiffs explain how they relied to their
detriment on an allegedly inaccurate statement that the investor restrictions precluded granting an
additional or second modification. Plaintiffs do not claim that these statements induced them to
take or refrain from taking any particular action. For example, Plaintiffs do not claim that they
discontinued seeking a loan modification after receiving these reasons for the denial. To the
contrary, Plaintiffs specifically allege that they continued to seek a loan modification up to and
including September 1, 2012. See Second Am. Compl. ¶ 29.
The reliance Plaintiffs do allege in the second amended complaint is as follows:
Plaintiffs relied upon the false, fraudulent and misleading
representations of material fact and/or made the representations in
utter disregard of the truth to their detriment as their property was
nonetheless foreclosed upon and they lost the opportunity to
pursue other loss mitigation opportunities to save their home, such
as seeking another type of loan modification, refinancing the
existing loan, pursuing a short sale, restructuring under the
bankruptcy code or renting the property and relocating . . . .
Second Am. Compl. ¶ 55. Yet, this reliance makes no sense with respect to a claim concerning
purported misstatements about the reasons for the loan-modification denial. Plaintiffs do not
explain how a false statement that the modification was denied due to a previous HAMP
modification — as opposed to a non-HAMP modification — caused them to “los[e] the
opportunity to pursue other mitigation opportunities.” Rather, this alleged reliance appears
targeted toward Plaintiffs’ claims regarding the alleged promises to review and adjourn the
foreclosure sale.
9
Further exemplifying the mismatch between Plaintiffs’ claimed reliance and the
purported fraud concerning the reasons for the denial is the passage of time between the alleged
statements and the foreclosure sale.
The statements at issue regarding Plaintiffs’ past
modification and the investor restrictions are contained in a January 12, 2011 letter sent to the
Plaintiffs. See 1/12/2011 Letter (Dkt. 46-7). But the foreclosure sale did not occur until October
25, 2012. Second Am. Compl. ¶ 29. Plaintiffs fail to explain how two statements about the
reason(s) for a loan modification denial — made over a year and a half before the foreclosure
sale — caused them to “los[e] the opportunity to pursue other loss mitigation opportunities”
during this period in between. To the contrary, the “los[s] of opportunity to pursue other loss
mitigation opportunities” as the alleged reliance in this case only makes sense in context of
Plaintiffs’ claims regarding the alleged promises to review their financial eligibility and adjourn
the foreclosure sale — claims that cannot form the basis for Plaintiffs’ claim for fraudulent
misrepresentation, as discussed earlier.
With respect to the remaining purported statement about the servicer not having received
the necessary documents, Plaintiffs fail to set forth the alleged injury arising out of this alleged
misrepresentation.
Plaintiffs do not provide any basis for recovering or calculating
compensatory damages — such as seeking compensation for time spent re-gathering documents,
costs of copying, etc. And to the extent Plaintiffs are seeking to have the foreclosure sale
rescinded based on this statement, the time to obtain this type of relief ended with the expiration
of the redemption period, because this claim relates to the servicing of the loan, rather than a
fraud or irregularity arising out of the foreclosure process. Campbell v. Nationstar Mortg., -- F.
App’x --, 2015 WL 2084023, at *5 (6th Cir. 2015) (“An alleged irregularity in the loan
modification process . . . does not constitute an irregularity in the foreclosure proceeding.”).
10
Moreover, Plaintiffs fail to explain how an alleged misrepresentation regarding the receipt of
documents should result in the rescission of the foreclosure sale, when Plaintiffs fail to
sufficiently allege that they would have qualified for a loan modification if the documents had
been reviewed, as described below.
Accordingly, the Court dismisses Plaintiffs’ claim for fraudulent misrepresentation.
B. Promissory Estoppel
Like their claim for fraudulent misrepresentation, Plaintiffs’ claim for promissory
estoppel centers on two alleged promises: (i) to review Plaintiffs’ financial eligibility for a loan
modification and (ii) to abstain from foreclosing during this review. The Court now considers
whether Plaintiffs have stated a claim for promissory estoppel based upon each promise.
i. Promise to Review Financial Eligibility
As described above, Plaintiffs’ second amended complaint challenges Defendants’
review of Plaintiffs’ request for a loan modification. Plaintiffs recognize that their request was
denied purportedly due to investor restrictions allowing only one loan modification, whereas
Plaintiffs were requesting a second modification. Second Am. Compl. ¶ 26. However, Plaintiffs
allege that Defendants promised to consider their financial eligibility for a modification — and,
indeed, solicited financial documents from Plaintiffs while promising to review them — but
never actually undertook such a review.
Plaintiffs further suggest that Defendants never
attempted to obtain an exception to the investor restriction on second modifications. Id. ¶¶ 1820, 26-29.
Defendants argue that Michigan’s statute of frauds bars Plaintiff from raising these
claims. Defs. Br. at 6-12. Plaintiffs briefly respond that the statute of frauds does not apply
here, because Plaintiffs only assert that Defendants promised to consider them for a loan
11
modification, not that Defendants promised to grant Plaintiffs a loan modification. Pls. Resp. at
14 (distinguishing Goss v. ABN AMRO Mort. Grp., 549 F. App’x 466 (6th Cir. 2013)).
The Court rejects Plaintiffs’ argument, given the breadth with which the statute of frauds
was intended to be applied with respect to financial institutions. Michigan’s statute of frauds for
financial institutions provides, as follows:
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.
