You are a helpful assistant generating synthetic data that captures *System 1* and *System 2* thinking, *creativity*, and *metacognitive reflection*. Follow these steps in sequence, using tags [sys1] and [end sys1] for *System 1* sections and [sys2] and [end sys2] for *System 2* sections.

1. *Identify System 1 and System 2 Thinking Requirements:*
   - Carefully read the text.
   - Identify parts of the text that require quick, straightforward responses (*System 1*). Mark these sections with [sys1] and [end sys1].
   - Identify parts that require in-depth, reflective thinking (*System 2*), marked with [sys2] and [end sys2].

2. *Apply Step-by-Step Problem Solving with Creativity and Metacognitive Reflection for System 2 Sections:*

   *2.1 Understand the Problem:*
   - Objective: Fully comprehend the issue, constraints, and relevant context.
   - Reflection: "What do I understand about this issue? What might I be overlooking?"
   - Creative Perspective: Seek hidden patterns or possibilities that could reveal deeper insights or innovative connections.

   *2.2 Analyze the Information:*
   - Objective: Break down the problem logically.
   - Reflection: "Am I considering all factors? Are there any assumptions that need challenging?"
   - Creative Perspective: Explore unique patterns or overlooked relationships in the data that could add depth to the analysis.

   *2.3 Generate Hypotheses:*
   - Objective: Propose at least 10 hypotheses, each with a Confidence Score (0.0 to 1.0) and Creative Score (0.0 to 1.0), reflecting originality, surprise, and utility.
   - Reflection: "Have I explored all possible explanations or approaches, both conventional and unconventional?"
   - Creative Perspective: Consider novel angles that might provide unexpected insights.

   *2.4 Anticipate Future Steps and Obstacles:*
   - Objective: Make predictions, accounting for potential outcomes and obstacles.
   - Reflection: "What challenges might I face? Is my plan flexible for different scenarios?"
   - Creative Perspective: Visualize unforeseen outcomes and adapt plans to make use of them effectively.

   *2.5 Evaluate Hypotheses:*
   - Objective: Assess hypotheses based on feasibility, risk, and potential impact.
   - Evaluation: Refine Confidence and Creative Scores as needed.
   - Reflection: "Am I unbiased in my assessment? Which options fit best with the overall objectives?"
   - Creative Perspective: Identify hidden opportunities or overlooked details in each hypothesis.

   *2.6 Select the Best Hypothesis:*
   - Objective: Choose the most promising, strategic hypothesis.
   - Reflection: "Why does this hypothesis stand out? How does it uniquely address the issue?"
   - Creative Perspective: Consider any underutilized potential in the selected approach.

   *2.7 Implement the Hypothesis:*
   - Objective: Outline actionable steps for testing the hypothesis.
   - Reflection: "Is this plan practical? What resources or preparation are required?"
   - Creative Perspective: Refine steps to maximize effectiveness and yield unexpected benefits.

   *2.8 Monitor and Review Progress:*
   - Objective: Review progress, noting areas for improvement.
   - Reflection: "What’s working well? What could be improved?"
   - Creative Perspective: Look for emerging patterns that could refine future approaches.

   *2.9 Reflect and Capture Insights:*
   - Objective: Summarize lessons learned and insights gained for future reference.
   - Reflection: "What new understanding has emerged from this process?"
   - Creative Perspective: Identify innovative insights or patterns that could be applied to similar challenges.

3. *Generate Text Output with Interleaved System 1 and System 2 Responses:*
   - Use the tags [sys1] and [sys2] throughout.
   - Aim for a lengthier, detailed response. Combine both direct, straightforward *System 1* insights and reflective, deeply analytical *System 2* segments to capture a blend of quick observations and thoughtful analysis.

---

### *Example Input Text:*

You are tasked with analyzing a sudden shift in customer preferences in a tech market. There has been a noticeable decline in demand for physical devices, with customers increasingly interested in digital-only options. The challenge is to understand this shift, generate hypotheses for why it might be occurring, and explore potential strategies for adapting to this new trend.

---

### *Processed Output with System 1 and System 2 Thinking:*

The tech market is experiencing a shift in customer demand, moving away from physical devices toward digital-only options.

[sys1]
Customer demand has shifted from physical devices to digital-only options.
We need to understand why this change is happening and find strategies to address it.
Key factors may include cost, convenience, and technological trends.
[end sys1]

[sys2]
**2.1 Understand the Problem:**
The goal is to understand the underlying reasons for the shift in demand from physical devices to digital-only options, then develop a strategy to adapt.

*Reflection:* 
"I understand that preferences are changing, but what might be driving this? Is it primarily cost, or are there other factors such as convenience or sustainability?"

