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Dolinski v. JPMorgan Chase Bank, National Association

United States District Court, E.D. Michigan, Southern Division

April 21, 2015

DAVID DOLINSKI, et al., Plaintiffs,




Plaintiffs David J. Dolinski and Yolanda M. Dolinski filed this mortgage foreclosure case in Monroe County Circuit Court, and defendant JP Morgan Chase Bank, N.A. removed it to this Court on August 22, 2014. (Dkt. 1). On September 26, 2014, defendant filed a motion to dismiss plaintiffs' complaint. (Dkt. 5). This motion was referred on October 2, 2014. (Dkt. 6). On November 24, 2014, plaintiffs filed their response to defendant's motion (Dkt. 10), and defendant filed its reply brief in support of its motion to dismiss on December 8, 2014. (Dkt. 11). On December 11, 2014, the parties filed their Joint Statement of Resolved and Unresolved Issues, indicating no resolved issues. (Dkt. 12). Pursuant to notice, a hearing on defendant's motion to dismiss was held on December 17, 2014. (Dkt. 8).

After hearing the parties' arguments, the matter was taken under advisement. For the reasons set forth below, the undersigned recommends that defendant's motion to dismiss be GRANTED and plaintiff's complaint be DISMISSED.


This case relates to real property located at 535 Godfroy Ave., Monroe, Michigan 48162 ("Property"). (Dkt. 1-2, Compl. ¶ 1). On September 7, 2005, plaintiff David J. Dolinski received a loan in the amount of $112, 500.00 ("Loan") from Acc-U-Rate Mortgage Company Ltd. ("Lender"). (Dkt. 5, Ex. 1, Note). To secure repayment of the Loan, plaintiffs granted a mortgage ("Mortgage") on the Property to Mortgage Electronic Registration Systems, Inc. ("MERS"), acting solely as nominee for Lender and Lender's successors and assigns. (Dkt. 5, Ex. 2, Mortgage). The Mortgage was recorded on September 29, 2004 in Liber 2592, Page 613, Monroe County Records. ( Id. ) MERS assigned the Mortgage to Chase on October 19, 2012, which assignment was recorded on November 5, 2012 as Instrument No. 2012R24963, Monroe County Records. (Dkt. 5, Ex. 3, "the Assignment").

Plaintiffs subsequently defaulted on their Loan obligations. Plaintiffs allege that in March 2013, they began the process of attempting to modify their loan. (Dkt, 1-2, Compl. ¶ 8). Plaintiffs allege they met with Michigan State Housing Counselor Pam Sarlito in March and April 2013. ( Id. ¶¶ 9-10). She advised that she was not optimistic plaintiffs would be approved for a loan modification, and she gave them information to contact the Michigan's Hardest Hit Program through the Michigan Homeowner Assistance Nonprofit Housing Corporation to apply for funding to reinstate their mortgage loan (the "Program"). ( Id. ¶ 9). Plaintiffs also communicated several times with Beverly Hampton, a liaison between Chase and plaintiffs, in April and May 2013, regarding the loan modification process and documentation required. ( Id. ¶¶ 13-17, 21-24). Plaintiffs allege they submitted their application for Program funding on April 25, 2013. ( Id. ¶¶ 19-20). Plaintiffs allege they received confirmation of Program financing to reinstate their mortgage in August 2013, and that they sent additional requested documents regarding that funding in September and October 2013. ( Id. ¶¶ 26-29). On November 21, 2013, plaintiffs received a notice of foreclosure sale from Chase. ( Id. ¶ 30). Plaintiffs allege they repeatedly attempted to call the Program to find out why they received the notice if they were approved for funding, and contacted Chase's foreclosure counsel to find out the cost to reinstate the mortgage, but foreclosure counsel advised plaintiffs to call Chase. ( Id. ¶¶ 31-32). Plaintiffs allege that, upon request, they resubmitted their Program application on December 12, 2013, and contacted Chase on December 13, 2013 to request a postponement of the Sheriff's sale to allow for Program funding to go through, but that Chase did not return plaintiffs' phone call. ( Id. ¶¶ 34-36). Plaintiffs also received a reinstatement quote from foreclosure counsel on December 19, 2013. ( Id. ¶ 37). Plaintiffs were advised of a new Chase Customer Assistance Specialist, Herbert Zamora, on December 20, 2013, and spoke with Mr. Zamora on December 30, 2013 to request that the Sheriff's sale be postponed. ( Id. ¶¶ 38, 40). Mr. Zamora advised plaintiffs that he did not see anything in his notes about Program funding. ( Id. ¶ 40). Plaintiffs allege, however, that they spoke with a counselor with the Program on January 2, 2014, who said that she had spoken with a Chase representative. ( Id. ¶ 41). Plaintiffs state that they received a phone call from Tammy at the Program on January 21, 2014, advising them that the Program received a letter from Chase advising that the Program funding had been denied because the Property had already been sold at Sheriff's sale. ( Id. ¶ 42).

