               NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 13a0118n.06

                                         No. 12-1325

                         UNITED STATES COURT OF APPEALS                             FILED
                              FOR THE SIXTH CIRCUIT                              Jan 31, 2013
                                                                          DEBORAH S. HUNT, Clerk
SALVATORE A. MUNACO,                        )
                                            )
              Plaintiff-Appellant,          )
                                            )      ON APPEAL FROM THE
v.                                          )      UNITED STATES DISTRICT
                                            )      COURT FOR THE EASTERN
BANK OF AMERICA; BANK OF                    )      DISTRICT OF MICHIGAN
NEW YORK MELLON,                            )
                                            )
              Defendants-Appellees.         )
                                            )


BEFORE: MARTIN, SUHRHEINRICH and GIBBONS, Circuit Judges.

       SUHRHEINRICH, Circuit Judge.

                                       I. Introduction

       Defendant The Bank of New York Mellon (“BNYM”) foreclosed the mortgage of Plaintiff

Salvatore A. Munaco (“Munaco”) after Munaco defaulted on the loan secured by the mortgage.

Munaco sued, alleging that the foreclosure sale violated Michigan’s advertisement statute, Mich.

Comp. Laws Ann. § 600.3220. The district court granted summary judgment to Defendants and also

denied Munaco’s motion for reconsideration or relief from judgment. Munaco appeals both of those

orders. We AFFIRM.

                                       II. Background

       On January 17, 2007, Munaco got a loan in the amount of $1,190,000.00 from America’s

Wholesale Lender (“AWL”), for residential property located in Rochester, Michigan. The note was
secured by a mortgage, which was recorded with the Oakland County Register of Deed (“ROD”).

Defendant Bank of America is the servicer of the loan. The mortgage identified Mortgage Electronic

Systems, Inc. (“MERS”) as the mortgagee. MERS assigned the mortgage to BNYM, by written

assignment, which was recorded with the ROD on June 25, 2009.

       Munaco defaulted on the note. On June 2, 2009, BNYM began foreclosure proceedings.

This was twenty-three days before it recorded the assignment of the mortgage with the ROD, on June

25, 2009. The foreclosure sale was originally scheduled for June 30, 2009, but after four

adjournments, took place on July 28, 2009. BNYM purchased the property at the foreclosure sale

for $697,000. Munaco had until July 28, 2010, to redeem the property from foreclosure but did not

redeem it.

       Thereafter, BNYM brought an action in the District Court for the 52-3 Judicial District of

the State of Michigan to recover the property. On September 13, 2010, Munaco brought this suit,

alleging wrongful foreclosure (Count I), and seeking to set aside the foreclosure sale and enjoin

Defendants from evicting him from the property (Count II). BNYM removed the action to federal

district court, dismissed its state court action, and agreed to have the pending issues regarding the

property resolved in this action.

       Defendants moved for summary judgment on November 1, 2011. On November 22, 2011,

Munaco filed his response. On January 24, 2012, the district court granted summary judgment to

Defendants. First, it concluded that Munaco had standing to challenge the foreclosure after the

expiration of the redemption period. The court found that there was no genuine issue of fact that the

foreclosure sale was properly adjourned from week to week, in accordance with Mich. Comp. Laws

Ann. § 600.3220, relying on the adjournment notices attached to Defendants’ motion for summary


                                                 2
judgment. The district court refused to consider Plaintiff’s argument, raised for the first time in his

response brief, that the foreclosure by advertisement was invalid under Mich. Comp. Laws Ann. §

600.3204, because BNYM did not record the mortgage until after the foreclosure proceeding began.