*Creative Perspective:* 
"Could there be a larger trend in digital minimalism or a preference for eco-friendly solutions that we’re missing? What unseen motivations might explain this shift?"

**2.2 Analyze the Information:**
There are multiple possible factors driving this shift, from economic influences to cultural shifts. It’s essential to isolate each factor and understand its impact.

*Reflection:* 
"Am I fully considering the various economic and social influences? Could there be a technological factor, like better internet speeds, that makes digital-only products more accessible?"

*Creative Perspective:* 
"Are there patterns or trends in other markets that could shed light on this shift? Could this be part of a larger trend toward virtual experiences?"

**2.3 Generate Hypotheses:**
1. Customers prefer digital options due to lower costs. (Confidence: 0.8, Creative: 0.4)
2. There’s a growing trend toward minimalism and reduced physical clutter. (Confidence: 0.7, Creative: 0.7)
3. Digital products offer greater flexibility and ease of use. (Confidence: 0.6, Creative: 0.6)
4. Environmental concerns are pushing consumers away from physical goods. (Confidence: 0.6, Creative: 0.8)
5. Advances in tech make digital-only options more functional. (Confidence: 0.8, Creative: 0.5)
6. Pandemic-era remote work increased demand for digital solutions. (Confidence: 0.7, Creative: 0.6)
7. Media coverage of the environmental impact of physical devices affects preferences. (Confidence: 0.5, Creative: 0.7)
8. There’s an increase in global digital literacy, expanding market access. (Confidence: 0.6, Creative: 0.6)
9. Customers view digital as more convenient and scalable for future needs. (Confidence: 0.7, Creative: 0.5)
10. Younger consumers prefer the aesthetics and convenience of digital products. (Confidence: 0.6, Creative: 0.6)

*Reflection:* 
"Have I considered all possible influences? Are there any surprising factors that could explain this shift?"

*Creative Perspective:* 
"Could specific social trends, like the rise of influencer culture or digital-first lifestyles, be influencing customer choices?"

**2.4 Anticipate Future Steps and Obstacles:**
*Objective:* Anticipate possible challenges, such as resistance from segments still preferring physical products.

*Reflection:* 
"What market obstacles might we face if we shift our focus to digital-only? Are there sub-segments that still prioritize physical products?"

*Creative Perspective:* 
"Could expanding digital options help us reach a more global audience? Are there emerging trends that we could leverage in our strategy?"

[end sys2]

[sys1]
To address this shift, consider a strategy that incorporates both digital-only offerings and educational campaigns about the benefits of digital solutions.
Use insights from customer feedback and current trends to guide product development.
Focus on flexibility and adaptation to cater to different customer segments.
[end sys1]


                NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 14a0789n.06

                                        Case No. 14-1253
                                                                                     FILED
                                                                                 Oct 17, 2014
                          UNITED STATES COURT OF APPEALS                    DEBORAH S. HUNT, Clerk
                               FOR THE SIXTH CIRCUIT


SUZANNE A. DERBABIAN; EDWARD                          )
DERBABIAN,                                            )
                                                      )
       Plaintiffs-Appellants,                         )        ON APPEAL FROM THE
                                                      )        UNITED STATES DISTRICT
v.                                                    )        COURT FOR THE EASTERN
                                                      )        DISTRICT OF MICHIGAN
BANK OF AMERICA, N.A., Successor to BAC               )
Home Loans Servicing, LP, formerly known as           )
Countrywide Home Loan Servicing, LP;                  )
COUNTRYWIDE HOME LOANS, INC.,                         )                            OPINION

       Defendants-Appellees.


BEFORE:        COLE, Chief Judge; KEITH and BATCHELDER, Circuit Judges.

       COLE, Chief Judge. Suzanne and Edward Derbabian sued Bank of America, N.A., and

Countrywide Home Loans, Inc., after their house was foreclosed. The district court dismissed all

of the Derbabians’ causes of action with prejudice, concluding that they either failed to state a

claim or were barred by the applicable statute of limitations, and entered judgment accordingly.

We agree with the district court’s decision and affirm its judgment.

                                      I. BACKGROUND

       The Derbabians lived in a house located at 4572 Brightmore Road, Bloomfield Hills,

Michigan (the “property”). On February 23, 2005, they entered into a mortgage loan transaction

for the property with Countrywide.       Suzanne Derbabian executed a promissory note for
Case No. 14-1253
Derbabian v. Bank of America, N.A.

$633,750.00 as part of the transaction; Edward Derbabian was not a party to the note. As

security for the loan, both Suzanne and Edward Derbabian granted a mortgage on the property to

Mortgage Electronic Registration Systems, Inc. (“MERS”)—the nominee for America’s

Wholesale Lender. The Derbabians also executed an Adjustable Rate Rider, which stated, “THE

NOTE CONTAINS PROVISIONS THAT WILL CHANGE THE INTEREST RATE AND THE

MONTHLY PAYMENT.” On March 23, 2005, the mortgage was recorded with the Oakland

County Register of Deeds.

