Opinion
CASE No. 1:19-CV-173
2020-11-04
Anthony A. MACHOLTZ, Plaintiff, v. CARRINGTON MORTGAGE SERVICES, LLC, et al., Defendants.
Theodore J. Westbrook, Westbrook Law PLLC, Grand Rapids, MI, for Plaintiff. Deborah Sharon Lapin, Martin Scott Frenkel, Maddin Hauser Wartell Roth & Heller PC, Southfield, MI, for Defendants.
Theodore J. Westbrook, Westbrook Law PLLC, Grand Rapids, MI, for Plaintiff.
Deborah Sharon Lapin, Martin Scott Frenkel, Maddin Hauser Wartell Roth & Heller PC, Southfield, MI, for Defendants.
OPINION AND ORDER
ROBERT J. JONKER, CHIEF UNITED STATES DISTRICT JUDGEINTRODUCTION
This is the latest chapter in a 15-year struggle between plaintiff and a series of lenders and servicers of a mortgage originated in 2005. The pivotal issue is whether the terms of a Loan Modification Agreement ("LMA") plaintiff negotiated to resolve a federal lawsuit in 2013 binds successor lenders and servicers, including the current defendants. In the Court's view, it does. The LMA ended the earlier federal lawsuit, set aside the original foreclosure, modified payment and other mortgage terms and resulted in stipulated orders approved by the District Judge based on the terms of the LMA. Documents detailing the deal were prepared in recordable form, recorded on the real estate records of the County and effectively became part of the mortgage terms.
That's the short version of this chapter of the saga. To understand the full basis for the Court's conclusion on this pivotal issue, as well as the particular impact of that conclusion on the pending motions and the seven causes of action at issue, it is unfortunately necessary to detail the full story. This requires a journey through a thick summary judgment record describing original mortgage loan documents; a payment default and the original foreclosure sale in 2011; an earlier federal lawsuit setting aside that foreclosure based on the LMA; a divorce decree and quit-claim deed between plaintiff and his then-wife and co-obligor on the mortgage; transfer of the modified mortgage to successor servicers and lenders; an unsuccessful Chapter 13 bankruptcy; the notice and servicing history culminating in a second foreclosure sale; and ultimately this lawsuit. Buckle up!
FACTUAL BACKGROUND
1. The First Foreclosure
In 1998, Plaintiff obtained title to a residence and real property located in Berrien County, Michigan. (Compl. ¶ 13, ECF No. 1, PageID.4; Quitclaim Deed, Pl.’s Ex. 1, ECF No. 31-1, PageID.875). In 2005 Plaintiff and his then-wife Dena Macholtz executed a promissory note (the "Note") for a $142,000 loan. (Note, Pl.’s Ex. 3, ECF No. 31-3, PageID.892 & Def.’s Ex. A, ECF No. 29-2, PageID.617). The Note was secured by a mortgage on the property that Plaintiff and Dena granted to Mortgage Electronic Registration Systems, Inc., as the nominee for the lender, Homeloan USA Corp. (Mortgage, Pl.’s Ex. 2, ECF No, 31-2, PageID.877, Def.’s Ex. B, PageID.621). The mortgage was subsequently assigned to nonparty CitiMortgage, Inc. Plaintiff has lived in the home continuously for the last twenty-two years.
Dena is not named on the 1998 Quitclaim deed, however it appears she obtained an interest in the property through a tenancy by the entireties at some point, before conveying that interest back to Plaintiff as part of the subsequent divorce.
Plaintiff and Dena eventually defaulted on their obligations under the Note. CitiMortgage instituted foreclosure by advertisement proceedings. This led to a sheriff's sale. CitiMorgage submitted the winning bid and a sheriff's deed issued on May 12, 2011. (Sheriff's Deed on Mortgage Sale, Pl.’s Ex. 5, ECF No. 31-5, PageID.902).
2. The First Lawsuit and a Divorce
Following the 2011 sheriff's sale, Plaintiff and Dena Macholtz sued CitiMortgage in State Court. They alleged a wrongful foreclosure and sought to quiet title because they claimed CitiMortgage had violated a State law requiring the lender to offer certain loss mitigation options before foreclosure. The case was removed to this Court. See generally Macholtz v. CitiMortgage, Inc. , 1:11-cv-1250 (W.D. Mich. filed Nov. 28, 2011) (Neff, J.).
The lawsuit eventually resulted in a settlement agreement that terminated the proceedings. While the settlement negotiations were proceeding, and while the lawsuit was still pending, Plaintiff and Dena Macholtz divorced. A Judgment of Divorce entered in Berrien County Family Court on March 21, 2013. (Pl.’s Ex. 9, ECF No. 31-9, PageID.928). Section 6.01 of the divorce judgment provided that Plaintiff "shall have and hold as his sole and separate estate" the residence and property underlying the instant dispute. (Id. at PageID.933). The same section provided that Plaintiff would pay all indebtedness owing on the real estate and would hold his ex-wife harmless for any debts. (Id. ). On April 8, 2013, consistent with the language of the divorce judgment, Dena executed a quit claim deed in Plaintiff's favor dissolving the tenancy by the entireties and quitclaiming her interest to Plaintiff. The quit claim deed was recorded in Berrien County on April 15, 2013. (Pl.’s Ex. 10, ECF No. 31-10, PageID.941).
3. The 2013 Settlement Agreement
Just before the quit claim deed was executed, the attorneys for both sides of the federal lawsuit notified the presiding judicial officer during a status conference that the lawsuit had been "substantially resolved" and that "a full resolution" of the matter was imminent. Macholtz v. CitiMortage , No. 1:11-cv-1250 (W.D. Mich. Apr. 3, 2013) (ECF No. 42). As apparent from the subsequent proceedings, the deal contemplated the execution of a Loan Modification Agreement between Plaintiff and CitiMortgage. An Order following the status conference, for example, required Plaintiff to sign a loan modification agreement and make a payment in the sum of $5,242.77 "as necessary for execution of the loan agreement." Id.
On April 10, 2013, the parties reported that Plaintiff had executed the loan agreement and mailed a payment of $5,242.77 to CitiMortgage's counsel. Id. at ECF No. 43. The parties requested more time before dismissing the case, however, for "the recording of the Quit Claim deed from Dena Macholtz to Anthony Macholtz ... which is necessary for [CitiMortgage] to book the loan modification." Id. If the payment was received and if the quit claim deed was recorded, the parties stipulated to filing of dismissal papers. Id. Judge Neff granted the request for more time. Id. at ECF No. 44.
On April 24, 2013, the parties reported to Judge Neff that Plaintiff's payment had been received by CitiMortgage. They also reported that the quit claim deed had been recorded and received by CitiMortgage on April 23, 2013. Id. at ECF No. 45, PageID.229. Though the two specified conditions had been met, the parties requested more time to execute a settlement agreement before filing dismissal papers. Judge Neff again granted the request.
Thereafter the parties filed a "stipulated order in recordable form" that set aside the foreclosure sale and rescinded the sheriff's deed. Id. at ECF No. 47. Among other things, the stipulation recited that Plaintiff "reaffirms and restates the terms and conditions of the original Note and Mortgage ... except as modified pursuant to the Parties’ Loan Modification Agreement entered as of December 26, 2012 and effective as of January 1, 2013, which is current and remains in effect. " Id. (emphasis added).
Up until this point, no mention on the available docket was made of Dena Macholtz, even though she had signed the 2005 Note along with Plaintiff. Plaintiff, for example, was the only one mentioned in the parties’ stipulation as having reaffirmed the mortgage and the conditions of the original note as modified under the Loan Modification Agreement. And a copy of the Loan Modification Agreement with dates mirroring those described by Judge Neff contained no signature line for Dena Macholtz. (Pl.’s Ex. 8, ECF No. 31-8, PageID.925). The first publicly available mention of Dena Macholtz in connection with the resolution of the case was made in a stipulation dated May 1, 2013. There the parties stipulated that Dena Macholtz was divorced from Plaintiff and had conveyed her interest in the subject property to Plaintiff. Accordingly, the parties agreed to dismiss Dena from the case and, following an order granting their earlier stipulation, would agree to dismiss with prejudice the remainder of the case. Id. at ECF No. 48.
An earlier version of the agreement was attached to Plaintiff's Complaint. Unlike the subsequent Loan Modification Agreement, this version contained a signature spot for Dena Macholtz. (ECF No. 1-4, PageID.50).