See Mich. Comp. Laws 566.132(2).4
A promise to consider a borrower for a loan modification is the functional equivalent of a
promise “to permit” a “financial accommodation” — i.e., considering the modification request is
the financial accommodation. See Barclae v. Zarb, 834 N.W.2d 100, 111 (Mich. Ct. App. 2013)
(statute of frauds applies to “an accommodation that would be made by a lender or creditor,” i.e.,
“an accommodation pertaining to those engaged in dealing with money and credit”). Therefore,
to avoid having their claims barred by the statute of frauds, Plaintiffs must identify a written,
signed promise. Any claims based on oral promises to review are barred. See Meyer v.
Citimortgage, Inc., No. 11-13432, 2012 WL 511995, at *10 (E.D. Mich. Feb. 16, 2012)
4
Plaintiffs do not dispute that Litton and the Defendants qualify as “financial institutions” under
the statute of frauds. See Mich. Comp. Laws § 566.132(3).
12
(dismissing promissory estoppel claim based on the defendant’s purported “unwritten agreement
. . . to consider plaintiffs for a loan modification” given statue of frauds); Wallace v. GMAC
Mortg., LLC, No. 12-13032, 2013 WL 1090614, at *6-7 (E.D. Mich. Feb. 22, 2013) (Majzoub,
M.J.) (same) adopted by 2013 WL 1090706 (E.D. Mich. Mar. 15, 2013); Reed v. BAC Home
Loans Servicing, LP, No. 11-963, 2012 WL 1579340, at *1 (W.D. Mich. May 4, 2012) (“[T]o
the extent that the Reeds are seeking to enforce an oral statement by BANA allegedly promising
to review their loan modification, Michigan’s statute of frauds bars the Reeds’ claim.”).
While Plaintiffs claim that Litton and Ocwen repeatedly solicited the submission of
financial documents for the purpose of considering Plaintiffs for a loan modification, the only
written documents Plaintiffs identify with particularity in their pleading as containing a promise
that Plaintiffs financial eligibility would be considered are the May 2009 Loan Workout Plan and
attached documents, a purported October 2010 letter from Litton, and a September 2012 letter
from Ocwen.5 See Second Am. Compl. ¶¶ 8-11, 32-36 (describing the May 2009 Loan Workout
Plan documents); id. ¶¶ 29, 37 (describing the September 1, 2012 letter).
With respect to the 2009 documents, Plaintiffs highlight the following statement from the
May 2009 Financial Hardship Affidavit:
“I/we understand that the Servicer will use this information to
evaluate my/our eligibility for a loan modification or other
workout.”
5
Plaintiffs allege that Litton “variously, continuously and repeatedly made verbal and written
representations to Plaintiffs’ [sic] throughout its ongoing solicitation of documents that it would
review these submissions to evaluate Plaintiffs’ eligibility for a loan modification.” Second Am.
Compl. ¶ 38. However, the only written documents containing such a purported promise that
Plaintiffs identify with particularity are those identified above. To the extent Plaintiffs allege
other such written documents exist, they have failed to identify these with the particularity
required by Federal Rule of Civil Procedure 8.
13
Financial Hardship Aff. ¶ 8 (Dkt. 46-4 (page 6 of 16 (cm/ecf page))); Second Am. Compl. ¶ 11.
Plaintiffs also rely upon a statement from the May 2009 cover letter, which states as follows:
“Step 1[:] Provide the Info We Need to Help You.” 5/11/2009 Cover Letter (Dkt. 46-4 (page 2
of 16 (cm/ecf page))); Second Am. Compl. ¶ 9.
Plaintiffs further claim that they received a letter from Litton in October 2010
“represent[ing that] [Litton] would initiate a review of [submitted] documentation to determine if
the loan qualified for a modification.” Second Am. Compl. ¶ 20; see also id. ¶¶ 43, 50. Finally,
in response to Defendants’ motion to dismiss, Plaintiffs attached the September 1, 2012 letter
from Defendant Ocwen, which includes the following statement:
We will conduct a thorough review of your financial situation, and
first verify for your eligibility for the HAMP program. If HAMP
doesn’t apply to your loan, we will work to match your situation to
our own mortgage modification and assistance programs.
9/1/2012 Correspondence (Dkt. 50-4); Second Am. Compl. ¶ 29.
The Court concludes that these statements are insufficient to state a claim for promissory
estoppel based upon a purported failure to consider Plaintiffs’ financial eligibility for a loan
modification. Under Michigan law, the elements of a claim for promissory estoppel are as
follows: “(1) a promise, (2) that the promisor should reasonabl[y] have expected to induce action
of a definite and substantial character on the part of the promisee, and (3) that in fact produced
reliance or forbearance of that nature in circumstances such that the promise must be enforced if
injustice is to be avoided.” Lessl, 515 F. App’x at 470 (quoting Novak v. Nationwide Mut. Ins.
Co., 599 N.W.2d 546, 552 (Mich. Ct. App. 1999)). Courts apply the doctrine of promissory
estoppel cautiously. See Lessl v. CitiMortgage Inc., No. 11-10871, 2011 WL 4351673, at *7
(E.D. Mich. Sept. 16, 2011).
14
Here, Plaintiffs’ claim based on the 2009 documents fails because Plaintiffs have not
sufficiently alleged why the promise “must be enforced if injustice is to be avoided.” Plaintiffs
point to no language promising that Defendants would consider their eligibility in a vacuum,
ignoring any restrictions aside from financial eligibility.
And Plaintiffs acknowledge that
Defendants determined that Plaintiffs were ineligible for a loan modification due to investor
restrictions. Second Am. Compl. ¶ 26. Plaintiffs do not allege that such an investor restriction
did not exist, nor — as explained below — do Plaintiffs affirmatively allege that they were
financially entitled to a modification. Therefore, Plaintiffs have failed to explain how they were
harmed by Defendants’ purported decision not to review their financial documentation, an
exercise that may have been futile in light of the investor restrictions imposed upon the servicer’s
ability to offer a second or additional modification. See Hart v. Countrywide Home Loans, Inc.,
735 F. Supp. 2d. 741, 749 (E.D. Mich. 2010) (“[R]eliance on a promise that Defendant would
review Plaintiff’s mortgage for modification could not cause an injury in this case where . . .
