plaintiffs / appellants brief on appeal …...plaintiffs / appellants, kamel and jehan kassem (the...

CASE NO. 16-1636

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

KAMEL AND JEHAN KASSEM,

Plaintiffs / Appellants,

v.

OCWEN LOAN SERVICING, LLC, AND BANK OF AMERICA, N.A.

Defendants /Appellees.

Appeal from the United States District Court Eastern District of Michigan Civil Case No. 2:14-cv-11143

PLAINTIFFS / APPELLANTS BRIEF ON APPEAL

ORAL ARGUMENT REQUESTED CERTIFICATE OF COMPLIANCE

CERTIFICATE OF SERVICE DESIGNATIONS OF RELEVANT DISTRICT COURT

DOCUMENTS The Law Offices of Carson J. Tucker Carson J. Tucker

Attorney for Plaintiffs / Appellants 117 N. First St., Suite 111 Ann Arbor, MI 48104 (734) 629-5870

Case: 16-1636 Document: 47 Filed: 02/23/2017 Page: 1

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CORPORATE DISCLOSURE STATEMENT

Pursuant to Sixth Circuit Rule (6 Cir. R.) 26.1, Plaintiffs / Appellants

Kamel and Jehan Kassem (the Kassem’s) state they are individual

persons and therefore not a subsidiary or affiliate of a publicly owned

corporation.

The Kassem’s are unaware of any publicly owned corporations with

respect to the claims they assert and with which they are aligned having

a financial interest in the outcome of this litigation and appeal.

Respectfully submitted,

Carson J. Tucker Attorney for Plaintiffs/Appellants

Date: February 23, 2017


ii

TABLE OF CONTENTS TABLE OF AUTHORITIES ...................................................................... iv STATEMENT IN SUPPORT OF ORAL ARGUMENT ............................ ix JURISDICTIONAL STATEMENT ............................................................ 1

A. The District Court’s Jurisdiction ....................................................... 1 B. The Court of Appeals Jurisdiction ..................................................... 1

STATEMENT OF ISSUES ......................................................................... 3 INTRODUCTION ....................................................................................... 4 STATEMENT OF THE CASE .................................................................. 25

A. Factual Background ......................................................................... 25 B. Procedural Background…………………………………….........…27 1. The Kassem's Lawsuit………………………………………………...27 2. Ocwen’s Motion to Dismiss ................................................................ 36 3. BOA’s Motion for Judgment on the Pleadings .................................. 37 4. District Court Opinion ....................................................................... 38

ARGUMENTS ........................................................................................... 43 STANDARDS OF REVIEW ...................................................................... 43 I. THE DISTRICT COURT ERRED IN FAILING TO CONVERT THE

OCWEN AND BOA MOTIONS UNDER 12(B)(6) AND 12(C) INTO RULE 56 MOTIONS – DEPRIVING THE KASSEM’S OF THEIR RIGHT TO DISCOVERY AND A “JUDICIAL” FORECLOSURE .. 43

II. A RULE 56 MOTION WOULD AT LEAST ENTITLE THE KASSEM’S TO A “JUDICIAL” NOT “SUMMARY” FORECLOSURE,


iii

AND AT BEST, ALLOW FULL ACCESS TO THEIR STATE CONSTITUTIONAL RIGHT TO A JURY TRIAL ............................ 49

III. THE KASSEM’S HAD A RIGHT TO CHALLENGE THE FORECLOSURE SALE WITH A FULL JUDICIAL REVIEW ....... 51

IV. THE KASSEM’S HAD STANDING AND A RIGHT TO CHALLENGE THE DOCUMENTS BEING ASSERTED AS LEGITIMATE IN THE “RECORD” TITLE ...................................... 57

CONCLUSION .......................................................................................... 58 RELIEF REQUESTED ............................................................................. 60


iv

TABLE OF AUTHORITIES Cases

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ..................................................... 44

Austin v. Anderson, 279 Mich. 424 (1937) ............................................... 56

Bank of Manhattan Trust Co. v. Ellda Corp., 265 N.Y.S. 115 (N.Y. Sup. Ct. 1933) ................................................................................................. 60

Catlin v. United States, 324 U.S. 229 (1945) ............................................ 2

Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42 (2d Cir. 1991) .... 46

Dohm v. Haskin, 88 Mich. 144 (1891) ...................................................... 55

Eastham v. Chesapeake Appalachia, LLC, 754 F.3d 356 (6th Cir.2014) ................................................................................................................ 43

Eerie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) ............................... 59

Fed. Title & Mortg. Guar. Co. v. Lowenstein, 166 A. 538 (N.J. Ch. 1933) ................................................................................................................ 59

Greenberg v. Life Ins. Co. of Virginia, 177 F.3d 507 (6th Cir. 1999) ...... 45

Guar. Trust Co. of N.Y. v. York, 326 U.S. 99 (1945) ................................ 59

Hammond v. United of Oakland, 483 N.W.2d 652 (Mich. App. 1992) ... 35

In re Matter of the Rehabilitation of TRIAD Guaranty Insurance Corporation, Cook County, Illinois, Case No. 12-CH-43895 ................. 9

In re Saffady, 524 F.3d 799 (6th Cir. 2008) ............................................... 2

Investment Co. Inst. v. United States CFTC, 891 F.Supp.2d 162 (USDC DC 2012) ................................................................................................. 12

Jones v. Select Portfolio Servicing, Inc., 2016 WL 6936526 (6th Cir. 2016) .................................................................................................................. 3

Kim v. JP Morgan Chase Bank, N.A., 825 N.W.2d 329 (2012) ............... 51

Livonia Props. Holding, LLC v. 12480-12976 Farmington Rd. Holdings, LLC, 399 Fed. Appx. 97 (6th Cir. 2010) .......................................... 21, 37


v

Madugula v. Taub, 853 N.W.2d 685 (2014) ............................................. 50

Mfrs. Hanover Mtg. Corp. v. Snell, 142 Mich. App. 548 (1985) .............. 51

Mississippi Mills v. Cohn, 150 U.S. 202 (1893) ....................................... 58

Pension Benefit Guaranty Corp. v. White Consol. Indus., Inc., 998 F.2d 1192 (3rd Cir. 1993) ............................................................................... 46

Philips v. Mirac, Inc., 685 N.W.2d 174 (2004) ......................................... 50

Reid v. Rylander, 258 N.W. 630 (1935) .................................................... 57

Romani v. Shearson Lehman Hutton, 929 F.2d 825 (1st Cir. 1991) ...... 46

Schulthies v. Barron, 167 N.W.2d 784 (Mich. App. 1969) ...................... 51

Slorp v. Lerner, et al., 587 Fed. Appx. 249 (6th Cir. 2014) ..... 3, 21, 40, 57

Triad Guar. Ins. v. Am. Home Mortg. Inv. Corp. (In re Am. Mortg. Holding), 477 B.R. 517 (2012) ................................................................. 9

Venture Associates Corp. v. Zenith Data Sys. Corp., 987 F.2d 429 (7th Cir. 1993) ....................................................................................................... 47

Weiner v. Klais & Co., 108 F.3d 86 (6th Cir. 1997) ................................. 45

Statutes

15 U.S.C. § 6701(d)(2)(A) .......................................................................... 12

28 U.S.C. § 1291 .......................................................................................... 1

28 U.S.C. § 1331 .......................................................................................... 1

28 U.S.C. § 1332 .......................................................................................... 1

28 U.S.C. § 1367 .......................................................................................... 1

28 U.S.C. § 1441 .......................................................................................... 1

7 U.S.C. § 2(g) ............................................................................................ 12

MCL 600.3204 ........................................................................................... 32

MCL 600.3204(1)(c) ................................................................................... 32


vi

MCL 600.3204(1)(d) .................................................................................. 32

MCL 600.3205(a) ....................................................................................... 49

Other Authorities

Accusations of Fraud at Wells Fargo Spread to Sham Insurance Policies, New York Times, December 9, 2016 ..................................................... 16

Barnett, And Some with a Fountain Pen: Mortgage Fraud, Securitization, and the Subprime Bubble (Columbia University Press 2010) ........... viii

Bender, Equity in Times of Mortgage Crisis, 48 Real Prop. Trust and Est. L.J. 543 (2013-2014) .............................................................................. 17

Brennan, The Foreclosure Crisis Isn’t Over Just Yet, Forbes, December 1, 2012 ........................................................................................................ 17

Eggert, Foreclosing on the Federal Power Grab: Dodd-Frank, Preemption, and the State Role in Mortgage Servicing Regulation, 15 Chap. L. Rev. 171 (2011) ......................................................................................... 12, 20

ElBoghdady, “Bank of America to Modify Mortgages from Countrywide,” Wash. Post, October 7, 2008 ................................................................ viii

Engel & McCoy, Predatory Lending: What Does Wall Street Have to Do with It?, 15 Housing Pol’y Debate 715 (2004). ..................................... 15

Ennis & Malek, Bank Risk of Failure and Too Big to Fail Policy, Economic Quarterly, vol. 91/2 (Spring 2005) .......................................... 7

Gottesdeiner, 10 Million Americans Have Had Their Homes Taken Away by the Banks – Often at the Point of a Gun, Alternet, August 2013 .... 18

Grahl, The Professors and the Banks, 28 Int’l Rev. of Applied Economics 3 (2014) ............................................................................................. 11, 19

John Steinbeck, The Grapes of Wrath, Penguin Classics (2006) .............. 5

Juster, Where Credit is Due: Foreclosure Without the Note Is a Remedy without a Right, 9 Pratt’s Journal of Bankruptcy Law 5 (2013) ......... 52

Kittler, Too Big to Fail, The 1499-1500 Banking Crisis in Renaissance Venice, 5:2 Journal of Cultural Economy 165-178 (2012) ...................... 6


vii

Levitin, The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title, 63 Duke L.J. 637 (2013) ...................... 14

Mihm and Roubini, Crisis Economics: A Crash Course in the Future of Finance (2d ed. 2011) ............................................................................. 18

O’Hara & Shaw, Deposit Insurance and Wealth Effects: The Value of Being Too Big to Fail, 45 Journal of Finance 1587-601 (December 1990) .................................................................................................................. 7

Odinet, Banks, Break-Ins and Bad Actors in Mortgage Foreclosure, 83 Univ. of Cincinnati L. Rev. 1155 (2015) ................................................. 8

Peterson, Cracking the Mortgage Assignment Shell Game, 85 Fla. Bar J. 9 (2011) ................................................................................................... 13

Peterson, Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory, 53 Wm. & Mary L. Rev. 111 (2012) ....... 54

Ramirez, Lawless Capitalism: The Subprime Crisis and the Case for an Economic Rule of Law, pp. xi-xii (New York University Press 2013) viii

