Sheldon v. Vilsack, Case Number 11-10487

CourtUnited States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
Writing for the CourtTHOMAS L. LUDINGTON
PartiesLAURA M. SHELDON, Plaintiff, v. THOMAS J. VILSACK, Secretary of the Department of Agriculture, et al., Defendants.
Decision Date29 March 2012
Docket NumberCase Number 11-10487

LAURA M. SHELDON, Plaintiff,
THOMAS J. VILSACK, Secretary of the Department of Agriculture, et al., Defendants.

Case Number 11-10487


Dated: March 29, 2012

Honorable Thomas L. Ludington


In July 2008, Plaintiff purchased a home for $39,000 with a $47,100 loan secured from a private lender, JP Morgan Chase Bank, N.A. ("J.P. Morgan"). The real property is located at 502 East Hazel Street, Saint Louis, Michigan (the "Property"). Verified Compl. ("Compl.") ¶¶ 10, 15, 28. Under its Guaranteed Loan Program, the Rural Housing Service ("RHS") provides private lenders with a loan guarantee of 90% of the principal amount of the loan. Id. ¶¶ 10, 18, 28, 30. Plaintiff's loan from JPMorgan Chase Bank, N.A. is serviced by Chase Home Finance, LLC (collectively, the "Chase Defendants"). Id. 15. In November 2009, Chase provided Plaintiff a three-month forbearance for reasons that will be explained hereafter. Id. ¶¶ 39, 47. When Plaintiff was unable to make payments after the end of the forbearance period, Chase scheduled a foreclosure sale for February 17, 2011. Id. 1.

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On February 7, 2011, Plaintiff filed her eight-count complaint. Count VIII is the sole count brought against the Chase Defendants. Plaintiff alleged in Count VIII that the Chase Defendants' developed a fiduciary relationship with Plaintiff, that they breached that duty, and that, as a result, the foreclosure sale scheduled for February 17, 2011, should be enjoined. In Counts I through VI, Plaintiff sought a declaratory ruling that the Secretary of Agriculture and RHS violated various provisions of the Housing Act of 1949, 42 U.S.C. § 1441 et seq., that were actionable under the Administrative Procedures Acts ("APA"). Finally, in Count VII, Plaintiff also sought a declaratory judgment determining that RHS denied Plaintiff due process "by failing to provide [Plaintiff] with notice of adverse decisions or a right to appeal those decisions." The various provisions of the Housing Act of 1949 that Plaintiff alleges the Federal Defendants violated are as follows:

Count I - Section 505(a) of the Housing Act: Section 505(a) of the Housing Act, 42 U.S.C. § 1475(a) was enacted by Congress in 1949 and provided, in relevant part, that "during any time that any such loan is outstanding, the Secretary [of Agriculture] is authorized under the regulations to be prescribed by him to grant a moratorium upon the payment of interest and principal on such loans . . . ." Plaintiff alleges that the Secretary and RHS have violated the APA by failing to grant her a moratorium for repayment of her guaranteed loan, which was authorized by Congress in 1990.
Count II - Section 501 and 502 Provisions for Refinancing Loans in Default: Sections 501(a) of the Housing Act of 1949, 502(h)(9)1 and 502(h)(17) of the Housing Act provide for RHS to refinance loans that are in default. Plaintiff alleges that the Secretary and RHS have violated the APA by failing to implement the statutory provisions and her "right to have her guaranteed loan refinanced by another guaranteed loan or by a direct and subsidized RHS loan."
Count III - Section 502(h)(15), 502(h)(17) and 517 for Assignment of Plaintiff's Loan and Reamortization of her Payments: Somewhat similar to Count II, Plaintiff cites three different provisions of the Housing Act, 502 (h)(15), 502(h)(17) and 517, that provide in part for "a program for assignment to the Secretary" and for "refinancing." Plaintiff alleges that the Secretary and RHS never implemented these

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statutory provisions, violating the APA because she was entitled to have her loan "assigned to the RHS" in order "to reamortize her loan."
Count IV - Section 502(h)(13) Alternative to Foreclosure: Section 502(h)(13), Pub. L. 106-569, § 701 (2009), provides in relevant part that "upon default of any mortgage guaranteed under this subsection, mortgagees shall engage in loss mitigation actions for the purpose of providing an alterative to foreclosure . . . as provided by the Secretary." Plaintiff alleges that the Secretary and RHS failed to require Chase to provide her an alternative to foreclosure.
Count V - Section 502(h)(14) Provision for Modification of Mortgages and Payment of a Partial Claim: Section 502(h)(14) authorizes the Secretary to provide loan modifications and partial claims. Again, Plaintiff alleges that the Secretary and RHS violated the APA by failing to require Chase to participate in such a loss mitigation program.

