Salvatore Munaco v. Bank of America , 513 F. App'x 508 ( 2013 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 13a0118n.06
No. 12-1325
UNITED STATES COURT OF APPEALS FILED
FOR THE SIXTH CIRCUIT Jan 31, 2013
DEBORAH S. HUNT, Clerk
SALVATORE A. MUNACO, )
)
Plaintiff-Appellant, )
) ON APPEAL FROM THE
v. ) UNITED STATES DISTRICT
) COURT FOR THE EASTERN
BANK OF AMERICA; BANK OF ) DISTRICT OF MICHIGAN
NEW YORK MELLON, )
)
Defendants-Appellees. )
)
BEFORE: MARTIN, SUHRHEINRICH and GIBBONS, Circuit Judges.
SUHRHEINRICH, Circuit Judge.
I. Introduction
Defendant The Bank of New York Mellon (“BNYM”) foreclosed the mortgage of Plaintiff
Salvatore A. Munaco (“Munaco”) after Munaco defaulted on the loan secured by the mortgage.
Munaco sued, alleging that the foreclosure sale violated Michigan’s advertisement statute, Mich.
Comp. Laws Ann. § 600.3220. The district court granted summary judgment to Defendants and also
denied Munaco’s motion for reconsideration or relief from judgment. Munaco appeals both of those
orders. We AFFIRM.
II. Background
On January 17, 2007, Munaco got a loan in the amount of $1,190,000.00 from America’s
Wholesale Lender (“AWL”), for residential property located in Rochester, Michigan. The note was
secured by a mortgage, which was recorded with the Oakland County Register of Deed (“ROD”).
Defendant Bank of America is the servicer of the loan. The mortgage identified Mortgage Electronic
Systems, Inc. (“MERS”) as the mortgagee. MERS assigned the mortgage to BNYM, by written
assignment, which was recorded with the ROD on June 25, 2009.
Munaco defaulted on the note. On June 2, 2009, BNYM began foreclosure proceedings.
This was twenty-three days before it recorded the assignment of the mortgage with the ROD, on June
25, 2009. The foreclosure sale was originally scheduled for June 30, 2009, but after four
adjournments, took place on July 28, 2009. BNYM purchased the property at the foreclosure sale
for $697,000. Munaco had until July 28, 2010, to redeem the property from foreclosure but did not
redeem it.
Thereafter, BNYM brought an action in the District Court for the 52-3 Judicial District of
the State of Michigan to recover the property. On September 13, 2010, Munaco brought this suit,
alleging wrongful foreclosure (Count I), and seeking to set aside the foreclosure sale and enjoin
Defendants from evicting him from the property (Count II). BNYM removed the action to federal
district court, dismissed its state court action, and agreed to have the pending issues regarding the
property resolved in this action.
Defendants moved for summary judgment on November 1, 2011. On November 22, 2011,
Munaco filed his response. On January 24, 2012, the district court granted summary judgment to
Defendants. First, it concluded that Munaco had standing to challenge the foreclosure after the
expiration of the redemption period. The court found that there was no genuine issue of fact that the
foreclosure sale was properly adjourned from week to week, in accordance with Mich. Comp. Laws
Ann. § 600.3220, relying on the adjournment notices attached to Defendants’ motion for summary
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judgment. The district court refused to consider Plaintiff’s argument, raised for the first time in his
response brief, that the foreclosure by advertisement was invalid under Mich. Comp. Laws Ann. §
600.3204, because BNYM did not record the mortgage until after the foreclosure proceeding began.
