Vil v. Wells Fargo Home Mortgage U.S. Bank National Association

          MEMORANDUM AND ORDER ON MOTION TO DISMISS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

         Plaintiff Angemarie Saint Vil filed suit against Wells Fargo Home Mortgage (“Wells Fargo”) and U.S. Bank National Association, individually and as Trustee of the Citigroup Mortgage Loan Trust, Inc. 2006 NC2, Asset Backed Pass Through Certificates Series 2006-NC2 (“U.S. Bank, ” and together, “Defendants”). This suit arises out of the threatened foreclosure of Plaintiff's residence in Malden, MA (the “Property”). Now pending before the Court is Defendants' Motion to Dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). [ECF No. 13]. For the reasons discussed below, the Court GRANTS IN PART and DENIES IN PART the Defendants' motion to dismiss.

         I. BACKGROUND

         The following facts are drawn from Plaintiff's Complaint [ECF No. 1-1 (hereinafter, the “Complaint”)], the well-pleaded allegations of which are taken as true for purposes of evaluating Defendants' motion to dismiss. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014). Certain details are also culled from documents whose authenticity are not disputed by the parties, official public records, and documents sufficiently referred to in the complaint or attached thereto. Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993); Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524 F.3d 315, 321 (1st Cir. 2008).

         Plaintiff is a Massachusetts resident who lives at the Property with her three children. Complaint ¶ 1. On July 7, 2006, Nazon St. Vil Maurilus, Plaintiff's former husband, executed a promissory note in the amount of $410, 000 (the “Note”) in exchange for a refinanced mortgage (the “Mortgage”) on the Property from New Century Mortgage Corporation (“New Century”). Id. ¶¶ 7-9, 11; [ECF No. 13-2]. Both Mr. St. Vil Maurilus and Plaintiff executed the Mortgage. Complaint ¶ 11.

         On April 2, 2007, New Century and certain related entities filed for chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. Id. ¶ 13. On June 20, 2007, New Century granted Wells Fargo Bank, N.A. a limited power of attorney that authorized it, inter alia, to “execute, acknowledge, seal, and deliver . . . assignments of . . . mortgage” on New Century's behalf. [ECF No. 13-4]. On January 3, 2012, Wells Fargo Bank, N.A., recorded an assignment of the Mortgage executed on December 30, 2011 on behalf of New Century to U.S. Bank (the “Assignment”). Complaint ¶ 22; [ECF No. 13-3].

         In 2014, Mr. St. Vil Maurilus stopped living at the Property and divorce proceedings commenced. Complaint ¶ 24. Plaintiff obtained a restraining order against Mr. St. Vil Maurilus after he threatened her with physical violence. Id. ¶ 26.

         On January 5, 2016, Wells Fargo and America's Servicing Company sent Plaintiff a Right to Cure notice and a Right to Request a Modified Loan notice. Id. ¶ 28. Plaintiff authorized her attorney to ask Wells Fargo about loan modification options that would enable her to retain the Property, but Wells Fargo refused to discuss loss mitigation with her attorney because Plaintiff did not execute the Note. Id. ¶ 31. On December 22, 2016, an attorney for U.S. Bank notified Plaintiff by letter that the Property would be sold at auction. Id. ¶ 41-42. After January 23, 2017, Plaintiff was erroneously told that the Property had been sold at auction. Id. ¶ 43.

         On February 6, 2017, Plaintiff sent a letter to Wells Fargo requesting information about the loan and the foreclosure. Id. ¶¶ 45-47. Plaintiff and Mr. St. Vil Maurilus settled their divorce action on February 8, 2017; in the settlement, Plaintiff was granted Mr. St. Vil Maurilus's interest in the Property. Id. ¶ 27. On February 13, 2017, Wells Fargo sent a letter to Plaintiff that notified her that it serviced the Mortgage on behalf of U.S. Bank and falsely stated that the Property had been sold at a foreclosure sale on January 23, 2017. Id. ¶¶ 48-52. Along with the February 13, 2017 letter, Wells Fargo sent Plaintiff copies of the Mortgage, the Assignment, and a Customer Account Activity Statement dated January 8, 2016. Id. ¶¶ 50, 53. The Customer Account Activity Statement contained an entry for $765.00 in attorney's fees that had been added to the Mortgage account on January 8, 2016. Id. ¶¶ 54-55.