R. 25 Page ID# 321.

       On February 7, 2012, Munaco filed a motion for reconsideration or relief from judgment and

to file an amended complaint. On February 28, 2012, the district court denied this motion. First,

the court held that while Munaco had made numerous allegations in his complaint, he “chose to

assert only a single claim of wrongful disclosure, and specifically stated in that count that his claim

was pursuant to MCL 600.3220.” R. 36 Page ID# 651. The court added that it was “not required

to consider other alleged statutory violations that Plaintiff was clearly aware of, but for whatever

reason chose not to assert as part of his claim.” Id. The district court also denied Munaco’s motion

to amend the complaint, on the grounds that Munaco offered no explanation for the delay in seeking

to amend, and Defendants had demonstrated significant prejudice. Id. 652. “As Defendants have

explained, if Plaintiff had asserted on a timely basis the fact that he now proposes to assert in an

amended complaint, Defendants would have had the option to agree to set aside the foreclosure and

to begin a new foreclosure by advertisement.” Id. 652–53. Finally, the court noted that Munaco

“had ample notice” that his additional claims had not been included in the complaint and thus not

considered on summary judgment, but he did not explain why he waited until after entry of judgment

to seek leave to amend. Id. 653.

       Munaco challenges both rulings on appeal.




                                                  3
                                             III. Analysis1

                                  A. Grant of Summary Judgment

       First, Munaco alleges that in granting summary judgment, the trial court refused to consider

various arguments he presented in support of his wrongful foreclosure claim. More specifically,

Munaco contends that the court elevated form over substance by considering only allegations that

were asserted specifically under Count I and completely disregarding other factual allegations in the

complaint or raised in response to summary judgment.

       A district court’s grant of summary judgment is reviewed de novo. Johnson v. Econ. Dev.

Corp., 241 F.3d 501, 509 (6th Cir. 2001). Summary judgment is proper “if the movant shows that

there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter

of law.” Fed.R.Civ.P. 56(a). “A ‘genuine issue of material fact’ is one which, if proven at trial,

would result in a reasonable jury finding for the non-moving party.” Doren v. Battle Creek Health

Sys., 187 F.3d 595, 597 (6th Cir.1999) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48

(1986)). All justifiable inferences are to be drawn in the non-moving party’s favor. Anderson, 477

U.S. at 255.

                                         1. General Principles

       In Michigan, once a foreclosure is complete and the redemption period following the

foreclosure has expired, a former owner loses all right, title, and interest in and to the mortgaged

property. Piotrowksi v. State Land Office Bd., 4 N.W.2d 514, 517 (Mich. 1942); see also Mich.




       1
           Subject matter jurisdiction is based on diversity.

                                                    4
Comp. Laws Ann. § 600.6236.2 Furthermore, “[t]he law in Michigan does not allow an equitable

extension of the period to redeem from a statutory foreclosure sale in connection with a mortgage

foreclosed by advertisement and posting of notice in the absence of a clear showing of fraud, or

irregularity.” Schulthies v. Barron, 167 N.W.2d 784, 785 (Mich. App. 1969) (per curiam). See also

Reid v. Rylander, 258 N.W. 630, 631 (Mich. 1935) (holding that a former owner may holdover and

challenge the validity of the foreclosure in a summary eviction proceeding, but is limited to

challenging the procedure).




