OPINION AND ORDER
PATRICK J. DUGGAN, District Judge.
On July 12, 2011, John and Vita Collins ("Plaintiffs") filed this purported class action, alleging violations of state and federal law in connection with the foreclosure of real property. The defendants are Macomb County Sheriff Anthony Wickersham, Wells Fargo Bank, N.A. ("Wells Fargo"), Mortgage Electronic Registration Systems, Inc. ("MERS"), the Federal National Mortgage Association ("Fannie Mae"), and Writs, Inc. Before the Court are several motions: (1) MERS and Wells Fargo's motion to stay these proceedings; (2) MERS and Wells Fargo's motion to dismiss; (3) Fannie Mae's motion to dismiss; and (4) Plaintiff's motion for leave to file an Amended Complaint. These matters have been fully briefed, and on March 19, 2012, the Court indicated to the parties that it was dispensing with oral argument pursuant to Eastern District of Michigan Local Rule 7.1(f)(2). For the reasons stated below, the Court grants the motions to dismiss and denies Plaintiffs' motion to amend. The motion to stay is denied as moot.
I. Factual and Procedural Background
On August 25, 2005, Plaintiffs obtained a loan of $156,000 from Nations First Financial. As security for this loan, they executed a mortgage on real property located at 30967 Roselawn, in Warren, Michigan. MERS was the mortgagee, as nominee for the lender and the lender's successors and assigns. This mortgage was recorded with the Macomb County Register of Deeds on September 22, 2005. Wells Fargo eventually became the servicer of this loan, although it is not exactly clear when this occurred.
Plaintiffs failed to make the scheduled loan payments, and on September 9, 2010, MERS assigned the mortgage to Wells Fargo. This assignment was recorded with the Register of Deeds on September 20, 2010. Wells Fargo then instituted proceedings to foreclose by advertisement. Wells Fargo published four consecutive weekly notices of foreclosure in the Macomb County Legal News, and a notice was posted at the property on October 18, 2010. The foreclosure sale was initially scheduled for November 12, 2010, but was later adjourned to January 7, 2011. Wells Fargo purchased the property at the sheriff's sale. Shortly after the sheriff's sale, Wells Fargo quitclaimed the property to Fannie Mae, and Fannie Mae commenced proceedings to evict Plaintiffs from the
Plaintiffs filed this purported class action on July 12, 2011 in the Eastern District of Michigan.
The Macomb County Sheriff and Writs, Inc. have each filed an Answer to the Complaint. The remaining defendants have filed motions to dismiss the claims against them pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). MERS and Wells Fargo have also filed a motion to stay these proceedings pending the Michigan Supreme Court's resolution of the appeal in Residential Funding Co., LLC v. Saurman, 292 Mich.App. 321, 807 N.W.2d 412 (Mich.Ct.App.2011). This case was reassigned to this Court from District Judge Victoria A. Roberts on January 24, 2012.
II. Motion to Dismiss for Lack of Subject Matter Jurisdiction
MERS and Wells Fargo seek dismissal of the claims against them pursuant to Rule 12(b)(1). A motion to dismiss pursuant to Rule 12(b)(1) seeks to dismiss a complaint for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). Proper jurisdiction is a requirement in determining the validity of a claim, and as such, Rule 12(b)(1) motions must be considered prior to any other challenges. See Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946).
The Rule 12(b)(1) motion focuses on Plaintiffs' "standing" to assert a claim to the property after the redemption period has expired. District courts have noted, however, that the term "standing" is "a bit of a misnomer" in the context of this sort of mortgage-related claim. Tatar v. Trott & Trott, P.C., No. 10-12832, 2011 WL 3706510, at *7 n. 3, 2011 U.S. Dist. LEXIS 94708, at *19 n. 3 (E.D.Mich. Aug. 3, 2011); Brezzell v. Bank of Am., N.A., No. 11-11467, 2011 WL 2682973, at *4 n. 3, 2011 U.S. Dist. LEXIS 74291, at *11 n. 3 (E.D.Mich. July 11, 2011). These courts have held that the standing requirement of Article III of the United States Constitution is satisfied, and the Plaintiff's failure to assert a claim during the redemption period is an issue that goes to the claim's merits. Brezzell, 2011 WL 2682973, at *4 n. 3, 2011 U.S. Dist. LEXIS 74291, at *11 n. 3. Defendants' arguments should therefore be addressed in the context of Rule 12(b)(6).