       On October 18, 2011, MERS assigned the mortgage to non-party The Bank of New York

Mellon (“BNYM”) and the assignment was recorded on November 14, 2011, with the Oakland

County Register of Deeds.1

       At some point, the Derbabians defaulted on the loan. BNYM, the mortgagee, initiated

foreclosure-by-advertisement proceedings.      On November 4, 2011, BNYM served the

Derbabians with notice of the proceedings as required by Michigan Compiled Laws § 600.3205a.

The Derbabians responded to the notice and requested a meeting pursuant to Michigan Compiled

Laws § 600.3205b, which allows a mortgagor to attempt to modify the loan after receiving

notice. No agreement was reached, however, and BNYM determined that the Derbabians were

not eligible for a loan modification. BNYM published notice of the foreclosure in Oakland

County Legal News—a newspaper circulated in Oakland County—on February 29, March 7,

March 14, and March 21, 2012. It also posted notice of the foreclosure sale on the front door of

       1
         In paragraph 7 of the complaint, the Derbabians alleged that they financed the property
with Countrywide by signing two notes and mortgages, one for $650,000.00 and another for
$131,250.00. The district court observed that the complaint and related documents only reflect
the existence of one promissory note for $633,750.00, but no second note or mortgage for
$131,250.00 or any note or mortgage signed “[o]n or about October 24, 2005,” as stated in the
complaint. Citing to the same page as paragraph 7 of the complaint, the Derbabians’ opening
appellate brief claims that they signed two notes and mortgages, the first for $633,750.00, but
does not otherwise address the district court’s observation.
                                             -2-
Case No. 14-1253
Derbabian v. Bank of America, N.A.

the property on March 5, 2012. BNYM then purchased the property at the foreclosure sale on

November 6, 2012. Under Michigan law, the Derbabians could have redeemed the property

within six months of the sale, but did not do so. Mich. Comp. Laws § 600.3240(8).

        On May 21, 2013, the Derbabians filed this suit in Michigan state court. On June 28,

2013, the defendants removed the action to the United States District Court for the Eastern

District of Michigan.     The Derbabians asserted eight causes of action:         (1) fraudulent

misrepresentations; (2) breach of contract; (3) violation of the federal Real Estate Settlement

Procedures Act (“RESPA”), 12 U.S.C. §§ 2601, et seq., and the federal Truth in Lending Act

(“TILA”), 15 U.S.C. §§ 1601, et seq.; (4) violation of 15 U.S.C. § 1639; (5) violation of

Michigan Compiled Laws §§ 600.3204, et seq.; (6) quiet title; (7) slander of title; and

(8) injunctive relief.

        The defendants moved to dismiss the complaint and the district court granted the motion

on all causes of action, dismissing the action with prejudice and entering judgment

simultaneously. The court concluded that the Derbabians failed to state a claim for fraudulent

misrepresentation, breach of contract, violation of RESPA, quiet title, and slander of title. The

court also concluded that the TILA, Section 1639, and Michigan state law claims were barred by

the relevant statute of limitations. The Derbabians now appeal the district court’s rulings with

respect to the claims concerning fraudulent misrepresentation, breach of contract, TILA,

Michigan Compiled Laws §§ 600.3204, et seq., quiet title, and slander of title.

                                         II. ANALYSIS

        A. Standard of Review

        We review a district court’s dismissal of a complaint de novo. Hensley Mfg. v. ProPride,

Inc., 579 F.3d 603, 608–9 (6th Cir. 2009). Under Federal Rule of Civil Procedure 8(a)(2), a


                                               -3-
Case No. 14-1253
Derbabian v. Bank of America, N.A.

complaint must contain “a short and plain statement of the claim showing that the pleader is

entitled to relief.” Fed. R. Civ. P. 8(a)(2). “Factual allegations must be enough to raise a right to

relief above the speculative level on the assumption that all the allegations in the complaint are

true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations

omitted). Naked assertions “without some further factual enhancement . . . stop[] short of the

line between possibility and plausibility of entitlement to relief.” Id. at 557 (internal punctuation

omitted). Although a complaint “does not need detailed factual allegations,” it still must provide

“more than labels and conclusions,” id. at 555, because “the tenet that a court must accept as true

all of the allegations contained in a complaint is inapplicable to legal conclusions,” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009). In particular, “[t]hreadbare recitals of the elements of a cause

of action, supported by mere conclusory statements, do not suffice.” Id.

