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### STATE OF MICHIGAN

COURT OF APPEALS

PHILIP J. DIEM,

Plaintiff-Appellant, FOR PUBLICATION October 16, 2014 9:00 a.m.

v No. 317499 Washtenaw Circuit Court SALLIE MAE HOME LOANS, INC., f/k/a PIONEER MORTGAGE, INC.,

Defendant,

and

ORLANS ASSOCIATES, P.C., DANIELLE JACKSON, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., JPMORGAN CHASE BANK, and FEDERAL NATIONAL MORTGAGE ASSOCIATION, LC No. 12-000905-CZ

Defendants-Appellees.

Before: S AAD , P.J., and O’C ONNELL and M URRAY , JJ.

O’C ONNELL , J.

This challenge to a mortgage foreclosure by advertisement is one of the spate of actions that have arisen in Michigan. Mortgagors, mortgagees, mortgage se rvicing agents, and the courts have contended with stat utes, case law, and procedural rules to resolve the requisite method of challenging foreclosure. Plaintiff’s claims in this case present several issues the courts have previously addressed and have determin ed to be insufficient to state a claim. Having reviewed the issues in this case, we affirm the circuit court’s dismissal of plaintiff’s claims, and we reconfirm the high substantive and procedural standards a mortgagor must meet to state a claim challenging a foreclos ure by advertisement.

I. FACTS AND PROCEDURAL HISTORY

In March 2003, plaintiff and his wife si gned a 30-year note for a $300,000 loan from defendant Pioneer Mortgage, Inc. as the lender. Paragraph 1 of the note established that the lender could transfer the note: “I understand that the Lender may transfer this Note. The Lender-2- or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the ‘Note Holder.’” Paragraph 6(B) of the note es tablished that plaintiff and his wife must make monthly payments on the loan: “If I do not pay the full amount of each monthly payment on the date it is due, I will be in default.”

As security for the loan, plaintiff and his wife executed a mortgage on their home, naming defendant Mortgage Electr onic Registration Systems, Inc. (MERS) as the mortgagee and Pioneer as the lender. The mortgage stated: “MERS is a separate corporation that is acting solely as a nominee for Lender an d Lender’s successors and assigns.” 1 The mortgage was recorded in the Washtenaw County Re gister of Deeds on April 10, 2003.

In 2010, plaintiff defaulted on the mortga ge. In January 2011, defendant Orlans Associates informed plaintiff that mortgage fo reclosure proceedings would be commenced. The following month, defendant Danielle Jackson—w ho was an Orlans attorney—recorded an Affidavit of Scrivener’s Error to correct a mist ake in the mortgage’s le gal description of the property. 2 In paragraph 5 of the affidavit, Jacks on attested, “A review of the public record reveals that said mortgage was last assigned to JPMorgan Chase Bank, National Association by assignment submitted to and recorded by the Wa shtenaw County Register of Deeds.” The pleadings in this case indicate that an assignm ent from MERS to JPMorgan Chase took place on October 5, 2011, several months after Jackson signed the affida vit. The assignment was recorded in October 2011.

On October 17, 2011, Orlans sent a certified le tter informing plaintiff that JPMorgan Chase intended to initiate mortgage foreclosur e proceedings. The parties did not attain a modification of the mortgage, and the foreclosur e by advertisement proceeded. JPMorgan Chase purchased the property at a sheriff’s sale on February 23, 2012. The applicable statutory redemption provision allowed plaintiff to re deem the property before August 23, 2012.

Plaintiff did not redeem the property. Tw o days before the redemption period expired, plaintiff filed a three-count complaint against Pi oneer, Orlans, Jackson, JPMorgan Chase, MERS, and defendant Federal National Mortgage Association (Fannie Mae). 3 In Count One, entitled “Wrongful Foreclosure by Advertisement,” plaintiff alleged that the assignment of the mortgage and note from MERS to JPMorgan Chase was invalid. Similarly, plaintiff alleged that the foreclosure and sheriff’s sa le were invalid, and claimed th e foreclosure and sale were initiated by an entity that did not own the note or the mortgage and had no record chain of title. In Count Two, entitled “Negligence,” plaintiff alleged essentially the same acts against defendants, and asserted that the acts violated defendants’ duty to the public and to plaintiff.