Reid, Foreclosure Without Original Documents: A Mere Techncality?, 2011 Franklin Business & Law 4 (2011) .............................................. 53

Renuart, Property Title Trouble in Non-Judicial Foreclosure States: The Ibanez Time Bomb?, 4 William & Mary Bus. Law Rev. 111 (2013) .... 13

Shah, Emergency Economic Stabilization Act [EESA] of 2008, 46 Harv. J. on Legis. 569 (2008) ............................................................................. 8

Sherman, A Short History of Financial Deregulation in the United States, Center for Economic and Policy Research (CEPR) (July 2009) ........... 13

Singer, Foreclosures and the Failures of Formality, or Subprime Mortgage Conundrums and How to Fix Them, 46 Conn. L. Rev. 497 (2013) ...................................................................................................... 17

Stern & Feldman, Too Big to Fail: The Hazards of Bank Bailouts, Brookings Inst. Press, Washington, D.C. (2004) .................................... 7

Stern, Supreme Court Practice (2002) ................................................... viii


viii

Stiglitz, Freefall: Free Markets and the Sinking of the Global Economy, (rev. ed. 2010) ............................................................................. 11, 19, 22

The Eye, Foreclosure Echo, October 7, 2016 ........................................... 15

Weiss, Rosso, and Clymer, What About Mortgage Insurers? A Case for Holding Mortgage Insurers Accountable for the Mortgage Crisis, 2012 Emerging Issues 6333 (Lexis Nexis 2012) .............................................. 9

Wells Fargo Isn’t the Only One, CNN Money, September 22, 2016 ...... 16

White, Losing the Paper – Mortgage Assignments, Note Transfers and Consumer Protection, 26 Loyola Cons. L. Rev. No. 468 (2012) ............ 15

Woolley & Herzog, MERS, The Unreported Effects of Lost Chain of Title on Real Property Owners, 8 Hastings Bus. L.J. 365 (2012). ................ 14

Rules

6 Cir. R. 26.1 ................................................................................................. i

6 Cir. R. 34(a) .......................................................................................... viii

Fed. R. Civ. P. 12(b)(7) .............................................................................. 43

Fed. R. Civ. P. 56 ............................................................................. 3, 44, 50


ix

STATEMENT IN SUPPORT OF ORAL ARGUMENT

Plaintiffs / Appellants, Kamel and Jehan Kassem (the Kassem’s)

request oral argument pursuant to 6 Cir. R. 34(a). “[O]ral argument is

the absolutely indispensable ingredient of appellate advocacy…. [The]

whole notion of what a case is about crystallizes at oral argument.” Stern,

Supreme Court Practice, p. 671 (2002) (quoting Justice Brennan).

Despite the fraud and manipulation of the legal system by the Banks

during the financial crisis,1 which included rote adoption by the judiciary

1 Attorneys general of several states have recovered only $8.6 billion in settlement with Bank of America to resolve predatory lending claims. See ElBoghdady, “Bank of America to Modify Mortgages from Countrywide,” at: http://www.washingtonpost.com/wpdyn/content/article/2008/10/06/AR2008100601150.html, October 7, 2008. By 2010, the Department of Justice (DOJ) led the prosecution of mortgage fraud and accounting, recovering an additional $2.3 billion. Designated “Operation Stolen Dreams”, DOJ’s aim was to “investigate, prosecute, and bring to justice swiftly those whose fraudulent activities contributed to the real estate market collapse.” See also Barnett, And Some with a Fountain Pen: Mortgage Fraud, Securitization, and the Subprime Bubble (Columbia University Press 2010), pp. 1-2. Accord Ramirez, Lawless Capitalism: The Subprime Crisis and the Case for an Economic Rule of Law, pp. xi-xii (New York University Press 2013) (outlining the hypocrisy of investigations and recoveries, and explaining that on September 18, 2008 then Chair of the Fed, Ben Bernanke, and the Secretary of the Treasury, Henry Paulson, convened a meeting with senior congressional leaders and informed Congress they needed to bail out the nation’s largest banks or “we may not have an economy on Monday”; three days later the Treasury


ii

of reasoning devoid of true jurisprudential support (other than that case

law hastily fabricated specifically supporting the Banks), this Court

should allow the Kassem’s to present oral argument if only to make a full

record of the facts and circumstances underlying their case.

Oral argument, along with the written words in this brief, is

worthwhile if only to fully explain the history of deception in which the

Banks have engaged and the now transparent machinations of after-the-

fact corrections in the law purposefully designed to exonerate them.

Department submitted a 3-page bill providing for $700 billion in “emergency” funding for the Banks “with only the thinnest oversight.”)


1

JURISDICTIONAL STATEMENT

A. The District Court’s Jurisdiction

The Kassem’s filed suit in the Circuit Court for the County of Oakland

(Michigan) alleging state- and federal-law claims against Ocwen Loan

Servicing, LLC (“Ocwen”) and Bank of America, N.A. (“BOA”). Ocwen

filed a notice of removal to the federal district court for the eastern

district of Michigan under 28 U.S.C. §§ 1331; 1332; and 1441, citing the

District Court’s jurisdiction to preside over the federal law claims, the

parties’ diversity of citizenship, and an amount in controversy that

exceeded $75,000. (Notice of Removal, R. 1, Page ID # 1-94). Ocwen also

invoked the District Court’s authority to exercise supplemental

jurisdiction under 28 U.S.C. § 1367 over the Kassem’s state law claims.

The Kassem’s do not challenge the District Court’s original jurisdiction,

diversity jurisdiction, or general equity jurisdiction.

B. The Court of Appeals Jurisdiction

This Court has jurisdiction over appeals from “final decisions of the

district courts.” 28 U.S.C. § 1291. A district court decision generally is

“final” for purposes of § 1291 if it “ends the litigation on the merits and


2

leaves nothing for the court to do but execute the judgment.” Catlin v.

United States, 324 U.S. 229, 233 (1945); accord In re Saffady, 524 F.3d

799, 802 (6th Cir. 2008).

The District Court issued its opinion, order and final judgment on

May 11, 2016 (R. 64, Page ID # 2345-2360 and R. 65, Page ID # 2361).

The District Court also granted in part and denied in part Ocwen’s

motion to dismiss on September 18, 2015. (Opinion and Order, R. 45,

Page ID # 1829-1855). In that same opinion, the District Court granted

in part and denied in part BOA’s motion for judgment on the pleadings.

(Id.)

The Kassem’s timely filed their appeal from the district court’s final

judgment on May 18, 2016 (Notice of Appeal, R. 66, Page ID # 2362).


3

STATEMENT OF ISSUES

I. Did the District Court err in failing to convert the motions filed by BOA and Ocwen into a motion for summary judgment under Fed. R. Civ. P. 56?

II. Did the District Court err in concluding the Kassem’s failed to

establish merit in their challenges to the “foreclosure by advertisement” process under Michigan law as initiated and prosecuted by Ocwen and BOA (that whether Ocwen and/or BOA failed to comply with Michigan’s foreclosure by advertisement statutes (and Michigan jurisprudence)) and whether, if they did so fail, the Kassem’s have been or will be prejudiced by such noncompliance?

III. Did the District Court err in dismissing the Kassem’s challenge to the record documents and chain of title even though the Kassem’s challenged them before the foreclosure sale and had standing as enunciated by this Court in Slorp v. Lerner, et al., 587 Fed. Appx. 249, 254 (6th Cir. 2014) and Jones v. Select Portfolio Servicing, Inc., ___ Fed. App’x ___; 2016 WL 6936526, at *5 (6th Cir. 2016)?

IV. Did the Kassem’s have standing to challenge the documents upon which the foreclosure by advertisement action was initiated?


4

INTRODUCTION

Some of the owner men were kind because they hated what they had to do, and some of them were angry because they hated to be cruel, and some of them were cold because they had long ago found that one could not be an owner unless one were cold. And all of them were caught in something larger than themselves. Some of them hated the mathematics that drove them, and some were afraid, and some worshiped the mathematics because it provided a refuge from thought and from feeling. If a bank or a finance company owned the land, the owner man said, the Bank – or the Company – needs-wants-insists-must have – as though the Bank or the Company were a monster, with thought and feeling, which had ensnared them. These last would take no responsibility for the banks or the companies because they were men and slaves, while the banks were machines and masters all at the same time. Some of the owner men were a little proud to be slaves to such cold and powerful masters.

*** And the owner men explained the workings and the thinkings of the monster that was stronger than they were. A man can hold land if he can just eat and pay taxes; he can do that. Yes, he can do that until his crops fail one day and he has to borrow money from


5

the bank. But – you see, a bank or a company can’t do that, because those creatures don’t breathe air, don’t eat side-meat. They breathe profits; they eat the interest on money. If they don’t get it, they die the way you die without air, without side-meat. It is a sad thing, but it is so. It is just so. The bank – the monster has to have profits all the time. It can’t wait. It’ll die…. When the monster stops growing, it dies. It can’t stay one size.

***

“Sure,” cried the tenant men, “but it’s our land! We measured it and broke it up. We were born on it, and we got killed on it, died on it. Even if it’s no good, it’s still ours! That’s what makes it ours.” “That makes ownership, not a paper with numbers on it.” “We’re sorry. It’s not us. It’s the monster. The bank isn’t like a man.” “Yes, but the bank is only made of men.” “No, you’re wrong there – quite wrong there. The bank is something else than men. It happens that every man in a bank hates what the bank does, and yet the bank does it. The bank is something more than men, I tell you. It’s the monster. Men made it, but they can’t control it.”2

2 John Steinbeck, The Grapes of Wrath, Penguin Classics (2006), Ch. 5, pp. 33-34.


6

Perhaps a different visual is helpful. The Bank’s “too big to fail”

(TBTF) “defense” for its responsibility in causing the foreclosure crisis

and the financial catastrophe that followed is akin to the “affluenza”

defense. When the rich, spoiled adolescent driving recklessly is involved

in an accident killing an innocent driver, the adolescent is bailed out of

jail. He gets his car back, or another one. He is even allowed to drive

again. He may have to pay more for insurance. But, he receives a mere

slap on the wrist from the hometown court. And the family of the innocent

victim? What do they get? Is there anything that can replace their loss?

In the case of the Banks, the lawyers did not even have to come up

with this defense. The courts have mollycoddled the Banks. By accepting

subtle common-law changes in the jurisprudence of real property law

that had heretofore withstood scrutiny for over a century, the courts have

been complicit. It is as if the spoiled rich adolescent’s own parents are the

ones sitting in judgment.