Plaintiffs do not allege that they were approved for a modification. Instead, plaintiffs allege that Chase would not accept funds provided by Michigan's Hardest Hit Program to reinstate their Loan in January 2014. (Dkt, 1-2, Compl. ¶¶ 41-42). However, the Property was already sold at Sheriff's Sale to Chase on January 2, 2014. (Dkt. 5, Ex. 4, Sheriff's Deed). The Sheriff's Deed was recorded on January 9, 2014 as Instrument No. 2014R00464, Monroe County Records. ( Id. )

Chase then transferred its interest in the Property to non-party Fannie Mae a/k/a Federal National Mortgage Association. (Dkt. 5, Ex. 5, Quit Claim Deed). The Quit Claim Deed was recorded on February 12, 2014 as Instrument No. 2014R02407, Monroe County Register of Deeds. ( Id. ) Plaintiffs had until July 2, 2014 to redeem the Property. (Dkt, 5, Ex. 4, p. 9). Plaintiffs did not redeem and the redemption period has now expired.

Plaintiffs subsequently filed their Complaint, alleging claims for: (1) fraudulent misrepresentation/silent fraud; (2) constructive fraud; (3) violation of Michigan's Regulation of Collection Practices Act (MRCPA); and (4) negligent administration of loan. Plaintiff seek both money damages and equitable relief in setting aside the foreclosure sale. Defendant filed a motion to dismiss plaintiff's complaint, arguing that plaintiffs have failed to state a claim to set aside the foreclosure sale because they lack standing to challenge the foreclosure sale, they do not present a strong case of fraud or irregularity regarding the foreclosure process itself or establish prejudice suffered as a result, and their claims are barred by the statute of frauds. Defendant further argues that plaintiffs cannot establish a violation of the MRCPA and that their claim regarding negligent administration of the loan fails as a matter of law.


A. Plaintiffs' "Standing" to Challenge the Foreclosure Sale

Chase argues that plaintiffs' challenges to the foreclosure sale should be rejected because plaintiffs lost all right, title and interest in the Property upon expiration of the redemption period, which divested them of standing under Michigan law to challenge the foreclosure. Under Michigan law, foreclosure by advertisement, such as the foreclosure at issue in this case, as well as the rights of both the mortgagor and mortgagee after the foreclosure sale has occurred, are governed by Michigan statutory law. See Conlin v. Mortgage Elec. Registration Sys., Inc., 714 F.3d 355, 359 (6th Cir. 2013) (applying Michigan law); see also Brewington v. Nationstar Mortg., LLC, 2013 WL 4009160, at *5 (E.D. Mich. Aug. 5, 2013) ("The statute not only governs the process for foreclosure, but also the parties' rights subsequent to the sale of the property."). Pursuant to Michigan law, a mortgagor has six months from the date of the Sheriff's sale to redeem the property. MCL § 600.3204(8). If the mortgagor fails to redeem the property before the redemption period expires, the mortgagor's "rights, title, and interest in and to the property" are extinguished, Piotrowski v. State Land Office Bd., 302 Mich. 179; 4 N.W.2d 514, 517 (1942), and the Sheriff's deed become[s] operative, and [ ] vest[s] in the grantee named therein... all the right, title, and interest [ ] the mortgagor had[.]" MCL § 600.3236. This rule of law - holding that absolute title vests in the purchaser at the foreclosure sale upon expiration of the redemption period - has been applied consistently by state and federal courts alike to bar former owners from making any claims with respect to the foreclosed property after the statutory redemption period has lapsed. See e.g., Conlin, 714 F.3d at 359; Piotrowski, 302 Mich. at 187.

There is, however, one caveat to the general rule described above. Once a foreclosure sale has taken place and the redemption period has run, a court may allow "an equitable extension of the period to redeem" if a plaintiff makes "a clear showing of fraud, or irregularity[.]" Conlin, 714 F.3d at 359; Freeman v. Wozniak, 241 Mich.App. 633, 637; 617 N.W.2d 784 (2000) ("[I]n the absence of fraud, accident or mistake, the possibility of injustice is not enough to tamper with the strict statutory requirements.") (citation omitted). However, "[i]t is clear that not just any type of fraud will suffice. Rather, [t]he misconduct ...

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