United States District Court, D. Massachusetts
REPORT AND RECOMMENDATION RE: MOTIONS TO DISMISS
VERIFIED COMPLAINT (DOCKET ENTRY ## 7, 32)
MARIANNE B. BOWLER UNITED STATES MAGISTRATE JUDGE.
real estate dispute arises out of an attempted purchase of
residential property in Brewster, Massachusetts through an
online auction. After plaintiff Timothy Burke
(“plaintiff”) entered into a purchase and sale
agreement (“the P&S”) with defendant Ocwen
Loan Servicing LLC (“Ocwen”), the seller, the
closing did not take place. Ocwen and defendant Altisource
Solutions, Inc. (“ASI”), which conducted the
online bidding, move to dismiss the complaint under
Fed.R.Civ.P. 12(b)(6) (“Rule 12(b)(6)”). (Docket
Entry # 7). Defendant HSBC Bank, USA (“HSBC”),
which purchased the property at foreclosure in June 2016,
also seeks to dismiss the complaint. (Docket Entry # 32).
Plaintiff opposes both motions. (Docket Entry ## 15, 37).
After conducting a hearing on April 25, 2018, this court took
the motions (Docket Entry ## 7, 32) under advisement.
verified complaint sets out claims against “the Seller,
” which it defines as Ocwen, ASI, and HSBC, for: breach
of contract (Count I); breach of the implied covenant of good
faith and fair dealing (Count II); specific performance
(Count III); and declaratory relief (Count IV). Counts V and
VI allege violations of Massachusetts General Laws chapter
93A (“chapter 93A”), section nine, against Ocwen
(Count V) and ASI (Count VI). (Docket Entry # 46).
survive a Rule 12(b)(6) motion to dismiss, the complaint must
contain “enough facts to state a claim to relief that
is plausible on its face” even if actual proof of the
facts is improbable. Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 556, 570 (2007); Miller v. Town of Wenham
Massachusetts, 833 F.3d 46, 51 (1st Cir. 2016). The
“standard is ‘not akin to a “probability
requirement, ” but it'” requires
“‘more than a sheer possibility that a defendant
has acted unlawfully.'” Saldivar v.
Racine, 818 F.3d 14, 18 (1st Cir. 2016);
Feliciano-Hernàndez v. Pereira-Castillo, 663
F.3d 527, 533 (1st Cir. 2011). If the facts in the complaint
“are ‘too meager, vague, or conclusory to remove
the possibility of relief from the realm of mere conjecture,
'” dismissal is appropriate. In re Montreal,
Maine & Atl. Ry., Ltd., 888 F.3d 1, 6 (1st
Cir. 2018). “[A]ll reasonable inferences” are
drawn “in the pleader's favor.” Sanders
v. Phoenix Ins. Co., 843 F.3d 37, 42 (1st Cir. 2016).
complaint includes 74 pages of attached exhibits.
“Exhibits attached to the complaint are properly
considered part of the pleading ‘for all purposes,'
including Rule 12(b)(6).” Trans-Spec Truck Service,
Inc. v. Caterpillar Inc., 524 F.3d 315, 321 (1st Cir.
2008). It is also appropriate to consider the
“‘implications from documents attached to or
fairly incorporated into the complaint.'”
Barchock v. CVS Health Corp., 886 F.3d 43, 48 (1st
Cir. 2018). Well-pleaded facts in a complaint must be
“non-speculative.” Schatz v. Republican State
Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012);
accord Saldivar v. Racine, 818 F.3d at 18
(“conclusory legal allegations” are not
credited). The conclusory statement in the complaint that
“The Buyer complied with all terms of the
P&S” (Docket Entry # 46, ¶ 9) is therefore not
considered. Setting aside “the complaint's
conclusory averments, ” In re Curan, 855 F.3d
19, 25 (1st Cir. 2017), the non-conclusory, non-speculative
facts in the complaint and attached exhibits are as follows.
2016, HSBC acquired property located at 23 Essex Way in
Brewster (“the property”) through a foreclosure.
Ocwen executed a foreclosure deed for the property as an
“attorney in fact.” (Docket Entry # 46, ¶
The property includes a single family residence.
around January 2017, Ocwen listed the property for sale on
HUBZU, “a subsidiary of ASI.” (Docket Entry # 46,
¶ 6). Ocwen, ASI, and/or HSBC also listed the property
for sale on Zillow. (Docket Entry # 46, ¶ 7). The Zillow
listing describes the property as including a three-bedroom
residence with central air conditioning and, like the HUBZU
listing, pictures the front side of a roof over the
structure. (Docket Entry # 46, pp. 28-29,
32-34). Both listings denote the residence as
occupied and state, “NO VIEWINGS of this property.
