GERALD E. ROSEN, Chief Judge.
Plaintiff Winston K. Jackson (now deceased) commenced this suit, through his estate, in Wayne County Circuit Court on January 6, 2013, asserting claims against Defendants Bank of America, N.A.; Seterus, Inc.; and the Federal National Mortgage Association, arising from the foreclosure sale of his home in Westland, Michigan. Plaintiff claims that Defendants initiated the foreclosure without properly assisting him in negotiating a modification of his loan, in violation of M.C.L. § 600.3205c (2011). Defendants removed the case to this Court on March 13, 2013, and Defendants have now filed a Motion to Dismiss.
Having reviewed and considered the parties' briefs and supporting documents
Plaintiff Winston K. Jackson and his now-ex-wife, Trenna Jackson, originally purchased the property at issue in this case, 30234 Julius Blvd., Westland, MI 48185 ("the Property"), for $60,000 in March 1994. Pl's Compl., Ex. 1, Dkt. #1-2. In 2004, the Jacksons borrowed $82,000 from Quicken Loans, Inc. ("the Loan"), secured by a mortgage ("the Mortgage") against the Property. Def. Seterus and Fannie Mae's Mot. to Dismiss, Ex. 2, Dkt. #13-3. Mortgage Electronic Registrations Systems, Inc. ("MERS") served as the nominee for the lender, id., and Bank of America, N.A. ("BANA"), was the servicer of the Mortgage, see Def. BANA's Mot. to Dismiss, Ex. C., Dkt. #11-4.
The Jacksons apparently carried out the terms of the Mortgage for about 9 years. They divorced in 2011, and Mr. Jackson retained all rights to the Property.
Id. A second, nearly identical, letter, dated March 2, 2013, was also sent to Mr. Jackson. Id.
Three days later, attorney Aliva Arabo, on behalf of Plaintiff, sent a facsimile to Orlans containing several documents, including Mr. Jackson's death certificate, a letter appointing nonparty Sharrina Jackson as Personal Representative of Mr. Jackson's estate, and a letter of authorization allowing Arabo to represent the estate regarding Mr. Jackson's mortgage. Pl.'s Resp. to Def.'s Mot. to Dismiss, Exs. B-C, Dkt. #20-2, 20-3. The facsimile cover sheet also included the text, "We are requesting a mediation for our client." Id.
The factual record at this point becomes less clear. Plaintiff alleges in its brief that Mr. Jackson's Estate, "through its attorney Aliva Arabo, submitted all of the necessary financial documents to Orlans for a loan modification for the family of Mr. Jackson." Pl.'s Resp. to Def.'s Mot. to Dismiss, at 2. Plaintiff has not, however, put any such documents on the record here, and the complaint itself makes no mention of specific documents. Defendants Seterus and the Federal National Mortgage Association ("Fannie Mae") maintain that "Plaintiff initially sought a loan modification, but never successfully completed the process" and that "[s]pecifically, the individual applying for the loan modification failed to prove he was the fiduciary or executor of Jackson's estate when he did not produce the requested documents." Seterus and Fannie Mae's Mot. to Dismiss, Ex. 2, Dkt. #13-3 at 3-4. As evidence for this, Seterus and Fannie Mae provide a "Statement of Compliance" made by Orlans attorney Nakia H. Robinson and filed with the Wayne County Register of Deeds on July 9, 2013, stating that "[Jackson's Estate] is not eligible for the protections under [Michigan's loan modification statute] as he/she has not claimed the subject property as a principal residence]." Def. Seterus and Fannie Mae's Mot. to Dismiss, Ex. 4, Dkt. #13-5.
On April 16, 2013, MERS assigned the Mortgage to Fannie Mae. Id. at Ex. 3, Dkt. #13-4. With no loan modification process moving forward, Seterus proceeded with a foreclosure by advertisement. On June 3, 2013, it posted a Notice of Foreclosure at the Property, and it published such notice in the Detroit Legal News on May 31, June 7, June 14, and June 21, 2013. Id. at Ex. 4, Dkt. #13-5. The Property was sold to Fannie Mae at a sheriff's sale held on July 11, 2013, for $75,122.44. Id. Pursuant to Michigan law, Plaintiff was given six months to redeem the Property for the amount paid at the sheriff's sale — that redemption period was set to expire on January 11, 2014.
