Johnson et al v. Fannie Mae
Filing
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DECISION; signed by Judge Gordon J. Quist (Judge Gordon J. Quist, jmt)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
__________________________
ERIK W. JOHNSON, all other occupants
N940 State Highway M35
Menominee, MI 49858-9572,
Plaintiff,
v.
Case No. 2:12-CV-00452
FANNIE MAE,
HON. GORDON J. QUIST
Defendant.
_________________________________/
DECISION
Plaintiff, Erik W. Johnson, seeks injunctive and declaratory relief (Counts I and II) to set
aside the sheriff’s sale of his home for The Federal National Mortgage Association’s (“Fannie
Mae”) alleged violations of Johnson’s equal protection and due process rights.
(Counter-
Compl., Docket no. 1-4, Page ID 40– 41.) Johnson further seeks damages under 42 U.S.C. §
1983 (Counts III and IV) for Fannie Mae’s alleged deprivations of Johnson’s federally-protected
rights, including equal protection. (Id. at Page ID 48.) Finally, Johnson seeks damages for
slander of title/quiet title (Count V) based on various irregularities in the foreclosure process.
(Id. at Page ID 49.)
Fannie Mae has moved for dismissal with prejudice 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 Fannie Mae’s motion and dismiss the Counter-Complaint with prejudice.
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I. BACKGROUND
During a 2010 dispute over the balance of payment due to PHH Mortgage,1 Johnson
defaulted on his loan. (Id. at Page ID 43.) PHH Mortgage provided Johnson a notice of default
and “notice to contact PHH Mortgage for loan counseling mediation services,” but Johnson did
not do so. (Id.) PHH Mortgage foreclosed on Johnson’s property, (id. at Page ID 44), using
Michigan’s nonjudicial foreclosure by advertisement under chapter 32 of Michigan Compiled
Laws, (id. at Page ID 41). PHH Mortgage published and posted notice of the nonjudicial sale.
(Id. at Page ID 44.) At the January 7, 2011 sheriff’s sale, PHH Mortgage purchased Johnson’s
property. (Id.) PHH Mortgage quitclaimed its interest in the property to Fannie Mae on January
19, 2011. (Id.)
The statutory redemption period expired on July 7, 2011 without Johnson redeeming his
property. (Id.) On June 26, 2012, Fannie Mae filed an eviction action against Johnson. Johnson
alleges that Fannie Mae is a “government controlled and operated entity or federal
instrumentality,” (id. at Page ID 45), because Fannie Mae was placed under a federal
conservatorship of the Federal Housing Finance Agency in September 2008, (id. at Page ID 42).
Johnson claims that Fannie Mae violated his constitutional rights to due process and
equal protection by taking his property through Michigan’s nonjudicial foreclosure by
advertisement process. (Id. at Page ID 41.) Accordingly, Johnson seeks damages under 42
U.S.C. § 1983. (Id. at Page ID 48.) Finally, Johnson alleges a claim for slander of title/quiet
title based on various irregularities in the foreclosure process. (Id. at Page ID 49.)
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Johnson claims that when he requested a mortgage payment book from PHH Mortgage, PHH Mortgage told him
that no property in PHH Mortgage’s database matched the address of his property and, therefore, the mortgage must
have been paid off. (Counter-Compl. at Page ID 43.)
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II. MOTION STANDARD
Although a court is normally precluded from considering matters outside of the pleadings
in addressing a motion to dismiss for failure to state a claim, courts recognize an exception for
documents attached to or referenced in the complaint. “When a court is presented with a
Rule12(b)(6) motion, it may consider the Complaint and any exhibits attached thereto . . . 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).
III. DISCUSSION
A.
Regardless of Whether Fannie Mae Has the Status of a Government Entity,
Johnson’s Due Process, Equal Protection and 42 § U.S.C. 1983 Claims Fail as a
Matter of Law
1.
Governmental Entity
Johnson’s due process and equal protection claims fail as a matter of law because Fannie
Mae is not a governmental entity capable of violating Johnson’s federal constitutional rights.
See, e.g., Lopez v. Bank of Am., N.A., ___ F. Supp. 2d ___, 2013 WL 150460, at *4 (W.D. Mich.