The following day, May 2, 2013, Judge Neff granted both stipulations, including the stipulation reciting that the Loan Modification Agreement was current and in full effect. Id. at 49. The case was then closed. A copy of Judge Neff's Order setting aside the sheriff's sale and rescinding the sheriff's deed was also recorded. (Pl.’s Ex. 7, ECF No. 31-7).
4. The October 2013 Bankruptcy
After Plaintiff made the $5,242.77 payment to close the settlement agreement, Plaintiff appears to have made few, if any payments, on the outstanding loan. On October 31, 2013, Plaintiff filed a Chapter 13 Bankruptcy Petition in the Western District of Michigan Bankruptcy Court. In Re Macholtz , No. 13-08467 (Bankr. W.D. Mich. filed Oct. 31, 2013). During those proceedings, CitiMortgage filed a proof of claim stating, in part, it was owed $75,853.53 in arrears. Plaintiff objected to CitiMortgage's claim, alleging that the claim did not account for the Loan Modification Agreement that had taken effect earlier that year. (Bankr. Case Dkt. # 19). When the bankruptcy judge scheduled a hearing on the matter, CitiMortgage did not appear or otherwise defend against the objection and the judge went on to sustain Plaintiff's objection based on the Loan Modification Agreement. (Bankr. Case Dkt. #27).
For his part, Plaintiff states that he was unable to make payments under the modification due to financial hardships related to his divorce. He says he attempted to discuss this matter with CitiMortgage through a forbearance request, however CitiMortgage insisted that it could only communicate with the lawyer who had represented him in the earlier litigation even though those proceedings had terminated. (Macholtz Aff. ¶¶ 13-15, ECF No. 31-4, PageID.896-897).
Ultimately, the bankruptcy case was dismissed on the trustee's motion on May 28, 2014. The Chapter 13 bankruptcy plan had required Plaintiff to make semi-monthly payments of $1,1000. The last payment of $2,200 was received on January 8, 2014, and Plaintiff was $8,800 in arrears when the trustee made the motion. Based on the lack of payments, the trustee sought dismissal. (ECF No. 29-9, PageID.692). The bankruptcy court dismissed the case in an order dated July 9, 2014. (Id. at PageID.693).
5. CitiMortgage Notifies Plaintiff of Default in 2016
Following the bankruptcy proceedings, Plaintiff contends he was still unable to communicate with CitiMortgage about options for reducing or postponing his payments. Then approximately two years later, on June 24, 2016, CitiMortgage sent Plaintiff a letter stating that his loan was in default. (Def.s’ Ex. I, ECF No. 29-10, PageID.696). To cure the default, the correspondence stated Plaintiff had to pay a past due amount of $146,844.12 along with $4,326.64 in delinquency expenses by July 29, 2016. (Id. ). The letter stated that failure to cure the default would risk acceleration of the entirety of the Note.
Plaintiff failed to cure the default as framed in the July 24, 2016 letter. On September 6, 2016, CitiMortgage's counsel, Schneiderman & Sherman, sent a Notice to Plaintiff that said the loan was in default and had been accelerated. (Def.’s Ex. J, ECF No. 29-11, PageID.701). The total amount due was said to be $247,238.34.
6. CitiMortgage assigns the Mortgage and Servicing Rights to Defendants
Around this time, Plaintiff retained a law firm, Volks Anwalt, to represent him and to "figure out where this loan was." (Macholtz Dep. 51, ECF No. 29-7, PageID.656). He contends, however, that the efforts of this entity, as well as those from subsequent counsel representing Plaintiff in this action, were frustrated by Defendants’ failure to provide information and complete responses to his inquiries.
The problems began, Plaintiff says, on January 13, 2017. On that date CitiMortgage assigned Plaintiff's mortgage to Defendant Wilmington. (Pl.’s Ex. 12, ECF No. 31-12, PageID.955). The assignment was recorded in Berrien County and made no mention of the Loan Modification Agreement:
ASSIGNMENT OF MORTGAGE
CitiMortgage Loan No 2003208301
FOR GOOD AND VALUABLE CONSIDERATION, the sufficiency of which is hereby acknowledged, the undersigned. CITIMORTGAGE, INC., WHOSE ADDRESS IS 1000 TECHNOLOGY DRIVE, O'FALLON, MO 63368, (ASSIGNOR), by these presents does convey, grant, assign, transfer and set over the described Mortgage with all interest secured thereby, all liens, and any rights due or to become due thereon to WILMINGTON SAVINGS FUND SOCIETY, FSB, AS TRUSTEE OF STANWICH MORTGAGE LOAN TRUST A, WHOSE ADDRESS IS 1600 SOUTH DOUGLASS ROAD, SUITE 200-A, ANAHEIM, CA 92806 (800)561-4567, ITS SUCCESSORS AND/OR ASSIGNS, (ASSIGNEE) .
Said Mortgage made on 09/21/2005, by ANTHONY A. MACHOLTZ AND DENA G. MACHOLTZ, HUSBAND AND WIFE to MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. AS NOMINEE FOR HOMELOAN USA CORPORATION, ITS SUCCESSORS AND ASSIGNS and recorded in office of the Register of Deeds of BERRIEN County, Michigan, in Book 2651, Page 1406, and/or Document # 2005034966.
Property is commonly known as: 1886 RUSSELL ROAD, BARODA, Ml 49101-0000.
IN WITNESS WHEREOF, this Assignment is executed this 13th day of January in the year 2017. CITIMORTGAGE, INC.
(ECF No. 31-12, PageID.955)
Around the same time, Defendant Carrington began servicing the loan. A notice of servicing transfer was sent to Plaintiff on January 19, 2017, that stated "[t]he servicing of your mortgage loan is being transferred .... This means that after this date, Carrington Mortgage Services, LLC (‘CMS’) will be collecting your mortgage loan payments from you. Nothing else about your mortgage loan will change." (Pl.’s Ex. 13, ECF No. 31-13, PageID.957). Plaintiff does not dispute that the transfer notice was sent, though he contends he never received it. Moreover, Plaintiff says he received no monthly statements from Defendant Carrington after the transfer was made through September 2018. (Macholtz Aff. ¶ 21, ECF No. 31-4, PageID.898).
On June 15, 2018, Plaintiff's current counsel sent a Request for Information ("RFI" also known as a Qualified Written Request or "QWR") to Defendant Carrington requesting, among other things, account statements, servicing notes, an account history, and documents relating to loss mitigation applications. (Pl.’s Ex. 14, ECF No. 31-14, PageID.964). Carrington responded on July 25, 2018 (Pl.’s Ex. 15, ECF No. 31-15, PageID.969). It noted that the mortgage loan was currently held by Defendant Wilmington Savings Fund Society, and that Carrington was servicing the loan on behalf of Wilmington. (Id. ). Carrington provided some of the requested materials, but it withheld other documents that it said were proprietary.
7. The 2018 Foreclosure Sale
In its July 25, 2018 response to Plaintiff's RFI, Carrington also stated that Plaintiff's account had been referred to foreclosure on September 1, 2016 (Id. ). And a short time later, on August 9, 2018, Defendants began a foreclosure by advertisement proceeding by sending a Notice of Sale and Pending Foreclosure to Plaintiff. (Pl.’s Ex. 16, ECF No. 31-16, PageID.1046; Def.’s Ex. M, ECF No. 29-14, PageID.715).
On August 24, 2018, Plaintiff, through counsel, sent a Notice of Error to Defendant Carrington. The letter asserted Carrington was in breach of its obligations under the mortgage because it had initiated a foreclosure without first giving Plaintiff a notice that specified, among other things, the default and the action required to cure the default. (Pl.’s Ex. 17, ECF No. 31-17, PageID.1049). The letter further requested Carrington provide Plaintiff with loss mitigation, modification, or forbearance options. (Id. at PageID.1050).
As the scheduled sale approached, Carrington delayed the sheriff's sale from the scheduled September 6, 2018, date until October 11, 2018. The delay was made in one week increments and communicated through weekly notices published in the Detroit Legal News. (See Def.’s Ex. N, ECF No. 29-15, PageID.718-722). Then on October 8, 2018—three days before the rescheduled sale was to take place—Carrington responded to the Notice of Error letter by declining to cancel the foreclosure action. (Pl.’s Ex. 18, ECF No. 31-18, PageID.1054). The next day, October 9, 2018, Carrington sent Plaintiff an "Account Reinstatement Notification." The notification stated that to reinstate the loan, Plaintiff needed to remit a total payment of $166,920.97. Since the foreclosure sale was scheduled for October 11th, the notification stated that Carrington had to be in receipt of the funds by 5:00 p.m. on October 9th (the same date of the letter). According to Plaintiff, he did not receive this notice until after that deadline had passed. Plaintiff further contends that the amounts in the letter, like Carrington's earlier communications, failed to account for the Loan Modification Agreement. (ECF No. 31, PageID.856). Separate from the Account Reinstatement Notification, Carrington sent Plaintiff's counsel a payoff statement reflecting a total loan balance of $284,587.40. (Pl.’s Ex. 19, ECF No, 31-19, PageID.1076).