On January 6, 2014, just prior to the expiration of the redemption period, Plaintiff brought this suit in Wayne County Circuit Court. Pl.'s Compl., Dkt. #1-2. Plaintiff's complaint asserts four claims for relief, all predicated on the theory that Defendants failed to follow the correct procedure in seeking a possible loan modification for Plaintiff. Plaintiff's complaint makes claims of quiet title (Count I), id. ¶ 21; breach of the loan modification requirements in Michigan's foreclosure law in effect at the time of the foreclosure
Defendants subsequently removed the action to this Court on March 13, 2014. Def.'s Removal, Dkt. #1. The January 11, 2014 expiration of the redemption period has now passed without Mr. Jackson's estate redeeming the Property.
In deciding a motion brought under Rule 12(b)(6), the Court must construe the complaint in the light most favorable to Plaintiffs and accept all well-pled factual allegations as true. League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir.2007). To withstand a motion to dismiss, however, a complaint "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, 167 L.Ed.2d 929 (2007). The factual allegations in the complaint, accepted as true, "must be enough to raise a right to relief above the speculative level," and must "state a claim to relief that is plausible on its face." Id. at 555, 570, 127 S.Ct. 1955. "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, 173 L.Ed.2d 868 (2009). "The plausibility of an inference depends on a host of considerations, including common sense and the strength of competing explanations for defendant's conduct." 16630 Southfield Ltd. P'ship v. Flagstar Bank, F.S.B., 727 F.3d 502, 504 (6th Cir.2013).
The Sixth Circuit has emphasized that the "combined effect of Twombly and Iqbal [is to] require [a] plaintiff to have greater knowledge ... of factual details in order to draft a `plausible complaint.'" New Albany Tractor, Inc. v. Louisville Tractor, Inc., 650 F.3d 1046, 1051 (6th Cir.2011) (citation omitted). Put another way, complaints must contain "plausible statements as to when, where, in what, or by whom," Center for Bio-Ethical Reform, Inc. v. Napolitano, 648 F.3d 365, 373 (6th Cir.2011), in order to avoid merely pleading an "unadorned, the-defendant-unlawfully-harmed me accusation," Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
Defendants Seterus and Fannie Mae first argue that because the statutory redemption period has expired and Plaintiff has not redeemed the Property, "Fannie Mae became vested with all right, title, and interest in the Property by operation of law." Def. Seterus and Fannie Mae's Mot. to Dismiss, at 7. Therefore, Seterus and Fannie Mae reason, Plaintiff "lacks standing to challenge the foreclosure sale." Id. at 9.
Defendants are correct that under Michigan's foreclosure law, "[u]nless the premises... shall be redeemed within the time limited for such redemption ..., [the sheriff's] deed shall thereupon become operative, and shall vest in the grantee therein named, his heirs or assigns, all the right, title, and interest which the mortgagor had at the time of the execution of the mortgage." M.C.L. § 600.3236. Based on a strict reading of the statute, one might infer that "the homeowner has no legal interest in the property that litigation might vindicate." El-Seblani v. IndyMac Mortg. Servs., 510 Fed.Appx. 425, 428 (6th
These decisions, however, are in tension with established standing principles. "When jurisdiction is premised on diversity of citizenship, a plaintiff must have standing under both Article III and state law in order to maintain a cause of action." Morell v. Star Taxi, 343 Fed. Appx. 54, 57 (6th Cir.2009). Under Article III, a plaintiff has standing when he has sustained an injury that is "concrete and particularized" and "actual or imminent," that injury is "fairly traceable to the challenged action of the defendant," and "it is likely ... that the injury will be redressed by a favorable decision." Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000). Clearly such standing is present in a case like this one, where a plaintiff claims injury resulting from an allegedly defective foreclosure procedure. And under Michigan's standing requirements, "a litigant has standing whenever there is a legal cause of action." Lansing Sch. Educ. Ass'n v. Lansing Bd. of Educ., 487 Mich. 349, 792 N.W.2d 686, 699 (2010). Michigan's courts have provided such a cause of action in this context, allowing plaintiffs to challenge the validity of a foreclosure through summary proceedings, M.C.L. § 600.5714, or by a separate lawsuit, El-Seblani, 510 Fed.Appx. at 428. If plaintiffs litigating the validity of a foreclosure after the expiration of the redemption period meet these basic requirements, as Plaintiff does here, how can these standing principles be squared with the holdings of Awad, Overton, and Mission of Love?
