Wilkerson v. JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, et al
Filing
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OPINION and ORDER Granting Defendant's 6 Motion to Dismiss. Signed by District Judge Linda V. Parker. (RLou)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
THERESA WILKERSON,
Plaintiff,
Civil Case No. 15-11667
Honorable Linda V. Parker
v.
JP MORGAN CHASE BANK NATIONAL
ASSOCIATION and MAWAD S. KHALIL,
Defendants.
________________________________/
OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO
DISMISS
Plaintiff, through counsel, initiated this action against Defendants JP Morgan
Chase Bank, N.A. (“Chase”) and Mawad S. Khalil (“Khalil”) in state court to
redress alleged improprieties in the foreclosure of her home. Chase timely
removed the action to this Court on May 8, 2015, on the basis of federal question
jurisdiction, 28 U.S.C. § 1331. This Court dismissed Khalil as a party to the action
on October 19, 2015, as a result of Plaintiff’s failure to prosecute her case against
him. (ECF No. 9.) Presently before the Court is Chase’s motion to dismiss
Plaintiff’s Complaint, filed pursuant to Federal Rule of Civil Procedure 12(b)(6) on
July 15, 2015. (ECF No. 6.) Plaintiff has failed to respond to the motion. On
August 25, 2015, this Court issued a notice informing the parties that it is
dispensing with oral argument with respect to Chase’s motion pursuant to Eastern
District of Michigan Local Rule 7.1(e). (ECF No. 8.) For the reasons that follow,
the Court grants Chase’s motion and dismisses the action with prejudice.
I.
Governing Legal Standard
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) allows
the Court to assess whether the plaintiff’s complaint states a claim upon which
relief may be granted. Fed. R. Civ. P. 12(b)(6). As the Supreme Court of the
United States has articulated, “[t]o survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 555, 570 (2007). This facial plausibility standard
requires the plaintiff to put forth “enough fact[s] to raise a reasonable expectation
that discovery will reveal evidence of” the requisite elements of the plaintiff’s
claims. Twombly, 550 U.S. at 557. Although a complaint need not contain
“detailed” factual allegations, the “factual allegations must be enough to raise a
right to relief above the speculative level.” Ass’n of Cleveland Fire Fighters v.
City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007) (citing Twombly, 550 U.S. at
555) (internal citations omitted).
While courts are required to accept the factual allegations in a complaint as
true, Twombly, 550 U.S. at 556, the presumption of truth does not apply to any
legal conclusions asserted by the plaintiff. Iqbal, 556 U.S. at 678. Therefore, to
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survive a motion to dismiss, a plaintiff’s pleading must provide “more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Twombly, 550 U.S. at 555.
In addition to evaluating the sufficiency of the factual allegations in the
complaint itself, courts may consider any exhibits attached to the complaint,
matters of public record, and exhibits attached to the defendant’s Rule 12(b)(6)
motion, provided that the latter are referred to in the complaint and are central to
the claims therein. Bassett v. NCAA, 528 F.3d 426, 430 (6th Cir. 2008) (citing
Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001)).
II.
Factual and Procedural Background
On May 16, 2007, Plaintiff accepted a $49,000.00 loan from Chase Bank
USA, N.A. (“lender”), and, in exchange, executed a promissory note secured by a
mortgage on real property commonly known as 8778 Bessemore Street, Detroit,
Michigan (hereinafter, the “Property”). (Compl. ¶¶ 9, 10, Ex. 2; Def.’s Mot. Ex.
A.) The mortgage was recorded with the Wayne County Register of Deeds on
December 7, 2007. (Compl., Ex. 2.)
The Lender assigned the mortgage to Chase on June 23, 2012. (Compl., Ex.
3.) The assignment was recorded with the Wayne County Register of Deeds on
July 16, 2012. (Id.)
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Plaintiff subsequently defaulted on her loan obligations. She alleges that she
began the process of attempting to modify her loan some time prior to June 1,
2014. (Compl. ¶ 15.) According to Plaintiff, although she cooperated with Chase
and provided Chase with all documents and/or information requested of her, Chase
consistently stated that it had not received all of the information and/or documents
requested and needed. (Id. ¶¶ 16-18.)
