NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 13a0264n.06

                                          No. 12-1578
                                                                                    FILED
                         UNITED STATES COURT OF APPEALS                          Mar 14, 2013
                              FOR THE SIXTH CIRCUIT                       DEBORAH S. HUNT, Clerk


JOHN MCLAUGHLIN; DEBORAH MCLAUGHLIN,                    )
                                                        )
       Plaintiffs-Appellants,                           )       ON APPEAL FROM THE
                                                        )       UNITED STATES DISTRICT
v.                                                      )       COURT FOR THE EASTERN
                                                        )       DISTRICT OF MICHIGAN
CHASE HOME FINANCE LLC; MORTGAGE                        )
ELECTRONIC REGISTRATION SYSTEMS, INC.,                  )                        OPINION
                                                        )
       Defendants-Appellees.                            )
                                                        )




BEFORE:       KEITH, MARTIN, and COLE, Circuit Judges;

       COLE, Circuit Judge. Plaintiffs-Appellants John McLaughlin and Deborah McLaughlin

brought suit against Chase Home Finance LLC (“Chase”) and Mortgage Electronic Registration

Systems, Inc. (“MERS”) in district court, alleging various claims in conjunction with Chase’s

foreclosure on a mortgage granted by the McLaughlins to MERS. The district court granted

Defendants-Appellees’ motion to dismiss each of the McLaughlins’ claims. For the reasons that

follow, we AFFIRM the district court’s grant of the motion to dismiss.

                                               I.

       On or about August 3, 2005, Sallie Mae Home Loans, Inc. (“Sallie Mae”) loaned $170,000

to the McLaughlins to purchase property located at 11461 Carr Road, Davison, Michigan 48423 (the

“Property”). John McLaughlin signed a Promissory Note (“Note”) in connection with the loan.
No. 12-1578
McLaughlin v. Chase Home Finance LLC

Sallie Mae assigned the Note without recourse to Morgan Stanley Mortgage Capital, Inc. (“Morgan

Stanley”) on August 3, 2005. Above the stamp assigning the Note from Sallie Mae to Morgan

Stanley is another stamp, signed by Morgan Stanley Vice President George Keyloun, that states “Pay

to the order of” and thereafter contains a blank.

       The McLaughlins granted MERS, as nominee of Sallie Mae, a mortgage on the Property (the

“Mortgage”) as security for the loan. Chase was the servicer of the Mortgage since at least 2006.

MERS assigned all of its right, title, and interest in the Property to Chase by assignment dated

February 22, 2010, and recorded February 23, 2010, with the Genesee County Register of Deeds.

       The McLaughlins defaulted on their obligations under the Mortgage, and Chase commenced

foreclosure proceedings. A sheriff’s sale of the Property was scheduled for January 26, 2011. Five

days prior to the sale, on January 21, 2011, the McLaughlins brought suit against Chase and MERS

in the Circuit Court for the County of Genesee, State of Michigan, seeking to enjoin the sale. Chase

and MERS removed the suit on March 14, 2011 to the United States District Court for the Eastern

District of Michigan, on the basis of diversity. The McLaughlins amended their complaint on June

1, 2011, to allege the following counts against Chase and MERS: Count I—Injunctive Relief and

Declaratory Order; Count II—Fraud and Misrepresentation; Count III—Wrongful Foreclosure; and

Count IV—Fair Debt Collections Practices Act (“FDCPA”) violations.

       On June 27, 2011, Chase and MERS moved to dismiss the amended complaint pursuant to

Federal Rules of Civil Procedure 9(b) and 12(b)(6). The district court granted the motion to dismiss

as to all counts on March 13, 2012. From this opinion, the McLaughlins appealed.



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                                                  II.

        We review de novo a district court’s dismissal of a plaintiff’s complaint under Federal Rule

of Civil Procedure 12(b)(6). Kottmyer v. Maas, 

, 688 (6th Cir. 2006). We must

construe the complaint in a light most favorable to the plaintiffs and accept all factual allegations as

true. 

allegations must be sufficient “to raise a right to relief above the speculative

level.” Bell Atl. Corp. v. Twombly, 

, 555 (2007). The complaint must “plead[] factual

content that allows the court to draw the reasonable inference that the defendant[s are] liable for the

misconduct alleged.” Ashcroft v. Iqbal, 

, 678 (2009). If the McLaughlins fail to

“nudge[] their claims across the line from conceivable to plausible, their complaint must be

dismissed.” 