R. 25 Page ID# 321.
On February 7, 2012, Munaco filed a motion for reconsideration or relief from judgment and
to file an amended complaint. On February 28, 2012, the district court denied this motion. First,
the court held that while Munaco had made numerous allegations in his complaint, he “chose to
assert only a single claim of wrongful disclosure, and specifically stated in that count that his claim
was pursuant to MCL 600.3220.” R. 36 Page ID# 651. The court added that it was “not required
to consider other alleged statutory violations that Plaintiff was clearly aware of, but for whatever
reason chose not to assert as part of his claim.” Id. The district court also denied Munaco’s motion
to amend the complaint, on the grounds that Munaco offered no explanation for the delay in seeking
to amend, and Defendants had demonstrated significant prejudice. Id. 652. “As Defendants have
explained, if Plaintiff had asserted on a timely basis the fact that he now proposes to assert in an
amended complaint, Defendants would have had the option to agree to set aside the foreclosure and
to begin a new foreclosure by advertisement.” Id. 652–53. Finally, the court noted that Munaco
“had ample notice” that his additional claims had not been included in the complaint and thus not
considered on summary judgment, but he did not explain why he waited until after entry of judgment
to seek leave to amend. Id. 653.
Munaco challenges both rulings on appeal.
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III. Analysis1
A. Grant of Summary Judgment
First, Munaco alleges that in granting summary judgment, the trial court refused to consider
various arguments he presented in support of his wrongful foreclosure claim. More specifically,
Munaco contends that the court elevated form over substance by considering only allegations that
were asserted specifically under Count I and completely disregarding other factual allegations in the
complaint or raised in response to summary judgment.
A district court’s grant of summary judgment is reviewed de novo. Johnson v. Econ. Dev.
Corp., 241 F.3d 501, 509 (6th Cir. 2001). Summary judgment is proper “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed.R.Civ.P. 56(a). “A ‘genuine issue of material fact’ is one which, if proven at trial,
would result in a reasonable jury finding for the non-moving party.” Doren v. Battle Creek Health
Sys., 187 F.3d 595, 597 (6th Cir.1999) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48
(1986)). All justifiable inferences are to be drawn in the non-moving party’s favor. Anderson, 477
U.S. at 255.
1. General Principles
In Michigan, once a foreclosure is complete and the redemption period following the
foreclosure has expired, a former owner loses all right, title, and interest in and to the mortgaged
property. Piotrowksi v. State Land Office Bd., 4 N.W.2d 514, 517 (Mich. 1942); see also Mich.
1
Subject matter jurisdiction is based on diversity.
4
Comp. Laws Ann. § 600.6236.2 Furthermore, “[t]he law in Michigan does not allow an equitable
extension of the period to redeem from a statutory foreclosure sale in connection with a mortgage
foreclosed by advertisement and posting of notice in the absence of a clear showing of fraud, or
irregularity.” Schulthies v. Barron, 167 N.W.2d 784, 785 (Mich. App. 1969) (per curiam). See also
Reid v. Rylander, 258 N.W. 630, 631 (Mich. 1935) (holding that a former owner may holdover and
challenge the validity of the foreclosure in a summary eviction proceeding, but is limited to
challenging the procedure).
2
In the district court, Defendants argued that Munaco lacked standing to challenge the
foreclosure once the redemption period expired. The district court rejected the argument, citing
Rainey v. U.S. Bank Nat’l Ass’n, No. 11-12520, 2011 WL 5075700 (E.D. Mich. Oct. 25, 2011).
Rainey, in turn, adopted the reasoning of Langley v. Chase Home Fin. LLC, No. 10-604, 2011 WL
1130926, at * 2 n.2 (W.D Mich. March 28, 2011). See also Ahmad v. Wells Fargo Bank, NA, 861
F. Supp. 2d 818, 824-25 (E.D. Mich. 2012) (adopting the views of Rainey and Langley). This issue
has arisen in several federal district courts in Michigan. See, e.g., Steinberg v. Fed. Home Loan
Mortg. Corp.,, 1-CV-15182, 2012 WL 4498297, at * 2 (E.D. Mich. Sept. 28, 2012) (and cases cited
therein); Witek v. Mortg. Elec. Reg. Sys., Inc. (MERS), No. 1:11-CV-216, 2012 WL 2261363, at *
1 (W.D. Mich. June 15, 2012); Ahmad, 861 F. Supp. 2d at 824-25; Rainey, 2011 WL 5075700, at
*2-4; Langley, 2011 WL 1130926, at *2 n.2.