The Detroit Legal News does not appear from its website to be a newspaper published in Berrien County, Michigan. See LegalNews.com , http://www.legalnews.com (last visited Nov. 3. 2020) (listing publications in several Michigan counties, but not Berrien County). Under Mich. Comp. Laws § 600.3220, adjournment of a week or less need not be published in the newspaper used for the foreclosure notice (or any newspaper for that matter). But under Mich. Comp. Laws § 600.3208, the original notice of foreclosure must appear "in a newspaper published in the county where the premises included in the mortgage and intended to be sold ... are situated." The Court has not found in this record whether the original notice was published in the Herald Palladium or other newspaper identified on the Berrien County website. See Berrien County , http://berriencounty.org/1060/Publications-Media (last visited Nov. 3, 2020).
The foreclosure sale eventually took place on October 11, 2018. (Pl.’s Ex. 20, ECF No. 31-20, PageID.1085). Wilmington was the successful bidder for $150,000.00 and it obtained a sheriff's deed to the property. (Id. ).
8. Post-Sale Events
Following the sheriff's sale, Plaintiff completed a mortgage assistance form that was included in Carrington's October 8th response to his Notice of Error. (Pl.’s Ex. 18, ECF No. 31-18). Plaintiff states he knew, at that time, that the sheriff's sale had already taken place, but he avers that he hoped from the inclusion of the modification form in the letter, that Carrington would still agree to modify the loan. Believing it was possible Carrington would still agree to modify the loan, Plaintiff completed and returned the form. (Macholtz Aff. ¶ 28, ECF No. 31-4, PageID.898).
Several months later, in February 2019, Plaintiff contacted Carrington to request information on how he could retain possession of his home. Carrington's representative responded that because the loan had gone through a foreclosure sale, a full redemption would be needed. When asked what the redemption amount was, the representative stated that it was the payoff amount, which Plaintiff understood to be the amount cited in Carrington's earlier communication to his counsel, $284,587.40. (Id. at ¶¶ 29-35). Plaintiff filed this lawsuit a short time later, on May 7, 2019. (ECF No. 1).
PROCEDURAL HISTORY
Plaintiff brings several claims under this Court's federal question and supplemental subject matter jurisdiction. Count I alleges violations of RESPA, 12 U.S.C. § 2605 et seq. against Defendant Carrington. Count II alleges Defendant Wilmington violated the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1638 et seq. Count III alleges Defendant Carrington violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. Count IV alleges Defendant Carrington violated the Michigan Mortgage Brokers, Lenders, and Servicers Licensing Act ("MBLSLA"), MICH. COMP. LAWS § 455.1681. Count V alleges that both defendants violated the Michigan Regulation of Collection Practices Act ("MRCPA"), MICH. COMP. LAWS § 455.257. Finally, Plaintiff brings two common law state claims against both defendants alleging breach of the mortgage (Count VI) and breach of the LMA (Count VII).
On August 14, 2019, Defendants filed a Rule 12 motion for judgment on the pleadings. (ECF No. 14). This Court denied the motion in an Order dated September 19, 2019, noting that the motion included some materials that would require review under Rule 56's standards. The briefing papers made clear, furthermore, that the parties differed both on legal and factual issues. (ECF No. 16).
After the completion of discovery, the parties have filed competing dispositive motions under Rule 56. The defense seeks complete dismissal (ECF No. 29). Plaintiff's motion seeks partial summary judgment in its favor with respect to liability on Counts I through IV and with respect to only Defendant Carrington's liability on Count V. (ECF No. 30). The Court heard oral argument on the matter in open court on July 16, 2020. (ECF No. 39). There, Plaintiff's counsel withdrew some of the claims raised in the Complaint. Counsel stated that he was no longer pursuing a RESPA claim based on a failure to provide a notice of servicing transfer, and proceeding only on a claim for a violation of Regulation X. Plaintiff also withdrew Count VI, breach of mortgage, as to Defendant Carrington and any requests for relief under breach of loan modification apart from an unwind of what Plaintiff seeks as wrongful foreclosure. After hearing from the parties, the Court took the motions under advisement. This is the decision of the Court.
LEGAL STANDARDS
Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Id. at 252, 106 S.Ct. 2505. In deciding a motion for summary judgment, the court must draw all inferences in a light most favorable to the non-moving party, but may grant summary judgment when " ‘the record taken as a whole could not lead a rational trier of fact to find for the non-moving party.’ " Agristor Fin. Corp. v. Van Sickle , 967 F.2d 233, 236 (6th Cir. 1992) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).
When cross-motions for summary judgment are filed, the court must "evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Taft Broad. Co. v. United States , 929 F.2d 240, 248 (6th Cir. 1991) (quoting Mingus Constructors, Inc. v. United States , 812 F.2d 1387, 1391 (Fed. Cir. 1987) ). "[I]f the moving party also bears the burden of persuasion at trial, the moving party's initial summary judgment burden is ‘higher in that it must show that the record contains evidence satisfying the burden of persuasion and that the evidence is so powerful that no reasonable jury would be free to disbelieve it.’ " Cockrel v. Shelby Cnty. Sch. Dist., 270 F.3d 1036, 1056 (6th Cir. 2001) (quoting Moore's Federal Practice ).
DISCUSSION
A. The Pivotal Issues
1. Loan Modification Agreement
The Loan Modification Agreement permeates the parties’ respective positions on the claims in Plaintiff's Complaint. As defense counsel put it during oral argument on the motions, the claims rise and fall on the LMA's effectiveness. Defendants contend that the agreement is not in effect and so the communications it sent to Plaintiff, which did not account for the LMA, contained accurate information. Plaintiff takes the opposite position that the LMA was in effect and so the communications that were sent to Plaintiff were incorrect, and ultimately led to a wrongful foreclosure. The Court finds that the Loan Modification Agreement is a valid and effective agreement, as a matter of law on the Summary Judgment record.
The Loan Modification Agreement question is one of contract law. In Michigan, a "valid contract requires five elements: (1) parties competent to contract, (2) a proper subject matter, (3) legal consideration, (4) mutuality of agreement, and (5) mutuality of obligation." Aft Michigan v. State of Michigan , 497 Mich. 197, 866 N.W.2d 782, 804 (2015). Of these elements, only one is at issue. Namely Defendants argue, in essence, there was no mutuality of agreement because the Loan Modification Agreement was not signed by CitiMortgage. Defendants say CitiMortgage declined to execute the agreement when Plaintiff failed to provide a copy of the divorce judgment to CitiMortgage. But there is no genuine issue of material fact on the summary judgment record that CitiMortgage did not require this from Plaintiff, and furthermore, that all parties understood that Plaintiff was divorcing his ex-wife and would proceed on his own with the mortgage, as modified. The proceedings in Judge Neff's case make clear that as part of the settlement proceedings, Plaintiff was to make a payment of $5,242.77 and record the quit claim deed from his ex-wife with the county registrar. There is no question that Plaintiff did both. Plaintiff then signed the Loan Modification Agreement. Following these three things, the parties submitted a signed stipulation that stated, among other things, the Loan Modification Agreement was "effective as of January 2013, which is current and remains in full force and effect." (Case No. 1:11-cv-1250, ECF No. 47 (W.D. Mich. May 1, 2013)). This signed stipulation was also signed by Judge Neff (id. at ECF No. 49) and itself was recorded in Berrien County. (Pl.’s Ex. 7, ECF No. 31-7).
Against this unambiguous record, the defense points to language in the settlement agreement that required Plaintiff to provide "all documents necessary to effectuate the loan modification, as detailed in the Loan Modification Agreement." (ECF No. 33-2, PageID.1162). They point to an internal Carrington record that states: "The account was in litigation and the borrower's counsel never provided the required divorce QCD. Hence, the 2013 mod was cancelled." (ECF No. 29-8). This does not create a triable issue on whether the Loan Modification Agreement was effective. For one thing, the record demonstrates that Plaintiff actually did provide a copy of the quitclaim deed, which the internal note references. It was also publicly filed. The parties stipulated to as much in Judge Neff's case. (Case No. 1:11-cv-1250, ECF No. 45, PageID.229 (W.D. Mich. Apr. 24, 2013) ("The quit-claim deed was recorded on April 15, 2013 and received by [CitiMortgage] yesterday, April 23, 2013 ")). Even if Carrington's internal note refers to some other material, such as a copy of the divorce judgment, there is no record that such a document was required to finalize the deal. Moreover, it too was obviously a matter of public record. At bottom, "a valid contract requires a ‘meeting of the minds’ on all the essential terms of [the contract]." Kamalnath v. Mercy Mem. Hosp. Corp. , 194 Mich. App. 543, 548, 487 N.W.2d 499 (1992). The summary judgment record demonstrates there was a meeting of the minds between Plaintiff and CitiMortgage on the Loan Modification Agreement. Plaintiff provided the materials that CitiMortgage required, paid the required amount, and CitiMortgage accepted and agreed to the Loan Modification Agreement, as evidenced by the recorded stipulation stating as much.
