McCann v. U.S. Bank, N.A.

Decision Date25 May 2012
Docket NumberCase No. 11–14804.
Citation873 F.Supp.2d 823
PartiesPatrick McCANN and Deborah McCann, Plaintiffs, v. U.S. BANK, N.A., as Trustee for the Structured Asset Securities Corporation, Series 2006–OW1, Defendant.
CourtU.S. District Court — Eastern District of Michigan

OPINION TEXT STARTS HERE

Adam J. Gantz, Nickolas C. Buonodono, Gantz Associates, Farmington Hills, MI, for Plaintiffs.

Matthew J. Boettcher, Plunkett & Cooney, Bloomfield Hills, MI, for Defendant.

OPINION AND ORDER OVERRULING OBJECTIONS, ADOPTING MAGISTRATE'S REPORT AND RECOMMENDATION, AND GRANTING DEFENDANT'S MOTION TO DISMISS THE COMPLAINT

THOMAS L. LUDINGTON, District Judge.

This case concerns a pending mortgage foreclosure by advertisement on a private residence. The plaintiffs have defaulted on the loan, the defendant is in possession of the promissory note endorsed in blank, and the assignment from the original mortgagee to the defendant is recorded in the county land records. The parties' primary dispute is whether the defendant has the authority to foreclose on the property. The ancillary dispute is whether the statute of frauds bars the plaintiffs' claims of breach of contract, promissory estoppel, and fraud regarding an alleged oral agreement to modify the interest rate of the loan. For the reasons that follow, the Court answers both questions in the affirmative.

Plaintiffs Patrick and Deborah McCann commenced this case in state court, filing a twelve-count complaint against Defendant seeking to enjoin the foreclosure by advertisement of their residence, money damages, and attorney fees. Defendant U.S. Bank, N.A., as Trustee for the Structured Asset Securities Corporation, Series 2006–OW1, removed the case to this court. In lieu of answering, Defendant moved to dismiss the complaint. ECF No. 3. Magistrate Judge Charles Binder issued a report and recommendation on April 3, 2012, recommending that the Court grant the motion to dismiss. ECF No. 11. Plaintiffs timely filed objections to Judge Binder's report and recommendation on April 17, 2012. ECF No. 11. As detailed below, the Court will overrule Plaintiffs' objections, adopt Judge Binder's report and recommendation, and grant Defendant's motion to dismiss.

I

On September 1, 2005, Plaintiffs obtained a home loan from Ownit Mortgage Solutions, Inc., to purchase a residence located at 1784 South 5 Mile Road in Midland, Michigan. The loan was for $120,000 with an annual interest rate of 7.875 percent. In exchange for the loan, Plaintiffs executed two documents, a mortgage and promissory note.

The mortgage is attached to the complaint as exhibit A. It identifies the borrowers, Patrick H. McCann and Deborah L. McCann, husband and wife as joint tenants,” as well as the lender, “Ownit Mortgage Solutions, Inc, a California corporation.” Compl. Ex. A. The mortgage also identifies the mortgagee and lender's nominee, specifying: “MERS is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as nominee for Lender and Lender's successors and assigns. MERS is the mortgagee under this Security Instrument.” Id.

The promissory note is also part of the record. Def.'s Reply Br. Supp. Mot. to Dismiss Ex. 5 (“Def.'s Reply. Br.”). “In return for a loan that I have received,” the note provides, “I promise to pay U.S. $120,000.00 (this amount is called “Principal”), to the order of the Lender. The Lender is Ownit Mortgage Solutions, Inc., a California corporation.” Id. at 1. The note continues: “I understand that the Lender may transfer this Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the ‘Note Holder.’ Id. Mr. McCann endorsed the note; Mrs. McCann did not. Id. at 3. A representativeof Ownit also endorsed the note, in blank.1Id. at 4.

In July 2006, MERS assigned the mortgage to Defendant. The assignment is attached to the complaint as exhibit B. In pertinent part, it provides:

Know all men by these presents, that Mortgage Electronic Registration Systems, Inc. as nominee for Lender and Lender's successors and/or assigns, ... for and in consideration of the sum of One Dollar ($1.00) and other valuable considerations, lawful money of the United States of America, to it paid by [Defendant] ... does hereby sell, assign and transfer to [Defendant], all the right, title and interest of [MERS] in and to a certain real estate mortgage made by Patrick H. McCann and Deborah L. McCann, Husband and Wife as Joint Tenants, original mortgagor(s), to Mortgage Electronic Registration Systems, Inc., as nominee for Lender and Lender's successors and/or assigns, Mortgagee, dated September 1, 2005.

Compl. Ex. B. On July 17, 2006, the assignment was recorded in the Midland County land records.

Sometime later, Ownit went out of business. “As a result,” the complaint asserts, “it is Plaintiffs' position that the mortgage at issue can never be foreclosed on, by anyone. Compl. ¶ 18 (emphasis in original).