1 In 2004, Pioneer changed its name to Sallie Mae Home Loans, Inc. Six years later, in June 2010, Sallie Mae dissolved.

2 A word had been omitted in the legal description in the mortgage.

3 The record indicates that on August 16, 2012, JPMorgan Chase c onveyed its interest to Fannie Mae by quit claim deed.-3- Against specific defendants, plaintiff alleged that Jackson’s affidavit falsely represented the date that MERS had assigned th e mortgage to JPMorgan Chase. Plaintiff further alleged that MERS lacked legal ownership of the loan, and that JPMorgan Chase should not have accepted the assignment from MERS. Plaintiff alleged that any assignments of the mo rtgage were invalid, because the mortgage terms required the note and mortgage to be maintained as a unit, rather than sold as separate interests.

In Count Three, entitled “F raud & Conversion,” plaintiff al leged that defendants falsely represented they were the holders of plaintiff’s note and mortgage , and that defendants falsely represented themselves as proper parties to foreclos e. Plaintiff went on to allege, “Defendants, with their false representations, intended to indu ce, and did induce Plaint iff to forebear from asserting his legal rights to challenge this fraudul ent foreclosure.” Plaintiff further alleged that he relied on defendants’ “publications and sworn filings” and that this reliance caused him to lose an opportunity to cha llenge the foreclosure prior to the sheriff’s sale.

On August 29, 2012, Fannie Mae filed a dist rict court action fo r possession of the property. On plaintiff’s moti on, the circuit court consolidatedthe district court case with plaintiff’s circuit court case. Defendants m oved for summary disposition in November 2012. Because of various delays in th e litigation, the circuit court did not hear arguments on the motion until March 6, 2013. On that date, the circuit c ourt entered a stipulated order of dismissal without prejudice, which dismissed Orlans and Jack son from plaintiff’s suit. On the same day, plaintiff filed a motion to amend his complaint to assert new claims against Orlans, Jackson, and the other defendants under the Fair Debt Collection Practices Act, 15 USC 1692k.

In May 2013, the circuit court denied plai ntiff’s motion to amend and granted summary disposition in favor of the remaining defendants. Citing Kim v JPMorgan Chase Bank, NA , 493 Mich 98; 825 NW2d 329 (2012), the circuit court determined that the foreclosure sale was voidable, and that plaintiff was required to show he was prejudiced by the alleged defects in the foreclosure procedure. The circuit court conc luded that plaintiff’s claims were clearly unenforceable and that no factual development c ould establish a cognizable claim. Plaintiff moved for reconsideration, which the court denied.

II. ANALYSIS

A. FAILURE TO STATE A CLAIM

We review de novo the circuit court’s summary disposition ruling. LaFontaine Saline, Inc v Chrysler Group, LLC , 496 Mich 26, 34; 852 NW2d 78 (2014) . “Summary disposition under MCR 2.116(C)(8) is appropriate where the complaint fails to state a claim on which relief may be granted.” Id. We must accept the plainti ff’s allegations as true. Bosanic v Motz Dev, Inc , 277 Mich App 277, 279 n 2; 745 NW2d 513 ( 2007). In addition, we draw any reasonable inferences from the alleged facts. Adair v State , 470 Mich 105, 119; 680 NW2d 386 (2004). However, “[c]onclusory statements, unsupported by f actual allegations, are insufficient to state a cause of action.” Churella v Pioneer State Mut Ins Co , 258 Mich App 260, 272; 671 NW2d 125 (2003).-4- Our Supreme Court identified the substantive requirements for a mortgagor to challenge a foreclosure by advertisement in Kim , 493 Mich 98. The Kim Court held that “defects or irregularities in a foreclosure proceeding result in a foreclos ure that is voidable, not void ab initio .” Id. at 115. The Court al so explained:

to set aside the foreclosure sale, plaintiffs must show that they were prejudiced by defendant’s failure to comply w ith MCL 600.3204. To demonstrate such prejudice, they must show that they would have been in a better position to preserve their interest in the property ab sent defendant’s noncompliance with the statute. [ Id. at 115-116.]

The Kim decision established that a mortgagor seeking to set aside a foreclosure by advertisement must allege facts to support three essential aspects of a claim: (1) fraud or irregularity in the foreclosur e procedure; (2) prejudice to the mortgagor; and (3) a causal relationship between the alleged fraud or irregular ity and the alleged prejudice, i.e., that the mortgagor would have been in a better position to preserve the property interest absent the fraud or irregularity. See Kim , 493 Mich at 115-116.

