Williams v. Pledged Prop. II, LLC

• Decision Date: 13 December 2012
• Docket Number: No. 12-1056,12-1056
• Parties: CEDRIC M. WILLIAMS, Plaintiff-Appellant, v. PLEDGED PROPERTY II, LLC, and LITTON LOAN SERVICING LP, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

CEDRIC M. WILLIAMS, Plaintiff-Appellant, v. PLEDGED PROPERTY II, LLC, and LITTON LOAN SERVICING LP, Defendants-Appellees.

No. 12-1056

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Date: December 13, 2012

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 12a1287n.06

ON APPEAL FROM THE UNITED

STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF

MICHIGAN

BEFORE: CLAY and STRANCH, Circuit Judges; BELL, District Judge.^*

BELL, District Judge. Plaintiff-Appellant Cedric M. Williams ("Williams") appeals an order granting summary judgment to Defendant-Appellees, Pledged Property II, LLC ("Pledged Property") and Litton Loan Servicing, LP ("Litton"). For the following reasons, we AFFIRM.

BACKGROUND

This case arose out of a dispute over the foreclosure and subsequent sale of a home in Wayne County, Michigan. Williams purchased the home on March 23, 2007, and financed the purchase with a mortgage. Litton contracted to service the loan beginning March 30, 2007. Williams became past due on the mortgage in September of 2007, and received Notice of Default in December of 2007. At Williams's request, Litton agreed to a loan modification on January 2, 2008. Williams didnot make his first three payments under the modified loan and filed for bankruptcy in July of 2008. The automatic bankruptcy stay was lifted to allow for the foreclosure to continue in March of 2009.

Notice of Foreclosure Sale was first published in the Detroit Legal News on June 8, 2009. Prior to the scheduled foreclosure sale, Williams requested a second loan modification from Litton. Litton adjourned the foreclosure sale to review the request. On October 2, 2009, Litton denied the loan modification request and proceeded with the foreclosure. Mortgage Electronic Registration Systems, Inc. (MERS) purchased the home at the foreclosure sale on October 14, 2009, and recorded its Sheriff's Deed on October 26, 2009. Thereafter, MERS conveyed its interest to Pledged Property by quit claim deed the same month. After the sale, Litton continued to discuss potential options with Williams until the lender released Litton from servicing the loan on March 1, 2010.

On June 9, 2010, after the redemption period had run, Williams filed this action in Wayne County Circuit Court, bringing the following claims: (1) quiet title, (2) unjust enrichment, (3) breach of implied agreement, (4) misrepresentation, (5) fraud, (6) constructive trust, and (7) breach of Mich. Comp. Laws § 600.3205. Defendants removed the case to district court on July 12, 2010, on the basis of diversity jurisdiction. On December 17, 2010, Defendants filed a motion for summary judgment. On the same day, Williams filed a motion to amend the complaint to add a claim of "Deceptive Act and/or Unfair Trade Practice." The motion to amend was denied on February 17, 2011, without prejudice. Williams did not file a response to the motion for summary judgment, andthe motion was granted by the district court on March 9, 2011. Williams filed a motion for reconsideration, which was granted on June 9, 2011.

After oral argument on November 22, 2011, the district court again granted Defendants' motion for summary judgment. The court explained in its oral opinion that it was granting the motion on two grounds: (1) lack of standing and (2) the Statute of Frauds. Williams appeals this ruling, claiming that Litton made an oral promise that it would not go forward with the foreclosure sale and would come to terms to let Williams keep the home. Williams argues that Litton breached its promise and acted fraudulently when it sold the house at the foreclosure sale. Williams also appeals the denial of his motion to amend.

STANDARD OF REVIEW

This Court reviews a district court's grant of summary judgment de novo. Bowling Green v. Martin Land Dev. Co., 561 F.3d 556, 558 (6th Cir. 2009). "The court shall grant summary judgment 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). In deciding a motion for summary judgment, the court examines all evidence in the light most favorable to the non-moving party. Tingle v. Arbors at Hillard, 692 F.3d 523, 529 (6th Cir. 2012).

This Court reviews the denial of a motion to amend for abuse of discretion. Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir. 2000).

DISCUSSION

The district court, in its oral decision, did not specify which claims failed due to lack of standing and which claims failed due to the Statute of Frauds. This opinion will address each of these issues separately.

