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Case No. 12-10280





This case concerns allegations by Plaintiff Richard C. Smith1 that Defendant

HSBC Mortgage Services, Inc. engaged in fraud in misleading Plaintiff that a loan

modification was being considered by Defendant while foreclosure proceedings were

moving forward, and subsequently breached a loan modification agreement. On

March 26, 2013, the Court held a hearing and heard argument. For the reasons stated

below, Defendant’s Motion for Summary Judgment [15] is GRANTED.

I. Procedural Background

Plaintiff originally filed this action on January 20, 2012. Scheduling/settlement

conferences were held on May 4, June 4, and August 24, 2012. Defendant Trott &

Trott was voluntarily dismissed by Plaintiff on June 4, 2012. Defendant First Indiana

1On July 19, 2013, Plaintiff’s counsel informed the Court of Mr. Smith’s death during the

pendency of this action.

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Bank has never appeared in this case. Defendant HSBC Mortgage Services’ Motion

for Summary Judgment [15] was filed on September 27, 2012.

II. Factual Background

On or about February 2, 2006, Plaintiff granted a mortgage on his property to

Defendant First Indiana Bank in exchange for a promissory note in the amount of

$200,000. Plaintiff alleges that the mortgage loan was securitized, with HSBC

Mortgage Services, Inc. as the trustee of the mortgage loan trust, and OneWest Bank

as the servicer.

In January 2008, HSBC agreed to a six-month “hardship restructuring” and

reduced Plaintiff’s interest rate from 7.89% to 4.25%. Def.’s Ex. 1. In December

2008, HSBC permanently reduced Plaintiff’s interest rate to 7.14%.

Plaintiff made his last payment on his mortgage on October 21, 2009. On

December 8, 2009, Plaintiff filed for Chapter 7 bankruptcy. He was discharged from

bankruptcy on March 22, 2010. Plaintiff’s debt to HSBC was discharged in

bankruptcy, although HSBC’s lien on his property remained in place.

On or about March 31, 2010, HSBC mailed Plaintiff’s bankruptcy attorney a

letter indicating that Plaintiff might be eligible for a modification to his mortgage

based on HAMP. On April 6, 2010, HSBC mailed Plaintiff’s attorney a letter offering

various options, including loan modifications. On May 10, 2010, Plaintiff began the

loan modification process with HSBC.

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In the midst of this process, on May 21, 2010, Plaintiff received a letter from

Trott & Trott (voluntarily dismissed from the instant suit) presenting itself as the

designated debt collection agent of HSBC Mortgage Services and offering Plaintiff

the opportunity to apply for a loan modification pursuant to Mich. Comp. L. §

600.3205. The letter stated that Trott & Trott had been designated as the agent that

“has authority to make agreements under MCL sections 600.3205b and 600.3205c.

Plaintiff wrote several letters to Trott & Trott disputing the debt. Plaintiff also alleges

in his complaint that he began working with Abayomi Community Development

Corporation, a MSHDA organization on the list provided by Trott & Trott, to qualify

for loan modification. On June 8, 2010 Trott & Trott sent Plaintiff a letter stating that

it had received a request to work out a loan modification and that the foreclosure

scheduled for August 19, 2010 would not take place. See Def’s Ex. 3. The letter

requested a number of financial documents from Plaintiff. Defendant claims these

documents were never received.

Defendants allege that on August 4, 2010, they offered Plaintiff a permanent

loan modification to reduce his interest rate from 7.14% to 5.63%, with monthly

principal and interest payments of $1,186.62. On October 8, 2010, Plaintiff sent

HSBC a letter in which he agreed to the terms of the monthly payments on principal

and interest of his loan. However, next to “voluntary monthly payments” and

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“previous unpaid payments” Plaintiff wrote “disagree . . . unable to afford.” HSBC

did not respond to Plaintiff’s inquiry regarding a more complete explanation of the

terms. On November 2, 2010 and December 2, 2010, HSBC sent Plaintiff letters

stating that his inquiry had been received and that “extensive research” had delayed

HSBC’s response. Def.’s Ex. 8.