The TBTF defense is no different. Remarkably, this “defense” is not

new. See Kittler, Too Big to Fail, The 1499-1500 Banking Crisis in

Renaissance Venice, 5:2 Journal of Cultural Economy 165-178 (2012). On

February 1, 1499, the Garzoni bank in Venice, the republic’s chief


7

financial institution with a 70-year legacy, announced bankruptcy. The

doge of Venice had been conducting “secret” meetings of the heads of all

governing bodies to “keep this bank on foot for the sake of the city and its

reputation”. Id. at 166. For two weeks prior to the default the Signoria

had discreetly pumped money into the bank, trying to increase its

liquidity to no avail. Id. It was clear the owners had brought the

bankruptcy on themselves by attempting to continuously increase profits

to sustain their luxurious lifestyles. Id. at 169. See also O’Hara & Shaw,

Deposit Insurance and Wealth Effects: The Value of Being Too Big to Fail,

45 Journal of Finance 1587-601 (December 1990); Stern & Feldman, Too

Big to Fail: The Hazards of Bank Bailouts, Brookings Inst. Press,

Washington, D.C. (2004); Ennis & Malek, Bank Risk of Failure and Too

Big to Fail Policy, Economic Quarterly, vol. 91/2 (Spring 2005).

The only question is: Will this “excuse” continue to be sufficient to

avoid sanction by an authority with the power (and the courage) to do so?

Not only were the Banks forgiven for their greed, but they were

actually given money by the government for their losses. Ramirez,

Lawless Capitalism, supra. In addition to “bailing the Banks out”, the

government spent the additional $700 billion to purchase back “toxic”


8

mortgage-backed securities to help the Banks and financial companies

“clear the books”. Id. BOA, which “participated actively in the system of

mortgage securitization and subprime lending that caused the crisis, as

well as engaged in the robosigning epidemic that followed thereafter –

received remarkable amounts of taxpayer money in order to stay afloat.”

See Shah, Emergency Economic Stabilization Act [EESA] of 2008, 46

Harv. J. on Legis. 569 (2008). To be exact, under the EESA, Bank of

America received $25 billion. Id. See also Odinet, Banks, Break-Ins and

Bad Actors in Mortgage Foreclosure, 83 Univ. of Cincinnati L. Rev. 1155,

1171 (2015). This was to help the Banks and financial companies “clear

the books”. Odinet, supra.

The Banks have also recovered insurance proceeds on mortgage

policies covering the defaulted mortgages. In 2007 alone, the mortgage

insurance industry paid out $1.4 billion in claims held by “policyholders”.

The “policyholders” included lenders who had required borrowers pay for

private mortgage insurance (PMI), and name the lender as an “additional

insured” on the policy with an entitlement to recover the benefits in the

event of a foreclosure and subsequent claim. See Weiss, Rosso, and

Clymer, What About Mortgage Insurers? A Case for Holding Mortgage


9

Insurers Accountable for the Mortgage Crisis, 2012 Emerging Issues 6333

(Lexis Nexis 2012).

Indeed, when American Home Mortgage Association (AHMA) (the

purported predecessor in interest to BOA’s purported interest in the

mortgage that is the subject of this appeal) filed for bankruptcy, Triad

Guaranty Insurance Company (Triad) filed an adversary proceeding

seeking, unsuccessfully, to avoid their obligations to payout mortgage

insurance claims to, inter alia, Bank of America, on the subject mortgage.

See Triad Guar. Ins. v. Am. Home Mortg. Inv. Corp. (In re Am. Mortg.

Holding), 477 B.R. 517 (2012). See also In re Matter of the Rehabilitation

of TRIAD Guaranty Insurance Corporation, TRIAD’s Objection, August,

26, 2013, filed in the Circuit Court of Cook County, Illinois, Case No. 12-

CH-43895. Ocwen, the loan servicer in this case, also later sought to

protect its interests in recovering insurance assets that included the

policy on the Kassem’s mortgage. Id., Ocwen’s Motion to Clarify Status

of Pending Claims, July 1, 2016. One of the principal objections of TRIAD

to the claims (and supporting their efforts to rescind the policies) was the

shoddy underwriting practices of AHMA. Who recovered the proceeds

from these insurance claims or from any settlement with TRIAD, BOA,


10

Ocwen, or both? Who gets credit for the “premiums” on these policies that

were charged to and assessed against the Kassem’s?

Of course, none of this ever really mattered to the Banks, because they

immediately sloughed off their “interests” in the underlying mortgages

by dumping them onto the market.

Ultimately, the Banks, or their “surrogate” servicers or assignees,

have been allowed to sell, or otherwise foreclose upon and recover the real

property for which they received bail out funds and insurance proceeds.

These entities have then been allowed to seek “deficiency” judgments

against the foreclosed upon homeowners (the latter of which was done in

this case in the name of and on behalf of the original assignee (here Bank

of America, See Emergency Motion for Stay of Eviction, App. R. 30-1,

Page ID # 1-11 and attachments 30-2 to 30-4). “Shellpointe” appeared as

a “servicer” in the state district court eviction proceedings, but Bank of

America is the named Plaintiff. Id.

In the end, the Banks, or a purportedly legitimate holder of the

assigned interest, “recovers” its “losses”, even after it “sold” the mortgage

as a security, had being bailed out by the federal government, and had

recovered insurance claims on the defaulted mortgages from the insurers.


11

Adding insult to injury, the Banks and the courts have apparently

ignored any residual equitable interest the prior owners may have held

in the foreclosed upon properties. The Banks never sought to genuinely

help the homeowners, and there seem to have been no sincere

requirements they even try.

Even after all of this, the Banks had the gall to blame the government

for letting them get away with it. As explained by Joseph Stiglitz, winner

of the Nobel Peace Prize in economics, this argument is even more

“disingenuous” because after “the financial markets had paid to get the

cops off the beat…[the Banks] successfully beat back attempts to regulate

derivatives and restrict predatory lending.” Stiglitz, Freefall: Free

Markets and the Sinking of the Global Economy, (rev. ed. 2010), pp. 9-10.

As Stiglitz describes it: “Their victory over America was total.” Id. See

also Grahl, The Professors and the Banks, 28 Int’l Rev. of Applied

Economics 3 (2014). Moreover, “the way [the government] designed the

bank bailouts hampered mortgage restructuring, failed to restart lending

– the alleged objective of the bank bailout – and has left the country with

a much larger national debt than if alternative approaches had been

taken.” Grahl, supra at 385; Stiglitz, supra at 108.


12

A series of Congressional acts were repealed or passed, respectively,

opening up the conduit that led the Banks and financial companies to call

it “open season” on the unsuspecting, largely middle-class American

public seeking to live the American Dream and become legitimate

homeowners. The Glass-Steagal Act of 1933 requiring separation

between and regulation of the Banks and securities and investment was

largely, if not totally repealed by Congress with the passage of the

Gramm-Leach-Bliley Act, 15 U.S.C. § 6701(d)(2)(A) (2006). See Eggert,

Foreclosing on the Federal Power Grab: Dodd-Frank, Preemption, and the

State Role in Mortgage Servicing Regulation, 15 Chap. L. Rev. 171, 199

and n. 142 (2011). The Commodity Futures Modernization Act (CFMA)

of 2000, Pub. L. No. 106-554, 114 Stat. 2763 (2000), exempted derivative

trading (including credit default swaps) from legislation. See 7 U.S.C. §

2(g) (2002) and CFMA §§ 302-303, 114 Stat. at 2763A-452. Investment

Co. Inst. v. United States CFTC, 891 F.Supp.2d 162, 171 (U.S.D.C. D.C.

2012). See also Sherman, supra at 11.

In a nutshell, predatory lending was legalized to dupe homeowners

into borrowing more on their property using falsified valuations thereof.

As one commentator stated, “[d]emand from Wall Street seduced


13

mortgage lenders, brokers and other players to churn out mortgage loans

in extraordinary numbers.” See Renuart, Property Title Trouble in Non-

Judicial Foreclosure States: The Ibanez Time Bomb?, 4 William & Mary

Bus. Law Rev. 111, 115 (2013). The Banks, knowing the borrowers’

inability to pay the loans on their homes based on the inflated and

therefore false values thereof, hastily sloughed off the mortgages into

bundled security arrangements. “[B]y a process of securitization, assets

could be pooled together and repackaged into securities. Financial

institutions could turn illiquid assets on their books into highly-liquid

securities that could be sold off to investors. Other financial obligations

mixed aspects of options and futures and insurance contracts, and they

allowed financial firms to bet on or hedge against all sorts of possible

outcomes.” Sherman, A Short History of Financial Deregulation in the

United States, Center for Economic and Policy Research (CEPR) (July

2009), p. 11.

These “arrangments” had been previously “legalized” by questionable

interpretations of the UCC. See Peterson, Cracking the Mortgage

Assignment Shell Game, 85 Fla. Bar J. 9 (2011).


14

Then, the assignments of these securitized instruments passed from

one assignee to another with little more than bald assertions affirming

the content and information on the mortgage and the note that secured

it were legitimate. Woolley & Herzog, MERS, The Unreported Effects of

Lost Chain of Title on Real Property Owners, 8 Hastings Bus. L.J. 365,

380 (2012). See also Levitin, The Paper Chase: Securitization,

Foreclosure, and the Uncertainty of Mortgage Title, 63 Duke L.J. 637

(2013). At the height of this gluttonous frenzy, “[m]ortgages would be

changing hands dozens of times, going from loan originators to banks to

Wall Street investment houses, which would collect them by the

thousands and package them into complex debt instruments that would

be chopped up into shares and sold off to multiple investors all over the

world.” Id.

Servicers were then substituted in for the Banks and foreclosures by

advertisements were initiated; insurance claims were made because of

the defaults; and the insurance proceeds were recovered (first, and

before) the foreclosures were finalized. The servicer (or a subsequent one)

was then allowed to take over and prosecute eviction proceedings with an

allowance that they would be able to pursue the homeowner for a


15

deficiency judgment (either for themselves or on behalf of the Bank for

which they had become the servicer). See generally, Emergency Motion

for Stay of Eviction, App. R. 30-1 to 30-4.

In some cases, insurers are now pursing homeowners under policies

which purportedly allow them to recoup losses in the amount of the claim

paid to the lender. See The Eye, Foreclosure Echo at

http://eye.necir.org/2015/01/17/foreclosure-echo/ (last visited on 10/7/16).

The practices described above were widespread and pervasive. “Most

mortgage loans made between 1990 and 2007 were sold on the secondary

market, and then ultimately resold to securities investors through a

process known as securitization.” See White, Losing the Paper – Mortgage

Assignments, Note Transfers and Consumer Protection, 26 Loyola Cons.