Plaintiff is not entitled [to] modification regardless of her eligibility under the Lending
Statutes.”).
Plaintiffs cite a HAMP supplemental directive as evidence that Defendants were required
to consider their financial eligibility when making a modification determination. See Supp.
Directive 09-01 (Dkt. 46-6); Second Am. Compl. ¶¶ 23-26. Pursuant to that directive, loan
modifications “must” be offered if certain financial calculations result in a positive net present
value. However, with respect to the May 2009 Loan Workout Plan documents, it is undisputed
that Litton was not a part of the HAMP program at the time the purported written promise was
made, and, therefore, the supplemental directive for HAMP modifications would not have
applied. See Second Am. Compl. ¶ 20; see also 4/29/2011 Letter (“Litton did not begin formal
15
participation in the HAMP until August 2009.”). Therefore, to the extent this claim is based on
the May 2009 documents, it cannot be supported by reference to the HAMP guidelines.6
Plaintiffs further suggest that Defendants failed to request an exception to the onemodification rule set forth by the investor guidelines. See Second Am. Compl. ¶ 26. The
HAMP supplemental directive on which Plaintiffs rely instructs servicers to “use reasonable
efforts to remove any prohibitions and obtain waivers or approvals from all necessary parties in
order to carry out any modification under the HAMP.” Supp. Directive 09-01 (Dkt. 50-2).
However, although the supplemental directive may have instructed Litton to undertake such
efforts, Plaintiffs do not claim that Litton ever promised this to them or even stated that it would
do so. Therefore, without such an explicit promise or statement being made to them, Plaintiffs’
claims for promissory estoppel cannot survive.
Finally, even if the HAMP Supplemental Directive is applicable to Plaintiffs’ claims,
Plaintiffs fail to sufficiently allege injury resulting from the purported promise (and subsequent
failure) to review their financial eligibility for a loan modification. Plaintiffs claim that they
6
Moreover, despite Plaintiffs’ protestations to the contrary, the HAMP guidelines do not require
servicers to ignore investor directives regarding granting modifications. See In re Pulsifer, No.
13-648, 2014 WL 4748233, at *5 (E.D. Wis. Sept. 23, 2014) (“Indeed, investor approval is
required, and even a positive NPV value does not guarantee a modification.”); Edwards v.
Aurora Loan Servs., LLC, 791 F. Supp. 2d 144, 148-149 (D.D.C. 2011) (“HAMP guidelines do
not require servicers to consider loans for HAMP modification where prohibited by the rules of
the applicable PSA and/or other investor servicing agreements.”); Williams v. Geithner, No. 091959, 2009 WL 3757380, at *2 (D. Minn. Nov. 9, 2009) (“The Treasury Guidelines explain that
‘participating servicers are required to consider all eligible mortgage loans unless prohibited by
the rules of the applicable [pooling and servicing agreement] and/or investor servicing
agreements. . . . Therefore, although an applicant may be eligible in the sense of meeting the
threshold criteria, servicers are not required to modify a loan with a negative NPV or if otherwise
prohibited by the investor.”); see also Supp. Directive 09-01 (Dkt. 50-2 (page 2 of 27 (cm/ecf
page))) (“[P]articipating servicers are required to consider all eligible mortgage loans unless
prohibited by the rules of the applicable PSA and/or other investor servicing agreements.
Participating servicers are required to use reasonable efforts to remove any prohibitions and
obtain waivers or approvals from all necessary parties in order to carry out any modification
under the HAMP.”).
16
relied on the purported promises to review their financial eligibility “to their detriment as . . .
their home was foreclosed upon and they forewent other opportunities to save their home, such
as seeking another type of loan modification, refinancing the existing loan, pursuing a short sale,
restructuring under the bankruptcy code[,] or renting the property and relocating.” Second Am.
Compl. ¶ 45. However, Plaintiffs fail to allege that they would have been granted a loan
modification had Defendants considered their financial eligibility. See id. ¶ 26 (claiming that a
waiver of investor restrictions is only required if the net present value is negative, and that it
“remains unknown whether a waiver of investor restrictions was even required”).7 Nor do
Plaintiffs claim in their second amended complaint or in their response to Defendants’ motion
that the investor would have granted an exception to the one-modification restriction if
requested.
If Plaintiffs were not eligible for a modification even with a review of their financial
information, then their decision to forego other possible options while the review was underway
would have been irrelevant; Plaintiffs do not allege that they would have been in a different
position, vis-à-vis the opportunity to pursue alternative remedies, had Defendants never made the
alleged promise in the first place. Indeed, if anything, the alleged promises allowed Plaintiffs to
remain in their home longer and/or gave more time for Plaintiffs to seek other possible options
while the review was allegedly underway. The asserted harms are, therefore, wholly speculative,
7
Plaintiffs do claim in their response that they would have qualified for a modification. Pls.
Resp. at 9, 25. However, this allegation does not appear in the governing complaint, and
Plaintiffs’ response cannot remedy this defect. See Botsford v. Bank of Am., N.A., No. 1313379, 2014 WL 4897529, at *11 (E.D. Mich. Sept. 30, 2014) (“Plaintiff cannot correct a faulty
claim in his First Amended Complaint through a response to Defendant’s motion.”); Jocham v.
Tuscola Cnty., 239 F. Supp. 2d 714, 732 (E.D. Mich. 2003). Indeed, Plaintiffs suggest in their
second amended complaint that they do not know if they would have qualified for a loan
modification based on their financial eligibility. See Second Am. Compl. ¶ 25-26.
