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Yes.UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

DARREN McLEHAN, No. 09-11547

Plaintiff, District Judge David M. Lawson

v. Magistrate Judge R. Steven Whalen

CHASE HOME FINANCE, LLC,

Defendant. /

REPORT AND RECOMMENDATION

Before the Court is Defendant Chase Home Finance’s and Federal Home Loan

Mortgage Corporation’s Motion to Dismiss and/or for Summary Judgment on All of

Plaintiffs’ Claims [Docket #28], filed December 8, 2009, which has been referred for a

Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). For the reasons set forth

below, I recommend that the motion be GRANTED, dismissing present Defendants from this

action with prejudice. 

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs filed suit in Wayne County Circuit Court on or about January 1, 2009,

alleging improprieties surrounding the May 21, 2008 foreclosure of their Detroit, Michigan

home. Darren and Noreen McLehan v. Federal National Mortgage Association, et. al., Trott

and Trott P.C., Case No. 09-000446-CH. Docket #1 at ¶1. On March 13, 2009, Plaintiffs’

motion to amend the complaint was granted, adding Defendant Chase Home Finance LLC

(“Chase”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) as Defendants.

Id. at ¶4. On April 24, 2009, Defendants Chase and Freddie Mac filed a notice of removal

to this Court pursuant to 28 U.S.C. §1446(b). Id. at ¶7. 
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Plaintiffs’ first amended complaint, filed in state court on February 18, 2009, alleges

that Defendants Trott & Trott P.C. (“Trott”) and the County of Wayne (“Wayne County”)

employed “false, defective, improper and/or suspicious and questionable” methods in

processing the mortgage foreclosure in violation of M.C.L. §§600.3216, 3232 and the Fair

Debt Collection Practices Act (“FDCPA”). Docket #1, pgs. 17-18 of 69, ¶¶17, 20. 

 Plaintiffs, also alleging detrimental reliance, unjust enrichment, fraud, irregularity,

misrepresentation and/or material defect in the foreclosure process, claim that Defendant

Chase failed to provide them with documents required by the Truth in Lending Act (“TILA”)

15 U.S.C. §§ 1601 et seq. at the time the mortgage was executed. Id., pg. 16 of 69, ¶6(a-d).

They allege that they were unaware that additional charges would be tacked on to the

“regular monthly payment;” that they would be obliged to pay a balloon note at the end of

term; or that they would be subject to prepayment penalties. Plaintiffs also allege that in

violation of the Federal Trade Commission Act (“FTCA”), Chase reneged on a promise to

give them a fixed rate mortgage. Id. pg. 17 0f 69, ¶10(e) (citing Federal Trade Commission

Act, 15 U.S.C. §45(a)). They contend further that Freddie Mac was “unjustly enriched due

to the violations of the Fair Debt Collections Practice Act” by Defendant Trott during the

foreclosure proceedings. Id. at pg. 19, ¶20. 

II. STANDARD OF REVIEW

In assessing the sufficiency of a complaint under 12(b)(6), the court must first

determine whether it contains factual allegations, as opposed to legal conclusions. Ashcroft

v. Iqbal, ---U.S.---, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). “Threadbare recitals of the

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

129 S.Ct. at 1949 (citing Bell Atlantic Corp. v. Twombley, 550 U.S 544, 555, 127 S.Ct. 1955,

1964-1965, 167 L.Ed.2d 929 (2007)). Second, the facts that are pled must show a
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“plausible” claim for relief, which the Court described as follows:

“Determining whether a complaint states a plausible claim for relief will, as

the Court of Appeals observed, be a context-specific task that requires the

reviewing court to draw on its judicial experience and common sense. But

where the well-pleaded facts do not permit the court to infer more than the

mere possibility of misconduct, the complaint has alleged–but it has not

shown–that the pleader is entitled to relief.”

129 S.Ct. at 1950 (internal citations omitted).

Summary judgment is appropriate where “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that there

is no genuine issue as to any material fact and that the moving party is entitled to a judgment

as a matter of law.” Fed. R.Civ.P. 56(c). To prevail on a motion for summary judgment, the

non-moving party must show sufficient evidence to create a genuine issue of material fact.

