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Kent v. Worldwide Financial Services, Inc.

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

March 20, 2017

DAVID KENT, Plaintiff,


          THOMAS L. LUDINGTON United States District Judge

         On June 7, 2016, this suit was removed from Cheboygan County Circuit Court. ECF No. 1. In the complaint, Plaintiff David Kent challenged a mortgage foreclosure which Defendants initiated against Kent's property. Id. at 11-12. In his complaint, filed April 28, 2016, Kent alleged that the property was scheduled to be sold at a sheriff's sale on April 29, 2016. Id. at 12. Concurrent with the filing of two motions to dismiss, this case was referred to Magistrate Judge Patricia T. Morris. ECF Nos. 6, 7, 8. On November 23, 2016, David Kent submitted a notice that he had filed a petition for bankruptcy and purporting to institute an automatic stay of the litigation. ECF No. 20. On January 11, 2017, Defendants filed a motion to strike Kent's suggestion that the automatic stay applied to the case. ECF No. 21. In the motion, Defendants argue that “the automatic stay provision of the bankruptcy code does not apply to actions brought by debtors, and because Plaintiff no longer has an interest in the real property in interest in this litigation.” Id. at 1. On January 12, 2017, the Magistrate Judge issued a report recommending that the motions to dismiss be granted, Plaintiff's complaint dismissed, and the motion to strike the notice of the automatic stay be denied as moot. ECF No. 22. Judge Morris's report and recommendation further explained that the parties had fourteen days to file written objections to the report and recommendation and that failure to file specific objections would waive further right of appeal. Id. at 18.

         The Chapter Seven Bankruptcy Trustee for Kent's estate timely filed objections to the report and recommendation. The Trustee asserts that a final decision in this matter should be stayed pursuant to 11 U.S.C. § 362. She also challenges aspects of Judge Morris's analysis regarding the substantive claims in Kent's suit. For the reasons stated below, the objections will be overruled, the report and recommendation will be adopted, and the complaint will be dismissed.


         In his complaint, Kent alleges that he obtained a loan from Defendant World Wide Financial Services, Inc., on property located at 572 West Shore View Lane, Indian River, Michigan 49749. Compl. at ¶ 8, ECF No. 1, Ex. A. In January 2015, Kent fell behind on his payments. Id. at ¶ 9. According to Kent, World Wide Financial then assigned the mortgage to Defendant CitiMortgage, Inc. Id. at ¶ 10. Several months later, Citimortgage assigned the mortgage to a trust administered by Defendant U.S. Bank National Association. Id. at ¶ 11. Kent asserts that the trust's guidelines prohibited “direct deposit of any mortgage loans” into the trust and that “the laws of the federal government regulating securitized trusts would be violated by accepting such a mortgage loan.” Id. at ¶ 12. According to Kent, U.S. Bank accepted the assignment despite knowledge of its invalidity and commenced foreclosure by advertisement proceedings via Defendant Potestivo. Id. at ¶ 13.

         Because U.S. Bank did not own the mortgage, Kent alleges that the foreclosure was wrongful. See Claim One, Compl. Kent also asserts claims for negligence and fraud/conversion arising out of the same subject matter. Specifically, Kent asserts that Defendants' affidavits asserting that they were the proper holders of the mortgage were made with fraudulent intent.

         Kent also alleges, in his breach of contract claim, that Defendants breached the mortgage contract by failing to provide Kent with “a 30 day opportunity to cure past due amounts before acceleration and foreclosure” were initiated. Id. at ¶ 46. Finally, Kent asserts that Defendants violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., because they did not have standing to foreclose on the property.


         Pursuant to Federal Rule of Civil Procedure 72, a party may object to and seek review of a magistrate judge's report and recommendation. See Fed. R. Civ. P. 72(b)(2). Objections must be stated with specificity. Thomas v. Arn, 474 U.S. 140, 151 (1985) (citation omitted). If objections are made, “[t]he district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to.” Fed.R.Civ.P. 72(b)(3). De novo review requires at least a review of the evidence before the magistrate judge; the Court may not act solely on the basis of a magistrate judge's report and recommendation. See Hill v. Duriron Co., 656 F.2d 1208, 1215 (6th Cir. 1981). After reviewing the evidence, the Court is free to accept, reject, or modify the findings or recommendations of the magistrate judge. See Lardie v. Birkett, 221 F.Supp.2d 806, 807 (E.D. Mich. 2002).

         Only those objections that are specific are entitled to a de novo review under the statute. Mira v. Marshall, 806 F.2d 636, 637 (6th Cir. 1986). “The parties have the duty to pinpoint those portions of the magistrate's report that the district court must specially consider.” Id. (internal quotation marks and citation omitted). A general objection, or one that merely restates the arguments previously presented, does not sufficiently identify alleged errors on the part of the magistrate judge. See VanDiver v. Martin, 304 F.Supp.2d 934, 937 (E.D. Mich. 2004). An “objection” that does nothing more than disagree with a magistrate judge's determination, “without explaining the source of the error, ” is not considered a valid objection. Howard v. Sec'y of Health and Human Servs., 932 F.2d 505, 509 (6th Cir. 1991). Without specific objections, “[t]he functions of the district court are effectively duplicated as both the magistrate and the district court perform identical tasks. This duplication of time and effort wastes judicial resources rather than saving them, and runs contrary to the purposes of the Magistrate's Act.” Id.


         The Bankruptcy Trustee has not specifically numbered or labeled her objections. The Court will construe her objections as asserting the following arguments: this case should be stayed pursuant to the automatic stay provisions of 11 U.S.C. § 362, the report and recommendation does not address the procedural defects which Kent alleges occurred, and that there are inconsistencies regarding the amount of outstanding property tax which Kent owes. These arguments will be addressed in turn.


         The Trustee first argues that she possesses the “exclusive right to assert the debtor's claims” pursuant to 11 U.S.C. § 704(a)(1). Objs. at 2. That section authorizes the trustee to “collect and reduce the property of the estate.” Id. According to 11 U.S.C. § 541(a)(1), the debtor's estate includes “all legal or equitable interests of the debtor in property as of the commencement of the estate.” Kent's cause of action in this ...

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