Editor: David Reiss
Brooklyn Law School

March 9, 2014

Michigan District Court Dismisses Fraud and Contract Breach Claims Against Mortgage Lender

By Karume James

In October 2013, the United States District Court of Michigan, Eastern District in Davis v. Green Tree Servicing, LLC 2013 WL 5551055 (E.D.Mich 2013) dismissed the Plaintiff homeowner’s claims for fraud and breach of contract against the Defendant mortgage lender.

In June 2007, Plaintiff Nataki Davis (“Plaintiff”) and non-party Paula Barnes–Rooks bought a home in Michigan with a mortgage from Quicken Loans Inc. (“Quicken”). Quicken then sold the mortgage to Green Tree Servicing, LLC (“Defendant”). Plaintiff made timely mortgage payments for over five years but failed to make a payment in July 2012 and Defendant started foreclosure proceedings. In December 2012, Defendant bought Plaintiff’s property at a sheriff’s sale and Plaintiff was given six months to redeem the property. Plaintiff did not redeem the property and Defendant later sold the property to Fannie Mae.

In June 2013, Plaintiff brought a pro se lawsuit against Defendant for fraud, breach of contract, that Defendant purposely failed to notify her of the status of her property and the foreclosure sale and the lack of notice removed her opportunity to buy the property at the sheriff’s sale, and that Defendant failed to satisfy the requirements of the Fair Debt Collection Practices Act (“FDCPA‘), § 339.915(f)3 because Defendant failed to notify Plaintiff that the property was being foreclosed or sold due to nonpayment of debt. Plaintiff also argued in her complaint that since she was not notified of the sheriff’s sale, she was not given the required six-month period from the date of the sale to redeem the property. Plaintiff also claimed that Defendant’s were not the not bona fide purchasers of the property. Plaintiff requested that the court discharge the foreclosure sale and give her an opportunity to redeem the property or alternatively require the Defendant to pay money damages for the value of the property.

Defendant responded with a motion to dismiss for failure to state a claim upon which relief could be granted under Federal Rules of Civil Procedure (“FRCP”) 12(b)(6), and that Plaintiff failed to meet the pleading standards for a complaint under FRCP Rule 8 and for fraud under FRCP Rule 9, failed to make proper claim under the FDCPA, and failed to set forth sufficient fraud or irregularity to set aside the foreclosure.

The District Court denied Defendant’s Rule 8 challenge and found that Plaintiff met the less stringent pleading standards for a pro se lawsuit. However, the District Court dismissed Plaintiff’s claim for fraud as it found that Plaintiff made conclusory accusations and failed to satisfy all of the required elements for fraud. The District Court similarly dismissed Plaintiff’s claim for fraud based on irregularities in the foreclosure proceedings for failing to allege facts to support the claim.

For Plaintiff’s claim under the FDCPA, the District Court found that it could not determine whether Defendant was a “debt collector” under the FDCPA because the Court could not determine Plaintiff’s actual date of default. The Court found that the default date was an issue of material fact and therefore ordered Plaintiff to appear for a future court date to show cause as to (1) the actual default date (2) why the date made Defendant’s “debt collectors” within the meaning of the FDCPA.

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