Jan. 14, 2013); Rubin v. Fannie Mae, No. 12-cv-12832, 2012 WL 6000572, at *2–3 (E.D. Mich.
Nov. 30, 2012); Kapla v. Fed. Nat’l Mortg. Ass’n., 485 B.R. 136 (Bankr. E.D. Mich. 2012); Fed.
Home Loan Mortg. Corp. v. Kelly, No. 12-1734 LT, slip op. (Mich. 55th Dist. July 13, 2012);
Fed. Nat’l Mortg. Ass’n. v. Jenks, No. 1102635-LT, slip op. (Mich. 55th Dist. Oct. 19, 2012);
Fannie Mae v. Sober, No. 12-680-AV slip op. at 4– 6 (Mich. Cir. Ct., Ingham County, Nov. 28,
2012).
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2.
Due Process
Fannie Mae’s failure to provide Johnson a hearing prior to foreclosure does not violate
Johnson’s right to due process. See Sutton v. United States Small Bus. Admin., 92 F. App’x 112,
121– 22 (6th Cir. 2003); see also Rubin, 2012 WL 6000572, at *3; Yousif v. Fed. Nat’l Mortg.
Ass'n, No. 12-cv-12427, 2013 WL 980159 at *2 n.2 (E.D. Mich. Mar. 13, 2013). The three
factor balancing test applied in Sutton produces the same result in this case. Like the plaintiffs in
Sutton, Johnson has a strong interest in retaining his property. On the other hand, Fannie Mae,
like the SBA, has an interest in maintaining an efficient foreclosure process. The second factor
also weighs in Fannie Mae’s favor. Under Michigan’s foreclosure by advertisement process,
Johnson received a six-month redemption period to reclaim his property but failed to redeem his
property within the allotted time. Johnson also had the opportunity to speak with a PHH
Mortgage counselor prior to foreclosure but failed to do so. Finally, Johnson had notice of the
foreclosure and sheriff’s sale because PHH Mortgage published notice of the sale. Therefore,
like the plaintiffs in Sutton, Johnson received all of the process that was “due.”
3.
Equal Protection
Johnson does not address his equal protection claim in his response to Fannie Mae’s
motion to dismiss. Therefore, the Court deems this claim abandoned. See Sommer v. Davis, 317
F. 3d 686, 691 (6th Cir. 2003) (deeming “abandoned” an issue the plaintiffs failed to address in
their briefs); Clear Sky Car Wash, LLC v. City of Chesapeake, 910 F. Supp. 2d 861, 871 (E.D.
Va. 2012) (“Because Plaintiff fails to address jurisdiction pursuant to 28 U.S.C. § 1346(a)(2) and
2201–02 in any of its responsive briefs to the motions to dismiss, the Court deems such grounds
abandoned.”).
4.
Damages Under § 1983
Johnson’s claim for damages pursuant to 42 U.S.C. § 1983 is also subject to dismissal.
Apart from failing to address his § 1983 claim in his response to Fannie Mae’s motion to
dismiss, Johnson’s claim fails for the independent reasons that: (1) Johnson fails to establish a
violation of his constitutional rights; (2) § 1983 applies only to state actors, not federal officials,
see Yandal v. City of Mayfield, No. 5:10CV-P92-M, 2010 WL 4638864, at *1 n.1 (W.D. Ky.
Nov. 5, 2010); and (3) an action pursuant to Bivens v. Six Unknown named Agents of Federal
Bureau of Narcotics, 403 U.S. 388, 91 S. Ct. 1999 (1971)—the judicially-created federal
counterpart to a § 1983 action—may be maintained only against individuals and not against
federal government agencies, see FDIC v. Meyer, 510 U.S. 471, 486, 114 S. Ct. 996, 1006
(1994).
B.
Johnson’s Slander of Title/Quiet Title Claims Lack Factual Support
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., 2009 WL 1507342,
at *1 (Mich. Ct. App. May, 28 2009) (citing Schulthies v. Barron, 16 Mich. App. 246, 247–48,
167 N.W.2d 784, (1969)). The fraud or irregularity must be present in the foreclosure process
itself. Williams v. Pledged Prop. II, LLC, No. 12-1056, 2012 WL 6200270, at *2 (6th Cir. Dec.