Please DO NOT DISTURB the occupant. ‘As is' cash
only sale with no contingencies or inspections . . . Live
bidding is ACTIVE for this property, ” and the property
is being “sold in ‘as is' condition”
with no warranties. (Docket Entry # 46, pp. 28-29, 32-34)
(Docket Entry # 46, ¶¶ 7-8).
was the successful bidder and entered into the P&S dated
January 27, 2017. With an effective date of February 3, 2017,
the P&S includes provisions regarding: the occupancy of
the property; a waiver of specific performance as a remedy;
an absence of representations regarding the septic system,
the roof, and the air conditioning; a return of the deposit
as the sole remedy in the event the seller defaults or
commits a material breach; the existence of mold; and the
buyer's responsibility to remediate mold. (Docket Entry #
46, pp. 38, 41-62).
the P&S, plaintiff agreed to pay a purchase price of
$215, 000, additional costs in the amount of $9, 974, and a
deposit credited at closing in the amount of $6, 450. (Docket
Entry # 46, ¶ 9) (Docket Entry # 46, pp. 38, 43-44,
¶¶ 2.11-2.14, 4.1.1, 4.1.2, 5.1). The agreement
provides that, “Subject to compliance with the terms
and conditions of this Agreement, and subject to applicable
law, Seller shall sell to Buyer and Buyer shall purchase from
Seller the Property.” (Docket Entry # 46, p. 46, ¶
3). Plaintiff transmitted the deposit to Ocwen's closing
agent, Elite Title & Closing Services, LLC
(“Elite”), which “accepted the deposit . .
. as an Escrow Agent.” (Docket Entry # 46, ¶¶
10-11) (Docket Entry # 46, p. 43, ¶¶ 2.1, 2.3).
Subject to a few exceptions, the deposit was non-refundable.
(Docket Entry # 46, p. 44, ¶ 5.2) (Docket Entry # 46, p.
53, ¶ 12.3). Plaintiff waived an inspection contingency.
(Docket Entry # 46, p. 43, ¶ 2.19).
and capitalized letters, section 13.2 of the P&S
emphasizes that the “PROPERTY IS SOLD ‘AS IS,
WHERE IS'” with “NO REPRESENTATIONS OR
WARRANTIES.” (Docket Entry # 46, p. 54, ¶ 13.2)
(bolding omitted). The section further provides that the
“SELLER MAKES NO REPRESENTATIONS OR WARRANTIES AS TO
ANY OF THE ABOVE, ” a category that includes the septic
system,  the air conditioning, and the roof.
(Docket Entry # 46, p. 54, ¶ 13.2). Section 13.2 also
states that the “SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES AS TO . . . THE CONDITION OF THE PROPERTY”
or “THE PROPERTY'S SYSTEMS.” (Docket Entry #
46, p. 54, ¶ 13.2). As stated in the immediately
preceding section, plaintiff acknowledged that the seller,
Ocwen, acquired the property “pursuant to a
foreclosure” or “similar action” and
therefore “has not made any disclosures regarding the
property” and is “not familiar with the condition
of the property, ” except as “disclosed in any
inspection reports” obtained by the seller which
“should not be relied upon by buyer . . ..”
(Docket Entry # 46, p. 54, ¶ 13.1) (capitalization
P&S set a closing date of February 20, 2017 and the
parties “agreed that time is of the essence.”
(Docket Entry # 46, p. 43, ¶ 2.21) (Docket Entry # 46,
p. 48, ¶¶ 9, 9.1) (capitalization omitted). The
agreement afforded Ocwen, as the seller (Docket Entry # 46,
p. 43, ¶ 2.1) and in its “sole discretion, ”
a unilateral right to extend the closing date if it was
“unable to close” by “the original Closing
Date” of February 20, 2017. (Docket Entry # 46, p. 49,
¶ 9.5.1). “Any further extensions must be agreed
to in writing by both Buyer and Seller.” (Docket Entry
# 46, p. 49, ¶ 9.5.1).
section 12.3 of the P&S gave Ocwen the ability to cancel
the agreement if it was “unable to perform” or
the property was “no longer available for sale for any
reason, ” provided Ocwen gave plaintiff written notice.