The Kim Court cited three cases as examples of th e nature of prejudice needed to support a foreclosure challenge. 493 Mich at 116 n 33. In the earliest case, Kuschinski v Equitable & Central Trust Co , 277 Mich 23; 268 NW 797 (1936), the Court upheld a sheriff’s sale against the plaintiff-borrower’s challenge. The Court first note d that the plaintiff had not been misled about whether the sale had occurred. Id. at 26. The Court concluded, “[t] he total lack of equity in plaintiff's claim, his failure to pay anything on the mortgage debt, and his laches preclude him from any relief.” Id. at 27. In the next case, Jackson Investment Corp v Pittsfield Prod, Inc , 162 Mich App 750; 413 NW2d 99 (1987), this Court upheld a sheriff’s sale agai nst a challenge that the sale had occurred five days early. The C ourt noted that at no time during the redemption period had the mortgagor attempted to redeem the property. Id. at 757. Similarly, in Sweet Air Investment, Inc v Kenny , 275 Mich App 492; 739 NW2d 656 (2007), this Court upheld a sheriff’s sale when the mortgagors made no effo rt to redeem the property and delayed their challenge to the sale. Id. at 503.

Justice Markman’s concurring opinion in Kim summarized these three cases as follows:

Although a nonexhaustive listing, some of the factors that might be relevant in [demonstrating prejudice] would include the following: whether plaintiffs were “misled into believing that no sale had been had,” Kuschinski v Equitable & Central Trust Co , 277 Mich 23, 26; 268 NW 797 ( 1936); whether plaintiffs “act[ed] promptly after [the y became] aware of the facts” on which they based their complaint, id.; whether plaintiffs made an effort to redeem the property during the redemption period, Sweet Air Investment, Inc v Kenney , 275 Mich App 492, 503; 739 NW2d 656 (2007); whether plaint iffs were “represented by counsel throughout the foreclosure process,” Jackson Investment Corp v Pittsfield Prod, Inc , 162 Mich App 750, 756; 413 NW2d 99 (1987) . . . . [ Kim , 493 Mich at 121 (Markman, J., concurring).]-5- In this case, plaintiff alle ges that defendant JPMorgan Ch ase was neither the mortgage holder nor the servicing agent, and that the foreclosure thus violated MCL 600.3204. Even assuming this allegation is true for the pur poses of summary disposition, and assuming the allegation is sufficient to present the first aspect of a claim to challenge a foreclosure, the circuit court correctly determined that plaintiff’s rema ining allegations are insufficient on the prejudice aspects of his claim.

Plaintiff’s allegations of prejudice in this case are conclusory, and he has not alleged a causal connection between the allege d fraud or irregularity in th e foreclosure procedure and any ability he might have had to preserve his propert y interest. Nothing in the pleadings indicates that plaintiff was qualified for a modification of the mortgage or to redeem the property. He does not claim that he was misled regarding whethe r a sheriff’s sale would occur. Consequently, plaintiff has not alleged any f acts that our Supreme Court sugge sted might support the prejudice element of a wrongful fo reclosure claim.

Instead, plaintiff alleged that defendants’ actions caused him to lose an opportunity to challenge the foreclosure prior to the sheriff’ s sale. Specifically, pl aintiff alleged that defendants’ conduct misrepresented the owners hip interests in the mortgage during the foreclosure process, as follows: in Februa ry 2011, Jackson recorded an affidavit falsely representing that JPMorgan had an ownership interest in the pr operty; in March 2011, he was informed that Fannie Mae was an “investor” in the mortgaged propert y; on October 7, 2011, he checked Fannie Mae’s website and learned that Fannie Mae owned a loan at the property address; and on October 17, 2011, plaintiff received a certified letter notifying him of mortgage foreclosure proceedings by JPMorgan Chase. Plaintiff alleged that he relied on these publications and sworn filings to hi s detriment, in that “the fra ud of defendants covered the truth about the legal and proper transf ers . . . and the identity of the foreclosing party . . . .”

Viewed in the light most favorable to plain tiff, there is no indicat ion of how or why the foreclosure initiated by JPMorgan Chase—rather than another entity—pr ecluded plaintiff from challenging the foreclosure. Plaintiff makes no allegations in this regard other than the conclusory statement that he lost an opportunity to challeng e the foreclosure prior to the mortgage sale. Given that plaintiff’s complaint c onfirms he knew of the changes in the mortgage holders by mid-October 2011, nothing in his pleadings supports his contention that defendants’ actions prevented him from challenging the forecl osure before the Februa ry 2012 sheriff’s sale. In sum, plaintiff failed to present sufficient al legations to support his claim that defendants’ conduct prejudiced his ability to preserve an interest in the mortgaged property. See Conlin v Mortgage Electronic Registration Sys, Inc , 714 F3d 355, 359-360 (CA 6, 2013).

