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White v. Wells Fargo Bank, N.A.

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

April 22, 2015

MARTIN WHITE JR. and TARANTA M. GASTON-WHITE, Plaintiffs,
v.
WELLS FARGO BANK, N.A., AS TRUSTEE FOR THE CERTIFICATE HOLDERS OF PARK PLACE SECURITIES, INC. ASSET-BACKED PASS THROUGH CERTIFICATES SERIES 2005-WCW3; BANK OF AMERICA, N.A., and SELECT PORTFOLIO SERVICING, INC., Defendant.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

MARIANNE O. BATTANI, District Judge.

I. INTRODUCTION

This matter is before the Court on motions by Defendants to dismiss the claim pursuant to Fed.R.Civ.P. 12(b)(6). (Docs. 13, 14.) Plaintiffs have brought the present action challenging the foreclosure of their mortgaged home and alleging violation of Michigan's statutory foreclosure procedures, violation of the Real Estate Settlement Procedures Act (RESPA), breach of contract, and violation of the Fair Housing Act (FHA). For the following reasons, the Court GRANTS IN PART AND DENIES IN PART Defendants' motions to dismiss.

II. STATEMENT OF FACTS

On May 6, 2005, Plaintiffs entered into a mortgage and loan agreement with Argent Mortgage Company, LLC, in the amount of $159, 000, secured by a home located at 2115 Seminole Street, Detroit, Michigan ("the Property"). (Doc. 13, Exs. A, B.) On May 11, 2005, Argent assigned the mortgage to Defendant Wells Fargo. (Id. at Ex. C.) Initially, the mortgage was serviced by Defendant Bank of America (BANA) but was transferred on September 6, 2012, to Defendant Select Portfolio Servicing (SPS) for servicing. (Compl., Ex. 7.) In August 2007, Plaintiffs defaulted on their mortgage payments and, consequently, entered into a loan modification agreement with Countrywide Home Loans Servicing, LP, in 2008. (Doc. 14, Ex. D.) Plaintiffs then defaulted on the modification agreement by making a late payment. Accordingly, Wells Fargo foreclosed on the Property, which was sold at a sheriff's sale conducted on March 27, 2014. At the sheriff's sale, Wells Fargo purchased the Property for $107, 152.23 pursuant to a Sheriff's Deed on Mortgage Sale, subject to Plaintiff's six-month statutory right to redeem. (Doc. 14, Ex. E.)

Plaintiffs made no effort to redeem the Property before their right expired on September 27, 2014. However, on March 27, 2014, the day of the sheriff's sale, Plaintiffs filed the present action in Wayne County Circuit Court. The complaint states the following causes of action: (1) violation of Mich. Comp. Laws §§ 600.3205c(1) and 600.3205c(3), (2) violation of RESPA, (3) breach of contract, (4) violation of the FHA, and (5) exemplary damages. Defendants removed the action to this Court, and on October 20, 2014, filed the instant motions to dismiss. On December 4, 2014, the Court notified the parties that Defendants' motions would be decided without oral argument.

III. STANDARD OF REVIEW

In order to survive a motion to dismiss pursuant to Rule 12(b)(6), 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, 570 (2007)). A claim that is plausible "pleads factual content that allows the court to draw the reasonable inference" and demonstrates "more than a sheer possibility" that the plaintiff's claim has merit. Id. A complaint that offers "labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'" Id. While a court must accept as true all factual allegations set forth in a plaintiff's complaint, it is not bound to accept as true a legal conclusion or a legal conclusion couched as a factual allegation. Id. All legal conclusions must be supported by the factual allegations. Id. at 679.

In deciding a motion to dismiss, "courts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 322 (2007). Further, the Sixth Circuit has found that courts may consider documents not formally incorporated by reference but that are referred to in the complaint and are central to the plaintiff's claim. See Greenberg v. Life Ins. Co. , 177 F.3d 507, 514 (6th Cir. 1999).

IV. DISCUSSION

A. Claims Under Mich. Comp. Laws §§ 600.3205c(1) and 600.3205c (3) (Count I)

After a sheriff's sale, a mortgagor has a statutory right to redeem the property by paying a requisite amount within six months of the sale. Mich. Comp. Laws § 600.3240. If the mortgaged property is not redeemed within six months, the mortgagor's rights in the property are extinguished, and the sheriff's deed vests with the purchaser all rights, title, and interest. Yono v. Deutsche Bank Nat'l Trust Co., No. 13-13218, 2014 U.S. Dist. LEXIS 25826 at *6 (E.D. Mich. February 28, 2014). Filing a lawsuit prior to the expiration of the redemption period does not toll the redemption period. Id. Once the statutory deadline for redeeming a foreclosed property has expired - as it has in this case - the redemption period may be equitably extended only by a clear showing of fraud or irregularity in the foreclosure proceedings. See Overton v. Mortg. Elec. Registration Sys., No. 284950 , 2009 Mich.App. LEXIS 1209 at *3 (Mich. Ct. App. May 28, 2009). In order to show fraud or irregularity, plaintiffs must plead that they were prejudiced by a defendant's failure to comply with foreclosure regulations. Yono, 2014 U.S. Dist. LEXIS 25826 at *9.

Plaintiffs cite to Mitan v. Federal Home Loan Mortgage Corp. , 703 F.3d 949 (6th Cir. 2012), for the proposition that a violation of the statutory foreclosure procedures results in a void foreclosure sale and a redemption period that never began. This reliance on Mitan is misplaced, as the case is recognized to have been overruled by the Michigan Supreme Court in Kim v. JPMorgan Chase Bank, N.A. , 493 Mich. 98 (2012). Yono, 2014 U.S. Dist. LEXIS 25826 at *11. According to Kim, "defects or irregularities in a foreclosure proceeding result in a foreclosure that is voidable, not void ab initio. " 493 Mich. at 115. Accordingly, Plaintiff's argument is unavailing.

Plaintiffs allege several irregularities in the foreclosure process violating Mich. Comp. Laws § 600.3205c. Specifically, they contend that Defendants failed to conduct a personal meeting with Plaintiffs in spite of their request for a loan modification; that Defendants failed to determine whether Plaintiffs qualified for a modification and failed to provide the calculations relating to Plaintiffs' eligibility; and that Defendants improperly proceeded with a foreclosure by advertisement rather than a judicial foreclosure. However, as argued by Defendants, the statute Plaintiff relies upon, Mich. Comp. Laws § 600.3205c, was repealed effective June 30, 2013, see Mich. Comp. Laws § 600.3205e (2012), and was later superseded by § 600.3204 (2014). The foreclosure proceedings at issue in the present case were initiated on February 26, 2014. (See Compl., Ex. 11.) Courts have declined to apply Mich. Comp. Laws §§ 600.3205a-d where, as here, the foreclosure proceedings took place after the repeal. See, e.g., Selakowski v. Fed. Home Loan Mortg. Corp., No. 13-12335, 2014 U.S. Dist. LEXIS 37966 at *31, n.13 (E.D. Mich. March 24, 2014) ("Michigan recently enacted legislation under which § 600.3205c and other related statutory provisions are repealed as of June 30, 2014, and the terms of § 600.3205c no longer apply to foreclosure proceedings in which the first notice is published after January 9, 2014."); Hardwick v. HSBC Bank United States, No. 310191, 2013 Mich.App. LEXIS 1278 at *4-5 (Mich. Ct. App. July 23, 2013) ...


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