OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION FOR JUDGMENT ON THE PLEADINGS
Before the Court is the defendants’ motion for judgment on the pleadings in this mortgage foreclosure case. The plaintiffs ceased making mortgage payments in July 2009, and foreclosure was initiated in early 2010. The foreclosure sale apparently has not yet occurred. The plaintiffs brought suit in state court on March 20, 2012, and the defendants removed the case to this Court and thereafter filed their motion. The Court heard oral argument on the motion on January 10, 2013.
The plaintiffs’ complaint is in large part based on their contention that the assignment of the mortgage to defendant Deutsche Bank was invalid. The plaintiffs also allege that defendant Bank of America has been acting as servicer of the mortgage loan without authоrization and that the commencement of foreclosure proceedings was wrongful. For the reasons discussed below, the Court finds that the plaintiff has not stated viable claims in any of the counts of their complaint except count III — conversion—against defendant Bank of America. The Court will grant the defendants’ motion in part, dismiss all claims against defendant Deutsche Bank, and dismiss all claims against defendant Bank of America except count III.
I.
The following facts are taken from the plaintiffs’ complaint and the documents referenced therein. The plaintiffs live at the subject property, 8444 Jack Pine Drive, Ypsilanti, Michigan. When they purchased the property on December 15, 2006, they signed a promissory note with New Cеntury Mortgage Corporation and a mortgage naming Mortgage Electronic Registration System (MERS) as the mortgagee in a nominee capacity for the lender. New Century then sold the note to a “special purpose vehicle” (SPV) designated as a Real Estate Mortgage Investment Conduit (REMIC) trust, which was named the HIS Asset Securitization Corporation Trust 2007-NCI (the Trust), of which defendant Deutsche Bank is the trustee. The plaintiffs were not notified of that transfer.
In July 2009, the plaintiffs requested that defendant Bank of America prove that it had the right to collect payments on the plaintiffs’ note. Not receiving a response, the plaintiffs stopped making payments. On November 18, 2010, MERS assigned the mortgage to defendant Deutsche Bank. Trott & Trott began fоreclosure proceedings at some point in early 2010. Trott & Trott identified defendant Bank of America as the loan servicer in a letter to the plaintiffs dated January 23, 2012, although it is not clear how that came to be. The complaint does not allege that a foreclosure sale actually has occurred, and the prayer for relief requests that the defendants be enjoined from seeking foreclosure.
The plaintiffs filed their complaint in state court on March 20, 2012. The complaint contains claims for wrongful foreclosure, breach of contract, conversion, slander of title, quiet title, civil conspiracy, and a count entitled “mortgage is unenforceable; Deutsche is not the true party in interеst and may not foreclose.” The plaintiffs allege that Trott & Trott was acting on behalf of the servicer, Bank of America, and that because Bank of America never acquired the mortgage it violated Michigan Compiled Laws § 600.3204(3). The plaintiffs allege that the assignment to the Trust violated Michigan Compiled
The defendants removed the case to this Court on April 10, 2012. On June 11, 2012, the Court entered a stipulated order dismissing the complaint without prejudice as to defendant Trott & Trott. Thereafter, the remaining defendants, Deutsche Bank and Bank of America, filed a motion for judgment on the pleadings. The plaintiffs responded and the defendants replied. The Court heard oral argument on January 10, 2013.
II.
A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) requires application of the same standards that govern motions to dismiss under Rule 12(b)(6). See Fed.R.Civ.P. 12(c); Vickers v. Fairfield Med. Ctr.,
Consideration of a motion to dismiss under Rule 12(b)(6) is confined to the pleadings. Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir.2008). Assessmеnt of the facial sufficiency of the complaint ordinarily must be undertaken without resort to matters outside the pleadings. Wysocki v. Int’l Bus. Mach. Corp.,
The plaintiffs attached the mortgage, the assignment of mortgage, a notice of foreclosure sale, a letter from Trott & Trott dated January 23, 2012, and a copy of their payment history to the complaint. The defendants attached a copy of the pooling and servicing agreement to their answer. Because these documents were attached to thе pleadings, the Court may consider them in deciding the defendants’ motion. In addition, the defendants attached the note to their motion for judgment on the pleadings. Because the plaintiffs refer to this document in the complaint and it is integral to the plaintiffs’ claims, the Court may also consider it in deciding the defendants’ motion.
