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UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

SOUTHERN DIVISION 

GAIL PANNY, 

Plaintiff, 

v. 

PENNYMAC LOAN SERVICES, LLC, ET.

AL., 

Defendants. 

Case No.14-13866 

SENIOR U.S. DISTRICT JUDGE 

ARTHUR J. TARNOW

U.S. MAGISTRATE JUDGE 

DAVID R. GRAND

 / 

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS [42] 

 Plaintiff is seeking to contest the sale of her foreclosed property at a 

Sherriff’s sale on September 9, 2014. Defendant PennyMac Loan Services 

removed this action from state court on October 7, 2014. Plaintiff amended her 

complaint on March 13, 2015 [17] adding Citi Investment Group Corp. as a 

Defendant. On March 14, 2016, Defendant Citi Investment Group Corp. 

(Defendant Citi) filed a Motion to Dismiss Plaintiff’s First Amended Complaint 

[42]. Plaintiff responded on May 17, 2016 [45] and Defendant Citi replied on May 

25, 2016 [48]. 

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 The Court finds the motion suitable for determination without a hearing, in 

accord with Local Rule 7.1(f)(2), with respect to all of Plaintiff’s claims. 

 For the reasons stated below, Defendant Citi’s Motion to Dismiss Plaintiff’s 

First Amended Complaint [42] is GRANTED. 

FACTS1

 On March 11, 2008, Plaintiff obtained a loan in the amount of $465,300.00 

secured by a mortgage on Plaintiff’s house located at 3700 Orchard Lake Road, 

Orchard Lake, Michigan. The mortgage was first assigned to BANA on September 

26, 2011. In 2012, Plaintiff defaulted on her Mortgage and BANA and Plaintiff 

engaged in unsuccessful loss mitigation efforts. On October 22, 2013, the 

Mortgage was assigned from BANA to Defendant PennyMac Mortgage 

Investment Trust Holdings, I, LLC, n/k/a Penny Mac Loan Services, LLC 

(PennyMac). Servicing rights for the Mortgage and Note were also transferred in 

2013 to PennyMac. Once again, loss mitigation efforts were unsuccessful and 

PennyMac initiated foreclosure proceedings on the defaulted property in the 

summer of 2014. 

 

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 The facts are taken from the Court’s previous Order in this case granting in part 

and denying in part Defendant PennyMac Loan Services, LLC’s Motion to 

Dismiss [43] filed on March 21, 2016. 

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 Plaintiff filed this case in the Oakland County Circuit Court on September 4, 

2014. Plaintiff also filed a motion seeking to enjoin the Sheriff’s sale on September 

4, 2014 and the Oakland County Circuit Court entered a temporary restraining 

order (TRO) on the same day. Per this Order, Plaintiff was required to serve 

Defendant Bank of America and PennyMac with the Order. However, technical 

difficulties rendered Plaintiff unable to serve PennyMac, and the Sherriff sale went 

forward on September 9, 2014 during the 14 day time period that the sale was 

supposed to be enjoined per the TRO. The property was purchased by Defendant 

Citi Investment Group Corp. and Plaintiff failed to redeem the Property. 

LEGAL STANDARD

 Defendant moves to dismiss Plaintiff’s claims pursuant to Federal Rule of 

Civil Procedure 12(b)(6). On a Rule 12(b)(6) motion to dismiss, the Court must 

“assume the veracity of [the plaintiff’s] well-pleaded factual allegations and 

determine whether the plaintiff is entitled to legal relief as a matter of law.” 

McCormick v. Miami Univ., 693 F.3d 654, 658 (6th Cir. 2012) (citing Ashcroft v. 

Iqbal, 556 U.S. 662, 679 (2009); Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 

1993)). 

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ANALYSIS

a. COUNTS I AND II 

Per Plaintiff’s Notice of Dismissal filed on February 28, 2016 [39], Counts I 

and II have been dismissed in their entirety. In a Court order entered on March 26, 

2016, Defendant PennyMac’s Motion to Dismiss Counts III against them was 

granted by the Court but denied as to Counts IV and V, as they are an 

indispensable party under Federal Rule of Civil Procedure 19(a)(1). All that 

remains to be decided are Count III against Defendant Citi Investment Group Corp. 

and Counts IV, and V as brought against Defendant PennyMac and Citi Investment 

Group Corp. 

b. COUNT III: DECLARATORY RELIEF: SET ASIDE SHERRIFF’S SALE 

CONDUCTED IN VIOLATION OF INJUNCTION 

Plaintiff alleges that Defendant PennyMac did not have a right to foreclose 

at the time of the Sheriff’s sale because the TRO that Plaintiff had obtained was 

still in full force on the day of the sale and requests that the sale be found void ab 

initio.