III. Motions to Dismiss for Failure to State a Claim for Relief
A. Standard of Review
MERS, Wells Fargo, and Fannie Mae have moved to dismiss the claims against them pursuant to Rule 12(b)(6). A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint. RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir.1996). Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." As the Supreme Court recently
In deciding whether the plaintiff has set forth a "plausible" claim, the court must accept the factual allegations in the complaint as true. Id.; see also Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007). This presumption, however, is not applicable to legal conclusions. Iqbal, 129 S.Ct. at 1949. Therefore, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555, 127 S.Ct. at 1964-65). Ultimately, "[d]etermining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950. In conducting this analysis, the Court may consider the pleadings, exhibits attached thereto, and documents referred to in the complaint that are central to the plaintiff's claims. See Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th Cir.1999).
B. Wrongful Foreclosure
Count I of the Complaint, wrongful foreclosure, is brought against Wells Fargo, MERS, Fannie Mae, and Writs, Inc. Plaintiffs allege that the foreclosure of their property was conducted in violation of several provisions of Michigan law. Wells Fargo, MERS, and Fannie Mae argue that the expiration of the redemption period bars Plaintiffs' claim.
Under Michigan law, once the redemption period has expired, the former owner's rights in and title to the property are extinguished. Piotrowski v. State Land Office Bd., 302 Mich. 179, 187, 4 N.W.2d 514, 517 (Mich.1942); see also Michigan Compiled Laws § 600.3236. At that point, the former owner can no longer assert claims with respect to the property. Overton v. Mortg. Elec. Registration Sys., Inc., No. 284950, 2009 WL 1507342, at *1, 2009 Mich.App. LEXIS 1209, at *3 (Mich. Ct.App. May 28, 2009). "`The law in Michigan does not allow an equitable extension of the period to redeem from a statutory foreclosure sale in connection with a mortgage foreclosed by advertisement and posting of notice in the absence of a clear showing of fraud, or irregularity.'" Id. (quoting Schulthies v. Barron, 16 Mich.App. 246, 247-248, 167 N.W.2d 784, 785 (Mich.Ct.App.1969)).
The statutory redemption period expired on July 7, 2011, before Plaintiffs even filed this suit. Even if Plaintiffs had filed suit before the redemption period expired, doing so would not have tolled the redemption period. Id. Nor does the Complaint allege sufficient fraud or irregularity to justify an equitable extension of the redemption period. Plaintiffs assert that notices of the adjournment of the foreclosure sale were not properly published and posted, but this would render the foreclosure voidable only if the plaintiff establishes prejudice from the defective
Plaintiffs rely heavily on the Michigan Court of Appeals' decision in Saurman, alleging that Wells Fargo did not have "ownership or an interest in the indebtedness." Compl. ¶ 63. Saurman, however, has been reversed by the Michigan Supreme Court. Residential Funding Co., LLC v. Saurman, 490 Mich. 909, 805 N.W.2d 183 (Mich.2011). In reversing the Court of Appeals, the Michigan Supreme Court stated that the holder of a mortgage contingent on satisfaction of a debt is "the owner of ... an interest in the indebtedness secured by the mortgage," and may therefore foreclose by advertisement under Michigan law. Id. at 909, 805 N.W.2d at 183 (citing Michigan Compiled Laws § 600.3204(1)(d)). Wells Fargo, the record holder of the mortgage, was therefore permitted to foreclose by advertisement. Wells Fargo also notes that it was entitled to foreclose by advertisement because it was the servicer of Plaintiffs' mortgage. See Michigan Compiled Laws § 600.3204(1)(d).
