Munaco v. Bank of Am.

• Decision Date: 31 January 2013
• Docket Number: No. 12-1325,12-1325
• Parties: SALVATORE A. MUNACO, Plaintiff-Appellant, v. BANK OF AMERICA; BANK OF NEW YORK MELLON, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

SALVATORE A. MUNACO, Plaintiff-Appellant, v. BANK OF AMERICA; BANK OF NEW YORK MELLON, Defendants-Appellees.

No. 12-1325

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

FILED: January 31, 2013

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 13a0118n.06

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN

BEFORE: MARTIN, SUHRHEINRICH and GIBBONS, Circuit Judges.

SUHRHEINRICH, Circuit Judge.

I. Introduction

Defendant The Bank of New York Mellon ("BNYM") foreclosed the mortgage of Plaintiff Salvatore A. Munaco ("Munaco") after Munaco defaulted on the loan secured by the mortgage. Munaco sued, alleging that the foreclosure sale violated Michigan's advertisement statute, Mich. Comp. Laws Ann. § 600.3220. The district court granted summary judgment to Defendants and also denied Munaco's motion for reconsideration or relief from judgment. Munaco appeals both of those orders. We AFFIRM.

II. Background

On January 17, 2007, Munaco got a loan in the amount of $1,190,000.00 from America's Wholesale Lender ("AWL"), for residential property located in Rochester, Michigan. The note wassecured by a mortgage, which was recorded with the Oakland County Register of Deed ("ROD"). Defendant Bank of America is the servicer of the loan. The mortgage identified Mortgage Electronic Systems, Inc. ("MERS") as the mortgagee. MERS assigned the mortgage to BNYM, by written assignment, which was recorded with the ROD on June 25, 2009.

Munaco defaulted on the note. On June 2, 2009, BNYM began foreclosure proceedings. This was twenty-three days before it recorded the assignment of the mortgage with the ROD, on June 25, 2009. The foreclosure sale was originally scheduled for June 30, 2009, but after four adjournments, took place on July 28, 2009. BNYM purchased the property at the foreclosure sale for $697,000. Munaco had until July 28, 2010, to redeem the property from foreclosure but did not redeem it.

Thereafter, BNYM brought an action in the District Court for the 52-3 Judicial District of the State of Michigan to recover the property. On September 13, 2010, Munaco brought this suit, alleging wrongful foreclosure (Count I), and seeking to set aside the foreclosure sale and enjoin Defendants from evicting him from the property (Count II). BNYM removed the action to federal district court, dismissed its state court action, and agreed to have the pending issues regarding the property resolved in this action.

Defendants moved for summary judgment on November 1, 2011. On November 22, 2011, Munaco filed his response. On January 24, 2012, the district court granted summary judgment to Defendants. First, it concluded that Munaco had standing to challenge the foreclosure after the expiration of the redemption period. The court found that there was no genuine issue of fact that the foreclosure sale was properly adjourned from week to week, in accordance with Mich. Comp. Laws Ann. § 600.3220, relying on the adjournment notices attached to Defendants' motion for summaryjudgment. The district court refused to consider Plaintiff's argument, raised for the first time in his response brief, that the foreclosure by advertisement was invalid under Mich. Comp. Laws Ann. § 600.3204, because BNYM did not record the mortgage until after the foreclosure proceeding began. R. 25 Page ID# 321.

On February 7, 2012, Munaco filed a motion for reconsideration or relief from judgment and to file an amended complaint. On February 28, 2012, the district court denied this motion. First, the court held that while Munaco had made numerous allegations in his complaint, he "chose to assert only a single claim of wrongful disclosure, and specifically stated in that count that his claim was pursuant to MCL 600.3220." R. 36 Page ID# 651. The court added that it was "not required to consider other alleged statutory violations that Plaintiff was clearly aware of, but for whatever reason chose not to assert as part of his claim." Id. The district court also denied Munaco's motion to amend the complaint, on the grounds that Munaco offered no explanation for the delay in seeking to amend, and Defendants had demonstrated significant prejudice. Id. 652. "As Defendants have explained, if Plaintiff had asserted on a timely basis the fact that he now proposes to assert in an amended complaint, Defendants would have had the option to agree to set aside the foreclosure and to begin a new foreclosure by advertisement." Id. 652-53. Finally, the court noted that Munaco "had ample notice" that his additional claims had not been included in the complaint and thus not considered on summary judgment, but he did not explain why he waited until after entry of judgment to seek leave to amend. Id. 653.

