192 F. Supp. 3d 832
E.D. Mich.2016Background
- Plaintiffs Cosme and Shirleann Cruz borrowed $360,000 in 2007 and granted a mortgage on their Michigan home; the mortgage was later assigned to Capital One.
- Plaintiffs fell behind on payments, allege they did not receive a required 30‑day default notice, and that Capital One accelerated the loan and foreclosed by advertisement in 2015.
- Capital One purchased the property at the foreclosure sale; the statutory redemption period expired and plaintiffs did not redeem.
- Plaintiffs sued in state court asserting six causes of action (wrongful foreclosure, breach of contract, slander of title, declaratory relief, preliminary injunction, equitable mortgage/conversion to judicial foreclosure); defendant removed and moved to dismiss under Fed. R. Civ. P. 12(b)(6).
- Plaintiffs did not defend most pleaded counts in their response; instead they asserted new theories in the response: breach of implied covenant of good faith and fraudulent misrepresentation.
- The court considered public records and the parties’ papers, treated the new theories as an amendment, and dismissed the complaint with prejudice for failure to state viable claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge foreclosure after redemption period | Plaintiffs alleged continued ownership and sought to contest foreclosure validity | Capital One argued plaintiffs lacked standing because they failed to redeem within redemption period | Plaintiffs have Article III and prudential standing; expiration of redemption period is a merits issue, not jurisdictional |
| Failure to defend pleaded claims | Plaintiffs offered no response to dismissal arguments on the original six counts | Defendant argued each claim lacked merit | Court treats unopposed arguments as conceded; original pleaded claims (including wrongful foreclosure, breach, slander) are abandoned and dismissed |
| Fraudulent‑misrepresentation (new) — pleading particularity | Plaintiffs claim Capital One promised a loan modification and induced reliance while foreclosing | Capital One argued Rule 9(b) requires particulars and that the claim is barred by Michigan's Statute of Frauds | Fraud claim fails: plaintiff did not plead who, when, where, or the exact statements; claim barred by Statute of Frauds for unwritten promises by financial institutions |
| Breach of implied covenant / unjust enrichment (new) | Plaintiffs asserted implied covenant and/or related equitable claims tied to loan modification dealings | Defendant argued Michigan law does not recognize implied covenant claim and express contract governs | Court held Michigan does not recognize a standalone implied‑covenant claim; unjust enrichment unavailable where express contract controls |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (limitations on accepting legal conclusions at pleading stage)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (constitutional requirements for Article III standing)
- MacDonald v. Thomas M. Cooley Law Sch., 724 F.3d 654 (elements of fraudulent misrepresentation under Michigan law)
- Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327 (documents integral to the complaint may be considered on Rule 12(b)(6))
- Crown Tech. Park v. D&N Bank, FSB, 242 Mich. App. 538 (Michigan Statute of Frauds bars enforcement of oral promises by financial institutions)