Plaintiffs also mistakenly assert that assignment of the mortgage from MERS will not satisfy § 600.3204(3), as the assignor of a mortgage can give no greater rights to the assignee than he had himself. Yet Saurman recognized that MERS has a right to foreclose by advertisement where it is the mortgagee as nominee for the lender. 490 Mich. at 909, 805 N.W.2d at 183. MERS was therefore
Plaintiffs have failed to allege any irregularity sufficient to justify extension of the redemption period, and the redemption period expired before Plaintiffs filed this action. The Court accordingly concludes that Plaintiffs' challenge to the sheriff's sale is barred, and Count I of the Complaint must be dismissed with respect to MERS, Wells Fargo, and Fannie Mae.
Count II of the Complaint, conversion, is brought against MERS, Wells Fargo, and Fannie Mae. Plaintiffs allege that Wells Fargo was not permitted to foreclose on their property and has wrongfully refused to return it to them. Compl. ¶ 69. Only personal property may be the subject of an action for conversion. Eadus v. Hunter, 268 Mich. 233, 237, 256 N.W. 323, 325 (Mich.1934); Embrey v. Weissman, 74 Mich.App. 138, 143, 253 N.W.2d 687, 690 (Mich.Ct.App.1977) ("Property while still part of the realty cannot be the subject of conversion."). Plaintiffs argue that they have properly brought a conversion claim under Michigan Compiled Laws § 600.2919a, which provides in pertinent part:
Although the statute does not expressly distinguish between real and personal property, the terms "stolen," "embezzled," and "converted" apply only to personal property. See Thoma v. Tracy Motor Sales, Inc., 360 Mich. 434, 438, 104 N.W.2d 360, 362 (Mich.1960) ("Conversion is any distinct act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein."); Michigan Compiled Laws § 750.174(1) (embezzlement statute applies only to "money or other personal property") Plaintiffs cannot recover under § 600.2919a for the wrongful foreclosure of real property. Moreover, even if Plaintiffs could bring a conversion claim based on the foreclosure of real property, the facts alleged do not establish that Plaintiffs were wrongfully deprived of their property. The Court concludes that Plaintiffs' conversion claim must be dismissed.
D. Breach of Contract
Count III of the Complaint, breach of contract, is brought against MERS, Wells Fargo, and Fannie Mae. Plaintiffs allege that "Defendants" breached their obligations under the mortgage contract "by allowing MERS or its assigns to initiate a foreclosure by advertisement in violation of MCL 600.3204(1)(d)." Compl. ¶ 76. Plaintiffs' mortgage grants MERS and its assigns the right to foreclose on the property. Plaintiffs' allegation therefore relies upon the decision of the Michigan Court of Appeals in Saurman, but this decision was overturned. To the extent that Plaintiffs assert that their claim arises from violations of Michigan's loan modification statute, the Court is unaware of any authority providing that
Count IV, alleging violations of RESPA, 12 U.S.C. § 2605, is brought against MERS, Wells Fargo, and Fannie Mae. Plaintiffs allege that they were not given proper notice of the identity of the servicer of their mortgage or of a change in the servicer. Compl. ¶¶ 79-80. A plaintiff asserting a claim under § 2605 must plead actual harm resulting from the violation.
Fannie Mae also requests dismissal of this claim because it is not bound by the statute's requirements. RESPA imposes duties on lenders and loan servicers. See 12 U.S.C. § 2605. Plaintiffs have not alleged that Fannie Mae originated their loan, and the promissory note states that the lender is Nations First Financial.
