Lipson, Neilson, Cole, Seltzer & Garin, P.C. The Mortgage News A Mortgage Banking Newsletter Editor: Howard A. Lax hlax@lipsonneilson.com

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Contents

Articles

For two reasons, Ursery is not entitled to this relief.

Ursery already sought this relief in the district court case, and lost. Ursery now seeks to mount a collateral attack on the foreclosure, sale and sheriff’s deed (and, necessarily, the judgment of possession). This is improper. People v Sessions, 474 Mich 1120; 712 NW2d 718 (2006); Fieger v Cox, ___ Mich App ___, ___; ___ NW2d ___ (2007) (“They [plaintiffs] also skirted our well-established statutes and court rules for appealing the district court’s issuance of search warrants and subpoenas and instead improperly mounted a collateral attack on the investigation by filing two original actions before a circuit court judge . . .” (emphasis added)); Kosch v Kosch, 233 Mich App 346, 353; 592 NW2d 434 (1999) (“Defendant’s failure to file an appeal from the original judgment . . . precludes a collateral attack on the merits of that decision”).

Accordingly, we conclude that Ursery’s requested relief of setting aside the mortgage foreclosure, sale and sheriff’s deed (and, necessarily, the judgment of possession) is invalid as a matter of law under the prohibition of collateral attacks on a judgment. In our opinion, under MCR 2.116(C)(8) and (10), the trial court correctly granted summary disposition, albeit on other grounds, on these claims for relief. This Court will not reverse where the lower court reaches the right result, albeit for a different reason. See, e.g., Hess v Cannon Twp, 265 Mich App 582, 596; 696 NW2d 742 (2005).

By requesting a reversal of the acceleration, foreclosure, sale and sheriff’s deed, Ursery seeks specific performance of an alleged oral agreement to reinstate the mortgage. Specific performance is an equitable remedy. Ruegsegger v Bangor Twp Relief Drain, 127 Mich App 28, 31; 338 NW2d 410 (1983). But because Ursery did not assert his challenge to the acceleration, foreclosure, sale and sheriff’s deed until  very late – after the six-month redemption period expired (at which time title vested in Option One16) – Ursery is guilty of laches. Jackson Investment Corp v Pittsfield Products, Inc, 162 Mich App 750, 752-753; 413 NW2d 99 (1987). .... Ursery waited until after the redemption period to file any challenge to the acceleration, foreclosure, sale and sheriff’s deed. Ursery is guilty of laches, and to a remarkable degree. Jackson Investment Corp, supra at 756-757. Therefore, Ursery is not entitled to specific performance of an oral agreement to reinstate the mortgage. It is far too late to challenge the acceleration, foreclosure, sale and sheriff’s deed.

Contracts are enforced according to their terms as a corollary of the parties’ liberty of contract. Rory, supra at 468. This Court examines contractual language and gives the words their plain and ordinary meanings. Wilkie, supra at 47. “[A]n unambiguous contractual provision is reflective of the parties’ intent as a matter of law,” and “[i]f the language of the contract is unambiguous, we construe and enforce the contract as written.” Quality Products & Concepts Co v Nagel Precision, Inc, 469 Mich 362, 375; 666 NW2d 251 (2003). Courts may not impose an ambiguity on clear contract language. City of  Grosse Pointe Park v Michigan Muni Liability & Prop Pool, 473 Mich 188, 198; 702 NW2d 106 (2005). A contract is ambiguous when two provisions “irreconcilably conflict with each other,” Klapp v United Ins Group Agency, Inc, 468 Mich 459, 467; 663 NW2d 447 (2003), or “when [a term] is equally susceptible to more than a single meaning.” City of Lansing Mayor v Michigan Pub Service Comm, 470 Mich 154, 166, 680 NW2d 840 (2004). Whether a contract is ambiguous is a question of law. Wilkie, supra at 47. Only when contract language is ambiguous does its meaning become a question of fact. Port Huron Ed Ass’n v Port Huron Area School Dist, 452 Mich 309, 323; 550 NW2d 228 (1996).

Our Supreme Court’s contracts jurisprudence emphasizes the limited role of courts in contract disputes: viz., courts enforce unambiguous contract terms. Quality Products & Concepts Co, supra at 375. For instance, courts generally may not attempt to evaluate whether a contract is one of “adhesion.” See Rory, supra at 477. “An ‘adhesion contract’ is simply that: a contract. It must be enforced according to its plain terms unless one of the traditional contract defenses applies.” Id.....

Parties are entitled to the benefit of their bargain: “The general rule [of contracts] is that competent persons shall have the utmost liberty of contracting and that their agreements voluntarily and fairly made shall be held valid and enforced in the courts.” Id. at 62 (internal quotation marks and citations omitted).

By the plain language of the statute of frauds, oral agreements for a delay in repayment of a loan are unenforceable. MCL 566.132(2)(b). Thus, even if there was an oral agreement here (which Ursery has failed to prove), its enforcement is barred. MCL 566.132(2)(b).