On November 29, 2010 Plaintiff received two additional letters from Trott &

Trott. The first letter was identical to the May 21, 2010 letter from Trott & Trott. The

second letter informed Plaintiff that Trott & Trott was accelerating the collection of

his loan. On December 7, 2010, after consulting another MSHDA credit counselor,

Green Path, Inc., Plaintiff sent a letter to Trott & Trott requesting a mediation

meeting. On December 12, 2010, Plaintiff sent a letter to both HSBC and Trott &

Trott expressing confusion as to which organization was responsible for discussing

his loan modification.

On December 13, 2010, Trott & Trott sent Plaintiff a letter noting that a housing

counselor had contacted them to discuss modification, and that as a result foreclosure

would be delayed until after February 27, 2011. See Def.’s Ex. 5. The letter requested

a number of documents. Defendant alleges that Plaintiff never provided these

documents. On January 12, 2011, Trott & Trott sent Plaintiff a letter noting its letter

of December 13, 2010 and stating that Plaintiff had not provided the requested

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financial documents. The letter stated that “eligibility review [for loan modification]

cannot be completed at this time.” See Def.’s Ex. 6. The letter warned of foreclosure

on or after February 27, 2011.

On May 13, 2011, Plaintiff received a notice of foreclosure with a sale date of

June 15, 2011.

At some point in May, 2011, Plaintiff sent HSBC a letter questioning the

pending foreclosure sale scheduled for June 15, 2011, stating that he had agreed in

writing to accept the previously-offered loan modification in terms of “the monthly

payment for the principal balance and the fees and interest that may be added to the

note,” but requesting terms and conditions of the agreement in writing. Plaintiff

received a letter from HSBC stating that a response would be delayed “due to the

extensive research required in this situation.” Plaintiff alleges he never received the

written agreement.

Plaintiff alleges that on July 7, 2011, HSBC sent him a letter offering him a

loan modification. He states that he “contacted HSBC and indicated his desire to

accept the new loan terms and was told that an agreement would be mailed out to

him.” However, HSBC’s July 7, 2011 letter is not an offer to provide a loan

modification. See Def’s Ex. 1. Rather, it states that if Plaintiff makes all past due

payments and legal fees and “reinstates” his loan, HSBC will consider a loan

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modification. It also reviews the past modifications that were offered in 2008 and

2009, and discusses Plaintiff’s request for validation of his debt.

On July 20, 2011, Plaintiff’s home was sold at a sheriff’s sale.

III. Analysis

Summary judgment is appropriate under Fed. R. Civ. P. 56(c)(2) where “the

pleadings, the discovery and disclosure materials on file, and any affidavits show that

there is no genuine issue as to any material fact and that movant is entitled to

judgment as a matter of law.” The facts and all inferences drawn from the facts must

be viewed in the light most favorable to the nonmoving party. Abeita v.

TransAmerica Mailings, Inc., 159 F.3d 246, 250 (6th Cir. 1998) (citing Matsushita

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). A genuine issue

for trial exists if “the evidence is such that a reasonable jury could return a verdict for

the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Once a moving party produces evidence establishing lack of a genuine issue of

material fact, the non-moving party must “set forth specific facts showing that there

is a genuine issue for trial.” Id. The mere existence of “a scintilla of evidence” in

support of a plaintiff’s position is not sufficient to create a genuine issue of material

fact. Anderson, 477 U.S. at 252.

