PAUL D. BORMAN, District Judge.
This is a mortgage foreclosure case. Before the Court is Defendant Wells Fargo Bank, N.A.'s ("Wells Fargo") Motion to Dismiss and/or for Summary Judgment. (ECF No. 22.) Also before the Court is Plaintiff's Motion for Leave to Amend the Complaint. (ECF No. 25). Both matters have been fully briefed and the Court held a hearing on August 21, 2015. For the reasons that follow, the Court GRANTS Wells Fargo's Motion to Dismiss, and DENIES Plaintiff's Motion for Leave to Amend.
This is a mortgage foreclosure case. Plaintiff's home was sold at a sheriff's sale on December 10, 2013. The redemption period expired on June 10, 2014, just days after Plaintiff initiated this action in state court. Plaintiff thus lost all right, title and interest in his property and, absent a showing of fraud or irregularity in the foreclosure process that resulted in actual prejudice to Plaintiff's ability to avoid losing his home, Plaintiff cannot set aside the foreclosure sale of his home.
On October 14, 2014, this Court entered an Order dismissing Counts II-XI of Plaintiff's original Complaint pursuant to the stipulation of the parties. The parties agreed at that time that Plaintiff would be permitted to file a motion for leave to file a single-count amended complaint for wrongful foreclosure under the guidance of his then-newly appointed counsel. Plaintiff filed his First Amended Complaint and Defendant now moves to dismiss Plaintiff's sole remaining wrongful foreclosure claim. Plaintiff opposes dismissal of the sole remaining Count of his First Amended Complaint and seeks leave to amend to file a Second Amended Complaint.
On July 28, 2011, Plaintiff received a $199,803 residential mortgage loan ("the Loan") from Talmer Bank & Trust on property located at 38940 Holsworth Court, Farmington Hills, Michigan 48331 ("the Property"). A copy of the Mortgage securing the Loan was recorded with the Oakland County Register of Deeds on August 16, 2011. (ECF No. 22, Def.'s Mot. Ex. 1, Mortgage.) On August 3, 2012, the Mortgage was assigned to Defendant Wells Fargo. (Def.'s Mot. Ex. 2, Assignment of Mortgage.) The Assignment was recorded on August 3, 2012 with the Oakland County Register of Deeds. Id.
In January, 2013, Plaintiff experienced financial hardship and contacted Wells Fargo about a possible loan modification.
On December 5, 2013, having learned that he was apparently no longer being considered for a loan modification, Plaintiff contacted Wells Fargo and Wells Fargo's designated reinstatement agent, Orlans & Associates, and requested a quote on the payment necessary to reinstate his loan. (Proposed Second Amended Compl. ¶ 44.) Defendant responded by sending Plaintiff a reinstatement quote on December 9, 2013, informing him that he could reinstate his loan by delivering a certified check to Orlans in the amount of $27,170.69, payable to Wells Fargo, by 5:00 p.m. on December 9, 2013. (Id. ¶ 45.) Plaintiff alleges that he personally appeared at the offices of Orlans on December 9, 2013 and tendered the payment of $27,170.69 but a representative of Orlans refused to accept the payment. (Id. ¶¶ 45-46.) Plaintiff then contacted Wells Fargo directly to attempt to make the reinstatement payment but was informed that the sale for the next day had been scheduled and would not be adjourned. Id. ¶ 47. Plaintiff alleges that at the time the foreclosure sale occurred, he was in possession of the funds necessary to reinstate the loan and stop the sale but his tender of payment was refused. Id. ¶ 48.
On October 14, 2014, Plaintiff, under the guidance of his then new counsel Mr. Kased, stipulated to dismiss all but one of the Counts of his original Complaint (which was drafted by his original and now withdrawn attorney) with the understanding that his new counsel would be permitted to file an Amended Complaint setting forth the factual allegations underlying the sole remaining Count for Wrongful Foreclosure. In accordance with the agreement placed on the record at the October 14, 2014 hearing on Defendant's original motion to dismiss Plaintiff's Eleven-Count Complaint, Plaintiff filed a Motion to for Leave to Amend on October 24, 2014, attaching his proposed First Amended Complaint. ECF No. 16, Motion to Amend. Defendant responded to the motion to amend on November 10, 2014, asking the Court to deny the motion for leave to amend on the grounds that the proposed new claim for wrongful foreclosure failed to state a claim upon which relief could be granted. ECF No. 17, Def.'s Response to Motion for Leave to Amend.