Also, Ursery cannot rely on the proposed written repayment plan (which, in any event, is not the basis for count II). Although the proposed written repayment plan is on Option One’s letterhead, it is not signed with an authorized signature (indeed it is not signed by an Option One representative at all).22 Therefore, the written proposed payment plan cannot save Ursery’s count II from summary disposition under MCR 2.116(C)(7). Although the trial court did not dismiss count II under subrule (C)(7), we will not reverse where the trial court reaches the right result, albeit for the wrong reason. Hess, supra at 596.

In count V, Ursery alleges a breach of the MCPA. Ursery alleges that Option One “engaged in unfair, unconscionable and deceptive methods, acts and practices in the conduct of trade or commerce[.]” This count fails to state a claim on which relief may be granted under MCR 2.116(C)(8), because Option One’s business is exempt from the MCPA as a matter of law. Newton, supra at 442.

“By its express language . . . the MCPA exempts from itself ‘transaction[s] or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States.’” Newton, supra at 437-438, quoting MCL 445.904(1)(a) (emphasis added).... This test was recently affirmed by our Supreme Court in Liss v Lewiston-Richards, Inc, 478 Mich 203, ____; ____ NW2d ____ (2007), where the Court stated: “Applying the Smith test, the relevant inquiry ‘is whether the general transaction is specifically authorized by law, regardless of whether the specific misconduct alleged is prohibited.’” Id. at ____.....

In Liss, the Court emphasized that “with limited exceptions, contracting to build a residential home is a transaction ‘specifically authorized’ under the MOC, subject to the administration of the Residential Builders’ and Maintenance and Alteration Contractors’ Board.” Id. at ____ (footnote omitted). Here, similarly, with limited exceptions,24 mortgage lending or servicing is a transaction specifically authorized under the MBLSLA, subject to the administration of the commissioner of the office of consumer and industry services. MCL 445.1653 et seq.

Accordingly, the general transaction between Ursery and Option One is explicitly sanctioned under a law administered by a regulatory board or officer acting under statutory authority of this state. MCL 445.904(1)(a). Option One’s residential mortgage business is exempt from the MCPA, and summary disposition in favor of Option One on count V was properly granted.

...[P]laintiff must show that the defendant used a proper legal procedure for a purpose other than that which it was designed to accomplish, and a plaintiff need not show that the proceeding was wrongfully initiated. Friedman, supra at 30 n 18; Bonner v Chicago Title Ins Co, 194 Mich App 462, 472; 487 NW2d 807 (1992). Here, Ursery only alleged that the foreclosure attempt was improper, not that Option One attempted to use the foreclosure process for anything other than what foreclosure is designed to accomplish.

“Liability for such a claim has been found only where the conduct complained of has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency and to be regarded as atrocious and utterly intolerable in a civilized community.” Teadt, supra at 582-583. The court should initially “determine whether the defendant’s conduct reasonably may be regarded as so extreme and outrageous as to permit recovery.” Doe v Mills, 212 Mich App 73, 91; 536 NW2d 824 (1995). However, “where reasonable [persons] may differ, it is for the jury, subject to the control of the court, to determine whether, in the particular case, the conduct has been sufficiently extreme and outrageous to result in liability.” Doe, supra at 91. Here, the essence of Ursery’s argument is that Option One breached contracts with him in various ways and foreclosed on his property. This type of activity does not rise to the level of conduct necessary to satisfy the standard in Michigan case law. Because Option One’s conduct could not be reasonably regarded as extreme and outrageous, there is no genuine issue of material fact with regard to this claim, so summary  disposition on count VIII was proper

We have held that, when it comes to TILA, “hypertechnicality reigns.” Handy, 464 F.3d at 764. (This is not, we recognize, the formulation that some of our sister circuits use. See, e.g., Santos-Rodriguez v. Doral Mortgage Corp., 485 F.3d 12, 17 n.6 (1st Cir. 2007) (noting the difference between our standard and that of other circuits)). Our decision on the adequacy of Ameriquest’s disclosure of the payment period depends on just how picky we think the statute is. The Supreme Court has held that “[t]he concept of ‘meaningful disclosure’ that animates TILA . . . cannot be applied in the abstract. Meaningful disclosure does not mean more disclosure. Rather, it describes a balance between competing considerations of complete disclosure . . . and the need to avoid . . . [informational overload].” Milhollin, 444 U.S. at 568 (internal quotation marks and citations omitted). Following Milhollin’s guidance, our approach means that when completeness of disclosure does not lead to informational overload, completeness must be required. Rhetoric to one side, this leads to an outcome that is fairly similar to the one reached in our sister circuits.

