Hrss, Inc. v. Wayne County Treasurer

• Decision Date: 28 August 2003
• Docket Number: No. 02-CV-71937-DT.,02-CV-71937-DT.
• Citation: 279 F.Supp.2d 846
• Parties: HRSS, INC., et al., Plaintiffs, v. WAYNE COUNTY TREASURER, et al., Defendants.
• Court: U.S. District Court — Eastern District of Michigan

279 F.Supp.2d 846

HRSS, INC., et al., Plaintiffs, v. WAYNE COUNTY TREASURER, et al., Defendants.

No. 02-CV-71937-DT.

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

August 28, 2003.

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Robert Horvath, Troy, MI, Hugh Davis, Jr., Constitutional Litigation Assoc., P.C., Detroit, MI, for Plaintiffs.

Samuel Nouhan, Wayne County Corporation Counsel, Detroit, MI, for Defendants.

ORDER DENYING PLAINTIFFS' "MOTION FOR SUMMARY JUDGMENT" AND GRANTING IN PART AND DENYING IN PART DEFENDANTS' "CROSS-MOTION FOR DISMISSAL AND/OR SUMMARY JUDGMENT" AND HOLDING PLAINTIFF'S "MOTION FOR CLASS CERTIFICATION" IN ABEYANCE AND PERMITTING ADDITIONAL LIMITED DISCOVERY AND DIRECTING FURTHER BRIEFING

CLELAND, District Judge.

On June 16, 2003 Plaintiffs filed two motions: a "Motion for Summary Judgment" and a "Motion for Class Certification." On July 17, 2003, Defendants filed a document entitled "Cross-Motion for Dismissal and/or Summary Judgment," which included Defendants' response to Plaintiffs' motion and a motion for dismissal and/or summary judgment.¹ In lieu of the August 27 hearing originally scheduled on these matters, the court conducted a status conference. See E.D. Mich. LR 7.1(e)(2). For the reasons stated below, Plaintiffs' motion for summary judgment will be denied and their motion for class certification will be held in abeyance. Defendants' motion will be granted in part and denied in part.

I. BACKGROUND

This dispute arises from mortgage foreclosure sales conducted by Wayne County (the "County"), primarily through the County's Sheriff and Treasurer. All have been named as defendants in this suit. The facts in this case are largely undisputed.

On October 27, 1999, Plaintiffs Harold and Joann Holt were involved as the mortgagors in a mortgage foreclosure sale conducted by the County. The property that was foreclosed upon had costs, including an outstanding mortgage, attached to it in the amount of $16,503.55. The property was purchased for $41,000.00 at the mortgage foreclosure sale, leaving an overbid surplus² of $24,496.45. State law directs the County to turn any surplus over to the mortgagor unless a claim, or competing claims, to the surplus proceeds are made. See Mich. Comp. Laws § 600.3252. If such claims are made, the state circuit court conducts a hearing to determine the proper disposition of the surplus funds.

In this case, Royal Mortgage Corporation, an alleged assignee of Harold and Joann Holt, made a claim to the $24,296.45 surplus. The case was assigned to Chief Wayne County Circuit Judge Michael Sapala, who issued an order on August 15 2000 directing the County to issue the $24,496.45 surplus to the Holts. On August 16, 2000, the Wayne County Clerk's Office issued a check in the amount of $24,496.45 to the Holts, which was retrieved by Joann Holt on September 15, 2000. A period of nearly ten months separated the foreclosure sale and the issuance of the check to the Holts.

Similarly, on August 3, 2000, Defendant Wayne County received an overbid surplus of $52,561.63 from the sale of certain other foreclosed-upon property. Plaintiff HRSS, Inc. ("HRSS") was the assignee for any overbid surpluses resulting from that sale. On October 21, 2000, Defendant Wayne County tendered payment in the amount of $52,561.63 to HRSS.

According to the testimony of Kate Ben-Ami, a staff attorney for the Wayne County Sheriff's Department, before June 1999, the Sheriff's Department managed the overbid surplus funds internally, depositing the money into an account handled by the Sheriff. (Ben-Ami Dep. at 45-47.) On or about June 1, 1999, however, Wayne County's "Director of Cash Management," its Treasurer and its Sheriff (or certain unnamed "personnel" thereof) apparently decided to integrate "the Sheriff Court Services Division's cash into the County general ledger system." (Ex. 5 attached to Ben-Ami Dep.) This integration resulted in the overbid surpluses being pooled into the same account as other governmental revenues, including tax money, transfers from government agencies, and revenues collected by county agencies and facilities, such as golf courses. (Smith Dep. at 10.) This pooled account, the Wayne County Treasurer's general receiving account, was deposited with Bank One.

