Complaint-10.23.08.doc 1

TROTT & TROTT, P.C. 31440 NORTHWESTERN HIGHWAY, SUITE 200

FARNMINGTON HILLS, MI

48334

PHONE (248) 642-2515

FACSIMILE (248) 205-4118

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

NORTHERN DIVISION

COUNTRYWIDE HOME LOANS, INC. as servicer Case No. for the UNITED STATES DEPARTMENT OF Hon. VETERANS AFFAIRS, Plaintiff, v

ROBERT J. KLEINE, not individually, but in his

capacity as STATE OF MICHIGAN TREASURER, and

THE MICHIGAN DEPARTMENT OF

NATURAL RESOURCES OFFICE OF

PROPERTY MANAGEMENT, and

MARVIN D. HARE, not individually, but in his capacity as the Treasurer for

the County of Saginaw, and

LARRY STATON and VICKI STATON, Husband and Wife, and

KENNETH BAKER, and

VERTIS SMITH, Defendants. _____________________________________________________________________/

RICHARD WELKE (P44403)

Trott & Trott, P.C. Attorney for Plaintiff

31440 Northwestern Highway, Suite 200

Farmington Hills, MI 48334

(248) 723-5765

______________________________________________________________________/

COMPLAINT TO VACATE TAX FORECLOSURE JUDGMENT

AND TO QUIET TITLE

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Complaint-10.23.08.doc 2

TROTT & TROTT, P.C. 31440 NORTHWESTERN HIGHWAY, SUITE 200

FARNMINGTON HILLS, MI

48334

PHONE (248) 642-2515

FACSIMILE (248) 205-4118

COMPLAINT TO VACATE TAX FORECLOSURE JUDGMENT

AND TO QUIET TITLE

NOW COMES Plaintiff, COUNTRYWIDE HOME LOANS, as servicer for the

UNITED STATES DEPARTMENT OF VETERANS AFFAIRS, by and through its

attorneys, TROTT & TROTT, P.C., by Richard Welke, and submits the following as its

Complaint against Defendants:

JURISDICTION AND PARTIES

1. That this is an action for damages and to vacate a judgment of foreclosure

entered in civil action no. 01-39387-CZ in the circuit court for the County of Saginaw, State of Michigan, in the matter of the petition filed by the Treasurer for the State of

Michigan for alleged delinquent real property taxes levied by the city and county taxing

authorities of Saginaw County. 2. That this is an action to enforce certain rights guaranteed to the Plaintiff

pursuant the property clause and the supremacy clause of the Federal Constitution of the

United States as well as State of Michigan tax foreclosure law. 3. That this Court has jurisdiction pursuant 28 U.S.C. ß1331 and 28 USCS ß 2410. 4. That Plaintiff, COUNTRYWIDE HOME LOANS, INC. (hereinafter referred as ìCHLî) is a foreign corporation that acts as a mortgage servicer for certain home loans

administered and owned by the UNITED STATES DEPARTMENT OF VETERAN

AFFAIRS (hereinafter referred as the ìVAî). 5. That Plaintiff, the UNITED STATES DEPARTMENT OF VETERAN

AFFAIRS is a government run military veteran benefit system with cabinet level status that

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administers a program of veteranís benefits for veterans and their families including but not

limited to home loans. 6. That Defendant, Robert J. Kleine, not individually, but in his capacity as

STATE OF MICHIGAN TREASURER was the foreclosing governmental unit, as that

term is defined in Michigan law, that foreclosed the property at issue in 2002 for alleged

delinquent property taxes. A copy of the Notice of Judgment of Foreclosure is attached

as Exhibit A. 7. That Defendant, MARVIN D. HARE, not individually, but in his capacity as the

Treasurer for the County of Saginaw, State of Michigan was the County taxing authority

that drafted and filed the Certificate of Forfeiture, as that term is defined in Michigan law,

that forfeited the property at issue in 2001 for alleged delinquent property taxes. A copy of

the Certificate of Forfeiture is attached as Exhibit B. 8. That Defendants, LARRY STATON and VICKI STATON, are husband and

wife who granted a mortgage on July 1, 1981, to Waterfield Mortgage Company

Incorporated, which was recorded on July 9, 1981, in Liber 1601, Page 2282, Saginaw

