El-Seblani v. IndyMac Mortg. Servs.

• Decision Date: 07 January 2013
• Docket Number: No. 12-1046,12-1046
• Parties: ABDULLAH EL-SEBLANI Plaintiff - Appellant v. INDYMAC MORTGAGE SERVICES, a division of OneWest Bank, FSB; ONEWEST, FSB, fka IndyMac Federal Bank Defendants - Appellees
• Court: U.S. Court of Appeals — Sixth Circuit

ABDULLAH EL-SEBLANI Plaintiff - Appellant v. INDYMAC MORTGAGE SERVICES, a division of OneWest Bank, FSB;

ONEWEST, FSB, fka IndyMac Federal Bank Defendants - Appellees

No. 12-1046

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

FILED: January 7, 2013

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 13a0030n.06

ON APPEAL FROM THE UNITED

STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF MICHIGAN

Before: DAUGHTREY, COLE, and GIBBONS, Circuit Judges.

JULIA SMITH GIBBONS, Circuit Judge. OneWest Bank ("OneWest") foreclosed on Abdullah El-Seblani's home in Dearborn Heights, Michigan in 2010. El-Seblani filed this civil action against OneWest and its subsidiary, IndyMac Mortgage Services ("IMS"), to contest the foreclosure under a variety of statutory and common-law theories. He claims that he properly accepted a mortgage-modification offer from IMS before the foreclosure sale of his home took place. The district court granted OneWest's and IMS's motion for summary judgment. We affirm.

I.

A.

El-Seblani purchased his home in 2007 using a loan from OneWest's predecessor, IndyMac Bank ("IndyMac"). IndyMac secured the loan through a mortgage on El-Seblani's property. The mortgage identified Mortgage Electronic Registration Systems ("MERS") as the "mortgagee" and "nominee for Lender and Lender's successors and assigns," and IndyMac as the "Lender."

El-Seblani began missing mortgage payments in 2010. MERS assigned all of its interest in El-Seblani's mortgage to OneWest on June 22, 2010, and the county register of deeds recorded the assignment on July 1. The day after MERS assigned its interest to OneWest, counsel for OneWest sent El-Seblani a letter, via both first-class and certified mail, notifying him of his default and providing information on his right to a meeting on loan modification. The letter stated that El-Seblani had the right to "request a meeting with [OneWest's counsel] to attempt to work out a modification of the mortgage loan to avoid foreclosure" within fourteen days. El-Seblani asserts that he never received this letter, but this assertion is not supported by an affidavit, declaration, or similar evidence. A published notice containing analogous information appeared in the Detroit Legal News on June 25, 2010.

OneWest and IMS received a fax from a third-party loan modification group authorizing discussions about El-Seblani's situation on July 7. On July 14, IMS sent El-Seblani a letter stating that he "may be eligible for a loan modification," along with a proposed agreement, based on El-Seblani's stated income and liabilities. The letter states in relevant part:

This offer is valid for a limited time. The enclosed modification agreement must be signed and returned to IndyMac Mortgage Services by 7/28/2010.

If you accept this offer, you will need to sign and return the enclosed modification agreement along with your first monthly payment in the enclosedprepaid envelope. The principal and interest portion of your monthly payment will be $856.45 and will change according to paragraph two on the enclosed modification agreement. . . .

Please sign and return the enclosed modification agreement on or before the above mentioned expiration date.

On July 31, 2010, OneWest received a check for $856.45 from El-Seblani, but not the signed modification agreement. According to Charles Boyle,¹ OneWest's vice president, OneWest placed the check in a suspense account "because the loan modification offer had expired." OneWest did not receive the signed agreement until August 18, 2010. The bank's notes also indicate that El-Seblani did not qualify for the loan modification program because he understated his liabilities by twenty percent. While this was taking place, OneWest and IMS published notice of their intent to foreclose by advertisement in the Detroit Legal News on July 22, July 29, August 5, and August 12.

On August 30, 2010, IMS sent El-Seblani a letter notifying him that his request for a mortgage modification could not be completed "due to an imminent foreclosure sale of the property." Fannie Mae purchased El-Seblani's home at a sheriff's sale on September 2, 2010. In an "affidavit of compliance" attached to the sheriff's deed, Marshall Issacs, an attorney for OneWest, certified that all proper legal measures had been taken prior to foreclosure and "[t]hat neither the borrower(s) nor a housing counselor requested [OneWest's counsel] set up a meeting to modify the mortgage, withinthe required time period." The six-month period in which El-Seblani could redeem his mortgage after the sheriff's sale expired on March 2, 2011. See Mich. Comp. Laws § 600.3240(8) (defining redemption period for "a mortgage . . . of residential property . . . if the amount claimed to be due on the mortgage is more than 66-2/3[%] of the original indebtedness secured by the mortgage").

