Nederhoed et al v. JP Morgan Chase Bank et al
Filing
30
OPINION; signed by Judge Gordon J. Quist (Judge Gordon J. Quist, jmt)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
__________________________
STEPHEN NEDERHOED and
PAULA NEDERHOED,
Plaintiffs,
v.
Case No. 1:12-CV-704
JP MORGAN CHASE BANK, a Federal
Association, and FEDERAL NATIONAL
MORTGAGE ASSOCIATION, a Federal
Association, jointly and severally,
HON. GORDON J. QUIST
Defendants.
_________________________________/
OPINION
Plaintiffs, Stephen and Paula Nederhoed, have sued Defendants, JP Morgan Chase Bank
(Chase) and Federal National Mortgage Association (Fannie Mae), alleging various claims arising
out of a foreclosure of the mortgage on the Nederhoeds’ residence.1 Those claims include rescission
(Count I); Defendants’ waiver of right, privilege, advantage or benefit (Count II); estoppel (Count
III); unclean hands, civil fraud (Count IV); and breach of contract (Count V). For relief on Counts
I through IV, the Nederhoeds request that the Court rescind or set aside the foreclosure sale and
restore the Nederhoeds’ ownership of the property. In Count V, the Nederhoeds seek damages in
excess of $25,000 for Defendants’ alleged breach of a forbearance agreement and two adjustment
agreements.
1
The Nederhoeds initially filed suit in the Kalamazoo County Circuit Court on or about June11, 2012.
Defendants removed the case to this Court on July 5, 2012, alleging diversity jurisdiction under 28 U.S.C. § 1332(a) as
the basis for removal jurisdiction. (Notice of Removal, dkt. # 1.) Following the removal, the parties filed a series of
stipulations and orders, which the Court entered, extending the time for Defendants to respond to the complaint while
the parties engaged in settlement discussions. (Dkt. ## 5–16.) Defendants filed the instant motion after the parties
reached an impasse.
Defendants now move for dismissal of all claims pursuant to Federal Rule of Civil Procedure
12(b)(6) for failure to state a claim. For the reasons set forth below, the Court will grant
Defendants’ motion and dismiss the complaint with prejudice.
I. BACKGROUND
The following facts are based on the allegations in the Nederhoeds’ complaint, the
documents attached to the complaint, matters of public record, and exhibits attached to Defendants’
motion that are referred to in the complaint.2
On July 9, 1999, the Nederhoeds obtained a mortgage loan from First Chicago NBD
Mortgage Company (First Chicago) in the principal amount of $217,600. To secure the loan, the
Nederhoeds granted First Chicago a mortgage on real property (Property) commonly known as 8820
W. ML Ave., Kalamazoo, Michigan 49009. (Compl. ¶¶ 4, 5; Defs.’ Br. Supp. Mot. Ex. 1.) On
January 25, 2001, First Chicago assigned the mortgage to Mortgage Electronic Registration
Systems, Inc. (MERS). (Defs.’ Br. Supp. Mot. Ex. 2.) On April 25, 2008, MERS assigned the
mortgage to Chase. (Id. Ex. 3.) Both assignments were properly recorded in the Kalamazoo County
Register of Deeds.
During 2009, the Nederhoeds fell behind in their mortgage payments due to unemployment
and economic uncertainties. (Compl. ¶ 6.) Unable to make their mortgage payments, the
Nederhoeds sought assistance from Chase, which offered the Nederhoeds a Forbearance Plan
Agreement (FPA), which the Nederhoeds accepted and signed. (Id. ¶¶ 6, 8; Compl. Ex. D.) The
2
Although a court is normally precluded from considering matters outside of the pleadings in addressing a
motion under Rule 12(b)(6), courts may consider various documents without converting the motion to a motion for
summary judgment. “W hen a court is presented with a Rule 12(b)(6) motion, it may consider the Complaint and any
exhibits attached thereto, public records, items appearing in the record of the case and exhibits attached to defendant’s
motion to dismiss so long as they are referred to in the Complaint and are central to the claims contained therein.”
Bassett v. NCAA, 528 F.3d 426, 430 (6th Cir. 2008) (citation omitted).
2
FPA required the Nederhoeds to make monthly payments in the amount of $448.88 from July 2009
through December 2009. The FPA also provided:
Payments are subject to change due to escrow analysis and or interest rate changes,
if applicable. If you are notified of a payment adjustment, please contact our office
immediately so we can adjust the terms of your Agreement accordingly. If all
payments are made as scheduled, we will reevaluate your application for assistance
and determine if we are able to offer you a permanent workout solution to bring your
loan current.
All of the original terms of your loan remain in full force and effect, unless
specifically mentioned within this Agreement. . . .
(Compl. Ex. D.)
