MATTHEW F. LEITMAN, District Judge.
In this action, Plaintiff Daemon Love ("Love") challenges certain federal regulations that, in his view, unlawfully prevent homeowners from redeeming their homes for fair market value following a foreclosure sale. (See the "Complaint," ECF #6 at ¶2.) Although Love acknowledges that his "Complaint is chiefly against the [federal] government" (Resp. Br., ECF #24 at 13, Pg. ID 309), Love also names Wells Fargo Bank, N.A. ("Wells Fargo"), as a defendant. Love contests Wells Fargo's foreclosure of his real property on the grounds that Wells Fargo (1) violated various federal regulations governing foreclosure proceedings, and (2) unfairly submitted a so-called "full-credit bid" — rather than a fair market price bid — at the sheriff's sale. Wells Fargo has now moved to dismiss Love's Complaint. (See ECF #18.) For the reasons explained below, the Court
On or about March 26, 2004, Love obtained a $98,055 loan from First Class Financial Corporation ("First Class") to purchase real property located at 20060 Conley Street in Detroit, Michigan (the "Property"). (See ECF #18-2.) As security for the loan, Love granted a mortgage to First Class. (See the "Mortgage," ECF #18-3 at 2, Pg. ID 210.) Through a series of assignments, Wells Fargo acquired the Mortgage on or about December 8, 2006. (See ECF #18-4.) Love eventually defaulted on the Mortgage, and Wells Fargo initiated foreclosure proceedings. (See ECF #18-5 at 6, Pg. ID 229.) Wells Fargo purchased the Property at a sheriff's sale on January 12, 2011, with a bid of $101,316.28 (the "Sheriff's Sale"). (See id. at 2, Pg. ID 225.) The $101,316.28 bid by Wells Fargo represented the full outstanding balance on Love's mortgage and did not necessarily represent the actual fair market value of the Property at that time. (See Resp. Br. at 2-3, Pg. ID 298-99.) Pursuant to M.C.L. § 600.3240, Love's right to redeem the Property expired on July 12, 2011.
On October 28, 2011, Wells Fargo initiated a summary proceeding in Michigan's 36th District Court to evict Love from the Property. (See ECF #18-6.) Love filed a counter-complaint against Wells Fargo seeking, inter alia, injunctive relief tolling the statutory redemption period. (See the "Counter-Complaint," ECF #18-7 at 13, Pg. ID 248.) Love alleged that Wells Fargo "submitted a full credit bid at the Sheriff[`s] Sale ... which was 90% greater than the current fair market value of the Property," thereby "preventing Love from having any realistic opportunity to redeem." (Id. at 11, 13; Pg. ID 246, 248.) Love asserted that Wells Fargo's full-credit bid violated M.C.L. § 600.3228, which provides that a mortgagee may purchase foreclosed property "fairly and in good faith." (Id. at 11, Pg. ID 246.) Wells Fargo moved for summary disposition, and the state district court denied Wells Fargo's motion.
On appeal, the Wayne County Circuit Court reversed the district court's ruling. (See the "Circuit Court Opinion," ECF #18-8 at 2-4, Pg. ID 255-57.) The circuit court found "no support in the law for [Love's] position that bidding the amount of the indebtedness is not fair or in good faith." (Id. at 8, Pg. ID 261.) Further, the circuit court specifically held that Wells Fargo's full-credit bid was "not by definition ... unfair." (Id.) Accordingly, the circuit court remanded the case to the district court. (Id.) The district court thereafter granted Wells Fargo's motion for summary disposition and entered a judgment of possession in Wells Fargo's favor. (See the "Judgment of Possession," ECF #18-9.)
On January 10, 2014, Love filed his Complaint in this Court.
Love requests two types of relief against Wells Fargo. First, Love "asks this Court to set aside the [foreclosure and Sheriff's Sale] and allow him to either seek a loan modification pursuant to statute and/or to purchase or redeem the property for the fair market value." (Id. at 12, Pg. ID 31.) Second, Love "ask[s] this Court to award [him] damages against [Wells Fargo] for the contractual breach of the implied covenant of good faith and fair dealing." (Id. at 14, Pg. ID 33.)