B.

El-Seblani filed a complaint against OneWest and IMS in Wayne County Circuit Court on February 4, 2011. The six counts in the complaint are: (1) violation of the Michigan Mortgage Brokers, Lender and Servicer Lending Act ("Mortgage Act"), Mich. Comp. Laws §§ 445.1651-84; (2) breach of contract; (3) promissory estoppel; (4) "misrepresentation"; (5) violation of Mich. Comp. Laws § 600.3205a (2010); and (6) "exemplary damages." El-Seblani's prayer for relief asked the state circuit court to "[s]tay all proceedings for possession including eviction of Plaintiff," "[s]et aside [the] sheriff's sale," and "[d]eclare [the] mortgage foreclosure void" as relief. OneWest became aware of the suit on February 23 and removed the action to the district court on March 23. By that time the redemption period had expired. The district court granted a motion for summary judgment as to all counts in the complaint on December 15.

II.

We review a district court's order granting summary judgment de novo. Nolfi v. Ohio Ky. Oil Corp., 675 F.3d 538, 544 (6th Cir. 2012). Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material facts and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "The non-moving party may not rest upon its mere allegations or denials of the adverse party's pleadings, but rather must set forth specific factsshowing that there is a genuine issue for trial." White v. Baxter Healthcare Corp., 533 F.3d 381, 390 (6th Cir. 2008).

III.

The district court held that El-Seblani had no "standing" to challenge the foreclosure because his "right, title and interest" in his home was "extinguished" after the expiration of the redemption period and he did not present sufficient reasons for an "equitable extension" of the redemption period. While we agree with the reasoning leading up to that holding, we would not characterize it as a holding on "standing" grounds. "[A] plaintiff must have standing under both Article III and state law in order to maintain a cause of action" when invoking diversity jurisdiction in federal court. Morell v. Star Taxi, 343 F. App'x 54, 57 (6th Cir. 2009). There is no serious dispute that El-Seblani has Article III standing to contest the foreclosure sale, Friends of the Earth, Inc. v. Laidlaw Envt'l Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000) (standing is established when there is a "concrete," "particularized," and "actual" injury that "is fairly traceable to the challenged action of" the defendants and capable of being "redressed by a favorable decision"), and the district court's "standing" argument was based entirely on state law. 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. Lansing Schs. Educ. Ass'n v. Lansing Bd. of Educ., 792 N.W.2d 686, 699 (Mich. 2010).

El-Seblani met Michigan's basic standing requirement. Michigan courts have long held that a mortgagor may challenge the validity of a statutory foreclosure either through "summary proceedings" in the Michigan courts pursuant to Mich. Comp. Laws § 600.5714, or by filing aseparate lawsuit, as El-Seblani did here. See Mfrs. Hanover Mortg. Corp. v. Snell, 370 N.W.2d 401, 404 (Mich. 1985) ("The [Michigan] Supreme Court has long held that the mortgagor may hold over after foreclosure by advertisement and test the validity of the sale in the summary proceeding."); Reid v. Nusholtz, 249 N.W. 831, 832 (Mich. 1933) (acknowledging that after foreclosure, the homeowner "could file a bill and have the sale set aside, or, which was equivalent thereto, hold over after redemption had expired and test the validity of the sale in the summary proceedings"). He therefore has a "cause of action" under state law.

The confusion over "standing" arises because under Michigan's foreclosure statute, "all the right, title and interest which the mortgagor had at the time of the execution of the mortgage" vests in the entity that purchased the foreclosed property in the sheriff's sale after the expiration of the redemption period. Mich. Comp. Laws § 600.3236; see also Piotrowski v. State Land Office Bd., 4 N.W.2d 514, 517 (Mich. 1942) ("Plaintiffs did not avail themselves of their right of redemption in the foreclosure proceedings and at the expiration of such right . . . all plaintiffs' rights in and to the property were extinguished."). A strict reading of the statute suggests that once the redemption period expires, the homeowner has no legal interest in the property that litigation might vindicate. Senters v. Ottawa Sav. Bank, FSB, 503 N.W. 2d 639, 643 (Mich. 1993) (arguing that Michigan's redemption statute "leav[es] no room for equitable considerations absent fraud, accident, or mistake"). Since a typical lawsuit cannot be completed before the expiration of the redemption period, Michigan courts 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 order to keep a plaintiff's suit...