Hurst v. Fed. Nat'l Mortg. Ass'n, 15-1586

Decision Date23 February 2016
Docket NumberNo. 15-1586,15-1586
PartiesGWENDOLYN HURST, Plaintiff-Appellant, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit


File Name: 16a0107n.06


BEFORE: CLAY and ROGERS, Circuit Judges; THAPAR, District Judge.*

CLAY, Circuit Judge. Plaintiff-Petitioner, Gwendolyn Hurst ("Plaintiff"), appeals from the district court's orders granting Defendants' motion to dismiss and denying Plaintiff's subsequent motion to alter or amend the judgment. Plaintiff's suit challenges the foreclosure on, and subsequent sheriff's sale of, the home in which she currently resides. Plaintiff seeks, inter alia, to quiet title and enjoin Defendants, the Federal National Mortgage Association ("Fannie Mae") and its conservator, the Federal Housing Financing Agency ("FHFA"), from taking any action based on the sheriff's deed that Fannie Mae acquired as a result of the sheriff's sale. For the reasons set forth below, we AFFIRM the district court's judgments.


On August 20, 2003, non-party Lue Lee Tomlin ("Tomlin") obtained a reverse mortgage loan from non-party Financial Freedom Senior Funding Corporation. As security for the loan, Tomlin granted a mortgage to Financial Freedom on her home ("the Property"). On September 4, 2012, Financial Freedom assigned the mortgage to non-party One West Bank, FSB ("One West"). Both the mortgage and its assignment to One West were properly recorded.

Prior to the at-issue foreclosure on that mortgage, Plaintiff Gwendolyn Hurst served as Tomlin's caretaker. While acting in this capacity, Plaintiff lived in the Property with Tomlin. Plaintiff's complaint alleges that at some point, "Tomlin promised Hurst that, upon Tomlin's death, [Hurst] could acquire the Property." (R. 1-2 at ¶ 14.) Although Plaintiff's complaint is unclear, the record indicates that Tomlin died at some time prior to November 29, 2012, and that either Tomlin or her estate defaulted on the mortgage prior to October 29, 2012.

One West thereafter foreclosed upon the Property pursuant to Michigan's foreclosure by advertisement statute, M.C.L. § 600.3201 et seq., by publishing notice of the foreclosure in a local newspaper on four occasions between October 29, 2012, and November 19, 2012. In accordance with M.C.L. § 600.3205a(3),1 written notice was mailed to Tomlin on September 21, 2012. Notice of a forthcoming sheriff's sale was posted on the Property on November 2, 2012, and the sheriff's sale was held on November 29, 2012. At the sale, One West purchased the Property for $15,500. Less than two weeks later, One West sold its interest in the Property to Defendant Federal National Mortgage Association ("Fannie Mae"). Fannie Mae properly recorded its quitclaim deed from that sale.

Plaintiff alleges that "[b]oth prior to and subsequent to the foreclosure sale," she "sought to acquire the Property . . . for the redemption price." (R. 1-2 at ¶¶ 19, 23.) However, when she attempted to do so, she was told by Fannie Mae that she could not acquire the property because "she was not Tomlin's blood relative." (Id. at ¶ 19.) On May 29, 2013, Michigan's six-month statutory redemption period passed with no redemption made. See M.C.L. § 600.3240. After Fannie Mae instituted eviction proceedings in September 2013, Plaintiff filed this suit in state court challenging the validity of the foreclosure and resulting sheriff's sale. Fannie Mae removed to federal court, and the parties stipulated to a stay of the eviction proceedings pending resolution of the suit.

Plaintiff's complaint alleged two defects in the foreclosure process—namely, "fail[ure] to serve notice on Tomlin's estate" and an invalid chain of title, both in violation of Michigan statutes governing foreclosure by advertisement, M.C.L. § 600.3201 et seq. (R. 1-2 at ¶¶ 20-21, 48.) Based on these alleged defects, Plaintiff requested (1) an order rescinding the sheriff's deed and quieting title in her favor; (2) $25,000 in damages for slander of title; and (3) an injunction preventing Fannie Mae from "taking any action based upon the Sheriff's Deed." (Id. at ¶¶ 56-73.) Plaintiff also alleged a claim for relief under 42 U.S.C. § 1983, asserting that Defendants' actions in foreclosing on the Property violated her constitutional rights under the Due Process, Equal Protection, and Privileges and Immunities Clauses of the United States Constitution.