We also strike the balance this way because the FRB specifically rejected our attempts at a more functional approach to TILA violations. In Carmichael v. Payment Ctr., Inc., 336 F.3d 636, 641 (7th Cir. 2003), we held that “courts are to evaluate § 1638(a)(6)’s strictures functionally, not in formalistic manner [sic].” Shortly after we issued the Carmichael decision, the FRB amended its commentary to avoid exactly the kind of result we reached in Carmichael; it noted that our decision was the impetus for its action. The crux of the revised commentary is that when a specific requirement is straightforward, lenders should not be able to dance around it in their disclosures. In other words, the FRB opted for hypertechnicality.

2. Content of new disclosures. If redisclosure is required, the creditor may provide a complete set of new disclosures, or may redisclose only the terms that vary from those originally disclosed. If the creditor chooses to provide a complete set of new disclosures, the creditor may but need not highlight the new terms, provided that the disclosures comply with the format requirements of §226.17(a). If the creditor chooses to disclose only the new terms, all the new terms must be disclosed. For example, a different annual percentage rate will almost always produce a different finance charge, and often a new schedule of payments; all of these changes would have to be disclosed. If, in addition, unrelated terms such as the amount financed or prepayment penalty vary from those originally disclosed, the accurate terms must be disclosed. However, no new disclosures are required if the only inaccuracies involve estimates other than the annual percentage rate, and no variable rate feature has been added.

This case illustrates how important it is for Experian, a company that traffics in the reputations of ordinary people, to train its employees to understand the legal significance of the documents they rely on. See generally Rudy Kleysteuber, Note, Tenant Screening Thirty Years Later: A Statutory Proposal To Protect Public Records, 116 Yale L.J. 1344, 1356-64 (2007). Because Experian negligently failed to conduct a reasonable reinvestigation, we grant summary judgment to Dennis on this claim.

The trial court correctly concluded that parol evidence was admissible because there was a dispute that the note was the complete and integrated expression of their agreement. Hamade, supra at 167-168. The trial court also correctly decided that the handwritten notes were insufficient evidence that the contract included an automatic renewal or a promise of a renewal on the same terms and conditions. Sharon admitted that defendants would have to qualify for the renewal and that the notes did not say that the renewal would be on the same terms, conditions,  and interest rate. “[L]enders and borrowers frequently enter into preliminary discussions of whether a loan will be refinanced or further credit will be extended,” and general discussions of extending credit should not “lead a borrower to reasonably believe that credit will be extended.” Farm Credit Services v Weldon, 232 Mich App 662, 672-673; 591 NW2d 438 (1998). Therefore, defendants were not entitled to a six-month renewal of the loan at the four percent interest rate, and the trial court did not err in enforcing the higher interest rate and late fee penalties as provided for in the contract.

The Cunninghams' argument must be rejected; neither D&E Services nor Moore was their mortgage broker. The HUD-1 Settlement Statement listed D&E Services as a creditor, and the Cunninghams signed the Settlement Statement, confirming that it was an accurate description of how their loan proceeds were to be distributed. The Cunninghams also signed a Loan Brokerage Agreement that made the Loan Center their sole mortgage broker, granting the Center the "exclusive right to negotiate a mortgage loan" on their behalf.

We have said before that TILA "is not a general prohibition of fraud in consumer transactions or even in consumer credit transactions. Its limited office is to protect consumers from being misled about the cost of credit." Gibson v. Bob Watson Chevrolet-Geo, Inc., 112 F.3d 283, 285 (7th Cir. 1997). Equicredit was not required to make HOEPA disclosures because the Cunninghams' loan does not constitute a high-cost loan under 15 U.S.C. § 1602(aa)(1). The legal consequences of Moore's fraud, and the extent to which the Cunninghams must bear responsibility for apparently closing their eyes to it, will have to be sorted out elsewhere.

“The doctrine of respondeat superior renders employers vicariously liable for the torts their employees commit while acting within the scope of their employment.” Tenn. Farmers Mut. Ins. Co. v. Am. Mut. Liability Ins. Co., 840 S.W.2d 933, 937 (Tenn. Ct. App. 1992). “In order to hold an employer liable, the plaintiff must prove (1) that the person who caused the injury was an employee, (2) that the employee was on the employer’s business, and (3) that the employee was acting within the scope of his employment when the injury occurred.” Id. (citing Hamrick v. Spring City Motor Co., 708 S.W.2d 383, 386 (Tenn. 1986)); Midwest Dairy Prods. Co. v. Esso Standard Oil Co., 246 S.W.2d 974, 975 (Tenn. 1952). Whether an employee is acting within the scope of her employment is a question of law. Id.

Tennessee courts consider the following factors, provided by the Restatement (Second) of Agency § 228 (1957), to determine whether an employee’s acts fall within the scope of her employment:

(1) Conduct of a servant is within the scope of employment if, but only if:
(a) it is of the kind he is employed to perform;
(b) it occurs substantially within the authorized time and space limits;
(c) it is actuated, at least in part, by a purpose to serve the master; and
(d) if force is intentionally used by the servant against another, the use of force is not unexpectable by the master.
(2) Conduct of a servant is not within the scope of employment if it is different in kind from that authorized, far beyond the authorized time and space limits, or too little actuated by a purpose to serve the master.