Klepper v. First American Bank, 916 F.2d 337, 341-42 (6th Cir. 1990). Drawing all

reasonable inferences in favor of the non-moving party, the Court must determine “whether

the evidence presents a sufficient disagreement to require submission to a jury or whether it

is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Entry of summary

judgment is appropriate “against a party who fails to make a showing sufficient to establish

the existence of an element essential to that party’s case, and on which that party will bear

the burden of proof at trial.” Celetox Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548,

91 L.Ed.2d 265 (1986). When the “record taken as a whole could not lead a rational trier of

fact to find for the nonmoving party,” there is no genuine issue of material fact, and summary

judgment is appropriate. Simmons-Harris v. Zelman, 234 F.3d 945, 951 (6th Cir. 2000).
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For ease of reference, arguments for dismissal are lettered (A-H) rather than

numbered, consistent with Defendant’s brief. Defendant’s Brief at 5-14. 

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III. ANALYSIS

Present Defendants contend that multiple grounds exist for dismissal:1 (A) TILA

claims are time-barred by the statute of limitations. Defendants’ Brief at 5; ( B) TILA claims

are barred by the statute of repose. Id. at 5-6; ( C) The Federal Trade Commission Act does

not contain a private right of action. Id. at 6-7 (D) The “consumer injury” claim states no

cause of action. Id. at 7; (E) Plaintiffs lack standing to challenge the foreclosure process.

Id. at 7-12; (F) Plaintiffs’ argument that the mortgage’s promissory note supplied by

Defendants is a copy rather than the original does not allege a cause of action. Id. at 12; (G)

Plaintiffs’ claims of unjust enrichment are dismissible given the presence of an express

contract. Id. at 13-14; (H) Plaintiffs’ argument that Freddie Mac is not a “holder in due

course” reflects a misapplication of M.C.L. §440.3302(1). Id. at 14-15. 

A. TILA Claims Are Time-barred by the Statute of Limitations. 

 15 U.S.C. § 1640(e) states in pertinent part that “[a]ny action under this section may

be brought in any United States district court, or in any other court of competent jurisdiction,

within one year from the date of the occurrence of the violation.” “The limitations period

in § 1640(e) runs from the date of consummation of the transaction.” Gray v. Home Bank of

Tennessee, 1995 WL 35660, *1 (6th Cir.1995)(citing Jones v. TransOhio Sav. Ass'n, 747

F.2d 1037, 1041 (6th Cir.1984)).

 Plaintiffs do not dispute that the mortgage in question was executed on November 23,

2005, over three years before filing suit on January 7, 2009. They have made no showing

that equitable tolling is appropriate. “[T]he doctrine of equitable tolling may, in the

appropriate circumstances, suspend the limitations period until the borrower discovers or has
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reasonable opportunity to discover the fraud or nondisclosures that form the basis of the

TILA action.” Id. Aside from Plaintiffs’ generalized allegations of fraud, neither the

Amended Complaint nor the response to the present motion contain factual allegations

justifying equitable tolling. The allegation that Defendant Chase failed to provide them with

a right of cancellation notice at the time of the mortgage execution is insufficient to toll the

claim. “The alleged act(s) that provide the factual predicate for the claim, i.e., inaccurate

loan documents, cannot, standing alone, also support equitable tolling.” Sobh v. Chase Home

Finance, LLC et al., E. D. Mich. Case no. 09-11986, Docket #19 at 6, July 28, 2009 (Rosen,

J.)(citing In re Community Bank of Northern Virginia, 467 F. Supp. 2d 466, 479 (W.D. Pa.

2006)). As such, dismissal of the TILA claims is appropriate. 

 B. TILA Claims Are Also Barred by the Statute of Repose. 

Under 15 U.S.C § 1635(f),

“[a]n obligor's right of rescission shall expire three years after the date of

consummation of the transaction or upon the sale of the property, whichever

occurs first, notwithstanding the fact that the information and forms required

under this section or any other disclosures required under this chapter . . . have

not been delivered to the obligor.”

“[T]he borrower has three years in which to rescind the transaction if (as alleged here) the

bank failed to satisfy the notice requirements of the Act.” Barrett v. JP Morgan Chase Bank,

N.A., 445 F.3d 874, 881 (6th Cir. 2006). “The statute . . . describes the rules for repose--three

days if the bank satisfies its disclosure requirements and three years if it does not.” Id.

Plaintiffs’ January 7, 2009 filing places it well beyond the three-year anniversary of

the November 23, 2005 mortgage consummation. Even assuming for the sake of argument

that Defendants in one way or another failed to satisfy TILA’s notice requirements (Affidavit

of Darren McLehan at ¶2), Plaintiffs’ claims for rescission are nonetheless extinguished.
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C. The Federal Trade Commission Act 

Claims made under the Federal Trade Commission Act (“FTCA”), 15 U.S.C.

§45(a) are also subject to dismissal. See Complaint, pg. 17 0f 69, ¶10(e). 