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A. Standing

Defendant first argues that Plaintiff lacks standing to challenge the foreclosure

because the statutory redemption period has expired. Relying on Overton v. Mortgage

Elec. Registration Sys., 2009 WL 1507342 (Mich. Ct. App. 2009) (unpublished),

Defendant argues that after the statutory redemption period expires, Plaintiff “had no

interest in the property.” Defendant then argues that Plaintiff’s purported lack of

“interest” in the property denies him Article III standing, for which a plaintiff must

show “(1) it has suffered an ‘injury in fact’ . . . (2) the injury is fairly traceable to the

challenged action of the defendant; and (3) it is likely, as opposed to merely

speculative, that the injury will be redressed by a favorable decision.” Cleveland

Branch, NAACP v. City of Parma, Ohio, 263 F.3d 513, 523-24 (6th Cir 2001) (quoting

Friends of the Earth, Inc. v. Laidlaw Entl. Servs., 528 U.S. 167, 180-81 (2000)).

Defendant’s argument is particularly remarkable because Plaintiff filed his case within

the statutory redemption period. Nevertheless, Defendant appears to be arguing that

if the redemption period runs while a case sits in court, a plaintiff loses their right to

have their case heard by the court.2

2Defendant partially withdrew this argument during the motion hearing, based upon the
recent decision in Mitan v. Federal Home Loan Mortg. Corp., 703 F.3d 949 (6th Cir. 2012), in
which the court held that a plaintiff may bring an action challenging a mortgage even after the
redemption period had run when alleged structural defects rendered the mortgage void.
Nevertheless, Defendant did argue at the motion hearing that no such structural defect existed in
the instance case, and thus that Plaintiff lacked standing.

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Defendant’s argument rests on a misconception of standing.


misconception is clearly explained in Langley v. Chase Home Finance LLC, 2011 WL

1130926 (W.D. Mich. Mar. 28, 2011):

Many Defendants suggest the basis for the ruling in Overton is a lack of
Plaintiff's standing once the redemption period expires, but the Court of
Appeals does not actually say this. Nor would it seem like Article III
standing could possibly be in doubt. After all, the Plaintiffs in such cases
are the last lawful owner and possessor of the property. Moreover, they
often remain in continuing possession of the property notwithstanding
any Sheriff's sale and expiration of a redemption period. Moreover,
Plaintiffs in such cases claim a continuing right to lawful ownership and
possession based on defects in the process used by Defendants to divest
them of those rights. This certainly seems to satisfy the basic Article III
requirement of “injury in fact,” as well as any prudential considerations
tied to a “zone of interests” analysis. Indeed, it is hard to imagine a
person with a better claim to standing to challenge the process at issue.
Of course, having standing to bring a claim does not mean you have a
valid claim on the merits. That is a different question. Overton is best
viewed as a merits decision, not a standing case.

Langley, 2011 WL 1130926 at *2 n.2.

This Court agrees with the reasoning in Langley, as did the court in Rainey v.

U.S. Bank Nat. Ass’n, 2011 WL 5075700 at *3 (E.D. Mich. Oct. 25, 2011) (Lawson,

J.). “The Michigan Supreme Court has long held that the mortgagor may hold over

after the foreclosure by advertisement and test the validity of the sale in the summary

[eviction] proceeding.” Mfg. Hanover Mortg. Corp. v. Snell, 370 N.W.2d 401, 404

(Mich. Ct. App. 1985) (citing Reid v. Rylander, 258 N.W. 630 (Mich. 1935)).

“Otherwise, the typical mortgagor who faces an invalid foreclosure would be without

remedy . . .” Id.

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The Court finds that the expiration of the statutory redemption period for a

foreclosure does not deprive a plaintiff of standing to challenge the subsequent

eviction by attacking the propriety of the foreclosure by advertisement. This is

particularly the case when, as here, a plaintiff files an action within the statutory

redemption period, but the period runs during the pendancy of the case.

Accordingly, Plaintiff has standing in this case.


Defendant argues that Plaintiff failed to plead with particularity his claim of

fraud. The elements of fraud in Michigan are (1) that a defendant made a material

misrepresentation (2) that was false (3) that when made by the defendant the

defendant knew the misrepresentation was false, or made the statement recklessly (4)

with the intention that it should be acted on by a plaintiff (5) that the plaintiff did act

in reliance on the misrepresentation and (6) suffered injury.