On or about June 30, 2014, Chase initiated foreclosure by advertisement
proceedings with respect to the Property. (Id. ¶ 20.) On July 31, 2014, the
Property was sold at a Sheriff’s Sale to Chase. (Id. ¶ 24, Ex. 5.) The Sheriff’s
Deed was recorded in the Wayne County Register of Deeds on August 13, 2014.
(Id., Ex. 5.) Chase then transferred the Property to Fannie Mae (a/k/a Federal
National Mortgage Association) via a Quit Claim Deed which was recorded in the
Wayne County Register of Deeds on October 17, 2014. (Id. ¶ 28, Ex. 6.) Fannie
Mae then transferred its interest in the Property to Khalil by way of a Quit Claim
Deed which was recorded in the Wayne County Register of Deeds on January 7,
2015. (Id. ¶ 29, Ex. 7.)
Plaintiff had until January 31, 2015 to redeem the Property. (Compl., Ex. 5.)
The statutory redemption period expired on that date with Plaintiff failing to
redeem.
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On February 3, 2015, Plaintiff filed her Complaint in state court. Plaintiff’s
Complaint contains three counts: (I) wrongful foreclosure, (II) breach of contract,
and (III) fraudulent misrepresentation. As indicated, Chase removed Plaintiff’s
Complaint to federal court on May 8, 2015. The parties thereafter stipulated to an
extension of time for Chase to respond to Plaintiff’s Complaint. (ECF Nos. 3, 5.)
Chase responded to the Complaint on July 15, 2015 by filing the pending motion to
dismiss.
III.
Applicable Law and Analysis
Foreclosures by advertisement, such as the foreclosure at issue in this case,
as well as the rights of both the mortgagor and mortgagee after a foreclosure sale
has occurred, are governed by Michigan statutory law. See, e.g., Senters v. Ottawa
Sav. Bank, F.S.B., 503 N.W.2d 639, 641 (Mich. 1993); Conlin v. Mortgage Elec.
Registration Sys., Inc., 714 F.3d 355, 359 (6th Cir. 2013) (applying Michigan law)
(citation omitted).
Pursuant to Michigan law, a mortgagor has six months from the date of the
sheriff’s sale to redeem foreclosed property. Mich. Comp. Laws § 600.3240(8).
Significant consequences flow from a mortgagor’s failure to redeem prior to the
expiration of the statutory redemption period: the mortgagor’s “right, title, and
interest in and to the property” are extinguished, Piotrowski v. State Land Office
Board, 4 N.W.2d 514, 517 (Mich. 1942), and the deed issued at the sheriff’s sale
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“become[s] operative, and [ ] vest[s] in the grantee named therein . . . all the right,
title, and interest [ ] the mortgagor had.” Michigan Compiled Laws § 600.3236.
This rule of law‒ holding that absolute title vests in the purchaser at the foreclosure
sale upon expiration of the redemption period‒ has been applied consistently by
state and federal courts alike to bar former owners from making any claims with
respect to a foreclosed property after the statutory redemption period has lapsed.
There is one caveat to the general rule described above: after the redemption
period has run, a court may allow “an equitable extension of the period to redeem”
if a plaintiff-mortgagor makes “a clear showing of fraud, or irregularity[.]”
Schulthies v. Barron, 167 N.W.2d 784, 785 (Mich. Ct. App. 1969); Freeman v.
Wozniak, 617 N.W.2d 46, 49 (Mich. Ct. App. 2000) (“[I]n the absence of fraud,
accident or mistake, the possibility of injustice is not enough to tamper with the
strict statutory requirements.”) (citing Senters, 503 N.W.2d at 643). In order to
satisfy this standard, a plaintiff-mortgagor’s pleading must allege misconduct
related to the foreclosure procedure itself. Conlin, 714 F.3d at 360; Reid v.
Rylander, 258 N.W. 630, 631 (Mich. 1935) (holding that only the foreclosure
procedure may be challenged after a sale); Freeman, 617 N.W.2d at 49 (reversal of
sheriff’s sale improper without fraud, accident, or mistake in foreclosure
procedure).
