NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 14a0398n.06

                                          No. 13-2257                                 FILED
                                                                                    Jun 02, 2014
                                                                            DEBORAH S. HUNT, Clerk
                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

NANCY GARDNER,                                           )
                                                         )
       Plaintiff-Appellant,                              )
                                                         )
v.                                                       )      ON APPEAL FROM THE
                                                         )      UNITED STATES DISTRICT
QUICKEN LOANS, INC., et al.,                             )      COURT FOR THE EASTERN
                                                         )      DISTRICT OF MICHIGAN
       Defendants-Appellees.                             )
                                                         )
                                                         )

BEFORE: GUY, GIBBONS, GRIFFIN, Circuit Judges.

       JULIA SMITH GIBBONS, Circuit Judge. In this mortgage foreclosure case, plaintiff-

appellant Nancy Gardner appeals the district court’s grant of the motion of the defendants-

appellees, Quicken Loans, Inc., Flagstar Bank, FSB, and Potestivo and Associates, P.C., to

dismiss for failure to state a claim upon which relief can be granted. We affirm.

                                                I.

       On May 18, 2007, Gardner executed a note in the amount of $215,200.00 to obtain a loan

from Flagstar to purchase real property commonly known as 7221 State Road, Burtchville,

Michigan 48059. As security for the loan, Gardner executed a mortgage on the property. On

May 22, 2007, the mortgage was recorded with the St. Clair County Register of Deeds, in Liber

3723 Page 10. Both the note and mortgage were in favor of Flagstar, as lender, with Mortgage

Electronic Registration Systems, Inc. (MERS) acting solely as the nominee for Flagstar and its

successors and assigns.     The mortgage provided that MERS is the mortgagee under the
No. 13-2257
Gardner v. Quicken Loans Inc., et al.

mortgage. On March 4, 2013, the mortgage was assigned from MERS, as nominee for Flagstar

and its successors and assigns, to Quicken. The assignment was recorded with the St. Clair

County Register of Deeds.

       Gardner defaulted on the note for nonpayment. On February 11, 2013, Potestivo, a debt

collector acting on behalf of Quicken, served a pre-foreclosure notice on Gardner notifying her

that default was made for nonpayment and that the amount due under the note was $207,350.35.

On March 6, Gardner responded, requesting a meeting with Potestivo to attempt to work out a

modification of the mortgage loan. On March 12, Potestivo replied, informing Gardner that it

was the designee for Quicken with regard to her loan pursuant to section 600.3205(a)(1)(c) of the

Michigan Compiled Laws. Potestivo advised that to initiate a modification, Gardner would need

to complete and return certain financial paperwork along with any supporting documentation

within seven days. Potestivo also advised that the ninety-day hold on foreclosure proceedings

would expire on May 13, 2013. Gardner responded on March 16. Instead of providing the

documentation Potestivo requested, Gardner requested documentation of Potestivo’s legal right

to negotiate with her and to enter into a modification agreement under the terms of the mortgage.

On March 25, Potestivo replied, stating that its response was in connection with Gardner’s

request that Quicken review the loan for a possible modification and again requesting that

Gardner complete and return certain financial paperwork along with supporting documentation

within seven days. The letter again advised that the ninety-day hold on foreclosure proceedings

would expire on May 13, 2013. On April 8, Potestivo again wrote to Gardner, noting the receipt

of her March 16 letter, explaining that it was the designee for Quicken, and advising that it must

receive Gardner’s documentation by April 12, 2013. On May 23, Potestivo again wrote to

Gardner, responding to her request for information about the mortgage loan. Potestivo reiterated


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No. 13-2257
Gardner v. Quicken Loans Inc., et al.

that it was the designee for Quicken and informed Gardner that on March 4, 2013, the mortgage

was assigned from MERS as nominee for Flagstar to Quicken. Potestivo enclosed copies of the

note, mortgage, assignment, and correspondence from its office.         The letter also informed

Gardner that Quicken was entitled to enforce the mortgage as the mortgagee of record, that the

outstanding balance of the loan was $210,270.10, and that a foreclosure sale was scheduled for

May 30, 2013. The foreclosure notice was posted on the door of the property and published four

times in the Port Huron Times Herald on April 19, April 25, May 3, and May 10, 2013. A

sheriff’s sale was held on May 30, 2013. Quicken was the highest bidder and received the

sheriff’s deed to the property.    Gardner had six months to redeem the property, and the

redemption period expired on November 30, 2013.

       A day before the sheriff’s sale, on May 29, 2013, Gardner filed a lawsuit in St. Clair

County circuit court against Flagstar, Quicken, and Potestivo. Gardner framed her complaint in

three counts. Count I sought a declaratory judgment of no debt owed the defendants because

they “failed to satisfy their burden of showing they are entitled to enforce the debt.” In Count I,

Gardner alleged multiple challenges to the foreclosure sale: (1) that the defendants failed to

comply with Article 3 of the UCC; (2) that they lacked “standing” to foreclose on her mortgage

because the defendants failed to endorse the note and were not a holder in due course; (3) that

she was entitled to a copy of the original note before Quicken could foreclose; and (4) that

Flagstar violated section 6 of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C.

