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Houle v. Green Tree Servicing, LLC

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

April 23, 2015

SCOTT HOULE, Plaintiff,



Plaintiff Scott Houle executed a Note and Mortgage in the amount of $99, 800.00 in favor of ABN AMRO on July 5, 2003. The mortgage was later assigned to Bank of America, and then re-assigned to defendant Green Tree Servicing LLC via an assignment of mortgage recorded June 3, 2013. Plaintiff defaulted on his payments under the note. Defendant offered plaintiff an opportunity to apply for a loan modification, which plaintiff claims he submitted on January 30, 2014. Attached to the complaint is a letter dated May 20, 2014, wherein defendant acknowledges receipt of the loan modification package and a statement that the file is being reviewed. Plaintiff alleges that he contacted defendant on May 24, 2014, and was told by a representative that his assistance request was denied for failure to make trial modification payments on time. Plaintiff claims he had no notice of any approved trial payment plan. Plaintiff was also told that his home was sold at Sheriff's sale on May 21, 2014.

Plaintiff filed his complaint in state court on November 16, 2014. Plaintiff's complaint contains four counts: Count I - a request to set aside the foreclosure sale because defendant acted in bad faith by not responding to plaintiff's request for a loan modification; Count II - breach of MCL 600.3205c by failing to determine plaintiff's eligibility for a loan modification; Count III - Real Estate Settlement Procedures Act ("RESPA") violations for failing to evaluate plaintiff's loss mitigation options and failing to provide written notice of which options, if any, would be offered; and Count IV - negligence for not reviewing or properly responding to plaintiff's loan modification request. Defendant removed the case to federal court on December 9, 2014, invoking this court's federal question jurisdiction.

Defendant filed a motion to dismiss for failure to state a claim under Rule 12(b)(6). In the alternative, defendant seeks summary judgment, and has attached many letters and documents as exhibits to its motion. A Rule 12(b)(6) analysis generally forbids a court from considering documents outside the pleadings. One exception is when "a document is referred to in the complaint and is central to the plaintiff's claim..., the defendant may submit an authentic copy to the court to be considered on a motion to dismiss." Greenberg v. Life Insurance Co. of Virginia, 177 F.3d 507, 514 (6th Cir. 1999). Greenberg involved a dispute over the payment of a life insurance policy. This case involves what happened after plaintiff defaulted on a note secured by his mortgage. If the mortgage or note was relevant to the dispute, the court would be able to consider such documents under the reasoning of Greenberg. However, the various letters and other communications defendant attaches to its motion are not analogous to an insurance policy or contract. The attachments are unsigned, there is no way for the court to know if defendant sent and plaintiff received the letters, plaintiff has not had a chance to question anybody with regard to the letters, and they only give one side of the story.

Therefore, the court will not consider the attachments to defendant's motion, and will treat the motion as a motion to dismiss under Rule 12(b)(6).


Rule 12(b)(6) allows the Court to make an assessment as to whether the plaintiff has stated a claim upon which relief may be granted. Under the Supreme Court's articulation of the Rule 12(b)(6) standard in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554-56 (2007), the Court must construe the complaint in favor of the plaintiff, accept the allegations of the complaint as true, and determine whether plaintiff's factual allegations present plausible claims. "[N]aked assertions devoid of further factual enhancement" are insufficient to "state a claim to relief that is plausible on its face". Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). To survive a Rule 12(b)(6) motion to dismiss, plaintiff's pleading for relief must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Ass'n of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007) ( quoting Bell Atlantic, 550 U.S. at 555) (citations and quotations omitted). Even though the complaint need not contain "detailed" factual allegations, its "factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the allegations in the complaint are true." Id. ( citing Bell Atlantic, 550 U.S. at 555).


I. Claims for Relief Seeking to Set Aside Foreclosure Sale

In Count I, plaintiff seeks to have the foreclosure sale set aside because defendant allegedly acted in bad faith by not responding to plaintiff's request for a loan modification. Plaintiff believes he may still qualify for a loan modification which would enable him to save his house. However, Michigan law does not recognize an independent cause of action for bad faith. Fodale v. Waste Management of Michigan, Inc., 271 Mich.App. 11, 35 (2006).

In Count IV, plaintiff claims that despite receiving a completed modification package in January of 2014, which plaintiff updated every month, defendant was negligent in never reviewing or properly responding to the loan modification request. Plaintiff relies on defendant's duties under federal law, specifically HAMP, to support his state law claim of negligence, citing to Mik v. Federal Home Loan Mortgage Corp., 743 F.3d 149 (6th Cir. 2014). While recognizing that a federal statute, even one that does not provide for a private right of action under federal law, can be used to establish a state law cause of action, defendant correctly points out that plaintiff must still show prejudice. See Kim v. JP Morgan Chase Bank, N.A., 493 Mich. 98 (2012). Plaintiff must show that he would have been in a better position to preserve his interest in the property absent the alleged noncompliance with the cited federal statute. The problem for plaintiff in this case is that even if defendant had properly reviewed plaintiff's loan modification application, and even if plaintiff qualified for a loan modification, the lender is not required to provide one. Without such a requirement, plaintiff cannot demonstrate prejudice.

Therefore, defendant's motion to dismiss plaintiff's bad faith (Count I) and negligence (Count II) claims is granted.

II. Claim for Relief for Violations of MCL 600.3205c

In Count II, plaintiff claims that defendant failed to determine his eligibility for a loan modification under the requirements of MCL 600.3205c. This statute was repealed effective June 30, 2013, MCL 600.3205e, which was before the events cited in support of plaintiff's complaint occurred. Even when the statute was in effect, a borrower's only recourse in the event of a violation of the statute was to seek an injunction to convert the action from a foreclosure by advertisement to a judicial foreclosure. MCL 600.3205c(8). Courts addressing the statute when it was in effect routinely held that the statute did not require a lender to modify a ...

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