17
particularly given Plaintiffs’ failure to affirmatively allege that they would have been granted a
modification had the proper review been completed.
The Court concludes that Plaintiffs have not sufficiently alleged definite harm, such that
“the promise must be enforced if injustice is to be avoided.” Lessl v. CitiMortgage, Inc., 515 F.
App’x 467, 470 (6th Cir. 2013) (citation omitted). Accordingly, Plaintiffs have not sufficiently
pled their claim for promissory estoppel based on the purported promise to consider their
financial eligibility for a modification.
ii. Promise to Adjourn Foreclosure Sale Pending Review
Plaintiffs next claim that Defendants are liable under a theory of promissory estoppel
because Defendants promised not to foreclose during the modification review process, but did so
anyway. See Second Am. Compl. ¶¶ 37, 44. Defendants argue that this claim is barred by the
statute of frauds, and, alternatively, that Plaintiffs cannot sufficiently allege reliance on these
purported promises to survive a motion to dismiss. Defs. Br. at 6-12, 14-16.
The Court first finds that the statute of frauds applies to Plaintiffs’ claimed promises not
to conduct a foreclosure sale. Michigan’s statute of frauds provides, as pertinent here, that “[a]n
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: . . . (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[; or] (c) A promise or commitment to
waive a provision of a loan, extension of credit, or other financial accommodation.” Mich.
Comp. Laws § 566.132(2). In FEI Co. v. Republic Bank, S.E., the Michigan Court of Appeals
concluded that “an agreement to delay a foreclosure sale is an agreement to make a financial
accommodation” under the statute of frauds. See No. 268700, 2006 WL 2313612, at *2 (Mich.
18
Ct. App. Aug. 10, 2006). Other courts have agreed. See, e.g., Williams v. Pledged Prop. II,
LLC, 508 F. App’x 465, 469 (6th Cir. 2012).
Here, Plaintiffs claim that they were promised that the foreclosure sale would be delayed
pending review of their loan modification request. Second Am. Compl. ¶¶ 37, 44. Therefore,
the statute of frauds applies; any claims based on oral or unsigned promises to adjourn the
foreclosure sale are barred.
Plaintiffs identify four writings that they claim contain promises to adjourn that satisfy
the statute of frauds: (i) the Frequently Asked Questions included with the May 2009 Loan
Workout Plan; (ii) a purported “Litton correspondence dated January 5, 2011,” (iii) a notice sent
by Defendant Ocwen in November 2012; and (iv) a communication from Ocwen from
September 2012. Second Am. Compl. ¶¶ 29, 37. With respect to the first three items, the Court
concludes that even if these writings contain the necessary signatures to satisfy the statute of
frauds — a question the Court need not decide — they fail to support Plaintiffs’ claim for
promissory estoppel.
As described earlier, the elements of a claim for promissory estoppel are as follows:
“(1) a promise, (2) that the promisor should reasonabl[y] have expected to induce action of a
definite and substantial character on the part of the promisee, and (3) that in fact produced
reliance or forbearance of that nature in circumstances such that the promise must be enforced if
injustice is to be avoided.” Lessl, 515 F. App’x at 470 (quoting Novak v. Nationwide Mut. Ins.
Co., 599 N.W.2d 546, 552 (Mich. Ct. App. 1999)).
Plaintiffs’ reliance on the Frequently Asked Questions included with the May 2009 Loan
Workout Plan is misplaced. This document did inform Plaintiffs that “[a]s long as [they] comply
with the terms of the Workout Plan, [the servicer would] not start foreclosure proceedings or
19
conduct a foreclosure sale if foreclosure proceedings have started.” FAQs (Dkt. 46-4 (page 9 of
16 (cm/ecf page))). But Plaintiffs acknowledge that by at least January 2011, and possibly
earlier, Defendants had denied Plaintiffs’ request for a loan modification under the 2009 Loan
Workout Plan. Second Am. Compl. ¶ 26. And the foreclosure sale did not occur until nearly
two years later. Id. ¶ 29. Therefore, Defendants did comply with their promise not to foreclose
during the May 2009 Loan Workout Plan review process; Defendants did not foreclose until well
after that review had been denied. Plaintiffs’ reliance on the accompanying 2009 Frequently
Asked Questions to establish a claim for promissory estoppel is, consequently, without merit.
Plaintiffs next claim that a similar promise to abstain from foreclosing was set forth in a
“Litton correspondence dated January 5, 2011.” Second Am. Compl. ¶ 37. But Plaintiffs do not
identify the language of this document or the alleged promise contained therein with
particularity; nor do Plaintiffs attach any such document to their second amended complaint.
This alone is grounds for rejecting Plaintiffs’ reliance on this vague document. See Northampton
Rest. Grp. v. FirstMerit Bank, N.A., 492 F. App’x 518, 521-522 (6th Cir. 2012) (dismissing
breach of contract claim where plaintiff did not set forth the terms of the contract breached, nor
attach the contract to the complaint); Charter Twp. of Ypsilanti v. Gen. Motors Corp., 506
N.W.2d 556, 559 (Mich. Ct. App. 1993) (“Promissory estoppel requires an actual, clear, and
definite promise.”); see also 2/19/2014 Op. & Order at 19 n.5 (Dkt. 34) (requiring Plaintiffs to
set forth the alleged promises with particularity).
To the extent Plaintiffs meant to rely on Litton’s January 12, 2011 correspondence (Dkt.
