Court Opinion

ID: 800576
Source: CourtListenerOpinion
Date Created: 2012-05-21 14:41:26+00
Date Added: 2024-06-11T17:59:56.522703
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 12a0525n.06

                                           No. 11-1484                                     FILED
                          UNITED STATES COURT OF APPEALS                              May 21, 2012
                               FOR THE SIXTH CIRCUIT                            LEONARD GREEN, Clerk

KARMON R. SHAYA, et al.,                              )
                                                      )   ON APPEAL FROM THE
       Plaintiffs-Appellants,                         )   UNITED STATES DISTRICT
                                                      )   COURT FOR THE EASTERN
v.                                                    )   DISTRICT OF MICHIGAN
                                                      )
COUNTRYWIDE HOME LOANS, INC.,                         )               OPINION
                                                      )
       Defendant-Appellee.                            )

BEFORE:        BATCHELDER, Chief Judge; McKEAGUE, Circuit Judge and QUIST,
               Senior District Judge.*

       QUIST, District Judge.

                                          BACKGROUND

       On April 12, 2004, Plaintiff Samira Mansor obtained a mortgage from Defendant,

Countrywide Home Loans, Inc. (Countrywide) to purchase a house. Plaintiff Karmon Shaya was

added to the title of the house in 2007 and became personally liable for the note as a co-borrower

after executing an assumption agreement. Plaintiffs stopped making payments on their loan in 2009.

On August 25, 2010, Plaintiffs filed a complaint against only Countrywide, but alleged the following

seven counts against Countrywide and non-parties: fraudulent misrepresentation (Defendant

Countrywide) (Count I); fraudulent misrepresentation (Defendant Lehman) (Count II); violation of

       *
       Honorable Gordon J. Quist, United States Senior District Judge for the Western District of
Michigan, sitting by designation.
Michigan’s Mortgage Broker Act (Count III); breach of contract (Count IV); quiet title (Count V);

violation of Michigan’s foreclosure statute, M.C.L.A. § 600.3204, et seq. (Count VI); and, injunctive

relief (Count VII). Subsequently, Countrywide foreclosed upon Plaintiffs’ house and eventually a

Sheriff’s sale took place on September 24, 2010.

       The district court dismissed Plaintiffs’ seven-count complaint for failure to state a claim. See

Fed. R. Civ. P. 12(b)(6). Plaintiffs timely appealed some of the district court’s findings. For the

reasons set forth below, we affirm the district court and award Countrywide sanctions against

Plaintiffs’ counsel.

                                             ANALYSIS

       This Court conducts a de novo review of a district court’s order granting a motion to dismiss

under Federal Rule of Civil Procedure 12(b). Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1991).

While a complaint need not contain detailed factual allegations, a plaintiff’s allegations must include

more than labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Ashcroft

v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949 (2009) (“Threadbare recitals of the elements of a cause

of action, supported by mere conclusory statements, do not suffice.”). A complaint must contain

“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570.

       I.      Failure to permit leave to amend

       On August 25, 2010, Plaintiffs filed their complaint in Macomb County Circuit Court. On

September 29, 2010, Countrywide removed the case to Eastern District of Michigan based on

diversity jurisdiction. On October 6, 2010, Countywide filed its motion to dismiss. In the motion

to dismiss, Countrywide notified Plaintiffs of numerous egregious errors in the complaint. For

example, the complaint referenced “Defendant Lehman” and “Defendant Federal”–two non-parties

                                                  2
to the lawsuit. In addition, the complaint cited authority that does not exist. Plaintiffs did not

initially respond to the motion to dismiss. In turn, on December 30, 2010, the district court ordered

the Plaintiffs to show cause why Countrywide’s motion should not be granted. Plaintiffs finally

responded on January 7, 2011. Plaintiffs did not address many of the “typographical” errors in the

complaint. The district court filed its opinion and order dismissing the complaint on March 22,

2011. Plaintiffs never moved to amend their complaint at any point.

       Now, Plaintiffs state that they “never had the opportunity to amend their pleadings to comply

with the United State[s] Court Rules before responding to the motion.” (Pl.’s Br. at 1.) Had

Plaintiffs had the opportunity, they allege, “they would have amended their pleadings to reflect that

MERS [Mortgage Electronic Registration Systems, Inc.] had no standing to bring foreclosure by

advertisement under Michigan’s Foreclosure by Advertisement statute.” (Id. at 1-2.) Moreover,

Plaintiffs contend that even if their pleadings were insufficient, the district court was bound by law

to permit amendment. (Id. at 2-3.)