A. Wrongful Foreclosure
1. Bank of America’s alleged violation of the Michigan foreclosure statute
In the first count of the plaintiffs’ complaint, the plaintiffs allege that the defendants have violated Michigan Compiled Laws § 600.3204(3). The plaintiffs state that if defendant Bank of America is determined to be the foreclosing party, it never acquired the mortgage. If defendant Deutsche Bank is determined to be the foreclosing party, the assignment of the mortgage was invalid for a number of reasons. Because neither of the defendants can demonstrate that it properly owned the mortgage, the plaintiffs argue, the defendants should be enjoined from foreclosing on the property. Although the plaintiffs’ complaint mentions only section 600.3204(3), in their response the plaintiffs also argue that defendant Bank of America violated section 600.3204(l)(d), which is not a theory set out in the pleadings. The plaintiffs also allege that the assignment to the Trust violates Michigan’s Statute of Uses, Michigan Compiled Laws § 555.5.
The defendants argue that Michigan law rejects the plaintiffs’ note-splitting theory, and they insist that the assignment is valid in all other respects.
Foreclosure sales by advertisement are governed by statute. Senters v. Ottawa Sav. Bank, FSB,
(a) A default in a condition of the mortgage has occurred, by which the power to sell became operative.
(b) An action or proceeding has not been instituted, at law, to recover the debt secured by the mortgage or any part of the mortgage; or, if an action or proceeding has been instituted, the action or proceeding has been discontinued; or an еxecution on a judgment rendered in an action or proceeding has been returned unsatisfied, in whole or in part.
(c) The mortgage containing the power of sale has been properly recorded.
(d) The party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage.
Mich. Comp. Laws § 600.3204(1). “If the party foreclosing a mortgage by advertise
The Michigan Supreme Court recently held that “defects or irregularities in a foreclosure proceeding result in a foreclosure that is voidable, not void ab initio.” Kim v. JPMorgan Chase Bank, N.A.,
The plaintiffs’ complaint alleges that the defendants have violated section 600.3204(3). However, the defendants cannot have violated that section, as it requires only that a record chain of title exist as of the date of sale. Because the sale has not yet occurred, the defendants have not violated section 3204(3).
The plaintiffs argue in their response that the defendants violated section 3204(l)(d) because defendant Bank of America did not have an interest in the mortgage at the time the foreclosure was initiated. However, that theory is not contained, in the plaintiffs complaint. Moreover, section 600.3204(l)(d) plainly states that the servicing agent of the mortgage may initiate foreclosure proceedings; the cases cited by the plaintiffs say nothing to the contrary, as they deal with situations in which the foreclosing party was not the servicer and did not acquire an interest in the mortgage until after the foreclosure process began. See Davenport v. HSBC Bank,
The plaintiffs’ comрlaint alleges inconsistent facts on the role of defendant Bank of America. The plaintiffs allege that Bank of America acted as the servicer of the loan from the time the mortgage was executed, but also they allege that Bank of America lacked the right or authority to act as the servicer for the plaintiffs’ loan because it did not have a servicing agreement with the Trust. In addition, in their response to the motion, the plaintiffs state that Bank of America was the servicer. As this Court has held previously, the plaintiffs’ allegation that Bank of America was their servicer is a factual allegation that the Court must accept as true at this stage of the proceedings, whereas the allegation that Bank of America was without lawful authorization to act as servicer is a legal conclusion that the Court may not accept as true unless it is plausibly supported by the pleaded facts. See Talton v. BAC Home Loans Servicing LP,
2. Validity of the assignment
The plaintiffs also allege that defendant Deutsche Bank, as trustee for the Trust, is responsible for wrongful foreclosure. The plaintiffs’ wrongful foreclosure claim is based on its allegations that the assignment to the Trust was invalid as violating the statute of uses and the PSA, and that MERS lacked the authority to transfer the mortgage for various reasons. Those arguments also form the basis of most of the remainder of the counts of the plaintiffs’ complaint. The Court will address them in turn.