L. Rev. No. 468, 471 (2012), citing Engel & McCoy, Predatory Lending:

What Does Wall Street Have to Do with It?, 15 Housing Pol’y Debate 715

(2004). This fraud has now bled into the accounting and insurance

sectors. In the recent consent order by the Consumer Financial

Protection Bureau, Wells Fargo “employees opened 1,534,280 deposit

accounts that may not have been authorized and that may have been

funded through simulated funding, or transferring funds from


16

consumers’ existing accounts without their knowledge or consent. That

analysis determined that roughly 85,000 of those accounts incurred about

$2 million in fees…” See Consent Order, 2016-CFPB-0015, Filed

September 8, 2016, ¶16. See Accusations of Fraud at Wells Fargo Spread

to Sham Insurance Policies, New York Times at:

http://www.nytimes.com/2016/12/09/business/dealbook/wells-fargo-

accusations-sham-insurance-policies.html?_r=0, December 9, 2016. More

Banks than originally thought were involved. BOA and SunTrust are also

implicated in this practice, as are others. Wells Fargo Isn’t the Only One,

CNN Money at: http://money.cnn.com/2016/09/22/investing/wells-fargo-

fake-accounts-banks/, September 22, 2016.

After total deregulation of the financial industry, allowing Banks to

commingle with insurers, securities investment firms, and derivative

clearinghouses federal regulatory oversight entered a period of total

blindness. The Banks tied their hopes to a runaway freight train – the

trading of mortgage-backed securities based on shoddily underwritten

loans for residential properties, the underlying values of which had been

purposefully and grossly exaggerated. See Singer, Foreclosures and the

Failures of Formality, or Subprime Mortgage Conundrums and How to


17

Fix Them, 46 Conn. L. Rev. 497, 500 (2013). In the end, the Banks

“brought the national economy to its knees”. Id.

When the bubble finally burst, home values plummeted. Homeowners

were left destabilized, but with perhaps accurately depreciated

properties. They were, as the term implied, “upside down”. They owed

more money on the house than the house was worth. Whose fault is this?

Is it the homeowners? Or, the Banks? And, in any event, who should bear

the brunt of the fallout from this fiasco?

One thing is certain, the individual homeowners, not the Banks,

suffered. The financial “crisis” was only that for one group – homeowners

– who had at once held normalized equitable value in their real property,

which value was stripped away from them in relatively short order. At

least 3.5 million U.S. households lost their family homes to foreclosures

during the subprime mortgage crisis. Bender, Equity in Times of

Mortgage Crisis, 48 Real Prop. Trust and Est. L.J. 543, 544 (2013-2014).

Later estimates rose to 4 million. Brennan, The Foreclosure Crisis Isn’t

Over Just Yet, Forbes at:

http://www.forbes.com/sites/morganbrennan/2012/12/01/the-foreclosure-

crisis-isnt-over-just-yet/, December 1, 2012.


18

While yet another study estimates more than double that amount.

Gottesdeiner, 10 Million Americans Have Had Their Homes Taken Away

by the Banks – Often at the Point of a Gun, Alternet at:

http://www.alternet.org/investigations/10-million-americans-foreclosed-

neighborhoods-devastated (Aug. 2013).

Years of hard work and moderate, but consistent, investment had left

homeowners with a certain amount of real value in equity in their

properties. But for the greedy and predatory ways of the Banks in over-

inflating property values, this equity was and should have been retained.

There should have been forced corrections in the housing market to allow

the equity to stabilize, at least to that of its pre-meltdown value.

But, only the finance companies and the banks got corrective relief.

Before Goldman Sachs converted to a “bank holding company” allowing

it to receive further assistance under the “Troubled Asset Repurchase

Program” (TARP), it had already received about “60 billion” in “public

funds”. Mihm and Roubini, Crisis Economics: A Crash Course in the

Future of Finance (2d ed. 2011), pp. 228-29. “The banks were paid 100

cents on the dollar: it was as if an insurance company cancelled a fire

insurance policy, but in doing so paid you as if the house had burned


19

down” Stiglitz, supra at 313. “While the banks argued for public bailouts

for themselves, they argued against any reprieve for the poor.” Stiglitz,

supra at 180. “[I]mmediate and comprehensive bailouts with no firm

conditions attached sacrificed the interests of the majority to those of the

financial elite”. Grahl, supra at 385.

When the party finally ended, and the clean-up began, the Banks,

like the affluent adolescent, got government backed assistance in the

form of actual money to bail them out. They were allowed to pursue

claims on insurance policies underwritten on the basis of their own

fraudulent statements about home values and the ability of the

homeowner to pay, and whose premiums were either paid for by or

assessed against the homeowners. Finally, the Banks could either sell

the foreclosed mortgages or pursue foreclosure themselves, recovering

the property from the homeowners who had at one time established a

certain amount of equity, which was no more. The Banks, or their

surrogates, were allowed to evict the original homeowners, sell the

property, and then pursue the homeowners for the alleged, but entirely

fabricated “deficiency”.


20

And, the courts stood by and watched. When legal challenges began

to amass against the Banks, state after state bent to the TBTF mantra.

Having originally hidden behind a gauntlet of federal regulations

protecting their predatory lending practices and shoddy underwriting

from state regulatory oversight, the Banks now suddenly championed

state courts that changed the common law and ignored the grossly

deficient errors of the Banks in failing to verify and properly record

transfers and assignments of mortgage notes, or their blatant illegality

in recording forged ones. The Banks rushed to shelter themselves under

the false pretense that state law had always protected them from having

to legitimize their attempts to transfer ownership of real property from

homeowners to unknown investors claiming an interest. See Eggert,

supra at 172-173.

State court judges were quick to accept the TBTF mantra. This way,

courts could dispense with the legal process that was (and continues to

be) due, and forever tamp out an inherent property right. In the process,

courts established a heretofore non-existent principle of real property

law, by ruling that a transfer based on a fraudulent (i.e., a forged or “robo-

signed”) assignment of a whole interest in the property was merely


21

voidable as opposed to void ab initio. This Court’s unpublished opinion

in Livonia Props. Holding, LLC v. 12480-12976 Farmington Rd.

Holdings, LLC, 399 Fed. Appx. 97 (6th Cir. 2010), notwithstanding, the

common-law rule in Michigan remains that an assignment of a “whole”,

i.e., 100 percent, interest in a residential mortgage must be recorded, and

the recorded assignment must be legitimate for a foreclosing mortgagee

to foreclose by advertisement. See also Slorp v. Lerner, et al., 587 Fed.

Appx. 249, 254 (6th Cir. 2014). Despite this clear rule, the courts

dispensed with the requirement that a failure to record an assignment

(or recordation of a fraudulently created one) necessitated a legal

proceeding, i.e., a full trial, to vet the evidence concerning who, if anyone,

truly had a right to claim the interest. Historically, a summary

proceeding, indeed, one without any judicial oversight, was simply not

possible under such circumstances. But, the courts let this happen.

The “double prejudice” rule was then created. Finally, the burden of

proof of the right to foreclose was shifted from one traditionally imposed

on the Banks, to being one imposed on the homeowner to prove the Banks

lacked the right.


22

And, through all of this, the courts have essentially turned a blind eye

to the windfalls enjoyed by the Banks: (1) government bailouts; (2)

mortgage insurance claims and recoveries; (3) recovery and sale of the

property; and (4) deficiency judgments against the homeowners (all

apparently based on the same loss), while castigating homeowners for

failing to pay their bills and for being unable to recuperate from the

financial crisis. No one offered to bail them out in the face of true, not

feigned crisis. After noting the Banks had recovered 100 cents on the

dollar (at least), Stiglitz noted: “The financial sector has paid the piper in

both parties and has called the tune. Can we citizens expect to have

regulations passed breaking up the too-big-to-fail, too-big-to-resolve, too-

big-to-manage banks if the banks continue to be the too-big-to-ignore

campaign contributors? Stiglitz, supra at 208.

So, why all this by way of introduction? What powers does the Sixth

Circuit Court of Appeals in Cincinnati possess remedy this tragedy that

has occurred in state courts throughout the country, including Michigan?

The integrity of civil litigation depends on the truthful disclosure and

discovery of facts. A system that depends on the adversary’s ability to

uncover falsehoods, i.e., fraud, is doomed to failure because it is


23

impossible to prove the negative. Reliance on unverified and forged

documents, i.e., purported assignments of whole interests in mortgages,

to conclude summarily that the assignor must have legitimately held the

right, and that the assignee, must have legitimately received it is a

mockery of a civil justice system that professes to be one in which the

vetting of facts and statements of record is a right reserved to citizens to

prove that the rights being asserted are legitimate.

A judicial foreclosure means a party seeking to foreclose upon and

repossess a person’s whole interest in real property must sustain the full

burdens of judicial review – a trial on the merits of their claimed rights.

The District Court erred in summarily dismissing the Kassem’s claims.

The District Court did this based on the bare documents presented by

BOA and Ocwen, which was nothing more than an arrogant presentment

by them of the the very information the legitimacy of which the Kassem’s

have sought to question. This summary dismissal deprived the Kassem’s

of their legal rights to challenge the foreclosure sale, even though they

timely filed suit to prevent it.

Moreover, the District Court erred in the substantive conclusion that

there could be no showing of prejudice. The District Court acknowledged


24

the multiple trustees listed who were supposed to have possession of the

note (according to BOA and Ocwen the name changed no less than four

times). It was impossible to summarily dismiss the Kassem’s challenges

to the deficiencies in the multiple purported assignments without

providing, at least, a Rule 56 dispositive motion to vet the evidence, and

at most, a jury trial, which the Kassem’s contend is the minimum that

should have been afforded them under Michigan’s Constitution.


25

STATEMENT OF THE CASE

A. Factual Background

In 2001, the Kassem’s purchased land in Bloomfield Hills, Oakland

County, Michigan to build their dream home. First Amended Complaint,

R. 27, Page ID # 901, ¶8. When it was finished, the Kassem’s home (the

Property) was given the address of 311 N. Berkshire Road. Id., ¶6.

On November 23, 2005, the Kassem’s refinanced their mortgage for

$1,120,000 (the 2005 Mortgage) with American Home Mortgage

Acceptance, Inc. (AHMA). Complaint, R. 1-2, Page ID # 17; Response to

Motion to Dismiss, R. 34-8, Page ID # 1382-1387. The Kassem’s were

provided with documentation for the new mortgage and note. There was

also a final truth in lending act (“TILA”) form. Motion for Stay of Eviction,

Court of Appeals Record (App. R.) 30-3, Page ID # 2. This form was

required to be presented to, read, and signed by both Kamel and Jehan

Kassem. It was never signed by Kamel and the document presented by

BOA in the state court eviction proceeding was forged. Id. See also Motion

for Stay of Eviction, App. R. 30-1, Page ID # 1-11.