County Records. (hereinafter referred to as the ìStaton Mortgageî). A copy of the Staton

Mortgage is attached as Exhibit C. 9. That the Staton Mortgage was properly assigned to and became the property of

the VA in 1985. A copy of all assignments are attached as Exhibit D. 10. That Defendants, KENNETH BAKER and VERTIS SMITH are postforeclosure tax sale purchasers pursuant a public auction sale and Quit Claim Deed from

the Michigan Department of Natural Resources dated September 19, 2002, which deed was

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recorded on December 4, 2002, in Liber 2235, Page 952, Saginaw County Records. A

copy of the Quit Claim Deed is attached as Exhibit E. 11. That the events giving rise to this cause of action occurred in the County of

Saginaw, which is part of the United States District Court, Eastern District, Northern

Division, for the State of Michigan. 12. That the real property which is the subject of this cause of action is located at

1001 Webber Street, Saginaw, Michigan 48601, and is more specifically described as:

Lot 1, Block 1, George W. Hesseís Addition to the City of East

Saginaw, according to the Plat thereof recorded in Liber 38, age 45 of Plats, Saginaw County Records. Parcel ID#: County: 91-10-3-13-9000-000 City: 11 0139 00000

(ìSubject Propertyî)

FACTUAL BACKGROUND & LEGAL CONTENTIONS

13. That Plaintiffís interest in the Subject Property is a first mortgage lien interest

granted by the Statons on July 1, 1981, to Waterfield Mortgage Company Incorporated, which was recorded on July 9, 1981, in Liber 1601, Page 2282, Saginaw County Records.

(See, Exhibit C)

14. That on July 16, 1981, the Waterfield Mortgage Company assigned the Staton

Mortgage to the Federal National Mortgage Association, said assignment recorded on July

30, 1981, in Liber 1602, Page 1512, Saginaw County Records. A copy of the referenced

Assignment to Federal National Mortgage Association is attached as Exhibit F. 15. That on May 25, 1995, Federal National Mortgage Association assigned the

Staton Mortgage to the Secretary of Veteran Affairs, the VA, with said assignment being

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TROTT & TROTT, P.C. 31440 NORTHWESTERN HIGHWAY, SUITE 200

FARNMINGTON HILLS, MI

48334

PHONE (248) 642-2515

FACSIMILE (248) 205-4118

being recorded in Liber 1936, Page 456, Saginaw County Records. A copy of the

Assignment to the Secretary of Veteran Affairs is attached as Exhibit G. 16. That on March 1, 2001, Defendant, MARVIN D. HARE, the Treasurer for the

County of Saginaw, State of Michigan drafted and filed the Certificate of Forfeiture, which

was recorded in Liber 2198, Page 445, Saginaw County Records. See Exhibit B. 17. That on July 30, 2002, the STATE OF MICHIGAN TREASURER, filed the

Notice of Judgment of Foreclosure, which was recorded in Liber 2233, Page 1140, Saginaw County Records. See Exhibit A. 18. That Defendants, KENNETH BAKER and VERTIS SMITH purchased the

Subject Property pursuant a public auction sale from the Michigan Department of Natural

Resources and received a Quit Claim Deed dated September 19, 2002, which deed was

recorded on December 4, 2002, in Liber 2235, Page 952, Saginaw County Records. A

copy of the Quit Claim Deed is attached as Exhibit E. 19. That a table of relevant recorded documents, in date of recording order, is