§ 2605, because it sold the note shortly after it was originated. Count II alleged that the

mortgage was an unenforceable contract of adhesion. Count III sought injunctive relief barring

the defendants from proceeding with the foreclosure. On June 19, Quicken and Potestivo timely

removed the case to federal district court because Gardner alleged that Flagstar violated the


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Gardner v. Quicken Loans Inc., et al.

REPSA, 12 U.S.C. § 2605. Flagstar consented to the removal. Quicken and Potestivo moved to

dismiss pursuant to Rule 12(b)(6). Flagstar concurred in the motion. On August 27, 2013, the

district court granted the defendants’ motion and dismissed Gardner’s case for failure to state a

claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6). Gardner v. Quicken

Loans, Inc., No. 13-12720, 

, at *1 (E.D. Mich. Aug. 27, 2013). Gardner

timely appealed.

                                                II.

       This court reviews de novo a district court’s grant of a motion to dismiss under Rule

12(b)(6). Top Flight Entm’t, Ltd. v. Schuette, 

, 630 (6th Cir. 2013). Federal Rule of

Civil Procedure 12(b)(6) tests the sufficiency of a complaint. The rule permits dismissal for

“failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “In

assessing a motion to dismiss under Rule 12(b)(6), this court construes the complaint in the light

most favorable to the plaintiff, accepts the plaintiff’s factual allegations as true, and determines

whether the complaint ‘contain[s] sufficient factual matter, accepted as true, to state a claim to

relief that is plausible on its face.’” Heinrich v. Waiting Angels Adoption Servs., Inc., 

, 403 (6th Cir. 2012) (alteration in original) (quoting Ashcroft v. Iqbal, 

, 678

(2009)).   “A plaintiff’s complaint must provide ‘more than labels and conclusions, and a

formulaic recitation of the elements of a cause of action will not do.’” 

Atl.

Corp. v. Twombly, 

, 555 (2007)). Courts are not required to accept as true legal

conclusions couched as factual allegations. See 

(citing Papasan v.

Allain, 

, 286 (1986)). “Factual allegations must be enough to raise a right to relief

above the speculative level on the assumption that all the allegations in the complaint are true

(even if doubtful in fact).” 

omitted). “[W]here the well-pleaded facts do


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Gardner v. Quicken Loans Inc., et al.

not permit the court to infer more than the mere possibility of misconduct, the complaint has

alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” 

(second alteration in original) (quoting Fed. R. Civ. P. 8(a)(2)).

       In reviewing this motion to dismiss, the panel may consider the complaint along with any

document not formally incorporated by reference or attached to the complaint as part of the

pleadings if the “document is referred to in the complaint and is central to the plaintiff’s claim.”

Greenberg v. Life Ins. Co. of Va., 

, 514 (6th Cir. 1999) (internal quotation marks

omitted); see also Commercial Money Ctr., Inc. v. Ill. Union Ins. Co., 

, 335−36 (6th

Cir. 2007) (“[W]hen a document is referred to in the pleadings and is integral to the claims, it

may be considered without converting a motion to dismiss into one for summary judgment.”);

Weiner v. Klais & Co., 

, 89 (6th Cir. 1997) (“‘[D]ocuments that a defendant attaches

to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff’s

complaint and are central to her claim.’” (quoting Venture Assocs. Corp. v. Zenith Data Sys.

Corp., 

, 431 (7th Cir. 1993))).         Hence, in this case, the panel may consider

documents relating the note, mortgage, assignment, loan modification process, and foreclosure

that are referenced in the complaint and integral to Gardner’s claims.

       Gardner’s complaint raised claims under both Michigan and federal law. As to the

former, this court applies the substantive law of Michigan and federal procedural law. Biegas v.

Quickway Carriers, Inc., 

, 374 (6th Cir. 2009) (citing Erie R. Co. v. Tompkins, 

(1938)). In applying Michigan law, we “must ‘follow the decisions of the state’s highest

court when that court has addressed the relevant issue.’” Savedoff v. Access Grp., Inc., 

, 762 (6th Cir. 2008) (quoting Talley v. State Farm Fire & Cas. Co., 

, 326 (6th

Cir. 2000)).


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Gardner v. Quicken Loans Inc., et al.