         On May 12, 2017, an attorney for U.S. Bank sent a letter to Plaintiff notifying her that the Property would be sold at auction on June 9, 2017. Id. ¶ 58. Plaintiff also received a letter from Wells Fargo dated May 15, 2017 and addressed to Mr. St. Vil. Maurilus that described options for avoiding foreclosure. Id. ¶ 60. On May 31, 2017, Plaintiff's attorney sent Defendants a demand letter pursuant to M.G.L. c. 93A, § 9 notifying Defendants that Plaintiff would bring a lawsuit to enjoin the foreclosure and for damages. Id. ¶ 62. On June 9, 2017, Defendants' attorney represented that Defendants would postpone the June 9, 2017 auction to allow Plaintiff time to apply for a loan modification. Id. ¶ 64. Notwithstanding that representation, Plaintiff later received a letter from Wells Fargo stating that it would go forward with the June 9, 2017 auction. Id. ¶ 65. Plaintiff stayed home on June 9, 2017 and observed that there was no auction or public proclamation of postponement that day. Id. ¶ 66. Defendants later notified Plaintiff that the auction had been rescheduled. Id. ¶ 67.

         On or about July 27, 2017, Plaintiff applied to assume and modify the loan. Id. ¶ 69. On September 22, 2017, Wells Fargo notified Plaintiff that it had denied her application for a loan modification and that she had a right to appeal. Id. ¶ 76. On October 5, 2017, Plaintiff appealed the denial of her loan modification application. Id. ¶ 84. On October 10, 2017, Wells Fargo denied Plaintiff's appeal. Id. ¶ 88. On October 17, 2017, during a telephone conversation with Plaintiff's attorney, Wells Fargo stated that an auction of the Property was scheduled for October 26, 2017. Id. ¶ 90.

         Plaintiff sent Defendants a second demand letter pursuant to M.G.L. c. 93A, and on October 25, 2017, Plaintiff filed a Complaint and an emergency motion for a temporary restraining order and a preliminary injunction in the Massachusetts Superior Court for Middlesex County. [ECF No. 1 at 2]. The court issued a temporary restraining order and scheduled a hearing on the preliminary injunction motion for October 30, 2017. [Id.]. On October 30, 2017, Defendants removed the action to this Court based on diversity jurisdiction, and rescheduled the foreclosure auction for December 11, 2017. [Id. at 1, 2 n.2]. On December 14, 2017, Defendants filed a motion to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). [ECF No. 13]. Defendants have postponed the scheduled foreclosure auction of the Property at least two additional times. [See ECF No. 10 ¶ 5 (postponing the foreclosure sale until at least February 12, 2018); ECF No. 25 (postponing the foreclosure sale during stay to pursue potential settlement)].

         II. STANDARD OF REVIEW

         On a motion to dismiss for failure to state a claim, the Court accepts as true all well-pleaded facts in the complaint and draws all reasonable inferences in the light most favorable to the plaintiff. U.S. ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). While detailed factual allegations are not required, the complaint must set forth “more than labels and conclusions, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), and it must contain “factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.” Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (internal quotations and citations omitted). The facts alleged, taken together, must “state a claim to relief that is plausible on its face.” A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (quoting Twombly, 550 U.S. at 570). “A claim is facially plausible if supported by ‘factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Eldredge v. Town of Falmouth, 662 F.3d 100, 104 (1st Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

         When assessing the sufficiency of a complaint, the Court first “separate[s] the complaint's factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).” Maddox, 732 F.3d at 80 (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). Next, the Court “determine[s] whether the remaining factual content allows a ‘reasonable inference that the defendant is liable for the misconduct alleged.'” Id. (quoting Morales-Cruz, 676 F.3d at 224). “[T]he court may not disregard properly pled factual allegations, ‘even if it strikes a savvy judge that actual proof of those facts is improbable.'” Ocasio-Hernandez v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011) (quoting Twombly, 550 U.S. at 556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, ” however, a claim may be dismissed. Iqbal, 556 U.S. at 679.

         III. ANALYSIS

         A. Legal Framework

         In Massachusetts, a mortgage that includes a power of sale, as Plaintiff's Mortgage does, incorporates by reference the statutory power of sale established under M.G.L. c. 183, § 21 and M.G.L. c. 244, §§ 11-17C. See U.S. Bank Nat'l Ass'n v. Ibanez, 941 N.E.2d 40, 49-50 (Mass. 2011). Under M.G.L. c. 183, § 21, after a mortgagor defaults in the performance of the underlying note, “[a] mortgage holder may foreclose on a mortgage that includes a power of sale without prior judicial authorization.” Ross v. Deutsche Bank Nat. Tr. Co., 933 F.Supp.2d 225, 230 (D. Mass. 2013). “Even where there is a dispute as to whether the mortgagor was in default or whether the party claiming to be the mortgage holder is the true mortgage holder, the foreclosure goes forward unless the mortgagor files an action and obtains a court order enjoining the foreclosure.” Ibanez, 941 N.E.2d at 49 (citing Beaton v. Land Court, 326 N.E.2d 302, 307 (Mass. 1975)). “Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, [Massachusetts courts] adhere to the familiar rule that ‘one who sells under a power [of sale] must follow strictly its terms.'” Id. at 49-50.

