Opinion
No. 318877
01-27-2015
SARENA HADDAD, Plaintiff/Counter-Defendant-Appellant, v. BANK OF AMERICA and ANTHONY TARATUTA, Defendants/Counter-Plaintiffs/Third-Party Plaintiffs-Appellees, and WESTERN SURETY COMPANY, Defendant, and BASIM HADDAD, Third-Party Defendant.
UNPUBLISHED Oakland Circuit Court
LC No. 2012-130252-CH
Before: DONOFRIO, P.J., and BORRELLO and STEPHENS, JJ. PER CURIAM.
Plaintiff/counter-defendant Serena Haddad appeals as of right the trial court's order granting summary disposition in favor of defendants/counter-plaintiffs/third-party plaintiffs Bank of America (BofA) and Anthony Taratuta pursuant to MCR 2.116(C)(10). For the reasons set forth in this opinion, we affirm.
I. FACTS.
Sarena and her husband Basim Haddad owned residential property in Oakland County. On September 16, 2002, Sarena and Basim obtained a mortgage on the property from ABN AMRO in the amount of $307,000. On November 5, 2002, the couple obtained an additional mortgage for $95,000 from Oakland Commerce Bank. These two mortgages are not in dispute in this case.
In September 2003, the parties obtained another mortgage on the property from Standard Federal Bank (hereinafter "the mortgage" or "Standard Federal mortgage"). The parties dispute the events surrounding this mortgage transaction. In an affidavit, Basim averred that Taratuta, who worked for Standard Federal at the time in question, contacted Basim about a loan and offered him a $400,000 mortgage. Basim stated that he did not tell his wife about his contact with Taratuta. A couple days later, according to Basim, Taratuta again called to inform Basim that the loan was prepared and Basim should come in to the bank to sign the documents. Basim averred that he did not bring his wife to the meeting. Basim averred, however, that Taratuta assured him that it was permissible for Basim to sign Sarena's name. Basim also averred that Taratuta told him he could sign the names of two witnesses. In response, Basim signed his own name, Sarena's name, and the names of Bashar Bidawid and Diana Kinaia as witnesses to the mortgage. Sarena and the two purported witnesses averred that they did not sign the document or attend the closing.
In contrast, Taratuta offered deposition testimony that differed from Basim's description of the transaction. Taratuta testified that he did not remember the specific transaction or any interaction with Basim or Sarena. However, Taratuta also testified that he could not have possibly encouraged Basim to forge the signatures of both Sarena and the witnesses, because he never allowed someone to forge a signature on a document he notarized. Additionally, Taratuta stated that he had a process that required anyone signing documents to be physically present, with their identification before he allowed them to sign a document that he notarized. Taratuta asserted that because he notarized the document in question, he knew that it did not contain forged signatures. Further, Taratuta also testified that he had no incentive to sell a mortgage so he had no reason to contact Basim, and preparing a loan and mortgage takes approximately 30 to 45 days—not the few days' turnaround as Basim alleged.
Regardless of the alleged forgery, the mortgage was prepared on September 15, 2003. The mortgage document stated that there would be a $400,000 loan to Basim and Sarena and listed the subject property as collateral. The mortgage contained signatures appearing to be from Basim and Sarena, as well as Bidawid and Kinaia as witnesses and it was notarized by Taratuta.
The proceeds from the Standard Federal mortgage were used to pay off the remaining balances on the prior two mortgages. The remaining funds were dispersed directly to Basim and Sarena in the amount of $15,792.94. This amount is reflected in a disclosure statement created by Standard Federal and containing signatures purporting to be those of Sarena and Basim.
At some point, after the funds were disbursed, Standard Federal became LaSalle Bank. In addition, despite claiming that her signature was forged and that she did not know about the mortgage, on February 28, 2007, in a signed credit application with Mercedes Benz, Sarena listed a $3,000-per-month mortgage payment as an existing debt.
In July 2007, Basim and Sarena defaulted on the mortgage. In May 2008, LaSalle Bank filed a judicial foreclosure action in the circuit court (LC No. 08-091442-CH). In that suit, Sarena filed a counterclaim, alleging that the mortgage was void because the signatures were forged. Sarena claimed that she previously filed suit attempting to void the mortgage in 2007, but that suit had been dismissed because she sued the wrong party.
Shortly thereafter, on April 21, 2009, Basim and Sarena filed for Chapter 7 bankruptcy protection in the United States Bankruptcy Court for the Eastern District of Michigan. In response to that bankruptcy petition, the circuit court ordered the judicial foreclosure action be placed on administrative stay pending the outcome of the bankruptcy proceedings. The court noted that the suit was closed without prejudice, that it was not a decision or dismissal on the merits, and that the case could be reopened on the motion of any party.
