Facione v. CHL Mortgage Trust 2006-J1

Citation: 628 F. App'x 919Docket: No. 14-2613

Court: Court of Appeals for the Fifth Circuit; October 9, 2015; Federal Appellate Court

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Anthony and Erin Facione filed a quiet-title and wrongful-foreclosure action against the Bank of New York Mellon after a foreclosure on their home, alleging irregularities in the process. The district court dismissed their complaint, ruling they lacked valid grounds to contest the foreclosure and failed to meet the requirements for a quiet-title claim. The Faciones had signed a mortgage with Golden Mortgage Corporation, designating Mortgage Electronic Registration Systems, Inc. (MERS) as the lender's representative. MERS assigned the mortgage to Bank of New York Mellon in December 2012. Following an unexplained eight-month period, the loan's balance was accelerated in August 2013, leading to non-judicial foreclosure proceedings initiated by the Bank in November 2013, culminating in a sheriff's sale in February 2014. The Faciones later sued in state court, claiming the mortgage assignment was illegitimate, which rendered the foreclosure invalid. The case was moved to federal court on diversity grounds, and the Faciones amended their complaint to include an additional wrongful-foreclosure claim. The Bank’s motion to dismiss was granted. 

The court addressed the issue of standing before discussing the merits. It clarified that standing, in a jurisdictional sense under Article III, requires (1) an injury-in-fact, (2) causation by the foreclosure, and (3) redressability through the requested equitable relief. The Faciones met this standard based on precedent. The court noted additional debates over standing concerning the mortgage assignment, indicating that this issue relates to the merits of the claim rather than jurisdiction. Lastly, the court mentioned a third aspect of standing, questioning whether the Faciones could challenge the foreclosure after the redemption period had lapsed, which is also a merits issue. Ultimately, the ruling emphasized that the Faciones’ claims failed on other grounds, negating the need to resolve these standing questions.

The legal framework for wrongful foreclosure claims in Michigan allows a mortgagor to reclaim foreclosed property within a six-month redemption period by paying a specified sum. If this period lapses without payment, the mortgagor forfeits all rights to the property, with an exception for claims of fraud or irregularity in the foreclosure process. The Michigan Supreme Court has clarified that while proving such irregularities does not void the foreclosure, it makes it voidable, requiring the claimant to demonstrate actual prejudice stemming from the irregularities.

In this case, the Faciones allege two statutory defects related to the foreclosure: that the foreclosing party must hold an interest in the indebtedness and that a proper record chain of title must exist if the foreclosing party is not the original mortgagee. They argue that the Bank lacked both an interest in the indebtedness and a valid mortgage assignment from MERS. However, the Faciones fail to demonstrate that these irregularities prejudiced them; they do not allege that they would have been in a better position to protect their property rights had they known about the alleged invalid assignment. Additionally, any new claims raised in their appellate brief cannot amend their original complaint under the Federal Rules of Civil Procedure. The Faciones also do not assert they would have qualified for a mortgage modification or been able to pay the redemption fee, nor do they claim they were misled about the possibility of a sheriff's sale.

In cases where plaintiffs contest the validity of a mortgage assignment, the potential for double liability does not establish adequate grounds for claims of prejudice, as demonstrated by the Faciones' inability to substantiate such claims. Consequently, their wrongful-foreclosure claims were rightly dismissed by the district court. Regarding their quiet-title action, Michigan law allows individuals with claims to property rights to initiate a suit against anyone claiming inconsistent interests. However, plaintiffs must demonstrate a superior interest in the property, which the Faciones failed to do. Their complaint lacked evidence of prejudice stemming from fraud or irregularities in the foreclosure process, and they forfeited all rights to the property once the redemption period expired. Allegations concerning the mortgage assignment’s validity do not alter this outcome, as legal precedent requires plaintiffs to establish their own prima facie case rather than rely on the defendant's title weaknesses. Without asserting a superior interest, the Faciones' quiet-title claim is insufficient to warrant relief, leading to the affirmation of the dismissal.