I. Standing under Michigan Law

Under Michigan law¹, a party must have "a legal or equitable right, title, or interest in the subject matter of the controversy" to establish standing.² MOSES, Inc. v. Se. Mich. Council of Gov'ts, 716 N.W.2d 278, 286 (Mich Ct. App. 2006) (internal quotation marks omitted); Awad v. Gen. Motors Acceptance Corp., No. 302692, 2012 WL 1415166, at *2 (Mich. Ct. App. Apr. 24, 2012) (per curiam). Upon foreclosure, the rights of both the mortgagor and mortgagee are controlled by statute. Senters v. Ottawa Sav. Bank, FSB, 503 N.W.2d 639, 642 (Mich. 1993). Michigan's foreclosure statute provides that, once the redemption period is expired, all of the mortgagor's rights in the property are extinguished by operation of law. Mich. Comp. Laws § 600.3236; Piotrowski v.State Land Office Bd., 4 N.W.2d 514, 517 (Mich. 1942). This includes any rights arising under equity. Senters, 503 N.W.2d at 644 ("Where, as in the present case, a statute is applicable to the circumstances and dictates the requirements for relief by one party, equity will not interfere.").

The redemption period following a foreclosure is six months after the date of the sale, Mich. Comp. Laws § 600.3240, and Michigan law does not allow for an extension of the statutory redemption period absent a clear showing of fraud or irregularity. Schulthies v. Barron, 167 N.W.2d 784, 785 (Mich. Ct. App. 1969). The Michigan courts have determined that, after the expiration of the redemption period, a mortgagor does not have standing to bring an action to quiet title or challenge the foreclosure proceedings. See Overton v. Mortg. Elec. Registration Sys., No. 284950, 2009 WL 1507342, at *1 (Mich. Ct. App. May 28, 2009) (per curiam); Sagmani v. Lending Assocs. LLC, No. 302865, 2012 WL 3193940, at *1 (Mich. Ct. App. Aug. 7, 2012) (per curiam); Awad, 2012 WL 1415166, at *4.

In this case, the district court held that Williams lacked standing to bring this case because, after the redemption period expired, Williams did not have a legal interest in the house. The foreclosure sale occurred on October 26, 2009, and the case was filed on June 9, 2010, nearly eight months after the sale and well after the end of the statutory redemption period. Thus, absent a clear showing of fraud or irregularity, Williams's rights to the property were extinguished, and he lacked standing under Michigan law to challenge the foreclosure proceedings or the foreclosure sale. See Overton, 2009 WL 1507342, at *1 (citing Mich. Comp. Laws § 600.3236).

Williams attempts to invoke the fraud or irregularity exception to extend the redemption period. In order to qualify for the exception and extend the redemption period, the fraud or irregularity must be in "conducting the legal measures." Heimerdinger v. Heimerdinger, 299 N.W. 844, 846 (Mich. 1941). This requires that the fraud or irregularity be present in the foreclosure procedure itself. Sagmani, 2012 WL 3193940, at *1 ("A party can challenge the foreclosure after the redemption period only if there is clear evidence of fraud or irregularity in the foreclosure proceedings."). However, Williams's claim of fraud relies on oral assurances during a negotiation to change the terms of the contract. Despite the fact that the negotiations may have taken place during the foreclosure process, these negotiations remained separate from the foreclosure process itself. As such, even if assumed to be true, Williams's allegations of fraud would not qualify him for the fraud exception because they are not fraud or irregularity in "the legal measures" of the foreclosure process.

Consequently, Williams did not have standing to assert any claim to legal or equitable title in the home because the redemption period had expired and he did not allege any fraud or irregularity in the foreclosure process. Without any legal or equitable title in the home, Williams cannot receive injunctive relief restoring him to title in the home. Therefore, Williams's claims for quiet title and constructive trust were properly dismissed.

II. Michigan Statute of Frauds

Williams also seeks relief for breach of implied agreement, misrepresentation, and fraud on account of an oral promise allegedly made by Litton to delay the foreclosure sale. However, the Michigan Statute of Frauds expressly states that "[a]n action shall not be brought against a financial institution to enforce [a promise or commitment to waive a provision of a loan or make any other financial accommodation] unless the promise or commitment is in writing and signed." Mich. Comp. Laws § 566.132(2). The language of this statute is unambiguous and should be read as an "unqualified and broad ban" of any claim - "no matter its label" - against a financial institution to enforce the terms of an oral promise waiving a loan provision. Crown Tech. Park v. D&N Bank, FSB, 619 N.W.2d 66, 72 (Mich. Ct. App. 2000).

Williams, relying on Schering-Plough Healthcare Products, Inc. v. NBD Bank, N.A., 98 F.3d 904 (6th Cir. 1996), argues that the meaning of "financial accommodation" in § 566.132(2) requires that the financial institution be exposed to some sort of risk of loss before there would be a writing requirement. Williams's argument is misplaced. In the period between Schering-Plough and this case, the Michigan Court of Appeals has clearly interpreted § 566.132(2) to include promises to delay foreclosure...