F. Unjust Enrichment
Count V, unjust enrichment, is brought against MERS, Wells Fargo, and Fannie Mae. This claim arises from the allegedly wrongful foreclosure conducted by MERS or its assignees. Compl. ¶ 84. "In order to sustain the claim of unjust enrichment, plaintiff must establish (1) the receipt of a benefit by defendant from plaintiff, and (2) an inequity resulting to plaintiff because of the retention of the benefit by defendant." Belle Isle Grill Corp. v. City of Detroit, 256 Mich.App. 463, 478, 666 N.W.2d 271, 280 (Mich.Ct.App. 2003) (citing Barber v. SMH (US), Inc., 202 Mich.App. 366, 375, 509 N.W.2d 791, 796 (1993)). As discussed above, Plaintiffs have failed to plead facts supporting a claim of wrongful foreclosure; thus, they have failed to establish inequity. Furthermore, an unjust enrichment claim does not
IV. Plaintiffs' Motion to Amend
Plaintiffs have moved for leave to file an Amended Complaint pursuant to Federal Rule of Civil Procedure 15. They have attached to their motion a Proposed Amended Complaint ("PAC") asserting claims similar to those contained in the original Complaint, plus three additional claims: fraudulent misrepresentation; negligent misrepresentation; and civil conspiracy. MERS, Wells Fargo, and Fannie Mae argue that amendment of the Complaint would be futile.
A. Standard of Review
Rule 15(a)(1) provides that a party may amend its pleading once as a matter of course within twenty-one days after service of the pleading, a responsive pleading, or a motion under Rule 12(b), (e), or (f). Plaintiffs did not move for leave to amend within this time frame; thus, they may amend only with the consent of the opposing parties or leave of the Court. Fed. R.Civ.P. 15(a)(2).
Courts have discretion in granting leave to amend. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). "If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject for relief, he ought to be afforded an opportunity to test his claim on the merits." Id. at 182, 83 S.Ct. at 230. Absent any apparent or declared reason, such as undue delay, bad faith, repeated failure to cure deficiencies, undue prejudice to the opposing party, and futility of amendment, leave to amend should be freely given. Id. at 182, 83 S.Ct. at 230. "Amendment of a complaint is futile when the proposed amendment would not permit the complaint to survive a motion to dismiss." Miller v. Calhoun Cnty., 408 F.3d 803, 817 (6th Cir.2005) (citing Neighborhood Dev. Corp. v. Advisory Council on Historic Pres., 632 F.2d 21, 23 (6th Cir.1980)).
B. Wrongful Foreclosure
Plaintiffs' amended claim of wrongful foreclosure attempts to avoid the effect of the Michigan Supreme Court's Saurman ruling by challenging the assignment of the mortgage from MERS to Wells Fargo. Plaintiffs allege that "[n]o chain of title existed between Defendant MERS and Defendant Wells Fargo that was sufficient to transfer ownership rights under the mortgage." PAC ¶ 85. Plaintiffs further assert that "MERS and its assigns do not meet the requirements of MCL 600.3204(3) and therefore may not foreclose by advertisement." PAC ¶ 86.
Again, Plaintiffs' challenge to the assignment is barred because they were not parties to the assignment. Livonia Props. Holdings, LLC, 399 Fed.Appx. at 102. Even if they could properly raise such a challenge, Plaintiffs provide no authority whatsoever for the assertion that an assignment from MERS cannot establish a record chain of title under the foreclosure statute. The statute provides only that "[i]f the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage." Michigan Compiled Laws § 600.3204(3). Under this statute, an assignment by the
Plaintiffs' Proposed Amended Complaint contains the same allegations in support of the conversion claim as the original Complaint. Because the Court has already determined that real property cannot be the subject of a conversion claim, this claim is futile.
