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Rose v. Bank of America

United States District Court, D. Massachusetts

April 17, 2016

BRUCE ROSE, Plaintiff,
BANK OF AMERICA as the successor-in-interest of COUNTRYWIDE MORTGAGE, OPTION ONE, and EASTSIDE MORTGAGE, Defendants.



         This is a dispute concerning a foreclosure. Plaintiff Bruce Rose has not made a payment on the mortgage loan on his home since 2007. Bank of America, N.A. (“BANA”), the mortgagee, now seeks to foreclose. Rose has brought suit against BANA and two others under Massachusetts law seeking to enjoin the foreclosure, recover compensatory damages, and obtain declaratory relief.

         BANA has moved to dismiss the complaint in its entirety. For the following reasons, the motion to dismiss will granted in part and denied in part.

         I. Background

         Unless otherwise indicated, the facts are set forth as alleged in the complaint.[1]

         A. Factual Background

         According to the complaint, Bruce Rose is a mentally disabled African-American man who lives at 22 Pompeii Street in Roxbury, Massachusetts (“property”). (Compl. ¶ 1). Defendant BANA is the successor-in-interest to Countrywide Bank, N.A. Defendants Eastside Mortgage and Option One were involved in the origination of the loan and mortgage that are the subject of this lawsuit.

         In 2006, Rose refinanced the mortgage loan on his property on two separate occasions. First, on February 24, 2006, he refinanced the loan with Option One. (Id. ¶ 13). Second, on April 25, 2006, he refinanced with Countrywide. (Id. ¶ 14). He borrowed $439, 000 from Countrywide in the second refinancing. (Id. ¶ 31). Eastside acted as the mortgage broker for both loans. (Id. ¶ 14). The note with Countrywide provides for a maturity date of May 1, 2036, and for acceleration of the loan in the event of default. (Note, Def. Ex. A ¶¶ 3(A), 7(C)). The complaint alleges that the loans were negative amortization loans with payments that increased to an unaffordable amount over time. (Compl. ¶¶ 31-32, 49).

         The complaint alleges that Eastside, in collusion with the other defendants, falsified documents, made fraudulent statements to induce Rose to refinance, and forged Rose's signature on the mortgage applications, among other things. (Id. ¶¶ 15-25). It further alleges that defendants used predatory lending practices to target Rose to induce him to accept a loan that he could not afford. (Id. ¶¶ 8, 11).

         About fourteen months after Rose refinanced his mortgage for the second time, he defaulted on the Countrywide loan. (Id. ¶ 43). He has not made payments on that loan since at least July 1, 2007. (Id.). On September 18, 2009, he received a notice of a mortgage foreclosure and sale of the property. (Id. ¶ 44).

         The complaint alleges multiple defects concerning the foreclosure process, including allegations that BANA does not hold the original note, has not made an offer to modify the loan, and has not recorded an affidavit certifying compliance with Mass. Gen. Laws ch. 244, § 35B in the registry of deeds. (Id. ¶¶ 42, 46-48).

         B. Procedural Background

         On September 22, 2009, Rose brought suit against the three defendants named here in Suffolk County Superior Court. (State Court Compl., Docket No. 9-3). That complaint alleged eleven counts arising out of the origination of the loans at issue here.

         On February 25, 2011, Rose filed a voluntary chapter seven petition for bankruptcy. (In re Rose, Bankruptcy No. 11-11563 (Bankr. D. Mass. Feb. 25, 2011)). On May 24, 2011, the bankruptcy court filed an order granting a discharge to Rose. (Bankr. Docket No. 11). In February 2012, Rose moved to reopen the bankruptcy case in order to add the state-court lawsuit as an asset of the estate. (Bankr. Docket No. 15). The court granted that motion. (Bankr. Docket No. 20).

         Thereafter, the trustee negotiated a settlement of the state-court lawsuit with two of the defendants in this case, BANA and Eastside. Under the terms of the settlement agreement, BANA and Eastside agreed to pay $16, 500 to the bankruptcy estate. (Settlement Agreement ¶ 2, Bankr. Docket No. 45). In exchange, the bankruptcy estate, on behalf of Rose, agreed that he “unconditionally and irrevocably remises, releases, and forever discharges BANA and Eastside . . . from any and all suits, . . . claims, . . . grievances, and debts, of any nature whatsoever . . . concerning, relating to, or arising from the Loan, the Claims, and/or the Action, including, but not limited to (a) all claims relating to or arising out of the origination, handling, processing, servicing, or administration of any aspect of the Loan; and (b) all claims that were, or could have been, asserted in the Action and/or any other proceeding concerning any aspect of the Loan.” (Id. ¶ 2).

         In addition, the agreement contained a covenant not to sue that provided that Rose would not “commence . . . any suit, arbitration or other proceeding . . . arising out of, relating to, or based upon, any claim released pursuant to the terms of this Agreement.” (Id. ¶ 6).

         On June 4, 2013, the trustee filed a motion in bankruptcy court seeking approval of the settlement agreement. (Bankr. Docket No. 45). Rose filed an objection to the proposed settlement agreement on the ground that the trustee was not entitled to “compromise future rights which were not raised in the complaint, and which would eliminate any defenses in the state court as to a wrongful foreclosure action based upon a lack of standing the alleged lender has.” (Bankr. Docket No. 52). On July 10, 2013, the bankruptcy court held a hearing concerning the motion. At the hearing, the trustee represented that, despite the broad language of the settlement agreement, the agreement did not waive defenses that Rose may be entitled to raise concerning foreclosure. (Audio Recording of Hearing, Docket No. 59, In re Rose, Bankruptcy No. 11-11563 (Bankr. D. Mass. July 10, 2013) (on file)).

         Counsel for BANA was also present at the bankruptcy hearing, and represented that the settlement agreement did not waive Rose's right to raise defenses to foreclosure, but instead addressed only claims concerning the origination of the loan. (Id.). Counsel further represented that although a foreclosure action against Rose had previously been commenced, that action had been stayed pending the resolution of the bankruptcy petition. (Id.). She stated that in light of that history, any “foreclosure based claims” raised by Rose in defense to a foreclosure action, such as a claim based on improper notice of foreclosure or a claim that BANA failed to properly assign the loan, do not relate to the state action and would constitute “new claims” that “wouldn't have anything to do with the original civil claims.” (Id.).

         The bankruptcy court approved the settlement agreement subject to the representations by the parties that it applied only to the origination-based claims brought in the state-court action. (Id.). The Court entered an order granting the motion by the trustee to approve the settlement agreement, and further stating, ...

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