Shelly OLSON, Plaintiff-Appellant, v. MERRILL LYNCH CREDIT CORPORATION, et al., Defendants-Appellees.
No. 13-1981
United States Court of Appeals, Sixth Circuit
Aug. 8, 2014
OPINION
STRANCH, Circuit Judge.
Shelly Olson is one of the tens of thousands of Michigan residents to find herself in foreclosure proceedings during the recent mortgage crisis. Unlike many in her position, Olson alleges that she rigorously pursued loan modification both before and after she defaulted, sending a total of ten loan modification packages over several years. But Merrill Lynch Credit Corporation denied her request, allegedly after a long period of unresponsiveness. Olson now seeks to overturn the district court‘s dismissal of her numerous claims against Merrill Lynch, which accuse the bank of fraudulently misrepresenting that it would consider her loan modification requests and of failing to follow Michigan law in the foreclosure-by-advertisement proceedings. Although Olson tells a grim story of an unhelpful lender, she has failed to state a plausible claim for fraud, irregularity of foreclosure proceedings, or other legal error. We thus affirm the judgment of the district court dismissing Olson‘s complaint.
The following facts are taken as true and construed in the light most favorable to the Plaintiff.1 In 2005, Shelly Olson bought a home in South Lyon, Michigan and entered into an adjustable-rate mortgage, with an interest rate not to exceed 10.625%, with Merrill Lynch. Some years later, she began having difficulties making payments due to decreased work in the construction industry in which she owned a small business and due to her minor daughter‘s debilitating cancer. Merrill Lynch eventually foreclosed on Olson‘s home and sold the property to itself, but not until after Olson had made many attempts to avoid foreclosure through loan modification and short sale.
Olson alleges that she filed her first loan-modification package in June 2008, before she ever defaulted. Merrill Lynch told her that it lost her package, so she sent a second in November 2008. Olson soon defaulted. Then, in September 2009, Merrill Lynch, through its agent Trott & Trott, sent Olson an acceleration letter and told her that her home would be set for sheriff‘s sale on October 2, 2009. Olson soon exercised her right under Michigan statute to request a meeting to attempt to negotiate loan modification and sent more financial information to Trott & Trott. She also sent a third loan-modification request to Merrill Lynch in October 2009.
In November 2009, Olson, accompanied by her attorney, attended her statutory loan-modification meeting, but she alleges that the representative from Trott & Trott told her that “he was just there because [she] had the right by law to have a meeting.” The representative requested additional paperwork, but did not conduct any negotiations or contact Merrill Lynch at the meeting.
What happened over the course of the next year is unclear. Olson alleges that Merrill Lynch told her both that she made too little money and that she made too much money to qualify for a modification, suggesting that there was some ongoing discussion. During this time, she also continued to send loan-modification packages, increasing the total of alleged packages to ten. What is clear is that on January 6, 2011, Trott & Trott sent a letter denying Olson‘s request for loan modification. It attached a calculation showing monthly housing-related costs of $1,620.50 and a monthly income of $2,800.00, resulting in a debt-to-income ratio of 70%. According to Olson, her actual monthly payment around this time was $650.35—it had adjusted downward due to lower interest rates during the mortgage crisis—but she does not say what her other housing-related costs were. She also does not say whether the numerous modification packages informed Merrill Lynch or Trott & Trott of her actual housing costs.
Olson did not give up. She next located two potential buyers who were willing to purchase her home in a short sale. But Merrill Lynch did not respond to either offer of purchase. In July 2011, she also sent a letter informing Merrill Lynch that her income had gone up to $6,400 per month due to a new construction contract she obtained. In August 2011, Merrill Lynch sent another letter denying Olson‘s loan-modification request on the basis of an “Incomplete Loss Mitigation Package“—which Olson says is untrue because the packages had been complete—and information from the credit-reporting agencies.
Olson makes one other relevant allegation—that Merrill Lynch was not the owner of her loan at the time of foreclosure. She bases this allegation on a 2011 IRS Form 1099-A—a form that lenders send to borrowers when they acquire an interest in a property—which lists Wells Fargo Bank as her lender.
Olson does not allege that she attempted to redeem her property within the Michigan six-month redemption period. See
II. STANDARD OF REVIEW
We review a district court‘s grant of a motion to dismiss de novo, construing the complaint in the light most favorable to the plaintiff and accepting all factual allegations as true. Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012). A claim will survive as long as the complaint “contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face“—meaning that it “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “[T]he Rules require that we not rely solely on labels in a complaint, but that we probe deeper and examine the substance of the complaint.” Minger v. Green, 239 F.3d 793, 799 (6th Cir. 2001).