In his complaint, Plaintiff states that:

39. That Defendant HSBC and T&T made false representations to
Plaintiff through correspondences informing Plaintiff to apply for a loan
modification knowing that Defendants were not going to comply with
the loan modification rules.
40. That Plaintiff relied on this information, believing that he had no
other recourse to save his home and so consequently he sought no other
remedy to save his home except to continually correspond with T&T and
HSBC and to continually comply with T&T and HSBC’s wishes.
41. That Defendants wanted Plaintiff to believe that there was no other
remedy to save his home.

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42. That Defendants then wrongfully denied Plaintiff’s right to be
reviewed for a loan modification causing Plaintiff damages.

Here, it appears that Defendant HSBC did offer Plaintiff a loan modification,

and that the offer was rejected by Plaintiff. While Defendant’s subsequent actions

only served to confuse the process, it is also true that there is no evidence that

Defendant misrepresented the availability of a loan modification. A loan modification

was available and was rejected by Plaintiff because of the specific terms of the

modification. Thus, the alleged fraud complained of by Plaintiff, that “Defendant was

not going to comply with the loan modification rules” is not supported by any

evidence in the record.

For the reasons stated above, Defendant’s Motion for Summary Judgment is

GRANTED with respect to the claim of fraud.

B. Breach of Contract

Defendant argues that Plaintiff’s breach of contract claim fails because the

Home Affordable Modification Program (“HAMP”) does not provide a private right

of action whereby homeowners may sue a bank for failing to comply with the act.

Defendant also denies failing to comply with the act. Defendant is correct that HAMP

does not provide a private right of action - however, HAMP also does not prevent a

plaintiff from bringing state-law-claims of breach of contract.

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Nevertheless, Defendant has established that there is no genuine issue of

material fact as to the question of whether a contract existed between Plaintiff and

Defendant. A plaintiff seeking to recover for breach of contract must prove that a

contract existed between the parties, the defendant breached the contract, and the

breach damaged the plaintiff. Rausch v. Yeo, 2007 WL 162569, at *2 (Mich. App.

Jan. 23, 2007) (citing Lawrence v. Will Darrah & Assocs., Inc., 516 N.W.2d 43 (Mich.


“In order to form a valid contract, there must be a meeting of the minds
on all the material facts.” Kamalnath v. Mercy Memorial Hosp. Corp.,
194 Mich.App. 543, 548, 487 N.W.2d 499, 503 (1992). “‘Meeting of the
minds' is a figure of speech for mutual assent.” Id. at 548-49, 487
N.W.2d at 503. “A contract is made when both parties have executed or
accepted it, and not before.” Id. at 549, 487 N.W.2d at 503. The party
seeking to enforce the contract has the burden to show the existence of
the contract.

High v. Capital Senior Living Properties 2-Heatherwood, Inc., 594 F. Supp. 2d 789,

798 (E.D. Mich. 2008) (Lawson, J.).

Defendant’s August 4, 2010, communication to Plaintiff appears to have been

an offer of a loan modification. The question is thus whether Plaintiff’s letter of

October 8, 2010 (Def.’s Ex. 4) constitutes “acceptance” and establishes “mutual

consent” on “all the material facts,” or “all the essential terms” of the contract. This

does not appear to be the case.

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In his response to Defendant’s offer of a loan modification, Plaintiff wrote that

he accepted the principal balance amount, and wrote “agree” next to the unpaid

interest, escrow balance, and principal and interest monthly payments of $1,186.82.

However, Plaintiff wrote “disagree . . . unable to afford” next to “voluntary monthly

payments” and “previously unpaid payments.” Plaintiff also wrote that unpaid late

charges and “other fees” were “acceptable upon agreement,” presumably some future

agreement based upon a different loan modification.

Because Plaintiff did not accept Defendant’s offer of a loan modification, his

claim for breach of contract fails. Accordingly, Defendant’s Motion for Summary

Judgment is GRANTED with respect to the breach of contract claim.

