                NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 13a0255n.06

                                           No. 12-1684
                                                                                         FILED
                          UNITED STATES COURT OF APPEALS                             Mar 12, 2013
                               FOR THE SIXTH CIRCUIT                            DEBORAH S. HUNT, Clerk


CHARLIE SMITH, JR.,                                      )
                                                         )
       Plaintiff-Appellant,                              )
                                                         )
               v.                                        )
                                                         )         ON APPEAL FROM THE
LITTON LOAN SERVICING, LP, a foreign                     )         UNITED STATES DISTRICT
corporation; and DEUTSCHE BANK NATIONAL                  )         COURT FOR THE EASTERN
TRUST COMPANY, as Trustee under the Pooling              )         DISTRICT OF MICHIGAN
and Servicing Agreement Dated April 1, 2006,             )
Fremont Home Loan Trust 2006-2, Asset-Backed             )
Certificates, Series 2006-2,                             )
                                                         )
       Defendants-Appellees.                             )
                                                         )



BEFORE: KEITH, COLE, and ROGERS, Circuit Judges.

       ROGERS, Circuit Judge. In 2010, Deutsche Bank National Trust Company foreclosed on

the house of a Charlie Smith in Romulus, Michigan. Charlie Smith, Jr. filed this action against

Deutsche Bank Trust and its loan servicer, Litton Loan Servicing, to contest the foreclosure under

a variety of theories. The district court properly concluded that none of Smith’s theories justifies

setting aside the foreclosure and that Smith’s unjust enrichment claim fails.

       Plaintiff Charlie Smith, Jr. claims an interest in real property located at 39079 Buckingham

in Romulus, Michigan. In 2005, Charlie Smith, Sr. mortgaged this property as security for a

$200,000 adjustable rate note. The exact relationship between Charlie Smith, Jr., Charlie Smith, Sr.,
No. 12-1684
Smith v. Litton Loan Servicing, LP, et al.


and the property is unclear. The record suggests that Charlie Smith, Sr. and Charlie Smith, Jr. are

different individuals, but the parties and the district court conflate the two by saying that the plaintiff,

Charlie Smith, Jr., mortgaged the property, despite the mortgage’s indication that Charlie Smith, Sr.

was the mortgagor. Construing the facts in the light most favorable to the plaintiff, this court

assumes for purposes of this opinion that Charlie Smith, Jr. is the same person as Charlie Smith, Sr.

so as to provide the relevant Smith with the maximum potential interest in the property that

Michigan law may provide him.

        In late 2009 and early 2010, Smith failed to make his scheduled payments. In February 2010,

Smith hired Bloomfield Financial Services in an attempt to keep the property. Bloomfield believed

that the best strategy was to pursue a “short payoff” in which the lender discounts the original

balance and the borrower refinances or pays off the discounted amount. See Litton’s Mot. for Summ.

J., Ex. F Pack Depo., 14–16. Kendra Pack, an employee of Bloomfield Financial Services,

distinguished between a “short payoff” and a “loan modification.” Id. The lender’s servicer,

defendant Litton Loan Servicing, was amenable to a short payoff, but the sticking point was a second

lien on the property for approximately $14,000. Litton required that the second lien holder accept

only $3000, but the second lien holder would only agree to accept the full balance. Because no

agreement could be reached, the short payoff did not occur.

        Defendant Deutsche Bank National Trust Company initiated the foreclosure process, see

Mich. Comp. Laws § 600.3201–.3285, by informing Smith of his § 3205a right to mediation. This

was done by posting notices at the property pursuant to § 3205a(3) and publishing notices in a


                                                   -2-
No. 12-1684
Smith v. Litton Loan Servicing, LP, et al.


newspaper pursuant to § 3205a(4) in March 2010. Smith did not make use of this right to mediation.

In April 2010, Deutsche Bank Trust began foreclosure proceedings by publishing notices of intent

to foreclose and posting notice pursuant to § 3208. Deutsche Bank Trust purchased the property at

a May 12, 2010 sheriff’s sale for $85,000.

       Smith did not redeem his property during the six-month statutory redemption period, see

Mich. Comp. Laws § 600.3240(8), which expired on November 12, 2010. On October 19, 2010,

Smith filed the present suit in Wayne County Circuit Court. Litton Loan Servicing removed the case

to the U.S. District Court for the Eastern District of Michigan based upon diversity jurisdiction.

Following discovery, Litton and Deutsche Bank Trust moved for summary judgment. On February

28, 2012, the district court granted summary judgment and issued an opinion and order. See Smith

v. Litton Loan Servicing, LP, No. 10-14700, 2012 WL 642060 (E.D. Mich. Feb. 28, 2012).

       Although Smith raised a number of claims below, we address only those arguments presented

in Smith’s appellate brief.

       Smith argues that he has standing to set aside the sheriff’s sale. The “standing” that Smith

refers to is not standing in the Article III sense, but rather a Michigan state-law requirement that is

functionally similar to a statute of limitations. The district court held that Smith lacked standing

because the statutory redemption period had expired and none of his arguments constituted sufficient

irregularities in the foreclosure proceeding to justify tolling the redemption period. We need not rely

on Michigan’s standing requirement because the district court correctly concluded that neither




                                                 -3-
No. 12-1684
Smith v. Litton Loan Servicing, LP, et al.


irregularity alleged by Smith warranted tolling of the redemption period. Therefore, Smith’s interest

in the property was extinguished by the sheriff’s sale.