included below. Date

Executed &

Recorded

Exhibit GRANTOR Document

Type

GRANTEE

7-1-81

R 7-9-81

L1601/P2282 C

Larry Staton &

Vicki Staton

Mortgage

$20,500.00

WATERFIELD

MORTGAGE

COMPANY

INCORPORATED

7-16-81

R7-30-81

L1602/P1512 F

WATERFIELD

MORTGAGE

COMPANY

INCORPORATED

Assignment of

Mortgage

Federal National

Mortgage

Association

5-23-95

R5-25-95

L1936/P456

G

Federal National

Mortgage

Association

Assignment of

Mortgage

The Secretary of

Veterans Affairs

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Complaint-10.23.08.doc 6

TROTT & TROTT, P.C. 31440 NORTHWESTERN HIGHWAY, SUITE 200

FARNMINGTON HILLS, MI

48334

PHONE (248) 642-2515

FACSIMILE (248) 205-4118

3-1-01

R3-26-01

L2198/P445 B

L/V. STATON Certificate of

Forfeiture of

Real Property

Saginaw County

Treasurer

7-30-02

R11-5-02

L2233/P1140

A

L/V. STATON Notice of

Judgment of

Foreclosure

State of Michigan

Treasurer

9-19-02

R12-4-02

L2235/P952 E

DEPARTMENT

OF NATURAL

RESOURCES ñ STATE OF MI

Quit Claim

Deed

Kenneth Baker

Vertis Smith, as

joint tenants and

not as tenants in

common.

20. That the mortgagee of record since 1995 has been and continues to be the VA. 21. That the VA did not receive requisite notice of the tax foreclosure and, further, was improperly foreclosed upon in violation of the property clause and the supremacy

clause of the Federal Constitution. 22. That the relevant tax statute dealing with notice, MCLA ß211.78i, states in

pertinent

ß 211.78i. Identification of owners of property interest; title

search; personal visit to determine occupancy; publication of

notice; sources of identification; notice provisions; prohibited

assertions if failure to redeem property; noncompliance; "authorized representative" defined; applicability of other

requirements. Sec. 78i. (1) Not later than May 1 immediately succeeding the

forfeiture of property to the county treasurer under section 78g, the

foreclosing governmental unit shall initiate a search of records

identified in subsection (6) to identify the owners of a property

interest in the property who are entitled to notice under this section

of the show cause hearing under section 78j and the foreclosure

hearing under section 78k. Ö

(6) The owner of a property interest is entitled to notice under

this section of the show cause hearing under section 78j and the

foreclosure hearing under section 78k if that owner's interest was

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TROTT & TROTT, P.C. 31440 NORTHWESTERN HIGHWAY, SUITE 200

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identifiable by reference to any of the following sources before

the date that the county treasurer records the certificate

required under section 78g(2):

(a) Land title records in the office of the county register of deeds. (emphasis added)

23. That the certificate required under ß78g(2) is the certificate of forfeiture. 24. That as of March 26, 2001 (the date that the county treasurer recorded the

certificate of forfeiture), the VA was the ìowner of a property interest . . . that . . . was

identifiable . . . before the date that the county treasurer recorded the certificateî, pursuant MCLA ß211.78i. See ìExhibit Bî. 25. That the record clearly showed the VAís property interest in the Subject

Property. 26. That the VA did not receive notice of the tax foreclosure and, as a result, the

State Treasurer foreclosed and sold the Subject Property at public auction, without the

requisite notice to the VA. 27. That the Property clause of the Federal Constitution states: The Congress shall

have Power to dispose of and make all needful Rules and Regulations respecting the

Territory or other Property belonging to the United States; and nothing in this Constitution

shall be so construed as to Prejudice any Claims of the United States, or of any particular

State. USCS Const. Art. IV, ß 3, Cl 2. 28. That the State Treasurer foreclosed and sold the property of the VA at public

auction without authority and in direct contradiction of the Property clause of the Federal

Constitution. 29. That the Supremacy clause of the Federal Constitution states: ìThis

Constitution, and the Laws of the United States which shall be made in Pursuance thereof;

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TROTT & TROTT, P.C. 31440 NORTHWESTERN HIGHWAY, SUITE 200

FARNMINGTON HILLS, MI

48334

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FACSIMILE (248) 205-4118

and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound

thereby, any Thing in the Constitution or Laws of any State to the Contrary

notwithstanding.î USCS Const. Art. VI, Cl 2. 30. That it is well settled that the United States is immune unless it consents to suit. United States v. Testan , 424 U.S. 392 (1976); Blackmar v. Guerre , 342 U.S. 512 (1952);