26

On January 10, 2006, AHMA recorded the 2005 Mortgage. First

Amended Complaint, R. 27, Page ID # 903. Mortgage Electronic

Registration System (MERS) acted as nominee for AHMA. Id.

AHMA filed for bankruptcy on August 6, 2007. Amended Complaint,

R. 23-1, Page ID # 649. See also In re American Home Mortgage Holdings,

Inc., et al, U.S.B.C. Del., Case Nos. 07-11047 through 07-11054.

Despite this, in January of 2008, the Kassem’s received a letter from

Countrywide Bank, FSB (Countrywide), stating that AHMA had

transferred the servicing rights to it, effective January 1, 2008 (after the

bankruptcy). R. 27-1, Page ID # 905. As AHMA was already closed, and

in bankruptcy, it was never ascertained how the MERS agent “conveyed”

an interest in the debtor AHMA’s estate to Countrywide without the

permission of the bankruptcy court. Id.

In 2008, the interest rate on the Mortgage rose to 7.43% and became

onerous for the Kassem’s. Opinion and Order, R. 45, Page ID # 1830.

On July 2, 2008, BOA purchased Countrywide. Id.

On August 15, 2008, a liquidation plan was submitted in the AHMA

bankruptcy in which BOA purportedly acquired AHMA’s assets,

including the subject mortgage. However, it was Countrywide that on


27

August 22, 2008 advertised a “sheriff’s sale” on the Kassem’s property to

be held on September 23, 2008. R. 27, Page ID # 906.

There was no recorded assignment to Countrywide before the “sheriff’s

sale” was advertised on August 22, 2008. However, a purported

assignment to Countrywide from MERS, acting solely as nominee for

AHMA, miraculously appeared in the register of deeds dated August 19,

2008 and recorded on August 29, 2008. Ocwen’s Motion to Dismiss, R. 31,

Page ID # 973 and Exhibit B. Ocwen acknowledged this discrepancy.

This “assignment” was “robo-signed” by a well-known robo-signer

attorney as a representative of MERS – Raymond H. Scodeller. R. 27,

Page ID # 907-908. The document did not contain the necessary language

that it was signed by MERS “as nominee for lender”. Id. MERS was never

a “lender” under the terms of the mortgage. Id. Moreover, the note was

signed (but not dated) by another robo-signer, Michelle Sjolander,

Executive Vice President of Countrywide. Ms. Sjolander has admitted in

other litigation that she never personally signed any endorsements on

any promissory notes with a pen. See, e.g., Kirby v. Bank of America,

N.A., Case No. 2:09-cv-00182 (U.S.D.C. S.D. Miss. 2009).


28

On November 17, 2011, BOA commenced new “non-judicial”

foreclosure by advertisement proceedings. R. 27, Page ID # 909. Trott &

Trott, a foreclosure firm, advertised the property on behalf of Bank of

America on December 17, 2011. Id. However, BOA had not yet recorded

any assignment of the interest from Countrywide, and they did not do so

until December 27, 2011. Id., Page ID # 909. See also Motion to Dismiss,

R. 31, Page ID # 973.

This “assignment” was signed by one Shenequa Mills as Assistant Vice

President of Countrywide, the latter of which had already been liquidated

in 2008. The assignment listed investor number 3784568, and investor

name BANA LAS HF1 1ST LIEN. The advertised “foreclosure” was said

to be in the name of Bank of America, N.A.

The Kassem’s then sent multiple letters to BOA and/or Ocwen

requesting proof of ownership of the mortgage on the Property by

demanding the note and proof of entitlement to foreclose. BOA and

Ocwen did not provide the Kassem’s with a sufficient response. The

Kassem’s specifically demanded to know who claimed ownership interest

in the Property because it was unclear what entity they would be liable

to for paying the mortgage.


29

As the Kassem’s explained in their complaint, they did not want to be

liable to more than one party for payment on the mortgage. There had

already been at least three purported holders, AHMA, Countrywide, and

BOA, who, while claiming an interest in the Property and the ostensible

right to foreclose on it, had not properly recorded a timely and valid

assignment of that right.

Ocwen then claimed it acquired servicing rights from BOA on October

4, 2012. Response to Motion to Dismiss, R. 19-8, Page ID # 403.

Things fell silent for nearly two years. This was likely due to the fact

BOA and Ocwen were engaged in litigation to recover “insurance

proceeds” from TRIAD, the mortgage insurer of the Kassem’s loan. They

would not have been able to recover such insurance benefits, or even

settle a dispute with respect thereto, had they foreclosed on the Kassem’s

property and sold it in excess of the insured amount.

In October of 2013, the Kassem’s sent Qualified Written Responses

(“QWR’s”) under the Real Estate Settlement Procedures Act (“RESPA”),

12 U.S.C. § 2605(e), requesting information about the creditor and/or who

held the purportedly assigned mortgage. BOA and/or Ocwen provided

various answers to this in correspondence to the Kassem’s:


30

• On July 11, 2011, BOA advised that the “creditor” was: BANA CWG CIG HFI 1ST LIENS;

• On April 12, 2012, BOA advised the Kassem’s that the current owner of the note was BANK OF AMERICA, N.A.;

• On October 12, 2012, Ocwen told the Kassem’s that the “creditor”

was BANK OF AMERICA DOJ NON – DSI-II.3

• On November 29, 2012 Ocwen attached a document which indicated the “investor” was BANA LAS HFI 1ST LIENS.

[First Amended Complaint, R. 27, Page ID # 903-904]

After Ocwen became the servicer in October 2012, the foreclosure was

delayed for two more years. Id., Page ID # 909-910.

The Kassem’s also requested the balance on the loan and received

conflicting information:

• On November 11, 2011, $1,622,988.77;

• On January 1, 2012, $1,166,464.26;

3 This entity was listed as a “Securitization Trust” in an “Exhibit” to an objection filed by Ocwen to the rehabilitation plan filed by Triad Guaranty Insurance Corporation in the Circuit Court of Cook County, Illinois. Case No. 12-CH-43895, public record filed on August 26, 2013. AHMA had underwritten the Kassem’s loan with TRIAD as the mortgage insurer. Ocwen, as the servicing company for the “Securitization Trusts”, objected to the rehabilitation of TRIAD on the basis it would allow the latter to rescind insurance policies without returning premiums. Premiums which were assessed against the Kassem’s. The objection also references $140 million in previously allowed “claims” held in escrow for payouts under the policies.


31

• On March 20, 2012, $1,665,404.81;

• On April 16, 2012, $1,496,830.59;

• On October 5, 2012, $1,627,219.18;

• On December 12, 2012, $1,523,733.97.

Notices of adjournment of the foreclosure sale were apparently

published between March of 2012 and March 4, 2014. Motion to Dismiss,

R. 31-5, Page ID # 1017 and 1120. The sheriff’s sale was eventually

rescheduled to March 4, 2014. Id.

B. Procedural Background

1. The Kassem’s Lawsuit

On March 3, 2014, prior the scheduled foreclosure sale, the Kassem’s

filed suit against Ocwen and BOA in Oakland County Circuit Court.

Amended Complaint, R. 27.

The Kassem’s sought injunctive relief against BOA and Ocwen to stop

the foreclosure sale, and a declaration that any such sale would be null

and void. The Kassem’s also sought to enjoin any eviction proceedings.

Ocwen removed the Kassem’s suit to federal court. Notice of Removal, R.

1. BOA consented. Id.


32

The Kassem’s alleged because of the inability of BOA or Ocwen to

demonstrate they had come into possession of the legitimate right to

foreclose; widely varying accounting errors and extra fees and charges;

fraudulent and unfair practices; and a failure to provide adequate

information when requested, Ocwen and BOA violated the Real Estate

Settlement and Procedure Act (RESPA); the Fair Debt Collection

Practices Act; the Truth in Lending Act; and Michigan statutory and

common law.

• MCL 600.3204 Foreclosure by advertisement, circumstances, chain of title4

Under Michigan’s foreclosure by advertisement provisions, the party

seeking to foreclose must either be the “owner” of the indebtedness

secured by the mortgage, or the servicing agent. See Michigan Compiled

Laws (MCL) § 600.3204(1)(c) and (d). The Kassem’s alleged that since

AHMA filed for bankruptcy in 2007, MERS, as a nominee could not have

assigned anything to Countrywide in August of 2008. Amended

4 This statute states that “[a] party may foreclose a mortgage by advertisement if all of the following circumstances exist:…[t]he mortgage containing the power of sale has been properly recorded” and “[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”, inter alia. MCL 600.3204(1)(c) and (d).


33

Complaint, R. 27, Page ID # 905. The Kassem’s also pointed out that the

person who signed the transfer from MERS to Countrywide was a well-

known “robo-signer” and not an employee of MERS. Id. Page ID # 906-

907. Finally, the Kassem’s alleged the assignment from Countrywide to

BOA was also not signed by an employee of Countrywide. Id., Page ID #

909.

The Kassem’s alleged the four letters sent to them by Ocwen and/or

BOA between 2011 and 2012 identified no less than four different entities

as being either a “creditor”, “owner”, or “investor”: On July 11, 2011, BOA

advised that the “creditor” was: BANA CWG CIG HFI 1ST LIENS; on

April 12, 2012, BOA advised the Kassem’s that the current owner of the

note was BANK OF AMERICA, N.A.; on October 12, 2012, Ocwen told

the Kassem’s that the “creditor” was BANK OF AMERICA DOJ NON –

DSI-II; and on November 29, 2012 Ocwen attached a document which

indicated the “investor” was BANA LAS HFI 1ST LIENS.

The Kassem’s alleged that as of June 25, 2014, no one knew who owned

the mortgage, who was authorized to collect money from them, or what

exact payments were expected in terms of current balance, charges, fees,

etc. See First Amended Complaint, R. 27, Page ID # 903-904.


34

• RESPA, 12 U.S.C. § 2601, et seq.

The Kassem’s also filed a count alleging a violation of RESPA on the

basis that Ocwen failed to adequately respond to the Kassem’s qualified

written requests (QWR’s). R. 27, Page ID # 917. In response to the

Kassem’s requests of November 1, 2012 and October 29, 2013, Ocwen

only sent copies of the mortgage, note, and an incomplete loan

transaction history. Id.

The Kassem’s alleged Ocwen failed to make corrections in their

account; failed to address why it thought the account was correct; listed

excessive fees, including unexplained fees, inspection fees, postponement

fees, sale resetting fees, publication fees and title fees, and failed to

discontinue negative credit reporting. The Kassem’s made the same

allegations with respect to BOA’s responses. Id., Page ID # 919.

The Kassem’s alleged Ocwen and BOA violated the mortgage contract

giving rise to actual damages under RESPA.