For the same reason, plaintiff’s negligence an d fraud claims fail. A cause of action for negligence must include allegations to support each of four elements: “(1) the defendant owed the plaintiff a legal duty, (2) the defendant breach ed the legal duty, (3) the plaintiff suffered damages, and (4) the defendant’s breach was a pr oximate cause of the plaintiff’s damages.” Loweke v Ann Arbor Ceiling & Partition Co, LLC , 489 Mich 157, 162; 809 NW2d 553 (2011). Even assuming that plaintiff’s allegations are suffi cient on the first three elements of negligence, plaintiff has not presented fact s to support his allegation that defendants’ breaches of duty proximately caused any damage to plaintiff. Sim ilarly, to state a claim for fraud, a plaintiff must assert, among other elements, that the plaintiff sustained damages as a result of having relied on-6- the defendant’s false representation. Lucas v Awaad , 299 Mich App 345, 363; 830 NW2d 141 (2013). Although plaintiff attempts to support his fraud allegations with references to various Michigan statutes, he does not ar gue that the statutes allow him to avoid alleging the elements of fraud. Plaintiff has failed to allege any ac tionable prejudice resulting from defendants’ representations. Accordingly, plai ntiff has failed to state any ac tionable claim against defendants in this case. 4

B. PLAINTIFF’S REQUEST FOR ADDITIONAL DISCOVERY

Plaintiff argues that the circuit court erred by denying his request for additional discovery, which plaintiff contends could yield addi tional facts to support hi s claim. This Court reviews for abuse of discretion a circuit c ourt’s decision to grant or deny discovery. King v Michigan State Police Dep’t , 303 Mich App 162, 175; 841 NW2d 914 (2013).

We conclude that the circuit court was within its discretion to deny plaintiff’s request for additional discovery. This Court has explai ned, “[A] party opposing a motion for summary disposition because discovery is not complete must provide some independent evidence that a factual dispute exists.” Michigan Nat’l Bank v Metro Inst itutional Food Service, Inc , 198 Mich App 236, 241; 497 NW2d 225 (1993). In this case, pl aintiff has not sugges ted what information might be within defendants’ knowledge that c ould plausibly demonstrate a causal connection between defendants’ actions and an y prejudice to plaintiff. As defendants point out, plaintiff himself is in the best position to determine whether he was prejudiced by any of defendants’ actions. Where, as here, there is no reasonable indication that additional discovery will provide factual support for a mortgagor’s challenge to a foreclosure by adve rtisement, a circuit court is within its discretion to de ny further discovery. See VanVourous v Burmeister , 262 Mich App 467, 477; 687 NW2d 132 (2004); see also Holliday v Wells Fargo Bank, NA , 569 F Appx 366, 371-372 (CA 6, 2014) (mortgagor not entitled to addi tional discovery to establish prejudice in a wrongful foreclosure claim).

C. PLAINTIFF’S MOTION TO AMEND THE COMPLAINT

After nearly a year of litigation, plaintiff sought to amend his complaint to add a claim under the federal Fair Debt Collect ion Practices Act (FDCPA) 15 USC 1692 et seq . Even later in the litigation, plaintiff sought to add a claim alleging violati on of due process rights. We review for abuse of discretion the circuit c ourt’s denial of the motions to amend. Wormsbacher v Seaver Title Co , 284 Mich App 1, 8; 772 NW2d 827 (2009).

We find no abuse of discretion in the circ uit court’s denial of the proposed amended claims. We recognize that in ordinary cas es, motions to amend are generally granted. Lane v KinderCare Learning Centers, Inc , 231 Mich App 689, 697; 588 NW 2d 715 (1998). The record in this case demonstrates that the litigation was not typical. Plaintiff did not redeem the property

4 Defendants argue that plaintiff la cks standing to sue. We need not address this issue, because even if we assume for purposes of this case that plaintiff has standing, plai ntiff has failed to state a claim.-7- as provided by law. Instead, pl aintiff sought to avoid eviction by alleging fraud, but without proof of prejudice. When the litigation had progressed to the point of summary disposition, plaintiff suddenly sought to add an additional fede ral claim. In our view, this approach to litigation warranted denial of th e proposed amended complaint. As this Court explained in Lane

, a motion to amend may be deni ed for the following reasons:

(1) undue delay, (2) bad faith or dilatory motive on the part of the movant, (3) repeated failure to cure deficiencies by amendments previously allowed, (4) undue prejudice to the opposing party by virt ue of allowance of the amendment, or (5) futility of the amen dment. Absent bad faith or actual prejudice to the opposing party, delay, alone, does not warrant denial of a motion to amend. [ Id

., citing Weymers v Khera , 454 Mich 639, 658; 563 NW2d 647 (1997).]