       2
         In the district court, Defendants argued that Munaco lacked standing to challenge the
foreclosure once the redemption period expired. The district court rejected the argument, citing
Rainey v. U.S. Bank Nat’l Ass’n, No. 11-12520, 2011 WL 5075700 (E.D. Mich. Oct. 25, 2011).
Rainey, in turn, adopted the reasoning of Langley v. Chase Home Fin. LLC, No. 10-604, 2011 WL
1130926, at * 2 n.2 (W.D Mich. March 28, 2011). See also Ahmad v. Wells Fargo Bank, NA, 861
F. Supp. 2d 818, 824-25 (E.D. Mich. 2012) (adopting the views of Rainey and Langley). This issue
has arisen in several federal district courts in Michigan. See, e.g., Steinberg v. Fed. Home Loan
Mortg. Corp.,, 1-CV-15182, 2012 WL 4498297, at * 2 (E.D. Mich. Sept. 28, 2012) (and cases cited
therein); Witek v. Mortg. Elec. Reg. Sys., Inc. (MERS), No. 1:11-CV-216, 2012 WL 2261363, at *
1 (W.D. Mich. June 15, 2012); Ahmad, 861 F. Supp. 2d at 824-25; Rainey, 2011 WL 5075700, at
*2-4; Langley, 2011 WL 1130926, at *2 n.2.
        Defendants do not raise this argument on appeal. Notwithstanding, we have an independent
obligation to consider the matter. See Planned Parenthood Ass’n. v. City of Cincinnati, 822 F.2d
1390, 1394 (6th Cir. 1987). Use of the term “standing” in this context is misleading. Brezzell v.
Bank of America, No. 11-11467, 2011 WL 2682973, at *4 (E.D. Mich. July 11, 2011). See generally
El-Seblani v. IndyMac Mortg. Servs., No. 12-1046, at *3-4 (6th Cir. Jan. 7, 2013) (explaining the
confusion over standing in this context).
        We conclude that Munaco satisfies constitutional and prudential standing requirements, for
the reasons articulated in Langley. See Langley, 2011 WL 1130926, at * 2. n.2; Rainey, 2011 WL
5075700, at * 2-4; see also Ahmad, 861 F. Supp. 2d at 824-25 (assuming standing because the
plaintiffs’ claims were still subject to dismissal under Fed. R. Civ. P. 12(b)(6)). We therefore affirm
the district court’s conclusion that Munaco had standing to challenge the foreclosure proceeding.


                                                  5
                               2. Mich. Comp. Laws Ann. § 600.3220

         In his complaint, Plaintiff alleged that Defendants failed to post notice of the adjournment

of the foreclosure sale as required by Mich. Comp. Laws Ann. § 600.3220.3 As discussed below,

this is the only claim raised in the complaint. Defendants offered undisputed evidence that the

foreclosure sale was adjourned from week to week in accordance with Mich. Comp. Laws Ann. §

600.3220, and the district court granted summary judgment on that basis. Munaco does not

challenge that conclusion on appeal. Summary judgment for Defendants is thus proper on this basis

alone.

                               3. Mich. Comp. Laws Ann. § 600.3204

         Munaco argued for the first time in his response to Defendants’ motion for summary

judgment that the foreclosure must be set aside because the assignment of the mortgage was not

recorded until after the foreclosure procedure began.

         Foreclosure by advertisement is governed by statute in Michigan. See Mich. Comp. Laws

Ann. § 600.3204; Senters v. Ottawa Sav. Bank, FSB, 503 N.W.2d 639, 641 (Mich. 1993). A party


         3
             Mich. Comp. Laws Ann. § 600.3220 states as follows:

         Sec. 3220. Such sale may be adjourned from time to time, by the sheriff or other
         officer or person appointed to make such sale at the request of the party in whose
         name the notice of sale is published by posting a notice of such adjournment before
         or at the time of and at the place where said sale is to be made, and if any
         adjournment be for more than 1 week at one time, the notice thereof, appended to the
         original notice of sale, shall also be published in the newspaper in which the original
         notice was published, the first publication to be within 10 days of the date from
         which the sale was adjourned and thereafter once in each full secular week during the
         time for which such sale shall be adjourned. No oral announcement of any
         adjournment shall be necessary.




                                                   6
may foreclose by advertisement if certain conditions are met. These include that “[t]he mortgage

containing the power of sale has been properly recorded” and that “[t]he party foreclosing the

mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the

mortgage or the servicing agent of the mortgage.” Mich. Comp. Laws Ann. § 600.3204(1)(c), (d).

The statute also provides: “If the party foreclosing a mortgage by advertisement is not the original

mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing

the assignment of the mortgage to the party foreclosing the mortgage.” Id. § 600. 3204(3) (emphasis

added).4

                                        a. Stating a Claim

       We agree with the district court that Munaco raised only one claim for wrongful foreclosure

based on Defendants’ alleged failure to comply with the adjournment procedure of Mich. Comp.