For these reasons, the Court concludes the Loan Modification Agreement is a valid contract because it satisfies all five elements of a valid contract under Michigan law. Furthermore, because the summary judgment record shows that CitiMortgage accepted the Loan Modification Agreement that Plaintiff signed, and then the parties signed a recorded stipulation stating that the agreement was current and in full effect, the Court finds no violation of Michigan's statute of frauds. MICH. COMP. LAWS § 566.132. Thus, to the extent the parties’ respective motions depend on the validity, or not, of the Loan Modification Agreement, the Court concludes the agreement is in effect.
2. Wrongful Foreclosure
A second issue running across the parties’ respective motions is whether the ultimate relief Plaintiff seeks—setting aside the foreclosure sale—is now unavailable to him. Defendants say it is unavailable because the redemption period following the sheriff's sale has expired and accordingly Wilmington is now the fee simple owner of the property. To set aside the foreclosure at this stage would require Plaintiff to carry a high burden under the reasoning of Conlin v. Mortgage Elec. Registration Sys., Inc. , 714 F.3d 355 (6th Cir. 2013). Defendants say Plaintiff cannot meet this standard; Plaintiff says that he can.
Michigan law generally provides for a six-month redemption period from the date of sale of foreclosed property. See MICH. COMP. LAWS § 600.3240. Both sides agree the foreclosure sale in this case was conducted on October 11, 2018, and so the redemption period expired on April 12, 2019. This was a little more than a month after Plaintiff filed this lawsuit, but as Defendants note, Plaintiff's filing of the lawsuit did not toll the redemption period. SeeAwad v. Gen. Motors Acceptance Corp. , No. 302692, 2012 WL 1415166, at *4 (Mich. Ct. App. Apr. 24, 2012) (discussing various case law on the subject of tolling, all of which indicate that filing a lawsuit does not toll the statute of limitations); see alsoConlin v. Mortg. Elec. Registration Sys., Inc., 714 F.3d 355, 360 (6th Cir. 2013) (citing Overton v. Mortg. Elec. Registration Sys., No. 284950, 2009 WL 1507342, at *1 (Mich. Ct. App. May 28, 2009), for the proposition that "the filing of a lawsuit is ‘insufficient to toll the redemption period.’ "); Lara v. TCF National Bank , No. 1:14-cv-228, 2014 WL 12479476 (ECF No. 29, PageID.257) (W.D. Mich. Aug. 18, 2014) (Jonker, J.) (finding the redemption period expired six days after the plaintiff filed the lawsuit).
Once the applicable redemption period has expired, a plaintiff must satisfy a ‘high standard’ to invalidate or set aside a mortgage foreclosure by advertisement. Conlin , 714 F.3d at 360. Specifically, a plaintiff must show both fraud related to the foreclosure procedure itself and that he or she was prejudiced by the defendants’ failure to comply with the requirements of the foreclosure statute. Id. at 360-61. To demonstrate this prejudice, a plaintiff must show that he or she would have been in a better position to preserve property interests absent the fraud (e.g., that the plaintiff would incur a double liability due to the fraud or that he lost a potential opportunity to preserve his interest in the property). Id. at 361-62. Because Plaintiff did not redeem the property during the redemption period, the question before the Court is whether he has alleged "a clear showing of fraud, or irregularity" that "relate[s] to the foreclosure process itself" and that he would have been in a better position to preserve his interests absent this fraud. Id. at 360-62.
The Court concludes there is a genuine question of fact here that precludes the defense motion for summary judgment to the extent it is based on Conlin . This is because—as the Court noted above—the Loan Modification Agreement was valid and in effect. This meant that the communications that Defendants sent to Plaintiff before the foreclosure contained inaccurate information and amounted to an irregularity in the foreclosure process. Indeed, the language of the mortgage stated that, before any foreclosure, the mortgagee was to "specify ... the default" and the "action required to cure the default" before beginning the foreclosure process. (ECF No. 31-2, PageID.888). Viewed in the light most favorable to Plaintiff, the summary judgment record demonstrates that Plaintiff attempted to communicate with Defendants about the Loan Modification Agreement, but he was unable to meaningfully do so. Meanwhile, Defendants proceeded with a foreclosure process which was based on an incorrect understanding of the mortgage note and its terms, as modified by the effective Loan Modification Agreement. Because Defendants’ communications as part of the foreclosure, indeed the basis for the foreclosure itself, failed to account for the Loan Modification Agreement, Defendants failed to accurately specify the action necessary to cure any default. Viewed under Rule 56 ’s framework, an irregularity in the process may be present. SeeGoss v. CitiMortgage, Inc. , No. 16-14391, 2017 WL 5499400, at *5 (E.D. Mich. Nov. 16, 2017) (concluding that Plaintiff had alleged an irregularity in the foreclosure process where the plaintiff claimed he was not in default).
Plaintiff furthermore has sufficiently demonstrated a triable issue with respect to prejudice. He avers that had Defendants properly applied the Loan Modification Agreement to their books, and sent him periodic mortgage statements to that effect, he would have been able to avoid default given his borrowing capability. (Macholtz Aff. ¶ 26, ECF No. 31-4, PageID.898). In other words, Plaintiff states that he would have been in a better position to preserve his property interest had Defendants properly booked the Loan Modification Agreement on its accounts. Defendants contest this assertion, pointing to Plaintiff's lackluster payment history. They argue that even under the Loan Modification Agreement, Plaintiff was in immediate default. Perhaps, but this factual difference is not one that can be resolved at the summary judgment stage. Furthermore, Defendants do not contest Plaintiff's claim that he received no account statements for several months after the mortgage and note were transferred from CitiMortgage to Defendants. On this record, Plaintiff has satisfied his burden under Conlin.
B. The Specific Causes of Action
1. Count I – RESPA
With all this in mind, the Court turns to the specific counts in Plaintiff's Complaint and the parties’ respective positions. In the remaining portion of Count 1, Plaintiff alleges that Defendant Carrington violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. 2605(k)(1)(E) and its implementing regulation, "Regulation X," 12 C.F.R. § 1024.36(d) by failing to respond to his counsel's June 15, 2018 Request for Information. Plaintiff argues he is entitled to summary judgment in his favor with respect to liability because Carrington's June 25, 2018 response was deficient as a matter of law. Defendant Carrington moves for summary judgment in its favor, asserting that it properly responded to Plaintiff's request and that Plaintiff failed to sufficiently allege damages. Neither party is entitled to summary judgment and the matter will have to go to the factfinder.
As noted above, Plaintiff has withdrawn his other theory for relief under RESPA, which had alleged that Defendant Carrington violated RESPA, specifically 12 U.S.C. § 2605(c), by failing to send a notice of transfer of servicing rights from CitiMortgage to Carrington.
A. Liability
RESPA – as implemented by Regulation X – allows borrowers to notify mortgage servicers of possible account errors and make requests for information relating to the servicing of a mortgage loan via a RFI or QWR. SeeNunez v. J.P. Morgan Chase Bank, N.A. , 648 F. App'x 905, 907 (11th Cir. 2016) ; see also 12 U.S.C. § 2605(e) ; 12 C.F.R. § 1024.35(a) & (b). Under RESPA, once a servicer (here Defendant Carrington) has received a RFI or QWR from a borrower, it "must respond in one of three ways." Anderson v. Staybridge Co. No. 17-cv-895, ECF No. 86, PageID.674 (W.D. Mich. Jan 31, 2020) (Berens, M.J.):
First, it may make corrections to the account. 12 U.S.C. § 2605(e)(2)(A). Second, following an investigation, it may explain or clarify why the account is correct. 12 U.S.C. § 2605(e)(2)(B). Last, following an investigation, it may provide the borrower with a written explanation or clarification that includes information requested or explains why the requested information is unavailable. 12 U.S.C. § 2605(e)(2)(C).
