Viola Chambers v. HSBC Bank USA, N.A.
796 F.3d 560
6th Cir.2015Background
- In April 2006 Chambers bought a Novi, Michigan condominium financed by a first and second mortgage from Fremont; mortgages later assigned to HSBC. Chambers defaulted; sheriff’s sale occurred January 22, 2013, when HSBC bought the property.
- Chambers filed suit in Michigan state court in September 2013 seeking to void the sheriff’s sale, alleging defendants (HSBC, servicers, law firms, and individuals) failed to provide statutorily required foreclosure notices (including notice of right to request loan modification), committed fraud, and that chain-of-title defects prevented foreclosure.
- Defendants (HSBC, MERS, Ocwen, Litton — the Removing Defendants) removed the case to federal court and moved to dismiss; they also argued several non-diverse defendants were fraudulently joined.
- The district court dismissed the claims under Rules 12(b)(6) and 12(c), found certain non-diverse defendants fraudulently joined, and denied Chambers’ remand motion as moot.
- Chambers appealed arguing the remand motion should not have been declared moot (unanimity rule / fraudulent joinder / timeliness) and that dismissal on the merits was improper because she alleged fraud and prejudice sufficient to set aside the foreclosure after the redemption period.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal lacked unanimity because not all defendants consented | Chambers: non-diverse defendants were properly joined (consent required); remand required | Removing Defendants: some non-diverse defendants were fraudulently joined so their consent not required | Court: unanimity rule only requires consent of properly joined defendants; several non-diverse defendants (including paralegal Koronowski) were fraudulently joined, so removal was proper and remand moot |
| Whether Koronowski was properly joined (defeats removal) | Chambers: Koronowski was a viable defendant supporting remand | Defendants: Koronowski (paralegal/notary) cannot be liable for the relief sought (voiding sheriff’s sale) | Court: Koronowski was fraudulently joined; no colorable claim against her; her consent not required for removal |
| Timeliness of motion to remand for other non-diverse defendants | Chambers: remand motion not time-barred because challenge to subject-matter jurisdiction can be raised anytime | Defendants: remand motion was untimely under 28 U.S.C. §1447(c) (30-day rule) | Court: local E.D. Mich. e-filing rules make removal filed Oct 23, 2013, so remand motion filed Nov 25 was untimely for those defendants; remand properly denied as moot |
| Whether foreclosure can be set aside for alleged lack of statutory notice after redemption period | Chambers: defendants’ failure to notify of loan-modification right was fraud/irregularity and prejudiced her — sale should be voided | Defendants: statutory scheme gives an exclusive remedy (convert to judicial foreclosure) during the redemption period; post-redemption relief not available | Court: Plaintiff failed to act during redemption period and did not pursue the exclusive remedy; cannot set aside sheriff’s sale post-redemption despite alleged notice flaws; dismissal affirmed |
Key Cases Cited
- Coyne v. Am. Tobacco Co., 183 F.3d 488 (6th Cir. 1999) (fraudulent joinder requires showing no colorable claim against non-diverse defendant)
- Page v. City of Southfield, 45 F.3d 128 (6th Cir. 1995) (lack of subject-matter jurisdiction may be raised any time before final judgment)
- Loftis v. United Parcel Serv., Inc., 342 F.3d 509 (6th Cir. 2003) (rule of unanimity is procedural; technical removal defects are distinct from subject-matter jurisdiction)
- Conlin v. Mortgage Elec. Registration Sys., Inc., 714 F.3d 355 (6th Cir. 2013) (Michigan law governs redemption and standards for setting aside sheriff’s sale)
- Elsheick v. Select Portfolio Servicing, [citation="566 F. App'x 492"] (6th Cir. 2014) (post-redemption relief unavailable where plaintiff failed to seek statutory remedy during redemption period)