Laws § 600.32205 and that the complaint does not contain any factual allegations or claims relating

to Munaco’s assertion that the mortgage foreclosure was invalid under Mich. Comp. Laws Ann. §

600.3204. The complaint does not allege that BNYM was not “either the owner of the indebtedness

or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage”

at the time BNYM began foreclosure proceedings, as required by Mich. Comp. Laws Ann. § 600.

3204(1)(d), or that BNYM failed to record the assignment of the mortgage prior to the date of sale,




       4
        Mich. Comp. Laws Ann. § 600.3216 pertains to the time and place of the sheriff’s
foreclosure sale.
       5
        Munaco’s complaint alleges that “Defendants did not properly post the adjournment as
required by MCL 600.3220,” and “Defendants failed to comply with MCLA 600.3220.” R. 1 Page
ID# 8.

                                                  7
as provided by Mich. Comp. Laws Ann § 600.3204(3). Having failed to state a claim under section

600.3204, Munaco has forfeited any right to pursue such arguments on appeal.

       The “other allegations of wrongdoing” in Munaco’s complaint allege that Defendants did

not afford Munaco an opportunity to meet with the foreclosing lender as required by Mich. Comp.

Laws Ann. § 600.3204(5). See R.1 Page ID# 7–9 (paragraphs 9–22). However, as Munaco

acknowledges, subsection 600.3204(5) was not in effect when BNYM began foreclosure

proceedings. See Mich. Comp. Laws Ann. § 600.3204(5) (“Subsection (4) [providing that a party

may not begin foreclosure proceedings if, inter alia, a mortgagor has requested a meeting and the

mortgagee has not met with him] applies only to proceedings under this chapter in which the first

notice . . . is published after July 5, 2009 and before December 31, 2012.”)

       As the Supreme Court recently observed, “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 ‘show[n]’—‘that the pleader is entitled to relief.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Fed. R. Civ. P. 8(a)(2)). See also Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 444 (6th

Cir. 2012) (setting forth analysis required under Iqbal and Bell Atlantic v. Twombly, 550 U.S. 544

(2007)). Munaco did not plead facts to establish a violation of Mich. Comp. Laws Ann. § 600.3204,

and did not allege fraud, mistake, or irregularity in connection with the foreclosure proceeding.

                                     b. Summary Judgment

       Even if Munaco has properly stated a claim based on Mich. Comp. Laws Ann. § 600.3204,

he still failed to meet his burden as the nonmoving party under Rule 56. BNYM offered undisputed

evidence that it owned the indebtedness since on or about February 27, 2007, before the foreclosure

proceedings began, and that the assignment was recorded on June 25, 2009, prior to the date of the


                                                 8
foreclosure sale on July 28, 2009 (albeit not before the proceedings were initiated). R. 18-2 Page

ID# 108; R. 18-2 Page ID# 123.        As noted above, the undisputed evidence establishes that

Defendants met all three requirements at the time of the foreclosure sale.6

        In support of his argument that the assignment of the mortgage must also be recorded prior

to the first publication of a notice of foreclosure, Munaco cites Residential Funding Company, LLC

v. Saurman, 807 N.W.2d 412 (Mich. Ct. App. 2011). Saurman held that Mortgage Electronic

Registration Systems (“MERS”) was not authorized to foreclose under Mich. Comp. Laws §

600.3204(1)(d) because it did not hold the mortgage note itself. Saurman, 807 N.W.2d at 414.

However, the Michigan Supreme Court reversed Saurman, rejecting the premise that only

mortgagees of record may commence foreclosure by advertisement:

       [T]he Legislature’s use of the phrase “interest in the indebtedness” to denote a
       category of parties entitled to foreclose by advertisement indicates the intent to
       include mortgagees of record among the parties entitled to foreclose by
       advertisement, along with parties who “own[ ] the indebtedness” and parties who act
       as “the servicing agent of the mortgage.”

