UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

BRIAN MCLEAN and

GAIL CLIFFORD,

Plaintiffs,

Case No. 09-CV-11239 

vs. HON. GEORGE CARAM STEEH

COUNTRYWIDE HOME LOANS, INC.,

and FIFTH THIRD MORTGAGE COMPANY,

Defendants.

_____________________________/

ORDER GRANTING DEFENDANT COUNTRYWIDE'S MOTION TO DISMISS (# 20)

AND DISMISSING COUNTRYWIDE FROM THIS LAWSUIT

Defendant Countrywide Home Loans, Inc. moves to dismiss plaintiffs Brian

McClean's and Gail Gifford's amended claims of fraudulent misrepresentation and negligent

misrepresentation. Oral argument would not significantly aid the decisional process.

Pursuant to E.D. Mich. Local R. 7.1(e)(2), it is ORDERED that the motion be resolved

without oral argument.

Plaintiffs purchased the real property commonly known as 5538 Arbor Bay Drive,

Brighton, Michigan 48116, in 2006 for $1,550,000.00, using a $1,000,000.00 "senior" loan

from Countrywide, and a "junior" $400,000.00 loan from defendant Fifth Third Bank. On

August 27, 2009, this court granted Countrywide's earlier motion to dismiss the plaintiffs'

claims seeking an accounting, rescission, and reformation, and alleging claims of wrongful

foreclosure, violations of the Truth in Lending Act, predatory lending, fraudulent

misrepresentation, negligent misrepresentation, violation of the Fair Credit Reporting Act,

violation of Michigan's Brokers, Lenders, and Servicers Licensing Act, and usury. Plaintiffs'

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fraudulent misrepresentation and negligent misrepresentation claims were dismissed for

failure to plead the claims with particularity as required by Federal Rule of Civil Procedure

9(b). August 27, 2009 Order, at 11. Plaintiffs were granted leave to file amended

fraudulent misrepresentation and negligent misrepresentation claims to cure the deficiency.

Id at 12. Plaintiffs filed a First Amended Complaint on September 18, 2009. Countrywide

filed the instant motion to dismiss the amended fraudulent misrepresentation and negligent

misrepresentation claims on September 30, 2009.

Plaintiffs allege in their First Amended Complaint:

8. Plaintiffs purchased the Property in 2006 for about one million five

hundred fifty thousand ($1,550,000.00) dollars.

9. Defendants structured the financing of the purchase of the Property as a

"senior/junior" loan with Countrywide servicing the senior position and Fifth

Third owning and/or servicing the junior position.

10. The senior lien was for one million ($1,000,000.00) dollars.

11. The junior lien was for about four hundred thousand ($400,000.00)

dollars.

12. In addition, Plaintiffs paid $136,500.00 towards the purchase price prior

to closing on top of a previously-paid $30,000.00 deposit. 

13. Plaintiffs could not afford the Property on the financing terms employed

by Defendants.

14. The Uniform Residential Loan Application created by Defendants in

connection with the closing on the loans at issue contains misstatements of

fact with respect to Plaintiffs' ability to pay the loans. (See "Exhibit A –

Uniform Residential Loan Application").

15. Specifically, Defendants fraudulently stated that Plaintiffs made

$5,200.00 per month leasing out rental properties.

16. However, these statements were patently false.

17. In reality, Plaintiffs earned about $19,000.00 per month in gross income.

However, including the payments on the loans at issue in this litigation,

Plaintiffs had nearly $17,000.00 in loan obligations per month. After paying

income tax, Plaintiffs had a net monthly loss as a direct result of the financing

scheme utilized by the Defendants. (Exhibit A).

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18. Plaintiffs were induced into obtaining the loans based upon the

representations made to Plaintiffs by Defendants' agent Tom Carmody on or

about March 23, 2005.

19. Specifically, Defendants' agent told Plaintiffs that their home was worth

over $1,500.000.00 and the purchase price was an adequate reflection of the

fair market value of the home.

20. Furthermore, Defendants' agent informed Plaintiffs that if making their

monthly payments became problematic, Plaintiffs would be able to sell their

home for a substantial profit, or refinance the mortgage loans in order to

obtain a more manageable monthly payment.

21. When Plaintiffs expressed their concern about potentially not being able

to afford this mortgage obligation, Defendants' agent assured Plaintiffs that

their combined monthly income would be more than enough to meet the

monthly payments while still living comfortably financially.

22. All these representations made by Defendants, or on Defendants' behalf

proved to be patently false and fabricated by Defendants in order to induce

Plaintiffs into obtaining the loans.

First Amended Complaint, at 3-4. Based on these allegations, plaintiffs allege fraudulent

misrepresentation and negligent misrepresentation. Id. at 5-7.