Id.
Accordingly, the servicer generally must either provide the borrower with the requested information or conduct a reasonable search for the requested information and provide the borrower with a written notification that states the information is not available to the servicer and provides the basis for the determination. See 12 C.F.R. § 1024.36(d)(1)(i)-(ii). A servicer, however, is not required to provide documents which the servicer "reasonably determines" are "[c]onfidential, proprietary or privileged information." 12 C.F.R. § 1024.36(f)(ii).
Plaintiff's RFI included a list of ten items. (Pl.’s Ex. 14, ECF No. 31-14, PageID.965). Carrington contends it responded to much of the request and that it specifically provided Plaintiff with the identity of the owner of the loan, a copy of the Note and Mortgage, payment history, and loss mitigation notices. (ECF No. 29, PageID.602). In this, it argues it more than satisfied the direction of the statute and the regulation. But Plaintiff complains that partial satisfaction is not enough, and the response to the RFI failed to include four of the categories of documents that were requested, namely (1) "all servicing notes regarding the Loan from its inception to date," (2) "all correspondence and other communications sent by Carrington and/or any prior servicer(s) to my client regarding the Loan," (3) a "complete account history for the Loan," and (4) a "complete escrow history regarding the loan." (ECF No. 31, PageID.859). In response, Carrington states that it withheld the information because it was confidential, proprietary or privileged information and so it was not required to turn the information over under Section 1024.36(f)(ii). It points to its response, which stated:
With regard to your request for protected documents, Carrington states that documents requested, if they exist, may be proprietary, confidential, and/or otherwise protected from disclosure and dissemination. Therefore, we are unable to provide you with copies of collection notes, collection records, communication files, or any other form of recorded data between CMS and the borrower, copies of servicing agreements, contracts, property inspections, invoices, and procedural manuals, etc.
(Pl.’s Ex. 15, ECF No. 31-15, PageID.970).
Carrington's response at least facially complied with RESPA's technical requirements, which precludes summary judgment for Plaintiff. Carrington provided some of the information that Plaintiff's counsel requested, and then explained why Carrington could not make available to Plaintiff some of the other information he requested, noting that the information was proprietary, confidential, or otherwise protected from disclosure. Thus Plaintiff's motion for summary judgment with respect to liability fails because a jury could find that this effort was enough. But Carrington is not entitled to summary judgment because issues of fact remain as to whether Carrington "reasonably" determined the information it withheld was proprietary, confidential, or otherwise privileged. Carrington does not disagree that the information Plaintiff requested was only information that was about his own loan and which had purportedly already been sent to him. Furthermore, Carrington's representative, Daryl Dewhurst, testified he was unaware whether there was any research done at Carrington regarding whether the requested documents were confidential and proprietary. (Dewhurst Dep. 104, ECF No. 31-11, PageID.952). He was similarly unaware of any policy or procedure in place at Carrington with respect to determining whether the requested documents were confidential and proprietary. (Id. ). Mr. Dewhurst did testify, however, that Carrington would have researched the file and provided the information they were able to provide. (Dewhurst Dep. 125-126, ECF No. 35-18, PageID.1516-1517). The jury will need to decide whether this level of review was "reasonable" given the materials that Plaintiff requested, particularly in light of the disputed history regarding the LMA.
B. Damages
Carrington also argues that it is entitled to summary judgment because Plaintiff's claim for damages under RESPA is conclusory and lacks factual support. RESPA permits individual borrowers like Plaintiff to sue for damages in certain specifically defined circumstances:
(f) Damages and costs
Whoever fails to comply with any provision of this section shall be liable to the borrower for each such failure in the following amounts:
(1) Individuals
In the case of any action by an individual, an amount equal to the sum of-
(A) any actual damages to the borrower as a result of the failure; and
(B) any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $2,000.
12 U.S.C. § 2605(f).
A successful plaintiff may also recover costs and fees. 12 U.S.C. § 2605. Plaintiff requests actual damages under Section 2605(f)(1)(A), additional damages under Section 2605(f)(1)(B), and statutory costs and fees under Section 2605(f)(3). (Compl. ECF No. 1).
With respect to emotional damages, the Court agrees with Carrington that there is nothing for a jury to decide. Plaintiff alleges in his Complaint that he suffered mental stress and emotional distress as part of Carrington's alleged RESPA violations. (Compl. ¶ 78, ECF No. 1, PageID.12). But on the sworn evidentiary record, he does not detail those damages or otherwise connect them to Carrington's allegedly deficient response. (See generally Macholtz Dep. 73-76, ECF No. 29-7, PageID.662). On this record, the defense is entitled to summary judgment on this portion of Plaintiff's damages claim. SeeBillings v. Seterus, Inc. , 170 F. Supp. 3d 1011, 1071 (W.D. Mich. 2016) (granting defense motion for summary judgment on RESPA claim where Plaintiff failed to show how Defendant's claimed RESPA violations caused emotional injury).
But that does not mean that all Plaintiff's claimed damages in the RESPA count are conclusory. For example, it is undisputed that Plaintiff sent the request for information via counsel. Furthermore Plaintiff seeks, among other things, attorney's fees as part of his RESPA claim. If Plaintiff is successful in demonstrating liability, these costs may properly be counted as actual damages. SeeMarais v. Chase Home Finance, LLC , 736 F.3d 711, 721 (6th Cir. 2013) (reversing district court's decision granting defendant's Rule 12 motion on RESPA claim and noting plaintiff's argument that "QWR expenses became actual damages when [defendant] ignored its statutory duties to adequately respond."). Moreover, it is at least possible Plaintiff will be able to link an inadequate response to other economic damages if he succeeds on the Conlin prejudice proofs. Accordingly, because there is at least some theory of damages, this count must go forward to trial.
2. Count II – TILA
Plaintiff next claims that Defendant Wilmington Savings Fund Society violated the Truth in Lending Act ("TILA"), 16 U.S.C. § 1638, by failing to send him monthly statements regarding his loan from January 2017 (the date when the mortgage and servicing rights were assigned to Defendants) through June 2018. Plaintiff argues he was prejudiced by this because, had he received the statements, he would have realized that Carrington was not honoring the Loan Modification Agreement. Plaintiff seeks summary judgment in his favor with respect to liability. The defense seeks summary judgment in its favor on the basis that the claim is time barred under TILA's one-year statute of limitations. They point out that this lawsuit was brought on March 7, 2019—well over a year, Defendant says, after the alleged violation. Defendant Wilmington does not articulate a merits based defense under TILA for failing to send the periodic statements. Accordingly the issue on summary judgment comes down to whether Plaintiff's claim is timely. The Court concludes that while a portion of this claim is time-barred, the remainder is timely brought.
Plaintiff originally claimed that Defendants failed to send any notices through September 2018. In their response brief, Defendants argue that statements were sent to Plaintiff by Carrington for July, August, and September 2018. (ECF No. 34), PageID.1246 (citing ECF No. 35-20, PageID.1556). And in reply, Plaintiff tacitly concedes there were statements sent during those months. (Pl.’s Reply at 5, ECF No. 37, PageID.1593). Accordingly the relevant period where no statements were sent is January 2017 through June 2018.
Under Section 1638(f) and Regulation Z of TILA, the creditor, assignee, or servicer of the mortgage was required to send Plaintiff a statement for each billing cycle. See 15 U.S.C. § 1638(f) ; 12 C.F.R. § 1026.41(a). The statements must include, in part, the amount due, a breakdown of total fees or charges imposed, recent transaction activities, relevant contact information, and certain information regarding the account, partial payments, and any delinquencies. See 12 C.F.R. § 1026.41(c) -(d) ; see also 15 U.S.C. § 1638(f) (identifying items to include in the periodic statements for residential mortgage loans as the outstanding loan balance, the interest rate, any prepayment fee to be charged, a description of any late payment fees, and the telephone number and email address to obtain information regarding the loan). And here, no statements were sent between January 2017 and June 2018.