Plaintiffs claim that once Defendants hold any surplus funds generated from mortgage foreclosure sales in an interest-bearing account, they have a duty to pay over the principal, along with any earned interest, to the mortgagor within a reasonable amount of time. Plaintiffs brought suit alleging violations of federal and state law. They also seek to certify this lawsuit as a class action on behalf of all mortgagors involved in Wayne County foreclosure sales that were not paid interest on their overbid surpluses.

II. SUMMARY JUDGMENT

A. Standard

Rule 56 of the Federal Rules of Civil Procedure, which governs summary judgment motions, provides in part that:

[t]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

Fed.R.Civ.P. 56(c). The moving party has the burden of demonstrating that there is no genuine issue as to any material fact, and a summary judgment is to be entered if the evidence is such that a reasonable jury could find only for the moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). It is not necessary for the moving party to support its motion with affidavits or other similar forms of evidence; rather, the movant need only show that "there is an absence of evidence to support the non-moving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson, 477 U.S. at 250, 106 S.Ct. 2505. Therefore, the court must necessarily examine the evidence provided in a light that is most favorable to the nonmoving party, United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962), and decide "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law," Anderson, 477 U.S. at 251-252, 106 S.Ct. 2505.

B. Discussion

1. State Tort Claims

Plaintiffs assert various state tort claims against Defendants, including conversion, wrongful appropriation, unjust enrichment, and breach of fiduciary duties. Because Defendants are immune from such allegations, these claims will be dismissed under Federal Rule of Civil Procedure 12(b)(6) for failing to state a claim upon which relief can be granted.

"A judge, a legislator, and the elective or highest appointive executive official of all levels of government are immune from tort liability for injuries to persons or damages to property if he or she is acting within the scope of his or her judicial, legislative, or executive authority." Mich. Comp. Laws § 691.1407(5). The Wayne County Sheriff and Treasurer were acting within the scope of their authority when they held and disbursed funds from foreclosure sales, and thus are immune from tort liability under this statute.

Plaintiffs' tort claims against Wayne County also fail as a matter of law because the county is immune under Michigan law. Unless a statutory exception applies, and no exceptions apply in this case, "a governmental agency is immune from tort liability if the governmental agency is engaged in the exercise or discharge of a governmental function." Mich. Comp. Laws § 691.1407(1). For purposes of this section, the term "governmental agency" includes counties. Accordingly, Wayne County is entitled to immunity for its role in foreclosure sales.

2. State Constitutional Claims

Plaintiffs' claims brought pursuant to the Michigan Constitution also fail as a matter of law. In Jones v. Powell, 462 Mich. 329, 612 N.W.2d 423 (2000), the Michigan Supreme Court held that inasmuch as other avenues of relief are available, there is no "damage remedy for a violation of the Michigan Constitution in an action against a municipality or an individual government employee." Id. at 426. As is evident in this case, another avenue of relief is available to obtain damages from the county and its officials, namely an action under 42 U.S.C. § 1983. Thus, under Jones, Plaintiffs' state constitutional damages claims are barred. See Curry v. Wayne County, No. 216842, 2001 WL 765901 (Mich.App. Jan. 26, 2001) (affirming summary disposition of the plaintiff's constitutional claims against the county and its sheriff under Jones).

3. Takings

In their complaint, Plaintiffs allege a violation of their "substantive due process [right] to be free from arbitrary or illegitimate governmental actions." Graham v. Connor, 490 U.S. 386, 395, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989), however, precludes the use of substantive due process analysis when a more specific constitutional provision governs. Thus, the court construes Plaintiffs' substantive due process claim as a takings claim.

Further, Plaintiffs assert a violation of the Fourth Amendment's prohibition of unreasonable seizures, made applicable to the states through the Fourteenth Amendment. Such a claim may be coupled with a Fifth Amendment takings claim. See Soldal v. Cook County, 506 U.S. 56, 70, 113 S.Ct. 538, 121 L.Ed.2d 450 (1992). Just as is the case with the Fifth Amendment takings claim, in order to demonstrate a violation of the Fourth Amendment, Plaintiffs must first demonstrate a constitutionally protected property interest. See United States v. Jacobsen, 466 U.S. 109, 113, 104 S.Ct. 1652, 80 L.Ed.2d 85 (1984) (a seizure of property occurs...