Conlin v. Mortg. Elec. Registration Sys., Inc.

• Decision Date: 10 April 2013
• Docket Number: No. 12–2021.,12–2021.
• Citation: 714 F.3d 355
• Parties: Michael J. CONLIN, Plaintiff–Appellant, v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (“MERS”); U.S. Bank, National Association, as trustee for an unknown securitized trust; Orlans Associates, P.C.; Marshall R. Isaacs, Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

714 F.3d 355

Michael J. CONLIN, Plaintiff–Appellant,

v.MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (“MERS”); U.S. Bank, National Association, as trustee for an unknown securitized trust; Orlans Associates, P.C.; Marshall R. Isaacs, Defendants–Appellees.

No. 12–2021.

United States Court of Appeals,Sixth Circuit.

Argued: March 11, 2013.

Decided and Filed: April 10, 2013.

ARGUED:Brian P. Parker, Bingham Farms, Michigan, for Appellant. Thomas M. Schehr, Dykema Gossett PLLC, Detroit, Michigan for Appellees Mortgage Electronic Registration Systems and U.S. Bank. Timothy B. Myers, Orlans Associates, P.C., Troy, Michigan, for Appellees Orlans and Isaacs

ON BRIEF

:

Brian P. Parker, Bingham Farms, Michigan, for Appellant. Thomas M. Schehr, Michael J. Blalock, Dykema Gossett PLLC, Detroit, Michigan, for Appellees Mortgage Electronic Registration Systems and U.S. Bank. Timothy B. Myers, Orlans Associates, P.C., Troy, Michigan, for Appellees Orlans and Isaacs.

Before: MERRITT, MARTIN, and CLAY, Circuit Judges.

OPINION

CLAY, Circuit Judge.

This appeal requires us once again to wade into the morass of litigation involving mortgage foreclosures under Michigan law. In this case, Plaintiff Michael Conlin seeks to have the foreclosure sale of his property in Ann Arbor, Michigan set aside based on alleged defects in the assignment of the mortgage on the property from Defendant Mortgage Electronic Registration Systems to Defendant U.S. Bank. For the following reasons, we AFFIRM the district court's dismissal of Plaintiff's case.

BACKGROUND

In April 2005, Plaintiff Michael Conlin refinanced his property at 1304 Belmar Place in Ann Arbor, Michigan (the “Property”) by obtaining a loan from Bergin Financial, Inc. (“Bergin”) in the amount of $240,000. To secure the loan, Plaintiff granted Bergin a mortgage on the Property; he also executed a promissory note to Bergin promising to repay the loan. Included in the mortgage was a provision that recognized Defendant Mortgage Electronic Registration Systems, Inc. (“MERS”) as “a nominee[ ¹] for [Bergin] and [Bergin's] successors and assigns.” (R. 7–3, Mortgage, PID# 486.)

Shortly after the note and mortgage were executed, Bergin sold the note to the Real Estate Mortgage Investment Conduit, of which Defendant U.S. Bank was the trustee. The mortgage was held by MERS, as Bergin's nominee. During this time, GMAC Mortgage, LLC acted as the servicer of the mortgage.²

On May 15, 2008, Defendant Marshall Isaacs, acting on behalf of MERS, assignedthe Mortgage to “U.S. Bank National Association as trustee.” (R. 7–4, Assignment, PID# 505.) On November 29, 2010, Defendant Orlans Associates, P.C. (“Orlans”) sent a letter to Plaintiff, pursuant to Mich. Comp. Laws § 600.3205a, notifying him that he was in default on the mortgage and of his ability to request a loan modification. The letter specified that it was sent by Orlans on behalf of GMAC as “the creditor to whom your mortgage debt is owed or the servicing agent for the creditor to whom the debt is owed.” (R. 19–9, PID# 1113–14.) Plaintiff remained in default on the mortgage.

On March 3, 2011, Orlans published its first notice of a foreclosure sale of the Property in a local newspaper, pursuant to Mich. Comp. Laws § 600.3208. The notice stated that “the mortgage is now held by U.S. Bank National Association as Trustee by assignment.” (R. 7–5, Sheriff's Deed and Notice Affidavits, PID# 510.) It noted that the sale would take place on March 31, 2011. This same notice ran on March 10, 17, and 24, 2011. The same notice was also “posted in a conspicuous place” on the Property, pursuant to Mich. Comp. Laws § 600.3208, on March 6, 2011. The Property was sold at a sheriff's sale on March 31, 2011 to U.S. Bank for a credit bid of $159,200. That sale was recorded on April 28, 2011.

On October 28, 2011, Plaintiff filed a complaint in Washtenaw County, Circuit Court, seeking damages and to have the foreclosure sheriff's sale of the Property set aside. Defendants removed the case to the United States District Court for the Eastern District of Michigan. On December 12, 2011, Defendants moved to dismiss Plaintiff's complaint. The district court granted dismissal on all counts on July 20, 2012. Conlin v. Mortg. Elec. Regis. Sys., Inc., No. 11–CV–15352, 2012 WL 3013920 (E.D.Mich. July 20, 2012). Plaintiff timely appealed, invoking this Court's jurisdiction under 28 U.S.C. § 1291.

