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Scott v. Wells Fargo Bank, N.A.

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

July 19, 2017



          STEPHEN J. MURPHY, III United States District Judge.

         Plaintiffs Shaun and Delania Scott sued Defendants Wells Fargo Bank, N.A.[1] and Wells Fargo Home Mortgage, Inc. (collectively, "Wells Fargo") for breach of contract, fraud, innocent misrepresentation, silent fraud, slander of title, and reformation of the parties' Loan Modification Agreement ("LMA"). Before the Court is Wells Fargo's motion to dismiss or, in the alternative, for summary judgment. For the following reasons, the Court will grant the motion and dismiss all claims.


         In 2004, Plaintiffs Shaun and Delania Scott obtained three mortgages to build a house at 5521 Oak Grove Road, Howell, Michigan ("Oak Grove"). The Construction Loan Company, Inc. provided the first mortgage, and it was later assigned to Wells Fargo. TCF Bank provided the second and third mortgages. ECF 2, PgID 69. In 2009, Plaintiffs suffered financial difficulties, filed for bankruptcy, and obtained a personal discharge of the debts secured by the three mortgages. They then moved to North Carolina to seek better job prospects. Id. Plaintiffs went into default on their mortgages, and Oak Grove was foreclosed and sold at a sheriff's sale to Wells Fargo on January 6, 2010. Id. After the completion of the sale, a one-year redemption period began pursuant to Mich. Comp. Laws § 600.3240-during which the Plaintiffs had the ability to redeem the property.

         In the months after the sheriff's sale, Plaintiffs' financial status improved and they returned to Michigan. Id. They contacted Trott and Trott, P.C. (foreclosure counsel for Wells Fargo) and spoke with "Jay" about the their loss mitigation options. Id. Between April 2010 and March 2011, Plaintiffs sent a series of "Hardship Letters" to Trott and Trott requesting their "monthly payment be lowered" and "a loan modification that involves payments of no more than $1000 per month." ECF 4, PgID 82-87. On January 6, 2011, the statutory redemption period ended without action by the Plaintiffs; title to Oak Grove thus vested in Wells Fargo, and all existing liens on the property extinguished in accordance with Mich. Comp. Laws § 600.3236. Meanwhile, the parties continued with the loan modification, and on July 29, 2011, Wells Fargo sent Plaintiffs a letter confirming the modification of the Wells Fargo mortgage and providing a Loan Modification Agreement ("LMA"). Id. at 89-102.

         The LMA "amend[ed] and supplement[ed] that certain Note and Mortgage or Deed of Trust dated 09/16/2004." Id. at 99. It explained that Plaintiffs' bankruptcy had discharged the debt resulting from the original mortgage from Wells Fargo, but that Wells Fargo's security interest and lien were still valid and enforceable. Id. It also confirmed that Plaintiffs were entering into the agreement freely, "for the sole purpose of retaining the Property" and that Plaintiff had "no personal obligation to repay the debt . . . discharged in bankruptcy." Id. The agreement allowed Plaintiffs to retain the property in exchange for Plaintiffs paying Wells Fargo the debt secured by the Oak Grove Property, "in the manner specified herein." Id. at 100.

         On October 31, 2011, Lindsay Andersen of Wells Fargo executed an "Affidavit to Expunge Sheriff's Deed on Mortgage Sale." ECF 4, PgID 104-05. The affidavit "set aside the sheriff's sale, " that had the effect of reinstating the Wells Fargo lien and two TCF Bank mortgage liens. Id. In 2016, Plaintiffs tried to refinance their mortgage with Wells Fargo and "discovered the TCF Bank mortgages on the title report." ECF 2, PgID 72. Plaintiff's claim to have been unaware that the TCF liens would continue to encumber the property after the parties executed the LMA because Wells Fargo "represented to [them] that its mortgage lien against Oak Grove was the only encumbrance on the property, " and "that the TCF mortgages would not encumber Oak Grove after the Modification Agreement was executed." Id. at 70.

         Plaintiffs filed suit in a Michigan state court on September 2, 2016, and Wells Fargo removed to the Court two weeks later. Plaintiffs filed an amended complaint and the instant motion followed.


         Wells Fargo moves to dismiss under Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, for summary judgment under Rule 56. As a preliminary matter, the Court must determine under which rule to construe the motion.

         Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of a complaint for failure to state a claim upon which relief can be granted. The Court may only grant a 12(b)(6) motion if the allegations are not "sufficient 'to raise a right to relief above the speculative level, ' and to 'state a claim to relief that is plausible on its face.'" Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)). When evaluating a claim under Rule 12(b)(6), the Court views the complaint in the light most favorable to the plaintiff, presumes the truth of all well-pled factual assertions, and draws every reasonable inference in favor of the non-moving party. Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir. 2008). Still, a "pleading that offers 'labels and conclusions' or 'a formulaic recitation of the element of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). If "a cause of action fails as a matter of law" then the Court may dismiss the case, "regardless of whether the plaintiff's factual allegations are true or not." Winnett v. Caterpillar, Inc., 553 F.3d 1000, 1005 (6th Cir. 2009).

         The Court will address Wells Fargo's motion under Rule 12(b)(6) rather than Rule 56. A decision on a Rule 12(b)(6) motion must "ordinarily be undertaken without resort to matters outside the pleadings." Gavitt v. Born, 835 F.3d 623, 640 (6th Cir. 2016). The Court may, however, "consider exhibits attached to the complaint, public records, items appearing in the record of the case, and exhibits attached to defendant's motion to dismiss, so long as they are referred to in the Complaint and are central to the claims contained therein.” Id. Here, Plaintiffs have referred to and attached multiple exhibits to their Amended Complaint which provide a sufficient basis for a ruling on Wells Fargo's motion under Rule 12(b)(6).


         Wells Fargo claims that Plaintiffs have not stated a cause of action for breach of contract, failed to plead their fraud-related counts with sufficient particularity, and failed to plead a sufficient factual basis for all other ...

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