46-7 (pages 2-3 of 5 (cm/ecf pages))), the Court has reviewed that document and finds no
language clearly promising to adjourn the foreclosure sale. To the contrary, that document
specifically warned Plaintiffs that “[i]f foreclosure action has begun, it will continue until you
20
make arrangements with us.” Id. Further, as Defendants highlight, any such promise contained
within the January 12, 2011 letter would have lapsed by the time of the sale, as Plaintiffs
acknowledge that Defendants had completed this review by, at latest, April 2011. See Second
Am. Compl. ¶ 39; see also 4/29/2011 Correspondence (Dkt. 46-7 (page 5 of 5 (cm/ecf page))).
Third, Plaintiffs rely on a form letter that was sent to them by Ocwen on or around
November 21, 2012. See Second Am. Compl. ¶ 37; see also 11/21/2012 Correspondence (Dkt.
46-8). That letter states, “While we consider your request [for a modification], we will not
initiate a new foreclosure action and will not move ahead with the foreclosure sale on an active
foreclosure as long as we have received all required documents and you have met the eligibility
requirements.” See 11/21/2012 Correspondence. The letter also warned, as follows:
The HAMP evaluation and the process of foreclosure may proceed
at the same time. You may receive foreclosure/eviction notices –
delivered by mail or in person – or you may see steps being taken
to proceed with a foreclosure sale of your home. While you will
not lose your home during the HAMP evaluation, to protect your
rights under applicable foreclosure law, you may need to respond
to these foreclosure notices or take other actions.
Id.
Plaintiffs acknowledge that this notice was sent after the foreclosure sale had already
been completed. See Second Am. Compl. ¶ 37. Moreover, Plaintiffs alleged in an earlier
complaint that they “learned of the sale of their home when, on November 5, 2012, an ‘Affidavit
of Abandonment’ . . . was found posted on their front door.” Am. Compl. ¶ 12 (Dkt. 11). This
Affidavit of Abandonment was, therefore, posted more than two weeks before Plaintiffs received
the above form letter from Ocwen. Accordingly, the Court finds that, as a matter of law,
Plaintiffs could not have reasonably relied on a form promise not to conduct a foreclosure sale
while the review process was underway, when this promise was sent nearly a month after the
21
foreclosure sale, and more than two weeks after Plaintiffs became aware of the sale.
Furthermore, the language quoted above clearly warned Plaintiffs that they may have to
respond to posted notices and/or take other actions to protect their home while the review
process was underway. This further supports the Court’s conclusion that any claimed reliance on
this November 2012 promise that may have resulted in Plaintiffs not taking action to save their
home or attempting to redeem the property post-sale was unreasonable. And to the extent
Plaintiffs did take action, they fail to explain how they relied to their detriment on the November
2012 promise at issue.
Lastly, Plaintiffs point to a September 1, 2012 letter from Ocwen as evidence of the
promise to adjourn the foreclosure sale. See Second Am. Compl. ¶ 29 (alleging that Ocwen’s
representative asked for additional documents on September 1, 2012, and made “representations
that the foreclosure sale scheduled for September 6, 2012, was adjourned”). Although Plaintiffs
did not include this letter with their Complaint, they attached it to their response to Defendants’
motion to dismiss. See 9/1/2012 Letter (Dkt. 50-4). The letter promises that, if Plaintiffs submit
the requested forms and documents, Defendants, “[w]hile . . . consider[ing] [Plaintiffs’] request,
will not initiate a new foreclosure action and . . . will not move ahead with the foreclosure sale
on an active foreclosure as long as [they] received all required documents and [Plaintiffs] met the
eligibility requirements.” Id. Plaintiffs allege that they submitted the requested documents, but
that the foreclosure sale nevertheless occurred on October 25, 2012 — before Ocwen even
considered Plaintiffs’ renewed application. See Second Am. Compl. ¶ 28-29; see also id. ¶ 37
(“Defendant Ocwen had already confirmed receipt, in September of 2012, of the requested
documents”).
22
Defendants argue that the Court should not consider the language of the September 2012
letter, because it was attached to Plaintiffs’ response to the motion to dismiss, rather than their
second amended complaint. Defs. Reply at 4 n.6. The Court rejects this argument. In ruling on
a Rule 12(b)(6) motion, courts may consider documents that are not attached to the pleadings,
but that are “referred to in the complaint and central to the plaintiff’s claim.” See Greenberg v.
Life Ins. Co. of Virginia, 177 F.3d 507, 514 (6th Cir. 1999) (internal citations omitted).8 Here,
the September 2012 communication is both referred to in the second amended complaint, see
Second Am. Compl. ¶¶ 28-29, 37, and is central to Plaintiffs’ claim that Defendants promised to
adjourn the foreclosure sale. The document also was included in response to Defendants’
argument that no signed writing existed evidencing such a promise that could support Plaintiffs’
claim for relief. Accordingly, the Court concludes that it can properly consider this document.
Next, Defendants claim that the September 2012 letter is insufficient to withstand the
statute of frauds, because it does not contain the signature of an authorized representative. See
Defs. Br. at 11. The Court disagrees.
Michigan’s statute of frauds for financial institutions requires a writing “signed with an
authorized signature by the financial institution.” Mich. Comp. Laws § 566.132(2). Whether a
contract is “signed” depends on whether the party intended to authenticate the writing. “[A]ny
symbol executed or adopted by a party with the present intent to authenticate a writing may serve
as a signature.” Jim-Bob, Inc. v. Mehling, 443 N.W.2d 451, 458 (Mich. Ct. App. 1989). The
September 2012 letter in this case is written on letterhead bearing Ocwen’s name and website,
and contains Ocwen’s contact phone number and address. Notably, the letter contains the words
“Sincerely, Ocwen Loan Servicing, LLC” at the bottom. See 9/1/2012 Letter (Dkt. 50-4).
8
Defendants are well aware of this rule, having cited it (and the corresponding authority)
themselves in a past motion to dismiss in this case. See Defs. Br. at 1 n.1, 4 (Dkt. 14).