       Generally, a court’s consideration of a motion to dismiss under Federal Rule 12(b)(6) is

limited to the pleadings, and reference outside the pleadings may convert the motion into one for

summary judgment. Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008). However,

“when a document is referred to in the pleadings and is integral to the claims, it may be

considered without converting a motion to dismiss into one for summary judgment.”

Commercial Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 335–36 (6th Cir. 2007). Such

documents include public records that are not attached to the pleadings. Barany-Snyder v.

Weiner, 539 F.3d 327, 332 (6th Cir. 2008); see also Goryoka v. Quicken Loan, Inc., 519 F.

App’x 926, 927 (6th Cir. 2013) (“Matters of public record may be considered on a motion to

dismiss.”).




                                                -4-
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Derbabian v. Bank of America, N.A.

       B. Discussion

               1. Fraudulent Misrepresentation

       The Derbabians contend that the district court improperly concluded that they failed to

state a claim for fraudulent misrepresentation.      Under Michigan law, a plaintiff charging

fraudulent misrepresentation must plead:

       (1) [t]hat defendant made a material representation; (2) that it was false; (3) that
       when he made it he knew that it was false, or made it recklessly, without any
       knowledge of its truth and as a positive assertion; (4) that he made it with the
       intention that it should be acted upon by plaintiff; (5) that plaintiff acted in
       reliance upon it; and (6) that he thereby suffered injury.
U. S. Fid. & Guar. Co. v. Black, 313 N.W.2d 77, 82 (Mich. 1981) (quoting Candler v. Heigho,

175 N.W. 141, 143 (Mich. 1919)). In addition, Federal Rule of Civil Procedure 9(b) requires a

plaintiff bringing a fraud claim to “state with particularity the circumstances constituting fraud.”

Fed. R. Civ. P. 9(b). Plaintiffs alleging fraud should therefore “specify the statement they

contend is fraudulent, identify the speaker, time, and location of the statement, and explain why

the statement is indeed untrue or a misrepresentation.” Rautu v. U.S. Bank, 557 F. App’x 411,

414 (6th Cir. 2014).

       The Derbabians argue that their complaint provides the date the loan was closed.

Appellants’ Br. 5–6. They assert that the defendants represented that their payments would fully

amortize the loan; that the appraisal secured by the Derbabians established that the value of the

property exceeded the amount of the loan; “that all terms, conditions and circumstances had been

adequately and fully disclosed as required by law”; and that the interest rate for the loan was one

percent. Id. at 6. These statements were false, they claim, because the loan is negatively

amortized; the appraisal failed to account for various economic factors; the defendants did not

provide all “required notices and disclosures”; and the interest rate kept changing. Id. at 6–7.


                                               -5-
Case No. 14-1253
Derbabian v. Bank of America, N.A.

They contend that the defendants knew their representations were false and the

misrepresentations were intended to induce the Derbabians’ reliance. Id. at 6–7. According to

the Derbabians, they “have suffered economic loss” as a result of the challenged statements. Id.

at 7.

        The Derbabians failed to adequately plead fraudulent misrepresentation with the requisite

specificity. As the district court rightly concluded, they have not pointed to any fraud committed

by the defendants. Construed liberally, the complaint is little more than “a formulaic recitation

of the elements of [the] cause of action” insufficient to meet the heightened standards of Rule

9(b). Twombly, 550 U.S. at 555. With regard to the claimed falsities, the Derbabians do not

“identify the exact speaker, the precise statement made, or the date when and the place where the

statement was uttered.” Elsheick v. Select Portfolio Servicing, Inc., 566 F. App’x 492, 498 (6th

Cir. 2014).   Nor do they claim that any of the alleged misstatements concerned material

information. The complaint is bereft of any factual detail sufficient to render the Derbabians’

claim plausible. See Twombly, 550 U.S. at 556. The district court properly dismissed this cause

of action.2

               2. Breach of Contract

        The Derbabians argue that the district court improperly concluded that they failed to state

a claim for breach of contract. To recover for breach of contract under Michigan law, a plaintiff


        2
          The defendants assert that even if the Derbabians had adequately pleaded fraud, their
claims are barred by the statute of limitations because the fraudulent conduct allegedly occurred
when the loan was executed—February 23, 2005—and the six-year statute of limitations had
passed by the time the complaint was filed on May 21, 2013. Appellees’ Br. 5–6. Although this
argument was raised in the motion to dismiss, the district court did not address it. The
defendants are correct that “Michigan employs a six-year statute of limitations for fraud actions,”
Agristor Fin. Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir. 1992) (citing Mich. Comp. Laws.
§ 600.5813), and thus this cause of action appears to be barred. Because the Derbabians failed to
state a claim in any event, there is no need to address this issue.
                                               -6-
Case No. 14-1253
Derbabian v. Bank of America, N.A.

must allege: (1) the existence of a contract; (2) the terms of the contract; (3) that the defendant

breached the contract; and (4) that the breach caused the plaintiff’s injury. See Webster v.