Id. at 938. Considering these factors, the district court ruled correctly that Davis was acting outside the scope of her employment when she applied for a credit card under Mary Borg’s name, used the credit card to withdraw thousands of dollars from Memphis-area ATMs, and forged checks under Mary Borg’s name to pay for the credit card bills. Even assuming Davis’s conduct satisfies the first two elements, there is no evidence in the record to suggest that Davis’s fraud and forgery was motivated in any part to serve Home Instead. Moreover, the uncontroverted evidence set forth in Doane’s affidavit provides that Home Instead performed numerous background checks on Davis before hiring her and was not informed of her fraudulent activities until the Borg’s called Home Instead and explained why they did not want Davis to return to the Borg residence. Because plaintiffs cannot satisfy either of the last two factors, the district court properly granted Home Instead’s motion for summary judgment on plaintiffs’ claim of vicarious liability.

The Debtor, Greg Forbes, Francesca Forbes and Eiseman were successful in leaving no paper trail as they proceeded with their scheme. We acknowledge that it is generally the Trustee’s burden to trace the funds he claims are property of the estate. However, the fact that the parties did such a thorough job of playing a shell game with their money does not prevent the bankruptcy court and this Panel from examining all the circumstances surrounding the parties’ evasive actions over several years to hinder the Debtor’s (and Greg Forbes’) creditors from being paid. As stated by the United States Court of Appeals for the Eleventh Circuit in IBT International, Inc. v. Northern (In re International Administrative Services, Inc.), 408 F.3d 689, 708 (11th Cir. 2005), “proper tracing does not require dollar-for-dollar accounting.” Like Greg Forbes, Francesca Forbes and Eiseman in the appeal before this Panel, the parties in International Administrative Services also engaged in  multiple, complicated transactions to make it extremely difficult, if not impossible, to trace the funds in a scheme to defraud creditors.

When the record in this appeal is carefully reviewed, it is abundantly clear that the Debtor was determined to evade paying her creditors. Greg Forbes, Eiseman and Francesca Forbes were determined to assist the Debtor in that scheme. These parties, especially Eiseman, cannot ostrich like stick their heads in the sand and pretend that the transfer of the Debtor’s funds was a bona fide transaction, whether “loans” or otherwise. Eiseman cannot convincingly claim to have been a “well intentioned, but gullible, part[y] who mistakenly fell victim” to this fraudulent scheme. In re Int’l Admin. Servs., Inc., 408 F.3d at 706.

There is no reason to limit the statutory obligation to provide notice to those cases where the insurance company directly reads the credit report and exclude those cases where the insurance company indirectly is advised of the results of the credit report. The relevant fact is that the insurance company used the credit information, i.e., the credit score, in establishing the applicable premium for insurance that the borrowers were required to pay. It makes no difference to the purpose of the Act if the credit information was derived from Radian's own reading of the consumer credit report or was transmitted to it by Countrywide based on its reading of the consumer credit report. In either event, the consumer report would have been the cause of the adverse action and thus the notice requirement applies.

If we were to accept Radian’s argument, responsibility to provide notice would be limited to the mortgagee. The Court of Appeals for the Ninth Circuit rejected that interpretation of the statute. As the court stated in Reynolds v. Hartford Fin. Ins. Servs., 435 F.3d 1081, 1095 (9th Cir. 2006), rev’d sub nom. on other grounds Safeco, 127 S. Ct. 2201, the definition of “any” (in the statutory provision “any person who takes an adverse action is liable”) “includes the plural.” Id. at 1095. Moreover, the court of appeals noted that “[w]ith regard to insurance transactions, liability attaches whenever an adverse action is taken ‘in connection with the underwriting of insurance.’” Id. (quoting 15 U.S.C. § 1681a(k)(1)(B)(i)). The court noted that the broad “‘in connection with’ language confirms that a variety of entities may be liable.” Id. It further stated that “[n]o provision in the statute nor comment in the legislative history suggests that Congress intended that only a single company be responsible under FCRA when a consumer is charged an increased rate for insurance.” Id. Although Reynolds presented a parent-subsidiary relationship and was discounted by the District Court for that reason, see 395 F. Supp. 2d at 238, we see no basis to make such a distinction.

We must construe the language of the statute in light of its clear purpose. As the court stated in Treadway v. Gateway Chevrolet Oldsmobile Inc., 362 F.3d 971, 981 (7th Cir. 2004), “Congress enacted the FCRA in 1970 to address abuses in the  consumer reporting industry.” Those abuses were that reliance was being placed on consumer reporting agencies that were too often reporting inaccurate information. Id. The FCRA as well as the Equal Credit Opportunity Act were designed to insure that agencies report accurate information. Id. at 982.