On June 4, 2014, Wells Fargo filed its Amended Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (See the "Motion," ECF #18.) The Court heard oral argument on the Motion on September 18, 2014.
Rule 12(b)(6) provides for dismissal of a complaint when a plaintiff fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). "To 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. 544, 555 (2007)). A claim is facially plausible when a plaintiff pleads factual content that permits a court to reasonably infer that the defendant is liable for the alleged misconduct. Id. (citing Twombly, 550 U.S. at 556). When assessing the sufficiency of a plaintiff's claim, a district court must accept all of a complaint's factual allegations as true. See Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 512 (6th Cir. 2001). "Mere conclusions," however, "are not entitled to the assumption of truth. While legal conclusions can provide the complaint's framework, they must be supported by factual allegations." Iqbal, 556 U.S. at 664. A plaintiff must therefore provide "more than labels and conclusions," or "a formulaic recitation of the elements of a cause of action" to survive a motion to dismiss. Twombly, 550 U.S. at 556. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.
Under the Rooker-Feldman doctrine, "lower federal courts are precluded from exercising appellate jurisdiction over final state-court judgments." Lance v. Dennis, 546 U.S. 359, 463 (2006) (discussing Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) and Dist. of Columbia Ct. of App. v. Feldman, 460 U.S. 462 (1983)). Stated another way, federal district courts lack subject-matter jurisdiction over "cases brought by state-court losers complaining of injuries caused by statecourt judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005). Thus, Rooker-Feldman precludes jurisdiction where "the relief that [plaintiff] request[s] c[an] not be granted without overturning the judgment of the state court." Durham v. Haslam, 528 Fed. App'x 559, 564 (6th Cir. 2013).
The Rooker-Feldman doctrine deprives this Court of subject-matter jurisdiction to grant Love the first form of relief he seeks: the setting-aside of the foreclosure and Sheriff's Sale to allow him to seek a loan modification or repurchase the Property at its fair market value. Granting this relief would effectively overturn the Judgment of Possession, which conclusively established Wells Fargo's right to possession of the Property. Because Love's request that the Court undo the foreclosure and Sheriff's Sale is "effectively ... [an] appeal from the state order granting possession" to Wells Fargo, Rooker-Feldman precludes this Court from granting relief. Givens v. Homecomings Financial, 278 Fed. App'x 607, 608 (6th Cir. 2008).
Moreover, even if this Court did have jurisdiction to consider Love's request for relief, his claim would still fail. After the redemption period lapses — as it has in this case — a mortgagor may invalidate or set aside a foreclosure and sheriff's sale "only by demonstrating fraud or irregularity in the foreclosure proceedings." Kopko v. Bank of N.Y. Mellon, No. 12-13941, 2012 WL 5265758, at *8 (E.D. Mich. Oct. 23, 2012) (collecting authority). The fraud or irregularity "must relate to the foreclosure proceeding itself." Conlin v. Mortg. Elec. Registration Sys., 714 F.3d 355, 359 (6th Cir. 2013). Further, "courts may only set aside the foreclosure if the mortgagor shows that he or she was prejudiced by the fraud or irregularity." Bernard v. Fed. Nat. Mortg. Ass'n, No. 13-1477, slip op. at 5 (6th Cir. Sept. 29, 2014). In this case, Love has cited no authority to support his assertion that Wells Fargo's alleged violations of HUD regulations and policies and/or Wells Fargo's "full-credit bid" constitute fraud or irregularity in the foreclosure proceedings. Moreover, Love has not pleaded that he suffered prejudice — i.e., "that he would have been in a better position to preserve his interest in the property absent [Wells Fargo's] actions." Thompson v. JPMorgan Chase Bank, N.A., 563 Fed. App'x 440, 442 (6th Cir. 2014)). Accordingly, Love has failed to state a viable claim for the setting aside of the foreclosure and Sheriff's Sale.