Edward D. Jones & Co., L.P., 197 F.3d 815, 819 (6th Cir. 1999). “Under Michigan state law, no

action to enforce a promise to modify [a loan] can be brought against a financial institution

unless the promise is written and signed.” Goryoka, 519 F. App’x at 928 (citing Mich. Comp.

Laws § 566.132(2) and Crown Tech. Park v. D & N Bank, FSB, 619 N.W.2d 66, 72 (Mich. Ct.

App. 2000)).

       The district court correctly concluded that the Derbabians failed to state a claim for

breach of contract. The Derbabians allege that the defendants breached the loan agreement “by

failing to disclose material facts, by making false and misleading statements and by having

Plaintiff[s] rely on a grossly inflated appraisal.” Compl. ¶ 31. They do not, however, provide

any further explanation, including the relevant terms of the loan agreement, how the agreement

was breached, and how that breach harmed them. Because the Derbabians did not adequately

plead each element of the cause of action, the breach of contract claim was properly dismissed.

       In its order, the district court surmised that the Derbabians might be basing their breach

of contract claim on an allegation that the defendants promised them a loan modification, but did

not offer them one. Though the Derbabians appear to make this allegation and argument in their

briefs on appeal, we cannot discern such an allegation in their complaint or such an argument in

their opposition brief to the motion to dismiss. As we have said, “[i]ssues that are not squarely

presented to the trial court are considered waived and may not be raised on appeal.” Thurman v.

Yellow Freight Sys., Inc., 90 F.3d 1160, 1172 (6th Cir. 1996). To the extent they were properly

made before the district court, this court has recognized that Michigan law prohibits actions

against financial institutions based on unwritten and unsigned promises to modify a loan.


                                               -7-
Case No. 14-1253
Derbabian v. Bank of America, N.A.

Goryoka, 519 Fed. App’x at 928. The Derbabians do not allege in their complaint that the

defendants made any promise in writing to modify the loan. The district court therefore properly

concluded that the Derbabians’ cause of action cannot survive on this alternative set of facts.

       The Derbabians cite Mounzer v. American Home Mortgage Servicing, Inc., No. 289356,

2010 WL 334691 (Mich. Ct. App. Jan. 28, 2010), for the proposition that an oral agreement to

reinstate a mortgage can be binding where performance is tendered. Appellants’ Br. 11. Their

argument is unavailing, however, because Mounzer does not support that principle. While the

plaintiff in Mounzer did assert that an oral agreement to reinstate a mortgage should be

enforceable, the court did not address the validity of that proposition. See Mounzer, 2010 WL

334691, at *1; see also Gandhi v. Fannie Mae, No. 13-cv-12710, 2013 WL 4496274, at *3 (E.D.

Mich. Aug. 21, 2013) (stating that Mounzer “did not involve the statute of frauds nor hold that an

oral agreement to reinstate a mortgage can be binding where performance is tendered”). On the

other hand, Michigan state courts have consistently reaffirmed that agreements relating to loans

from a financial institution must be in writing to be enforceable. See, e.g., Huntington Nat’l

Bank v. Daniel J. Aronoff Living Trust, No. 309761, 2014 WL 1267287, at *7 (Mich. Ct. App.

Mar. 27, 2014) (“[T]he party seeking to enforce the promise or commitment must present

evidence that the promise or commitment itself was reduced to writing and properly signed.”);

Edgett v. Flagstar Bank, No. 311092, 2014 WL 783573, at *5 (Mich. Ct. App. Feb. 25, 2014).

So has this court. See, e.g., Khadher v. PNC Bank, N.A., No. 13-2708, 2014 WL 4057880, at *5

(6th Cir. Aug. 18, 2014); Blackward Properties, LLC v. Bank of Am., 476 F. App’x 639, 640 (6th

Cir. 2012). Even if the Derbabians were correct about Mounzer, it still would not help them

because the complaint does not plead the existence of any oral agreement between the parties.




                                               -8-
Case No. 14-1253
Derbabian v. Bank of America, N.A.