• Breach of Contract

Counts IV and V of the Kassem’s Complaint alleged breach of contract

against Ocwen and BOA. First Amended Complaint, R. 27, Page ID #


35

920-924. The Kassem’s alleged a valid and binding contract existed

between the parties, being the Mortgage. Id.

The Kassem’s noted Michigan law implied a covenant of good faith and

fair dealing in every contract, and a breach of that duty constitutes a

breach of the contract, prohibiting Ocwen and BOA from foreclosing on

the Mortgage – its actions and conduct were now governed by Michigan

common law respecting the breach of a contract by bad faith and was

therefore ex contractu. Id., Page ID # 923. See Hammond v. United of

Oakland, 483 N.W.2d 652, 654-55 (Mich. App. 1992) (Michigan

recognizes a cause of action for breach of the covenant of good faith and

fair dealing arising out of a written contract).

The Kassem’s also alleged Ocwen and BOA acted in bad faith when it

overcharged the Kassem’s and misapplied their payments and credits,

causing excessive fees to accrue. The Kassem’s alleged further that

Ocwen and BOA acted in bad faith by failing to provide proper notice and

attempting to foreclose on the Property.

The Kassem’s also alleged the proffering of documents that were “robo-

signed” constituted deceptive acts and unfair practices, and otherwise

violated state law. R. 27, Page ID # 912.


36

The Kassem’s claimed a right to a jury trial in equity to prove and

recover their damages (including actual damages incurred as a result of

the excessive fees), and to avoid any alleged damages based on the

contract, i.e., any deficiency judgment. Id., Page ID # 933.

The Kassem’s requested that the non-judicial foreclosure sale be

enjoined so they could have a jury trial on the merits of their claims.

Therefore, the Kassem’s timely sought to convert the non-judicial

foreclosure by advertisement into a judicial foreclosure, i.e., a full trial

with discovery so they could vet the evidence that was being used to

foreclose on their home.

2. Ocwen’s Motion to Dismiss Ocwen filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6). R. 31,

Page ID # 962. Ocwen claimed it could attach documents to the motion

which had been referred to but not attached in the Kassem’s amended

complaint.

Ocwen claimed the Kassem’s executed the November 23, 2005

Mortgage and therein “named” MERS as nominee for AHMA’s successors

and assigns.” Id., Page ID # 972-973. Ocwen asserted the Mortgage was

assigned to Countrywide and recorded on August 29, 2008. Id. Ocwen


37

claimed Countrywide then assigned the Mortgage to BOA on December

27, 2011. Id. Ocwen then asserted that it was the current “servicer” of

the loan. Id.

As to the Kassem’s challenge to the legitimacy of the foreclosure by

advertisement and sheriff’s sale, Ocwen, citing to MCL 600.3204(3),

simply claimed that if the foreclosing mortgagee is not the original

mortgagee and a “record” chain of title exists before the sale, a foreclosure

by advertisement is proper. R. 31, Page ID # 978.

Ocwen also argued under Michigan law the Kassem’s could not

challenge the chain of title based on fraudulent assignments (whether by

forgery or by “robo-signing”). R. 31, Page ID # 980-981. In this latter

regard, Ocwen asserted the Kassem’s had no standing to challenge the

validity of any of the assignments because they were strangers to the

transaction. Id., Page ID # 981, citing Livonia Props. Holding, LLC v.

12480-12976 Farmington Rd. Holdings, LLC, 399 Fed. Appx. 97 (6th Cir.

2010).

3. BOA’s Motion for Judgment on the Pleadings

BOA filed a motion for judgment on the pleadings under Fed. R. Civ.

P. 12(c). R. 36, Page ID # 1449-1559. As with Ocwen, BOA claimed the


38

District Court could consider the documents not attached to the Kassem’s

complaint, even though BOA was filing a motion on the pleadings under

Rule 12(c). Id., Page ID # 1459, footnote 1, and Page ID # 1462.

Also like Ocwen, the only “documents” BOA offered to refute the

Kassem’s claim that the documetns upon which the parties had sought

to foreclose by advertisement were the very documents that were being

challenged by the Kassem’s for lack of authenticity (because they were

robo-signed), or for their failure to prove the truth for what they were

being offered, to wit, that they represented a legitimate transfer of any

or all interest in the Kassem’s Property from one purported holder to

another.

BOA repeated Ocwen’s argument that a foreclosure by advertisement

is proper if a “record” chain of title exists before the sale. Like Ocwen,

BOA glossed over the fact that the legitimacy of the documents

themselves were being challenged.

4. District Court Opinion

The District Court granted in part and denied in part Ocwen’s motion

and BOA’s motion. Opinion and Order, R. 45, Page ID # 1829-1855. The

District Court noted although Ocwen and BOA had moved for judgment


39

on the pleadings, and the court presented “as fact the non-conclusory

allegations in the Kassem’s Amended Complaint”, it also

“supplement[ed] its factual summary with uncontroverted facts found in

documents referenced in the Amended Complaint and central to its

claims, e.g., the note, assignments of the mortgage, and certain letters

between the parties.” R. 45, Page ID # 1830 and footnote 1.

The District Court did this without converting either of the motions to

summary judgment motions under Fed. R. Civ. P. 56.

As to the Kassem’s argument Ocwen and/or BOA violated Michigan’s

foreclosure by advertisement provisions, the District Court found the

record contained “record” chain of title from AHMA to BOA: “the

Mortgage made MERS (nominee for AHMA) the original mortgagee,

recorded January 10, 2006; MERS assigned the Mortgage to

Countrywide, recorded August 29, 2008; Countrywide assigned the

Mortgage to BOA, recorded on December 27, 2011. R. 45, Page ID 3 1838.

Citing to this Court’s decision in Livonia Properties, supra, the District

Court stated an assignee of a mortgage may foreclose under MCL

600.3204(1)(d) or (3) if there is merely a “record chain of title, i.e., the

chain of title available to the public through the register of deeds,


40

showing the assignment to the foreclosing party.” Id. (emphasis in

original).

The District Court then addressed the Kassem’s attacks on the

legitimacy of the assignments and transfers. Id., Page ID # 1839. The

District Court found the “Kassem’s lack standing (in the common-law-of-

contracts sense) to raise assignment defects unless they could show that

the defects caused them prejudice. Id. The District Court used the

familiar example of being unable to establish “double liability”. Id.

The District Court ruled that while the Kassem’s could not identify

who of the four entities identified actually held the note (or an interest)

as either “creditor”, “owner”, or “investor”, it did not follow that any of

these entities, or any entity other than BOA would ever seek to hold the

Kassem’s liable, and the Kassem’s had not alleged that any other entity

was “claiming ownership of the note or seeking to hold them responsible.”

Id., Page ID # 1840. Further, the District Court noted other than BOA

and the servicer, Ocwen, the Kassem’s had not alleged that any other

entity was seeking to foreclose, including any of the three trusts. Id.

The District Court dismissed this Court’s ruling in Slorp v. Lerner, et

al., 587 Fed. Appx. 249, 254 (6th Cir. 2014), which held a homeowner did


41

have standing to challenge as means to protect itself from prejudice

resulting from a defective assignment. See also Livonia, supra 399 Fed.

Appx. at 102 (“Obligors have standing to raise these claims [e.g.,

assignee’s lack of title] because they cannot otherwise protect themselves

from having to pay the same debt twice.”). See R. 45, Page ID # 1841).

The District Court distinguished Slorp claiming that because the

Kassem’s elected to bring this lawsuit, and thus had not claimed

prejudice as a result of defending an action by the foreclosing party, there

was a difference. Further, the District Court reasoned had they not filed

suit, and a sheriff's sale had taken place despite a defective chain of title,

the Kassem’s would not have been prejudiced because no other entity

other than BOA or Ocwen has sought to collect on the debt or foreclose

on their home. Id.

The District Court then concluded the Kassem’s had waived, or no

longer sought judicial foreclosure. Id.

The District Court ruled the Kassem’s claim of a defective chain of title

did not state a claim upon which relief could be granted as to either

Ocwen or BOA. Id. “In sum, the non-conclusory allegations of the


42

Amended Complaint do not make it plausible that Ocwen or [BOA] failed

to comply with Michigan’s foreclosure by advertisement statutes or, if

they do, that the Kassem’s have been or will be prejudiced by Defendants’

noncompliance.” Id.

The District Court did not dismiss part of the RESPA claims against

Ocwen and BOA. The court found that the Kassem’s had sufficiently

plead Ocwen violated § 2605(e)(2) by failing to explain certain fees in

responding to their October 28, 2013 letter, and that the Kassem’s had

sufficiently plead BOA violated § 2605(e)(2) in responding to their

January 8, 2012 letter.

The Kassem’s dismissed the remaining count against BOA. On May

11, 2016, the District Court granted judgment for Ocwen on the

remaining RESPA claim. R. 64, Page ID # 2345-2360. The District Court

found the Kassem’s failed to prove they were damaged by any deficiencies

in Ocwen’s responses under RESPA. Id., Page ID # 2357.

The Kassem’s timely appealed. During the pendency of the appeal,

BOA filed a state court eviction (using “Shellpointe” a “new” servicer as

a front – even though BOA is named in the state court lawsuit). See App


43

R. 30-1, 30-2, 30-3, and 30-4. The Kassem’s filed an emergency motion to

stay, pointing out that the TILA form that was presented to the Kassem’s

upon the closing in 2005 (the Mortgage with the onerous interest rate

hike) was forged. Id. This Court denied the motion to stay the eviction

proceedings. The Kassem’s were subsequently evicted from their home

by Shellpointe while this appeal was pending.

ARGUMENTS

STANDARDS OF REVIEW

This Court reviews a district court’s grant of summary judgment de

novo. Eastham v. Chesapeake Appalachia, LLC, 754 F.3d 356, 360 (6th

Cir.2014).

I. THE DISTRICT COURT ERRED IN FAILING TO CONVERT THE OCWEN AND BOA MOTIONS UNDER 12(B)(6) AND 12(C) INTO RULE 56 MOTIONS – DEPRIVING THE KASSEM’S OF THEIR RIGHT TO DISCOVERY AND A “JUDICIAL” FORECLOSURE

Rule 12(b)(7) of the Federal Rules of Civil Procedure establishes a

mandatory requirement. “If, on a motion asserting…the failure of the

pleadings to state a claim upon which relief can be granted, matters

outside the pleading are presented to and not excluded by the court, the


44

motion shall be treated as one for summary judgment and disposed of as

provided in Rule 56.” “Shall” denotes a mandatory act when used in court

rules and statutes.

