Worthy v. World Wide Financial Services, Inc.

• Decision Date: 13 December 2004
• Docket Number: No. CIV. 04-72969.,CIV. 04-72969.
• Citation: 347 F.Supp.2d 502
• Parties: Anthonia WORTHY, Plaintiff, v. WORLD WIDE FINANCIAL SERVICES, INC., Real Financial, L.L.C., Homecomings Financial Network, Inc., Select Portfolio Servicing, Inc. f/k/a Fairbanks Capital Corp., Mortgage Electronic Registration Services, Inc. Defendants.
• Court: U.S. District Court — Eastern District of Michigan

347 F.Supp.2d 502

Anthonia WORTHY, Plaintiff, v. WORLD WIDE FINANCIAL SERVICES, INC., Real Financial, L.L.C., Homecomings Financial Network, Inc., Select Portfolio Servicing, Inc. f/k/a Fairbanks Capital Corp., Mortgage Electronic Registration Services, Inc. Defendants.

No. CIV. 04-72969.

United States District Court, E.D. Michigan, Southern Division.

December 13, 2004.

COPYRIGHT MATERIAL OMITTED

Kevin W. Kevelighan, Kevelighan & Kevelighan, Bingham Farms, MI, for Plaintiff.

Monica L. Plaxton, Thomas G. Costello, Lipson, Neilson, Bloomfield Hills, MI, Robert M. Horwitz, Thomas M. Schehr, Dykema Gossett, Detroit, MI, for Defendants.

OPINION AND ORDER

FEIKENS, District Judge.

This is a consumer lending case arising out of Plaintiff's mortgage with Defendants and Defendants' foreclosure on Plaintiff's home. Plaintiff alleges that Defendants violated the Truth in Lending Act, 15 U.S.C. § 1601 et. seq. ("TILA") by failing to provide Plaintiff with the requisite number of Notices of Right to Cancel and the material disclosures. Further, Plaintiff alleges that by violating TILA, Defendants also violated Michigan's Secondary Mortgage Loan Act ("SMLA"), M.C.L.A. § 493.51. Finally, Plaintiff claims that the foreclosure sale should be voided because (1) the adjournment of the foreclosure proceeding violated the automatic stay under the bankruptcy code; and (2) the notice of foreclosure incorrectly stated he was a woman.

Defendants Homecomings Financial Network, Inc. ("Homecomings") and Mortgage Electronic Registration Services, Inc. ("MERS") move for this Court to dismiss Plaintiff's First Amended Complaint in its entirety. The remaining Defendants Real Financial L.L.C. ("Real"), World Wide Financial Services, Inc. ("World Wide") and Select Portfolio Servicing, Inc. ("Select") concur with this Motion to Dismiss Plaintiff's complaint. For the reasons below, I GRANT Defendants' Motion to Dismiss, pursuant to Fed.R.Civ.P. 12(b)(6).

I. FACTUAL BACKGROUND

On April 4, 2002, Worthy refinanced his home mortgage loan with World Wide. (Pl.'s Am. Compl. ¶ 10.) Real was the broker that originated the loan, and World Wide funded the loan. Id. at ¶ 12-13. The mortgage secured a property located in Sumpter Township, in Wayne County. (Br. in Supp. of Mot. to Dismiss at 2; citing Pl.'s Am. Compl. Ex. E.) World Wide subsequently assigned its rights in the mortgage to Homecomings. (Pl.'s Am. Compl. ¶ 14.) Homecomings subsequently assigned its rights in the mortgage to Select. Id. at ¶ 15. MERS purchased the property at the foreclosure sale. (Br. in Supp. of Mot. to Dismiss Ex. B.)

MERS commenced a foreclosure proceeding and published a notice of foreclosure by advertisement in the Detroit Legal News on September 23, 2003. (Br. in Supp. of Mot. to Dismiss at 2.) This notice listed the names of the mortgagor and mortgagee, the date of the mortgage and its recording, the amount due ($280,944.90 plus interest), described the property, and stated the six-month redemption period. (Pl.'s Am. Compl. Ex. E.) Additionally, this notice referred to Worthy as "a single woman" although Plaintiff is a single man. Id. at 1.

A foreclosure sale was scheduled for October 22, 2003. Id. at ¶ 20. On October 21, 2003, Plaintiff filed his third bankruptcy petition in less than a year under Chapter 13 of the Bankruptcy Code. (Br. in Supp. of Mot. to Dismiss at 2.) Therefore, the foreclosure auction was adjourned to February 4, 2004. (Pl.'s Response to Mot. to Dismiss at 2.) The bankruptcy court dismissed Plaintiff's bankruptcy case on January 23, 2004, and entered an order stating that Plaintiff "is barred from filing a case under any chapter for 180 days." (Br. in Supp. of Mot. to Dismiss Ex. E; citing In re Anthonia Worthy, No. 03-68948 (Bankr.E.D.Mich. Jan. 23, 2004) (Am. Order Dismissing Chapter 13 Bankruptcy with a 180-Day Bar to Refiling Bankruptcy).)