If Radian had sent the Whitfields the required notice of adverse action, the Whitfields would have been in a position to correct any inaccurate information in their credit report and thereby lower the price they  would have to pay for credit in  future transactions. Indeed, the record shows that the Whitfields might even have been able to lower the mortgage guaranty insurance premium that they were obligated to pay in the present transaction with Countrywide. The mortgage papers were signed three days before Countrywide placed the request for insurance with Radian, but the record does not indicate that the Whitfields had no opportunity to adjust or correct the premium after the mortgage transaction was set. In fact, the Whitfields’ obligation to pay any mortgage insurance premium was eliminated long before their responsibility under the mortgage ceased.

In her report, the magistrate judge recommended dismissal for lack of subject matter jurisdiction pursuant to the Rooker-Feldman doctrine. That doctrine, named after the decisions in Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 461 U.S. 462 (1983), stands for the proposition that “the lower federal courts do not have jurisdiction ‘over cases brought by “state-court losers” challenging “state-court judgments rendered before the district court proceedings commenced.”’” Raymond v. Moyer, __ F.3d __, __, 2007 WL 2372296, *2 (6th Cir. 2007) (quoting Lance v. Dennis, 546 U.S. 549, 460 (2006) (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005))). The magistrate judge determined that the doctrine applied because the plaintiff was, in essence, attempting to appeal a decision of the state court granting summary judgment in favor of the defendants in an earlier action to quiet title.....

Given this history, and particularly the litigation in the state courts concerning the validity of the foreclosure and the Gay family’s right to possession, Magistrate Judge Morgan determined that the plaintiff’s allegations of breach of contract and trespass were “inextricably intertwined” with the state court decisions. R & R at 5. She wrote:

Id. at 5-6.....

Like his other lawsuit papers, the plaintiff’s objections are not a model of clarity. The document containing those objections is rife with nonsensical rhetoric and misplaced citations to law. Nevertheless, three basic objections can be distilled. First, the plaintiff objects to what he perceives as the magistrate judge’s failure to consider various documents filed by the plaintiff under the name Akir En Ra El Bey. Second, the plaintiff objects on the grounds that the magistrate judge misconstrued the nature of the complaint. Third, the plaintiff alleges that Magistrate Judge Morgan erred in recommending dismissal of his case without allowing him an opportunity to amend the complaint.

In this case, the plaintiff insists that he is not suing for breach of a mortgage contract, but rather is “bringing suit for administrative review of affiant’s international claim private administrative remedy.” Pl.’s Objs. at 3. As perplexing as that sounds, the plaintiff’s attempt to elucidate the nature of that claim only confuses matters further. It is clear that the claim, in the plaintiff’s view, has something to do with a UCC financing statement attached to the objections as an exhibit. See Pls.’ Objs. at 2; Ex. A, UCC Financing Statement. A UCC financing statement is, of course, a record filed for the purpose of giving  notice of a secured party’s interest in the property of a debtor. However, the financing statement in this case is incomprehensible; among other things, there is no way to discern the identity of the subject property. Moreover, the financing statement was not registered until April 2, 2007, months after the complaint was filed, so it is unclear how that statement could be the basis of a claim stated in the complaint.

In any event, if the Court accepts the plaintiff’s position that his lawsuit is not about the state foreclosure proceedings, his claim probably cannot be considered an incognizable appeal. However, the plaintiff’s argument is fatally flawed because it fails to recognize that the Court must look to the face of the complaint to determine the nature of the claims. See Gentek, 491 F.3d at 325; Palkow, 431 F.3d at 552; Ching, 921 F.2d at 13. A post hoc revision of the claims can only be achieved by filing an amended complaint under Federal Rule of Civil Procedure 15.

The plaintiff’s complaint was extremely ambiguous, containing only a few discernable pieces of information. What can be gleaned is that the plaintiff alleged breach of contract and trespass, and he averred that “the lower courts . . . dishonored the equitable instrument placed before [them].” Compl. at 1-2. In addition, the named defendants are the company that foreclosed on the plaintiff’s parents’ home (Liberty Savings) and the law firm that prosecuted the possession proceedings in statecourt (Trott & Trott, P.C.). Given this information, it was reasonable for the magistrate judge to construe the complaint as alleging erroneous decisions on the part of the state courts addressing the foreclosure and related proceedings. Thus understood, the plaintiff’s complaint clearly falls within the ambit of the Rooker-Feldman doctrine, which stands for the simple proposition that lower federal courts lack jurisdiction “over cases brought by ‘state-court losers’ challenging ‘state-court judgments rendered before the district court proceedings commenced.’” Lance, 546 U.S. at 460 (quoting Exxon Mobile Corp., 544 U.S. at 284). The conclusion that the complaint is directed at overturning the state court decisions is bolstered by  review of the motions that were filed along with the complaint. In those motions, the plaintiff requested a preliminary injunction prohibiting attempts at forcible removal, and asked the Court to “stay [the] eviction proceedings by the 36th District Court,” Mot. to Stay [dkt # 4] at 2.