In March 2010, Plaintiffs contacted their mortgage servicing agent, America's Servicing Company (“ASC”), and requested a modification of the terms of the mortgage. Id. ¶ 19. In May 2010, the complaint alleges, ASC told Plaintiffs “that their loan would be permanently modified from the fraudulently inflated rate of 7.875% to a more reasonable 4.5%, which would reduce their payment from $1,057 per month to $786.90 per month. A representative of ASC who identified himself as Robert Grant further informed Plaintiffs that all they had to do to ensure the permanent modification of their loan was to make a payment in June, 2010 of $689, followed by five monthly installments of $786.90 [i.e., through November 2010].” Id. ¶ 22 (emphasis omitted). In November 2010, the complaint further alleges, Mr. Grant “stopped calling the prior agreement a ‘trial period,’ and started calling it a ‘forbearance plan,’ which is a completely different kind of agreement.” Id. ¶ 24.

In February 2011, the complaint continues, ASC notified Plaintiffs that they had been approved for a permanent loan modification, reducing their interest rate from 7.875 percent to 6.5 percent, “and if that wasn't bad enough, the agreement showed that as a result of the forbearance period, there was now a $5,000 arrearage that did not exist prior to the forbearance period, which would be tacked onto to the back end of Plaintiff's loan.” Compl. ¶ 27.

In June 2011, a second assignment of mortgage from MERS to Defendant was executed and recorded in the land records of Midland County. The following month, Defendant commenced foreclosure by advertisement proceedings. See id. Ex. F. The public auction was noticed for October 25, 2011.

On October 24, 2011, Plaintiffs filed suit against Defendant in the Midland County Circuit Court. Plaintiffs requested a temporary restraining order preventing the foreclosure auction from proceeding. Additionally, Plaintiffs' complaint contained the following twelve counts: (1) “invalid assignments—no proof of ownership of loan/authority to foreclose”; (2) “breach of contract”; (3) “promissory estoppel”; (4) “intentional fraud”; (5) “constructive fraud”; (6) “unjust enrichment”; (7) “Truth in Lending Act; (8) “declaratory relief—foreclosure barred by unclean hands”; (9) “breach of contract—implied duty of good faith and fair dealing”; (10) “Mortgage Brokers, Lenders, and Servicers Licensing Act; (11) Fair Debt Collection Practices Act; and (12) Fair Debt Collection Practices Act.” Plaintiffs requested an order enjoining the foreclosure, money damages, and attorney fees.

Defendant removed the case to this Court on November 1, 2011. The case was referred to Judge Binder for general case management pursuant to 28 U.S.C. § 636(b). On November 14, 2011, in lieu of answering Defendant filed a motion to dismiss and/or for summary judgment brought “under Fed.R.Civ.P. 12(b)(6) and/or 56(a).” On April 3, 2012, Judge Binder issued a report recommending that the motion be granted and the complaint be dismissed. Plaintiffs timely filed objections to the report.

II

The district court will make a “de novo determination of those portions of the report ... to which objection is made.” 28 U.S.C. § 636(b)(1). The Court is not obligated to review the portions of the report to which no objection was made. Thomas v. Arn, 474 U.S. 140, 149–52, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985).

III
A

Plaintiffs first object to Judge Binder's recommendation that the Court dismiss count one. Titled “invalid assignments—no proof of ownership of loan/authority to foreclose,” count one alleges that “the chain of title at the Register of Deeds makes it clear that it is Ownit, which no longer exists as a corporate entity, which would be the only person or entity with authority to foreclose.” Compl. ¶ 46. It continues: “The Michigan Court of Appeals has held, in authority that is fully binding upon this Court, that MERS is not a mortgagee, but merely a ‘nominee’ of the mortgagee, and as a result, MERS has been barred under Michigan law from commencing any further foreclosure proceedings in the State of Michigan since approximately April, 2011.” Id. ¶ 49. (The Michigan Court of Appeals decision referenced in this paragraph of the complaint, Residential Funding Co. LLC v. Saurman, 292 Mich.App. 321, 807 N.W.2d 412 (Mich.Ct.App.2011), was summarily reversed by the Michigan Supreme Court less than a month after this case was filed. Saurman, 805 N.W.2d 183 (Mich.2011).)

Judge Binder recommends that this count be dismissed because Plaintiffs lack standing to challenge the validity of the assignment.... Even if Plaintiffs did have standing to challenge the assignments, I suggest that the result would be the same.” Report & Recommendation 7–8 (citing Livonia Props. Holdings, LLC v. 12840–12976 Farmington Rd. Holdings, LLC, 399 Fed.Appx. 97, 102–03 (6th Cir.2010); and Bakri v. Mortgage Elec. Reg. Sys., No. 297962, 2011 WL 3476818, at *4 (Mich.Ct.App. Aug. 9, 2011) (unpublished)). Judge ...

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