a. Plaintiffs’ ability to challenge assignment
The defendants first argue that the plaintiffs may not challenge the validity of the assignment. The plaintiffs argue that they should be permitted to challenge the assignment on the basis that it is absolutely invalid because MERS lacked the authority to assign the mortgage as it wаs not a nominee of the creditor. The Sixth Circuit has rejected a similar challenge to the validity of an assignment under Mich. Comp. Laws § 600.3204(3) on the grounds that the invalidation of the assignment would not destroy the record chain of title because the public record would remain unchanged and that the plaintiff, as a non-party to the assignment, lacked standing to challenge the assignment. See Livonia Props. v. 12840-12976 Farmington Road Holdings, LLC,
Immediately after observing the general rule that a third party cannot challenge an assignment, the court noted that “[a]n obligor ‘may assert as a defense any matter which renders the assignment absolutely invalid or ineffective, or void.’ ” Livonia Properties,
The Michigan Supreme Court’s ruling in Residential Funding Co., LLC v. Saurman,
In this case, the plaintiffs argue that they should be permitted to challenge the assignment because the assignment was invalid for various reasons. The complaint supports the concern that the plaintiffs might be subject to double liability because the mortgage and note have been assigned to different parties. The plaintiffs allege in their complaint that the note was sold to a trust, and that the mortgage was assigned to defendant Deutsche Bank as trustee for that trust. However, the foreclosure procеss was initiated, although not completed, by defendant Bank of America. In order to complete the foreclosure, the mortgage would have to be assigned to Bank of America. The note would then be in the hands of the Trust and the mortgage in the hands of Bank of America. In such a situation, the plaintiffs will be permitted to challenge the validity of the assignment.
b. Legality of the assignment
Whether the plaintiffs’ challenge prevails, however, is a separate question. The plaintiffs advance several theories upon which the assignment might be invalid in their complaint: the assignment violated Michigan’s statute of uses, MERS lacked authority from the owner of the note to transfer the mortgage, MERS could not transfer the mortgage without the note under Michigan law, and the mortgage was assigned after the closing date of the Trust. The plaintiffs press only the first two of those theories in their response to the defendants’ motion,
i. Statute of uses
The plaintiffs first argue that the assignment of the mortgage to defendant Deutsche Bank as trustee violated a provision of Michigan’s statute of uses, Michigan Compiled Laws § 555.5, which states:
Every disposition of lands, whether by deed or devise, hereafter made, except as otherwise provided in this chapter, shall be directly to the person in whom the right to the possession and the profits shall be intended to be vested, and not to any other, to the use of, or in trust for, such person; and if made to 1 or more persons, in trust for, or to the use of another, no estate or interest, legal оr equitable, shall vest in the trustee.
Mich. Comp. Laws § 555.5. The plaintiffs argue that the Trust in this case, like all REMIC trusts, is a passive trust, and therefore the assignment of mortgage did not vest a security interest in defendant Deutsche Bank, but rather in the investors in the Trust. The defendants counter that the statute does not apply in this case because it deals with conveyances that purport to create trusts without any duties. The defendants point out that the assignment in this case is not to the trustee “in trust” for investors, but rather to the trustee “as trustee” for the existing trust. Because the Trust already existed and the trustee’s duties were defined, the statute does not apply.
Michigan case law interpreting this statute is not extensive. In Cone v. Zelony, No. 233034,
The plaintiffs’ statute of uses argument in this case fails for at least two reasons. First, under Cone, where a trustee is “charged with holding title,” the trust is not passive and the statute does not affect the conveyance. In this case, under the PSA, defendant Deutsche Bank as trustee is charged with numerous duties, including “hold[ing] the Trust Fund and exercising]” rights on behalf of certificate holders. Defs.’ Answer Ex. A at 49. The obligation created by the PSA likewise suggests that the Trust is not passive and the statute does not apply in this case. Second, as the plaintiffs seem to acknowledge in their response, even if the statute did apply, the effect would not be to invalidate the assignment; rather, it would mean that the security interest was vested in the Trust’s investors. Because the statute would not invalidate the assignment in any cаse, the plaintiffs’ challenge under Michigan Compiled Laws § 555.5 fails.