Munaco challenges both rulings on appeal.

III. Analysis¹

A. Grant of Summary Judgment

First, Munaco alleges that in granting summary judgment, the trial court refused to consider various arguments he presented in support of his wrongful foreclosure claim. More specifically, Munaco contends that the court elevated form over substance by considering only allegations that were asserted specifically under Count I and completely disregarding other factual allegations in the complaint or raised in response to summary judgment.

A district court's grant of summary judgment is reviewed de novo. Johnson v. Econ. Dev. Corp., 241 F.3d 501, 509 (6th Cir. 2001). Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "A 'genuine issue of material fact' is one which, if proven at trial, would result in a reasonable jury finding for the non-moving party." Doren v. Battle Creek Health Sys., 187 F.3d 595, 597 (6th Cir.1999) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)). All justifiable inferences are to be drawn in the non-moving party's favor. Anderson, 477 U.S. at 255.

1. General Principles

In Michigan, once a foreclosure is complete and the redemption period following the foreclosure has expired, a former owner loses all right, title, and interest in and to the mortgaged property. Piotrowksi v. State Land Office Bd., 4 N.W.2d 514, 517 (Mich. 1942); see also Mich.Comp. Laws Ann. § 600.6236.² Furthermore, "[t]he 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." Schulthies v. Barron, 167 N.W.2d 784, 785 (Mich. App. 1969) (per curiam). See also Reid v. Rylander, 258 N.W. 630, 631 (Mich. 1935) (holding that a former owner may holdover and challenge the validity of the foreclosure in a summary eviction proceeding, but is limited to challenging the procedure).

2. Mich. Comp. Laws Ann. § 600.3220

In his complaint, Plaintiff alleged that Defendants failed to post notice of the adjournment of the foreclosure sale as required by Mich. Comp. Laws Ann. § 600.3220.³ As discussed below, this is the only claim raised in the complaint. Defendants offered undisputed evidence that the foreclosure sale was adjourned from week to week in accordance with Mich. Comp. Laws Ann. § 600.3220, and the district court granted summary judgment on that basis. Munaco does not challenge that conclusion on appeal. Summary judgment for Defendants is thus proper on this basis alone.

3. Mich. Comp. Laws Ann. § 600.3204

Munaco argued for the first time in his response to Defendants' motion for summary judgment that the foreclosure must be set aside because the assignment of the mortgage was not recorded until after the foreclosure procedure began.

Foreclosure by advertisement is governed by statute in Michigan. See Mich. Comp. Laws Ann. § 600.3204; Senters v. Ottawa Sav. Bank, FSB, 503 N.W.2d 639, 641 (Mich. 1993). A partymay foreclose by advertisement if certain conditions are met. These include that "[t]he mortgage containing the power of sale has been properly recorded" and that "[t]he party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage." Mich. Comp. Laws Ann. § 600.3204(1)(c), (d). The statute also provides: "If 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." Id. § 600. 3204(3) (emphasis added).⁴

a. Stating a Claim

We agree with the district court that Munaco raised only one claim for wrongful foreclosure based on Defendants' alleged failure to comply with the adjournment procedure of Mich. Comp. Laws § 600.3220⁵ and that the complaint does not contain any factual allegations or claims relating to Munaco's assertion that the mortgage foreclosure was invalid under Mich. Comp. Laws Ann. § 600.3204. The complaint does not allege that BNYM was not "either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage" at the time BNYM began foreclosure proceedings, as required by Mich. Comp. Laws Ann. § 600. 3204(1)(d), or that BNYM failed to record the assignment of the mortgage prior to the date of sale,as provided by Mich. Comp. Laws Ann § 600.3204(3). Having failed to state a claim under section 600.3204, Munaco has forfeited any right to pursue such arguments on appeal.

The "other allegations of wrongdoing" in Munaco's complaint allege that Defendants did not afford Munaco an opportunity to meet with the foreclosing lender as required by Mich. Comp. Laws Ann. § 600.3204(5). See R.1 Page ID# 7-9 (paragraphs 9-22). However, as Munaco acknowledges, subsection 600.3204(5) was not in effect when BNYM began foreclosure proceedings. See Mich. Comp. Laws Ann. § 600.3204(5) ("Subsection (4) ...