In the present case, the plaintiff apparently seeks to amend his complaint to avoid application of the Rooker-Feldman doctrine by bringing a “suit for administrative remedy review of [his] international claim private administrative remedy.” Pl.’s Objs. at 3. Whatever merit such a claim may have in the plaintiff’s mind, it knows no place  in the law. Although the Court can only guess as to what it is the plaintiff is actually alleging, it is readily apparent that an amended complaint advancing this theory would not survive a motion to dismiss under Rule 12(b)(6). Therefore, the magistrate judge made no error in failing to offer the plaintiff an opportunity to amend.

The evidence was undisputed that: (1) Home Loan funded the loan as a wholesale lender and First Premier Lending, who was reflected as the lender in the closing documents, merely brokered the loan; and (2) Chicago Title's escrow officer, Ginny Rogers, knew that Home Loan was the true lender and had followed the closing instructions Home Loan provided to Chicago Title. Because the transaction could thus not be closed without Home Loan's participation in funding the loan, its involvement in the escrow transaction as a party was undeniable under any commonly understood meaning of that term, notwithstanding the fact that First Premier Lending was ostensibly reflected in the closing documents as the lender.

In order to determine whether notice was “effectively conveyed,” “[t]his Court uses the ‘least sophisticated debtor [or consumer]’ standard.” Id; see also Smith v. Transworld Sys., Inc., 953 F.2d 1025, 1028 (6th Cir. 1992). “The least sophisticated debtor standard is lower than simply examining whether particular language would deceive or mislead a reasonable debtor.” Computer Credit, 167 F.3d at 1054 (internal punctuation and citation omitted). “The basic purpose of the least-sophisticated-consumer standard is to ensure that the FDCPA protects all consumers, the gullible as well as the shrewd.” Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993). “[A]lthough this standard protects naive consumers, it also ‘prevents liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness and presuming a basic level of understanding and willingness to read with care.’” Wilson v. Quadramed Corp., 225 F.3d 350, 354-55 (3d Cir. 2000) (quoting United States v. Nat’l Fin. Servs., Inc., 98 F.3d 131, 136) (4th Cir. 1996)). Moreover, this standard “assumes that a Validation Notice is read in its entirety, carefully and with some elementary level of understanding.” Martinez v. Law Offices of David J. Stern, P.A. (In re Martinez), 266 B.R. 523, 532 (Bankr. S.D. Fla. 2001)......

Courts have characterized the FDCPA as a strict liability statute, meaning that a consumer may recover statutory damages if the debt collector violates the FDCPA even if the consumer suffered no actual damages. See 15 U.S.C. § 1692k(a); see also Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 307 (2d Cir. 2003) (“[C]ourts have held that actual damages are not required for standing under the  FDCPA”). As a district court in the Second Circuit recently noted “[t]he interaction of the least sophisticated consumer standard with the presumption that the FDCPA imposes strict liability has led to a proliferation of litigation.” Jacobson, 434 F. Supp. 2d at 138. The court in Jacobson continued:

Ironically, it appears that it is often the extremely sophisticated consumer who takes advantage of the civil liability scheme defined by this statute, not the individual who has been threatened or misled. The cottage industry that has emerged does not bring suits to remedy the “widespread and serious national problem” of abuse that the Senate observed in adopting the legislation, 1977 U.S.C.C.A.N. 1695, 1696, nor to ferret out collection abuse in the form of “obscene or profane language, threats of violence, telephone calls at unreasonable hours, misrepresentation of a consumer’s legal rights, disclosing a consumer’s personal affairs to friends, neighbors, or an employer, obtaining information about a consumer through false pretense,  impersonating public officials and attorneys, and simulating legal process.” Id. Rather, the inescapable inference is that the judicially developed standards have enabled a class of professional plaintiffs . . . .

It is interesting to contemplate the genesis of these suits. The hypothetical Mr. Least Sophisticated Consumer (“LSC”) makes a $ 400 purchase. His debt remains unpaid and undisputed. He eventually receives a collection letter requesting payment of the debt which he rightfully owes. Mr. LSC, upon receiving a debt collection letter that  contains some minute variation from the statute’s requirements, immediately exclaims “This clearly runs afoul of the FDCPA!” and — rather than simply pay what he owes — repairs to his lawyer’s office to vindicate a perceived “wrong.” “[T]here comes a point where this Court should not be ignorant as judges of what we know as men.” Watts v. State of Ind., 338 U.S. 49, 52, 69 S.Ct. 1347, 1349, 93 L. Ed. 1801 (1949).

