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Johnson v. U.S. Bank N.A.

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

September 25, 2017

ERNIE JOHNSON, Plaintiff,
v.
U.S. BANK NATIONAL ASSOCIATION, [1]Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS, OR INTHE ALTERNATIVE, FOR SUMMARY JUDGMENT [#7]

          Denise Page Hood Chief Judge

         I. INTRODUCTION

         On October 26, 2016, Plaintiff filed an action in Genesee County Circuit Court regarding the foreclosure sale of his home by Defendant on April 27, 2016. Defendants filed a Notice of Removal of Plaintiff's cause of action with this Court on November 11, 2016. Presently before the Court is Defendant's Motion to Dismiss, or in the Alternative, for Summary Judgment[2] [Dkt. No. 3], which has been fully briefed. For the reasons that follow, Defendant's Motion is granted in part and denied in part.

         II. STATEMENT OF FACTS

         On November 12, 2007, Plaintiff purchased a property at 5416 River Meadow Boulevard, Flint Township, Michigan (the “Property”). Dkt. No. 1, Complaint ¶ 9. In connection with the purchase of the Property, Plaintiff executed a mortgage and note for $165, 648 in favor of MAC-CLAIR MORTGAGE CORPORATION. Dkt. No. 1, Complaint ¶ 11; Dkt. No. 3, Ex. 1, Ex. 2. Later that month, Plaintiff was given notice that servicing of the mortgage loan was assigned from MAC-CLAIR MORTGAGE CORPORATION to defendant U.S. Bank National Association (“Defendant”), Dkt. No. 3, Ex. 3, and the mortgage and note also were assigned to Defendant. Dkt. No. 1, Complaint ¶ 15; Dkt. No. 3, Ex. 4, Ex. 2 at 2.

         On July 29, 2009, Plaintiff was advised by Defendant that he was “pre-approved for a Loan Modification.” Dkt. No. 3, Ex. 5. The 2009 offer for Loan Modification was finalized in February 2010, added the delinquent interest and escrow to the principal balance of the loan, and reduced the interest rate from 7% to 5.75%. In 2011, Plaintiff again requested mortgage assistance after falling behind on his monthly payments due under the mortgage loan. Dkt. No. 3, Ex. 7. Defendant advised Plaintiff on July 8, 2011, that he was “pre-approved for a Loan Modification.” Dkt. No. 3, Ex. 8. Under the 2011 Loan Modification, finalized in December 2011, the delinquent interest and escrow were added to the principal balance of the loan, the interest rate was reduced from 5.75% to 5.125%, and the maturity date of the loan was extended.

         On February 1, 2013, Plaintiff submitted another application for mortgage assistance. Dkt. No. 3, Ex. 10. On June 5, 2013, Defendant advised Plaintiff that he was in default and offered Plaintiff a special forbearance. Dkt. No. 3, Ex. 11. The forbearance offer was never accepted, and Plaintiff advised Defendant that he would “not be able to do repay plan.” Dkt. No. 3, Ex. 12. On July 22, 2013, Defendant advised Plaintiff that “[d]ue to the status of your account, it is necessary to initiate foreclosure action.” Dkt. No. 3, Ex. 13.

         On September 8, 2015, Plaintiff was notified that he was in breach of the mortgage loan for failure to pay the monthly installments when due. Dkt. No. 3, Ex. 14. The last payment made by Plaintiff under the mortgage loan was for September 2015. Dkt. No. 3, Ex. 15. On March 17, 2016, Defendant acknowledged receiving another application for mortgage assistance from Plaintiff that was incomplete. Dkt. No. 3, Ex. 16. In the letter, Defendant advised Plaintiff that during the review of the application, “all foreclosure activities, including a potential foreclosure sale, will proceed as scheduled.” Dkt. No. 3, Ex. 16 at 2. On March 18, 2016, Plaintiff was advised that Defendant elected to accelerate the total indebtedness due and owing under the mortgage loan. Dkt. No. 3, Ex. 17.

         On March 25, 2016, Plaintiff was mailed a copy of the publication notice advising Plaintiff that a foreclosure sale would take place on April 27, 2016 at 11:00 a.m. Dkt. No. 3, Ex. 18. Notice of default and the foreclosure sale were published in the Flint-Genesee County Legal News on March 23, March 30, April 6, and April 13, 2016. Dkt. No. 3, Ex. 19. Notice of the default and the foreclosure sale were also posted on the Property on April 4, 2016. Dkt. No. 3, Ex. 20. Publication and posting of the default and foreclosure are acknowledged in the Complaint. Dkt. No. 1, Complaint ¶¶ 45-46. The sheriff's sale took place as scheduled on April 27, 2016, and the Property was sold at foreclosure to Defendant for $154, 160. Dkt. No. 1, Complaint ¶¶ 18, 47; Dkt. No. 3, Ex. 21. The redemption period expired on October 27, 2016. Dkt. No. 1, Complaint ¶ 54; Dkt. No. 3, Ex. 21 at 6.