 “Unfair methods of competition in or affecting commerce, and unfair or deceptive acts

or practices in or affecting commerce, are hereby declared unlawful.” 15 U.S.C. § 45(a)(1).

“The Commission is . . . empowered and directed to prevent persons, partnerships, or

corporations . . . from using unfair methods of competition in or affecting commerce and

unfair or deceptive acts or practices in or affecting commerce.” Id.

Regardless of whether Defendant engaged in “deceptive acts” as defined by the

subsection, a private right of action is unavailable under the FTCA. “The Act nowhere

purports to confer upon private individuals, either or business competitors, a right of action

to enjoin the practices prohibited by the Act or to obtain damages following the commission

of such acts.” Holloway v. Bristol-Myers Corp. 485 F.2d 986, 989-990 (D.C. Cir. 1973); See

also Diessner v. Mortgage Electronic Registration Systems, 618 F. Supp. 2d 1184, 1191 (D.

Arizona 2009). 

D. Plaintiffs’ “Consumer Injury” Claim Does Not State a Cause of Action. 

To the extent that Plaintiffs’ “consumer injury” allegations are based on TILA,

these claims, as discussed above, are barred by both the statute of limitations and the

statute of repose. Construed alternatively to state violations of the FTCA, Plaintiffs do

not enjoy a private a cause of action. See Holloway, supra. 

E. Standing

Defendants argue next that Plaintiffs lack standing to contest the foreclosure sale. 

They point out that the six-month redemption period for the May 21, 2008 foreclosure sale

expired on November 21, 2008 but that Plaintiffs did not file suit until January, 2009.
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However, outstanding FDCPA claims against Co-Defendant Trott pertaining to

the May, 2008 foreclosure sale will not be addressed here. 

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Defendants’ Brief at 8-9 (citing Mission of Love v. Evangelist Hutchinson Ministries, No.

26619, 2007 WL 1094424 at *5 (Mich. Ct. App., April 12, 2007)). On a related note,

Defendant Chase contends that its own processing of the mortgage and Co-Defendant Trott’s

administration of the sale proceedings do not present grounds to set aside the foreclosure.

Id. at 9-11. Defendants argue further that Plaintiffs are guilty of laches. Id. at 11-12. 

The court in Mission of Love, finding that the lower court had properly declined to

hear the merits of the plaintiff’s claim subsequent to the expiration of the redemption period,

observed that “[a]fter the redemption period expired, plaintiff no longer had any right or

interest in the foreclosure sale.” 2007 WL 1094424 at *5. See also MOSES Inc. v. SEMCOG,

270 Mich.App. 401, 415, 716 N.W.2d 278, 287 (2006)(“On these facts, the individual

plaintiffs lack standing because they have not alleged an injury in fact to a legally protected

interest.” )(internal citations omitted). 

Applicably here, Plaintiffs’ lack of standing at the time the lawsuit was filed defeats

the allegation that Defendant Freddie Mac, having purchased the mortgage note, is not “the

holder in due course,” as a result of foreclosure sale improprieties. Complaint at ¶21. 2

F. The Authenticity of the Promissory Note

 Pursuant to Fed. R. Evid. 1003, Plaintiffs apparently contend that a copy of the

promissory note submitted by Defendants is insufficient. See Defendants’ Exhibit 6. 

Fed. R. Evid. 1003 reads as follows:

“A duplicate is admissible to the same extent as an original unless (1) a

genuine question is raised as to the authenticity of the original or (2) in the
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circumstances it would be unfair to admit the duplicate in lieu of the original.”

 The failure to comply with Rule 1003 does not state a cause action. Further, the

allegation is moot to the extent that it would actually support the time-barred TILA claims.

More obviously, Plaintiffs have not provided any evidence to show that Defendants altered

the original document or that the copy was otherwise inadequate. English v. Flagstar Bank,

2009 WL 3429674, *4 (E.D. Mich. October 21 2009)(Cohn, J.). 

G. Unjust Enrichment 

 Claims for unjust enrichment made pursuant to FDCPA are unavailing given that 

neither Chase nor Freddie Mac are “debt collectors” under the Act. Under the FDCPA,

only “debt collectors” are subject to liability. Montgomery v. Huntington Bank, 346 F.3d

693, 698 -699 (6th Cir. 2003).

“The term ‘debt collector’ means any person who uses any instrumentality

of interstate commerce or the mails in any business the principal purpose of

which is the collection of any debts, or who regularly collects or attempts to

collect, directly or indirectly, debts owed or due or asserted to be owed or

due another.”