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If fraud or irregularity is shown in connection to the foreclosure procedure,
the result is “a foreclosure that is voidable, not void ab initio.” Kim v. JPMorgan
Chase Bank, N.A., 825 N.W.2d 329, 337 (Mich. 2012). In order “to set aside the
foreclosure sale, [the] plaintiffs must show that they were prejudiced by [the]
defendant’s failure to comply” with Michigan’s foreclosure by advertisement
statute. Id.; Conlin, 714 F.3d at 361. “To demonstrate such prejudice, [the
plaintiffs] must show that they would have been in a better position to preserve
their interest in the property absent [the] defendant’s noncompliance with the
statute.” Kim, 825 N.W.2d at 337 (footnote omitted).
Because the redemption period with respect to the Property at issue in this
case has expired, the Court must analyze Plaintiff’s claims within the fraud or
irregularity framework outlined above. Thus, the Court must decide whether,
under Michigan law, the foreclosure sale can be set aside, or is voidable, on the
facts alleged. See Savedoff v. Access Group, Inc., 524 F.3d 754, 762 (6th Cir.
2008) (observing that the Erie doctrine requires federal courts hearing state law
claims to apply the decisions of the state’s highest court).
In her Complaint, Plaintiff alleges that Chase “failed to properly notify [her]
of the foreclosure” and engaged in wrongdoing in connection with her loss
mitigation options. (See Compl. ¶¶ 36-41.) Any alleged fraud or irregularity with
respect to the loan modification process, however, does not constitute a showing of
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fraud or irregularity in the foreclosure procedure. See, e.g., Williams v. Pledged
Property II, L.L.C., 508 F. App’x 465, 468 (6th Cir. 2012) (“Despite the fact that
[loan] negotiations may have taken place during the foreclosure process, these
negotiations remained separate from the foreclosure process itself.”). With respect
to Chase’s alleged failure to provide notice of the foreclosure to Plaintiff, this
allegation is belied by the publicly filed records reflecting that notice was posted as
required by law. (Compl., Ex. 5 at Pg ID 51.) In any event, to set aside the
foreclosure sale, Plaintiff must show that she was prejudiced by Chase’s alleged
failure to provide notice of the foreclosure. Kim, 825 N.W.2d at 115. To make
this showing, Plaintiff “must show that [she] would have been in a better position
to preserve [her] interest in the property absent [Chase’s] noncompliance with the
[foreclosure by advertisement statute].” Id. at 116.
In her Complaint, Plaintiff does not allege prejudice as a result of Chase’s
alleged violation. There is no suggestion that she would have been in a better
position to preserve her interest in the Property had she received the notice she
claims was not provided. Notably, Chase demonstrates that Plaintiff in fact was
approved for a trial loan modification, but was subsequently denied a permanent
modification because she failed to make the trial period loan payments.1 (Def.’s
The Court may consider the correspondence Chase sent Plaintiff with respect to
the loan modification as it is central to the claims in Plaintiff’s Complaint,
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Mot. at Pg ID 104 n.2, citing Ex. C.) As such, the Court cannot find that Plaintiff
would have been able to redeem the Property or pay off the debt had she received
notice of the foreclosure proceedings.
For these reasons, Plaintiff is not entitled to the relief she seeks with respect
to rescinding the foreclosure sale or subsequent transfers of the Property and her
wrongful foreclosure claim fails to state a claim upon which relief may be granted.
Plaintiff’s breach of contract and fraudulent misrepresentation claims fail for the
following reasons.
To establish a breach of contract in Michigan, Plaintiff must allege: (1) the
existence of a valid contract, (2) establish the contract’s terms, (3) present evidence
of a breach of those terms, and (4) show an injury causally related to that breach.
Webster v. Edward D. Jones & Co., 197 F.3d 815, 819 (6th Cir. 1999). Plaintiff
alleges in her Complaint that Chase breached the terms of the mortgage,
specifically paragraph 22 requiring Chase to provide notice to Plaintiff prior to
acceleration.2 (Compl. ¶¶ 47-49.) Plaintiff fails to allege an injury resulting from
specifically her claim that she was denied loss mitigation and was able to afford a
reasonable payment had the loan been modified.