Countrywide moves to dismiss the amended fraudulent and negligent

misrepresentation claims arguing the claims again fail to meet the particularity requirements

of Federal Rule of Civil Procedure 9(b). Countrywide also argues that the plaintiffs could

not have reasonably relied on any alleged misrepresentations in the Uniform Residential

Loan Application because plaintiffs themselves signed the document, and in doing so,

represented that "the information provided in this application is true and correct as of the

date set forth opposite my signature[.]" Countrywide asserts that the alleged

misrepresentation regarding the appraised $1.5 million value of the property is not

actionable because the plaintiffs had the means to reappraise the property before executing

the loan. Countrywide maintains that the alleged statements that the plaintiffs could

financially afford the property, and that they would be able to resell the property at a profit

or refinance the loans if they found they could not make the loan payments, are not

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actionable because the statements constitute contractual "puffing," opinions as opposed

to past or existing facts, or future promises. Countrywide maintains that any alleged

promise to refinance the loans in the future is unenforceable under Michigan's statute of

frauds, M.C.L. § 566.132(2).

Federal Rule of Civil Procedure 12(b)(6) authorizes the court to assess whether the

plaintiff has stated a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). In

deciding a motion to dismiss under Rule 12(b)(6), the court must construe the complaint

in favor of the plaintiff, accept the factual allegations of the complaint as true, and

determine whether the allegations present plausible claims. Bell Atlantic Corp. v. Twombly,

550 U.S. 544, 127 S. Ct. 1955, 1964-65 (2007). To survive a Rule 12(b)(6) motion to

dismiss, plaintiff’s pleading for relief must provide "more than labels and conclusions, and

a formulaic recitation of the elements of a cause of action will not do." Id. at 1964-65.

Although the complaint need not contain detailed factual allegations, its "factual allegations

must be enough to raise a right to relief above the speculative level on the assumption that

all of the allegations in the complaint are true." Ass’n of Cleveland Fire Fighters v. City of

Cleveland, 502 F.3d 545, 548 (6th Cir. 2007) (citing Twombly, 127 S. Ct. at 1965).

In conducting this Rule 12(b)(6) analysis, a district court should first identify any

conclusory allegations and bare assertions in the complaint that are not entitled to an

assumption of truth. Ashcroft v. Iqbal, — U.S. — ; 129 S.Ct. 1937, 1951 (2009). The

district court should then consider the factual allegations that are entitled to a presumption

of truth and determine if they plausibly suggest entitlement to relief. Id. "[W]here the wellpleaded facts do not permit the court to infer more than the mere possibility of misconduct,

the complaint has alleged - but it has not "show[n]" - "that the pleader is entitled to relief."

Id. at 1950 (quoting Fed. R. Civ. P. 8(a)(2)).

Plaintiffs' amended claims of fraudulent and negligent misrepresentation meet the

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pleading requirements of Rule 9(b) by identifying the statements the plaintiffs contend are

fraudulent, the speaker, where and when the statements were made, and an explanation

why the defendants believe the statements were fraudulent. See Frank v. Dana Corp., 547

F.3rd 564, 569-570 (6th Cir. 2008). Plaintiffs allege that Countrywide made

misrepresentations in the March 23, 2005 Uniform Residential Loan Application that

plaintiffs made $5,200.00 per month leasing out rental properties. Plaintiffs allege that

Countrywide's agent Tom Carmody misrepresented on or about March 23, 2005 that the

Troy property was worth over $1,500,000.00, that the $1,550,000.00 purchase price set

forth in the March 23, 2005 Uniform Residential Loan Application was an adequate

reflection of the fair market value of the home, that if the plaintiffs encountered problems

making their loan payments they would be able to sell the home for a substantial profit or

refinance the loan, and that the plaintiffs' combined monthly income would be more than

enough to meet the monthly payments while still living comfortably financially. Id. Plaintiffs

allege they ultimately purchased the home in 2006.

Fraudulent misrepresentation requires proof of a false misrepresentation made by

the defendant knowing it was false, or made with reckless disregard for the truth. Bergen

v. Baker, 264 Mich. App. 376, 382, 691 N.W.2d 770 (2004). Negligent misrepresentation

requires proof that the defendant provided information without reasonable care to a plaintiff

to whom a duty was owed. Law Offices of Lawrence J. Stockler, P.C. v. Rose, 174 Mich.

App. 14, 33, 436 N.W.2d 70 (1989). Fraudulent misrepresentation and negligent

misrepresentation each require proof of a misrepresentation of a past or existing fact.

Boumelhem v. BIC Corporation, 211 Mich. App. 175, 184, 535 N.W.2d 574 (1995) (citing

Marrero v. McDonnell Douglas Capital Corp., 200 Mich. App. 438, 444, 505 N.W.2d 275

(1993); City Nat'l Bank of Detroit v. Rodgers & Morgenstein, 155 Mich. App. 318, 323, 399

N.W.2d 505 (1986)). Broken future promises do not constitute fraud, nor evidence of fraud.