The Sixth Circuit has recently provided a compelling answer. In El-Seblani, the court noted that longstanding Michigan state law has held that in cases seeking to set aside a foreclosure following the expiration of the statutory redemption period, plaintiffs face a "stringent" burden, and must allege "fraud or irregularity" that is "relate[d] to the foreclosure procedure itself." El-Seblani, 510 Fed.Appx. at 429 (internal quotation marks omitted). Accordingly, the court assessed Awad, Overton, and Mission of Love, and concluded that those cases, despite making superficial references to standing, "[did] not turn on standing doctrine.... It is more accurate to say that the `fraud or irregularity' claims in Overton, Awad, and Mission of Love lacked sufficient merit to meet the high standard imposed by Michigan law on claims to set aside a foreclosure sale." Id. (internal quotation marks omitted).
Accordingly, the Court likewise finds that Plaintiff has standing in this case, under both Article III and Michigan state law, to bring his claim. A plaintiff who
Though Plaintiff's complaint contains four Counts for relief, all four rely centrally on the allegation that Defendants violated M.C.L. § 600.3205c (2011), a since-repealed statute that governed the loan modification process during foreclosure proceedings. See Pl.'s Compl. ¶¶ 21 (Count I), 24-27 (Count II), 29-32 (Count III), 37 (Count IV). Under the statutory scheme in place at the time of this foreclosure, M.C.L. § 600.3205a provided that before commencing a foreclosure by advertisement, the foreclosing party was required to designate a "mortgage servicer" or other agent "as the person to contact and that has the authority to make agreements under sections 3205b and 3205c," which provide for loan modifications. M.C.L. § 600.3205a(1)(b)-(c) (2011). Seterus did so, naming Orlans as its agent to negotiate any possible loan modification. Def. Seterus and Fannie Mae's Mot. to Dismiss, Ex. 4-5, Dkt. #13-5, 13-6.
M.C.L. § 600.3205b then outlined the initial contact to be made between the borrower and the foreclosing party's agent, requiring the two to meet "to attempt to work out a modification of the mortgage loan," M.C.L. § 600.3205b(3) and providing that "the person designated under section 3205a(1)(c) may request the borrower to provide any documents that are necessary to determine whether the borrower is eligible for a modification under section 3205c," id. § 600.3205b(2). The statute was explicit that "[i]f the borrower does not provide the documents requested as required by this subsection, a party entitled to foreclose the mortgage may proceed with the foreclosure." Id.
M.C.L. § 600.3205c prescribed the final step, should these initial negotiations be fruitless. It provided that "[i]f a borrower has ... contacted a person designated under section 3025a(1)(c) under section 3205b but the process has not resulted in an agreement to modify the mortgage loan, the person designated under section 3205a(1)(c) shall work with the borrower to determine whether the borrower qualifies for a loan modification." Id. § 600.3205c(1) (footnotes omitted). The statute further outlined a number of features that the loan modification process was required to include. See id. Included in these was the provision that foreclosing party's agent was required to provide the borrower with "a copy of any calculations made" in determining whether the borrower qualified for a loan modification, as well as "a copy of the program, process, or guidelines under which the determination... was made." Id. § 600.3205c(5). Finally, the statute provided a remedy for its violation: "If a mortgage holder or mortgage servicer begins foreclosure proceedings under this chapter in violation of this section, the borrower may file an action in the circuit court for the county where the mortgaged property is situated to convert the foreclosure proceeding to a judicial foreclosure." Id. § 600.3205c(8).