On January 30, 2015, this Court granted Plaintiff's motion for leave to file his First Amended Complaint without addressing the merits of the claims, recognizing the somewhat unusual posture of the case given the then-recent substitution of Mr. Kased as Plaintiff's attorney. ECF No. 18, Order Granting Motion to Amend. The Court acknowledged that Defendant would be able to test the First Amended Complaint with a motion to dismiss, to which Plaintiff would be permitted to respond rather than having to defend the claims of his First Amended Complaint in the context of a reply in support of his motion for leave to amend. Id. at 2. On February 19, 2015, Defendant did file the motion to dismiss the First Amended Complaint that is presently before the Court. ECF No. 22, Def.'s Mot. to Dismiss.
On March 11, 2015, Plaintiff filed his Response to Defendant's Motion to Dismiss (ECF No. 24) and also filed a motion for leave to file a Second Amended Complaint (ECF No. 25). The proposed Second Amended Complaint continues to assert only one claim for Wrongful Foreclosure, but includes factual allegations in support of that claim that were set forth in Plaintiff's Original Complaint but omitted from Plaintiff's First Amended Complaint. Defendant filed a Reply in support of its motion to dismiss (ECF No. 26) and has also filed a Response in Opposition to Plaintiff's motion for leave to file a second amended complaint, urging the Court to deny Plaintiff's request for leave to file a second amended complaint based upon futility (ECF No. 27).
Defendants file this motion pursuant to Federal Rule of Civil Procedure 12(b)(6) "and/or" Federal Rule of Procedure 56. The Court determines that it need not consider matters outside the pleadings in ruling on the motion and therefore will treat the motion as one to dismiss pursuant to Rule 12(b)(6), which provides for the dismissal of a case where the complaint fails to state a claim upon which relief can be granted. When reviewing a motion to dismiss under Rule 12(b)(6), a court must "construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." DirectTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). But the court "need not accept as true legal conclusions or unwarranted factual inferences." Id. (quoting Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir. 2000)). "[L]egal conclusions masquerading as factual allegations will not suffice." Eidson v. State of Tenn. Dep't of Children's Servs., 510 F.3d 631, 634 (6th Cir. 2007).
In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court explained that "a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level . . . ." Id. at 555 (internal citations omitted). Dismissal is appropriate if the plaintiff has failed to offer sufficient factual allegations that make the asserted claim plausible on its face. Id. at 570. The Supreme Court clarified the concept of "plausibilty" in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009):
Id. at 1948-50. A plaintiff's factual allegations, while "assumed to be true, must do more than create speculation or suspicion of a legally cognizable cause of action; they must show entitlement to relief." LULAC v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (emphasis in original) (citing Twombly, 127 S.Ct. at 1965). Thus, "[t]o state a valid claim, a complaint must contain either direct or inferential allegations respecting all the material elements to sustain recovery under some viable legal theory." Bredesen, 500 F.3d at 527 (citing Twombly, 127 S.Ct. at 1969). While a "pro se complaint . . . must be held to less stringent standards than formal pleadings drafted by lawyers," Erickson v. Pardus, 551 U.S. 89, 94 (2007), still under even this lenient standard pro se plaintiffs must meet basic pleading requirements. Martin v. Overton, 391 F.3d 710, 714 (6th Cir. 2004). The leniency granted to pro se plaintiffs "does not require a court to conjure allegations on a litigant's behalf." Id. at 714 (internal quotation marks and citation omitted).