               3. Violation of TILA

       The Derbabians contend that the district court erred by holding that their TILA claim fails

because it is barred by the applicable statute of limitations. TILA requires those who extend

loans to “provide borrowers with clear and accurate disclosures of terms dealing with things like

finance charges, annual percentage rates of interest, and the borrower’s rights.” Marais v. Chase

Home Fin. LLC, 736 F.3d 711, 714 (6th Cir. 2013) (quoting Beach v. Ocwen Fed. Bank, 523

U.S. 410, 412 (1998)). “[A]ny action under [TILA] may be brought . . . within one year from the

date of the occurrence of the violation.” 15 U.S.C. § 1640(e). The limitations period for claims

alleging violation of disclosure requirements begins running when the agreement is entered and

the lender does not make the required disclosures. See Wike v. Vertrue, Inc., 566 F.3d 590, 593

(6th Cir. 2009) (citing Wachtel v. West, 476 F.2d 1062, 1065–66 (6th Cir. 1973)); see also

Khadher, 2014 WL 4057880, at *6 (explaining that the “occurrence of the violation” is the date

of the loan agreement). “For claims arising under 15 U.S.C. § 1639(f), pertaining to negative

amortization, the statute of limitations is extended to three years from ‘the date of the occurrence

of the violation.’” Khadher, 2014 WL 4057880, at *6 (citing 15 U.S.C. § 1640(e)).

       This claim is barred by the statute of limitations: the loan was obtained on February 23,

2005, and the complaint was filed May 21, 2013—more than seven years after the statute of

limitations passed. To the extent the Derbabians are attempting to make a claim based on

negative amortization, the three-year statute of limitations has also long passed. Id. Even if it

was not time-barred, the Derbabians’ claim would still fail because they do not adequately plead

any specific violations of TILA. See id. (holding that the plaintiff’s “argument fails because he

does not explain how [the defendant] violated these sections”).




                                               -9-
Case No. 14-1253
Derbabian v. Bank of America, N.A.

       The Derbabians cite to another portion of TILA’s statute of limitations in arguing that

their claim is timely. Appellants’ Br. 11-12. That provision states that the statute of limitations

       does not bar a person from asserting a violation of this subchapter in an action to
       collect the debt which was brought more than one year from the date of the
       occurrence of the violation as a matter of defense by recoupment or set-off in such
       action, except as otherwise provided by State law.
15 U.S.C. § 1640(e). The statute further states:

       Notwithstanding any other provision of law, when a creditor, assignee, or other
       holder of a residential mortgage loan . . . initiates a judicial or nonjudicial
       foreclosure of the residential mortgage loan, or any other action to collect the debt
       in connection with such loan, a consumer may assert a violation by a creditor of
       paragraph (1) or (2) of section 1639b(c) of this title, or of section 1639c(a) of this
       title, as a matter of defense by recoupment or set off without regard for the time
       limit on a private action for damages under subsection (e).
15 U.S.C. § 1640(k)(1). The Derbabians thus claim a defense by recoupment or set off against

the “nonjudicial” foreclosure.

       The problem with the Derbabians’ recoupment and set-off argument is that they are not

raising TILA violations “as a matter of defense”; on the contrary, they brought this suit—an

affirmative action—seeking damages and other relief. As one court explained, “This expanded

statute of limitations applies only to actions to defend against a foreclosure including claims for

recoupment.” Bhandari v. Capital One, N.A., No. 12-4533 PSG, 2013 WL 1736789, at *5 (N.D.

Cal. Apr. 22, 2013). In other words, the one-year statute of limitations applies to “offensive”

TILA claims like this one, thereby barring it. See Qadeer v. Bank of Am., N.A., No. 12-14310,

2013 WL 424776, at *4 (E.D. Mich. Feb. 4, 2013). In any event, the foreclosure has already

occurred here, so even if the statute of limitations did not apply, these provisions do not help the

Derbabians.




                                               - 10 -
Case No. 14-1253
Derbabian v. Bank of America, N.A.

               4. Michigan Compiled Laws § 600.3204, et. seq.

       The Derbabians contend that the district court wrongly concluded that they failed to state

a claim under Michigan Compiled Laws §§ 600.3204, et seq.             In Michigan, non-judicial

foreclosures, or foreclosures by advertisement, are governed by statute. See Mich. Comp. Laws

§ 600.3204. A lender must provide a borrower with an opportunity “to attempt to work out a

modification of the mortgage loan to avoid foreclosure” before proceeding with foreclosure by

advertisement. Mich. Comp. Laws § 600.3205a(1)(d). After a foreclosure by advertisement

occurs and the property is sold at a sheriff’s sale, Michigan law provides the defaulting

mortgagor with a statutory period of time in which to redeem the property. Mich. Comp. Laws

§ 600.3240(8); Edgett, 2014 WL 783573, at *4 (citation omitted). If the property is not timely

redeemed, the mortgagor loses all right, title, and interest in the property. Mich. Comp. Laws

§ 600.3236; Goryoka, 519 F. App’x at 927 (“Under Michigan law, a plaintiff’s rights in and title

to property are extinguished once the redemption period expires.”).