Case No. 09-52412.
During the bankruptcy proceedings, Basim and Sarena listed the LaSalle Bank mortgage on a list of secured creditors on their Schedule D disclosures. The debt to LaSalle Bank was listed as a mortgage in the amount of $340,000. There was no mention, however, of any claims against LaSalle Bank, or Standard Federal Bank, regarding Sarena's counterclaim in the judicial foreclosure action. In the Statement of Intentions portion of the bankruptcy paperwork, Basim and Sarena stated that LaSalle Bank maintained a mortgage on the subject property but that Basim and Sarena intended to maintain the home and reaffirm the debt. Nevertheless, on July 28, 2009, the Bankruptcy Court entered an order discharging Basim and Sarena's debts. Included on the list was the LaSalle Bank mortgage and note.
Sometime thereafter, BofA acquired LaSalle Bank and it became the successor in interest to LaSalle's assets and liabilities. On November 11, 2011, BofA commenced a foreclosure by advertisement on the subject property. On May 4, 2012, BofA purchased the property at a Sheriff's Sale.
In response, with one day left on the period of redemption, Sarena commenced this action. Sarena's claims can be distilled to the following: (1) Sarena argued that the mortgage was void because Basim forged her signature at the behest of Taratuta; (2) Sarena alleged that BofA's foreclosure by advertisement was void under MCL 600.3204(b), because the foreclosure was commenced while LaSalle Bank's judicial foreclosure was still pending.
Sarena also alleged notary liability on the part of Taratuta; however, that claim was necessarily dependent on her claim that the mortgage was void because of fraud.
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BofA and Taratuta moved for summary disposition, alleging that Sarena did not have standing to challenge the mortgage documents because that right lay solely with the bankruptcy trustee, and that the foreclosure by advertisement sale was proper under the law. The trial court agreed and granted the motion.
II. ANALYSIS.
On appeal, Sarena argues that the trial court erred in granting summary disposition in favor of BofA and Taratuta.
"This Court reviews decisions on motions for summary disposition de novo to determine if the moving party was entitled to judgment as a matter of law." Alcona Co v Wolverine Environmental Prod, Inc, 233 Mich App 238, 245; 590 NW2d 586 (1998). To the extent we must interpret the relevant statutes and court rules, these issues are also reviewed de novo. Grzesick v Cepela, 237 Mich App 554, 559; 603 NW2d 809 (1999).
Initially, Sarena asserts that the trial court erred in holding that she did not have standing to assert a claim of forgery regarding the underlying mortgage. Sarena contends that BofA and Taratuta waived the defense of standing by failing to raise it in their initial responsive pleading.
"[T]he primary function of a pleading in Michigan is to give notice of the nature of the claim or defense sufficient to permit the opposite party to take a responsive position." Stanke v State Farm Mutual Auto Ins Co, 200 Mich App 307, 317; 503 NW2d 758 (1993). MCR 2.111(F)(3)(c) provides that "a party must state the facts constituting . . . a ground of defense that, if not raised in the pleading, would be likely to take the adverse party by surprise." "The underlying rationale for requiring a party to provide factual support for affirmative defenses is to prevent the adverse party from being taken by surprise at trial." Horvath v Delida, 213 Mich App 620, 630; 540 NW2d 760 (1995).
In the present case, BofA and Taratuta's first responsive pleading contained a section of affirmative defenses, which included the following assertion: "[Sarena]'s claims are barred, in whole or in part, for lack of standing and/or jurisdiction, including by failure to redeem prior to the expiration of the redemption period[,]" and "[Sarena]'s claims are estopped by virtue of [Sarena]'s scheduling, and subsequent discharge of the debt associated with the 2003 mortgage and note[.]" (Emphasis added). It is quite clear from this language that BofA and Taratuta raised the affirmative defense of standing. Indeed, eliminating the second half of the statement above, it simply states, "[Sarena]'s claims are barred, in whole or in part, for lack of standing[]" (emphasis added). That statement could hardly be clearer regarding whether BofA and Taratuta intended to raise the defense of standing. Combining that with the very explicit defense regarding the effect of the bankruptcy on Sarena's ability to make a claim, Sarena should not have been surprised when the defense was asserted in the motion for summary disposition. See Horvath, 213 Mich App at 630.