       A party may amend its pleading once as a matter of course within 21 days after serving it,

or 21 days after service of a motion under Federal Rule of Civil Procedure 12(b). Fed. R. Civ. P.

15(a)(1). Plaintiffs failed to amend their complaint as a matter of course.

       Despite Plaintiffs’ failure to amend as a matter of course, under Federal Rule of Civil

Procedure 15(a)(2), “a party may amend its pleading only with the opposing party’s written consent

or the court’s leave.” Fed. R. Civ. P. 15(a)(2) (emphasis added). Plaintiffs never sought

Countrywide’s consent to amend nor did Plaintiffs ever move the district court for leave to amend

their complaint. So, even though Plaintiffs allege that they “would have amended their pleadings,”

they did not. Moreover, even though leave must be freely given, a motion must first be made to the

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district court. See Fed. R. Civ. P. 15(a)(2). We have noted in the past that “the party requesting

leave to amend must act with due diligence if it wants to take advantage of [Rule 38's] liberality.”

Parry v. Mohawk Motors of Mich., Inc., 236 F.3d 299, 306 (6th Cir. 2000) (internal quotation marks

omitted). Never filing a request for leave to amend at all, despite a plethora of chances to do so, is

the very antitheses of due diligence.

        Therefore, Plaintiffs’ allegation that they did not have the opportunity to amend their

complaint and that they should have been entitled to amend it as a matter of law is disingenuous and

is thus rejected.

        II.     New claim against MERS

        Plaintiffs argue that “MERS did not have standing to bring foreclosure by advertisement.”

First, MERS is not a party to this lawsuit. Second, Plaintiffs did not make this argument to the

district court. Since Plaintiffs did not raise the issue before the district court, they “have waived their

right to argue the point on appeal.” United States v. Universal Mgmt. Servs., Inc., 191 F.3d 750, 758

(6th Cir. 1999); White v. Anchor Motor Freight, Inc., 899 F.2d 555, 559 (6th Cir. 1990) (“This court

will not decide issues or claims not litigated before the district court.”). Therefore, Plaintiffs’ new

claim against MERS is dismissed.

        III.    Violation of M.C.L.A. § 600.3204, et seq. (Count VI)

        Plaintiffs contend that the district court erred by dismissing Count VI of their complaint,

which alleges violations of Michigan’s foreclosure statute, M.C.L.A. § 600.3204, et seq. Plaintiffs

argue that no offer was made to them to enter into a loan modification as required by M.C.L.A. §

600.3205a. Plaintiffs state that they were in the process of modification discussions when the

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Sheriff’s sale was held. (Compl. ¶ 45.) Plaintiffs also allege that the foreclosure notice failed to

comply with M.C.L.A. § 600.3205a. (Compl. ¶ 46.)

        Count VI only makes allegations against “Defendant Lehman.” Countrywide, however, is

the only defendant in this case. The district court noted this error, and on appeal Plaintiffs do not

address it.1 See United States v. Johnson, 440 F.3d 832, 846 (6th Cir. 2006) (noting that issues not

raised by an appellant in his opening brief are deemed waived). Even if “Defendant Lehman”

somehow violated Michigan’s foreclosure statute that infringed on Plaintiffs’ rights, the district court

could not have provided relief since Defendant Lehman was not a party before the district court.

Therefore, Count VI does not state a claim for which relief can be granted.