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 The Court addressed this claim in its Order entered on March 21, 2016 and 

explained that a foreclosure undertaken in violation of a TRO results in a 

foreclosure that is voidable, not void ab initio. Kim v. JPMorgan Chase Bank, 

N.A., 493 Mich. 98, 114 (2012). Therefore, the Court’s analysis of the claim will 

consider the foreclosure voidable, not void ab initio.

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Michigan Courts have held that to invalidate a foreclosure sale once the 

statutory redemption period has elapsed, the sale can be set aside by the Court only 

if the mortgageor had made “a clear showing of fraud, or irregularity.” Conlin v. 

Mortgage Elec. Registration Sys., Inc., 714 F.3d 355, 359 (6th Cir. 2013); citing 

Schulthies v. Barron, 16 Mich. App. 246, 248 (1969). To prove a foreclosure 

defect claim, “plaintiffs must show that they were prejudiced by defendant's failure 

to comply with MCL 600.3204.” Kim v. JPMorgan Chase Bank, N.A., 493 Mich. 

98, 115 (2012). To demonstrate this prejudice, a Plaintiff must “show that they 

would have been in a better position to preserve their interest in the property absent 

defendant's noncompliance with the statute.” Id. 

In a previous order granting in part and denying in part Defendant 

PennyMac’s Motion to Dismiss Plaintiff’s First Amended Complaint [37], the 

Court held that Plaintiff had not shown any prejudice and the response to this 

currently pending Motion to Dismiss does not introduce any new arguments for the 

Court to consider regarding their previous holding on the issue of prejudice. 

Therefore, the Court reiterates its holding concerning the finding of no prejudice: 

Plaintiff contends that she was prejudiced because, if the Sherriff’s 

sale had not taken place per the TRO, she would have been able to 

possibly reinstate her mortgage from default by possibly filing for 

Chapter 13 bankruptcy and spread the approximately $100,000 she 

owed over 60 months. Instead, the Sherriff’s sale required her have to 

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redeem her mortgage at the Sherriff’s sale price of $561,150.64 plus 

interest per the Sherriff’s deed [21-7]. 

Plaintiff cannot demonstrate that she was actually prejudiced by the 

Sherriff’s sale because it cannot be shown that she would have been in 

a better position absent the early Sherriff’s Sale. Plaintiff has not 

demonstrated that it would have been possible to reinstate her 

mortgage rather than have to redeem it. Plaintiff has voluntarily 

dismissed all claims outside of the declaratory relief surrounding the 

Sherriff’s Sale, and there are no facts to suggest that Defendant 

PennyMac failed to follow the statutory requirements in the 

foreclosure proceeding. There is no evidence that a preliminary 

injunction would have issued and Defendant would not have been 

allowed to conduct the Sherriff’s Sale as soon as the 14 days of the 

TRO expired on September 18, 2014. Additionally, there is no dispute 

that Plaintiff was in default on the mortgage and did not take any 

action prior to the sale to remedy the default, and has continued to not 

take action, failing to redeem the property as of the March 9, 2015 

deadline. 

[43 at 5-6]. 

 Additionally, Plaintiff alleges that Citi did not have a certificate of authority 

at the time of the Sheriff’s sale to transact business in Michigan and therefore was 

an illegal sale [45 at 13]. However, the merit of this allegation has no impact on the 

claim as, per Michigan law, what is at issue is the question of a failure to comply 

with MCL 600.3204. As the Court has already held, there are no facts to suggest 

that Defendant PennyMac failed to follow the statutory requirements, and as a 

third-party purchaser, Defendant Citi had no statutory obligations concerning the 

foreclosure sale. 

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 Therefore, Count III is dismissed with prejudice. 

c. COUNT IV: DECLARATORY RELIEF: SET ASIDE SHERIFF’S SALE TO 

COMPANY NOT AUTHORIZED TO CONDUCT BUSINESS IN MICHIGAN

In Count IV, Plaintiff requests that the Sheriff’s sale be set aside because 

Defendant Citi is allegedly not authorized to conduct business in Michigan, and 

thus lacked the legal authority to purchase the Property at the sale. 