Residential Funding Co., LLC. v. Saurman, 805 N.W.2d 183, 184 (Mich. 2011). See also Hargraw

v. Wells Fargo Bank NA, No. 11-1806, 2012 WL 2552805, at *2 (6th Cir. July 3, 2012). Thus, the

person foreclosing a mortgage does not need to be a mortgagee. Instead, mortgagees of record are

only one category of parties entitled to foreclosure by advertisement, and the owner of the

indebtedness is also entitled to foreclose by advertisement. The Michigan Supreme Court did not

alter the requirement that the assignment of the mortgage to the person foreclosing the mortgage




       6
       The other requirements of Mich. Comp. Laws Ann. § 600.3204(1)(a), (b,), and (c) are also
met and not at issue.

                                                 9
must be recorded prior to sale. It is undisputed that BNYM was the owner of the indebtedness prior

to the commencement of foreclosure and the assignment was recorded prior to sale.

       Munaco also relies on Rainey v. U.S. Bank Nat’l Ass’n, No. 11-12520, 2011 WL 5075700

(E.D. Mich. Oct. 25, 2011), which held that an assignment of the mortgage must be recorded prior

to beginning foreclosure. Rainey, which was decided prior to Saurman, has been effectively

overruled.

       And most importantly, this result in consistent with the plain language Mich. Comp. Laws

Ann. § 600.3204(3), which states simply that if the foreclosing party “is not the original mortgagee,

a record chain of title shall exist prior to the date of sale.”        Mich. Comp. Laws Ann. §

600.3204(3)(emphasis added).

                                 B. Motion to Amend Complaint

       Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that a court may freely grant

leave to amend a pleading “when justice so requires,” in order to ensure that a case is tried on its

merits “rather than [on] the technicalities of the pleadings.” Moore v. City of Paducah, 790 F.2d 557,

559 (6th Cir. 1986) (per curiam). “In deciding whether to grant a motion to amend, courts should

consider undue delay in filing, lack of notice to the opposing party, and futility of amendment.”

Brumbalough v. Camelot Care Ctrs., Inc., 427 F.3d 996, 1001 (6th Cir. 2005).

       We review the denial of a motion to amend for abuse of discretion, unless the district court

ruled that the amendment would not withstand a motion to dismiss. Bridgeport Music, Inc. v.

Dimension Films, 383 F.3d 390, 402 (6th Cir. 2004).

       The district court did not abuse its discretion in denying Munaco leave to amend his

complaint. The court properly considered the relevant factors and found that Munaco never offered


                                                 10
an explanation for the long delay in seeking leave to amend, despite having notice that his additional

claims were not included as counts in his complaint, and that Defendants suffered prejudice, because

they conducted their defense based on the single theory presented in the complaint. The court also

noted that with timely notice, Defendants could have agreed to set aside the foreclosure and begin

a new foreclosure by advertisement.

       Munaco asserts that he could not have moved to amend until Rainey was decided. This

attempt to explain away the delay is not persuasive. Rainey was decided in October 2011, and

Defendants moved for summary judgment on November 1, 2011. Munaco did not move to amend

until February 7, 2012. But more importantly, Rainey did not change the substantive law of

Michigan regarding foreclosure by advertisement, which clearly states that an assignment must be

recorded prior to the foreclosure sale, not the first publication of the foreclosure notice. See Mich.

Comp. Laws Ann. § 600.3204(3). Finally, Munaco’s argument is undermined by the fact that he

relied on the Attorney General’s 2004 opinion, see Op. Att’y Gen. 2003-2004 No. 7147 (2004),7

which was available six years before Munaco brought this action.

       Finally, an amendment would have been futile, so there was no abuse of discretion in denying

leave to amend.

                                          IV. Conclusion

       For the foregoing reasons, the judgment of the district court is AFFIRMED.




       7
       Mich. Comp. Laws Ann. § 600.3204(3) was amended to its present form after Op. Att’y
Gen. 7147 was released. See generally Kim v. JP Morgan Chase Bank, NA, 813 N.W.2d 778, 781-
82 (Mich. Ct. App. 2012), aff’d in part, rev’d in part, 493 Mich. 98 (Mich. Dec. 21, 2012) (No.
144690).

                                                 11