Both sides agree that under TILA, claims for damages are subject to a one-year limitation period. 15 U.S.C. § 1640(e) ("Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation."); United States v. Petroff–Kline, 557 F.3d 285, 296 (6th Cir. 2009) (setting out TILA's general rule on statute of limitations). Given this authority, the portion of Plaintiff's TILA claim for the period before March 2018 is time barred because the claim was not brought within one year of the date of those of the violation. Plaintiff does not disagree that some of the alleged TILA violations may be untimely. But Plaintiff also argues Defendant Wilmington committed violations within the one year preceding the filing of the complaint, namely, failing to send monthly statements in the months of March, April, May, and June of 2018. The question is whether these are discrete violations that are timely brought, or whether they are tied to the earlier untimely violations such that the whole claim must fail as being time barred. The sole authority provided by the defense, Williams v. G.M. Mortgage Corp. , 2004 WL 3704081 (E.D. Mich. Aug. 18, 2004), is not directly on point. Unlike this case, which alleges a series of TILA violations, the plaintiff in Williams alleged a single violation: the defendant's failure to provide the plaintiff with two copies of a Right to Cancel letter that the plaintiff alleged were required under TILA. The court found the claim was time barred because the plaintiff brought the case more than a year after this alleged violation. Id. at *7.
Plaintiff mentions "one or two" violations as being untimely. (ECF No. 33, PageID.1129). This appears to be based on both sides mistaken belief in the initial briefing that the Complaint in this case was brought in March 2018 not, as it actually was, in March 2019.
This case involves more than one instance of an alleged TILA violation, and some of those instances took place within one year of the date Plaintiff filed his lawsuit. This fact pattern more closely aligns to the case of Edgerton v. Nationstar Mortgage, LLC , No. 18-12020, 2018 WL 7680610, at *4 (E.D. Mich. Dec. 31, 2018), rep. and recommendation adopted , 2019 WL 1011108 (E.D. Mich. Mar. 4, 2019). In that case, the plaintiff filed a lawsuit in in June 2018, alleging that she had not received any periodic mortgage loan statements since May 2017. The defendant argued that the claim was untimely because the alleged violation took place more than a year before the plaintiff filed the lawsuit. Id. at *4. In reviewing the defense's Rule 12 motion, the magistrate judge concluded that "each month's missed statement forms a discrete violation. Hence, only the omitted statements pre-dating the one-year window fall outside the limitations period." Id. at *5. The Court agrees. Periodic statements differ from each other month to month, reflecting different balances based on previous payments, late fees, interest, and the like. Thus, this was not a mere failure to send a statement in January 2017 that was not remedied through June 2018, rather each month Defendant violated the statute when it failed to send a periodic statement to the Plaintiff. For these reasons, Plaintiff's TILA claim is timely, in as much as it depends upon those violations taking place on March 2018 and thereafter, and Plaintiff is entitled to summary judgment on his TILA claim with respect to liability on those timely violations.
Defendant finally suggests that it is entitled to summary judgment on this count because Plaintiff has not demonstrated damages. (ECF No. 9, PageID.604). Defendant references its damages argument made on the RESPA claim, and for the same reason the Court found a triable issue on damages on the RESPA claim, the Court concludes there is a triable issue of damages here. As to liability, Defendant's motion must be granted as to the claims arising more than a year before the filing of this lawsuit, but Plaintiff's motion must be granted as to the timely claims. The only issue for the factfinder will be damages.
3. Count III – FDCPA
Plaintiff next brings a claim for violations of the FDCPA against Defendant Carrington. The briefing on the respective motions focuses on two sets of alleged violations. In the first group, Plaintiff contends that each and every communication from Carrington to Macholtz that included demands for payment materially inflated sums of money because it failed to account for the Loan Modification Agreement. In the second group, Plaintiff contends that the October 2018 communication from Defendant Carrington was deceptive because Defendant Carrington sent a Request for Mortgage Assistance form that communicated to Plaintiff that it would process his request for a loan modification and consider a modification or other mitigation option in lieu of foreclosure when it had no intention to do so.
The FDCPA prohibits a debt collector from using any "false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. In determining whether a statement qualifies as false or misleading under the FDCPA, courts apply an objective "least sophisticated consumer" test. Miller v. Javitch, Block & Rathbone , 561 F.3d 588, 591 (6th Cir. 2009). "This standard ‘protects naive consumers [while] prevent[ing] liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness and presuming a basic level of understanding and willingness to read with care.’ " Id. (quoting Kistner v. Law Offices of Michael P. Margelefsky LLC , 518 F.3d 433, 438-39 (6th Cir. 2008) ).
Applying the least sophisticated consumer standard, the Court finds that the first set of communications Plaintiff challenges were deceptive or misleading under the FDCPA. This is so because, as set out above, the Loan Modification Agreement was valid and in effect. The communications that were sent to Plaintiff, therefore, contained an inaccurate and misleading accounting of Plaintiff's loan and the amount owed. See 15 U.S.C. § 1692e(2), (8) (a debt collector may not use any false deceptive or misleading misrepresentation or means in connection with the collection of any debt including (2) the false representation of the character, amount, or legal status of any debt or (8) communicating or threating to communicate to any person credit information which is known or should be known to be false).
Defendant argues that there is no violation of the statute under the "least sophisticated consumer" test because it can hardly be said that Plaintiff was confused about the loan. It contends that Plaintiff's actions are, rather, indicative of "someone who was not seriously attempting to redeem the Property" and that Plaintiff "is not a gullible consumer, having gone through the foreclosure process before[.]" (ECF No. 34, PageID.1249). It states there were numerous avenues through which Plaintiff could have clarified the amount owed if he truly wanted to. This argument lacks merit. The amount due is at the heart of any debt repayment or collection action, so misstating that amount by claiming costs that are not actually due under the Loan Modification Agreement is materially false or misleading for FDCPA purposes. Moreover, when a servicer fails to provide monthly periodic statements, and sends other communications with inaccurate information, the "least sophisticated consumer" is unlikely to recognize which claimed costs are proper, and which are not. The Court concludes, therefore, that the communications that failed to account for the Loan Modification Agreement were improper and violated the FDCPA.
With respect to the remaining group of communications, however, Defendant Carrington is entitled to summary judgment in its favor. Plaintiff's Complaint alleges that Defendant Carrington violated Section 1692g of the FDCPA by failing to send him a notice required by the statute within five days of the initial communication with Plaintiff. (Compl. ¶¶ 84-85, ECF No. 1, PageID.13). But Plaintiff does not pursue this at all in the briefing. And with respect to the mortgage assistance form, this was provided in response to Plaintiff's Notice of Error. (Pl.’s Ex. 18, ECF No. 31-18). Plaintiff fails to show how it is a false representation regarding the character, amount or legal status of his debt. Rather the letter stated it was providing the form per Plaintiff's request, and that the account was still in foreclosure and set for sale on October 11, 2018. Plaintiff states that, given the timing of things, Carrington had no intention of honoring the request, but the Court fails to see how responding to Plaintiff's request constitutes "[t]he use of a[ ] false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." 15 U.S.C. § 1692e(10).
4. Count IV – MBLSLA
Plaintiff's Complaint next argues Defendant Carrington violated the Michigan Mortgage Brokers, Lenders, and Servicers Licensing Act (MBLSLA) for its "failure to provide Plaintiff with material disclosures of information required by RESPA, TILA, and the FDCPA[.]" (Compl. ¶ 103, ECF No. 1, PageID.15). Plaintiff seeks summary judgment in his favor with respect to liability. (ECF No. 30, PageID.867-868). Defendant Carrington, in turn, seeks summary judgment in its favor, asserting that Defendant has failed to state a claim for a MBLSLA violation. (ECF No. 29, PageID.607).
Defendants first seek summary judgment on this count on the basis that "Courts in the Eastern District of Michigan have determined that the statute does not allow for a private right of action." (ECF No. 29, PageID.607). As an initial matter, decisions from the Eastern District of Michigan are not binding on courts here in the Western District, though of course they may be persuasive authority. But the Court does not find the authority cited persuasive. The statute provides that "any person, prosecutor, or the attorney general may bring an action ... to ... recover actual damages resulting from a violation of this act." MICH. COMP. LAWS § 445.1681 (emphasis added). Based on this language courts in this district (as well as the Eastern District) have concluded that the MBLSLA does, in fact, provide for a "private right of action, as set forth in M.C.L.A. § 445.1681." Hoch v. SunTrust Mortgage, Inc. , No. 1:18-cv-767, 2019 WL 1383712, at *2 (W.D. Mich. Jan. 18, 2019) (Quist, J.) (citing Yaldu v. Bank of Am. Corp. , 700 F. Supp. 2d 832, 846 (E.D. Mich. 2010), for the proposition that the "MBLSLA ‘provides an individual cause of action’ pursuant to § 445.1681(1)."); Griffor v. BSI Financial Services Ventures Trust , No. 16-12552, 2017 WL 1196368, at *3-*4 (E.D. Mich. Mar. 31, 2017) (concluding the plaintiffs had a private cause of action under the MBLSLA). The line of authority cited by Defendant has been distinguished, furthermore, as "uniformly fail[ing] to cite to the section of the statute providing such a [private] right." Edgerton , 2018 WL 7680610, at *12 (concluding the MBLSLA provides for a private cause of action). The Court is persuaded by the authority that directly deals with Section 445.1681 and concludes that there is a private right of action under the MBLSLA.