On February 4, 2004, a foreclosure sale was held. (Pl.'s Am. Compl. ¶ 17.) MERS purchased the property for $298,050.73, and obtained a sheriff's deed to the property. (Br. in Supp. of Mot. to Dismiss Ex. F.) Plaintiff's redemption date for the property was August 4, 2004. (Pl.'s Am. Compl. Ex. D.) On August 4, 2004, Worthy's attorney sent a letter to all the Defendants stating Plaintiff rescinded the loan transaction that Worthy entered into with World Wide. Id. at Ex. B. Worthy did not tender any money to redeem the property before the expiration of the redemption period. (Br. in Supp. of Mot. to Dismiss at 3.)

II. ANALYSIS

A. Motion to Dismiss Standard

A party is entitled to a motion to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim on which relief can be granted. A motion to dismiss may be granted under Fed.R.Civ.P. 12(b)(6), "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984). In reviewing the motion, courts must "construe the complaint in the light most favorable to the plaintiff, accept all of the complaint's factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claim that would entitle him to relief." Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 512 (6th Cir.2001).

B. Truth in Lending Act (15 U.S.C. § 1601 et. seq.) & Michigan's Secondary Mortgage Loan Act (M.C.L. § 493.51)

1. Right to Rescind the Mortgage Transaction

Plaintiff alleges that Defendants violated TILA because Defendants did not provide Plaintiff with two separate sets of notices of Plaintiff's right to rescind the mortgage transaction within three days of closing.¹ (Pl.'s Compl. ¶ 26.) Plaintiff claims that because Defendants did not provide him with two separate notices Plaintiff retained his "right to rescind the mortgage transaction until expiration of three years from the date of consummation of the transaction." Id. at ¶ 27. Defendants Homecomings and MERS contend that Plaintiff's right to rescind the mortgage transaction under TILA expired on February 4, 2004, the day of the foreclosure sale of the property. (Br. in Supp. of Mot. to Dismiss at 5.)

The TILA and its implementing Regulation Z require that a creditor deliver to an obligor two copies of a notice of the right to rescind a credit transaction prior to the consummation of a consumer credit sale. 15 U.S.C. § 1635(a); 12 C.F.R. § 226.23(a)(1) and (b)(1). An obligor may rescind the credit transaction "until midnight of the third business day following consummation, delivery of the notice [...], or delivery of all material disclosures, whichever occurs last." 12 C.F.R. § 226.23(a)(3). Where the creditor does not deliver the required notice or material disclosures, "the right to rescind shall expire 3 years after consummation [of the transaction], upon transfer of all the consumer's interest in the property, [or] upon sale of the property, whichever occurs first." Id.; 15 U.S.C. § 1635(f).

Plaintiff claims that "completion of the foreclosure auction in the instant case" does not terminate Plaintiff's right to rescind the mortgage transaction because "the FED says all the consumer's interest must be transferred before the right to rescind is extinguished." Id. at 5. However this argument fails. "A sale or transfer of the property need not be voluntary to terminate the right to rescind. For example, a foreclosure sale would terminate an unexpired right to rescind." 12 C.F.R. § 226.23(a)(3) (Supp.I.1995).

Plaintiff attempts to escape the regulation by arguing that the Sixth Circuit has stated that courts should interpret TILA in the borrower's favor TILA provides rights to Plaintiff beyond the plain meaning of the statute. The cases cited, however, provide no support for the proposition that this regulation is invalid. Weeden v. Auto Workers Credit Union, 173 F.3d 857 1999 WL 191430 (6th Cir.1999), cert denied, 528 U.S. 1076, 120 S.Ct. 790, 145 L.Ed.2d 667 (2000) (examining whether those plaintiffs properly rescinded their mortgage transaction, when the property at issue had not been sold or transferred); Pfennig v. Household Credit Services, Inc., 295 F.3d 522 (6th Cir.2002) (reversed on different grounds)(discussing whether a fee imposed on the plaintiff's monthly statement should include the fee for exceeding her credit limit)²; Inge v. Rock Fin. Corp., 281 F.3d 613 (6th Cir.2002)(analyzing whether the defendant violated the TILA by failing to disclose, as part of its finance charge, its fees for "document preparation" and "settlement or closing" prior to the settlement date). Therefore, this Court will not grant Plaintiff any rights beyond those explicitly stated in the statute. The language of the statute, read in a light most favorable to Plaintiff borrower, does not provide Plaintiff with a right to rescind the mortgage transaction after the foreclosure auction.

Plaintiff raises two more reasons why this Court should grant to Plaintiff a right of recision after the foreclosure auction. Plaintiff argues: (1) "TILA is a Federal Law impacting each separate state's particular foreclosure procedures;" and (2) "the foreclosure auction is one step in each foreclosure sale process — in some states the auction is the step which finally transfers all the consumer's interest, while in others it is not." (Pl.'s Response to Mot. to Dismiss at 5.) Plaintiff's arguments are unconvincing. Plaintiff's first point is a conclusory statement that appears to argue, yet again, that this Court disregard the statutory language and the interpretation of the statute by the implementing agency ("a foreclosure sale would terminate an unexpired right to rescind."). 12 C.F.R. § 226.23(a)(3) (Supp.L.1995). Plaintiff offers no support for the contention that this Court should read this sentence in a manner other than the way in which it Federal Reserve's staff wrote it.

Plaintiff's second argument is that this Court should...