.

        We also review de novo “a district court’s dismissal of a complaint for failure to plead with

particularity under Rule 9(b).” Chesbrough v. VPA, P.C., 

, 467 (6th Cir. 2011). Rule

9(b) “‘is to be interpreted in conjunction with Federal Rule of Civil Procedure 8,’ requiring a ‘short

and plain statement of the claim.’” 

States ex rel. Bledsoe v. Cmty. Health Sys.,

Inc., 

, 503 (6th Cir. 2007)). The plaintiff must allege the following to plead fraud with

particularity: (1) “the time, place, and content of the alleged misrepresentation on which he or she

relied”; (2) “the fraudulent scheme”; (3) “the fraudulent intent of the defendants”; and (4) “the injury

resulting from the fraud.” 

(internal quotation marks and citation omitted).

        The McLaughlins appeal the district court’s dismissal of the following counts in the amended

complaint:     Count I—Injunctive Relief and Declaratory Order; Count II—Fraud and



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McLaughlin v. Chase Home Finance LLC

Misrepresentation; and Count IV—FDCPA violations. The McLaughlins do not appeal the district

court’s dismissal of Count III—Wrongful Foreclosure.

        A. Count I—Injunctive Relief and Declaratory Order

        The McLaughlins first argue that the district court erred in dismissing Count I, for injunctive

relief and a declaratory order. They make the following contentions as to Count I: (1) Deborah

McLaughlin is not in default because she did not sign the Note, and Chase and MERS are therefore

precluded from foreclosing; (2) the Mortgage was unenforceable because MERS failed to give Sallie

Mae consideration for being granted the Mortgage; (3) the failure of Chase and MERS to pay transfer

taxes under Michigan law precludes foreclosure; and (4) Chase is precluded from foreclosing

because it assigned the Note to an unknown entity. Each of these arguments is without merit.

                1. Default

        First, the McLaughlins contend that Chase and MERS are precluded from foreclosing on the

Property under Mich. Comp. Laws (“MCL”) Section 600.3204 because Deborah McLaughlin did

not sign the Note and is therefore not in default. This argument falls flat. Although Deborah

McLaughlin did not sign the Note, she did sign the Mortgage, along with John McLaughlin. Under

Michigan’s foreclosure statute, it is not required that all signatories to a mortgage sign the

promissory note that evidences the loan; rather, all that is required is that “[a] default in a condition

of the mortgage [occur], by which the power to sell [becomes] inoperative.” MCL § 600.3204(1)(a).

Here, Chase, as the servicer of the Mortgage and assignee of MERS, had the right to foreclose upon

the Mortgage because the McLaughlins defaulted under the Mortgage by failing to make the required

monthly payments.

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               2. Consideration for Mortgage

       Second, the McLaughlins argue that the Mortgage is unenforceable because MERS failed to

give Sallie Mae consideration for being granted the Mortgage. The McLaughlins base their

argument primarily upon a Michigan Supreme Court case, Teed v. Marvin, 

(Mich. 1879).

In Teed, the court held that a set of promissory notes “represented no debt, and were purely

voluntary.” 

For this reason, the court found that the promissory notes were not supported

by consideration. 

distinguishable from the instant case because here, the Note was

supported by consideration—Sallie Mae loaned John McLaughlin $170,000 in exchange for a

promise of repayment.

       The Michigan Supreme Court has held that MERS was “the owner . . . of an interest in the

indebtedness secured by [a] mortgage” for which MERS, like in the instant case, was not the lender

but was the mortgagee. Residential Funding Co., L.L.C. v. Saurman, 

, 183 (Mich.

2011) (internal quotation marks and citation omitted); see also Residential Funding v. Saurman, 

, 414 (Mich. Ct. App. 2011), rev’d by Residential Funding Co., L.L.C. v. Saurman, 

(Mich. 2011) (noting that the mortgage instrument did not designate the lender as the

mortgagee but rather designated MERS). MERS was “the owner,” and the Mortgage was properly

supported by consideration, because MERS’s “contractual obligations as mortgagee were dependent

upon whether the mortgagor met the obligation to pay the indebtedness which the mortgage

secured.” 