Id. at 138-39 (emphasis added). We echo Jacobson’s sentiments and concerns. Lamar fits the description of Jacobson’s hypothetical consumer to a tee, and we will not “countenance lawsuits based on frivolous misinterpretations or nonsensical assertions of being led astray.”5 Id. at 138.

Generally, a court is warranted in disregarding the separate existence of a corporation where (1) the corporate entity is a mere instrumentality of another individual or entity, (2) the entity was used to commit a wrong or fraud, and (3) there is an unjust injury or loss to the plaintiff. Rymal v Baergen, 262 Mich App 274, 293-294; 686 NW2d 241 (2004). “There is no single rule delineating when a corporate entity should be disregarded, and the facts are to be assessed in light of a corporation’s economic justification to determine if the corporate form has been abused.” Id. at 294.

Plaintiffs who seek to have the trial court disregard the corporate form must specifically plead facts sufficient to justify piercing the corporate veil. 18 CJS, Corporations, § 17, p 289. If such grounds for piercing the corporate veil are not pleaded, they are waived. 1 Fletcher, Cyclopedia Corporations, § 41.28, pp 614-615. Because plaintiffs never raised or otherwise addressed the alleged violation of 1979 AC, R 338.1533 in any of their pleadings, we conclude that they waived this alleged ground for disregarding the corporate form. Without sufficient allegations to show that J.B. Log Homes, itself, was used to commit an alleged fraud or wrong, plaintiffs have failed to make the requisite showing to allow piercing of the corporate veil. See, e.g., SCD Chem Distributors, Inc v Medley, 203 Mich App 374, 382; 512 NW2d 86 (1994). Summary disposition was properly granted in favor of Bruce on this issue.

Pursuant to the Seller Disclosure Act (SDA), MCL 565.951 et seq., sellers have a legal duty to disclose, in “good faith,” certain conditions of their home to prospective buyers. See MCL 565.957 and MCL 565.960. In the event that the disclosures are fraudulently made, a buyer may maintain an action for fraud against the sellers. Bergen v Baker, 264 Mich App 376, 385; 691 NW2d 770 (2004). “There are essentially three theories to establish fraud: (1) traditional common-law fraud, (2) innocent misrepresentation, and (3) silent fraud.” M & D, Inc v W B McConkey, 231 Mich App 22, 26-27; 585 NW2d 33 (1998).

The evidence in this case supported the trial court’s finding that defendants defrauded plaintiff by representing to her that the roof on their home did not leak.


Under the SDA, defendants were specifically required to disclose whether the roof leaked. MCL 565.957(1). The SDA places no time limitation on disclosures of leaks......

...It is well established that the actions of an agent bind a principal when the agent acts with either actual or apparent authority. Meretta v Peach, 195 Mich App 695, 697-698; 491 NW2d 278 (1992). Defendants were liable for their agent’s representation regarding the roof, even if the agent did not know that the representation was false. M & D, Inc, supra at 27-28; Mitchell v Dahlberg, 215 Mich App 718, 723; 547 NW2d 74 (1996).

Before plaintiff purchased the home, defendants’ real estate agent told her that the roof did not leak. It is well established that the actions of an agent bind a principal when the agent acts with either actual or apparent authority. Meretta v Peach, 195 Mich App 695, 697-698; 491 NW2d 278 (1992). Defendants were liable for their agent’s representation regarding the roof, even if the agent did not know that the representation was false. M & D, Inc, supra at 27-28; Mitchell v Dahlberg, 215 Mich App 718, 723; 547 NW2d 74 (1996). 

Defendants argue that they did not have a duty to warn plaintiff of defects that could have been reasonably discovered upon inspection. This Court has recognized that a seller does not violate the SDA “where undisclosed and unknown information could be obtained only through inspection or observation of inaccessible areas of the home or could only be discovered by a person with expertise beyond the knowledge of the seller.” Bergen, supra at 385 n 4. However, the information  regarding the roof leak was not unknown. Defendants admittedly knew about the leak. Furthermore, the fact that plaintiff could have obtained a home inspection before purchasing the property was not fatal to her fraud claim. An inspection does not necessarily preclude a showing of reliance upon a seller’s representations. See Le Roy Const Co, supra at 308, and Bergen, supra at 389-390. Moreover, defendant failed to present any evidence that the leaking, as disclosed to defendants by the neighbor, would have been discovered by a home inspector. The trial court properly denied defendants’ motion for a directed verdict concerning plaintiff’s roof-related fraud claim.

The trial court also properly denied defendants’ motion for a directed verdict concerning plaintiff’s claim that defendants committed fraud by representing that there were hardwood floors throughout the home..... Assuming arguendo that the agent did not know that the representations regarding the floors were false, defendants were liable for the agent’s representations regarding the floors under the innocent misrepresentation theory. M & D, Inc, supra at 27-28; Meretta, supra at 697-698.