(Docket Entry # 46, p. 53, ¶ 12.3). In the event Ocwen
exercised this right, plaintiff was “entitled to the
return of the Deposit” as his “sole and exclusive
remedy.” (Docket Entry # 46, p. 53, ¶ 12.3). In
the event of a “default or material breach” by
Ocwen, the P&S likewise limited plaintiff's recovery
to a return of the deposit. (Docket Entry # 46, p. 53, ¶
12.4). Plaintiff waived the right to maintain an action for
specific performance and agreed to the return of the deposit
as adequate and fair compensation. (Docket Entry # 46, p. 53,
¶ 12.4). Plaintiff also agreed that Ocwen was not liable
“for any special, consequential or punitive damages . .
. in contract . . . arising from or related to this agreement
or a breach of this agreement.” (Docket Entry # 46, p.
53, ¶ 12.5) (capitalization omitted). Moreover,
“In the event [of] a legal proceeding, ” the
P&S dictated an award of attorneys' fees and costs to
the prevailing party. (Docket Entry # 46, p. 60, ¶
to the closing, the P&S required Ocwen and plaintiff to
deliver “[a]n executed Settlement Statement” to
the other party. (Docket Entry # 46, pp. 49-50, ¶¶
9.8.1, 9.8.2). On February 14, 2017, “the Seller
requested that its counsel prepare the HUD-1 (Settlement
Statement) for review.” (Docket Entry # 46, ¶ 13).
Specifically, on February 14, 2017, Ramya A. Shetty, a
closing coordinator at ASI, emailed a legal assistant at
Elite asking, “Please advise us on HUD for seller's
review.” (Docket Entry # 46, pp. 67, 83). Ocwen's
“counsel never prepared the HUD-1” settlement
statement for Ocwen or plaintiff. (Docket Entry # 46, ¶
23) (Docket Entry # 46, p. 50, ¶¶ 9.8.1, 9.8.2). As
stated in the P&S, the failure to perform this condition
precedent to closing “shall not, in and of itself,
relieve any Party of its obligations set forth elsewhere in
this Agreement.” (Docket Entry # 46, p. 49, ¶
February, plaintiff and Elite discussed “the vacancy of
the Property.” (Docket Entry # 46, ¶ 12). The
P&S denotes the property as “[o]ccupied” at
the time of the listing. (Docket Entry # 46, p. 43, ¶
2.22). In a February 14, 2017 email to plaintiff, Elite
stated that the “property is vacant.” (Docket
Entry # 46, p. 67). On February 15, 2017, plaintiff forwarded
the town's requirements for securing the final water bill
to Elite. (Docket Entry # 46, ¶ 14) (Docket Entry # 46,
p. 70). By email, he acknowledged his responsibility to
obtain the final water bill. (Docket Entry # 46, p. 72). In a
February 16, 2017 email regarding the final water bill,
plaintiff informed Elite that the town needed to access the
property. (Docket Entry # 46, p. 69) (Docket Entry # 46,
this time period, the parties agreed to a February 21, 2017
inspection. (Docket Entry # 46, ¶ 15) (Docket Entry #
46, p. 75). A February 21, 2017 email late in the afternoon
from Elite asked plaintiff if he had gone to the property and
states, “we are waiting on final bills in order to
schedule the closing.” (Docket Entry # 46, p. 64).
During the inspection to the property on or about February
21, 2017, plaintiff discovered the property did not have
central air conditioning. (Docket Entry # 46, ¶ 16). In
a February 22, 2017 email plaintiff sent to Elite and a
number of other individuals, plaintiff complained there was
no central air conditioning and the property was
“infested with black mold.” (Docket Entry # 46,
p. 64). As stated in the email, plaintiff deemed the failure
to provide a warning about the mold
“unacceptable.” (Docket Entry # 46, p. 64). The
email notes that Ocwen had the property winterized and
therefore “knew of the problem” but did not
inform him about the condition. (Docket Entry # 46, p. 64)
(Docket Entry # 46, ¶ 21). Section 13.3.6 of the P&S
states that, “Seller further advises buyer that as a
consequence of possible water damage and/or excessive
moisture, the Property may be or has been irrevocably
contaminated with mildew, mold, and/or other microscopic
organisms” and that “exposure to certain species
of mold may pose serious health risks . . ..” (Docket
Entry # 46, p. 55, ¶ 13.3.6). Plaintiff experienced
respiratory issues for two days after the inspection. (Docket
Entry # 46, ¶ 21).
indicated, the closing did not take place on February 20,
2017. The P&S provides for an automatic extension of the
“original Closing Date” for 30 days at
Ocwen's “sole discretion” if Ocwen is
“unable to close the transaction.” (Docket Entry
# 46, p. 49, ¶ 9.5.1). The day after plaintiff's
February 22, 2017 email regarding the black mold and lack of
air conditioning, plaintiff sent Ocwen a chapter 93A demand
letter alleging fraud and deceit on the part of Ocwen for
engaging in half-truths and material misrepresentations about
the black mold, the lack of air conditioning, and the failure
to inspect the septic system within six months of the June
2016 foreclosure sale. (Docket Entry # 46, pp. 15-22).