Carrington alternatively argues that even if Plaintiff has a private cause of action under the MBLSLA, the claim must fail because he fails to provide any facts in support of his claim. (ECF No. 29, PageID.607). Carrington points to Plaintiff's deposition testimony where he stated (after counsel lodged an objection) that he did not know how Defendant violated the MBLSLA. (Macholtz. Dep. 103-104, ECF No. 29-7, PageID.669). Plaintiff responds by pointing to two alleged violations: (1) Carrington's failure to send periodic statements with respect to his loan and (2) Carrington's misrepresentations with respect to the balance of the loan during a February 28, 2019 phone call. This is sufficient to deny the defense motion seeking dismissal for failure to state a claim. SeeNoel v. Fleet Fin., Inc. , 971 F. Supp. 1102, 1113 (E.D. Mich. 1997) ("Under the clear language of the [MBLSLA], if the Plaintiffs have successfully alleged that the Plaintiffs failed to conduct their businesses in accordance with the law, then they have also successfully alleged a violation of the [MBLSLA].").
The Court is, moreover, satisfied that Plaintiff is entitled to summary judgment in his favor with respect to liability on this count. Under the MBLSLA it is unlawful for a licensee or registrant to, among other things "[f]ail to conduct the business in accordance with law, this act, or a rule promulgated or order issued under this act" and "[e]ngage in fraud, deceit, or material misrepresentation in connection with any transaction governed by this act." MICH. COMP. LAWS § 445.1672(a), (b). There is no genuine issue of material fact but that Defendant Carrington did both. Defendant Carrington does not disagree that it qualifies as a licensee or a registrant under the act. Nor does it aver it was somehow exempt from the legal requirement to send periodic statements to Plaintiff which, as set out above, it did not do. Furthermore, the failure of Carrington to account for the Loan Modification Agreement in its communications with Plaintiff, including the February 28, 2019 phone call, amounts to a material misrepresentation, as the Court found above with respect to the FDCPA claim. Accordingly, Plaintiff is entitled to summary judgment in his favor with respect to liability. Damages will be a triable issue.
The statute also provides that a violation occurs when a licensee or registrant "[i]ntentionally or due to gross or wanton negligence, repeatedly fail[s] to provide borrowers material disclosures of information as required by law." Mich. Comp. Laws § 445.1672(c). Plaintiff's Complaint alleged Defendant violated this, as well as the earlier, subsections. (See Compl. ¶ 101, ECF No. 1, PageID.15). The summary judgment record, however, does not reflect anything that would amount to the scienter element of Section 445.1672(c), and Plaintiff does not pursue this claim in the briefing. Accordingly to the extent this count depends on an intentional or gross or negligent violation of the statute, the Court concludes it has been abandoned.
5. Count V – Michigan Regulation of Collection Practices Act
The MRCPA prohibits misrepresentations and misleading communications by a "regulated person" in connection with the collection of a debt or a claim. MICH. COMP. LAWS § 445.252. The MRCPA creates a private right of action, permitting recovery of damages or equitable relief. MICH. COMP. LAWS § 445.257. In Count V, Plaintiff avers that both Defendants are liable under the MRCPA. The motions for summary judgment makes clear that the claim largely overlaps with the FDCPA claim, and both sides largely assert their arguments with respect to that count. See Gamby v. Equifax Information Services LLC , 462 F. Appx 552, 556 n.5 (6th Cir. 2012) (noting the similarities between the federal and state statutes). Accordingly, for the same reason the Court found a violation of the FDCPA, the Court finds a violation of the MRCPA here.
Defendants, however, argue that even if there is a violation, they are not liable. Defendant Carrington, they first argue, does not qualify as a "regulated person" under the MRCPA. The MRCPA defines a "regulated person" as:
[A] person whose collection activities are confined and are directly related to the operation of a business other than that of a collection agency including any of the following:
(i ) A regular employee who collects accounts for 1 employer if the collection efforts are carried on in the name of the employer.
(ii ) A state or federally chartered bank that collects its own claim.
(iii ) A trust company that collects its own claim.
(iv ) A state or federally chartered savings and loan association that collects its own claim.
(v ) A state or federally chartered credit union that collects its own claim.
(vi ) A licensee under the regulatory loan act, 1939 PA 21, MCL 493.1 to 493.24.
(vii ) A business that is licensed by this state under a regulatory act that regulates collection activity.
(viii ) An abstract company that is engaged in an escrow business.
(ix ) A licensed real estate broker or salesperson if the claim the broker or salesperson is collecting is related to or in connection with the broker's or salesperson's real estate business.
(x ) A public officer or a person that is acting under a court order.
(xi ) An attorney who is handling a claim or collection on behalf of a client and in the attorney's own name.
MICH. COMP. LAWS § 445.251(g).
Carrington says that none of these definitions apply to it, because it is acting to collect a debt on behalf of Defendant Wilmington. (ECF No. 29, PageID.609). It cites the Court to the case of Casper v. Nationstar Mortgage, LLC , 2015 WL 13376708, at *5 (E.D. Mich. June 2, 2015), where the court concluded that the MRCPA did not apply to a mortgage-loan servicer appointed to collect a bank's claim against the plaintiff. The allegations in Plaintiff's complaint and the summary judgment record, however, demonstrate that Carrington communicated with Plaintiff in an attempt to collect a debt in a way that violated the statute, and that Carrington was a regulated person under the statute. SeeEdgerton , 2018 WL 7680610, at *10-*11 (finding mortgage servicer qualified as a "regulated person"). Casper , furthermore, has been distinguished by a subsequent published decision:
[I]n deciding whether a mortgage loan servicer was a "regulated person," [ Casper ] only analyzed one provision, and that provision is not relevant here: if a state or federally chartered bank is collecting its own claim. See Mich. Comp. Laws § 445.251(g)(ii). Thus, the provision at issue in this case—status as a business licensed by Michigan under a regulatory act that regulates collection activity, Mich. Comp. Laws § 445.251(g)(vii) —was not discussed.
Knight v. Ocwen Loan Servicing, LLC , 301 F. Supp. 3d 723, 725 (E.D. Mich. 2018).
Like the servicer in Knight , Carrington qualifies as a regulated person under Section 445.251(g)(vii). Carrington is a mortgage loan servicer that is licensed under the MBLSLA, and it is plainly participating in a collection activity to collect on Plaintiff's Mortgage Loan. This is enough to bring Carrington within the ambit of a regulated person and the Court concludes Carrington is liable under the MRCPA.
Next, Defendant Wilmington contends it too may not be liable under the act because Plaintiff has not alleged a violation of the statute as to it. It points out that the Statute prohibits certain affirmative acts, including, inter alia, mispresenting the legal status of a debt in a communication with a borrower. See MICH. COMP. LAWS § 445.252(f). It correctly points out that Plaintiff's claims against it relate to the claims in TILA for failing to send periodic statements from January 2017 through June 2018. These are, at most, omissions it says, and not a prohibited act under the statute. (ECF No. 29, PageID.609). On the other hand, Plaintiff has pointed to affirmative acts on the behalf of Carrington, including the misrepresentations on the loan amount. The question is whether liability under the act extends to a mortgagee for actions of its servicer that violate the MRCPA. Neither side provides a case directly on point. Plaintiff contends that Wilmington may be liable as the principal for its agent Carrington's affirmative actions citing to this court's decision in an FDCPA action, In re: FDCPA Cognate Cases , 2016 WL 1273349 (W.D. Mich. Mar. 28, 2016) (ECF No. 33, PageID.1139-1140). Wilmington does not respond to Plaintiff's principal / agent contention, and the Court discerns no reason why liability should not reach Wilmington on these facts. Defendant Wilmington engaged Carrington to service the mortgage loan it held, which created a principal-agent relationship for the purpose of collecting a debt. Defendant Carrington did so in a way that affirmatively misrepresented the amount of Plaintiff's debt in violation of the statute and thus Defendant Wilmington may be held liable under the statute. SeeLongshore v. Pan American Growth Properties , 1998 WL 1991079, at *2 (Mich. Ct. App. July 14, 1998) ("[T]he evidence was sufficient to support the finding that the misrepresentation of defendant's agent to Longshore violated the MCPA in this case."); c.f.National Union Fire Ins. Co. of Pittsburgh, Pa. v. Arioli , 941 F. Supp. 646, 656 (E.D. Mich. 1996) (MCPA claim failed where complained of actions were conducted by individual who was not an agent of the counter-defendant).
