## Facts

- Annie L. Jeminson contracted to buy a Detroit home from Montgomery Real Estate and Company.
- Jeminson financed the purchase through Michigan Mortgage Corporation, executing an FHA-insured mortgage for $11,800.
- After moving in, Jeminson discovered conditions rendering the house uninhabitable, abandoned the property, and the mortgage was foreclosed.
- Jeminson alleged Montgomery fraudulently misrepresented the home’s condition, value, and FHA eligibility.
- Jeminson alleged Michigan Mortgage knew she was economically and educationally vulnerable, including reliance on welfare assistance, unemployment, limited education, and inexperience in real-estate transactions.
- Jeminson alleged Michigan Mortgage knew or should have known Montgomery had a notorious reputation for deceptive practices in selling older inner-city homes through FHA-insured programs to unsophisticated buyers.
- Jeminson sued Montgomery and Michigan Mortgage, alleging Michigan Mortgage breached a duty to protect her from the seller’s deception or participated in the fraud.
- The trial court granted Michigan Mortgage summary judgment for failure to state a claim; Jeminson pursued a delayed interlocutory appeal limited to the mortgagee.

## Issues

1. Whether a complaint states a legally sufficient claim against a mortgagee alleged to have known of the borrower’s vulnerability and the seller’s notorious FHA-related deceptive practices, yet financed the purchase of an uninhabitable home.
2. Whether dismissal at the pleading stage was proper where the claims against the mortgagee depended on factual questions about knowledge, participation, and reasonable care.

## Decision

- The Michigan Court of Appeals reversed the summary judgment in favor of Michigan Mortgage Corporation.
- The court held the complaint, with well-pleaded allegations taken as true, stated a cause of action sufficient to proceed against the mortgagee.
- The case was remanded for further proceedings.

## Legal Principles

- On a motion testing the legal sufficiency of a complaint, well-pleaded allegations are accepted as true and construed in the plaintiff’s favor.
- A lender may owe a duty, depending on alleged facts, to refrain from knowingly facilitating or participating in a seller’s fraud where the lender’s role enables the transaction and the risk of harm is foreseeable.
- Allegations that a mortgagee knew of a borrower’s extreme vulnerability and a seller’s established pattern of deceptive practices can be sufficient to avoid dismissal and require factual development.
- Claims turning on the mortgagee’s knowledge, involvement, and reasonable care are generally not resolved on the pleadings when the complaint plausibly alleges misconduct.

## Conclusion

The court allowed the borrower’s claims against the mortgage company to go forward because the pleaded facts plausibly supported liability based on foreseeable harm and alleged knowing facilitation or participation in a fraudulent FHA-insured home sale, making summary judgment at the pleading stage improper.


Jeminson v. Montgomery Real Estate & Co., 47 Mich. App. 731, 210 N.W.2d 10 (Mich. Ct. App. 1973)