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Hayden v. HSBC Bank USA, N.A.

United States District Court, D. Massachusetts

September 30, 2016



          CASPER, J.

         I. Introduction

         Plaintiffs Christopher Hayden and Denine L. Hayden (collectively “Haydens”) bring claims against Defendants HSBC Bank USA, N.A., as Trustee on behalf of Wells Fargo Asset Securities Corporation Mortgage Asset-Backed Pass Through Certificates, Series 2007-PA3, (“HSBC”), and Wells Fargo Bank, N.A. (“Wells Fargo”) (collectively “Defendants”), relating to the foreclosure of the Haydens' residence located at 128 Peck Street, Rehoboth, Massachusetts (the “Property”). D. 5 at 7. The Haydens seek a preliminary injunction enjoining Defendants from conducting the foreclosure sale of the Property, now scheduled for October 4, 2016, until this matter is adjudicated on the merits. D. 18. Defendants have filed a motion to dismiss, D. 13. For the reasons stated below, the Haydens' motion is DENIED and Defendants' motion is ALLOWED.

         II. Legal Standard

         To merit a preliminary injunction, plaintiffs must show: (1) a reasonable likelihood of success on the merits; (2) that they will likely suffer irreparable harm in the absence of the injunction; (3) that the balance of equities tips in their favor; and (4) that an injunction is in the public interest. Bruns v. Mayhew, 750 F.3d 61, 65 (1st Cir. 2014). Although there are four factors, likelihood of success on the merits is the foremost consideration. Esso Standard Oil Co. (Puerto Rico) v. Monroig-Zayas, 445 F.3d 13, 18 (1st Cir. 2006). When a complaint is subject to dismissal for failure to state a claim, a plaintiff obviously cannot demonstrate likelihood of success and a preliminary injunction will not issue. See, e.g., Hicks v. Ryan, No. 13-cv-10709-RGS, 2013 WL 1992679, at *15 (D. Mass. May 9, 2013).

         On a motion to dismiss based upon Rule 12(b)(6), the Court will dismiss a complaint that fails to allege adequate facts “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Court accepts non-conclusory factual allegations in the complaint as true, Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011), and “draw[s] all reasonable inferences” in favor of the plaintiff, Gargano v. Liberty Int'l Underwriters, Inc., 572 F.3d 45, 48 (1st Cir. 2009). In reviewing the complaint, the Court can consider documents attached to or fairly incorporated into the complaint and facts susceptible to judicial notice. Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012).

         III. Discussion

         A. Motion to Dismiss

         The Haydens allege three claims in this case. D. 1-1. They seek declaratory judgment that HSBC may not foreclose on the Property under Mass. Gen. L. c. 244, § 14 (Count I), assert that Wells Fargo violated Mass. Gen. L. c. 93A for failing to comply with 209 C.M.R. § 18.17 and § 18.21 (Count II), and seek declaratory judgment that the mortgage is obsolete by operation of Mass. Gen. L. c. 260, § 33 (Count III). D. 1-1 at 12-17.

         1. Declaratory Judgment Pursuant to Mass. Gen. L. c. 244 § 14 (Count I)

         In Count I, the Haydens contend that the Mortgage Electronic Registration System, Inc. (“MERS”) lacked authority to transfer their mortgage because MERS was never a mortgagee, did not hold title to the property and lacked the power of sale, thus invalidating the mortgage assignment to HSBC. D. 1-1 at 12-14. The Court disagrees. First, the express language of the mortgage, attached and incorporated into the complaint, provides that MERS was properly the mortgagee and had power of sale. The Mortgage authorizes MERS to assign the Mortgage and additionally provides that the “[b]orrower understands and agrees that . . . MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property . . . .” D. 1-1 (mortgage) at 25, 27. Second, the First Circuit has held both that a note and a mortgage need not be held by the same entity and that MERS can validly transfer or assign a mortgage without holding title to the property. See, e.g., Culhane v. Aurora Loan Servs. of Nebraska, 708 F.3d 282, 293 (1st Cir. 2013) (noting that “MERS's role as mortgagee of record and custodian of the bare legal interest as nominee for the member-noteholder, and the member-noteholder's role as owner of the beneficial interest in the loan, fit comfortably with each other and fit comfortably within the structure of Massachusetts mortgage law”); Serra v. Quantum Servicing, Corp., 747 F.3d 37, 40-41 (1st Cir. 2014) (reinforcing Culhane); Jepson v. HSBC Bank USA, Nat'l Ass'n, No. 12-cv-12179-LTS, 2013 WL 639184, at *4 (D. Mass. Feb. 20, 2013), aff'd No. 13-1364, 2014 U.S. App. LEXIS 24246 (1st Cir. June 23, 2014). Both under the language of the mortgage and First Circuit precedent, MERS had the requisite legal authority. For support the Haydens cite to Eaton v. Fed. Nat'l Mortg. Ass'n, 462 Mass. 569 (2012). Eaton, however, does not diminish the ability of MERS to make such an assignment. Id. at 576-77, 589 n.28; see also Culhane, 708 F.3d at 292-93 (citing Eaton, 462 Mass. at 575-77).

         Under Count I, the Haydens also allege that HSBC cannot foreclose because the transfer of the mortgage into the applicable trust did not comply with the terms of the Pooling and Servicing Agreement (“PSA”). D. 1-1 at 12-14. The Haydens first assert that violating the terms of the PSA contravenes New York law in which the breaching mortgage assignments would be voided. D. 1-1 at 12-14. New York law, however, is inapplicable here where “Massachusetts applies its own law to claims and defenses involving real property located within its borders.” U.S. Bank Nat'l Ass'n v. Bolling, 90 Mass.App.Ct. 154, 154 (2016) (citations omitted).

         Under Massachusetts law, the Haydens do not have standing to challenge a mortgage assignment based upon the PSA terms even as pled in this specific case. D. 1-1 ¶¶ 32-36, 43-47, 49-52, 85-86, 93. This is because “infirmities in the assignment of a mortgage, such as failure to abide by the terms of a governing trust agreement[] are barred for lack of standing.” Butler v. Deutsche Bank Trust Co. Americas, 748 F.3d 28, 37 (1st Cir. 2014) (quoting Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 354 (1st Cir. 2013)); Jepson, 2013 WL 639184, at *4. Indeed “a mortgagor does not have standing to challenge shortcomings in an assignment that render it merely voidable at the election of one party.” Whitehead v. HMC Assets, LLC, No. 14-cv-13408-IT, 2014 WL 5112111, at *5 (D. Mass. Oct. 10, 2014) (internal quotation mark and citation omitted). The Haydens' allegations that the assignment of the mortgage violated the PSA would render the assignment voidable by the parties of the PSA; thus they do not have standing. In re Sheedy, 801 F.3d 12, 24-25 (1st Cir. 2015); Butler, 748 F.3d at 37; Bolling, 90 Mass.App.Ct. at 154. Even if the assignment to HSBC lacked certain intermediary sales, as the Haydens contend, D. 1-1 ¶¶ 43-51, 98, the Haydens would still lack standing to challenge those assignments, see Butler, 748 F.3d at 34-35, 37, even as the allegations are pled here. Thus, the Court dismisses Count I.

         2. Violation of Mass. Gen. ...

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