ii. MERS’s authority as nominee
The plaintiffs next argue that MERS did not have the authority to assign the mortgage because the trustee did not have the power or authority to nominate MERS to hold the mortgage. The plaintiffs contend that the note passed to two non-MERS member — the depositor and the Trust — and argue that MERS had no authority to assign the mortgage because it had no relationship with the holder of the note. The defendants respond that plaintiffs themselves gave MERS the authority to act as a nominee for the lender and the lender’s successors and assigns when the plaintiffs signed the mortgage.
The plaintiffs’ argument is disconnected. The mortgage states that MERS is the mortgagee under the security instrument and that it acts “solely as a nominee for Lender and Lender’s successors and assigns.” Compl. Ex. 1 at 2. The plaintiffs have presented no reason to believe that the lender’s “successors and assigns” do not include the Trust. Moreover, the PSA grants Deutsche Bank the authority as trustee to accept assignment of the mortgage. The plaintiffs cite neither authority nor facts suggesting that MERS lacked the authority to assign the mortgage in these circumstances, and courts in this district have rejected this argument repeatedly. See Cable v. Mortgage Electronic Registration Systems, Inc., No. 11-14877,
iii. Separation of Note and Mortgage
The plаintiffs’ complaint contains the argument that the assignment was invalid because it separated the note from the mortgage. The plaintiffs do not pursue this argument in their response, with good reason, since the Michigan Supreme Court held in Residential Funding Co., L.L.C. v. Saurman,
iv. Closing Date of Trust
The plaintiffs’ complaint also advances the theory that the assignment is invalid because it occurred after the closing date of the Trust. That argument does not help the plaintiffs. If the mortgage loan were added to the Trust improperly, that might create a cause of action for the beneficiaries of the Trust. See Livonia Property Holdings, L.L.C. v. 12840-12976 Farmington Road Holdings, L.L.C.,
B. Breach of contract
In count II of their complaint, the plaintiffs allege that the defendants have violated paragraph 20 of the mortgage, which, according to the plaintiffs, requires that the note cannot be separated from the mortgage without notice. The plaintiffs further argue that the illegitimate transfer of the note to the Trust meant that defendant Bank of America had no right to collect payments on the mortgage loan.
Paragraph 20 of the mortgage states, in relevant part: “The Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to the Borrower.” Compl. Ex. 1 (emphasis added).
When construing a contract or one of its provisions, the intentions of the parties govern. First Nat. Bank of Ypsilanti v. Redford Chevrolet Co.,
A contract is unambiguous if it “fairly admits of but one interpretation.” Allstate Ins. Co. v. Goldwater,
This Court previously has held that contract language identical to that cited by the plaintiff is ambiguous because it fairly admits of more than one interpretation. Gregory v. Citimortgage,
C. Conversion
In count III of the complaint, the plaintiffs сharge conversion against defendant Bank of America only. The plaintiffs allege that Bank of America acted as a servicer but did not have authorization to collect payments on the plaintiffs’ mortgage and did not have a servicing agreement with the Trust holding the plaintiffs’ note. The defendants argue that the PSA specifically designates Bank of America’s predecessor-in-interest as the servicer, and therefore defendant Bank of America is authorized to service the loan.
In Michigan, conversion has both a common-law and statutory basis. Common law conversion “consists of any distinct act or domain exerted over another’s personal property in denial of or inconsistent with the rights therein.” Dep’t of Agric. v. Appletree Marketing, L.L.C.,
(a) Another person’s stealing or embezzling property or converting property to the other person’s own use.
(b) Another person’s buying, receiving, possessing, concealing, or aiding in the concealment of stolen, embezzled, or converted property when the person buying, receiving, possessing, concealing, or aiding in the concealment of stolen, embezzled, оr converted property knew that the property was stolen, embezzled, or converted.