A motion to dismiss or for judgment on the pleadings under 12(b)(6)

and 12(c) allows summary treatment of the plaintiff’s legal claims in the

complaint. However, a motion for summary judgment under Rule 56

requires the district court to provide the plaintiff an opportunity to

submit additional evidentiary material to support his or her claim and to

rebut the dismissal sought by the opposing party.

Here, even though BOA and Ocwen submitted extrinsic materials in

support of their respective summary dismissal motions, the District

Court refused to convert the motions citing several cases from this Court

ostensibly allowing it to avoid providing the Kassem’s with the more

robust discovery allowances if the motion had been converted to a rule 56

motion. In footnote 1, the district court noted that while it had to accept

as fact the allegations in the Kassem’s complaint at true, citing Ashcroft

v. Iqbal, 556 U.S. 662, 678 (2009), it could supplement its analysis with

“documents referenced in the Amended Complaint and central to its

claims, i.e., the note, assignments of the mortgage, and certain letters


45

between the parties.” R. 45, Page ID # 1830. For this proposition, the

district court cited Weiner v. Klais & Co., 108 F.3d 86, 89 (6th Cir. 1997)

and Greenberg v. Life Ins. Co. of Virginia, 177 F.3d 507, 514 (6th Cir.

1999)

The problem with this analysis is twofold. The complaint survives both

motions (the motion to dismiss and motion for judgment on the pleadings)

unless the non-moving party submits the documentation and record

evidence. Even though this Court allows reference to documents where

referenced in a complaint, the challenge to BOA’s claimed right to

foreclose was that that the documentation presented by BOA ostensibly

proving its ostensible right to do so were not legitimate at all.

As this Court noted in Weiner, supra at 89, one of the cases relied on

by the District Court, a defendant may introduce “certain pertinent

documents if the plaintiff fails to do so.” But, the rule does not stand if

the actual validity of the very documents referenced in the complaint are

being challenged by the plaintiff as lacking in the necessary legitimacy

to advance their intended purpose. Otherwise, the restriction could be

arbitrarily imposed to consider only those documents that a court or a

moving party deems as the better evidence at the dismissal stage.


46

Indeed, none of the cases cited in Klais address reliance on documents

submitted by the moving party, where the non-moving party was directly

challenging the legitimacy of such documents. In Pension Benefit

Guaranty Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3rd

Cir. 1993), the court held “a court may consider an indisputably authentic

document that a defendant attaches as an exhibit to a motion to dismiss

if the plaintiff’s claims are based on the document.” (emphasis added).

Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42, 48 (2d Cir. 1991),

the second case in Klais, supra, was a securities fraud action. The

legitimacy of documents was not being challenged. Rather, the

documents were merely the objective offerings to prove the illegal actions.

The documents were transmitted to the plaintiffs. The fact the plaintiffs

did not attach them to the complaint was of no moment in the court’s

ability to dispose of the controversy on a 12(b)(6) motion. Romani v.

Shearson Lehman Hutton, 929 F.2d 825, 879, n. 3 (1st Cir. 1991) also

addressed the same situation, a securities fraud claim where the

plaintiffs alleged fraud represented in the prospectus, which they failed

to attach to the complaint.


47

The Seventh Circuit decision in Venture Associates Corp. v. Zenith

Data Sys. Corp., 987 F.2d 429 (7th Cir. 1993), also relied on by the

District Court, fares no better. There, the court addressed a commercial

breach of contract claim. The court allowed introduction by the

defendants of the relevant documents to assess the strength of the

plaintiff’s case, but the authenticity and verity of the documents

themselves were not challenged by the plaintiff.

The District Court cannot pick and choose what evidence it will and

will not review when summarily disposing of a party’s legal claims – it is

either all in or all out. If it is the former, then the moving party has a

right to a motion for summary judgment under Rule 56 to vet the

evidence fully. There is no half measure in this regard. The District

Court’s decision to approach the case this way right out the gate is

reversible error.

Here, the Kassem’s alleged several counts against BOA and Ocwen

and their allegations are to be taken as true. Principal among these is

the legitimacy and verity of the documents upon which the defendants

sought to foreclose. What good is the conversion rule if the principal claim

of legitimacy of the documents can be summarily refuted by the opposing


48

party’s presentation to the District Court of those challenged documents?

It is rather absurd when put this way to think a Rule 56 proceeding is

not required.

There is also now a discovery of fraud in the alleged forgery of a TILA

form at the 2005 closing, based on the public documents introduced in

the state court eviction proceedings and the affidavit of Kamel Kassem.

See Emergency Motion for Stay of Eviction, App. R., 30-1, 30-2, 30-3, 30-

4. This was attached to the Kassem’s Motion. The fact that it was only

introduced at this late stage is a direct consequence of the federal district

court’s failure to allow the full discovery allowed in a Rule 56 proceeding.

The United States Supreme Court has not addressed this issue, but

it does not appear any Circuit Court has allowed introduction by the non-

moving party of documents the authenticity of which is being challenged

by the moving party to supplement a motion to dismiss or motion for

judgment on the pleadings, without requiring a Rule 56 proceeding.

The District Court erred when it allowed these documents into the

record without converting the motions to those for summary judgment

under Rule 56. All other errors flowed from this initial decision because,

as explained, below, the Kassem’s were deprived of their right to a


49

judicial foreclosure proceeding; their constitutional right to have all the

evidence vetted and bring BOA and Ocwen to task on the legitimacy of

their claimed “right” to foreclose.

What is worse, Ocwen and BOA simply presented the District Court

with the same information that it relied on in response to the Kassem’s,

which had already been shown by the Kassem’s to be unreliable and

inadequate to prove BOA was the recipient of a valid assignment.

II. A RULE 56 MOTION WOULD AT LEAST ENTITLE THE KASSEM’S TO A “JUDICIAL” NOT “SUMMARY” FORECLOSURE, AND AT BEST, ALLOW FULL ACCESS TO THEIR STATE CONSTITUTIONAL RIGHT TO A JURY TRIAL

Following from the error presented in Argument I, supra, the District

Court’s decision not to convert the motion deprived the Kassem’s of a

judicial foreclosure. Despite the District Court’s conclusion that the

Kassem’s waived, or somehow forfeited the argument they were entitled

to a judicial foreclosure under MCL 600.3205(a). See R. 45, Page ID #

1841. A close reading of the pleadings relied on for this conclusion

demonstrates otherwise. See Kassem’s Response to BOA’s Motion, R. 39,

Page ID # 1585. The Kassem’s specifically say that converting the

“foreclosure by advertisement” to a “judicial foreclosure” through the


50

procedures of MCL 600.3205 does not warrant summary dismissal of the

lawsuit. Id. The latter is exactly what Ocwen and BOA achieved by

convincing the District Court after it was presented with the “challenged”

documents. This shows the District Court substituted its judgment for

that of a jury by concluding, on its own accord, that the transfers were

sufficient to deprive the Kassem’s of Rule 56, at best, and, at worst,

depriving the Kassem’s with their Michigan constitutional right to a trial

by jury.

The Kassem’s requested a jury trial in the Michigan state court

action. R. 1-2, Page ID # 16. This is a constitutional right for Michigan

citizens. See Michigan Const. 1963, art. 1, § 14. See also Madugula v.

Taub, 853 N.W.2d 685 (2014); Philips v. Mirac, Inc., 685 N.W.2d 174

(2004). The Kassem’s timely challenged the propriety of the foreclosure

sale by filing an affirmative action requesting a jury trial. At best, the

District Court committed error in failing to convert BOA’s motion and

Ocwen’s motion to a full summary judgment motion under Fed. R. Civ.

P. 56.


51

III. THE KASSEM’S HAD A RIGHT TO CHALLENGE THE FORECLOSURE SALE WITH A FULL JUDICIAL REVIEW

Michigan Courts make a fundamental distinction between what was

traditionally called “chancery foreclosures” and statutory foreclosures.

Schulthies v. Barron, 167 N.W.2d 784, 785, n. 1 (Mich. App. 1969). The

latter is what is now known as “foreclosure by advertisement”. As

recognized in Michigan, foreclosure by advertisement is not a judicial

proceeding at all. Mfrs. Hanover Mtg. Corp. v. Snell, 142 Mich. App. 548,

552-553 (1985).

To challenge it after the redemption period has expired, the

homeowner must show fraud or procedural irregularity. Id. at 785.

However, if the homeowner files suit prior to the foreclosure sale, the case

must be converted to a judicial foreclosure, i.e., a foreclosure in chancery;

the court then must sit in equity and may therefore exercise the powers

and authorities it has in such premises. Id. at n. 1.

Despite the Michigan Supreme Court’s decision in Kim v. JP Morgan

Chase Bank, N.A., 825 N.W.2d 329 (2012), it has never been the law that

assignment of a “whole” interest, that is an interest in the entire

mortgaged property, did not have to be recorded. In other words, if there

is a failure in assignment of a whole mortgage interest, a failure to record


52

the assignment, or if the assignment is invalid (because it was based on

a forgery or robo-signed – as most of the assignments in these cases are),

then the attempt on the part of the entity that claims to have been

assigned said interest is a de facto fraud, and it is void ab initio, i.e., it is

non-cognizable by law.

Otherwise, it is as legitimate to accept the foreclosing party’s claims,

as much as if any stranger came in off the street and presented a

purported assignment, which he or she had simply created by showing a

forged or otherwise notarized “assignment” of an interest in the real

property by starting off with the legitimate information recorded in the

property records (which just about anyone can gain access to). Does the

court accept the former’s assertions over the latter’s just because it is a

bank, or some other entity adorned with some recognized legal existence?

It is recognition of a remedy where there is no right. See Juster, Where

Credit is Due: Foreclosure Without the Note Is a Remedy without a Right,

9 Pratt’s Journal of Bankruptcy Law 5, pp. 448-484 (2013).

Put simply, and in context, what this Court and all other courts have

accepted, is the concept that any individual or entity can advertise a

foreclosure, and subsequently approach the courts with the claimed right


53

to foreclose on property, where said right is based on a forged document

or an unverified assignment (because the robo-signer never saw the

original documents verifying that the true “whole” interest in the real

property was being legitimately transferred). See Reid, Foreclosure

Without Original Documents: A Mere Technicality?, 2011 Franklin

Business & Law 4, 19 (2011) (noting 40 percent of foreclosure litigation

contains robo-signed assignments or simply unverified notes).

With this glaring deficiency in reason, the concept of “double

recovery” and “prejudice” has been introduced. It is a mockery upon the

Court. Of course, it is true, that some other entity may never come along

to claim an interest in the property. That entity may very well no longer

exist. However, this inability to prove the negative is not sufficient reason

to justify believing that the entity coming forth with a claimed right to

the real property is in fact entitled to foreclose upon it without full

judicial vetting of the evidence just because they say so.