In ruling on a motion to dismiss, the Court may consider the complaint as well as (1) documents that are referenced in the plaintiff's complaint or that are central to plaintiff's claims (2) matters of which a court may take judicial notice (3) documents that are a matter of public record and (4) letters that constitute decisions of a government agency. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). See also Greenberg v. Life Ins. Co. Of Virginia, 177 F.3d 507, 514 (6th Cir. 1999) (finding that documents attached to a motion to dismiss that are referred to in the complaint and central to the claim are deemed to form a part of the pleadings). Where the claims rely on the existence of a written agreement, and plaintiff fails to attach the written instrument, "the defendant may introduce the pertinent exhibit," which is then considered part of the pleadings. QQC, Inc. v. Hewlett-Packard Co., 258 F.Supp.2d 718, 721 (E.D. Mich. 2003). "Otherwise, a plaintiff with a legally deficient claims could survive a motion to dismiss simply by failing to attach a dispositive document." Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997).
The proposed Second Amended Complaint attempts to insert back into the case several allegations from the original Complaint that were omitted from the First Amended Complaint. Because, as discussed infra, the additional factual allegations of the proposed Second Amended Complaint do not plausibly suggest a claim for wrongful foreclosure, the Court DENIES Plaintiff's Motion for Leave to Amend based on futility. See Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 458 (6th Cir. 2013) (noting that "denying leave to amend is appropriate where the proposed amendment would be futile"). A proposed amendment is futile if it could not withstand a motion to dismiss. Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir. 2000).
"Non-judicial foreclosures, or foreclosures by advertisement, are governed by statute under Michigan law." Conlin v. Mortg. Elec. Registration Sys., Inc., 714 F.3d 355, 359 (6th Cir. 2013). "While the statutory scheme provides certain steps that the mortgagee must go through in order to validly foreclose, it also controls the rights of both the mortgagee and the mortgagor once the sale is completed." Id. (internal reference and citations omitted). "The statutes provide the mortgagor six months after the sheriff's sale in which to redeem the property." Id. "Once this statutory redemption period lapses, however, the mortgagor's `right, title, and interest in and to the property' are extinguished." Id. (quoting Piotrowski v. State Land Office Bd., 302 Mich. 179, 4 N.W.2d 514, 517 (1942)).
Plaintiff's redemption period expired on June 10, 2014. Plaintiff filed this action in state court on June 6, 2014 and Wells Fargo removed to this Court on June 26, 2014. The filing of the lawsuit was insufficient to toll the statutory redemption period. Bryan v. JPMorgan Chase Bank, 304 Mich.App. 708, 714 (2014). See also Conlin, 714 F.3d at 360 (citing Overton v. Mortg. Elec. Registration Sys., No. 284950, 2009 WL 1507342, at *1 (Mich. Ct. App. May 28, 2009) ("[T]he filing of a lawsuit is insufficient to toll the redemption period."). Accordingly, Jundy's redemption period expired on June 10, 2014, notwithstanding the fact that he filed his Complaint four days before the redemption had expired.
In Bryan, the Michigan Court Appeals reaffirmed that "[i]f a mortgagor fails to avail him or herself of the right of redemption, all the mortgagor's rights in and to the property are extinguished." Bryan, 304 Mich. App. at 713 (citing Piotrowski, 302 Mich. 179, 187 (1942)) (alteration added). "The law in Michigan does not allow an equitable extension of the period to redeem from a statutory foreclosure sale in connection with a mortgage foreclosed by advertisement and posting of notice in the absence of a clear showing of fraud, or irregularity. Once the redemption period expired, all of plaintiff's rights in and title to the property were extinguished." Bryan, 304 Mich. App. at 714 (internal quotation marks and citation omitted).