       On appeal, Gardner ignores the district court’s dismissal of some claims and raises other

new claims. Gardner does not challenge the district court’s dismissal of the RESPA claim, the

contract of adhesion claim, or the claim that she was entitled to a copy of the original note before

the initiation of foreclosure proceedings. Those claims are therefore forfeited. See Farm Labor

Org. Comm. v. Ohio State Highway Patrol, 

, 544 n.8 (6th Cir. 2002) (“It is well

established that an issue not raised in a party’s briefs on appeal may be deemed waived.” (citing

Ahlers v. Schebil, 

, 374 (6th Cir. 1999))). Gardner does, however, challenge the

authority of Potestivo and Quicken to initiate the foreclosure sale because the assignment of the

mortgage was invalid. This claim is raised for the first time on appeal and therefore is not

properly before this court. J.C. Wyckoff & Assocs. v. Standard Fire Ins. Co., 

,

1488 (6th Cir. 1991).

       Of the properly presented claims, the focus of Gardner’s challenge is that Quicken and

Potestivo did not lawfully initiate the foreclosure sale because they cannot show that they are the

holder of the note. Gardner couches this challenge as a failure to comply with Article 3 of the

UCC, specifically the requirement that a person who makes a “presentment” of an instrument

must, upon demand, exhibit the instrument and give reasonable identification. See Mich. Comp.

Laws § 440.3501. But, as several district courts have properly concluded, the UCC does not

apply to mortgage foreclosures. Schare v. Mortgage Elec. Registration Sys., Inc., No. 11-cv-

11889, 

(E.D. Mich. June 6, 2012) (holding that Article 3 of the UCC is

inapplicable to mortgages); Jaboro v. Wells Fargo Bank, N.A., No. 10-11686, 

, at *6 (E.D. Mich. Dec. 20, 2010) (same). More importantly, the highest state court to

have addressed the relevant issue has also held that “[a] mortgage instrument is not a negotiable

instrument since it does not ‘contain an unconditional promise or order to pay a sum certain. . . .”


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No. 13-2257
Gardner v. Quicken Loans Inc., et al.

Mox v. Jordan, 

, 115 (Mich. Ct. App. 1990) (alternation in original) (quoting

Mich. Comp. Laws § 440.3104(1)(b)). The Mox court explained that “[a] mortgage merely

secures payment of the negotiable instrument. In effect, the mortgagor merely grants a security

interest in the real estate to the mortgagee.” 

v. Handlos Real Estate & Bldg.

Corp., 

, 588 (Mich. Ct. App. 1986)); see also Schare, 

, at *1–

2 (noting that the argument that the defendant did not meet the UCC’s requirements to enforce a

negotiable instrument has been rejected sub silentio by the Michigan Supreme Court (citing

Residential Funding Co. v. Saurman, 

(Mich. 2011))). Therefore, Gardner is not

entitled to relief on this claim.1

        Gardner also reasserts the bare claim that Quicken and Potestivo lacked authority to

conduct the foreclosure sale because neither defendant is the holder of the note. Michigan’s

foreclosure-by-advertisement statute does not require that the underlying note be endorsed to the

party instituting the foreclosure or that that party be a holder or a holder-in-due-course of the

note. Rather, the statute only requires that the party instituting the foreclosure have an interest in

the indebtedness secured by the mortgage. Mich. Comp. Laws § 600.3204(1)(d). The Supreme

Court of Michigan has held that mortgagees of record have an interest in the indebtedness.

(“[T]he Legislature’s use of the phrase ‘interest in the

indebtedness’ to denote a category of parties entitled to foreclose by advertisement indicates the

intent to include mortgagees of record among the parties entitled to foreclose by advertisement,


        1
         Gardner also asserts on appeal that the mortgage is a security instrument subject to
Article 9 of the UCC. This argument was not conspicuously presented, but it seems that
Gardner’s claim is that Article 9 requires that only the note holder can enforce its security
instrument, the mortgage. In her complaint, Gardner did not specifically challenge the
foreclosure sale as in violation of any provision in Article 9 of the UCC. Accordingly, the claim
is not properly presented on appeal. See J.C. 

. And, in any event,
removed from its UCC housing, Gardner’s argument is addressed and rejected below.
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Gardner v. Quicken Loans Inc., et al.

along with parties who ‘own[ ] the indebtedness’ and parties who act as ‘the servicing agent of

the mortgage.’” (second alteration in original) (quoting Mich. Comp. Laws § 600.3204(1)(d))).

Furthermore, the Saurman court restated its longstanding view that “[i]t has never been

necessary that the mortgage should be given directly to the beneficiaries. The security is always

made in trust to secure obligations, and the trust and the beneficial interest need not be in the

same hands. . . . The choice of a mortgagee is a matter of convenience.” 

in

original) (citing Adams v. Niemann, 

, 720 (Mich. 1881)). In other words, “[u]nder

Michigan law, it is lawful for the holder of the mortgage to be different from the holder of the

debt.” Hargrow v. Wells Fargo Bank N.A., 491 F. App’x 534, 538 (6th Cir. 2012) (citing

). Accordingly, the district court properly dismissed the claim that

Quicken and Potestivo lacked the authority to initiate the foreclosure sale because neither is the

holder of the note.

                                               III.

       For the foregoing reasons, we affirm the district court’s grant of the defendants’ motion

to dismiss.




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