Next, Sarena argues that she had standing because her alleged injury occurred after the bankruptcy—presumably when BofA commenced the foreclosure by advertisement. In Young v Ind Bank, 294 Mich App 141, 143-144; 818 NW2d 406 (2011), this Court considered the standing doctrine and its relationship with bankruptcy law, explaining:
A debtor loses all rights to his or her property when he or she files for bankruptcy. 11 USC 541(a). A party filing for bankruptcy must list all of his or
her assets on the bankruptcy schedule, 11 USC 521(a)(1), including "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 USC 541(a)(1). "[I]t is well established that the interests of the debtor in property include causes of action." Bauer v Commerce Union Bank, 859 F2d 438, 441 (CA 6, 1988) (quotation marks and citations omitted). Moreover, "the right to pursue causes of action formerly belonging to the debtor . . . vests in the trustee for the benefit of the estate. The debtor has no standing to pursue such causes of action." Id. (quotation marks and citation omitted). The debtor can only bring suit on a vested asset if the trustee abandons it or the court gives permission." [Young, 294 Mich App at 143-144, citing Kuriakuz v Community Nat'l Bank of Pontiac, 107 Mich App 72, 75; 308 NW2d 658 (1981) (emphasis added).]
Furthermore, an asset cannot possibly be abandoned by the bankruptcy trustee where it was not listed as an asset during the bankruptcy proceedings. Kuriakuz, 107 Mich App at 75. "A cause of action that is known about and filed before the filing of bankruptcy is an asset and properly belongs to the bankruptcy estate whether or not it was listed on the schedule." Young, 294 Mich App at 144.
In this case, Sarena clearly knew of her challenge to the underlying mortgage where she asserted the challenge in a counterclaim in the 2008 judicial foreclosure proceeding. Because Sarena knew of the challenge before filing for bankruptcy, the claim belongs to the bankruptcy estate. Id. As such, her only means of saving the claim is by permission of the Bankruptcy Court or abandonment by the trustee. Id. at 143-144. It is undisputed that the Bankruptcy Court did not give permission. It is also undisputed that the claim was not listed as an asset in the bankruptcy proceeding. Therefore, because a claim cannot be abandoned when it was not listed as an asset, Kuriakuz, 107 Mich App at 75, Sarena's right to claim forgery now exists solely with the bankruptcy trustee and she has no standing to raise that claim in the present action.
Sarena's argument that her injury occurred after the bankruptcy closed—i.e. when BofA commenced foreclosure by advertisement—is without merit. Sarena misunderstands the trial court's order. The trial court did not hold that Sarena lacked standing to challenge the foreclosure by advertisement. Rather, the court held that Sarena lacked standing to raise claims about the alleged forgery of the underlying mortgage. As discussed above, the court properly reached this conclusion.
Next, Sarena argues that MCL 600.3204(1)(b) barred BofA's foreclosure by advertisement because the 2008 judicial foreclosure action was still pending.
MCL 600.3204(1)(b) provides:
(1) A party may foreclose a mortgage by advertisement if all of the following circumstances exist:
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(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, either the action or proceeding has been discontinued or an execution on a judgment rendered in the action or proceeding has been returned unsatisfied, in whole or in part.
The statute, by its plain language, is concerned with actions "to recover the debt secured by the mortgage." MCL 600.3204(1)(b) (emphasis added). In other words, "the intention of the Legislature with respect to the foreclosure statute(s) was to force an election of remedies by a mortgagee concerning a single debt. . . ." Church & Church, Inc v A-1Carpentry, 281 Mich App 330, 341; 766 NW2d 30 (2008), affirmed in part, vacated in part on other grounds, 483 Mich 885 (2009). The intent being that "the same mortgagee cannot simultaneously maintain a lawsuit for judicial foreclosure and a foreclosure by advertisement, as it would allow for double recovery on the same debt." Id. Stated differently, "it is the purpose of the statute to force an election of remedies which if not made would create the possibility that the mortgagee could foreclose the mortgage and at the same time hold the maker of the note personally liable for the debt." United States v Leslie, 421 F2d 763, 766 (CA 6, 1970).
In this case, when BofA commenced the foreclosure by advertisement, there was no underlying debt as it had been discharged during the bankruptcy proceedings. Thus, there was no opportunity for double recovery and MCL 600.3204(1)(b) was satisfied. Church, 281 Mich App at 341. As such, the foreclosure by advertisement was not legally deficient and Sarena's arguments to the contrary are devoid of merit.
In sum, Sarena lacked standing to challenge the underlying mortgage and there is no genuine issue of fact to support that BofA violated MCL 600.3204(1)(b). Accordingly, because all of Sarena's claims were dependent on these two claims, the trial court did not err in granting summary disposition in favor of BofA and Taratuta.
Affirmed. No costs awarded. MCR 7.219(A).
/s/ Pat M. Donofrio
/s/ Stephen L. Borrello
/s/ Cynthia Diane Stephens