15 U.S.C.. § 1692a(6). Attempts to collect on a security interest in the property by Defendant

Chase are also exempt from liability under the Act. See Montgomery at 698-699 (finding

that the defendant bank collecting on its accounts fell “within the exception of” §

1692a(6)(F)(iii)). 

The unjust enrichment claims, alternatively construed under state law, are likewise

unavailing. Under Michigan law, “[t]he essential elements of an unjust enrichment claim are:

‘(1) receipt of a benefit by the defendant from the plaintiff and (2) an inequity resulting to the

plaintiff because of the retention of the benefit by defendant.’” J & J Plumbing & Heating,

LLC v. Tate, 2008 WL 4891807,*4 (Mich.App. 2008)(citing Barber v. SMH (US), Inc., 202
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Mich.App 366, 375, 509 NW2d 791 (1993)). “‘In such instances, the law operates to imply

a contract in order to prevent unjust enrichment.’” Id. “‘However, a contract will be implied

only if there is no express contract covering the same subject matter.’” Id. 

This action is governed by the written terms of the November 23, 2005 mortgage

agreement. Docket #28, Exhibit 7. Further, Defendants, addressing the merits of the

allegation, note that “Freddie Mac paid full consideration (the outstanding amounts due under

the note) for the property at the foreclosure sale.” Defendants’ Brief at 14; Exhibit 10. They

point out that “it is not like Freddie Mac paid $1 for the property or otherwise received a

‘sweetheart deal.’” The unjust enrichment claim, construed as either a FDCPA or state law

claim, is subject to dismissal. 

H. M.C.L. § 440.3302(1)

 Finally, Plaintiffs’ allegation that Defendant Freddie Mac is not “the holder in due

course” is also dismissible on its face. 

Pursuant to M.C.L. § 440.3302(1) “‘holder in due course’” requires that 

 “(a) The instrument when issued or negotiated to the holder does not bear

such apparent evidence of forgery or alteration or is not otherwise so irregular

or incomplete as to call into question its authenticity” 

and 

“(b) The holder took the instrument (i) for value, (ii) in good faith, (iii)

without notice that the instrument is overdue or has been dishonored or that

there is an incurred default with respect to payment of another instrument

issued as part of the same series, (iv) without notice that the instrument

contains an unauthorized signature or has been altered, (v) without notice of

any claim to the instrument described in section 3306, and (vi) without notice

that any party has a defense or claim in recoupment described in section

3305(1).”

 Defendants contend that § 440.3302 and the “holder in due course doctrine” is
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inapplicable to Freddie Mac’s deed to the property. Defendants’ Brief at 14-15. From a

substantive perspective, Plaintiffs’ allegation, construed to state that Freddie Mac’s interest

in the property is invalidated by foreclosure irregularities, is unavailing. Freddie Mac’s

purchase was “for value.” Defendants’ Exhibit 10. Plaintiffs, waiting until January, 2009 to

file suit, cannot show that Freddie Mac had reason to question the validity of the note at the

time of the May 21, 2008 sale or that the purchase was not made in good faith. 

IV. CONCLUSION

 For these reasons, I recommend that the motion to dismiss and/or for summary

judgment [Docket #28] be GRANTED, dismissing present Defendants from this action

with prejudice. 

Any objections to this Report and Recommendation must be filed within fourteen

(14) days of service of a copy hereof as provided for in 28 U.S.C. §636(b)(1) and E.D.

Mich. LR 72.1(d)(2). Failure to file specific objections constitutes a waiver of any further

right of appeal. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985);

Howard v. Secretary of HHS, 932 F.2d 505 (6th Cir. 1991); United States v. Walters, 638

F.2d 947 (6th Cir. 1981). Filing of objections which raise some issues but fail to raise

others with specificity will not preserve all the objections a party might have to this Report

and Recommendation. Willis v. Sullivan, 931 F.2d 390, 401 (6th Cir. 1991); Smith v.

Detroit Fd’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). Pursuant to

E.D. Mich. LR 72.1(d)(2), a copy of any objections is to be served upon this Magistrate

Judge.

Within fourteen (14) days of service of any objecting party’s timely filed

objections, the opposing party may file a response. The response shall be not more than
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twenty (20) pages in length unless by motion and order such page limit is extended by the 

court. The response shall address specifically, and in the same order raised, each issue

contained within the objections.

S/R. Steven Whalen 

R. STEVEN WHALEN

UNITED STATES MAGISTRATE JUDGE

Dated: July 2, 2010

CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the foregoing order was served on the attorneys

and/or parties of record by electronic means or U.S. Mail on July 2, 2010.

S/G. Wilson 

Judicial Assistant