Foreclosure upon the whole interest can never be foreclosed on by

advertisement if it is timely challenged, and this right is not defeated

simply by baldly asserting the homeowner will not be able to show

prejudice. “A belief is not true simply because it is convenient.” Peterson,


54

Two Faces: Demystifying the Mortgage Electronic Registration System’s

Land Title Theory, 53 Wm. & Mary L. Rev. 111, 146 (2011-2012) (noting

the hypocrisy in allowing foreclosures on the basis of false and

fraudulently created assignments and not requiring those asserting the

right to foreclose to pay multiple recording fees to the local government

deed rooms).

Thus, any purported foreclosure in this situation is void ab initio

because the foreclosure by advertisement can never be executed. The only

true solution is through a trial on the merits (not summary disposition

because the party asserting the right to foreclose is simply showing the

court the same exact thing it shows to the sheriff or anyone else when it

goes to foreclose by advertisement). As the Court stated in Feldman v.

Equit. Trust. Co., 270 N.W. 809, 811 (Mich. 1937):

The statute concerning foreclosure by advertisement requires as a condition precedent to that procedure a recording of the mortgage, and all assignments. It is the plain intent of that statute that it is a condition precedent to the right to foreclose by advertisement that the title of an assignee of a mortgage appear of record, and of record in such manner that evidence extraneous to the record will not be needed to put it beyond reasonable question. Id. at 624-25 (emphasis added)

And the Court clairvoyantly addressed the issue of those who


55

appear before it with forged and unverified documents, continuing:

This is not a requirement of supertechnical niceties and details of description. It means only that, the ordinary rules of evidence and interpretation considered, if the record, without the aid of extraneous evidence, does not put the title of the assignee of a mortgage beyond doubt, he cannot foreclose by advertisement. If he cannot remedy the defects in the record, he must resort to foreclosure by [judicial] action. Id. (emphasis added)

Foreclosure by advertisement assumes, and the publicly recorded

assignments demonstrate, without resort to anything extraneous, that

the one initiating the foreclosure by advertisement holds the right to the

entire interest. But, where the assignment is not without doubt, as where

the holder claiming the interest cannot prove that he or she is in

possession of the actual instruments purportedly assigned, then a trial

must occur so that proofs can be presented to correct the failure of proofs

on the public records.

“The right to foreclose by advertisement is conferred solely by the

statute, and its provisions must be strictly complied with. Under this

statute, the mortgage and assignment must not only be recorded, but

they must be executed in such a manner as to entitle them to record.”

Dohm v. Haskin, 88 Mich. 144, 147 (1891) (emphasis added). If neither


56

the recording, or the execution is valid, the foreclosure by advertisement

cannot occur.

“The failure of the defendant to keep the mortgages recorded in

compliance with [the statute] precludes their foreclosure by

advertisement.” Austin v. Anderson, 279 Mich. 424, 428 (1937) (emphasis

added). There could not be a simpler, more direct statement than this.

The “failure” is an absence of a recorded transfer, or evidence that a

purported assignment thereof was robo-signed or forged without any

verified proofs that the transfer was based on one’s witnessing of the

original documentation. The Banks cannot hide from this truth.

The bald statement by Ocwen and BOA that as long as there is a

“record” of title demonstrating a transfer of the interest from one entity

to another, it is sufficient for the last assignee to foreclose without judicial

scrutiny is pure sophistry. The very statement of the proposition is

enough to refute it in light of the above-mentioned rationale. And, the

District Court’s “acceptance” of the “record” chain based on the

documents presented by Ocwen and BOA cannot substitute for judicial

review of evidence of their legitimacy.

Moreover, legally triable issues (those outside of the record) can never


57

be a part of summary proceedings. Reid v. Rylander, 258 N.W. 630, 631

(1935) (underlying equities bearing on the instrument, legal capacity of

the mortgagee or trustee, and other matters, wholly dehors the record,

including an accounting of the amount due, “cannot be made triable

issues in the summary proceedings”) (emphasis added). The burden, at

every step of the way to establishing the right to possession is on the

party seeking it; and this requires “evidence of compliance with every

statutory provision relative to foreclosure by advertisement.” Id.

(emphasis added). If compliance is unattainable, then the action must be

converted to a full trial on the merits. Id.

IV. THE KASSEM’S HAD STANDING AND A RIGHT TO CHALLENGE THE DOCUMENTS BEING ASSERTED AS LEGITIMATE IN THE “RECORD” TITLE

Neither Ocwen or BOA addressed the Kassem’s argument that

pursuant to this Court’s decision in Slorp v. Lerner, et al., 587 Fed. Appx.

249, 254 (6th Cir. 2014), it could challenge the foreclosure on the basis of

“nonassignability of the instrument, assignee’s lack of title, [or a] prior

revocation.” As this Court has noted (“[i]f Bank of America ha[s] no right

to file the foreclosure action, it makes no difference whether [the

mortgagor] previously had defaulted on his mortgage”). See also Jones v.


58

Select Portfolio Servicing, Inc., No. 16-5313, 2016 WL 6936526, at *5 (6th

Cir. Nov. 28, 2016) (stating “a loan obligor may, in limited circumstances,

have standing to contest a loan assignment based on defects in the chain

of title, or errors in transfers and assignments”) See 399 Fed.Appx. at 102

(citing 6A C.J.S., Assignments § 132 (2010)).

CONCLUSION

The Kassem’s rights to a full hearing were timely asserted before the

foreclosure sale. The District Court erred in failing, at least, to convert

the proceedings to a full hearing as required by substantive Michigan

law. This is especially true where, as here, the Kassem’s constitutional

right to a trial by a jury under Michigan’s Constitution (a right that is

greater than that provided by federal law and the 7th Amendment) was

foreclosed by this summary process.

It is well settled that “[t]he jurisdiction of the Federal courts, sitting

as courts of equity, is neither enlarged nor diminished by state

legislation.” Mississippi Mills v. Cohn, 150 U.S. 202, 204 (1893). The

latter decision confirmed the equitable powers of federal courts to allow

a judgment creditor to reach the property of his debtor “by removing

fraudulent judgments or conveyances or transfers which defeat his legal


59

remedy at law.” Id. at 207 (emphasis added), citing 3 Pomeroy’s Eq. Juris.

§ 1415. There should be no difference in outcome just because a claimed

“debt” is extorted by similar fraud from the alleged debtor by the

ostensible “creditor”. “Equity will not suffer a wrong without a remedy.”

Fed. Title & Mortg. Guar. Co. v. Lowenstein, 166 A. 538, 542 (N.J. Ch.

1933).

Even after Eerie Railroad Co. v. Tompkins, 304 U.S. 64, 78-79 (1938),

federal courts may afford an equitable remedy not otherwise available in

a state court. Guar. Trust Co. of N.Y. v. York, 326 U.S. 99, 105 (1945).

This relief includes forgiveness of a debt where the elements of fraud,

although not proved, or clearly present by the nature of the transaction

itself, and is coupled with an inability to provide any other remedy such

as rescission, remittitur, or return of the property due to its acquisition

by a third party. Id.

In the instant case, the Kassem’s have lost their home based on a

skewed system that rewarded the Banks and ignored the plight of

millions of homeowners. The equitable powers of this Court can recognize

the failure of Ocwen and BOA to have proved anything in regard to their

rights to initiate the foreclosure by advertisement proceeding. It follows


60

then that the Court has authority to recognize the causes of action

sounding in breach of contract and of good faith and fair dealing, as well

as those other equitable remedies it may impose as a result of the lack of

any proper record chain of title.

The Kassem’s are entitled at least to the remedies available, including

the prohibition placed on the parties (Ocwen and BOA, and anyone acting

on their behalf) from recovering any deficiency judgment.

“If equity can mold its remedies to meet conditions as they arise, then

equity should not fail in this emergency to hold the scales even.” Bank of

Manhattan Trust Co. v. Ellda Corp., 265 N.Y.S. 115, 124 (N.Y. Sup. Ct.

1933), rev’d on other grounds, 271 N.Y.S. 522 (N.Y. App. Div. 1934). And,

this Court should rise to the occasion. It is herein provided how this Court

retains the constitutional authority to correct the balance of justice. The

only question is whether it will so endeavor.

RELIEF REQUESTED

The Kassem’s respectfully request the District Court’s judgment be

reversed and the Kassem’s be allowed a full judicial proceeding to

determine their rights and obligations. The Kassem’s also specifically

request the Court to forbid Ocwen and/or BOA (or anyone acting on their


61

behalf and in their name) from recovering a deficiency judgment against

the Kassem’s. The Kassem’s request the Court to grant such other relief

as justice requires.

Respectfully submitted,

Carson J. Tucker Attorney for Plaintiffs/Appellants


CERTIFICATE OF COMPLIANCE

I, Carson J. Tucker, certify that this brief complies with the type-

volume and word-count limitations, containing 11,948 words within the

applicable sections, which is within the 13,000-word allowable limit

under the Sixth Circuit and Federal Rules of Appellate Procedure.


CERTIFICATE OF SERVICE

Carson J. Tucker, attorney for Appellants, being first duly sworn,

deposes and states that on the 23rd day of February 2017, he caused a

copy of APPELLANT’S BRIEF ON APPEAL to be served upon all parties

of record by electronically filing and serving same upon counsel of record

for the parties, each of whom is registered with the United States Court

of Appeals for the Sixth Circuit.


1

DESIGNATION OF RECORD5

Docket Entry Number (DE)

Description

R. 1, Page ID # 1-94 Notice of Removal and Exhibits R. 19, Page ID # 260-425 Response to Ocwen’s Motion to Dismiss R. 23, Page ID # 638-699 Motion to Amend Complaint R. 27, Page ID # 901-955 First Amended Complaint R. 31, Page ID # 962-1155 Ocwen’s Motion to Dismiss R. 36, Page ID # 1449-1559 BOA’s Motion to Dismiss R. 39, PID # 1564-1589 Kassem’s Response to BOA’s Motion R. 45, Page ID # 1829-1855 District Court’s Opinion and Order, 7/18/15 R. 64, Page ID # 2345-2360 District Court’s Opinion, 5/11/16 R. 65, Page ID # 2361 District Court’s Judgment, 5/11/16 R. 66, Page ID # 2362 Notice of Appeal, 5/18/16 App. R. 30-1 to 30-4 Emergency Motion to Stay Execution and

Attachments

5 The lower court record is referred to by reference to the electronic “docket entry” number (“R.”) and the page identification numbers (“Page ID #”) appearing in the record, in seriatum. Entries in the Court of Appeals record are similarly referred to and designated by the docket number (“App. R.”) and page number (“Page ID #”).