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Marrero, 200 Mich. App. at 444. Fraudulent misrepresentation and negligent

misrepresentation also each require proof of reasonable or justifiable reliance. Nieves v.

Bell Industries, Inc., 204 Mich. App. 459, 464, 517 N.W.2d 235 (1994); Stockler, 174 Mich.

App. at 33. "[T]here can be no fraud where the means of knowledge regrading the

truthfulness of the representation are available to the plaintiff and the degree of their

utilization has not been prohibited by the defendant." Webb v. First of Michigan Corp., 195

Mich. App. 470, 474, 491 N.W.2d 851 (1992)). "[A] plaintiff cannot claim to have been

defrauded where he had information available to him that he chose to ignore." Nieves, 204

Mich. App. at 464. 

Construing the factual allegations in a light most favorable to the plaintiffs, plaintiffs

have failed to allege plausible claims of fraudulent misrepresentation or negligent

misrepresentation. Iqbal, 129 S.Ct. at 1951; Twombly, 127 S.Ct. at 1964-65. Plaintiffs

allegation that the March 23, 2005 Uniform Residential Loan Application misrepresented

that plaintiffs made $5,200.00 per month leasing out rental properties fails for lack of

reasonable and justifiable reliance in that plaintiffs had personal knowledge of their own

incomes. Webb, 195 Mich. App. at 474; Nieves, 204 Mich. App. at 464; Stockler, 174 Mich.

App. at 33. Plaintiffs do not allege facts allowing for a reasonable inference that

Countrywide somehow prohibited plaintiffs from accurately assessing the income plaintiffs

earned renting out properties. Id. Plaintiffs do not allege that they were prevented from

reading the Uniform Residential Loan Application. Id. Plaintiffs' self-serving attestations

that they relied upon the numbers set forth in the Uniform Residential Loan Application fall

short of establishing a plausible finding of reasonable or justifiable reliance. See Evans v.

Ameriquest Mortgage Co., No. 233115, 2003 WL 734169, *1 (Mich. Ct. App. Mar. 4, 2003)

(reasoning that "[b]ecause defendants did not prohibit plaintiffs from reading the

documents, plaintiffs cannot claim fraud based on an alleged misrepresentation clearly

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contradicted by the documents.").

Plaintiffs' allegations that Carmody misrepresented on March 23, 2005 that the

property was worth over $1,500,000.00, and that the $1,550,000.00 purchase price

adequately reflected the home's fair market value, likewise fail for lack of reasonable or

justifiable reliance. Webb, 195 Mich. App. at 474; Nieves, 204 Mich. App. at 464; Stockler,

174 Mich. App. at 33. The representations were allegedly made over eight months before

the loan allegedly closed in late 2005. Plaintiffs do not allege that Countrywide provided

fraudulent appraisals of the property, or prevented plaintiffs from acquiring independent

appraisals before closing. Id. Plaintiffs do not allege the "true" fair market value of the

property when Carmody made his alleged misrepresentation concerning the value of the

property. At best, the court can do no more than infer the mere possibility of misconduct,

an inference that is insufficient to show a plausible claim for relief. Iqbal, 129 S.Ct. at 1951.

 

Carmody's alleged March 23, 2005 representations that the plaintiffs would later be

able to sell the home for a substantial profit or refinance the loan, and that the plaintiffs'

income would be more than enough to meet the monthly loan payments while allowing

plaintiffs to remain living comfortably, are not actionable representations of past or existing

facts. Boumelhem, 211 Mich. App. at 184; Marrero, 200 Mich. App. at 444. The

allegations instead involve predictions for the future. Id. Further, plaintiffs could not

reasonably rely on representations made in 2005 that they would be able to resell their

home at a profit, or refinance the loan, four years later in 2009. Carmody's alleged

representation that plaintiffs would be able to remain "living comfortably financially"

constitutes mere contractual "puffing." See Webb, 195 Mich. App. at 474. Again, the

allegations raise only a possible inference of misconduct, an inference that is insufficient

to show a plausible claim of fraudulent or negligent misrepresentation. Iqbal, 129 S.Ct. at

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1951.

Plaintiffs have not alleged that Countrywide is liable for breach of a contract to

refinance or sell the property. Accordingly, the court does not address Countrywide's

statute of frauds defense.

For the reasons set forth above, Countrywide's motion to dismiss is hereby

GRANTED. Plaintiffs' amended claims of fraudulent misrepresentation and negligent

misrepresentation are hereby DISMISSED with prejudice. Countrywide is hereby

DISMISSED from this lawsuit. 

SO ORDERED.

Dated: December 22, 2009

s/George Caram Steeh 

GEORGE CARAM STEEH

UNITED STATES DISTRICT JUDGE

CERTIFICATE OF SERVICE

Copies of this Order were served upon attorneys of record on

December 22, 2009, by electronic and/or ordinary mail.

s/Josephine Chaffee

Deputy Clerk

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