Sherwood v. United States , 312 U.S. 584 (1941). 31. That the State Treasurer foreclosed and sold the Subject Property of the VA at

public auction without authority and in direct contradiction of the Supremacy Clause of the

Federal Constitution. 32. That 28 USCS ß 2410, Actions affecting property on which United States has

lien, states in pertinent part;

(a) Under the conditions prescribed in this section and section 1444

of this title [28 USCS ß 1444] for the protection of the United

States, the United States may be named a party in any civil action

or suit in any district court, or in any State court having jurisdiction

of the subject matter--

(1) to quiet title to, (2) to foreclose a mortgage or other lien upon, Ö

real or personal property on which the United States has or claims

a mortgage or other lien.

33. That the State Treasurer foreclosed the Subject Property in state circuit court

and sold the Subject Property at public auction, all without naming the VA and without

authority in direct contradiction of 28 USCS ß 2410.

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TROTT & TROTT, P.C. 31440 NORTHWESTERN HIGHWAY, SUITE 200

FARNMINGTON HILLS, MI

48334

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34. That 28 USC ß 1444, Foreclosure action against United States, states;

Any action brought under section 2410 of this title [28 USCS ß 2410] against the United

States in any State court may be removed by the United States to the district court of the

United States for the district and division in which the action is pending. 35. That 28 USCS ß 2410(c), Actions affecting property on which United States has

lien, states in pertinent part;

(c) A judgment or decree in such action or suit shall have the same effect

respecting the discharge of the property from the mortgage or other lien

held by the United States as may be provided with respect to such matters

by the local law of the place where the court is situated. However, an

action to foreclose a mortgage or other lien, naming the United States as a

party under this section, must seek judicial sale. 36. That although 28 USCS ß 2410 permits suits against United States to foreclose

mortgage or other lien upon real property on which United States claims lien, action against

United States would be barred where plaintiff had not sought judicial sale as required

pursuant to 28 USCS ß 2410(c). United States v Perpetual Help's Boys Home (1978, ED

Wis) 451 F Supp 270, 78-2 USTC P 9598, 42 AFTR 2d 5407. 37. That the State Treasurer foreclosed the Subject Property in state circuit court

and sold the Subject Property at public auction, all without notice to the VA or seeking a

judicial sale in direct contradiction of 28 USCS ß 2410. 38. United States cannot be party to suit to foreclose tax sales certificates without its

consent. Kenilworth v Corwine (1951, DC NJ) 96 F Supp 68, 43 AFTR 1.19. 39. That the State Treasurer foreclosed the Subject Property in state circuit court

and sold the Subject Property at public auction, all without notice to the VA and contrary to

existing state and federal law.

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40. Similarly and by analogy, Lien interest held by FDIC cannot be extinguished

without FDIC's consent as result of foreclosure of liens securing payment of local property

taxes Matagorda County v Russell Law (1994, CA5 Tex) 19 F3d 215, 94 TNT 80-16. 41. That based upon all of the above described defects in the foreclosure process

and procedure by the State and County Treasurer this tax foreclosure should be set aside,

redemption allowed and title quieted as before the wrongful tax foreclosure. WHEREFORE, Plaintiff respectfully requests that this Court enter an order vacating

the judgment of foreclosure as to the Subject Property and quieting title in Larry Staton and

Vicki Staton, husband and wife, subject to the valid first mortgage lien of the Veterans

Administration. Additionally, Plaintiff respectfully requests that this court grant such other

relief deemed appropriate, including but not limited to, actual damages and an award of

costs and reasonable attorneyís fees necessitated by filing this complaint.

October 23, 2008 s/Richard Welke

Attorney for Plaintiff

31440 Northwestern Highway

Farmington Hills, MI 48334

(248) 723-5765

Email: rwelke@trottlaw.com

P44403

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