Plaintiff argues that his pr oposed amendments to the compla int were designed to provide proof of prejudice, as required by Kim , 493 Mich 98. However, plai ntiff does not identify which of the proposed amendments presen ted facts to support his allegation of prejudice. There are no allegations in the proposed amendments to estab lish that defendants’ conduct caused plaintiff to lose an opportunity to preserve an interest in the propert y. Absent any proposed amendments that could support a causal connection between de fendants’ conduct and the alleged prejudice to plaintiff, the circuit court correctly denied the proposed amendment.

Plaintiff also argues that he opted to assert the FDCPA cl aim in reliance on a decision issued in 2013: Glazer v Chase Home Finance LLC , 704 F3d 453 (CA 6, 2013). In Glazer , the Sixth Circuit Court of Appeals recognized that mortgage foreclosure may constitute debt collection within the meaning of the FDCPA. C ontrary to plaintiff’s re presentation on appeal, however, the Glazer decision was not the first de cision on this issue. The Glazer Court recognized that “confusion has arisen on the ques tion of whether mortgage foreclosure is debt collection under the Act” and that “[o]ther courts have taken varying appr oaches on the issue.” In Michigan, this Court recognized as early as 2008 that a mortgagor might challenge a foreclosure pursuant to the FDCP A, if the mortgagor properly al leged that the defendant was a debt collector and properly allege d violations of the FDCPA. See Jackson v Flagstar Bank

, unpublished opinion per curiam of the Court of Appeals, issued December 16, 2008 (Docket No. 281333).

Notwithstanding the existing law on FDCPA clai ms, plaintiff did not attempt to assert the claims until the day of the stipulated dismissal of Orlans and Jackson, which was also the day the circuit court first held a motion hearing on defendants’ summary disposition motion. The attempt to add claims appeared to be an effort to circumvent the stipulated dismissal and to prolong the summary disposition ar guments. Plaintiff exhibite d undue delay in presenting the motion to amend. Moreover, the delay in asse rting the FDCPA claims, which arose from the same facts as plaintiff’s other claims, prejudiced defendants both in their ability to defend the claims and in their ability to conduct effici ent litigation. On the ground of undue delay and prejudice, the motion to ame nd was properly denied. See Franchino v Franchino , 263 Mich App 172, 190; 687 NW2d 620 (2004); see also Glazer , 704 F3d at 459 (regarding certain claims, mortgagor “waited too long to seek leave to amend, and the delay unduly prejudiced the [mortgagee].”).-8- Plaintiff’s attempt to add a due process clai m was similarly improper and was meritless. This Court has determined that a mortgagor cannot pursue a due pr ocess claim against a government-sponsored entity akin to Fannie Mae. Federal Home Mortgage Ass’n v Kelley (On Reconsideration) , ___ Mich App ___; ___ NW2d ___, Do cket No. 315082 (August 26, 2014). The Sixth Circuit Court of Appeals recently cited Kelley and determined that Fannie Mae is not a governmental actor, and that the plaintiff-mo rtgagor’s attempt to challenge Fannie Mae’s foreclosure on due process grounds failed as a matter of law. Rubin v Fannie Mae , ___ F Appx ___, 2014 Westlaw 4800282 (CA 6, September 29, 2014).

D. REAL PARTY IN INTEREST

Plaintiff argues that JPMorgan Chase wa s not the proper part y to foreclose by advertisement, and that Fannie Mae was not th e proper party to bring a possession action. The circuit court rejected these arguments on summar y disposition. We review de novo the circuit court’s summary disposition ruling, and will uphold the ruling under MCR 2.116(C)(8) if the complaint fails to state a claim on which relief may be granted. LaFontaine , 496 Mich at 34.

We find no error in the summary disposition ruling. Under Kim , 493 Mich 98, even if the foreclosure was procedurally incorrect, a mortgagor cannot state a claim unless there was prejudice arising from the procedur al flaw. Plaintiff in this case has not alleged or demonstrated any prejudice arising from any procedural flaw in the foreclosure by advertisement. Accordingly, summary disposition was appropriate.

III. CONCLUSION

The circuit court’s order gr anting summary disposition, denying amendment of the claim, and resolving the possession action is affirmed.

/s/ Peter D. O’Connell /s/ Henry William Saad /s/ Christopher M. Murray