Love's second request for relief — contractual damages for Wells Fargo's alleged breach of an implied covenant of good faith and fair dealing by "overbidding" at the Sheriff's Sale — fails as a matter of law because Michigan does not recognize an independent claim for breach of a covenant of good faith and fair dealing. See, e.g., Burrell v. CitiMortgage, Inc., No. 12-cv-14081, 2014 WL 1464441, at *7 (E.D. Mich. Apr. 15, 2014) (citing Fodale v. Waste Mgmt. of Mich., Inc., 271 Mich.App. 11, 35 (2006)). Love recognizes as much. He acknowledges that his "claim should have been pled [sic] as a breach of contract claim whereby [Wells Fargo] breached the contract by breaching the implied covenant of good faith and fair dealing." (Resp. Br. at 16, Pg. ID 312.) He therefore informally requests leave to "amend the Complaint to comply with the existing caselaw." (Id.) The Court will not permit Love to amend his Complaint because, even if repleaded, his request for contractual damages based on Wells Fargo's alleged bad faith would be barred by collateral estoppel. See Foman v. Davis, 371 U.S. 178, 182 (1962) (denial of leave to amend is appropriate if amendment would be futile).
Under Michigan law, collateral estoppel generally prevents a party from relitigating an issue when "(1) a question of fact essential to the judgment [was] actually litigated and determined by a valid and final judgment; (2) the same parties ... had a full and fair opportunity to litigate the issue; and (3) there [was] mutuality of estoppel." McCormick v. Braverman, 451 F.3d 382, 397 (6th Cir. 2006) (citing Monat v. State Farm Ins. Co., 677 N.W.2d 843, 845-46 (2004)) (internal punctuation omitted).
Love argues that collateral estoppel does not bar his request for relief because the Judgment of Possession has limited preclusive effect. (See Resp. Br. at 7-9, Pg. ID 303-05.) Love cites to M.C.L. § 600.5750, which provides that a judgment obtained via a summary proceeding — like the Judgment of Possession — "does not merge or bar any other claim for relief." M.C.L. § 600.5750. However, the Michigan Supreme Court's decision in Sewell v. Clean Cut Mgmt., Inc., 621 N.W.2d 222 (Mich. 2001), which interpreted M.C.L. § 600.5750, makes clear that the Judgment of Possession does preclude Love from re-litigating the specific issue of whether Wells Fargo acted unfairly or in bad faith. In Sewell, a tenant sued her landlord for unlawful eviction, and the landlord moved for a directed verdict on the ground that the tenant's claims were precluded by a judgment of possession he previously obtained in a summary proceeding. See id. at 222. The Michigan Supreme Court held that although a judgment obtained in a summary proceeding does not bar claims that "could have been brought" during summary proceedings, "but were not," it does bar the re-litigation of "the issues actually litigated in the summary proceedings." Id. at 225 (emphasis added). Thus, the Sewell court held that the landlord's prior judgment of possession obtained in the summary proceeding was "conclusive on the narrow issue whether the eviction was proper." Id. at 225-26. Similarly, in this case, the Judgment of Possession precludes Love from attacking the foreclosure and Sheriff's Sale on the ground that Wells Fargo's full-credit bid was unfair or in bad faith.
Finally, even if Love's request for damages based upon Wells Fargo's alleged unfairness and/or bad faith was not barred by collateral estoppel, he still would not be entitled to relief. Indeed, the United States Court of Appeals for the Sixth Circuit and other courts in this District have held that a foreclosing bank's full-credit bid does not violate the bank's duty to act fairly and in good faith. See Rubin v. Fannie Mae, No. 13-1010, slip op. at 5-6 (6th Cir. Sept. 29, 2014); Letvin v. Lew, No. 13-cv-12015, 2014 WL 2865143 at *7-8 (E.D. Mich. June 24, 2014); In re Hopkins, 13-cv-14757, 2014 922773 at *4 (E.D. Mich. March 10, 2014); Bank of America v. Dennis, No. 12-cv-11821, 2013 WL 1212602 (E.D. Mich. March 25, 2013). Moreover, "[s]uch bids actually help a borrower because in such [a] situation the borrower is no longer liable for the debt." Washington v. BAC Home Loans Servicing, L.P., No. 12-cv-12940, 2013 WL 5476023, at *5 (E.D. Mich. Oct. 2, 2013) (internal citation omitted). Love has failed to demonstrate that a bid that "actually help[s] a borrower" is somehow unfair or in bad faith.
For all the reasons stated in this Opinion and Order,