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In Count II, Plaintiff also asserts that Chase breached the implied covenant of
good faith and fair dealing. (Compl. ¶¶ 50-51.) Michigan does not recognize such
a claim under the circumstances of this case, however. See Jawad v. Hudson City
Sav. Bank, FSB, No. 2014 WL 7272342, at *5 (E.D. Mich. Dec. 18, 2014) (citing
Belle Isle Grill Corp. v. City of Detroit, 666 N.W.2d 271, 279-80 (Mich. Ct. App.
2003)); Jarbo v. BAC Home Loan Servicing, No. 10-12632, 2010 WL 5173825, at
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the alleged breach. Moreover, Michigan law precludes Plaintiff from maintaining
a claim for breach of contract claim because, by her default, Plaintiff committed
the first substantial breach of the parties’ contract. As the Sixth Circuit has stated
with regard to Michigan law: “He who commits the first substantial breach of a
contract cannot maintain an action against the other contracting party for failure to
perform.” Chrysler Int’l Corp. v. Cherokee Export Co., 134 F.3d 738, 742 (6th
Cir. 1998) (quoting Ehlinger v. Bodi Lake Lumber Co., 36 N.W.2d 311, 316 (Mich.
1949)); see also Goodman v. CitiMortgage, Inc., No. 15-12456, 2015 WL
6387451, at *4 (E.D. Mich. Oct. 22, 2015) (no question that plaintiffs breached the
mortgage by failing to make the required loan payments).
Lastly, in Count III of her Complaint, Plaintiff asserts fraudulent
misrepresentation based on allegations that Chase told her that “it would not begin
foreclosure proceedings while the parties were actively pursuing loan modification
or other financial assistance options.” (Compl. ¶ 53.) Plaintiff alleges that Chase’s
representations induced her “to refrain from defending the foreclosure of her home
. . ..” (Id. ¶ 57.)
Under the Federal Rules of Civil Procedure, the circumstances of a
fraudulent misrepresentation must be pled with particularity. Fed. R. Civ. P. 9(b).
In order to satisfy the particularity requirement, a plaintiff must: (1) specify the
*14-15 (E.D. Mich. 2010) (citing Ulrich v. Fed. Land Bank of St. Paul, 480
N.W.2d 910, 912 (Mich. Ct. App. 1991)).
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alleged fraudulent statements; (2) identify the speaker; (3) state when and where
the statements were made; and (4) explain why the statements were fraudulent.
Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008). Here, Plaintiff fails to
particularly identify the specific fraudulent statements, who made the statements,
and when and where the statements were made. Therefore, Plaintiff fails to plead
fraudulent misrepresentation with the level of particularity required by Rule 9(b).
Furthermore, promises from a financial institution regarding loan
modifications must be in writing to be enforceable under the statute of frauds.
Michigan Compiled Laws Section 566.132(2)(b) provides that no cause of action
can be brought against a financial institution for a promise of financial
accommodation unless the promise is in writing and signed by an authorized
signature. Here, there is no reference to a written instrument pertaining to a stay of
the foreclosure proceedings during the loan modification process, therefore
Plaintiff’s claim should be dismissed due to non-compliance with the statute of
frauds.
For the reasons stated above, the Court holds that Plaintiff’s wrongful
foreclosure, breach of contract, and fraudulent misrepresentation claims are subject
to dismissal.
Accordingly,
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IT IS ORDERED, that Defendant JP Morgan Chase Bank, N.A.’s motion
to dismiss Plaintiff’s Complaint is GRANTED.
s/ Linda V. Parker
LINDA V. PARKER
U.S. DISTRICT JUDGE
Dated: January 6, 2016
I hereby certify that a copy of the foregoing document was mailed to counsel of
record and/or pro se parties on this date, January 6, 2016, by electronic and/or U.S.
First Class mail.
s/ Richard Loury
Case Manager
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