The Nederhoeds made their first payment under the FPA but received a letter from Chase
shortly thereafter, stating that Chase would not accept the payment because “‘[f]unds insufficient
to cure default.’” (Compl. ¶ 6.) Chase sent the Nederhoeds mortgage rate change notices on
September 1, 2010, and again on September 1, 2011, each time notifying the Nederhoeds of a new
interest rate and a new monthly payment amount. The Nederhoeds timely made all of the adjusted
payments. (Id. ¶¶ 7, 8.) However, Chase continued to send the Nederhoeds delinquency notices.
Chase also responded to the Nederhoeds’ written inquiries by informing them that their “‘inquiry
[wa]s under’” review. (Id. ¶ 9.) The Nederhoeds made numerous attempts to contact Chase by
telephone to discuss the status of their loan, but were able to speak with a live person on only one
occasion, when they learned that Chase had assigned their mortgage to Fannie Mae. (Id. ¶ 12.) The
Nederhoeds had no further contact with any person or entity concerning their mortgage until May
24, 2012, when a realtor arrived at their front door to post a notice stating that Chase, on behalf of
Fannie Mae, had completed a foreclosure on the Property. The realtor advised the Nederhoeds that
they could rent the Property. (Id. ¶ 13.)
3
The Nederhoeds claim that Chase never provided them with notice of the foreclosure or the
foreclosure sale and never posted a notice of foreclosure in a conspicuous place on the Property.
(Compl. ¶¶ 15, 17, 18.) The foreclosure sale was held on September 9, 2010, at which Chase
purchased the Property for $219,333.53 and received a Sheriff’s Deed. (Defs.’ Br. Supp. Ex. 4, Page
ID 119.) Following the foreclosure sale, Chase transferred the Property to Fannie Mae. (Defs.’ Br.
Supp. Ex. 5.) The redemption period expired on March 9, 2011, but the Nederhoeds did not redeem
the Property.
II. MOTION STANDARD
Pursuant to Federal Rule of Civil Procedure 8(a), a complaint must provide “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Detailed factual allegations are
not required, but “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’
requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1964–65 (2007)
(quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 103 (1957)). The court must accept all of
the plaintiff’s factual allegations as true and construe the complaint in the light most favorable to
the plaintiff. Gunasekera v. Irwin, 551 F.3d 461, 466 (6th Cir. 2009). The court must determine
whether the complaint contains “enough facts to state a claim to relief that is plausible on its face.”
Twombly, 550 U.S. at 570, 127 S. Ct. at 1974. “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949
(2009). Although the plausibility standard is not equivalent to a “‘probability requirement,’ . . . it
asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly,
550 U.S. at 556, 127 S. Ct. at 1965). “[W]here the well-pleaded facts do not permit the court to infer
4
more than the mere possibility of misconduct, the complaint has alleged—but it has not
‘show[n]’—that the pleader is entitled to relief.” Id. at 1950 (quoting Fed. R. Civ. P. 8(a)(2)).
III. DISCUSSION
A.
The Nederhoeds’ Foreclosure-Related Claims (Counts I–IV) Provide No Basis to
Invalidate the Foreclosure
In Michigan, the rights of a mortgagor and mortgagee after foreclosure are controlled by
statute. Senters v. Ottawa Sav. Bank, FSB, 443 Mich. 45, 52, 503 N.W.2d 639, 642 (1993). The
foreclosure statute provides that once the redemption period has expired, all of the mortgagor’s
rights in the property are extinguished by operation of law. M.C.L. § 600.3236; see Piotrowski v.
State Land Office Bd., 302 Mich. 179, 187–88, 4 N.W.2d 514, 517 (1942). The six-month statutory
redemption period under M.C.L. § 600.3240 may not be extended absent a clear showing of fraud
or irregularity. Overton v. Mortg. Elec. Registration Sys., No. 284950, 2009 WL 1507342, at *1
(Mich. Ct. App. May 28, 2009) (per curiam) (citing Schulthies v. Barron, 16 Mich. App. 246,
247–48, 167 N.W.2d 784, 785 (1969) (per curiam)). The fraud or irregularity must be present in the
foreclosure process itself. Williams v. Pledged Prop. II, LLC, 508 F. App’x 465, 468 (6th Cir.
2012). Thus, to upset the foreclosure once the redemption period has expired “would require a
strong case of fraud or irregularity, or some peculiar exigency.” United States v. Garno, 974 F.
Supp. 628, 633 (E.D. Mich. 1997) (citing Detroit Trust Co. v. Aqozzino, 280 Mich. 402, 405–06, 273
N.W. 747, 748 (1937) and Calaveras Timber Co. v. Mich. Trust Co., 278 Mich. 445, 450, 270 N.W.