D. Breach of Contract
Plaintiffs' amended claim for breach of contract alleges that "MERS and/or an originator and their assigns Fannie Mae and Wells Fargo" were parties to the mortgage contract with Plaintiffs. PAC ¶ 97. Plaintiffs assert that MERS, Wells Fargo, and Fannie Mae breached provisions of the mortgage agreement "by allowing MERS or its assigns to initiate a foreclosure by advertisement in violation of MCL 600.3204(3)." PAC ¶ 98. As discussed above, MERS, as record holder of the mortgage, had the right to foreclose by advertisement and could assign that right to Wells Fargo. The action complained of by Plaintiffs does not constitute a violation of the statute or the mortgage agreement. The Court therefore concludes that the amended breach of contract claim is futile.
Plaintiffs' amended RESPA claim states that they have suffered actual damages from the alleged violations in the form of "infliction of mental distress, loss of credit rating and loss of their property." PAC ¶ 106. The Complaint fails to plead facts sufficient to make a connection between these injuries and the claimed violations, which include the failure to give notice of changes in the loan's servicer and the failure to respond to "qualified written requests." Id. ¶¶ 103, 105. The alleged injuries plainly resulted from Plaintiffs' failure to make loan payments and the ensuing foreclosure. Plaintiffs have not pleaded actual harm resulting from the alleged RESPA violations; their claim is therefore futile.
F. Fraudulent/Negligent Misrepresentation
Plaintiffs' claims of fraudulent and negligent misrepresentation are substantially identical. Plaintiffs allege that MERS, Wells Fargo, and Fannie Mae caused the recording of mortgages stating that MERS is the mortgagee. PAC ¶¶ 122, 127. Plaintiffs assert that "[s]uch statements are false as MERS is not a mortgagee as it lends no money and requires no interest in the promissory notes which are secured by the mortgages that are recorded." Id. A plaintiff generally must show that the defendant made a false representation in order to prevail on a fraud claim. See Hi-Way Motor Co. v. Int'l Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813, 816 (Mich.1976). It was not false to state that MERS was the mortgagee, as the mortgage signed by Plaintiffs expressly provided: "MERS is the mortgagee under this Security Instrument." MERS Br. Ex. 2 at 1. Plaintiffs assert, without supporting authority, that a mortgagee must lend money to the mortgagor. In Saurman, however, the Michigan Supreme Court upheld the foreclosure
G. Civil Conspiracy
Plaintiffs assert a claim of civil conspiracy, alleging that MERS, Wells Fargo, and Fannie Mae engaged in concerted action to avoid recording assignments and to hide the identities of lenders. PAC ¶ 116. Plaintiffs further assert that these Defendants caused fraudulent documents to be recorded in counties throughout the State of Michigan. Id. ¶ 119. Allegations of a civil conspiracy, standing alone, are not actionable. Roche v. Blair, 305 Mich. 608, 614, 9 N.W.2d 861, 863 (Mich.1943). In order to establish liability, the plaintiff must prove a separate, actionable tort. Early Detection Center, PC v. New York Life Ins. Co., 157 Mich.App. 618, 632, 403 N.W.2d 830, 836 (Mich.Ct. App.1986). As set forth above, Plaintiffs' fraud claim is futile. Plaintiffs have also failed to articulate a tort theory underlying their claim that MERS and mortgage lenders have schemed to avoid recording assignments and to hide lenders' identities. The Court accordingly concludes that Plaintiffs' proposed civil conspiracy claim is futile.
V. Conclusion and Order
The Court has determined that the claims stated in the Complaint against MERS, Wells Fargo, and Fannie Mae must be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6).
Plaintiffs' proposed amendments to the Complaint are futile with respect to the claims against MERS, Wells Fargo, and Fannie Mae. It also does not appear that the proposed Amended Complaint includes substantial changes to the allegations against the Macomb County Sheriff and Writs, Inc., which are the remaining defendants in this action. The Court therefore concludes that leave to amend is properly denied.
The motion to stay filed by MERS and Wells Fargo was rendered moot by the Michigan Supreme Court's Saurman decision, and shall therefore be denied.