The Federal Defendants' motion to dismiss is before the Court. ECF No. 29. The Federal Defendants allege generally that the Court lacks subject matter jurisdiction over Plaintiff's first, fourth, sixth, and seventh causes of action. More specifically, the Federal Defendants argue that the Court lacks jurisdiction over the first and fourth causes of action because the APA does not extend jurisdiction to federal courts to review agency actions that are "committed to agency discretion by law" and that Plaintiff lacks standing to assert her first, sixth, and seventh causes of action because she has not suffered an injury-in-fact and, even assuming a legally cognizable injury attributable to her first cause of action, the relief she seeks would not redress her alleged injury. The Federal Defendants also contend that Plaintiff's first through sixth causes of action fail to state claims on which relief can be granted because the Housing Act's moratorium provision does not apply to guaranteed loans, the specific relief Plaintiff seeks is not required by the applicable APA sections and that the United States Department of Agriculture ("USDA") has complied with the other applicable statutory sections.

Plaintiff responds that the Court has subject matter jurisdiction to review her claims pursuant

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to the National Housing Goals, 42 U.S.C. § 1441a, and that she has been injured by RHS's failure to extend moratorium relief and due process. ECF No. 35. Moreover, Plaintiff contends that she has adequately stated claims upon which relief can be granted because the National Housing Goals limit RHS's discretion, RHS is required to extend moratorium relief to guaranteed borrows, and RHS is obligated to refinance guaranteed loans, to implement an assignment program, to implement a loss mitigation program, and to implement a mortgage modification and partial claims program. Plaintiff also argues that she has a statutory right to an administrative due process hearing.

I. Procedural History

Plaintiff filed a motion for a temporary restraining order and preliminary injunction on February 8, 2011, to enjoin the non-judicial foreclosure sale of her home scheduled for February 17, 2011. ECF No. 5. Plaintiff contended that the loss of her home and threat of homelessness were sufficient to justify the grant of a temporary restraining order and preliminary injunction. See Smith, 2010 WL 3270116, at *10; Sayo, Inc., 2006 WL 3240706 at *2. Plaintiff claimed she could not be compensated with monetary damages for "either of these enormous losses." ECF No. 5. Plaintiff, however, did not provide evidence that she would not be able to afford alternate housing and did not explain why monetary compensation would be inadequate should she be required to relocate. The Court noted that Plaintiff would also retain the right of possession to the property for the statutory redemption period of six months after the foreclosure sale. The Court concluded that Plaintiff had not shown that irreparable harm would occur at the time of the foreclosure sale and denied Plaintiff's motion without prejudice (ECF No. 8). Livonia Prop. Holdings v. 12840-12976 Farmington Rd. Holdings, 717 F. Supp. 2d 724, 740-41 (E.D. Mich. 2010). Plaintiff then filed a renewed motion for a temporary restraining order (ECF No. 9) and notice of appeal of the Court's order denying her

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original motion for a temporary restraining order (ECF No. 14). On March 1, 2011, the Court entered the parties' stipulation and order withdrawing Plaintiff's renewed motion for an expedited temporary restraining order because the Chase Defendants agreed to adjourn the foreclosure sale during the pendency of the litigation. ECF No. 24. Plaintiff also filed a motion for voluntary dismissal of her appeal, and her appeal was dismissed from the United States Court of Appeals for the Sixth Circuit on February 25, 2011.

Chase filed a motion for judgment on the pleadings, contending that there is no private right of action against it under the Doug Bereuter Section 502 Single Family Housing Loan Guarantee Act (the "Guarantee Act"), that it does not owe a fiduciary duty to Plaintiff, and that it took all mitigation...

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