Seeking $50, 000, the letter advised Ocwen that plaintiff
would file a lawsuit seeking damages absent a reasonable
settlement offer within 30 days. (Docket Entry # 46, p. 22).
email dated April 11, 2017, the closing coordinator at ASI
informed plaintiff and a number of other individuals
“that the Seller ha[d] exercised its automatic and
unilateral right to extend the Closing Date” under
section 9.5.1 of the P&S to April 25, 2017. (Docket Entry
# 46, p. 83) (Docket Entry # 46, ¶ 23). By email dated
April 19, 2017, Ocwen “voided and canceled the
P&S.” (Docket Entry # 46, ¶ 24) (Docket Entry
# 46, p. 85).
letter dated June 12, 2017, Ocwen's counsel wrote to
plaintiff. The letter states that, as set forth in an
“enclosed Seller Termination of Purchase and Sale
Agreement, ” the agreement “has been terminated
as the closing was unable to occur by the Closing Date”
and, “pursuant to Section 12.3, ” the deposit
held by Elite “will be returned to you . . ..”
(Docket Entry # 46, ¶ 25) (Docket Entry # 46, p. 87).
The attached Seller Termination of Purchase and Sale
Agreement dated April 19, 2017 with an executed signature by
the “Seller” dated April 18, 2017 instructs that
the deposit of $6, 450 “shall be” returned to
plaintiff. (Docket Entry # 46, ¶ 25) (Docket Entry # 46,
p. 88). It further states that the closing was “unable
to occur” by the closing date. (Docket Entry # 46,
¶ 25) (Docket Entry # 46, p. 88).
Breach of Contract (Count I)
ASI, and HSBC (“defendants”) initially move to
dismiss the contract claim against ASI and HSBC because they
are not parties to the P&S. (Docket Entry ## 8, 32). They
also maintain that the indemnification provision bars all of
the claims or counts in the complaint, including the breach
of contract count. (Docket Entry ## 8, 32). As to Ocwen, they
submit that: (1) plaintiff was not ready, willing, and able
to perform the contract; (2) Ocwen did not breach the
P&S; and (3) Ocwen canceled the P&S under section
12.3 and returned the deposit such that plaintiff did not
suffer any damages. (Docket Entry ## 8, 32). Plaintiff
submits that “the Sellers, ” which he defines as
Ocwen and ASI, are the parties that breached the P&S
because they refused to comply with environmental laws in the
following manner: (1) they did not undertake to complete an
inspection of the septic system as required under chapter 310
of Massachusetts Code of Regulations, section 15.301
(“regulation 15.301”), and a Brewster “Real
Estate Transfer Regulation” (Docket Entry # 46, pp.
77-81); and (2) they “acted to avoid the entry”
of town employees seeking to secure a final water meter
reading. (Docket Entry ## 15, 37). Plaintiff argues
that these breaches were material which thereby excused
plaintiff from further performance.
breach of contract under Massachusetts law “requires
the plaintiff to show that (1) a valid contract between the
parties existed, (2) the plaintiff was ready, willing, and
able to perform, (3) the defendant was in breach of the
contract, and (4) the plaintiff sustained damages as a
result.” Bose Corp. v. Ejaz, 732 F.3d 17, 21
(1st Cir. 2013). In short, the plaintiff must show that a
valid “‘contract existed, the defendant breached
the terms of the contract, and the plaintiff sustained
damages as a result of the breach.'” Young v.
Wells Fargo Bank, N.A., 717 F.3d 224, 232 (1st Cir.
2013) (internal brackets omitted).
15.301 requires inspection of a septic system “at or
within two years prior to the time of transfer of title . .
..” 310 Mass. Code Regs. 15.301. The owner or
operator of the septic system is “responsible for the
inspection and maintenance of, and any necessary upgrades to,
the system.” 310 Mass. Code Regs. 15.300(4). “A
copy of the complete inspection report shall be submitted to
the buyer . . ..” 310 Mass. Code Regs. 15.301. An
owner's failure “to have the system
inspected” constitutes a violation of 310 Mass. Code
Regs. 15.000. 310 Mass. Code Regs. 15.301(11). Subject to
certain exceptions, the Brewster “Real Estate Transfer
Regulation” requires the owner to have an inspection of
the septic system no less than 30 days before a transfer of
property. (Docket Entry # 46, pp. 77, 80). In the event an
inspection uncovers a failed ...