"`The Michigan Supreme Court has held that it would require a strong case of fraud or irregularity, or some peculiar exigency, to warrant setting a foreclosure sale aside.'" Conlin, 714 F.3d at 359 (quoting Sweet Air Inv., Inc. v. Kenney, 275 Mich.App. 492, 739 N.W.2d 656, 659 (2007)). "[I]n the absence of fraud, accident or mistake, the possibility of injustice is not enough to tamper with the strict statutory requirements." Freeman v. Wozniak, 241 Mich.App. 633, 637 (2000). "It is further clear that not just any type of fraud will suffice. Rather, `[t]he misconduct must relate to the foreclosure procedure itself.'" Conlin, 714 F.3d at 360 (quoting El-Seblani v. IndyMac Mortg. Servs., 510 F. App'x. 425, 429-30 (6th Cir. Jan. 7, 2013)) (alteration in original). The fraud "must relate to the sheriff's sale itself, not to the underlying equities, if any, bearing on the instrument. . . ." Bernard v. Fed. Nat'l Mtg. Ass'n, 587 F. App'x 266, 269 (6th Cir. 2014) (internal quotation marks and citation omitted). The fraud, mistake or irregularity must pertain to the "technical" requirements of the statutory procedure itself. See Freeman, 241 Mich. App. at 637 ("Plaintiff cannot argue that there was fraud, accident, or mistake because plaintiff readily conceded that the foreclosure procedure was technically proper."). The alleged fraud or mistake must relate to "conducting the legal measures" required under the statutory scheme:
Williams v. Pledged Property II, LLC, 508 F. App'x 465, 468 (6th Cir. 2012).
Moreover, even upon a showing of such fraud or irregularity, plaintiff must demonstrate actual prejudice as a result of the fraud or irregularity in order to proceed with a post-redemption claim. Conlin, 714 F.3d at 359-60. Prejudice can only be shown by demonstrating that Plaintiff "would have been in a better position to preserve his interest in the property absent defendant's non-compliance with the statute." Kim v. JPMorgan Chase Bank, N.A., 493 Mich. 98, 115-16 (2012). Plaintiff must allege "a causal relationship between the alleged fraud or irregularity and the alleged prejudice." Diem v. Sallie Mae Home Loans, Inc., 307 Mich.App. 204, 859 N.W.2d 238, 242 (Mich. Ct. App. 2014).
In this case, Plaintiff cannot establish that the alleged fraud or irregularity related to the foreclosure process itself, nor can he establish the type of prejudice required to set aside the sale of his property. Plaintiff claims prejudice in this case based upon his allegation that the Defendant refused Plaintiff's "tender of the full amount due [to reinstate his loan] and its insistence on the redemption amount."
Even if Plaintiff could establish that he suffered a wrong that related to the Defendant's failure to comply with the Michigan foreclosure by advertisement statute, he has not alleged the type of the prejudice that would justify setting aside the completed foreclosure sale of his property, i.e. he does not allege that he stood ready to redeem the property himself and could have done so during the redemption period but for some identified alleged defect in the process attributable to the Defendant. To do this, Plaintiff, who (post-foreclosure) took no action until just days before the redemption period expired, would have to at least plausibly allege that he had the financial means to redeem the Property. See Donkers v. Countrywide Home Loans, Inc., No. 270474, 2007 WL 2683755, at *3 (Mich. Ct. App. Sept. 13, 2007) (finding plaintiff's lengthy delay, inaction, and failure to offer evidence that she had a financial ability to redeem insufficient to create a factual issue of prejudice). He has not done so. While he alleges that he had the financial ability to pay $27,170.69 to reinstate his loan the day before it was sold at foreclosure, there is no suggestion that he made any effort over the course of the next six months to redeem the property, and no suggestion that he was able to pay $169,125 required to redeem the Property six months later. Plaintiff has not alleged that he had the financial wherewithal to pay the redemption amount to reclaim his Property after it had been sold at foreclosure. See Conlin, 714 F.3d at 361-62.
Plaintiff is not entitled to the relief he seeks, i.e. setting aside the foreclosure sale of his home. In the State of Michigan, winning back your home after it has been sold at a foreclosure sale, and you have let the six-month redemption period lapse, is difficult. That is because the Michigan legislature expressly made it so. "Michigan's foreclosure-by-advertisement scheme was meant to, at once, impose order on the foreclosure process while still giving security and finality to purchasers of foreclosed properties. To effectuate this interest in finality, the ability for a court to set aside a sheriff's sale has been drastically circumscribed." Conlin, 714 F.3d at 359.
For the foregoing reasons the Court DENIES Plaintiff's motion for leave to file a second amended complaint and GRANTS Defendant's motion to dismiss Plaintiff's First Amended Complaint.
IT IS SO ORDERED.