       “Michigan law allows the mortgagors to set aside the foreclosure sale if they make a clear

showing of fraud or irregularity, but only as to the foreclosure procedure itself.” Vanderhoof v.

Deutsche Bank Nat’l Trust, 554 F. App’x 355, 357 (6th Cir. 2014); see also Elsheick, 2014 WL

2139140, at *5; Freeman v. Wozniak, 617 N.W.2d 46, 49 (Mich. Ct. App. 2000). The standard

to do so is high. Vanderhoof, 554 F. App’x at 357. In addition, the mortgagor must show

prejudice, i.e., “that they would have been in a better position to preserve their interest in the

property absent defendant’s noncompliance with the statute.” Kim v. JPMorgan Chase Bank,

N.A., 825 N.W.2d 329, 337 (Mich. 2012). This showing can be made by demonstrating an

ability to redeem the property. See Sweet Air Inv., Inc. v. Kenney, 739 N.W.2d 656, 662 (Mich.

Ct. App. 2007). A mortgagor “has not plausibly alleged such prejudice” if “she has not alleged


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Case No. 14-1253
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that she qualified for loan modification before the sheriff’s sale.” Olson v. Merrill Lynch Credit

Corp., No. 13-1981, 2014 WL 3930459, at *5 (6th Cir. Aug. 8, 2014).

       The district court properly rejected the Derbabians’ claim.       The Derbabians do not

adequately or plausibly allege any fraud or irregularity in the foreclosure sale sufficient to set

aside the foreclosure. They complain that the defendants foreclosed the property “without giving

required notices” or offering a loan modification to them. Under Michigan Compiled Laws

§ 600.3204(4), foreclosure by advertisement cannot occur unless the mortgagor is provided

certain notices. Mich. Comp. Laws § 600.3204(4) (2011). However, the Derbabians do not

allege what notices they were not given, and the bare assertion that the defendants failed to give

“required notices” does not meet the minimal pleading standards of Rule 8. More importantly,

the sheriff’s deed reflecting the foreclosure sale shows that the Derbabians were given the

statutorily required notices.

       As for the allegation that the defendants did not offer to modify the Derbabians’ loan, the

deed also indicates that BNYM did communicate with the Derbabians concerning a loan

modification, but no agreement was reached and they were determined to be ineligible. Nothing

more was needed since “Michigan’s statutory loan modification process does not require that the

lender modify a loan, but requires only that the lender give notice and an opportunity for loan

modification.” Thompson v. JPMorgan Chase Bank, N.A., 563 F. App’x 440, 443 (6th Cir.

2014); Edgett, 2014 WL 783573, at *4 (“If the borrower was not eligible upon making the

calculations [for loan modification], the lender could proceed with foreclosure by

advertisement.”). The Derbabians have not plausibly alleged that these steps were not taken.

       Even if the Derbabians adequately pleaded fraud or irregularity in the foreclosure

process, they have not adequately pleaded prejudice. They did not allege that they could redeem


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Case No. 14-1253
Derbabian v. Bank of America, N.A.

the property or could have paid off their debt. They also did not allege that they qualified for

loan modification. Accordingly, the district court correctly dismissed the complaint. Holliday v.

Wells Fargo Bank, NA, 569 F. App’x 366, 369 (6th Cir. 2014) (affirming district court’s

dismissal of complaint because the plaintiff “does not make any mention of prejudice in this

section of her argument, despite the necessity of establishing prejudice in order to have the

sheriff's sale set aside”).

        The Derbabians rely on Mitan v. Federal Home Loan Mortgage Corp., 703 F.3d 949 (6th

Cir. 2012), to support their argument that the foreclosure was void and the redemption period

never began because of the defendants’ violation of Michigan Compiled Laws § 600.3404. In

Mitan, we held that a foreclosure by advertisement that violates Michigan Compiled Laws

§ 600.3204 is void and no redemption period can begin. Id. at 952. That principle, however, has

since been abrogated by the Supreme Court of Michigan in Kim v. JPMorgan Chase Bank, N.A.,

825 N.W.2d 329, 330 (Mich. 2012), which held instead that any foreclosure sale that occurs

without complying fully with the statute is voidable rather than void ab initio. The district court

here had already explained that Mitan was abrogated by Kim, and this court has repeatedly

recognized that Mitan is no longer good law on that point since Kim was decided. See, e.g.,

Goryoka, 519 F. App’x at 928; Mourad v. Homeward Residential, Inc., 517 F. App’x 360, 367

(6th Cir. 2013). In any event, the redemption period has now lapsed: the Derbabians “brought

this action after the foreclosure sale occurred, and so there is no foreclosure to enjoin or

convert.” Smith v. Bank of Am. Corp., 485 F. App’x 749, 756 (6th Cir. 2012).