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13, 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)).
Johnson alleges that PHH Mortgage did not have proper title to his property at the time
of the foreclosure because Cendant Mortgage (the name of Johnson’s lender at the time Johnson
financed his property) failed to assign his mortgage to PHH Mortgage—the foreclosing lender.
(Counter-Compl. at Page ID 49.) Johnson further alleges that PHH Mortgage did not own the
note at the time of the foreclosure. (Id.) See M.C.L. § 600.3204(3). Finally, Johnson alleges
that the foreclosure was invalid because PHH Mortgage foreclosed on his property while
Johnson was “negotiating the validity of [his] debt toward a loan modification.” (CounterCompl. at Page ID 49.)
1.
The Mortgage
Johnson mistakenly asserts that PHH Mortgage and Cendant Mortgage are separate
entities. Public records, including those of the Michigan Department of Consumer Industry
Services, show that Cendant Mortgage simply changed its name to PHH Mortgage when
Cendant Corporation—the parent of PHH Mortgage—spun off its subsidiary—Cendant
Mortgage—to Cendant Corporation shareholders. (Am. App. for Certification of Authority to
Transact Bus. in Mich. (24 Jan. 2008), available at http://www.dleg.state.mi.us/bcs_corp/image.
asp?FILE_TYPE=UCO&FILE_NAME=D200501\2005026\00001890.tif; see also Affidavit of
Publication for Arizona Corporation Commission (11 Apr. 2005), available at http://images.azcc.
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gov/scripts/cgi/dwispart2.pl (certifying that Cendant Mortgage changed its name to PHH
Mortgage)).
Cendant Mortgage was thus not required to assign Johnson’s mortgage PHH
Mortgage because Cendant Mortgage and PHH Mortgage are the same company. In other
words, the “spin-off” of PHH Mortgage from Cendant Corporation did not affect the ownership
interest in Johnson’s mortgage.
2.
The Note
Nothing in Johnson’s Counter-Complaint suggests that Cendant Mortgage (also known as
PHH Mortgage) transferred the note. Moreover, the Michigan Supreme Court has held that the
holder of a mortgage may foreclosure the mortgage under Michigan’s foreclosure by
advertisement statute even if it does not own the note. Residential Funding Co., L.L.C. v.
Saurman, 490 Mich. 909, 910, 805 N.W.2d 183, 184 (2011). Therefore, the potential separation
of the mortgage and note does not support a slander of title/quiet title claim.
3.
The Loan Modification
Johnson’s claim fails because Johnson admits that he did not contact a housing counselor
or seek a modification from PHH Mortgage. (Counter-Compl. at Page ID 43.) Moreover, even
if Johnson were eligible for a loan modification (which he fails to allege), M.C.L. § 600.3205c
provides no basis to disturb the completed foreclosure process. As the Michigan Court of
Appeals has recently noted, M.C.L. § 600.3205c “provides a mechanism by which a borrower
may demand that a foreclosure proceed under supervision of a court, but the statute does not in
and of itself create an independent cause of action to nullify a foreclosure sale after the
expiration of the redemption period and entry of a judgment of possession.” Tipton v. Flagstar
Bank, FSB, No. 305911, 2012 WL 4800169, at *1 (Mich. Ct. App. Oct. 9, 2012) (per curiam);
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see also Yousif v. Deutsche Bank Nat’l Trust Co., No. 12-11387, 2013 WL 93319, at *5 (E.D.
Mich. Jan. 8, 2013) (noting that “courts in the Eastern District of Michigan have uniformly held
that a violation of Section 600.3205c is insufficient to justify setting aside a completed
foreclosure sale”).
IV. CONCLUSION
For the foregoing reasons, the Court will grant Fannie Mae’s Motion to Dismiss and
dismiss Johnson’s Counter-Complaint with prejudice.
An Order consistent with this Decision will be entered.
Dated: July 23, 2013
/s/ Gordon J. Quist
GORDON J. QUIST
UNITED STATES DISTRICT JUDGE
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