23
Finally, there is no indication that Ocwen intended any further action on its part — such as an
additional signature by one of its representatives — before the promise to adjourn the foreclosure
sale became effective. This cluster of facts is sufficient to raise an inference that Ocwen intended
to authenticate the letter as embodying an enforceable promise.
The Court recognizes that there are non-binding court decisions in this circuit that have
concluded that the phrase “Sincerely, [Servicer Name]” on the bottom of a cover letter is
insufficient to satisfy the “authorized signature” requirement of the statute of frauds.
See
Trombley v. Seterus, Inc., No. 12-15676, 2014 WL 1664823, at *5 (E.D. Mich. Apr. 25, 2014);
Super v. Seterus, Inc., No. 13-11626, 2014 WL 902827, at *3-4 (E.D. Mich. Mar. 7, 2014)
(typefaced name of lender does “not fall within the ‘authorized signature’ requirement in the
statute of frauds”). However, the Court does not find those cases persuasive here for a number
of reasons.
First, some of those cases are distinguishable from the instant action, because the
borrowers in some of those cases sought to enforce a statement or promise contained within an
unsigned agreement attached to a signed cover letter. In other words, the challenged promise
was not set out in the signed cover letter itself. See, e.g., Trombley, 2014 WL 1664823, at *5;
Rummell v. Vantium Capital, Inc., No. 12-10952, 2012 WL 2564846, at *6 (E.D. Mich. July 2,
2012) (seeking to enforce the “Trial Period Plan” that was attached to cover letter); Brady v.
Chase Home Fin., LLC, No. 11-838, 2012 WL 1900606, at *8 (W.D. Mich. May 24, 2012)
(same). Here, on the other hand, Plaintiffs are seeking to enforce a promise contained within the
signed document, i.e., a promise detailed in the cover letter.
Second, here, unlike in most of the cases above, there is no indication that Defendants
intended that any further action on their part — signature or otherwise — be required before the
24
promise to adjourn the foreclosure sale became effective. Rather, all that was required was that
Plaintiffs submit the necessary materials, a requirement that Plaintiffs allege that they met. See
Trombley v. Seterus Inc., -- F. App’x --, 2015 WL 3620412, at *2 n.2, 5 (6th Cir. June 11, 2015)
(while “presum[ing] that the phrase ‘Sincerely, IBM Lender Business Process Services, Inc[.]’
was intended as a ‘signature’ of the cover letter by Seterus,” the court declined to enforce
unsigned modification agreement attached to the cover letter, because the modification
agreement contained blank signature lines for both the borrower and the servicer, which would
have been “pointless” if the “signature line on the accompanying cover letter was intended to
bind Seterus to the [attached] Modification.”).9
Third, the Court concludes that the cases that insist on the personal signature of some
identifiable individual graft an unjustifiable requirement onto the Michigan statute based on a
misinterpretation of Michigan case law. The cases referenced above suggest that the only way to
satisfy the statute of frauds is to identify a document containing the signature of an “authorized
representative,” which the decisions imply means the personal signature of an individual agent.
Under this reasoning, an authorized representative’s inclusion of a typed entity-servicer’s name
is insufficient. These cases generally reach this conclusion based on the following language
from Cadle Company II, Inc. v. P.M. Group, Inc., No. 275099, 2007 WL 3119569, at *2 (Mich.
Ct. App. Oct. 25, 2007): “[A]ny modification or waiver of the guaranty [at issue] is not
enforceable unless it is in writing and signed by an authorized representative of Fifth Third
9
Defendants’ reliance on Goss v. ABN AMRO Mortgage Group, 549 F. App’x 466 (6th Cir.
2013); Federal Home Loan Mortgage Corp. v. Hassell, No. 11-14564, 2013 WL 823241, at *6-7
(E.D. Mich. Mar. 6, 2013); Ellis v. Chase Home Finance, LLC, No. 14-11186, 2014 WL
7184457, at *6-7 (E.D. Mich. Dec. 16, 2014); Garcia v. Federal National Mortgage Ass’n, No.
13-1259, 2014 WL 2210784, at *5-7 (W.D. Mich. Apr. 30, 2014); and Voydanoff v. Select
Portfolio Servicing, Inc., No. 298098, 2011 WL 6757841, at *6-7 (Mich. Ct. App. Dec. 22,
2011), is not persuasive for these same reasons.
25
Bank.” See Helmus v. Chase Home Fin., LLC, 890 F. Supp. 2d 806, 813 (W.D. Mich. 2012)
(citing Cadle Co. II, Inc.); Brady, 2012 WL 1900606, at *8 (same).
However, the court in Cadle Company II, Inc. did not state that the “authorized
representative” must sign the document in his or her name. In Cadle, the defendant’s president
signed an unlimited personal guaranty in 2002 that stated, in relevant part, “In consideration of
any credit or other financial accommodation heretofore or hereafter extended by [Fifth Third
Bank] . . . to [the defendant], [the president] guarantees prompt payment when due. . . . The
indebtedness includes any and all indebtedness and obligations now or hereafter owing to [Fifth
Third Bank].” In 2004, Fifth Third Bank and the defendant executed a revolving note, on which
Fifth Third Bank claimed defendant subsequently defaulted. Fifth Third Bank subsequently filed
suit, claiming that the defendant’s president was responsible for payment of the 2004 note
pursuant to the 2002 guaranty. The defendant’s president responded by arguing that Fifth Third
Bank had waived or modified the provision in the guaranty specifying that it extended to all
future debts, as purportedly evidenced by “an agreement that [the] 2004 note was a stand alone
note not guaranteed by the June 2002 guaranty.” Cadle Co. II, 2007 WL 3119569, at *1.