(internal quotation marks and citation omitted).

       Further, the Michigan Supreme Court has long held that a party other than the lender can be

the mortgagee of record. See 

never been necessary that the mortgage should be given

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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.’” (quoting Adams v. Niemann, 

, 719-20 (Mich. 1881))). Under

Michigan law, for consideration to exist, the consideration “may inure to one other than the

promisor.” City of Highland Park v. Grant-Mackenzie Co., 

, 278 (Mich. 1962).

Therefore, the fact that it was Sallie Mae and not MERS that gave consideration for the Mortgage

does not render the Mortgage unenforceable.

                3. Transfer Taxes

        Third, the McLaughlins contend that the failure of Chase and MERS to pay property transfer

taxes in connection with the filing of the Mortgage violated Michigan law and precluded a

foreclosure. This argument fails because assignments of mortgages are exempt from transfer taxes

under MCL §§ 207.505(d) and 207.526(d).

                4. Assignment of Note

        Finally, the McLaughlins argue that Chase is precluded from foreclosing upon the Mortgage

because it assigned the Note to an unknown entity. The McLaughlins base this argument on the fact

that there is a stamp on the last page of the Note, signed by Morgan Stanley Vice President George

Keyloun, that states “Pay to the order of” and thereafter contains a blank. The McLaughlins contend

that Chase assigned the Note to an unknown entity, which precludes Chase from foreclosing upon

the Mortgage.

        Even if this stamp followed by a blank space were a valid assignment of the Note, it is not

a valid assignment of the Mortgage because it appears not on the Mortgage but rather on the Note.

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So even if Chase did assign the Note, it did not assign the Mortgage, and this stamp does not

preclude Chase from foreclosing upon the Mortgage.

       Thus, for the foregoing reasons, the district court did not err in dismissing Count I.

       B. Count II—Fraud and Misrepresentation

       Next, the McLaughlins argue that the district court erred in dismissing Count II, which

alleged fraud and misrepresentation. The district court held that the McLaughlins failed to “allege

any sort of detail or particularity regarding who made false representations, when such

representations were made, or why such representations were intentional.” The district court is

correct: the amended complaint is void of particularity as to the McLaughlins’ claim for fraud and

misrepresentation. On appeal, the McLaughlins fail to argue that the amended complaint alleged any

detail or particularity regarding the alleged false representations. As such, this claim fails for lack

of particularity under Federal Rule of Civil Procedure 9(b), and the district court therefore did not

err in dismissing Count II.

       C. Count IV—FDCPA Violations

       Finally, the McLaughlins assert that the district court erred in dismissing Count IV, which

alleged FDCPA violations. The McLaughlins argue that MERS is a debt collector under the FDCPA

and that MERS violated the statute by attempting to foreclose upon the Property by use of false

representations and deceptive means. The McLaughlins do not argue on appeal that Chase violated

the FDCPA. The McLauglins’ argument regarding MERS falls flat for two reasons: (1) MERS is

not a debt collector under the FDCPA; and (2) MERS neither attempted to foreclose nor did it have

the power to foreclose upon the Mortgage.

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       The FDCPA excludes from the definition of “debt collector” any “person collecting or

attempting to collect any debt owed or due or asserted to be owed or due another to the extent such

activity . . . concerns a debt which was not in default at the time it was obtained by such person.”

15 U.S.C. § 1692a(6)(F) (2010). MERS “obtained” the debt when the McLaughlins granted MERS

the Mortgage as security for Sallie Mae’s loan to them. At that time, the debt was not in default, so

under the statute, MERS cannot be a debt collector.

       Further, MERS never attempted to foreclose upon the debt and indeed lacked the power to

foreclose. Under Michigan law, “[o]nly the record holder of the mortgage has the power to

foreclose.” 

(internal quotation marks and citations omitted). MERS

assigned all of its right, title and interest in the property to Chase on February 22, 2010. The

McLaughlins then defaulted. Only after the McLaughlins defaulted did Chase commence foreclosure

proceedings—something that MERS lacked the power to do at that time because it was no longer

the record holder of the Mortgage.

       For these reasons, the district court did not err in dismissing Count IV.

                                                III.

       For the foregoing reasons, we AFFIRM.




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