C. Plaintiff’s Claims Under Mich. Comp. L. §§ 600.3205a-c (Foreclosure by


Michigan’s foreclosure-by-advertisement statute contains several provisions

discussing the proper procedure to be followed in cases involving possible loan

modification. In particular, the statute says the following:

(g) That if the borrower and the person designated under subdivision (c)
do not agree to modify the mortgage loan but it is determined that the
borrower meets criteria for a modification under section 3205c(1) and
foreclosure under this chapter is not allowed under section 3205c(7), the
foreclosure of the mortgage will proceed before a judge instead of by

Mich. Comp. Laws § 3205a.

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In addition, another requirement involves the bank being required to provide

a person seeking a loan modification certain information, and prohibits a person who

qualifies for a loan modification from being foreclosed on by advertisement:

(5) Before 90 days after the notice required under section 3205a(1) is
sent or 10 days after the meeting between the borrower and the person
designated under section 3205a(1)(c), whichever is later, the person
designated under section 3205a(1)(c) shall provide the borrower with
both of the following:
(a) A copy of any calculations made by the person under this section.
(b) If requested by the borrower, a copy of the program, process, or
guidelines under which the determination under subsection (1) was
(6) Subject to subsection (7), if the results of the calculation under
subsection (1) are that the borrower is eligible for a modification, the
mortgage holder or mortgage servicer shall not foreclose the
mortgage under this chapter but may proceed under chapter 31.3 If
the results of the calculation under subsection (1) are that the borrower
is not eligible for a modification or if subsection (7) applies, the
mortgage holder or mortgage lender may foreclose the mortgage under
this chapter.
(7) If the determination under subsection (1) is that the borrower is
eligible for a modification, the mortgage holder or mortgage servicer
may proceed to foreclose the mortgage under this chapter if both of the
following apply:
(a) The person designated under section 3205a(1)(c) has in good
faith offered the borrower a modification agreement prepared in
accordance with the modification determination.
(b) For reasons not related to any action or inaction of the mortgage
holder or mortgage servicer, the borrower has not executed and returned
the modification agreement within 14 days after the borrower received
the agreement.
(8) If a mortgage holder or mortgage servicer begins foreclosure
proceedings under this chapter in violation of this section, the borrower
may file an action in the circuit court for the county where the mortgaged
property is situated to convert the foreclosure proceeding to a judicial

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foreclosure. If a borrower files an action under this section and the court
determines that the borrower participated in the process under section
3205b, a modification agreement was not reached, and the borrower is
eligible for modification under subsection (1), and subsection (7) does
not apply, the court shall enjoin foreclosure of the mortgage by
advertisement and order that the foreclosure proceed under chapter 31.

Mich. Comp. Laws § 3205c (emphasis added).

Plaintiff argues that Defendant found Plaintiff to be qualified for a loan

modification, but did not offer him a loan modification. Defendant argues that they

did in fact provide Plaintiff with a loan modification agreement, but that Plaintiff

rejected this agreement. See Def.’s Ex. 4.

It is clear from the record that Plaintiff was offered a loan modification and did

not accept the modification. Accordingly, Defendant was permitted to foreclose by

advertisement pursuant to Mich. Comp. Laws § 3205c(7). Defendant’s Motion for

Summary Judgment is GRANTED with respect to the violation of Michigan’s

foreclosure-by-advertisement statute.

D. Plaintiff’s Claim of Civil Conspiracy

Plaintiff has failed to establish the necessary elements of civil conspiracy.

Plaintiff appears to argue that Defendant conspired with Trott & Trott to act as if it

had authority to engage in loan modification when it did not have such authority.

Plaintiff points to no evidence in the record that would establish a genuine issue of

material fact in his claim of conspiracy. As such, Defendant’s Motion for Summary

Judgment is GRANTED with respect to the claim of civil conspiracy count.

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IV. Conclusion

For the reasons stated above, Defendant’s Motion for Summary Judgment [15]



Dated: July 31, 2013

s/Arthur J. Tarnow

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