Defendants do not raise this argument on appeal. Notwithstanding, we have an independent
obligation to consider the matter. See Planned Parenthood Ass’n. v. City of Cincinnati, 822 F.2d
1390, 1394 (6th Cir. 1987). Use of the term “standing” in this context is misleading. Brezzell v.
Bank of America, No. 11-11467, 2011 WL 2682973, at *4 (E.D. Mich. July 11, 2011). See generally
El-Seblani v. IndyMac Mortg. Servs., No. 12-1046, at *3-4 (6th Cir. Jan. 7, 2013) (explaining the
confusion over standing in this context).
We conclude that Munaco satisfies constitutional and prudential standing requirements, for
the reasons articulated in Langley. See Langley, 2011 WL 1130926, at * 2. n.2; Rainey, 2011 WL
5075700, at * 2-4; see also Ahmad, 861 F. Supp. 2d at 824-25 (assuming standing because the
plaintiffs’ claims were still subject to dismissal under Fed. R. Civ. P. 12(b)(6)). We therefore affirm
the district court’s conclusion that Munaco had standing to challenge the foreclosure proceeding.
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2. Mich. Comp. Laws Ann. § 600.3220In his complaint, Plaintiff alleged that Defendants failed to post notice of the adjournment
of the foreclosure sale as required by Mich. Comp. Laws Ann. § 600.3220.3 As discussed below,
this is the only claim raised in the complaint. Defendants offered undisputed evidence that the
foreclosure sale was adjourned from week to week in accordance with Mich. Comp. Laws Ann. §
600.3220, and the district court granted summary judgment on that basis. Munaco does not
challenge that conclusion on appeal. Summary judgment for Defendants is thus proper on this basis
alone.
3. Mich. Comp. Laws Ann. § 600.3204Munaco argued for the first time in his response to Defendants’ motion for summary
judgment that the foreclosure must be set aside because the assignment of the mortgage was not
recorded until after the foreclosure procedure began.
Foreclosure by advertisement is governed by statute in Michigan. See Mich. Comp. Laws
Ann. § 600.3204; Senters v. Ottawa Sav. Bank, FSB, 503 N.W.2d 639, 641 (Mich. 1993). A party
3
Mich. Comp. Laws Ann. § 600.3220 states as follows:
Sec. 3220. Such sale may be adjourned from time to time, by the sheriff or other
officer or person appointed to make such sale at the request of the party in whose
name the notice of sale is published by posting a notice of such adjournment before
or at the time of and at the place where said sale is to be made, and if any
adjournment be for more than 1 week at one time, the notice thereof, appended to the
original notice of sale, shall also be published in the newspaper in which the original
notice was published, the first publication to be within 10 days of the date from
which the sale was adjourned and thereafter once in each full secular week during the
time for which such sale shall be adjourned. No oral announcement of any
adjournment shall be necessary.
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may foreclose by advertisement if certain conditions are met. These include that “[t]he mortgage
containing the power of sale has been properly recorded” and that “[t]he party foreclosing the
mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the
mortgage or the servicing agent of the mortgage.” Mich. Comp. Laws Ann. § 600.3204(1)(c), (d).
The statute also provides: “If the party foreclosing a mortgage by advertisement is not the original
mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing
the assignment of the mortgage to the party foreclosing the mortgage.” Id. § 600. 3204(3) (emphasis
added).4
a. Stating a Claim
We agree with the district court that Munaco raised only one claim for wrongful foreclosure
based on Defendants’ alleged failure to comply with the adjournment procedure of Mich. Comp.