In their motion to dismiss, the defendants state that the PSA defines servicer to include Countrywide Servicing and any successor in interest and that Countrywide changed its name to BAC Home Loans Servicing and then merged into Bank of America on July 1, 2011. However, the defendants provide no evidence to support this assertion, such as public records that might document the name change or merger. As discussed above, when considering a motion for judgment on the pleadings, the Court must accept as true the plaintiffs’ assertion that Bank of America had no servicing agreement with the Trust, especially as the defendants have provided no documentation to rebut that assertion. The plaintiffs further allege that Bank of America converted the mortgage payments “to its own use.” Compl. ¶ 52. That is sufficient at this stage of the case to support a claim that the plaintiffs delivered funds to Bank of America for a mortgage payment that Bank of America then diverted to its own use.
D. Slander of title
In count IV the plaintiffs allege that defendant Deutsche Bank slandered their title because the invalid assignment and foreclosure notices diminished the
Slander of title claims in Michigan “have both a common-law and statutory basis.” B & B Inv. Group v. Gitler,
As discussed above, the plaintiffs have presented no grounds upon which the Court could find that the assignment was invalid. Therefore, count IV will be dismissed.
E. Quiet Title
In count V, the plaintiffs seek to quiet title in themselves against the intеrests of defendant Deutsche Bank only. The plaintiffs reiterate their argument that the assignment was invalid both because it violates Michigan law and because it is contrary to the PSA. The defendants argue that the plaintiffs cannot challenge the legal effect of the assignment, the assignment did not violate the Michigan statute of uses, the plaintiffs and the trustee authorized the assignment, and the PSA permits the assignment.
In Michigan a quiet title action is a statutory cause of action. Michigan Compiled Laws § 600.2932(1) states that “[a]ny person, whether he is in possession of the land in question or not, who claims any right in, title to, equitable title to, interest in, or right to possession of land, may bring an action in the circuit courts against any other person who claims оr might claim any interest inconsistent with the interest claimed by the plaintiff.” That statute “codifie[s] actions to quiet title and authorize^] suits to determine competing parties’ respective interests in land.” Republic Bank v. Modular One LLC,
As discussed above, the plaintiffs have presented no grounds upon which the Court could find that the assignment was invalid. Therefore, count V of the plaintiffs’ complaint will be dismissed.
F. Mortgage is unenforceable
The sixth count of the plaintiffs’ complaint is titled “Mortgage is unenforceable; Deutsche is not the true party in interest and may not foreclose.” The plaintiffs argue that their obligation under the nоte was extinguished when the note was transferred into the Trust and also that the assignment of the note to the Trust was invalid. Attempts to base claims on the securitization of a mortgage and the alleged separation of the mortgage and note have not been well received by courts around the country. See Leone v. Citi
G. Civil conspiracy
The seventh and final count of the plaintiffs’ complaint is for civil conspiracy. The plaintiffs allege that the dеfendants have conspired to convert the plaintiffs’ mortgage payments and to take possession of the plaintiffs’ home.
Under Michigan Law, a civil conspiracy consists of (1) a concerted action, (2) by a combination of two or more persons, (3) to accomplish an unlawful purpose, (4) or to accomplish a lawful purpose by unlawful means. Petroleum Enhancer, LLC v. Woodward,
As discussed above, all of the plaintiffs’ claims against defendant Deutsche Bank fail. The plaintiffs have not pleaded any facts that would suggest that Deutsche Bank has sought to accomplish an unlawful purpose through conсerted action with'defendant Bank of America, beyond conclusory allegations in the complaint that all of the defendants have conspired to take the plaintiffs’ mortgage payments and home. The plaintiffs complaint does not state a claim for relief on the civil conspiracy count, and the Court will dismiss count VII of the complaint.
m.
Except for count III of the complaint, which alleges conversion against defendant Bank of America, the complaint fails to state a claim for which relief can be granted.
Accordingly, it is ORDERED that the defendants’ motion for judgment on the pleadings [dkt. #15] is GRANTED IN PART AND DENIED IN PART.
It is further ORDERED that the complaint is DISMISSED WITH PREJUDICE as to defendant Deutsche Bank, only.
It is further ORDERED that counts I, II and IV through VII of the complaint are DISMISSED WITH PREJUDICE as to defendant Bank of America.