It is not disputed by the parties that only the Attorney General has the 

authority to bring a suit against Defendant Citi and assess monetary penalties for 

violation of the licensing requirement. See MCL 450.5010; Miller v. Allstate Ins. 

Co., 481 Mich. 601, 615 (2008). However, in her response brief, Plaintiff attests 

that she is not seeking penalties for the violation of the statute, but instead is 

seeking equitable relief from the Court in the form of setting aside the Sheriff’s 

Deed. 

The statute that underlays Plaintiff’s equitable relief claim is the Michigan 

Business Corporation Act (MBCA), and the Court looks to the law to base its 

decision for possible equitable relief. Under the MBCA, a corporation is not 

considered to be conducting business if the corporation owns real or personal 

property. MCL 450.2012(1)(i). Since one must first buy property to own it, it 

follows that the action of Defendant Citi purchasing Plaintiff’s Property at the 

Sheriff’s Sale was not a violation of the MBCA, and that Defendant Citi had legal 

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authority to make the purchase. Thus the act of Citi purchasing the Property was 

not a “structural defect” of the sale. Additionally, under the MBCA, even if 

Defendant Citi did violate the law when they purchased the Property, the statute 

explicitly provides that, if a business fails to obtain a certificate of authority to 

transact business in Michigan, “the validity of a contract or act of the corporation” 

is not impaired. MCL 450.2051. 

Because Defendant Citi had the legal authority to purchase the Property at 

the Sheriff’s sale, the Court denies Plaintiff’s request for equitable relief and Count 

IV is dismissed with prejudice. 

d. COUNT V: DECLARATORY RELIEF RE: REDEMPTION

In Count V, Plaintiff requests declaratory relief with respect to the 

redemption based upon the allegation that Defendant Citi refused to accept 

redemption funds tendered by the Servicer in violation of MCL 600.3240. 

Under MCL 600.3240, upon purchasing property from a Sheriff sale, the 

purchaser “shall provide an affidavit with the deed to be recorded...that states the 

exact amount required to redeem the property under this subsection.” MCL 

600.3240(2). In order to redeem the property, the purchaser must pay the 

statutorily required amount to any of the following: the purchaser, the purchaser’s 

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personal representative or assigns, or “to the register of deeds in whose office the 

deed is deposited for the benefit of the purchaser.” Id. 

Defendant Citi fulfilled its obligation under MCL 600.3240 when this 

affidavit was submitted to the Oakland County Register of Deeds on September 16, 

2014. [42- Exhibit A]. If Plaintiff wished to redeem the Property, she was not 

required to pay the redemption price to the purchaser and wait for them to accept 

it; all that was required was to pay the money to the register of deeds where the 

affidavit and deed were placed by Defendant Citi. Per MCL 600.3240(1), there is 

no need for the purchaser to accept the funds; once the payment is made, the 

property is redeemed. There are no facts alleged showing that Plaintiff or the 

Servicer ever posted the redemption funds at the Office of Deeds to redeem the 

property as required by statute. 3 Plaintiff fails to allege any facts to suggest that 

Defendant Citi violated MCL 600.3240. Therefore, Count V is dismissed with 

prejudice for failure to state a claim. 

CONCLUSION

Per Plaintiff’s notice of voluntary dismissal, Counts I and II are dismissed 

with prejudice. For the reasons stated above, the Court dismisses with prejudice 

 

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 In the response brief [45], Plaintiff did not respond to Defendant Citi’s legal 

arguments for the dismissal of Count V. Therefore, the Court relies solely on the 

information contained in Plaintiff’s Amended Complaint to analyze the validity of 

Count V. 

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Counts III, IV and V against Defendant Citi and Defendant PennyMac. 

Accordingly, 

IT IS ORDERED that Defendant’s Motion to Dismiss [42] is GRANTED. 

 IT IS FURTHER ORDERED that Plaintiff’s First Amended Complaint is 

DISMISSED with prejudice. 

SO ORDERED. 

s/Arthur J. Tarnow 

 Arthur J. Tarnow 

Dated: June 7, 2016 Senior United States District Judge 

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