“Where, as here, federal jurisdiction is based on diversity, this Court applies the substantive law of the forum state—in this case, Michigan.” Conlin v. Mortg. Elec. Registration Sys., Inc., 714 F.3d 355, 358 (6th Cir. 2013). To discern Michigan law, we first look to the final decisions of that state‘s highest court; if the question is unresolved, we make an Erie guess as to how that court would resolve a question, treating intermediate state court decisions as persuasive authority. Id. at 358-59.
III. ANALYSIS
Without a doubt, Olson has alleged, supported by Merrill Lynch‘s own answer, that Merrill Lynch made little effort to negotiate loan-modification or prevent foreclosure, communicated poorly, and dragged its feet. But this does not mean that Olson alleged a plausible legal claim. Her claims fall short of that standard for both factual and legal reasons.
Olson‘s only theories under this section are that Merrill Lynch violated the statute by 1) failing to delay the sheriff‘s sale until loan-modification negotiations were complete and 2) failing to provide legitimate reasons why her loan-modification request was denied. Neither suffices to raise a claim under
Similar problems defeat Olson‘s fraudulent-inducement and misrepresentation claims. Michigan law renders a foreclosure proceeding voidable after the six-month redemption period if the plaintiff shows fraud or some other highly suspect irregularity in the foreclosure proceedings. See Conlin, 714 F.3d at 359-60 (citing Sweet Air Inv., Inc. v. Kenney, 275 Mich. App. 492, 739 N.W.2d 656, 659 (2007)). But Michigan sets a “high standard” for such a showing, id., and such claims must
Olson‘s theory is that Merrill Lynch fraudulently misrepresented that it would review her mortgage for potential modification when it had no intention of doing so and that this prevented her from exercising any other legal options. She alleges that a representative from Trott & Trott indicated that there would be no negotiation but requested more information; that Merrill Lynch told her that she made too little money and later that she made too much money to qualify for modification; that Merrill Lynch waited fourteen months after the meeting to deny her request; and that Merrill Lynch provided three reasons for the denial. Under the high standards applicable here, this is not sufficient to support a plausible inference that Merrill Lynch falsely represented that it would review her request for modification. See also Brown, 2013 WL 6083906, at *6-7 (rejecting a very similar fraud in the inducement claim). Olson raises additional fraud theories in her appellate brief, but we decline to consider these new claims on appeal. See Groeneveld Transp. Efficiency, Inc. v. Lubecore Int‘l, Inc., 730 F.3d 494, 520 (6th Cir. 2013) (citing Foster v. Barilow, 6 F.3d 405, 407 (6th Cir. 1993)).
Olson‘s promissory-estoppel claim fares no better. A promissory-estoppel claim is valid where the plaintiff alleges a broken promise that the promisor reasonably expected to, and did, induce action or forbearance to the promisee‘s detriment. State Bank of Standish v. Curry, 442 Mich. 76, 500 N.W.2d 104, 107 (1993). The promise itself must be “actual, clear, and definite“—a conditional promise will not do. Gore v. Flagstar Bank, FSB, 474 Mich. 1075, 711 N.W.2d 330, 330-31 (2006) (Taylor, J., concurring); see also First Sec. Sav. Bank v. Aitken, 226 Mich. App. 291, 573 N.W.2d 307, 317 (1997) (overruled on other grounds in Smith v. Globe Life Ins. Co., 460 Mich. 446, 597 N.W.2d 28, 33 n.2 (1999)). And the promisee‘s reliance must be reasonable. Curry, 500 N.W.2d at 107-08. Olson alleges that Merrill Lynch made a promise that it would review her for potential modification in accordance with the law, but, as explained above, Olson did not plausibly allege that Merrill Lynch failed to consider her application in accordance with the law. And based on the limited facts alleged, we cannot make a logical inference that she reasonably relied on a promise to review her application.
Olson‘s separate claim under the Home Affordable Mortgage Program (HAMP) also fails. HAMP is a federal program enacted pursuant to the Emergency Economic Stabilization Act,
Finally, Olson‘s claim of wrongful foreclosure under
Because Olson did not plausibly allege her first five claims, we have no occasion to consider her claim for exemplary damages.
IV. CONCLUSION
For the reasons explained above, we AFFIRM the district court‘s dismissal of all of Olson‘s claims.