Laws § 600.32205 and that the complaint does not contain any factual allegations or claims relating
to Munaco’s assertion that the mortgage foreclosure was invalid under Mich. Comp. Laws Ann. §
600.3204. The complaint does not allege that BNYM was not “either the owner of the indebtedness
or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage”
at the time BNYM began foreclosure proceedings, as required by Mich. Comp. Laws Ann. § 600.
3204(1)(d), or that BNYM failed to record the assignment of the mortgage prior to the date of sale,
4
Mich. Comp. Laws Ann. § 600.3216 pertains to the time and place of the sheriff’s
foreclosure sale.
5
Munaco’s complaint alleges that “Defendants did not properly post the adjournment as
required by MCL 600.3220,” and “Defendants failed to comply with MCLA 600.3220.” R. 1 Page
ID# 8.
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as provided by Mich. Comp. Laws Ann § 600.3204(3). Having failed to state a claim under section
600.3204, Munaco has forfeited any right to pursue such arguments on appeal.
The “other allegations of wrongdoing” in Munaco’s complaint allege that Defendants did
not afford Munaco an opportunity to meet with the foreclosing lender as required by Mich. Comp.
Laws Ann. § 600.3204(5). See R.1 Page ID# 7–9 (paragraphs 9–22). However, as Munaco
acknowledges, subsection 600.3204(5) was not in effect when BNYM began foreclosure
proceedings. See Mich. Comp. Laws Ann. § 600.3204(5) (“Subsection (4) [providing that a party
may not begin foreclosure proceedings if, inter alia, a mortgagor has requested a meeting and the
mortgagee has not met with him] applies only to proceedings under this chapter in which the first
notice . . . is published after July 5, 2009 and before December 31, 2012.”)
As the Supreme Court recently observed, “where the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has
not ‘show[n]’—‘that the pleader is entitled to relief.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Fed. R. Civ. P. 8(a)(2)). See also Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 444 (6th
Cir. 2012) (setting forth analysis required under Iqbal and Bell Atlantic v. Twombly, 550 U.S. 544(2007)). Munaco did not plead facts to establish a violation of Mich. Comp. Laws Ann. § 600.3204,
and did not allege fraud, mistake, or irregularity in connection with the foreclosure proceeding.
b. Summary Judgment
Even if Munaco has properly stated a claim based on Mich. Comp. Laws Ann. § 600.3204,
he still failed to meet his burden as the nonmoving party under Rule 56. BNYM offered undisputed
evidence that it owned the indebtedness since on or about February 27, 2007, before the foreclosure
proceedings began, and that the assignment was recorded on June 25, 2009, prior to the date of the
8
foreclosure sale on July 28, 2009 (albeit not before the proceedings were initiated). R. 18-2 Page
ID# 108; R. 18-2 Page ID# 123. As noted above, the undisputed evidence establishes that
Defendants met all three requirements at the time of the foreclosure sale.6
In support of his argument that the assignment of the mortgage must also be recorded prior
to the first publication of a notice of foreclosure, Munaco cites Residential Funding Company, LLC
v. Saurman, 807 N.W.2d 412 (Mich. Ct. App. 2011). Saurman held that Mortgage Electronic
Registration Systems (“MERS”) was not authorized to foreclose under Mich. Comp. Laws §
600.3204(1)(d) because it did not hold the mortgage note itself. Saurman, 807 N.W.2d at 414.
However, the Michigan Supreme Court reversed Saurman, rejecting the premise that only
mortgagees of record may commence foreclosure by advertisement:
[T]he Legislature’s use of the phrase “interest in the indebtedness” to denote a
category of parties entitled to foreclose by advertisement indicates the intent to
include mortgagees of record among the parties entitled to foreclose by
advertisement, along with parties who “own[ ] the indebtedness” and parties who act
as “the servicing agent of the mortgage.”