       Smith alleges two irregularities in the foreclosure process. First, he argues that Michigan

Compiled Laws §§ 600.3205a–.3205c required: (1) a ninety-day extension of the foreclosure date,

(2) a determination of whether Smith was eligible for a loan modification, and (3) Smith’s receipt

of a letter with the required calculations explaining why modification was denied. Regarding the

ninety-day extension, as the right-to-mediation notice that Smith received explained, to receive the

extension, Smith had to contact Deutsche Bank Trust’s designate, Orlans Associates, within fourteen

days. See Mich. Comp. Laws § 600.3205a(1)(e). Smith has not put forth any evidence that he

contacted Orlans within fourteen days. Regarding his eligibility for a loan modification, as the

district court recognized, Smith has not indicated that he requested a loan modification by contacting

a housing counselor within fourteen days as required by § 3205b(1). The loan-modification process

hinges on the initial contact with a housing counselor because the lender receives the documents that

would allow it to calculate the borrower’s eligibility after the counselor informs the lender that the

borrower wishes to modify his loan. See §§ 3205b–3205c. The only case that Smith cites in support

of his § 3205c argument, Roller v. Federal National Mortgage Association, No. 12-CV-11236, 2012

WL 5828625 (E.D. Mich. June 4, 2012), is easily distinguishable because Roller contacted a housing

counselor, see id. at *1, while Smith did not. Nor does Smith’s attempt to pursue a short payoff

qualify as a loan modification request, for the two strategies are distinct. Because Smith failed to




                                                -4-
No. 12-1684
Smith v. Litton Loan Servicing, LP, et al.


avail himself of his rights under §§ 3205a–3205c, he has not shown any irregularity flowing from

the loan-modification provisions.

        Second, Smith argues that Deutsche Bank Trust never received ownership of the mortgage

because the assignment of the mortgage to the Trust violated the terms of the Trust’s Pooling and

Service Agreement. Smith’s argument is that the mortgage entered the Trust after the Pooling and

Service Agreement’s defined “closing date” of the Trust, and therefore, the assignment of the

mortgage was invalid. However, Smith was neither a party nor a third-party beneficiary to the

Pooling and Service Agreement, so even if its terms were violated, Smith may not challenge

compliance with the Pooling and Service Agreement. This court directly addressed a similar issue

in Livonia Properties Holdings, LLC v. 12840–12976 Farmington Road Holdings, LLC, 399 F.

App’x 97, 102–03 (6th Cir. 2010). Livonia involved a multi-step transfer from the mortgagee to a

trust to the foreclosing entity, Farmington Road Holdings. Livonia argued that because the trust was

not created until after the date that was entered on the transfer document between the mortgagee and

the trust, that this assignment was invalid and therefore, so was the foreclosure. We rejected this

argument because a valid “record chain of title,” Mich. Comp. Laws § 600.3204, existed. While a

plaintiff in a foreclosure case can challenge the existence of a record chain of title, the record chain

of title is distinct from the validity of each underlying agreement in the chain of title. See Livonia,

399 F. App’x at 100–03.

        In Livonia we recognized that an obligor may assert defenses which render an assignment

void. See id. at 102 (citing 6A C.J.S. Assignments § 132 (2010)). However, Smith has not shown


                                                 -5-
No. 12-1684
Smith v. Litton Loan Servicing, LP, et al.


that the assignment to the Trust was void rather than voidable. There is no dispute that the Trust

existed at the time of the assignment. If the Trust violated the terms of the Pooling and Service

Agreement by accepting the mortgage, the beneficiaries of the Trust might have a cause of action,

but this would make the assignment merely voidable. Further, as explained in Livonia, the purpose

of an obligor’s defenses is to avoid the risk of paying the same debt twice. While the record in this

case is not as clear as in Livonia that the foreclosing entity owns the note, there is no evidence that

another party owns the note, so Smith has not put forth any evidence showing a genuine risk of

having to pay the same debt twice. Smith may not challenge Deutsche Bank Trust’s compliance with

the terms of the Pooling and Service Agreement.

       Because neither of Smith’s alleged irregularities in the foreclosure proceeding justifies tolling

the redemption period, Smith’s right to the property was extinguished by the sheriff’s sale.

       Smith also argues that the district court should have granted his common-law claim for unjust

enrichment. The district court properly rejected this claim. Michigan allows a claim for unjust

enrichment when a plaintiff establishes “(1) the 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 the

defendant.” Morris Pumps v. Centerline Piping, Inc., 729 N.W.2d 898, 904 (Mich. Ct. App. 2006).

Smith argues that Deutsche Bank Trust received the benefit of title to the property and the ability to

sue Smith for the deficiency between the sale price and the outstanding balance of the note. Smith

says that the inequity is obvious because Smith may be forced to move from the property.




                                                 -6-
No. 12-1684
Smith v. Litton Loan Servicing, LP, et al.


       Smith has not shown any inequity. Smith may have lost his property and may be forced to

go through the hardship of moving, but he received a $200,000 loan and then failed to make his

promised payments under the note. There is nothing inequitable about a bank’s decision to exercise

a standard, statutory foreclosure remedy when a borrower stops making payments on a loan secured

by a mortgage. Economic stress can produce lamentable situations, but these situations are

anticipated by mortgage agreements and are not the sort of inequity that unjust enrichment is meant

to address.

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




                                               -7-