On March 10, 2014, Defendant Fannie Mae filed a motion to dismiss Plaintiff's suit pursuant to Federal Rule of Civil Procedure 12(b)(6). After further briefing by the parties, the district court issued an opinion and order granting Fannie Mae's motion and dismissing Plaintiff's suit. Relying on Plaintiff's allegation that "Tomlin promised Hurst that, upon Tomlin's death, [Hurst] could acquire the property," the district court held that Plaintiff lackedstanding to challenge the foreclosure proceedings. Specifically, the court interpreted Plaintiff's allegation to mean that she would merely "be able to purchase the property upon [Tomlin's] death," and that Plaintiff otherwise failed to allege that she possessed "any legally binding instrument that would establish" her right to challenge the foreclosure proceedings. (R. 10, PageID 159.) However, the district court opined that even assuming Plaintiff had standing, her claims would fail on the merits because (1) Plaintiff failed to allege sufficient prejudice to challenge the sheriff's sale; and (2) as a non-governmental actor, Fannie Mae could not be held liable for constitutional violations.

On February 19, 2015, Plaintiff filed a motion to alter or amend the judgment pursuant to Federal Rules of Civil Procedure 59(e) and 60(b). Plaintiff attached an affidavit to this motion, in which she asserted that Tomlin had "orally assigned" Plaintiff "her rights with regard to her reverse mortgage and/or the Property," and that Tomlin's daughter, Casey Tomlin, had done the same. (R. 13, PageID 182.) Plaintiff argued that the affidavit clarifies that she does have sufficient interest in the Property to establish standing to challenge the foreclosure. Plaintiff also attached a November 25, 2014 FHFA policy announcement relating to the sale of properties held by Fannie Mae.2 The policy "permit[s] [Fannie Mae] to sell existing . . . properties to any qualified purchaser at the property's fair-market value, as determined by [Fannie Mae]." (Id. at 180.) Plaintiff argued that this new policy constitutes a change in law sufficient to warrant alteration of the judgment under Rules 59 and 60.

On April 17, 2015, the district court issued an opinion and order denying Plaintiff's motion to alter or amend the judgment. The court noted that "Plaintiff provide[d] no indication that any of the information provided in her affidavit was unavailable at the time of her complaintor Defendants' motion to dismiss." (R. 22, PageID 249.) Similarly, the court observed that "[t]he News Release that Plaintiff relies on was issued on November 25, 2014, nearly two months before this Court's January 22, 2015, Order granting Defendants' Motion to Dismiss." (Id. at 251.) For those reasons, the court held that Plaintiff failed to demonstrate "newly discovered evidence" or an "intervening change in the controlling law" such that relief under Rules 59 or 60 was warranted. (See id. at 249, 251.)

Plaintiff timely appealed from the district court's order granting Defendants' motion to dismiss, as well as from the order denying her motion to alter or amend the judgment.

Standard of Review and Applicable Law

We review de novo the grant of a motion to dismiss for failure to state a claim. Casias v. Wal-Mart Stores, Inc., 695 F.3d 428, 435 (6th Cir. 2012). In so doing, we must "accept all factual allegations as true," construing the complaint "in the light most favorable to the plaintiff." Laborers' Local 265 Pension Fund v. iShares Trust, 769 F.3d 399, 403 (6th Cir. 2014). To survive a motion to dismiss, plaintiffs must plead "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Under this standard, a plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

A. Standing

We review a decision regarding a plaintiff's Article III standing de novo. Schultz v. United States, 529 F.3d 343, 349 (6th Cir. 2008). "The 'well established' law of Article IIIstanding requires a plaintiff to 'allege personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief.'" Murray v. U.S. Dep't of Treasury, 681 F.3d 744, 748 (6th Cir. 2012) (quoting Hein v. Freedom From Religion Found., Inc., 551 U.S. 587, 598 (2007)). "We look to the complaint and any accompanying materials in deciding standing questions." Id. Moreover, "[a] litigant has standing under Michigan law ' whenever there is a legal cause of action,' including instances when a plaintiff can meet the standards for seeking a declaratory judgment." El-Seblani v. IndyMac Mortgage Servs., 510 F. App'x 425, 428 (6th Cir. 2013) (quoting Lansing Schs. Educ. Ass'n v. Lansing Bd. of Educ., 792 N.W.2d 686, 699 (Mich. 2010)).

Below, the district court concluded that Plaintiff "claims no actual interest in the Property that would result in an injury to her upon foreclosure of the Property." (R. 10, PageID 159.) The district court held that without such an interest, "Plaintiff was merely a tenant who occupied the Property, not an owner," and that she therefore lacked Article III standing to challenge the foreclosure proceedings. (Id.) On the other hand, Plaintiff claims the...

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