Residential Funding Co., LLC. v. Saurman, 805 N.W.2d 183, 184 (Mich. 2011). See also Hargraw
v. Wells Fargo Bank NA, No. 11-1806, 2012 WL 2552805, at *2 (6th Cir. July 3, 2012). Thus, the
person foreclosing a mortgage does not need to be a mortgagee. Instead, mortgagees of record are
only one category of parties entitled to foreclosure by advertisement, and the owner of the
indebtedness is also entitled to foreclose by advertisement. The Michigan Supreme Court did not
alter the requirement that the assignment of the mortgage to the person foreclosing the mortgage
6
The other requirements of Mich. Comp. Laws Ann. § 600.3204(1)(a), (b,), and (c) are also
met and not at issue.
9
must be recorded prior to sale. It is undisputed that BNYM was the owner of the indebtedness prior
to the commencement of foreclosure and the assignment was recorded prior to sale.
Munaco also relies on Rainey v. U.S. Bank Nat’l Ass’n, No. 11-12520, 2011 WL 5075700(E.D. Mich. Oct. 25, 2011), which held that an assignment of the mortgage must be recorded prior
to beginning foreclosure. Rainey, which was decided prior to Saurman, has been effectively
overruled.
And most importantly, this result in consistent with the plain language Mich. Comp. Laws
Ann. § 600.3204(3), which states simply that if the foreclosing party “is not the original mortgagee,
a record chain of title shall exist prior to the date of sale.” Mich. Comp. Laws Ann. §
600.3204(3)(emphasis added).
B. Motion to Amend Complaint
Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that a court may freely grant
leave to amend a pleading “when justice so requires,” in order to ensure that a case is tried on its
merits “rather than [on] the technicalities of the pleadings.” Moore v. City of Paducah, 790 F.2d 557,
559 (6th Cir. 1986) (per curiam). “In deciding whether to grant a motion to amend, courts should
consider undue delay in filing, lack of notice to the opposing party, and futility of amendment.”
Brumbalough v. Camelot Care Ctrs., Inc., 427 F.3d 996, 1001 (6th Cir. 2005).
We review the denial of a motion to amend for abuse of discretion, unless the district court
ruled that the amendment would not withstand a motion to dismiss. Bridgeport Music, Inc. v.
Dimension Films, 383 F.3d 390, 402 (6th Cir. 2004).
The district court did not abuse its discretion in denying Munaco leave to amend his
complaint. The court properly considered the relevant factors and found that Munaco never offered
10
an explanation for the long delay in seeking leave to amend, despite having notice that his additional
claims were not included as counts in his complaint, and that Defendants suffered prejudice, because
they conducted their defense based on the single theory presented in the complaint. The court also
noted that with timely notice, Defendants could have agreed to set aside the foreclosure and begin
a new foreclosure by advertisement.
Munaco asserts that he could not have moved to amend until Rainey was decided. This
attempt to explain away the delay is not persuasive. Rainey was decided in October 2011, and
Defendants moved for summary judgment on November 1, 2011. Munaco did not move to amend
until February 7, 2012. But more importantly, Rainey did not change the substantive law of
Michigan regarding foreclosure by advertisement, which clearly states that an assignment must be
recorded prior to the foreclosure sale, not the first publication of the foreclosure notice. See Mich.
Comp. Laws Ann. § 600.3204(3). Finally, Munaco’s argument is undermined by the fact that he
relied on the Attorney General’s 2004 opinion, see Op. Att’y Gen. 2003-2004 No. 7147 (2004),7
which was available six years before Munaco brought this action.
Finally, an amendment would have been futile, so there was no abuse of discretion in denying
leave to amend.
IV. Conclusion
For the foregoing reasons, the judgment of the district court is AFFIRMED.
7
Mich. Comp. Laws Ann. § 600.3204(3) was amended to its present form after Op. Att’y
Gen. 7147 was released. See generally Kim v. JP Morgan Chase Bank, NA, 813 N.W.2d 778, 781-
82 (Mich. Ct. App. 2012), aff’d in part, rev’d in part, 493 Mich. 98 (Mich. Dec. 21, 2012) (No.
144690).
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