        To the extent that Plaintiffs intended the allegations to apply to Countrywide, the district

court would still be affirmed. As the district court said, Plaintiffs failed to support any of their

conclusory statements that Countrywide’s foreclosure failed to comply with M.C.L.A. § 600.3205

with factual allegations. Moreover, Plaintiffs do not dispute that Plaintiffs and Countrywide had not

yet entered into a loan modification agreement.

        Thus, the district court’s dismissal of Count VI is affirmed.

        IV.     Fraudulent Misrepresentation Claims

        Count I alleges that Countrywide made several fraudulent misrepresentations to Plaintiffs

when Plaintiffs’ loan was originated. Count II alleges that “Defendant Lehman” made fraudulent

misrepresentations. On appeal, Plaintiffs contend that other misrepresentations are contained in

Count III, which, very generally, alleges violations of the Truth in Lending Act (TILA), 15 U.S.C.

       1
          Countrywide’s motion to dismiss also pointed out this mistake to Plaintiffs. Likewise,
Plaintiffs did not address the mistake in their response to Countrywide’s motion.

                                                   5
§ 1601 et seq., the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et. seq., and

Michigan’s Consumer Mortgage Protection Act (CMPA), M.C.L.A. § 445.1631 et seq.

        The district court said that, pursuant to M.C.L.A. § 600.5813, Plaintiffs’ fraudulent

misrepresentation claims were barred by Michigan’s six-year statute of limitations. See Boyle v.

Gen. Motors Corp., 468 Mich. 226, 232, 661 N.W.2d 557, 560 (2003) (holding that the six-year

statute of limitations period begins when the fraud is done). The district court also found that Count

III’s allegations of TILA violations were time barred because TILA has a one-year statute of

limitations. 15 U.S.C. § 1640(e).

        Plaintiffs contend that “the statute of limitations applicable to the instant matter is 12 CFR

108 & 130, which provides that there is no time limit on willful violations of RESPA or TILA” that

were intended to mislead a consumer. This Court, like the district court, was unable to find the Code

of Federal Regulation sections that Plaintiffs cite and also could not find any case law to support

Plaintiffs’ contention.2 Plaintiffs’ frivolous argument has no merit or basis. Therefore, the district

court’s dismissal of Count I and Count III’s allegations of TILA violations is affirmed because these

claims are time barred.

        2
        The district court noted that Plaintiffs’ counsel previously had made this argument without
providing any support for it.

        Plaintiffs’ counsel, Julian Levant, had a similar case before this Court (Koczara v.
        IndyMac Bank, Case no. 10-14065). Mr. Levant cited these same CFRs in Koczara.
        In that case, the Court could not locate the CFRs and requested that Mr. Levant
        submit any authority to support his assertion that there is no statute of limitations
        applicable to willful violations. He did not submit the CFRs that he cited in his brief
        or any case law to support his assertion. Instead, Mr. Levant submitted [the] 133
        page Comptroller’s Handbook on the Truth in Lending Act, with no citation
        references.

(R. 11 at 8 n.1.)

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        The district court listed several other reasons to dismiss Counts II and III, but Plaintiffs do

not address any of these reasons. Finding no error in the district court’s reasoning, and since

Plaintiffs have waived any argument that the district court erred in these regards, see Johnson, 440
F.3d at 846, the district court’s dismissal of Counts II and III is also affirmed for the unaddressed

reasons.

        V.          Quiet title claim (Count V)

        Plaintiffs argue that the district court erred in dismissing Count V, which requests the court

to quiet title in favor of Plaintiffs. On appeal, Plaintiffs’ entire argument is:

        Plaintiffs-Appellants have sought relief to Quiet Title pursuant to MCL §
        600.2932(5). See Richards v. Tibaldi, 272 Mich. App. 522, 528-29, 726 N.W.2d
770 (2006). Fraud, deceit and intentional violation of statutory duties are sufficient
        to permit the court to exercise its equitable powers.

(Pl.’s Br. at 7.)

