569 F. App'x 366
6th Cir.2014Background
- Holliday obtained a $360,000 mortgage on 5269 Pond Bluff Dr., West Bloomfield, MI, with MERS as nominee; mortgage recorded Nov. 7, 2006.
- Assignment chain: MERS to U.S. Bank Trust National Association (Sequoia Funding Trust) recorded May 27, 2008, then to Wells Fargo Bank, NA, recorded Dec. 27, 2011.
- Foreclosure by advertisement was commenced; Holliday alleges she sought a loan modification but WF allegedly failed to provide a modification package.
- Notice of sale was sent Sept. 14, 2011; sheriff’s sale occurred June 26, 2012; WF purchased for $175,000; redemption period expired Dec. 26, 2012.
- Holliday filed a four-count complaint in Oakland County Circuit Court Jan. 30, 2013; WF removed to ED Mich. and moved to dismiss; district court granted dismissal July 26, 2013; reconsideration denied Aug. 14, 2013; Holliday appealed.
- The Sixth Circuit affirmed the district court’s dismissal of Holliday’s complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to challenge the mortgage assignment under Michigan law | Holliday asserts authority despite redemption deadline due to fraud/irregularities | WF argues no authority to challenge assignment; no prejudice shown | Yes, Holliday lacks authority without prejudice showing |
| Fraud/irregularity sufficient for extension of redemption period | Fraud/irregularities in foreclosure justify extension | Vagueness; not shown to meet stringent standard | No sufficient fraud/irregularity shown to warrant extension |
| Violation of Mich. Comp. Laws § 600.3205 and loan modification rights | WF failed to engage modification process and notify; §600.3205c violated | Record shows notice; no evidence of proper modification submission or eligibility | District court properly dismissed for lack of pleading and relief not applicable |
| Effect of foreclosure by advertisement and compliance with §600.3204 | Assignment invalid due to trust issues; foreclosure void ab initio | Defect shown would render sale voidable; prejudice required; no prejudice proven | Dismissal proper; no authority to void completed sheriff’s sale |
| Prejudice and the role of discovery in proving prejudice | Discovery would show prejudice; must be allowed | Discovery cannot cure lack of pleaded prejudice; remedy is limited | Holliday failed to plead prejudice; discovery not warranted to salvage claim |
Key Cases Cited
- Conlin v. Mortgage Electronic Registration Systems, Inc., 714 F.3d 355 (6th Cir. 2013) (prejudice required to overturn foreclosure; not shown here)
- Kim v. JPMorgan Chase Bank, N.A., 825 N.W.2d 329 (Mich. 2012) (foreclosure defects render sale voidable, not void ab initio)
- El-Seblani v. IndyMac Mortgage Services, 510 F. App’x 425 (6th Cir. 2013) (prejudice/extension standard for 600.3204 and 600.3205(a))
- Smith v. Bank of America Corp., 485 F. App’x 749 (6th Cir. 2012) (modification process requires notice and opportunity; not a right to modification)
- Spadafore v. Aurora Loan Services, LLC, 2014 WL 1622771 (6th Cir. 2014) (prejudice required to set aside foreclosure; considerations of prejudice)
- Schulthies v. Barron, 16 Mich. App. 246 (1969) (equitable extension of redemption period context)
- Piotrowski v. State Land Office Board, 302 Mich. 179 (1942) (early Michigan redemption/fraud doctrine)
- Vanderhoof v. Deutsche Bank National Trust, 554 F. App’x 355 (6th Cir. 2014) (prejudice requirement for foreclosure challenges)