        The Derbabians’ remaining argument that a “mortgagor may hold over after foreclosure

by advertisement and test the validity of the sale in the summary proceeding” is unavailing.

Appellants’ Br. 15 (quoting Mfrs. Hanover Mortg. Corp. v. Snell, 370 N.W.2d 401, 404 (Mich.


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Derbabian v. Bank of America, N.A.

Ct. App. 1985)). As a practical matter, the sale has already occurred. Even if it has not, Snell

does not help the Derbabians because the fact that they may test the validity of the sale does not

mean that they are entitled to relief. As discussed above, the redemption period has expired and

the Derbabians have failed to adequately plead fraud or prejudice sufficient to set aside the

foreclosure. The district court therefore properly dismissed this claim. See Houston v. U.S. Bank

Home Mortg. Wis. Servicing, 505 F. App’x 543, 548–49 (6th Cir. 2012) (finding wrongful-

foreclosure claim failed despite hold-over right because redemption period lapsed); Jackson v.

Laker Grp., L.L.C., No. 261588, 2005 WL 2901787, at *2 (Mich. Ct. App. Nov. 3, 2005)

(holding that a hold-over to challenge the validity of a foreclosure sale must occur before the

redemption period lapses).

               5. Quiet Title

       The Derbabians argue that the district court improperly dismissed their claim for quiet

title. Michigan law allows any person who claims any right, title, or interest in land—whether

the person is in possession or not—to bring an action to quiet title.        Mich. Comp. Laws

§ 600.2932. The plaintiff bears the burden of proof and must make a prima facie case that he or

she has superior title or right to the property.       Beulah Hoagland Appleton Qualified Pers.

Residence Trust v. Emmet Cnty. Rd. Comm’n, 600 N.W.2d 698, 700 (Mich. Ct. App. 1999);

Stinebaugh v. Bristol, 347 N.W.2d 219, 221 (Mich. Ct. App. 1984). If the plaintiff makes such a

showing, the burden then shifts to the defendant to prove superior right or title. Stinebaugh, 347

N.W.2d at 221.

       The Derbabians have not made a prima facie showing that their title to the property is

superior and, therefore, the district court properly dismissed this cause of action. The pleadings

and other documents incorporated by reference reflect that the Derbabians entered into a


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Case No. 14-1253
Derbabian v. Bank of America, N.A.

mortgage transaction, and the Derbabians do not dispute that they defaulted on their loan. As

discussed above, the Derbabians have not plausibly alleged that the loan transaction was invalid

and that the foreclosure was improper. See Edgett, 2014 WL 783573, at *4 (“Setting aside the

foreclosure sale would be the only mechanism by which title could even conceptually be quieted

in plaintiff’s favor.”). Indeed, nowhere in the complaint do the Derbabians allege that they have

superior title, and their bare assertion in their briefs that they “have sworn to ample grounds to

quiet title,” Appellants’ Br. 17, Reply 12, without specifying those grounds, is insufficient to

state a claim. Therefore, they have not shown that their right to the property is superior and that

they are entitled to quiet title. To the extent that the Derbabians argue that this court should use

its equitable powers to quiet title, they also fail to demonstrate entitlement to such relief. See

Khadher, 2014 WL 4057880, at *5 (rejecting plaintiff’s request that court use equitable powers

to quiet title based on fraud because plaintiff “points to no evidence of such violations to warrant

this equitable remedy”). The district court properly dismissed this cause of action.

               6. Slander of Title

       The Derbabians argue that the district court improperly dismissed their cause of action

for slander of title. “In Michigan, slander of title claims have both a common-law and statutory

basis.” B & B Inv. Grp. v. Gitler, 581 N.W.2d 17, 20 (Mich. Ct. App. 1998). Under both

common law and Michigan Compiled Laws § 565.108, “a plaintiff must show falsity, malice,

and special damages, i.e., that the defendant maliciously published false statements that

disparaged a plaintiff’s right in property, causing special damages.” See id. “Special damages”

include litigation costs, impairment of vendibility, and loss of rent or interest. Id.

       The district court concluded that the Derbabians failed to plausibly identify any false

statements that disparaged the Derbabians’ right to the property and have not pointed to any


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Case No. 14-1253
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“special damages.” In addition, as discussed above, the plaintiffs have not sufficiently alleged

that they had any right to the property after the redemption period expired. The district court

correctly dismissed this cause of action.

                                       III. CONCLUSION

       The Derbabians have failed to adequately plead their causes of action for fraudulent

misrepresentation, breach of contract, violation of Michigan Compiled Laws §§ 600.3204, et

seq., quiet title, and slander of title. Their cause of action under TILA is also barred by the

statute of limitations. We thus affirm the judgment of the district court.




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