As with the other state law statutory claim, it is likely Michigan's six year statute of limitations applies here. Thus, unlike the TILA claim, all of the complained of omissions here likely are timely. SeeHoch v. SunTrust Mortgage, Inc., No. 1:18-cv-767, 2019 WL 1383712, at *2 n.1 (W.D. Mich. Jan. 18, 2019) (Quist, J.).
6. Counts V & VII – Breach of Mortgage and Loan Modification Agreement
Plaintiff's final two counts allege both defendants breached the Mortgage and the Loan Modification Agreement. During oral argument on the motions, Plaintiff withdrew the Breach of Mortgage claim as to Defendant Carrington and the entirety of his claim for Breach of the Loan Modification Agreement except to the extent they serve as a premise for the wrongful foreclosure theory. Only the Breach of the Mortgage claim as to Defendant Wilmington, then, remains, as an independent claim. In this Count, Plaintiff contends that Defendant Wilmington breached the mortgage when it failed to send a notice of foreclosure and provide Plaintiff an opportunity to cure his default at least 30 days before the foreclosure sale. (Compl. ¶¶ 113-114, ECF No. 1, PageID.17). Plaintiff has not moved for summary judgment on this count. Defendant Wilmington has moved for summary judgment.
To establish a claim for breach of contract under Michigan law, a plaintiff must prove by a preponderance of the evidence the following: "1) the existence of a contract between the parties; 2) the terms of the contract; 3) that defendant breached the contract; 4) that the breach caused the plaintiff injury." Timmis v. Sulzer Intermedics, Inc. , 157 F. Supp. 2d 775, 777 (E.D. Mich. 2001) (citing Webster v. Edward D. Jones & Co., L.P. , 197 F.3d 815, 819 (6th Cir. 1999) ). Where "the contractual language is unambiguous, a court must interpret and enforce the contract as written, because an unambiguous contract reflects the parties’ intent as a matter of law." In re Smith Trust , 480 Mich. 19, 745 N.W.2d 754, 758 (2008) (citing Frankenmuth Mut. Ins. Co. v. Masters , 460 Mich. 105, 595 N.W.2d 832, 837 (1999) ).
A breach is a violation or infraction of an obligation by failing to perform one's own contractual promise, by repudiating the promise, or by interfering with another party's performance. Breach of Contract , Black's Law Dictionary (8th ed. 2007). "Nonperformance of an obligation due is a breach of contract ...." Woody v. Tamer , 158 Mich. App. 764, 405 N.W.2d 213, 217 (1987). "The rule in Michigan is that one who first breaches a contract cannot maintain an action against the other contracting party for his subsequent breach or failure to perform." Michaels v. Amway Corp., 206 Mich. App. 644, 650, 522 N.W.2d 703, 706 (1994) (internal quotation marks omitted); see alsoMcCarty v. Mercury Metalcraft Co., 372 Mich. 567, 573, 127 N.W.2d 340 (1964) ; Chrysler Int'l Corp. v. Cherokee Export Co., 134 F.3d 738, 742 (6th Cir. 1998) ("He who commits the first substantial breach of a contract cannot maintain an action against the other contracting party for failure to perform."). The rule applies only when the initial breach is material, or substantial. Michaels, 522 N.W.2d at 707.
Paragraph 22 of the Mortgage provided:
22. Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require Immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence.
(Def.’s Ex. B, ECF No. 29-3, PageID.632).
Defendants contend that they are entitled to summary judgment because there was no breach of this paragraph. Namely, they contend the June 24, 2016 letter from CitiMortgage (Pl.’s Ex. I, ECF No. 29-10, PageID.696-699) fully satisfied the obligations set out in Paragraph 22 of the Mortgage because it specified the default, the action required to cure the default, and the other requisite information. (ECF No. 29, PageID.610). Plaintiff responds that this notice was ineffective because it was inaccurate. It contained an amount due that was in excess of that actually owed under what Plaintiff says was the correct amount under the loan agreement. A reasonable fact-finder could agree with plaintiff. As set out above, the Loan Modification Agreement should have been, but was not, applied to Plaintiff's account. Because it was not, the June 24, 2016 letter failed to specify the action required to cure the default because the amount Plaintiff was in arrears, and thus the amount necessary to cure the actual default, was less than what CitiMortgage, and then Defendants, communicated to Plaintiff. On this basis, Defendant Wilmington is not entitled to summary judgment on this basis, or, as set out above, on the Conlin issues. Even if it breached Paragraph 22 of the mortgage, Defendant Wilmington argues it is still entitled to summary judgment because Plaintiff committed the first substantial breach by failing to make payments as far back as 2013. (ECF No. 29, PageID.611-612). The Court disagrees that this breach is a substantial, or material, breach. Paragraph 22 begins by contemplating payment failures by the borrower. These failures trigger the notice requirement. The failure to make payments, then, was contemplated by the paragraph itself and cannot amount to a material breach. An unpublished decision from the Sixth Circuit Court of Appeals, involving a similar claim with similar contractual language, has concluded as much:
The fact that plaintiffs were behind on their mortgage payments does not bar them from enforcing the notice provisions of the contract. The contract states that "Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument." Plaintiffs admit that they fell behind in their mortgage payments but allege that the banks failed to give the required notice prior to acceleration. By failing to give the required notice, the banks breached the contract.
***
Considered in the context of the contested provisions, plaintiffs’ missed payments did not render notice of acceleration ineffective or impossible. Indeed, notice was required only if plaintiffs failed to pay. A breach contemplated by the language of the contract is unlikely to render performance impossible, especially when the contract provides for a contingency in the event of that breach. Additionally, as noted by plaintiffs, if notice provisions cannot ever be enforced because of the first-breach rule, then a common contractual provision could never be enforced.
Jawad v. Hudson City Savings Bank , 636 F. App'x 319, 322-323 (6th Cir. 2016).
The first substantial breach doctrine, therefore, does not provide Defendant Wilmington with a basis for summary judgment.
CONCLUSION
Plaintiff and Defendants’ predecessor-in-interest settled earlier litigation in this Court by agreeing to modify the terms of Plaintiff's mortgage. Lawyers for each side signed multiple stipulations recognizing the Loan Modification Agreement and other settlement terms. The District Judge signed Orders based on these stipulations. Plaintiff paid the required money to close the deal. And ultimately key documents embodying the deal were recorded on the County's real estate records. The Loan Modification Agreement was a valid and effective agreement as a matter of law. Yet Defendants did not honor the terms of that Agreement in their notices to Plaintiff, or in the eventual foreclosure at issue in this case.
It can no doubt be frustrating to a lender where, as here, the borrower has paid little on the outstanding loan balance after cutting a new deal. But it can also be difficult for a borrower who thinks he cut a new deal but can't get the new servicer or mortgagor to acknowledge that. And obviously, losing a house that Plaintiff has continually occupied for twenty-two years is an issue of significant interest of Plaintiff. Both sides should have the chance to resolve their differences in light of the Court's conclusion that the Loan Modification Agreement went into effect by its terms. If they cannot resolve the matter on their own, the Court will move the case to trial on the issues framed in this Opinion and Order.
ACCORDINGLY, IT IS ORDERED THAT:
1. Defendants’ Motion for Summary Judgment (ECF No. 29) is GRANTED IN PART and DENIED IN PART.
2. Plaintiff's Motion for Partial Summary Judgment (ECF No. 30) is GRANTED IN PART and DENIED IN PART.
3. Triable issues will be:
a. Liability and Damages (other than emotional distress damages) with respect to the Claim in Count I that Defendant Carrington violated RESPA by failing to adequately respond to the June 15, 2018 Request for Information;
b. Plaintiff's Damages on Count II (TILA), that Defendant Wilmington failed to provide required periodic notices during the period of March, April, May, and June of 2018;
c. Plaintiff's Damages on Count III (FDCPA) based on Carrington's communications that failed to account for the Loan Modification Agreement;
d. Plaintiff's Damages on Count IV (MBLSLA);
e. Plaintiff's Damages on Count V (MRCPA);
f. Liability and damages on whether Defendant Wilmington breached the mortgage by failing to send notice required under Paragraph 22; and
g. Whether Plaintiff is entitled to judgment setting aside the foreclosure sale under the Conlin standard.
4. The settlement conference, final pretrial, and trial dates have been cancelled by earlier order. The Court will reset the final pretrial and trial dates, if needed, after the Magistrate Judge has rescheduled and conducted the settlement conference.