        As the district court noted, “quiet title” is not a separate cause of action, but rather, it is a

remedy. Furthermore, Richards does not provide any support for Plaintiffs’ claim. Richards has no

relation whatsoever to Plaintiffs’ claim. Thus, since the district court did not err by dismissing all

of Plaintiffs’ claims for failing to state a claim, the district court is affirmed for dismissing Plaintiffs’

request to quiet title in their favor.

        Moreover, Plaintiffs do not attempt to explain their allegations in Count V. For one, like

other claims in the complaint, Count V references two defendants who are not a party to this

action–“Defendant Federal” and “Defendant Lehman.” In addition, Plaintiffs’ complaint references

the Sheriff’s sale of their property as if it already had occurred, even though it did not occur until one

month after Plaintiffs filed their complaint.

                                                     7
       VI.     Attorneys Fees

       “Under Rule 38 of the Federal Rules of Appellate Procedure this Court may ‘award just

damages and . . . costs to the appellee’ if it determines that an appeal is frivolous.” WSM, Inc. v.

Tenn. Sales Co., 709 F.2d 1084, 1088 (6th Cir. 1983) (quoting Fed. R. App. P. 38). “Rule 38 should

doubtless be more often enforced than ignored in the face of a frivolous appeal.” Id. Here, the

appeal is so lacking in legal and factual basis that it is frivolous. “In Wilton Corp. v. Ashland

Castings Corp., 188 F.3d 670 (6th Cir. 1999), we held that sanctions under FRAP 38 were

appropriate when an appeal is ‘wholly without merit’ and when the appellant’s ‘arguments

essentially had no reasonable expectation of altering the district court’s judgment based on law or

fact.’” B & H Med., L.L.C. v. ABP Admin., Inc., 526 F.3d 257, 270 (6th Cir. 2008) (also stating that

this Court does not require a finding of bad faith). Here, Plaintiffs’ arguments are wholly without

merit and had no reasonable expectation of altering the district court’s judgment. Therefore,

Countrywide will be awarded sanctions for defending this appeal.

       The sanctions will be awarded against Plaintiffs’ counsel because the blame sits on Plaintiffs’

counsel’s shoulders. Plaintiffs’ counsel has made egregious errors in filing Plaintiffs’ complaint

which have gone uncorrected and unaddressed over a lengthy period of time. Moreover, Plaintiffs’

counsel’s citation to “12 CFR 108 & 130"–a citation that was made in two separate district court

cases and now on appeal, and which does not exist–is frivolous, unreasonable, and without

foundation. Plaintiffs’ counsel’s other arguments on appeal are not any better. The arguments do

not address many of the reasons that the district court provided for dismissing each count and do not

address any of the egregious errors made in the complaint. To make matters worse, on appeal,

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Plaintiffs’ counsel made an argument directed at another nonparty, MERS3–the third nonparty

Plaintiffs’ counsel advanced claims against–and also argued that he did not have the opportunity to

amend Plaintiffs’ complaint, a disingenuous argument considering Plaintiffs’ counsel had seventeen

months to do so.

       Therefore, Countrywide will be awarded sanctions against Plaintiffs’ counsel. See Royal

Food Prods., Inc. v. Buckeye Union Ins. Co., 1993 WL 5907, at *3 (6th Cir. Jan. 13, 1993) (stating

that, pursuant to Rule 38, “this court, sua sponte, is awarding sanctions to all defendants against

plaintiff’s counsel”). Accordingly, Countrywide will have fifteen days from the filing of this opinion

to file an affidavit setting forth the hourly rates of its counsel and the number of hours spent in

defending this appeal, and whatever documentation and argument in support thereof Countrywide’s

counsel deems appropriate. Plaintiffs’ counsel may then file a response to this documentation within

ten days. See B & H Med., 526 F.3d at 272; Wilton Corp., 188 F.3d at 678 (Gilman, J., concurring).

                                           CONCLUSION

       Therefore, the district court is AFFIRMED and we AWARD Countrywide sanctions against

Plaintiffs’ counsel.

       3
        This allegation is also directly contrary to the entire complaint. Plaintiffs allege that
Countrywide, the defendant, not MERS, foreclosed upon their house.

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