The Michigan Court of Appeals concluded that this alleged agreement modifying or
waiving the 2002 guaranty as to the 2004 note was unenforceable under Michigan’s statute of
frauds. The court noted that the 2002 guaranty was a financial accommodation covered by
Michigan Compiled Laws § 566.132(2), and, therefore, “any modification or waiver of the
guaranty is not enforceable unless it is in writing and signed by an authorized representative of
Fifth Third Bank.” Id. at *2. The court highlighted that “[t]he undisputed evidence discloses
that no authorized representative of Fifth Third Bank signed such a modification or waiver.” Id.
Therefore, the court declined to enforce the alleged modification or waiver.
26
However, the terse, unpublished opinion does not describe the alleged waiver or
modification agreement. It cannot be determined whether there was no writing at all, or whether
there was a written agreement without any authenticating symbol, or whether the bank’s name
did appear on the document but it lacked the cursive signature of an individual bank official.
Thus, Cadle does not hold that an individual’s personal signature must be affixed to the writing.
Fourth, to adopt Defendant’s construction of the statute would torture its language. The
statute requires that the writing be “signed with an authorized signature by the financial
institution.” Mich. Comp. Laws § 566.132(2) (emphasis added). The language does not say that
the writing must be signed by an individual, or that a cursive signature must be employed.
Courts should not graft language onto a statute that goes beyond its natural reading. PIC
Maintenance, Inc. v. Dep’t of Treasury, 809 N.W.2d 669, 674 (Mich. Ct. App. 2011) (courts
should not “read words into the plain language of the statute”); see also People v. Carey, 170
N.W.2d 145, 147 (Mich. 1969) (“The Court can only give full effect to the plain meaning of the
term as used in the statute and cannot read into the law a requirement that the law-making body
has seen fit to omit.”).
Fifth, insisting on a personal signature would depart markedly from the long history of
the statute of frauds under which a “signature” could include any notation signifying adoption or
assent to being bound. See 4 Corbin, Contracts § 23.4, pp. 789-798; 72 Am. Jur. 2d Statute of
Frauds § 257 (“[T]he general rule [is that the signature may be] typewritten or printed
mechanically, if, but only if, by signing in any of these methods the party whose signature is
essential intends to authenticate the instrument as his act.”); 37 C.J.S. Statute of Frauds § 204
(1943) (“Where employed with intent to authenticate the writing, a printed, stamped or
typewritten signature will satisfy the requirements of the statute of frauds.”); Restatement
27
(Second) of Contracts § 134 (1979); see also Mich. Comp. Laws § 440.1201(kk) (“‘Signed’
includes any symbol executed or adopted by a party with present intention to adopt or accept a
writing.”). While the statute of frauds for financial institutions was meant to broaden the kinds
of promises that had to be in writing, nothing in the wording of the statute suggests that the
standards for determining whether there was a sufficient signature had been made more stringent.
Compare Mich. Comp. Laws § 566.132(1) (for the ordinary statute of frauds, promises must be
“in writing and signed with an authorized signature by the party to be charged”), with Mich.
Comp. Laws § 566.132(2) (for the statute of frauds for financial institutions, promises must be
“in writing and signed with an authorized signature by the financial institution”). Nor have
Defendants identified any legislative history that would lead to a contrary conclusion.
Finally, adopting a heightened stringency for signatures would promote unjust results.
Consumers and seasoned merchants alike are used to being tendered documents containing
promises — such as form contracts, warranties, quotes and invoices — that close with only a
printed company name, rather than the personal handwritten signature of an individual.
Defendants’ theory would mean that lenders could make detailed promises to customers and
affix the lender’s name, and deceive even the most sophisticated customer into believing that an
enforceable promise had been made and could be relied upon.
Can it really be imagined that the Michigan Legislature intended that a lender would
escape liability for its promises by having an authorized representative affix the typewritten
name of the servicer-institution — rather than the handwritten name of the representative himself
or herself — below the word “Sincerely” on a form document printed on the lender’s letterhead?
This recipe for ensnaring the unwary would convert the statute of frauds into a statute for frauds,
and undermine its fundamental purpose of “‘preventing fraud or an opportunity for fraud.’”
28
Kent v. Bell, 132 N.W.2d 601, 654 (Mich. 1965) (quoting Hunter v. Slater, 49 N.W.2d 33, 35
(Mich. 1951)) (statute must not be interpreted so as to become “an instrumentality to be used in
aid of fraud or as a stumbling block in the path of justice”); see also FEI Co. v. Republic Bank,
S.E., No. 268700, 2006 WL 2313612, at *2 (Mich. Ct. App. Aug. 10, 2006) (same).
For purposes of the instant motion to dismiss, Defendants do not dispute that an
authorized representative (i) included the typewritten “Sincerely, Ocwen Loan Servicing, LLC”
on the bottom of the September 2012 letter, (ii) printed the letter on Ocwen’s letterhead, and
(iii) sent it to Plaintiffs on Ocwen’s behalf. In light of the above arguments, and given that
compliance with Michigan’s statute of frauds is decided on a case-by-case basis, Kelly-Stehney
& Assocs., Inc. v. MacDonald’s Indus. Prods., Inc., 693 N.W.2d 394, 398 (Mich. Ct. App. 2005),
the Court concludes that the letterhead, closing statement, and contact information combined are
sufficient in this case to satisfy the “signature” requirement for purposes of a motion to dismiss
regarding promises made in the letter. See Frost v. Wells Fargo Bank, N.A., 901 F. Supp. 2d
999, 1007 (W.D. Mich. 2012). Accordingly, the Court rejects Defendants’ argument that the
statute of frauds necessarily disposes of Plaintiffs’ claim.