Plaintiff's complaint alleges several violations of these provisions. In Count I, Plaintiff alleges broadly that Defendants foreclosed on the Property "without allowing Plaintiff to enter into a Loan Modification... in violation of M.C.L. § 600.3205c" and requests that the court "[g]rant[] Plaintiff all legal title to the ... [P]roperty." Pl.'s Compl. ¶¶ 21-22. Counts II and III provides more specific allegations, asserting that Defendants "never sent" the copy of the program or calculations as
There are several problems with Plaintiff's complaint that warrant its dismissal. First, a violation of M.C.L. § 600.3205c and its related sections does not allow for the relief that Plaintiff seeks in Counts I and II: that the Court set aside the foreclosure and grant title to Plaintiff. At the expiration of the redemption period, Fannie Mae, which lawfully purchased the Property and held legal title to it via the Sheriff's Deed, "was vested with `all the right, title, and interest' in the Property." Evans v. Fed. Nat. Mortg. Ass'n, No. 12-13116, 2012 WL 5268849, at *6 (E.D.Mich. Oct. 23, 2012) (quoting M.C.L. § 600.3236). "As such, Plaintiff cannot obtain the relief she seeks, i.e., unravel the foreclosure process, void the sheriff's deed, and quiet title in her name." Id.; see also Saroki v. Bank of New York Mellon, No. 12-13961, 2012 WL 5379169, at *6 (E.D.Mich. Oct. 31, 2012) ("[C]ourts in the Eastern District of Michigan uniformly have held that a violation of Section 600.3205c is insufficient to justify setting aside a completed foreclosure sale."). Instead, § 600.3205c provided a specific, exclusive remedy for its violation: "the borrower may file an action in the circuit court for the county where the mortgaged property is situated to convert the foreclosure proceeding to a judicial foreclosure." M.C.L. § 600.3205c(8) (2011); see also Saroki, 2012 WL 5379169, at *6; Adams v.
Count III, however, does seek to convert the foreclosure by advertisement to a judicial foreclosure pursuant to M.C.L. § 600.3205c(8). The Sixth Circuit has made explicit that such relief can only be sought prior to completion of the foreclosure:
Holliday v. Wells Fargo Bank, NA, 569 Fed.Appx. 366, 370 (6th Cir.2014) (citations omitted); see also Smith v. Bank of Am. Corp., 485 Fed.Appx. 749, 756 (6th Cir. 2012) ("[Plaintiffs] appear to have missed the boat regarding the applicability of [§ 600.3205c(8)] which, when triggered, allows plaintiffs to enjoin a foreclosure by advertisement and convert it to a judicial foreclosure: they brought this action after the foreclosure sale occurred, and so there is no foreclosure to enjoin or convert"); Rugiero v. Flagstar Bank, FSB, No. 11-CV-12312, 2013 WL 1316910, at *8 (E.D.Mich. Mar. 29, 2013) ("[T]he remedy made available solely by Mich. Comp. Laws § 600.3205c(8), must be exercised before the foreclosure sale occurs."); Butts v. JPMorgan Chase Bank, N.A., No. 12-CV-13282, 2012 WL 6194228, at *6 (E.D.Mich. Dec. 12, 2012) (finding that "[t]he statute's plain language" prevents borrowers from setting aside a completed foreclosure); but see Bobel v. Met Life Home Loans, No. 11-CV-10574, 2012 WL 5823759, at *2 (E.D.Mich. Mar. 21, 2012) (finding that "there is no language in the statute that would bar setting aside a foreclosure sale that has taken place").
In this case, Plaintiff's request to have the foreclosure by advertisement converted to a judicial foreclosure was filed on January 6, 2014: after the sheriff's sale (which occurred on June 11, 2013) but before the expiration of the redemption period (which expired on January 11, 2014). The caselaw discussed above does not make clear which event — the sheriff's sale or the expiration of the redemption period — serves as the cutoff for requesting a conversion to judicial foreclosure. See Smith, 485 Fed.Appx. at 756 (holding that § 3205c(8) cannot be applied "after the foreclosure sale occurred"); Holliday, 569 Fed.Appx. at 370 (holding that § 3205c(8) "can only apply when the foreclosure itself is still pending"). Presuming, for the moment, that a foreclosure sale is still "pending" until the expiration of the statutory redemption period for the purposes of § 3205c(8), the redemption period has still passed without any attempt from Plaintiff to redeem. And both this Court and Michigan state courts have repeatedly held
The Court need not consider, however, whether Plaintiff's request for a preliminary injunction preserves his ability to obtain relief under § 600.3205c(8), because his claim for relief under that section fails on the merits.
Even assuming that Defendants initiated foreclosure by advertisement proceedings without carrying out the duties imposed by § 600.3205c and related provisions,
For all of the foregoing reasons,
IT IS HEREBY ORDERED that Defendants' Motion to Dismiss (Dkt. #11, 13) is GRANTED and Plaintiff's Complaint is DISMISSED WITH PREJUDICE.