DISCUSSION

A. Standard of Review and Applicable Law

We review a ruling on a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss de novo. Casias v. Wal–Mart Stores, Inc., 695 F.3d 428, 435 (6th Cir.2012). Though a complaint need not contain “ ‘detailed factual allegations' ” to be sufficient, it must go beyond mere “ ‘labels and conclusions.’ ” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “Following Twombly and Iqbal, it is well settled that ‘a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” ’ ” Ctr. for Bio–Ethical Reform v. Napolitano, 648 F.3d 365, 369 (6th Cir.2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (in turn quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955)). “A claim is plausible on its face if the ‘plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ ” Id. (quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937).

Where, as here, federal jurisdiction is based on diversity, this Court applies the substantive law of the forum state—in this case, Michigan. Savedoff v. Access Grp., Inc., 524 F.3d 754, 762 (6th Cir.2008) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). In resolving issues of Michigan law, we look to the final decisions of that state's highest court, and if there is no decision directly on point, then we must make an Erie guess to determine how that court, if presented with the issue, would resolve it. See id. In making this determination, “[i]ntermediate state appellate courts' decisions are also viewed as persuasive unless it is shown that the state's highest court would decide the issue differently.” Id. (internal quotation marks omitted).

B. Ability to Set Aside a Foreclosure Sale after the Lapse of the Statutory Redemption Period

Non-judicial foreclosures, or foreclosures by advertisement, are governed by statute under Michigan law. Munaco v. Bank of America, 513Fed.Appx. 508, ––––, No. 12–1325, 2013 WL 362752, at *3 (6th Cir. Jan. 31, 2013) (citing Mich. Comp. Laws § 600.3204 and Senters v. Ottawa Sav. Bank, FSB, 443 Mich. 45, 503 N.W.2d 639, 641 (1993)). While the statutory scheme provides certain steps that the mortgagee must go through in order to validly foreclose, id., it also controls the rights of both the mortgagee and the mortgagor once the sale is completed, Williams v. Pledged Prop. II, LLC, 508 Fed.Appx. 465, 467–68, No. 12–1056, 2012 WL 6200270, at *2 (6th Cir. Dec. 13, 2012) (citing Senters, 503 N.W.2d at 641). The statutes provide the mortgagor six months after the sheriff's sale in which to redeem the property. Mich. Comp. Laws § 600.3240(8); see also Mitan v. Fed. Home Loan Mortg. Corp., 703 F.3d 949, 951 (6th Cir.2012). Once this statutory redemption period lapses, however, the mortgagor's “right, title, and interest in and to the property” are extinguished. Piotrowski v. State Land Office Bd., 302 Mich. 179, 4 N.W.2d 514, 517 (1942); seeMich. Comp. Laws § 600.3236.

Michigan's foreclosure-by-advertisement scheme was meant to, at once, impose order on the foreclosure process while still giving security and finality to purchasers of foreclosed properties. See Mills v. Jirasek, 267 Mich. 609, 255 N.W. 402, 404 (1934) (citing Reading v. Waterman, 46 Mich. 107, 8 N.W. 691, 692 (1881)); see also Gordon Grossman Bldg. Co. v. Elliott, 382 Mich. 596, 171 N.W.2d 441, 445 (1969). To effectuate this interest in finality, the ability for a court to set aside a sheriff's sale has been drastically circumscribed. See Schulthies v. Barron, 16 Mich.App. 246, 167 N.W.2d 784, 785 (1969); see also Senters, 503 N.W.2d at 643. Michigan courts have held that once the statutory redemption period lapses, they can only entertain the setting aside of a foreclosure sale where the mortgagor has made “a clear showing of fraud, or irregularity.” Schulthies, 167 N.W.2d at 785;see also Sweet Air Inv., Inc. v. Kenney, 275 Mich.App. 492, 739 N.W.2d 656, 659 (2007) (“The Michigan Supreme Court has held that it would require a strong case of fraud or irregularity, or some peculiar exigency, to warrant setting a foreclosure sale aside.” (internal quotation marks omitted)). Whether the failure to make this showing is best classified as standing issue ³ or as a merits determination,⁴ one thing is clear: a plaintiff-mortgagor must meet this “high standard” in order to have a foreclosure set aside after the lapse of the statutory redemption period. See El–Seblani v. IndyMac Mortg. Servs., 510 Fed.Appx. 425, 429–30, No. 12–1046, 2013 WL 69226, at *4 (6th Cir. Jan. 7, 2013).

It is further clear that not just any type of fraud will suffice. Rather, “[t]he misconduct must relate to the foreclosure procedure itself.” Id. (citing Freeman v. Wozniak, 241 Mich.App. 633, 617 N.W.2d 46, 49 (2000)); see also Williams, 508 Fed.Appx. at 468–69, 2012 WL 6200270, at *3 (citing Heimerdinger v. Heimerdinger, 299 Mich. 149, 299 N.W. 844, 846 (1941), and Sagmani v. Lending Assocs. LLC, No. 302865, 2012 WL 3193940, at *1 (Mich.Ct.App. Aug. 7, 2012)).

C. Plaintiff's Claim of Fraud

As the six-month statutory redemption period has long since lapsed and the filing of a lawsuit is “insufficient to toll the redemption period,” Plaintiff must make a clear showing of fraud or irregularity to maintain this action. Overton v. Mortg. Elec. Registration Sys., No. 284950, 2009 WL 1507342, at *1 (M...