         “One of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose.” Id. at 50. The statutory power of sale can be exercised by “the mortgagee or his executors, administrators, successors or assigns.” M.G.L. c. 183, § 21. An assignee exercising the power of sale “must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder in the notice and in order to have the authority to foreclose under the power of sale.” Ibanez, 941 N.E.2d at 53. “To establish itself as the mortgage holder, ‘a foreclosing entity may provide a complete chain of assignments linking it to the record holder of the mortgage, or a single assignment from the record holder of the mortgage.'” Simmons v. Deutsche Bank Nat'l Tr. Co., No. 18-cv-10136-ADB, 2018 WL 1924453, at *3 (D. Mass. Apr. 24, 2018) (quoting Orellana v. Deutsche Bank Nat'l Trust Co., No. 12-cv-11982-NMG, 2013 WL 5348596, at *7 (D. Mass. Aug. 30, 2013)). “A mortgage assignment executed by an assignor who has no interest to assign or ‘no authority to make an assignment to a particular assignee' is thus void and does not confer upon the assignee the legal status required to exercise the power of sale.” Ross, 933 F.Supp.2d at 230 (quoting Culhane v. Aurora Loan Servs. of Nebraska, 708 F.3d 282, 290 (1st Cir. 2013)).

         In addition, a mortgage holder seeking to foreclose pursuant to M.G.L. c. 183, § 21 must strictly follow the statutory notice provisions. M.G.L. c. 244, § 14 governs the procedure for providing proper notice of foreclosure under the power of sale. Section 14 requires “[a]dvance notice of the foreclosure sale . . . by publication in a newspaper published or generally circulating in the town where the mortgaged property lies, ” Culhane v. Aurora Loan Servs. of Nebraska, 826 F.Supp.2d 352, 362 (D. Mass. 2011), aff'd, 708 F.3d 282 (1st Cir. 2013), and also “that a mortgagee send notice of the foreclosure to the mortgagor at least fourteen days prior to the date of the sale.” Sovereign Bank v. Sturgis, 863 F.Supp.2d 75, 80 (D. Mass. 2012). “[T]he failure to identify the holder of the mortgage in the notice of sale may render the notice defective.” Ibanez, 941 N.E.2d at 50. Further, “while details of the initial auction must be provided by written notice to the appropriate parties and published in a newspaper . . ., a postponement of the sale may be announced by public proclamation to those present at the auction site.” Fitzgerald v. First Nat. Bank of Bos., 703 N.E.2d 1192, 1194 (Mass. App. Ct. 1999).

         Under M.G.L. c. 244, § 35A, mortgagors are entitled to a 90-day right to cure a mortgage default before a mortgagee can commence the foreclosure process by invoking the statutory power of sale. See M.G.L. c. 244, § 35A(a)-(b). Pursuant to the statutory scheme, a mortgagee that seeks to foreclose on a mortgage must notify the mortgagor of his right to cure, and “shall not accelerate maturity of the unpaid balance of such mortgage” or “otherwise enforce the mortgage” until at least 90 days after the service of such notice. Id. at § 35A(b). The Right to Cure notice must be “given by the mortgagee to the mortgagor, ” and must provide the mortgagor with certain categories of information, including the nature of the default, the date by which the mortgagor must cure the default to avoid acceleration, and the telephone number for a representative of the mortgagee whom the mortgagor may contact if the mortgagee disagrees with the mortgagee's assertion that a default has occurred or the mortgagee's calculation of the amount required to cure the default. Id. at § 35A(c). Section 35A further provides that “[t]he mortgagor shall not be liable for any attorneys' fees relating to the mortgagor's default that are incurred by the mortgagee or anyone holding thereunder prior to or during the period set forth in the notice required by this section.” Id. at § 35A(d). A mortgagor alleging a violation of Section 35A in a pre-foreclosure suit can enjoin a foreclosure by establishing that the mortgagee's Right to Cure notice was inadequate. See U.S. Bank Nat'l Ass'n v. Schumacher, 5 N.E.3d 882, 890-91 (Mass. 2014) (Gants, J., concurring).

         Under M.G.L. c. 244, § 35B, a creditor must “first take[] reasonable steps and ma[ke] a good faith effort to avoid foreclosure” before publishing notice of a foreclosure sale under M.G.L. c. 244, § 14. M.G.L. c. 244, § 35B(b). “A creditor is deemed to have taken reasonable ...