         On October 24, 2016, two days before filing his Complaint, Plaintiff sent a qualified written request (“QWR”) to Defendant. Dkt. No. 1, Complaint ¶ 13. Defendant timely responded to the QWR on November 8, 2016. Dkt. No. 3, Ex. 22. On October 26, 2016, Plaintiff filed his fifteen-count Complaint seeking equitable, declaratory and monetary relief against Defendant. His claims are: (1) Count I -Declaratory Relief; (2) Count II - Quiet Title; (3) Count III - Illegal Foreclosure under M.C.L. § 600.3204 et seq.; (4) Count IV - Illegal Foreclosure - Respecting Notice of Default; (5) Count V - Illegal Foreclosure - Respecting Foreclosure Alternatives; (6) Count VI - Violation of the Fair Debt Collection Practices Act (“FDCPA”); (7) Count VII - Violations of 12 C.F.R. § 1024.41 et seq. - Regulation X; (8) Count VIII -Violations of 15 U.S.C. § 1601 et seq. - Regulation Z; (9) Count IX - Violations of 12 U.S.C. § 2605 et seq. (Regulation X); (10) Count X - Breach of Contract; (11) Count XI - Intentional Misrepresentation and Fraud; (12) Count XII - Slander of Title; (13) Count XIII - Declaratory Relief - Foreclosure Barred by Unclean Hands; (14) Count XIV - Declaratory Relief - Violation of Michigan Consumer Protection Act (“MCPA”); and (15) Count XV - Request for Conversion to Judicial Foreclosure.

         III. APPLICABLE LAW

         A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the plaintiff's complaint. Accepting all factual allegations as true, the court will review the complaint in the light most favorable to the plaintiff. Eidson v. Tennessee Dep't of Children's Servs., 510 F.3d 631, 634 (6th Cir. 2007). As a general rule, to survive a motion to dismiss, the complaint must state sufficient “facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The complaint must demonstrate more than a sheer possibility that the defendant's conduct was unlawful. Id. at 556. Claims comprised of “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555. Rather, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         IV. ANALYSIS

         A. Counts I - IV

         In Michigan, “all the right, title, and interest” a mortgagor has in real property is extinguished upon the expiration of the redemption period. M.C.L. § 600.3236; Conlin v. MERS, Inc., 714 F.3d 355, 359 (6th Cir. 2013) (“Unless the premises described in [the sheriff's] deed shall be redeemed within the time limited for such redemption . . . such deed shall thereupon become operative, and shall vest in the grantee . . . all the right, title, and interest which the mortgagor had at the time of the execution of the mortgage”). See also Bryan v. JPMorgan Chase Bank, 304 Mich.App. 708, 713-14 (2014) (“by failing to redeem the property within the applicable time, plaintiff lost standing to bring her claim”); Spartan Distrs., Inc. v. Golf Coast Int'l, L.L.C., 2011 WL 1879722 (Mich.App. 2011).

         In Michigan, the redemption period is six months from the date of the foreclosure sale. See M.C.L. § 600.3240(8). See also Piotrowski v. State Land Office Bd., 302 Mich. 179, 187 (1942); Overton v. Mortgage Electronic Registration Systems, No. 284950, 2009 WL 1507342, at *1 (Mich. App. May 28, 2009); Jackson v. CitiMortgage, Inc., No. 10-14221, 2011 WL 479923, at *2 (E.D. Mich. Feb. 4, 2011); Moriarty v. BNC Mortgage, Inc., No. 10-13860, 2010 WL 5173830, at *2 (E.D. Mich. Dec. 10, 2010); Mission of Love v. Evangelist Hutchinson Ministries, No 266219, 2007 WL 1094424, at *5 (Mich. App. April 12, 2007).

         In this case, the redemption period expired on October 27, 2016, six months after the sheriff's sale of the Property. Plaintiffs filed the instant cause of action on October 26, 2016, one day prior to the expiration of the redemption period. Even though Plaintiff filed his Complaint the day before the redemption period expired, the redemption period still expired on the same date (October 27, 2016). One's ability to challenge the foreclosure is not tolled simply by filing a complaint, so Plaintiff lacks standing to challenge the foreclosure even though his Complaint pre-dated October 27, 2016 (six months after the foreclosure sale). See Overton, 2009 WL 1507342, at *1 (Mich. App. May 28, 2009) (“Although [plaintiff] filed his suit before the redemption period expired, that was insufficient to toll the redemption period”); Jackson, 2011 WL 479923, at *2; Moriarty, 2010 WL 5173830, at *2; Mission of Love, 2007 WL 1094424, at *5.

         Under Michigan law, a plaintiff may challenge the foreclosure sale after the expiration of the redemption period by alleging fraud or irregularity in the foreclosure sale process. See, e.g., Paige v. Kress, 80 Mich. 85, 89 (1890); Overton, 2009 WL 1507342, at *1; Stein v. U.S. Bancorp, No. 10-14026, 2011 WL 740537, at *6 (E.D. Mich. Feb. 24, 2011) (“A court has no authority to set aside a properly conducted foreclosure in the absence of a clear showing of fraud, accident, or mistake in the foreclosure proceedings.”). As Defendant argues, Plaintiff has failed to allege any fraud or irregularity in the foreclosure process itself, as the alleged.

         The Court dismisses Counts I-IV of the Complaint.

         B. Count V

         In Count V, Plaintiff alleges “Defendants unlawfully caused a foreclosure proceeding to commence and continue when Plaintiff was being considered for foreclosure alternatives prior to the publication of the notice of sale and holding of the foreclosure sale.” Dkt. No. 1, Complaint ¶ 101. Defendant asserts, and the language used by Plaintiff supports a finding, ...


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