Defendants next claim that the Court should dismiss this cause of action, because
Plaintiffs’ interest in the property was extinguished upon expiration of the statutory redemption
period. Defs. Br. at 16-17. As this Court explained in a past decision in this case, a plaintiff may
seek to set aside a foreclosure sale even after the redemption period has run, so long as the
plaintiff can show a fraud or irregularity relating to the foreclosure process. See Etts v. Deutsche
Bank Nat’l Trust Co., No. 13-11588, 2014 WL 645358, at *5 (E.D. Mich. Feb. 19, 2014). The
Court concludes that Plaintiffs’ allegation regarding a promise (and subsequent failure) to
adjourn the foreclosure sale fits within this rule.
29
Michigan’s statutory requirements for
conducting foreclosures by advertisement contain detailed notice requirements to ensure that
borrowers are aware of the sale, have a chance to purchase the property at the sale, and are aware
of the timeline for redemption. See Mich. Comp. Laws § 600.3208, et seq. To that end, the
statutes set forth specific requirements for adjourning a foreclosure sale, including notice
requirements. See Mich. Comp. Laws § 600.3220. Were this not the case, the initial notification
requirements for conducting a foreclosure sale would have no meaning, as a lender could simply
set a date and then continually adjourn it until the borrowers no longer knew of the sale, and
therefore lost the right to attempt to purchase the property and/or redeem within the statutorily
defined period.
Here, Defendants allegedly promised to adjourn the foreclosure sale pending a review of
Plaintiffs’ request for a loan modification. Yet, Plaintiffs claim that Defendants moved forward
with the sale on October 25, 2012, while Plaintiffs believed the review was still pending. If true,
this undermined both the statutory requirements and intention behind the notice requirements for
conducting a foreclosure by advertisement.10 Therefore, the Court concludes that the alleged
broken promise to adjourn the foreclosure sale is a potential irregularity arising out of the
foreclosure process, not just an issue concerning the loan modification negotiations.
Furthermore, Plaintiffs sufficiently allege that they would have been in a better position
to preserve their interest in the property, but for the alleged promise to adjourn the foreclosure
sale during the review period. See Kim v. JPMorgan Chase Bank, N.A., 825 N.W.2d 329, 331
(Mich. 2012). Plaintiffs claim that, because of this promise, they “forewent other opportunities
10
Notably, Defendants attached the sheriff’s deed, with the notices of foreclosure included, in
support of a past motion to dismiss. See Sheriff’s Deed (Dkt. 14-6). These notices reflected an
originally scheduled sale date of September 6, 2012, and an actual sale date of October 25, 2012,
without any notices of adjournment in between. This supports Plaintiffs’ claim that Defendants
adjourned the sale as promised, but subsequently rescheduled it without notice to Plaintiffs.
30
to save their home, such as seeking another type of loan modification, refinancing the existing
loan, pursuing a short sale, restructuring under the bankruptcy code or renting the property and
relocating.” Second Am. Compl. ¶ 45. The Court concludes this is sufficient to survive a
motion to dismiss in this case.
Defendants next suggest that Plaintiffs cannot rely on alleged promises to adjourn the
foreclosure sale pending review, because “Defendants performed every obligation that they
colorably promised.” Defs. Br. at 16. Defendants argue that the documents “establish that the
October 25, 2012 foreclosure did not occur during a review period, because the review had
already been completed by April 29, 2011.” Id. As described above, this is true regarding the
alleged written promises that Plaintiffs rely on from before April 29, 2011. But Plaintiffs also
seek to enforce the promise to adjourn that is contained in the September 2012 letter, which predates the foreclosure sale and post-dates the April 29, 2011 completion of the original review. In
other words, taking all inferences in Plaintiffs’ favor, Defendant Ocwen agreed to undertake a
new review in September 2012, but foreclosed one month later — before that review was
competed. Accordingly, the October 2012 foreclosure may have occurred during a review
period.
Finally, Defendants argue that laches should bar Plaintiffs’ claim, because Plaintiffs
could have included this cause of action in its original or amended complaints. Defs. Br. at 2022. Defendants claim that, at latest, Plaintiffs should have been aware of this claim by the date
of the sheriff’s sale, October 25, 2012. Id. at 21. However, “[f]or laches to apply, inexcusable
delay in bringing suit must have resulted in prejudice.” Tenneco Inc. v. Amerisure Mut. Ins. Co.,
761 N.W.2d 846, 864 (Mich. Ct. App. 2008) (citations omitted). Defendants have not alleged or
shown how they were prejudiced by Plaintiffs bringing this claim for the first time in the second
31
amended complaint. Instead, Defendants focus on Plaintiffs’ failure to “allege [a] reason for
their inexcusable delay.” Defs. Br. at 22. This is insufficient.
Therefore, having carefully reviewed Defendants’ arguments in support of their motion to
dismiss, the Court concludes that Plaintiffs have stated a valid claim for promissory estoppel
based on Defendant Ocwen’s September 1, 2012 written promise to adjourn the foreclosure sale
pending a loan modification review. This claim may proceed.
V. CONCLUSION
For the foregoing reasons, the Court grants in part and denies in part Defendants’ motion
to dismiss (Dkt. 47). Plaintiffs may proceed only with their claim for promissory estoppel, to the
extent this claim is based on the promise to adjourn the foreclosure sale that is contained in the
September 1, 2012 letter from Ocwen. The Court dismisses all of Plaintiffs’ remaining claims
with prejudice.
SO ORDERED.
Dated: August 25, 2015
Detroit, Michigan
s/Mark A. Goldsmith
MARK A. GOLDSMITH
United States District Judge
CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served upon counsel of record and any
unrepresented parties via the Court's ECF System to their respective email or First Class U.S. mail
addresses disclosed on the Notice of Electronic Filing on August 25, 2015.
s/Carrie Haddon
Case Manager
32
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