743, 745 (1936)); see also Freeman v. Wozniak, 241 Mich. App. 633, 637, 617 N.W.2d 46, 49
(2000) (observing that “in the absence of fraud, accident or mistake, the possibility of injustice is
not enough to tamper with the strict . . . requirements” of the foreclosure statute).
5
Because the Nederhoeds did not contest the foreclosure prior to the expiration of the
redemption period, they may obtain relief only if they can establish a strong case of fraud or
irregularity in connection with the foreclosure sale. Sweet Air Inv., Inc. v. Kenney, 275 Mich. App.
492, 497, 739 N.W.2d 656, 659 (2007). Defendants contend that the foreclosure sale complied with
all of the statutory requirements3 and the Nederhoeds have not sufficiently alleged fraud or
irregularity in connection with the foreclosure sale. Defendants contend that the Nederhoeds’
assertions that they never received notice of the foreclosure and that Chase never posted a
foreclosure notice on the Property as required by M.C.L.A. § 600.3208 do not save their claims from
dismissal. Defendants argue that the Evidence of Sale and Affidavit of Publication, attached to
Defendants’ opening brief, shows that notice was in fact posted on the Property on February 12,
2009. (Defs.’ Br. Supp. Ex. 4 at Page ID 122.) Defendants further note that because the affidavit
was recorded, it is presumptive evidence of the facts stated therein. See M.C.L. A. § 600.3264
(affidavits recorded by the register of deeds “shall be presumptive evidence of the facts therein
contained”). The Nederhoeds respond that the allegations in their verified complaint that they never
3
Under Michigan law,
a party may foreclose a mortgage by advertisement if all of the following circumstances exist:
(a) A default in a condition of the mortgage has occurred, by which the power to sell became
operative.
(b) An action or proceeding has not been instituted, at law, to recover the debt secured by the
mortgage or any part fo the mortgage; or, if an action or proceeding has been instituted, the action or
proceeding has been discontinued; or an execution on a judgment rendered in an action or proceeding
has been returned unsatisfied, in whole or in part.
(c) The mortgage containing the power of sale has been properly recorded.
(d) The party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the
indebtedness secured by the mortgage or the servicing agent of the mortgage.
M.C.L.A. § 600.3204(1).
6
received notice of the foreclosure and that a foreclosure notice was never posted on the Property
suffice to create a disputed issue of fact and defeat Defendants’ motion to dismiss.4
The Court rejects the Nederhoeds’ argument because the allegations in their verified
complaint do not contradict Defendants’ affidavit of posting. “A failure to observe the posting does
not, by itself, contradict evidence that the notice was properly posted.” Galati v. Wells Fargo Bank,
No. 11-11487, 2011 WL 5178276, at *6 (E.D. Mich. Nov. 1, 2011) (citing Grech v. Am. Home Mort.
Servicing, No. 292121, 2010 WL 376609, at *1 (Mich. Ct. App. Sept. 28, 2010) (per curiam)). In
Grech, the defendant presented an affidavit stating that a notice of the foreclosure sale had been
posted in a secure manner on the front door of the plaintiffs’ property. The plaintiffs responded with
an affidavit averring that they never observed a notice of foreclosure posted on the front door or at
any other conspicuous location at the property. The court held that the plaintiffs’ assertions were
insufficient to defeat the defendant’s evidence of posting, observing:
Although plaintiffs’ affidavit stated that they “resided” at the property and never
observed a notice of foreclosure posted on the front door or any other conspicuous
place, the affidavit does not state that they had occasion to observe the front door on
or around the date of the purported posting and that the notice was not present. Their
failure to observe the posting does not by itself contradict defendant’s evidence that
the notice was properly posted on the front door.
Grech, 2010 WL 376609, at *1.
As in Grech, the Nederhoeds broadly assert that a notice of foreclosure was never posted on
the Property in a conspicuous place, but they fail to allege that they observed the Property on or
around February 12, 2009—the date the affidavit of posting states that a notice of foreclosure was
4
Although not explicitly alleged in their complaint, the Nederhoeds also argue that the foreclosure was invalid
because the FPA adjusted their mortgage, such that there was no default under the mortgage. (Pls.’ Resp. at 11.) This
argument is contradicted by the Nederhoeds’ own admission in their complaint that they defaulted based on nonpayment.
(Compl. ¶ 6.) Moreover, as explained below, M ichigan’s statute of frauds bars the Nederhoeds from asserting that the
FPA altered the terms of the mortgage.
7
posted on the Property. Thus, following Grech, the Court concludes that the Nederhoeds’ verified
—but very general—allegation that a foreclosure notice was never posted on the Property is
insufficient to contradict the factual assertion in the affidavit of posting that notice was posted on
the Property on February 12, 2009.
Moreover, the Nederhoeds’ notice argument fails even if their verified allegations could
establish a lack of notice. A defect in the foreclosure process under Michigan law does not void the
foreclosure, but instead renders it merely voidable. Kim v. JPMorgan Chase Bank, N.A., 439 Mich.