Defendants argue that they were not liable to plaintiff for the condition of the roof or the floors because the house was sold “as is.” This argument is without merit. It is “wellestablished . . . that if a seller makes fraudulent representations before a purchaser signs a binding agreement, then an ‘as is’ clause may be ineffective.” M & D, Inc, supra at 32; Clemens v Lesnek, 200 Mich App 456, 460; 505 NW2d 283 (1993). The “as is” clause in the purchase agreement did not insulate defendants from liability in this case because they made fraudulent representations in connection with the sale of the property. Bergen, supra at 390 n 5; Lorenzo v Noel, 206 Mich App 682, 687; 522 NW2d 724 (1994).

If the allegations in the verified complaint are true, the Smiths may have been defrauded. But fraud could not have been a defense in this foreclosure case. The Smiths did not adequately allege fraud against Chase and MERS in their answer. The Smiths’ answer stated that they were victims of predatory lending, that they were sold four houses in a year, and that the houses were overpriced. The answer did not indicate when the allegedly fraudulent transactions had occurred. It did not specifically allege that Chase or MERS had received any benefits from the fraud. It did not say what false representation had been made to them, or by whom.

The Smiths’ answer was filed pro se. While some leniency toward pro se litigants might be appropriate at times, in general pro se litigants must follow the same rules as represented litigants. The Smiths effectively asserted no defenses and did not deny that they had defaulted on their loan. Chase and MERS were entitled to summary judgment. There was no issue of material fact for a jury to decide.....

The verified complaint alleged some facts that were based on the Smiths’ personal knowledge. But as to Chase and MERS, the verified complaint was lacking. Chase and MERS were mentioned only in conclusory statements that were not based on personal knowledge. For example, the complaint alleged that Henry was an agent of Chase and MERS, and that Chase and MERS had known that the loan would force the Smiths to seek bankruptcy. But it offered nothing to show that the Smiths personally knew this to be true. An allegation does not equate with personal knowledge.

OFIS Issues Best Practices for Subprime Mortgage Lending
Guidance will provide underwriting standards for adjustable rate mortgage products

The Michigan Office of Financial and Insurance Services (OFIS) has issued regulatory best practices covering underwriting standards, management practices, and consumer protection provisions that mortgage originators should follow when marketing and selling certain adjustable-rate mortgage (ARM) products to subprime borrowers, Commissioner Linda A. Watters announced today....

Beyond the Statement on Subprime Mortgage Lending, state regulators also plan to issue Examination Guidance for state supervisors to use in evaluating state-licensed mortgage lenders’ compliance with the best practices on lending to subprime borrowers.

Supervisory Review

The Michigan Office of Financial and Insurance Services will carefully review risk management and consumer compliance processes, policies, and procedures. The Michigan Office of Financial and Insurance Services will take action against providers that exhibit predatory lending practices, violate consumer protection laws or fair lending laws, engage in unfair or deceptive acts or practices, or otherwise engage in unsafe or unsound lending practices.

With respect to the issue that you raise regarding the authority of the Commissioner to issue interpretive bulletins, such as Bulletin No. 2003-09-CF, pursuant to the Act. The Act statutorily charges the Commissioner with the responsibility and authority to implement and administer the Act. Further, the Commissioner is expressly required to exercise general supervision and control over all mortgage brokers, mortgage lenders, and mortgage servicers operating in Michigan pursuant to the Act. Consistent with, and as an essential element of, that responsibility and authority, the commissioner has periodically issued interpretive bulletins on matters that she believes to be of interest to the industry. These bulletins are intended to offer explanation and clarification to the industry concerning the Commissioner's interpretation of the Act and manner in which she will implement and administer the Act. They do not carry the force and effect of law.

Also, Title VIII of the Garn-St. Germain Depository Institutions Act of 1982, PL 97-320, entitled "Alternative Mortgage Transaction Parity Act of 1982," authorizes state-chartered banks, credit unions, savings banks and other housing creditors (including licensees under the Mortgage Brokers, Lenders and Servicers Licensing Act and the Secondary Mortgage Loan Act) to make alternative mortgage transactions notwithstanding any provisions of state law which restrict or prohibit the making of such transactions. States had the authority to override the federal preemption but had to take action before October 15, 1985. The state of Michigan did not take action before the deadline.

1. Who is covered? 

a. First, financial institutions and creditors that offer or maintain at least one “covered account” must develop and implement a written Program to protect its customers against identity theft. A covered account is:

i. An account primarily for personal, family, or household purposes, that involves or is designed to permit multiple payments or transactions (including any consumer credit, loan, or deposit account), or

ii. Any other account for which there is a reasonably foreseeable risk to customers or the safety and soundness of the financial institution or creditor from identity theft (including business accounts).

Each financial institution and creditor must periodically determine whether it offers or maintains a “covered account.” The definition includes accounts prior to and at the time that they are established. The definition of “creditor” has the same definition as in Regulation B (which could include debt collectors).