98, 115, 825 N.W.2d 329, 337 (2012). Under this standard, a plaintiff seeking to set aside a
foreclosure sale must show prejudice resulting from
noncompliance with the foreclosure
requirements. Id. Specifically, a plaintiff “must show that [he] would have been in a better position
to preserve [his] interest in the property absent defendant’s noncompliance with the statute.” Id. at
115–16, 825 N.W.2d at 337; see also Jackson Inv. Corp. v. Pittsfield Prods., Inc., 162 Mich. App.
750, 755, 413 N.W.2d 99, 101 (1987) (holding that “a defect in notice renders a foreclosure sale
voidable”). Although the Nederhoeds make vague references to prejudice in their complaint, they
fail to allege how notice of the foreclosure would have put them in a better position to preserve their
interest in the Property. The Nederhoeds do not allege that they would have redeemed the Property,
or even that they had the means to do so. Accordingly, the Nederhoeds fail to establish that the
foreclosure should be set aside because of a defect in the foreclosure process.5
In Count IV, the Nederhoeds allege that Defendants engaged in civil fraud. Their scant and
conclusory allegations, however, provide no basis to set aside the foreclosure sale. That is, the
Nederhoeds allege that Defendants committed “civil fraud,” but they fail to allege the nature of the
5
In light of this conclusion, the Court need not address Defendants’ laches argument. Similarly, the Court need
not address Defendants’ argument regarding the viability of the Nederhoeds’ unclean hands claim in Count IV.
8
fraud or, more importantly, that such fraud was committed as part of the foreclosure process. See
Williams, 508 F. App’x at 468. Thus, the Nederhoeds have failed to sufficiently allege fraud as a
basis to set aside the foreclosure.6
B.
The Breach of Contract Claim is Barred by the Statute of Frauds
In Count V, the Nederhoeds allege that Defendants breached the FPA and the mortgage
adjustment notices by foreclosing on the Property. This claim is barred by Michigan’s statute of
frauds, which states in relevant part:
With regard to claims against financial institutions, Michigan’s statute of frauds provides:
(2) An action shall not be brought against a financial institution to enforce any of the
following promises or commitments of the financial institution unless the promise
or commitment is in writing and signed with an authorized signature by the financial
institution:
(a) A promise or commitment to lend money, grant or extend credit, or make any
other financial accommodation.
(b) A promise or commitment to renew, extend, modify, or permit a delay in
repayment or performance of a loan, extension of credit, or other financial
accommodation.
(c) A promise or commitment to waive a provision of a loan, extension of credit, or
other financial accommodation.
M.C.L.A. § 566.132(2). This provision applies to actions against financial institutions based upon
a promise to modify a loan and is “‘unambiguous.’” Ennis v. Wells Fargo Bank, N.A., No. 1:10-CV751, 2011 WL 1118669, at *3 (W.D. Mich. Mar. 25, 2011) (quoting Crown Tech. Park v. D & N
6
Although the Nederhoeds have had ample time to do so, they have neither requested leave to amend nor
submitted a proposed amended complaint to address any pleading deficiencies. Accordingly, the Court need not consider
whether the Nederhoeds should be allowed to amend. See Goryoka v. Quicken Loan, Inc., 519 F. App’x 926, 929 (6th
Cir. 2013) (declining to consider whether the district court erred in dismissing the plaintiff’s complaint without allowing
her leave to amend because the plaintiff “did not move for leave to amend her complaint in the district court or file a
proposed amended complaint”); Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430,
438 (6th Cir. 2008) (“Importantly, Plaintiffs never requested leave for additional amendments, and it is not the district
court’s role to initiate amendments.”).
9
Bank, FSB, 242 Mich. App. 538, 550, 619 N.W.2d 66, 72 (2000)). Moreover, it applies to any
“claim–no matter its label–against a financial institution to enforce the terms of an oral promise to
waive a loan provision.” Crown Tech., 242 Mich. App. at 550, 619 N.W.2d at 72.
The statute of frauds bars the Nederhoeds’ reliance on the FPA because that document was
not signed by an authorized representative of Chase. The same is true of the rate change notices,
even if they could be considered contractual agreements—a stretch by any measure. Moreover,
nothing in the FPA or the rate change notices states that Chase agreed not to foreclose, as the
Nederhoeds allege. Thus, this claim is properly dismissed.
IV. CONCLUSION
For the foregoing reasons, the Court will grant Defendants’ motion to dismiss and dismiss
the Nederhoeds’ complaint with prejudice.
An Order consistent with this Opinion will be entered.
Dated: October 7, 2013
/s/ Gordon J. Quist
GORDON J. QUIST
UNITED STATES DISTRICT JUDGE
10
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?